2020 CARES Act: Key Provisions

• Americans are starting to receive their rebate checks. These rebates are designed as a refundable income tax credit against 2020 income of up to $2,400 for married couples filing a joint return. All other filers begin with a refundable credit of up $1,200. The credit amount then increases by up to $500 for each child a taxpayer has under the age 17.

• Adjusted gross income threshold amounts: Married Filing Jointly: $150,000; Head of Household: $112,500; All Other Filers: $75,000. Payment is reduced by $50 for every $1,000 over threshold amounts.

• Individuals must have a work-eligible Social Security number (and not be claimed as a dependent). They do not need to have had reportable income in 2019 and can also be eligible for other income-benefit programs.

• Distributions are exempt from the 10% penalty, not subject to mandatory withholding requirements, are eligible to be repaid over 3 years, and the income may be spread over 3 years.

• Such loans, which have an interest rate 1.0%, may be eligible for full or partial forgiveness. Eligible amounts must be spent during the first 8 weeks after the loan is made on payroll costs, rent, utilities, and group health insurance premiums, subject to certain restrictions.

• Payroll tax credit for qualifying businesses not receiving a covered loan (above).

• Employers are eligible to defer payroll taxes from the date of enactment, through the end of the year, until the end of 2021 and 2022.

• Unemployment benefits will be available the first week of unemployment, waiving the normal one-week waiting period.

• Required Minimum Distributions are waived for 2020, and taxpayers who have already taken their RMDs for 2020 have the options of returning them, if they so desire.

• 2020 is ignored for the purposes of the 5-year rule that applies to non-designated beneficiaries (e.g. charities, estates, non-see-through trusts) who inherit a retirement account from decedents who die prior to reaching their required beginning date.

• New $300 above-the-line deduction for qualified charitable contributions. The adjusted gross income limit for cash charitable contributions has been temporarily repealed.

• Student loan payments deferred until September 30, 2020, and employers can exclude student loan repayments from compensation.

Sources: congress.gov (Coronavirus Aid, Relief, and Economic Security Act); www.kitces.com (Michael Kitces)

This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for legal or tax advice. Any tax or legal information contained herein is of a general nature. You should seek specific advice from your tax or legal professional before pursuing any idea contemplated herein. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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