Wondering how the law will impact you and your family? The CARES Act has several provisions that could affect your planning, including:
- Relief payments. One of the most high-profile pieces of the legislation is a refundable tax credit against your taxable income for 2020, equal to $1,200 per person ($2,400 for joint filers) and $500 per qualifying child. The credits begin to phase out for those earning more than $75,000.
- More time for tax filings and IRA contributions. You now have until July 15, 2020, to file your 2019 tax returns, instead of April 15. The Treasury Department has also postponed the deadline for making individual retirement account (IRA) contributions. Under the new rules, you can contribute to your IRA until you file your 2019 tax return or July 15, whichever comes first.
- Temporary waivers on required minimum distributions for retirement plans. Under the CARES Act, you can hold off on taking distributions from certain defined contribution plans and IRAs in 2020. Generally, you need to start taking those distributions by age 72 if you were born on or after July 1, 1949, or by 70 ½ if you were born before that.
- No penalties on retirement plan withdrawals. You can now withdraw up to $100,000 from tax-qualified retirement plans during 2020 for coronavirus-related purposes without a 10% early withdrawal penalty (you still must pay income taxes on the withdrawals). That includes those who have been diagnosed with COVID-19, had a spouse or dependent diagnosed with COVID-19 or experienced financial hardship because of the virus.
- Enhanced tax benefits on charitable gifts. There have been several updates to the limits on tax benefits you can gain from charitable contributions. For example, for those who itemize their deductions for charitable giving, the 60% of adjusted gross income limit is suspended for 2020.
- Small business provisions. If you’re a business owner, you might be in luck. While the first $350 billion small business loan program officially ran out of funding April 16, more funding appears to be on the way soon.
Talk to us to help sort out what this all means for your estate plan, and how to maximize tax benefits this year.