The CARES Act was signed on March 27th, and we now have the full details of the relief programs available for individuals and businesses.
Relief for Individuals
Stimulus Checks
- Amounts are based on 2019 tax returns (if they have been filed). If not, they will be based on 2018 tax returns.
- Single Taxpayers will receive $1,200 each. This is reduced for individuals making over $75,000 and will be completely phased out for individuals making over $99,000.
- Head of Household Taxpayers will receive $1,200 each. This is reduced for individuals making over $112,500 and will be completely phased out for individuals making over $135,500.
- Married Filing Jointly Taxpayers will receive $2,400. This is reduced for couples making over $150,000 and will be completely phased out for couples making over $198,000.
- Taxpayers who claimed children under 17 as dependents will receive an additional $500 per child. These tax rebates may also be reduced based on taxpayer income.
- Individuals who had social security only income and did not have any other tax liabilities, or did not even file a tax return, will still receive a check for $600 each.
- These stimulus checks are designed as tax rebates for 2020. The checks will be based on a past return (either 2018 or 2019), but will be reconciled with your 2020 income. That means that you may receive a reduced rebate check now based on 2019 income, but when you file your 2020 return you may get an additional refund.
- The tax rebates will operate very much like the advance premium tax credit for health care premiums.
- To qualify, taxpayers and their children need to have social security numbers.
- How do I get this? Just wait for the check, or direct deposit from the IRS.
Retirement Accounts
- Required minimum distributions (RMDs) are waived for 2020.
- Distributions from retirement accounts are allowed for COVID-19 losses – up to $100,000.
- Normally if you take out an early distribution (prior to age 59 1/2) you would pay an additional 10% penalty, and the full amount would count towards ordinary income.
- This provision waives the 10% penalty, and you can include the income over 2020, 2021 and 2022 instead of claiming it all in 2020.
- You can also repay the distributions back into your retirement plan and not include it in income.
Tax Return Filing Deadline Extension
- All individual taxpayers have been given an automatic extension to file their 2019 tax return until July 15, 2020.
- All individual taxpayers have been given an automatic extension to PAY their 2019 taxes until July 15, 2020.
- How do I get this? Everyone gets it.
Unemployment Benefits
- If you were employed and are now unemployed, you can claim unemployment benefits. Typically, you are required to wait one week before making a claim. The new law changes this so you can get unemployment benefits immediately for up to 39 weeks of pay.
- The new bill also allows payments to include an additional $600 per week.
- Unemployment claims are higher than they have ever been. It may take a while to get through to a real person.
- How do I get this? You’ll need to apply online.
Other Items
- Student loan payments will be suspended for three months.
- Charitable contributions up to $300 can be deducted “above the line”.
- This means that you would not need to itemize your deductions in order to claim a deduction.
- Anything over $300 would still need to be part of your itemized deductions.
- HSA accounts can now be used to pay for over the counter medication.
- However, it may be more beneficial to leave your HSA funds alone if possible since they have the potential to grow tax-free for years, possibly decades, and then they will be available for major medical expenses.
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