On Friday, March 27th, the Coronavirus Aid, Relief and Economic Security Act known as the CARES Act was signed into law. It is over 800 pages and contains many benefits to taxpayers and businesses. To save you the headache of information overload, we have put together information from parts of the bill that we feel will be most beneficial to taxpayers.
This blog post will answer the question: What benefits are there for individual taxpayers?
- The biggest and most significant benefit is the direct cash payment to taxpayers. Taxpayers making 75K or below will get $1200 (for joint taxpayers it’s $150K or below) plus $500 for every child under 17. If you’re a dependent on someone’s tax return, even if you file your own taxes you get nothing. If your income goes over 75K but under 100K then you will get a reduced check. Once you’re over 100K, you get nothing. This is nontaxable income based on your 2019 AGI. If you did not file 2019 taxes, it will be based on 2018 taxes and if you haven’t filed 2018 taxes, then as of now there is no clarity if you will get the money or not so make sure to file at least 2018 if you haven’t yet.
- Increased and expanded unemployment benefits. For those of you who are on unemployment or may go on unemployment, there is some good news. The amount you get will be boosted. This bill adds $600 per week from the federal government on top of whatever base amount a worker receives from their own state. That boosted payment will last for four months.
- Gig workers, freelancers and self-employed individuals also included. Generally unemployment is not available to those who are self employed but this bill creates a new, temporary Pandemic Unemployment Assistance program through the end of this year to help people who lose work as a direct result of the public health emergency up to $600 a week. You would generally apply for this through your state unemployment website.
- Ability to withdraw from 401-K for Retirement Account without penalties. Eligible individuals can withdraw vested amounts up to $100,000 from tax-qualified retirement plans during 2020 without a 10% early distribution penalty, and income inclusion can be spread over three years. Repayment of distributions during the next three years will be treated as tax-free rollovers of the distribution. The bill also makes it easier to borrow money from 401(k) accounts, raising the limit to $100,000 from $50,000 for the first 180 days after enactment, and the payment dates for any loans due the rest of 2020 would be extended for a year.
- Student Loan Interest delayed. The Department of Education would suspend payments on student loan borrowers, without penalty, through September 30, according to the bill.
- Changes to charitable contributions. The CARES Act allows an individual to make a cash contribution of up to $300 made to certain qualifying charities and deduct the contribution “above-the-line” in computing adjusted gross income. Thus, the taxpayer receives the deduction in addition to the standard deduction. This above-the-line deduction is here for 2020 and beyond. The CARES Act allows such contributions to be deducted up to 100% of AGI for 2020, with any excess contributions available to be carried over to the next five years. In the past you could only deduct charity up to 60% of your AGI.
We understand many people may still have questions about the above items, please do not hesitate to send us an email with your questions and we will try our best to assist. In this times of uncertainty, we want to help in any way possible. Stay safe and stay healthy!
