CARES ACT FOR INDIVIDUALS

COVID-19, Individual, Taxes

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief for individuals and small businesses.  Below is a recap of some of the key provisions helping individuals.

Direct cash payments

Provides a one-time cash payment as follows:

  • Individuals will get $1,200 (joint filers get $2,400) plus $500 per child.
  • Benefits start to phase out for those with incomes exceeding $150,000 for married couples, $75,000 for singles, and $112,500 for single parents.
  • Payments will not go to single filers earning more than $99,000; head-of-household filers with one child, more than $146,500; and more than $198,000 for joint filers with no children.
  • 2019 or 2018 tax returns will be used to calculate the rebate advanced to taxpayers.
  • Taxpayers eligible for a larger rebate based on 2020 income will receive it with the filing of their 2020 return.
  • Taxpayers with higher income in 2020 will not be required to repay the rebate.
  • Will use information from Social Security Benefit Statement if no return required to be filed so seniors who don’t otherwise file will not need to.

Expanded unemployment

Expands unemployment to help those who have lost their jobs or are experiencing reduced incomes.

  • Additional $600 per week payment to each recipient for up to four months.
  • No waiting period to begin collecting.
  • Available to self-employed individuals, part-time workers, independent contractors, and gig workers, including ride-sharing drivers.
  • Additional 13 weeks of benefits after state benefits run out, through December 31, 2020

Waiver of 10% penalty

  • The additional 10% tax on early distributions from IRAs and 401(k)s is waived for distributions during 2020.
  • Eligibility is a person who is infected with Coronavirus or has a family member infected or who is economically harmed by the Coronavirus.
  • Limited to $100,000.
  • Income is spread over three years unless elect to have it all taxed in first year.

Waiver of required minimum distributions

  • Required minimum distributions, distributions from an IRA because the account owner is 70 ½ are waived for 2020.

Charitable deductions

  • Above the line (means you don’t have to itemize to get deduction) deduction for cash contributions to charities in 2020 up to $300.
  • Contribution limit increased from 60% to 100%. Usually the most you can claim as a deduction in a given year is limited to 60% of your adjusted gross income for that year.  That limit is changed to 100% for 2020.
  • Same for corporations. They are normally limited to 10% of their income and for 2020 the limit is increased to 25%.

Student loan changes

  • Currently an employer can provide up to $5,250 of education assistance and exclude it from the employee’s income. The CARES Act adds to the definition of qualified expenses to include student loan payments for 2020.