Top 5 Provisions of the CARES Act

  1. ECONOMIC IMPACT PAYMENTS
  • Did you file 2018- or 2019-income tax returns? If so, you do not need to do anything else to receive your payment.
  • $1,200 for an individual. Single taxpayers phase out between $75,000 and $99,000.
  • $2,400 for a married couple. Married taxpayers filing jointly phase out between $150,000 and $198,000. Have kiddos?  Then add $500 per child under age 17.

 

  1. NEW RULES FOR RETIREMENT ACCOUNT DISTRIBUTIONS
  • Withdraw up to $100,000 in 2020 from your IRA or 401(k).
  • You are eligible if you are diagnosed with, or suffered adverse financial consequences from, COVID-19. No 10% early withdrawal penalty if you are under 59½.
  • It is still taxable, but you can spread the income over three years (2020, 2021, 2022). Avoid taxes, however, by repaying it back into the account over three years.
  • Required Minimum Distributions are gone this year for IRAs and employer retirement plans (like your 401(k) or equivalent), but not for cash balance and defined benefit plans.
  • Did you turn 72 in 2020? Were you over 70½ in 2019? Are you the beneficiary of an inherited IRA? If yes, then this relief applies to you.

 

  1. CHARITABLE CONTRIBUTION TAX INCENTIVES
  • Taxpayers who do not itemize get a $300 deduction in 2020.
  • These new Qualified Charitable Contributions must be made using cash.
  • They cannot be made to finance a donor advised fund.
  • For 2020, the limit on charitable cash contributions is 100% of Adjusted Gross Income (AGI), up from 60% of AGI. Any excess can be carried forward for up to five years.

 

  1. STUDENT LOAN HELP
  • Federal student loan payments through Sept. 30, 2020 are suspended.
  • No additional interest will accrue during this time period.
  • All involuntary debt collections are suspended through Sept. 30, 2020.
  • Employers can pay down up to $5,250 of an employee’s student debt through direct payment to the lender. This is only available through Dec. 31, 2020, and it is tax-free to the employee.

 

  1. MEDICAL EXPENSES
  • HSAs, MSA and FSAs can now be used for over-the-counter medications.
  • Medicare beneficiaries will receive the COVID-19 vaccine (when available) at no cost.
  • Medicare Part D recipients must be allowed to request a 90-day supply of prescription medicine.
  • Telehealth services are covered in 2020 by an HSA before a participant meets their deductible.