April 6, 2020
In times of uncertainty, our nation comes together. Congress passed the bipartisan bill, and on March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The $2 trillion stimulus package, the largest in American history, offers broad economic relief and support to individuals and businesses affected by coronavirus (COVID-19).
What does this mean for you? While many of the specific details are still evolving, we’d like to offer highlights of important provisions that affect individuals, families, and businesses:
Recovery Rebates: Based on your 2019 tax return, or your 2018 tax return if you have not yet filed, the CARES Act provides up to $1,200 for individuals/$2,400 for married couples and an additional $500 for each child under the age of 17. The amount of the rebate phases out using your adjusted gross income (AGI) based on your tax filing status. The phase-out begins at $150,000 for Married Filing Jointly, $112,500 for Head of Household, and $75,000 for Single. Payment should be paid as soon as possible but may not be sent to you until May 2020.
Retirement: Required minimum distributions (RMDs) have been waived for 2020. If you have already received your yearly RMD within the last 60 days and you have only completed one IRA-to-IRA or Roth IRA-to-Roth IRA transfer in the past 365 days, you may be eligible to roll the money back into your original account assuming you do not need the money.
Charitable Contributions: A $300 charitable contribution is allowed if you do not itemize deductions. However, it must be in the form of cash and cannot be contributed to a donor-advised fund or supporting organization.
Student Loans: Federal student loan payments have been deferred for six months until September 30, 2020. No action is needed on the part of the borrower. Loan servicers will automatically implement deferments, and no interest will be accrued during this period.
Healthcare-Related Provisions: You can now use Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), or Healthcare Flexible Spending Accounts (FSAs) to buy certain over-the-counter medications. Coronavirus testing and vaccines will now be covered by all group health plans, including Medicare Part B.
Tax Filing Deadline, IRA, and HSA Contributions: The tax filing deadline has been extended to July 15, 2020; 2019 IRA or Roth contributions and HSA contributions can still be made by July 15.
Loans: Qualifying small businesses are eligible for the Paycheck Protection Program (PPP) loan to cover payroll costs, which include the following: salary, wages, commissions, tips, paid leave (vacation, parental, family, medical or sick), health care payments (group health care, including premiums), retirement benefit payments, payment of state or local tax assessments on compensation, and some independent contractor payments. Parts of this loan may not have to be repaid. Some small businesses are also eligible for an Economic Injury Disaster Loan (EIDL), providing them with economic support to help overcome the temporary loss of revenue they are experiencing. A borrower can request a loan advance of $10,000 (i.e., grant) that does not need to be repaid, but this will reduce any loan forgiveness under the PPP loan.
Refunds: The CARES Act has changed the treatment of Net Operating Losses (NOLs) generated in 2018, 2019, and 2020 to permit them to be carried back up to five years. This allows an immediate claim for refunds for taxpayers who had taxable income during the carryback time period. The excess business loss limitations have been removed; therefore, a partner or shareholder of a pass-through can deduct excess business losses in 2018 or 2019.
Credits: The Employee Retention Credit allows qualified businesses who have not had forgiveness under a PPP loan to claim a refundable payroll tax credit for up to 50% of qualified wages paid, limited to $10,000 per employee, resulting in a maximum credit of $5,000. Employers can also get a credit against payroll taxes for paid employee sick leave or family leave.
As the economic impact of coronavirus persists, we understand the complexities of new legislation can seem overwhelming. We are here to help. For more details and to read our full summary of CARES Act implications, click here for individuals/families and here for businesses. If you have questions about the CARES Act and how it can benefit you or your business, please contact your Ronald Blue Trust advisor, call 800.987.2987, or email [email protected].