Congress has just passed a new bill called the CARES Act to provide stimulus and relief for the Coronavirus situation. There are many aspects of the bill. Here are some of the individual tax provisions summarized:
- Section 2202 provides that Coronavirus withdrawals from retirement plans are allowed. Up to $100k can be withdrawn without penalty any time prior to Dec 31, 2020. Taxpayer may repay any amount of the $100k withdrawal within 3 year period from the date of withdrawal. Income is recognized ratably over the 3 year period 2020-2022. If a taxpayer repays an amount they will not be taxed on that portion of the distribution and it will be treated as a rollover. Taxpayer must be directly impacted to qualify for this treatment meaning: diagnosed with Coronavirus, having a spouse or dependent diagnosed, experiencing adverse financial consequences as a result of being quarantined, furloughed or laid off or having hours reduced, unable to work due to lack of childcare, reduced hours if a business owner, or other similar factors. This section also increases the allowed loans from retirement plans from $50k up to $100k.
- Section 2203 provides that Required Minimum Distributions for 2020 can be delayed. Anyone who has not yet taken their 2020 RMD can just skip it entirely. There is no relief for those who already did a 2020 RMD and no relief for 2019 RMDs that a taxpayer is electing to take in 2020. Only the 2020 specific RMDs can be skipped.
- Section 2204 provides that starting in 2020 a $300 above the line deduction allowed for cash contributions to a public charity for taxpayers who do not itemize. Only cash contributions are allowed for the $300 deduction and contributions to a donor advised fund and contributions to a private foundation are not permitted for the $300 above the line deduction. This $300 deduction does not expire and will apply in future years.
- Section 2205 provides that the limitations on charitable contributions for Schedule A are repealed for 2020 so cash contributions can offset 100% of income. A new 25% limitation applies for C Corps for 2020. These new higher limits do not apply to contributions to private foundations or to donor advised funds.
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