Disasters have been declared in all 50 states for the first time in history, in addition to the disaster declaration by the federal government. Congress has passed the Families First Coronavirus Response Act and the $2 trillion recently enacted CARES Act to provide relief to an economy that is shedding jobs at a rate never seen before in this country. Our country’s leaders hope that these efforts will reach far enough to stave off the depression at which the country is staring.
What relief is there for individuals?
Individual Stimulus Payments
The CARES Act’s most discussed provision to directly impact most individuals is the stimulus payment to be provided as a rebate check mailed directly to an individual’s home. U.S. residents with social security numbers will receive the rebate in the form of a non-refundable credit against their 2020 income tax liability, to be no more than $1,200 ($2,400 for a married couple), plus $500 per qualifying child. The amount of the rebate is based on 2019 AGI (2018 if 2019 is not yet filed) and is phased out at $5 per $100 of income above $75,000 for single filers ($112,500 Head of Household, $150,000 Married Filing Jointly). Existing tax liabilities will not affect whether one receives a rebate check.
Congress included special provisions for retirement savers in the CARES Act, as well. Required minimum distributions for defined contribution plans and IRAs have been suspended for 2020, allowing retirees that can weather the storm to put off liquidating assets, given they have lost so much value in recent weeks. Individuals affected by Coronavirus through family illness or loss of work will have early withdrawal penalties on IRAs and qualified plans waived in 2020 for distributions of up to $100,000. These individuals will also have greater access to loans from their employer retirement plans, now allowed up to the greater of $100,000 or 100% of the vested balance.
The CARES Act requires group health plans to cover preventive items, services and vaccines for COVID-19 with no copayments.
Taxpayers who do not itemize their deductions can receive an above-the-line deduction up to $300 for cash contributions made to certain charitable organizations.
Student loan payments
All federally backed student loans have been placed in administrative forbearance. Payments on federal student loans have been automatically suspended through Sept. 30, 2020, and interest will not accrue during this period. These terms do not apply to private student loans; however, many have adopted flexible payment terms during the crisis. Contact your loan servicer for details. You’ll need to contact your loan servicer if you don’t want to be placed in administrative forbearance and would prefer to continue making payments.
Whether you need help understanding how this new legislation will impact your taxes, or you need help navigating these trying economic times as creditors bear down, contact the dual-licensed attorney-CPAs at Daniel Rosefelt & Associates to enlist a trusted advisor today.