The CARES Act and What it Could Mean For You

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted on March 27, 2020 to provide relief for Americans facing economic hardship due to 2020 coronavirus pandemic, including financial assistance for affected individuals, families, and businesses. This stimulus bill is #3 and #4 is likely to follow. It is a massive $2.2 trillion package. In addition, the Treasury Department moved the deadline to file and pay 2019 federal income taxes from April 15 to July 15.

There are relief efforts and also some tax incentives provided in this Act. We want to share those with you in this blog. One that requires no action on your part is the stimulus checks. It is $1,200 per person and $2,400 for joint filers as well as $500 per dependent child. The refund does phase out for single filers starting at $75,000 and $150,000 for joint filers. For filing and payment, the April 15 date is moved to July 15, 2020. For IRA contributions for 2019 the deadline is also July 15.

A few of the changes that you should be aware of are the following:

• The new law allows an above the line income tax charitable deduction up to $300. This is subtracted from your Adjusted Gross Income and is available even if you don’t itemize your deductions on your 2020 income tax return. There appears to be some question on this change. Some believe on a joint return the amount is $600. There is also confusion if this deduction carries into future tax years or if it is only for 2020.
• The CARES Act also impacts owners of Individual Retirement Accounts (IRAs) by providing a temporary waiver of the Required Minimum Distribution (RMDs) for 2020. With the current depressed stock market this allowed suspension of all or part of your IRA fund may allow your fund to gain back some value. This incentive is for tax year 2020 only. You may still make direct distributions to charity from your IRA, just as before, if it makes financial sense to do so.
• Another 2020 tax year only change allows donors the ability to donate to charity up to 100% of their adjusted gross income (AGI) for cash gifts to public charities. Thus one could eliminate all taxable income and pay no federal income tax for 2020. The prior limit was 60% of adjusted gross income. Gifts to Donor Advised Funds (DAFs) do not qualify.
  The Act also held out many business incentives. Several examples were payroll protection loans or grants, disaster loans, credits on payroll taxes and a 2-year delay on payments.

Events of the past months may have given you more time to reflect on your financial future. The uncertainties of life may have also caused you to review your estate planning and the legacy you wish to leave. If we can be of assistance as it relates to charitable giving, both current and deferred, please feel free to contact Gary Raterink at graterink@wedgwood.org or (616) 942-2392 with your questions.