Individual Tax Provisions
- Direct Payments
The CARES Act provides a $1,200 recovery rebate for individuals ($2,400 for joint taxpayers). The rebate phases out at adjusted gross income of $75,000 for singles, $122,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers and $198,000 for joint taxpayers. Additionally, taxpayers with children will receive a flat $500 for each qualifying child. Rebates will be based on the filed tax year 2019 tax return (or tax year 2018 if a 2019 return has not yet been filed).
- Special Rules for Use of Retirement Account Funds
Taxpayers facing virus-related economic challenges may withdraw up to $100,000 from retirement accounts without facing penalty. The distributions may be made between January 1 and December 31, 2020. Income attributable to such distributions would be subject to tax over three years. The Act provides for taxpayers to restore any withdrawn funds without affecting retirement account caps.
- Waiver of RMD Distribution Rules
In general, RMDs are required annually once the owner reaches age 72. Required minimum distributions from defined contribution plans and IRAs in calendar year 2020 are temporarily waived. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.
- Enhanced Charitable Giving
Individuals receive a new $300 above-the-line deduction on charitable donations for filers taking the standard deduction and expands the limit on charitable contributions for those that itemize. The 50% of adjusted gross income limitation is suspended for 2020.
- Student Loan Payment Suspensions and Exclusions
Most Americans with federal student loans can suspend their monthly payments through September 30, 2020. Employers are also allowed to make tax-exempt contributions toward their workers’ student loan payments.
- Independent Contractors
Benefits and grants are extended to self-employed individuals who are unemployed, partially employed or unable to work because of Covid-19. The bill includes a $600-a-week increase on top of current levels of unemployment benefits for up to four months. Independent contractors also can apply for EIDL (Economic Injury Disaster Loan) funds.
- Unemployed Workers
Jobless benefits would be extended to 39 weeks from 26 weeks in most states, and includes a $600-a-week increase for up to four months with the bonus payment available through 7/31.