In an attempt to grant additional relief to Americans, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed and signed by the President on Friday March 27th. The most recognized provision of this bill is to offer $1,200 for recovery rebates for individual taxpayers ($2,400 for joint filers) with $500 credit for each child which is considered an advance of a tax credit for 2020 return. The amount will be phased out by $5 for every $100 in excess of a threshold amount. The threshold is based on the 2018 adjusted gross income (unless a 2019 return has already been filed) with the phaseout beginning at $75,000 for single filers, $112,500 for head of households, and $150,000 for joint filers. Additional requirements apply to be eligible for the recovery rebate. The rebate is entirely phased out if income exceeds $99,000 for single filers, $136,500 for head of households, and $198,000 for joint filers.

Other notable provisions for the 2020 tax year include:

  • Waiver of 10% penalty on early withdrawals up to $100,000 from qualified plans for coronavirus-related withdrawals.
  • Waiver of mandatory 2020 RMD withdrawals from Retirement Plans.
  • Above the line deduction for charitable contributions up to $300, as well as providing unlimited itemized deduction for charitable contributions for individuals and increased limits for corporations.
  • Inclusion of over-the-counter drugs and menstrual products as qualified medical expenses for purposes of FSA and HSA reimbursement.
  • Exclusion from income tax of forgiveness of certain small business loans and mortgage obligations, subject to limits.
  • Net Operating Loss carryback for business losses arising in 2018, 2019, and 2020.
  • Increased limits for the Business Interest Expense Limitation.
  • Clarification that Qualified Improvement Property qualifies for 15-year useful life, allowing such expenditures placed in service after September 27, 2017 to qualify for 100% bonus depreciation in the year incurred.
  • See next article regarding the Employee Retention Credit and Payroll Tax Credits.

If you have any questions about the above, feel free to reach out to your DKC representative for more information.

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