CARES Act – Individuals
- Recovery Rebates
Eligible individuals are allowed a credit of $1,200 ($2,400 for joint filers), plus $500 for each qualifying child, for the first taxable year beginning in 2020. An eligible individual is:
- any individual who has a Social Security number and who is not a nonresident alien, and
- an individual who is not claimed as a dependent on another taxpayer’s return, or
- not an estate or trust.
The allowable credit is reduced by 5% of the eligible individual’s adjusted gross income in excess of $75,000 (all filers other than joint and head of household), $112,500 (head of household), or $150,000 (joint filers). The credit phases out entirely at $99,000 (all filers other than joint and head of household), $136,500 (head of household with one child), and $198,000 for joint filers. The threshold amount is based on 2018 adjusted gross income (unless a 2019 return has already been filed).
- Tax-Favored Withdrawals from Retirement Plans
Coronavirus-related distributions from eligible retirement plans are not subject to the 10% excise tax on early distributions. Distributions must be made on or after January 1, 2020 and before December 31, 2020 to an individual who is diagnosed with SARS-CoV-2 or COVID-19, whose spouse or dependent is so diagnosed, or who experiences financial hardship because of quarantine or other factors. Coronavirus related distributions may not exceed $100,000 in the aggregate for any taxable year. Taxpayers may elect to ratably spread the income over a 3-year period beginning with taxable year 2020. Taxpayers may also avoid income recognition by repaying the distribution to the retirement plan within three years of receipt.
- Temporary Waiver of Required Minimum Distribution Rules
Minimum distribution rules are waived for calendar year 2020 for IRAs and certain defined contribution plans. Waiver does not apply to required beginning dates in calendars year after 2020 and amounts which would otherwise be required to be distributed are not eligible rollover distributions. For distributions required to be made over a 5-year period that includes calendar year 2020, calculations of the distribution period shall disregard calendar year 2020.
- Charitable Contribution Deductions- Itemized Deductions
For the 2020 tax year, the deduction percentage limitation for charitable contributions of cash has been removed for individual taxpayers (the limit was previously 60%). This means that any qualified contribution is allowed to the extent that the aggregate of such contributions does not exceed the taxpayer’s adjusted gross income. This provision is applicable only to cash contributions.
- Charitable Contribution Deductions- Above-the-Line
For tax years beginning in 2020, eligible taxpayers are entitled to an above-the-line deduction of up to $300 for qualified charitable contributions. An eligible taxpayer is an individual that did not elect to itemize deductions. A qualified charitable contribution is a cash contribution to a qualified tax-exempt organization.
- Additional Unemployment Benefits
Unemployment compensation for eligible individuals will be the sum of whatever weekly benefit would be provided at the state level plus $600. This $600 increase is referred to as “Federal Pandemic Unemployment Compensation.”