The $2 trillion Coronavirus Aid, Relief and Economic Security Act that was signed into law on March 27 has several provisions you should know about with respect to personal finances.
- A one-time payment of $1,200 per individual, $2,400 per married couple, will be paid as a rebate from the IRS. The payments will go to individuals with adjusted gross income (AGI) of up to $75,000 and married couples with AGI up to $150,000 based on 2019 tax returns. There will be an additional payment of $500 per child.
- The 2019 deadline for Traditional and Roth IRAs contributions has been extended to July 15, the new tax filing deadline. Be sure to indicate the tax year on any contribution checks to make sure they are recorded properly by the custodian.
- Required minimum distributions (RMDs) have been suspended for 2020. The suspension covers RMDs from IRAs, SIMPLE IRAs, SEP IRAs, 401(k)s and inherited IRAs. The waiver also covers those taking their first RMD in 2019 which would have been due by April 1.
- Charitable contributions receive a new above-the-line deduction of up to $300. This provides a charitable tax deduction for those who do not itemize and take the standard deduction. Also, for those who do itemize, the 50% of adjusted gross income (AGI) limit for charitable contributions is suspended for 2020.
- Early withdrawal penalty is waived for distributions from retirement accounts that are needed for coronavirus-related purposes. The 10% penalty is waived, retroactive to January 1. These distributions will still be taxed, but the taxes are spread over three years. The taxpayer could also roll the money back in within three years without being taxed or counted toward that year’s contribution limit.
- The 401(k)-loan limit has been increased from $50,000 to $100,000.
The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor Yeo & Yeo’s COVID-19 Resource Center for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking professional advice.