The passage of the CARES Act provided sweeping measures to help individuals and businesses during this time of uncertainty. Here are some of the key takeaways:
- You will only receive a check under the following circumstances: $1,200 per adult ($2,400 for married couples) and $500 for each child age 16 or under subject to certain income limitations. Single adults earning $75,000 or less and married adults earning $150,000 or less will get the full amount. Payments decrease for incomes above these levels.
IRAs and Retirement Plans
- For 2020, you do NOT have to take an RMD from your retirement account if you choose not to. Please notify us as soon as possible if you do not wish to take for 2020.
- You can take up to $100,000 out of your IRA or retirement plan early without the 10% penalty if your hardship is due to the Coronavirus. Income taxes on this withdrawal can be spread over three years, or you can put the money back within three years.
Charitable Contributions
- To incentivize charitable contributions, the CARES Act provides an above-the-line deduction for “qualified charitable contributions” up to $300 for individuals who do not itemize deductions.
- Increases the income limitations on charitable deductions by suspending the 50% adjusted gross income (AGI) limitation for 2020.
- Thus, individuals may deduct qualified contributions in 2020 up to 100% of their AGI. Any excess qualified contributions are carried forward to future years in the same manner as other charitable contribution carryovers.
Small Businesses
- Any “small business” (generally a business with less than 500 employees) can apply for loans up to the lesser of 2.5X their average monthly payroll costs or $10 million. Loan proceeds must be used to pay for payroll costs, mortgage interest, rent and/or utilities and are made on a non-recourse basis with no personal guarantees. The interest rate is capped at 4%, and the loan is payable over no longer than 10 years.
- Businesses are eligible for tax-free forgiveness of some or all of the principal amount borrowed, presuming they expend the proceeds on qualifying expenditures (payroll, rent, interest, etc.) during the eight-week period following the loan funding date. Businesses that receive loans but that cut back on workforce levels or gross payroll after February 15, 2020 are only eligible for limited forgiveness (pursuant to certain formulas) unless they restore their current workforce levels and gross payroll to pre-COVID-19 emergency amounts by June 30, 2020.
- We highly encourage small business owners to reach out to their CPA and/or banker to discuss this opportunity and are happy to help facilitate these conversations.
As always, please feel free to reach out to us with any questions or concerns.