On March 27 the President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to address the impacts of the ongoing COVID-19 pandemic at the federal level.
At over $2 trillion, the aid package seeks to provide economic support to the business sector, employees, individuals and families. In addition, it includes support for the industries that have been impacted the most as well as tax relief for individuals and businesses.
Individual Tax Relief
• Advanced Tax credit rebates of up to $1,200 per individual and $500 per child that are phased out for taxpayers with Adjusted Gross income over $75,000 ($150,000 Married Filing Jointly and $112,500 Head of Household based on 2018 tax return)
• Penalty-free withdrawals of tax retirement funds of up to $100,000 (income recognized over a three-year period) and increases the maximum retirement plan loan allowed to $100,000
• A temporary waiver of Required Minimum Distribution requirements in 2020
• Creates an above-the-line charitable deduction for 2020 (not to exceed $300). The bill modifies the Adjusted Gross Income (AGI) limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations.
• Generates a new incentive that allows employers to provide up to $5,250 annually toward employee student loan payments on a tax-free basis for one year
Business Tax Relief
• Allows employers (including the self-employed) to delay the payment of the employer portion of Social Security payroll tax
• Acceleration of the corporate credit for prior-year alternative minimum tax liability, allowing a 100% credit to be claimed in 2019 and possibly 2018 with taxpayer election
• Temporarily repeals the 80% income limitation for net operating loss deductions for years beginning before 2021
• Reinstates Net Operating Loss carrybacks for the 2018–2020 taxable years
• For losses arising in 2018, 2019, and 2020, a five-year carryback is allowed (taxpayers can elect to forgo the carryback)
• Raises the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year
• Provides employers with a refundable tax credit equal to 50% of employee compensation up to $10,000 per employee in 2020 for retaining employees
• Corrects technical issues regarding qualified improvement property under Sec. 168 by making it 15-year property allowing depreciation over a longer period
• The deferral of excess business loss limitations until 2021
• Up to $349 billion of SBA loans are available, forgiveness on loans is available if the money is used for maintaining payroll and related costs
• A Cancellation of Debt income exclusion of small business loans forgiven under the Act.
RINA Accountants & Advisors is here to help guide you through these difficult times and to keep you updated on the financial and tax effects of this crisis.
Please, reach out to us if you have any questions or if we can help in anyway. We are here to be of service.