CARES Act Provisions That Help Individuals

By Wayne M. Zell, Esq.of Zell Law, PLLC, an estate and business planning law firm located in Northern Virginia that focuses on helping clients realize their dreams of wealth and freedom.

We hope that you are keeping yourself, your loved ones and your community safe from COVID-19 (commonly referred to as the Coronavirus). Along with those paramount health concerns, you may be wondering about some of the recent tax changes meant to help everyone coping with the Coronavirus fallout.

This article updates you on the tax-related provisions in the Coronavirus Aid, Relief and Economic Security (CARES) Act, Congress’s gigantic economic stimulus package that the President signed into law on March 27, 2020. This month’s installment summarizes provisions that impact individuals. The next installment will discuss business-related provisions.

Recovery Rebates for Individuals

To help individuals stay afloat during this time of economic uncertainty, the government will send up to $1,200 payments to eligible taxpayers and $2,400 for married couples filing joints returns. An additional $500 additional payment will be sent to taxpayers for each qualifying child dependent under age 17 (using the qualification rules under the Child Tax Credit).

Rebates are gradually phased out, at a rate of 5% of the individual’s adjusted gross income over $75,000 (singles or marrieds filing separately), $122,500 (head of household) and $150,000 (joint).

Waiver of 10% Early Distribution Penalty

The additional 10% tax on early distributions from IRAs and defined contribution plans (such as 401(k) plans) is waived for distributions made between January 1 and December 31, 2020 by a person who (or whose family) is infected with the Coronavirus or who is economically harmed by the Coronavirus (a qualified individual).

Penalty-free distributions are limited to $100,000, and may, subject to guidelines, be re-contributed to the plan or IRA. Income arising from the distributions is spread out over three years unless the employee elects to turn down the spread out. Employers may amend defined contribution plans to provide for these distributions. Additionally, defined contribution plans are permitted additional flexibility in the amount and repayment terms of loans to employees who are qualified individuals.

Waiver of Required Distribution Rules

Required minimum distributions that otherwise would have to be made in 2020 from defined contribution plans (such as 401(k) plans) and IRAs are waived. This includes distributions that would have been required by April 1, 2020, due to the account owner’s having turned age 70 1/2 in 2019.

Charitable Deduction Liberalizations

The CARES Act makes various significant liberalizations to the rules governing charitable deductions, detailed in the full version of the blog on our website.

Other provisions

  • The CARES Act expands the definition of expenses qualifying for the exclusion to include employer payments of student loan debt made before January 1, 2021.
  • For amounts paid after December 31, 2019, the CARES Act allows amounts paid from Health Savings Accounts and Archer Medical Savings Accounts to be treated as paid for medical care even if they aren’t paid under a prescription.

For more details on these and other tax-related provisions in the CARES Act, please visit our website.

Recent Stories

Students at West Potomac High School walked out in September to protest Virginia’s proposed policies on the treatment of transgender students (photo courtesy of Mara Surovell) The Virginia Department of…

The arts center could be located on Block J in Reston Town Center (via Fairfax County) A proposal for a new arts center in Reston will be the topic of…

The office building at 11091 Sunset Hills Road in Reston (via Google Maps) A solar and roofing company is moving its location in McLean to Reston — a $350,000 relocation…

Morning Notes

Construction machinery at the I-66 and Nutley Street interchange during sunset (staff photo by Angela Woolsey) In-Person Black Friday Returns — “Over at Tysons Corner in Virginia the parking lot…

The Ravel Dance Studio will re-open for fall classes 2020. The school will offer in person and virtual online instruction. With over 5000 sq. ft. to social distance the school has added air ionization filtration systems, ballet barres, acrylic dividers, hands free bathrooms, strict monitoring and more.

The Ravel Dance Studio will produce a Nutcracker Ballet Hollywood style video through the Reston Community CenterStage. REGISTRATION online begins August 17.

Submit your own Community Post here for just $99.

Chris Green is one of the DMV’s finest fitness instructors. A Lululemon and South Block ambassador, he is a coach and mentor to so many. He embodies grace, positivity and motivation in ways that no one else can. If we could all learn a thing or two from him, the world would be a much better place. He does so much for others, and does so with a smile on his face 99% of the time.

He recently ruptured his Achilles and has an incredibly long and tough journey ahead. As if COVID hadn’t impacted fitness professionals enough, throw this in the mix and it’s a double, even triple whammy. CG is no longer able to work and do what he loves for the time being because of this and we’d love your support.

Read More

Submit your own Community Post here for just $99.

×

Subscribe to our mailing list