Cares Act

Cares Act

Following are some provisions in the Cares Act:

  • Changes related to distributions from retirement accounts
    • The tax can be paid ratably over a 3 year period instead of all in the year of distribution
    • The 10% early withdrawal penalty is waived for distributions up to $100,000 for coronavirus related purposes during 2020
    • The purposes include if you, your spouse or dependent are either diagnosed with COVID-19 or if you experience adverse financial consequences as a result of being quarantined, laid off or having work hours reduced or if unable to work due to lack of child care, etc.
    • Can recontribute the funds to an eligible plan within 3 years of the distributions without regard to the annual cap on contributions
  • Waiver of Required Minimum Distribution (RMD) for 2020
    • From IRAs and from certain defined contributions plans
    • Generally these begin in the year someone turns 72 during the year if born on or after 7/1/49 or at age 70 ½ if born before 7/1/49
    • If you have already taken your 2020 RMD you have 60 days from the date of distribution to put it back.  On the 61st day you can no longer redeposit it.
  • Contributions to HSAs and IRAs
    • The deadline to contribution to HSAs and IRAs for 2019 has been extended to July 15, 2020.  
  • Charitable contribution ABOVE THE LINE deduction for 2020
    • Can deduct up to $300 against Adjusted Gross Income  if not itemizing
    • Must be to an eligible charitable institution (not to an individual)
    • This also saves on Ohio taxes
  • A higher percentage of charitable contributions is allowable for 2020
    • Any excess is carried forward in each of the succeeding 5 year.

Changes related to Businesses for 2018, 2019 and 2020

  • Net Operating Losses: can now be carried back 5 years
  • Deductible business losses can be claimed in full against non-business income by taxpayers other than C Corporation.  This may result in Net Operating Losses that can now be carried back five years
  • More generous amount can be deducted for business interest expense in relation to business interest income
  • Qualified improvement property now have a life of 15 years for depreciation purposes.  This also makes it eligible for 100% bonus depreciation.

Colleen Minnich