Providing tax relief for those who qualify
You might have sometime wondered how to get a tax break. Especially now during the coronavirus pandemic, saving money is something everyone is looking into. Tax breaks are something every American wants to know about however often don’t know how to get started or where to look. Always ask a tax preparer or a financial advisor when managing taxes for assistance as they will make the tax filing and tax break process much clearer and easier. As a tax person myself, I am here to inform you on how the CARES act can provide tax relief for individuals if you meet the requirements.
Do I qualify for tax relief from the CARES act?
As anticipated, the CARES Act contains measures to provide rebates to U.S. residents with adjusted gross income of up to $75,000 ($150,000 for joint returns) that are not dependents of other U.S. taxpayers. Let’s say you are a person looking for a tax break in Grand Rapids, MI, a place where a lot of middle income households reside. You would be eligible to receive $1,200 ($2,400 in the case of eligible individuals filing a joint return), which amounts are reduced by $5 for every $100 that a taxpayer’s income exceeds the thresholds—thus, persons with income exceeding $99,000 ($198,000 for joint filers) will not be entitled to any rebates. In addition, eligible individuals are entitled to an additional $500 rebate for each child of such individual.
How can I receive my rebate?
Rebates are to be issued as rapidly as possible, and may be disbursed electronically to accounts authorized by a payee on or after January 1, 2018, for the delivery of a refund of taxes. Rebates will be issued based on 2019 tax returns (or 2018 tax returns) filed by such individuals. No action will be required by eligible recipients to receive their rebate.
Eligible retirement plans are permitted to allow certain distributions during 2020 in an amount of up to $100,000 (in the aggregate from all plans maintained by the employer or any ERISA affiliate of the employer) to participants without such participants incurring the 10% penalty tax for early withdrawal. A distribution is eligible for this exception to the 10% penalty tax if the distribution is made during the 2020 calendar year to an individual (i) who is diagnosed with the virus SARS-CoV-2 or COVID-19 by a test approved by the CDC; (ii) whose spouse or dependent is diagnosed with such virus; or (iii) who experiences adverse financial consequences as a result of being quarantined, laid-off, furloughed, working reduced hours or is unable to work due to lack of childcare (a “Qualified Individual”). A Qualified Individual has the opportunity to repay the distribution within three years of taking the distribution and such repayment will be treated as a tax free rollover. A coronavirus distribution otherwise is included in a Qualified Individual’s income ratably over a three-year period beginning with the taxable year in which the distribution is made unless the Qualified Individual elects to include it income earlier (or makes a tax-free repayment of the distribution) and such distribution is not subject to 20% withholding that applies to eligible rollover distributions. Plans may, but are not required, to permit such distributions and may need to be amended to permit in-service withdrawals.
The limit on loans made during the 180-day period beginning on the date the CARES Act is enacted is increased to the lesser of $100,000 and 100% of the participant’s account balance (which doubles the current limit of the lesser of $50,000 and 50% of the participant’s account balance). In addition, a Qualified Individual with an outstanding loan may delay loan repayments that occur during the period beginning with the enactment of the CARES Act and ending on December 31, 2020 for one year. The remaining payments plus interest are re-amortized over the extended period. These plan loan provisions appear to be mandatory.
Temporary Waiver of Required Minimum Distributions from Retirement Plans. The minimum distribution requirements relating to certain defined contribution plans and IRAs are waived for 2020. In addition, amounts subject to the required minimum distribution rules may be rolled over.
Qualified Medical Expenses
The CARES Act eliminates the requirement that any amount paid for medicine or drugs must be pursuant to a prescription and expands qualified medical expenses reimbursable under these plans to include menstrual care products.
Charitable Deductions. Persons claiming the standard deduction may still be eligible to receive an above-the-line deduction, up to $300, for charitable contributions made in cash in tax year 2020 and beyond. Charitable contribution deductions are generally limited to 50 percent of a taxpayer’s adjusted gross income, but that limitation is suspended for 2020.