New Tax Law-CARES Act (Part 2)

Dear Friends and Clients,
 
With the passage of the CARES Act last week there are now two major pieces of legislation that were passed to help ease the strain on individuals, employees and employers due to the COVID-19 Pandemic. We are breaking this down into two parts.
 
  • Part I will cover the main provisions enacted under the Families First Act. This covers what employers need to know and how it affects employees.
 
  • Part II will cover the main provisions enacted under the CARES Act. The CARES Act contains provisions that directly benefit individuals as well as businesses. The CARES Act also provides for certain SBA loans to be forgiven if used for qualified expenses. We will be sending out additional information on the SBA loans in a separate communication.
 
The Coronavirus Aid, Relief, and Economic Recovery Security ("CARES") Act is the largest tax relief package in history that was passed to help relieve the financial stresses placed on employees and businesses due the the shutdown of so many businesses.
 
Economic Relief Legislation: The CARES Act
The CARES Act is a $2 trillion economic relief package which includes numerous tax measures has passed the House and the Senate and was signed by the President on Friday, March 27th.

For individual taxpayers, the CARES Act -
 
Direct Payments
  • Provides 2020 recovery rebates of up to $1,200 for singles and $2,400 for joint filers which begin phasing out at adjusted gross income of $75,000 and $150,000 respectively.
  • Taxpayers with children will receive an additional $500 per child.
  • Rebates will be issued based on 2019 income tax returns, or 2018 returns for individuals who haven't yet filed in 2019.
 
IRA Withdrawals
  • Waives the 10% early withdrawal penalty for coronavirus-related distributions from retirement plans and provides the option of recontributing the funds for up to three years after such distributions are made.
 
Required Minimum Distributions
  • Temporarily waives the required minimum distribution rules for 2020 for defined contribution plans, including an eligible deferred compensation plan, and individual retirement plans.
 
Charitable Contributions
  • Allows an above the line deduction of up to $300 for charitable contributions and relaxes the limitations on deductible charitable contributions for taxpayers who itemize and
 
  • Modifies the limitations on individual and corporate charitable contributions made during 2020 and increases the limit on contributions of food inventory.
 
Student Loan Debt
  • Excludes from income certain student loan debt repaid by an individual's employer for repayments made after date of enactment and before 2021.
 
For business taxpayers, the CARES Act -
 
Payroll Taxes
  • Provides an employee retention credit against applicable employment taxes of 50% of wages for employers subject to closure due to COVID-19.
  • Extends the time for paying employer payroll taxes.
 
Net Operating Losses
  • Temporarily repeals the taxable income limitation for net operating losses and allows a five-year carryback for losses incurred after 2017 and before 2021.
 
Excess Farm Losses
  • Eliminates the limitation on excess farm losses for years after 2017 and before 2026.
 
Corporate Minimum Tax
  • Modifies the credit for prior year minimum tax liability of corporations by reducing the limitation on the amount of the credit that is refundable.
 
Business Interest Expense
  • Modifies the limitation on deductions for business interest by increasing the amount of taxable income which limits the deduction from 30% to 50%.
 
Depreciation
  • Fixes the technical glitch in the Tax Cuts and Jobs Act which prevented qualified improvement property from qualifying as 15-year depreciation property and bonus depreciation property.
 
Obviously, there are a lot of changes to absorb relating to these new tax laws. Especially, during such a stressful time. Please contact us if you would like to discuss the impact this new law may have on you or your business.
 
 
529 Plans and Covid-19
New Tax Law-Families First Act (Part 1)

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Phone: 602-212-1040
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info@vestpointe.com

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