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Tax Relief and Incentives Part of $2 Trillion CARES Act

Tax Relief and Incentives Part of $2 Trillion CARES Act

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President Trump signed into law the CARES Act (the “Act”), the $2 trillion stimulus package designed to stabilize the economy amid the COVID-19 pandemic. The groups that will most benefit are individuals, small businesses, big corporations, hospitals and public health, state and local governments, and education. The 880-page Act can be accessed HERE.

The Act includes tax relief and tax incentive provisions for both individuals and businesses. For individuals, an estimated $560 billion has been designated for recovery rebates to taxpayers. Most taxpayers earning less than $75,000 will receive a one-time cash payment of $1,200, and married couples earning up to $150,000 will receive $2,400. Taxpayers with minor dependents would also receive an additional $500 per child. The rebates begin the phase out as income rises, with a total phase out at $99,000 for taxpayers filing single and $198,000 for those filing jointly.

The Act also waives the 10 percent penalty on early withdrawals up to $100,000 from qualified retirement plans for COVID-19-related distributions, and waives all required minimum distributions for 2020, regardless of whether the taxpayer has been impacted by the coronavirus. In addition, the Act provides for an exclusion of up to $5,250 from income for payments of an employee’s education loans that have been incurred by the employee for the education of the employee only. The exclusion only applies to employer-paid education loans, and for payments made by an employer after the date of enactment and before January 1, 2021.

Lastly, the Act enhances tax incentives for making charitable contributions for the 2020 tax year by allowing an above-the-line deduction of up to $300 for charitable contributions made by individuals, and increasing the percent-of-adjusted gross income (AGI) limitations for all taxpayers, as well as for specific types of contributions.

For businesses, there are several tax provisions, including an employee retention credit, payroll tax deferral, five-year carryback of net operating losses, excise tax relief, and changes to minimum tax credits, business interest expense limitation, and qualified improvement property. For more detailed information on the tax relief and incentives available to businesses under the Act, click HERE.

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