What you need to know about the Coronavirus Relief Bill
After much debate and negotiation, Congress has passed a $2 trillion stimulus package intended to provide relief to individuals and businesses during the Coronavirus outbreak. Here are a few of the provisions we believe are most impactful for our clients:
- Required minimum distributions from IRAs, 401(k)s, 403(b)s, and similar retirement accounts have been suspended for 2020. The provision also applies to inherited retirement accounts. Qualified charitable distributions are not taxable and may still be completed for individuals who have reached age 70 ½.
- IRA and 401(k) hardship distribution rules have been changed to permit withdrawals up to $100,000, which will not be subject to the 10% early distribution penalty before age 59 ½. The withdrawal is still taxable, but the tax may be paid over a three-year period, and the money may be redeposited within a three-year period with no tax due. To qualify, account owners (or their spouse or dependents) must be diagnosed with Coronavirus; or have experienced lost income, reduced hours, business closure, quarantine, or inability to work due to lack of child care.
- 401(k) loan limits have been raised to $100,000 up to 100% of the account balance to participants who have been diagnosed or impacted by economic losses. Participants with loans can also delay any repayment due in 2020 for one year, thus extending their term accordingly.
- Much of the news is focused on the checks to be sent to individuals. The bill includes payments to households of $1,200 per adult and $500 per child (age 17 or under). The payments are reduced for individuals starting at $75,000 of income and eliminated for individuals above $99,000 of income ($198,000 for a married couple).
- Individuals who claim the standard deduction may claim up to $300 for charitable contributions in 2020. For taxpayers itemizing deductions and making significant charitable donations, the 50% of adjusted gross income limitations on deductions for charitable contributions is suspended for 2020.
- Most individuals with federal student loan payments may suspend their monthly payments through September 30, 2020 without additional interest accrual. Anyone planning to take advantage of this strategy should contact their loan provider to confirm qualification.
- Employers have the option to defer payment of their portion of 2020 payroll taxes. The payments would be due 50% in 2021 and 50% in 2022.
Please follow up with your team members directly if you have questions regarding how specific provisions apply to your personal financial situation.