Q: What are the key tax provisions in the CARES Act?
A. Along with financial assistance for individuals, the health care system, state and local governments, businesses, and other entities, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides significant tax relief to individuals, businesses and other employers to help them weather the coronavirus (COVID-19) pandemic.
A quick look
Here’s a quick look at some of the tax-related CARES Act provisions that may affect you:
- Recovery rebates of up to $1,200 for singles, $1,200 for heads of households and $2,400 for married couples filing jointly — plus $500 per qualifying child — subject to income-based phaseouts starting at $75,000, $122,500 and $150,000, respectively (based on 2018 or 2019 income tax return filings)
- Waiver of the 10% penalty on COVID-19-related early distributions from IRAs, 401(k)s and certain other retirement plans
- Waiver of required minimum distribution rules for IRAs, 401(k)s and certain other retirement plans
- Expansion of charitable contribution tax deductions
- Exclusion for certain employer payments of student loans
Businesses and other employers
- Retention tax credit for eligible employers that continue to pay employee wages while their operations are fully or partially suspended as a result of certain COVID-19-related government orders
- Deferral of the employer portion of payments of certain payroll taxes
- Modification of net operating loss (NOL) and limitation on losses rules
- Modification of the deduction limitation on business interest
- Qualified improvement property technical correction, allowing qualifying interior improvements of buildings to be immediately expensed rather than depreciated over a period of years
Help during a challenging time
This is just a brief overview of the tax-related provisions of the CARES Act. Contact your tax advisor for more details on these provisions and how they might help you during this challenging time.