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The CARES Act:  How it May Affect You Thumbnail

The CARES Act: How it May Affect You

On March 27, 2020, the White House and Congress passed the largest relief package in United States history, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Spreading $2 trillion amongst businesses, hospitals, families and individuals, this economic stimulus package is designed to bring relief to those experiencing the ever-increasing threat of economic turmoil and downturn amidst the COVID-19 pandemic.

Here is a brief summary of three areas addressed that may impact you and your family:

Flexibility with IRA Distributions

The CARES Act allows for early distributions up to $100,000 from IRAs without a 10% early withdrawal penalty for those affected by the coronavirus - people who have gotten sick, lost a job, or have had their business impacted.  You still will owe income tax on the withdrawal, but will have three years (2020, 2021, and 2022) to pay the taxes - and if you return the cash to your IRA from this early withdrawal over the next three years you will avoid owing related taxes.

We expect the IRS to offer additional guidance on how the Act impacts inherited IRA distributions.

Additionally, if you are over 72, you do not need to take your required minimum distribution (RMD) through 2020. If you have already taken your 2020 RMD, you may be able to roll that amount back into your IRA - but talk to your tax professional or financial advisor first.

Stimulus Checks

Some taxpayers will be receiving direct stimulus payments of $1,200 as part of the new bill. Those with incomes up to $75,000 will receive the full $1,200, with the amount lowering and eventually phasing out for those who earn more than $99,000. Individuals earning $99,000 or more and couples earning $198,000 or more will not receive checks. Families who qualify with children can expect to receive an additional $500 in direct payments per child.

To determine how much you will receive, the government will reference your income level on your 2018 tax return, unless you have already filed your 2019 tax return. As a reminder, the 2019 tax filing deadline has been extended to July 15, 2020.

Charitable Contributions

The CARES Act lets taxpayers deduct up to $300 in charitable donations made in 2020 from their taxable income. Taxpayers will be able to claim the deductions on their tax forms next year, even if they do not itemize.

For taxpayers that do itemize, the CARES Act increases the limit on individual taxpayers’ deductions for cash contributions to public charities from 60% of the individual’s AGI (adjusted gross income) to 100% of the individual’s AGI.  Additionally, the increased limits for individual taxpayers are limited to contributions made to public charities, and are not applicable to contributions to private foundations (other than private operating foundations) or donor-advised funds.


The author does not intend to provide investment, legal or tax advice as these materials are for general educational purposes only.  Please consult your legal, tax or investment professional for advice on your particular situation. This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. It is not intended to be a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results. Please refer to RRCM’s Form ADV Part 2 for additional disclosures regarding RRCM and its practices.