Six Planning Tips to Consider After the Stimulus CARES Act

Coronavirus Aid, Relief, and Economic Security (“CARES”) Planning

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. The $2.2 trillion dollar bill provides broad relief across the American economy for businesses and individuals. Below is a summary of how it impacts individuals specifically:

Recovery Rebate Checks 

• $1,200 to each individual plus $500 per each dependent child, subject to income phaseouts starting at $75,000 for Single filers and $150,000 Joint (see chart below).
• Checks will be based on income from your most recent tax return. So, if you already filed your 2019 return it will be based on your income from 2019. If you haven’t then it will be based on 2018 income.
• Planning Tip:
  • If your income will be lower in 2019 and you haven’t filed your return, it may make sense to do so now.
  • If you retired or have much lower income in 2020, good news…you will receive a rebate based on 2020 income after filing your 2020 return.

Required Minimum Distributions (RMDs)

• For 2020, all RMDs are waived – this includes 401ks, IRAs, and Inherited IRAs.
• If you already took an RMD this year and don’t need the distribution for cash flow, there may be an opportunity to roll it back into your IRA if the distribution was made in the last 60 days. This does not apply to Inherited IRAs
• Planning Tip:
  • Evaluate your income for this year and how it will compare to years going forward. If your tax rate will be much lower this year, consider a Roth Conversion. Roth assets grow tax free and are not taxed when withdrawn. Additionally, while the market is down it’s a great time to put temporarily depreciated assets into the Roth avoiding any tax on the growth when the market recovers.
  • Qualified Charitable Distributions – if you have been making gifts to charity from your IRA, you can still do so in 2020. That said, there may be better alternatives for this tax year. Talk to your BDF team about your 2020 charitable giving plan.

Charitable Contributions

• Even if you do not itemize deductions, for 2020 you will receive a tax deduction for up to $300 of cash contributions to charity.
• Planning Tip
  • If you give cash to charity, keep your receipt.

Student Loans

• All federal student loan payments are deferred until 9/30/2020. During that time no interest will accrue.
• Planning Tip:
  • If your cash flow allows…continue to make full payments on student loans. With no interest for the next 6 months, it’s a great time to get ahead and pay off the loan quicker than originally expected.