Stimulus and Other ChangesMarch 26, 2020 -
Categorized in: Uncategorized
You likely have heard of the giant $2 trillion economic stimulus package working its way through Congress. While it is not quite law yet, there are some important provisions that impact investors and are likely to become law in the near future.
If the current version of the legislation is signed into law the following changes will take place:
- Required Minimum Distributions (RMDs) for 2020 would be cancelled. If you do not want to take funds out of your retirement accounts in 2020, you may not be required to do so. RMDs would return in 2021.
- If you use the standard deduction on your taxes, starting in 2020 you would be able to deduct up to $300 for cash donations to charity in addition to the standard deduction.
- Limits on the deductibility of cash donations to charity would be eliminated for 2020. Typically such deductions are capped at 50% of Adjusted Gross Income. This would not include donations to donor advised funds.
- If you are impacted by COVID-19 physically or economically, you would be able to withdraw up to $100,000 from your retirement accounts penalty-free between January 1, 2020, and December 31, 2020. The IRS would automatically spread the tax liability of your distribution over 3 years unless you request otherwise. You would be able to recontribute the funds within 3 years.
- If you are impacted by COVID-19 physically or economically, you would be able to borrow up to $100,000 from your employer retirement plans (instead of $50,000) with no tax consequences if the loan is taken out within 180 days of enactment.
- Certain student loan payments would be suspended through September 30, 2020 and interest would not accrue during this period.
- Health Savings Accounts (HSAs) and Health Flexible Spending Arrangements would be able to be used to pay for specific over-the-counter medical products.
Additionally, there are some impactful changes that are already official:
- Both the IRS and Wisconsin Department of Revenue have extended the deadline for filing your 2019 income taxes until July 15, 2020. You may still file earlier than that if you would like your refund!
- The IRS has also extended the deadline for 2019 IRA, Roth IRA, and Health Savings Account contributions to July 15, 2020. However, 2019 contributions to Wisconsin 529 college savings plans must be made by April 15, 2020
For more answers to frequently asked questions, please see the links below:
Wisconsin DOR: https://www.revenue.wi.gov/Pages/News/2020/wi-covid-19.aspx
As with all tax matters, please be sure to consult with your personal tax professional as your unique circumstances will impact how these new tax rules would be applied to your personal tax return.
These are times of rapid change in many aspects of our clients’ lives. Your everyday life has been turned upside down. As we have been for 35 years, we are here to help you adapt to these changes and use them to your advantage in working toward your personal and financial goals.
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