How the Recently Passed CARES Act Impacts Retirees
We are all on information overload these days, so I am trying to only share information with you that is pertinent and that directly impacts your situation as a retiree.
Our government sprang into action this past week to create an unprecedented stimulus package to combat the financial effects of the coronavirus. The new law resulting from this stimulus is called the Coronavirus Aid, Relief, & Economic Security Act or the CARES Act. The CARES Act covers a lot and it contains provisions that are designed to benefit individuals as well as businesses. I think it is important for you to understand some of the major provisions of this new law but the following is not intended to be an all-encompassing review of the CARES Act. I simply want to outline those provisions of the stimulus package that most impact retirees.
- Eligible taxpayers will receive a tax rebate check. The amount of the tax rebate is $1,200 per person plus $500 per dependent child. The amount of the check is reduced by a phaseout provision for individuals who made over $75,000 and couples that made over $150,000 last year, or in 2018 if you have not filed your 2019 taxes. Starting in May, you should begin to see this money deposited in the checking account that receives your tax refund or into the account where your Social Security check is deposited. If the government has no checking account on file for you, you will receive a check in the mail. Please be careful of scams! Nobody from the government will be calling or emailing you regarding this rebate!
- Many retirees begrudgingly take money that they don’t need out of their IRAs once they are age 72 (previously was age 70.5) because the required minimum distribution rules stipulate that they such a distribution. The CARES Act has eliminated the IRA required minimum distribution requirements in 2020. Retirees who have taken required minimum distributions within the last sixty days can redeposit their RMD to eliminate the tax on those distributions. For retirees who donate to charity: It can still be advantageous to make charitable contributions directly from your IRA to your charity even though there is not a required minimum distribution obligation in 2020.
- The tax filing deadline has been extended from April 15th to July 15th. This means that the date to make 2019 contributions to IRA and HSA accounts has also been extended to July 15th.
There are additional provisions and benefits associated with the CARES Act for those that have contracted the virus, have a spouse that has contracted the virus, or if you have lost your job as a result of the coronavirus. I won’t mention those benefits here but you should be aware that they exist if you are unfortunate enough to fall into this category.
Please contact us if you would like specifics or have any questions.
Stay safe out there.