Opportunities from the CARES Act
With the recent passage of the CARES Act, there are opportunities to help reduce your tax burden as well as support your community through charitable giving. Some of these provisions create an interesting twist with recently passed provisions in the SECURE Act and others. As of the date of this post, the IRS is still planning to provide further guidance on these provisions. Collaboration with your tax professional before implementing any of these ideas is recommended.
IRA Owners
- Suspension of required minimum distributions (RMD) in 2020 – If you don’t spend what’s required to be withdrawn, don’t take it and leave it in the IRA. This reduction in the amount withdrawn will save state and Federal taxes. This applies to all withdrawals done in all of 2020 for IRA’s, retirement plans, as well as inherited IRA’s.
- Convert some or all your IRA to a Roth this year – for those that had an RMD, use that amount you were required to take before and convert to take advantage of drop in market. These funds will now be able to grow tax free versus tax deferred in a Roth IRA. This could also be advantageous with the market down from all-time highs recently even if you don’t have an RMD.
- Take a “Coronavirus related distribution from a retirement account” – this can be done in 2020.This is a self-certifying withdrawal you can take up to $100k from a retirement plan or IRA and either pay it back or pay the taxes over three years. There is no 10% penalty if you’re under age 59 ½.
- Replacing an RMD as a “Coronavirus related distribution” – If you already took your RMD this year, you might be able to consider this withdrawal a “Coronavirus related distribution” and replace the funds back into your IRA if this was done within the last 60 days as a 60 day rollover. Be sure to make up the taxes that were withheld in any payment back into your IRA account
Charitable giving ideas
- Take a Qualified Charitable Distribution – if you’re over age 70 ½, you can direct a payment up to $100,000 from your IRA to a charity and the amount is not considered taxable. This is not as tax beneficial now, since there is no required minimum required distribution this year with the recent passage of the CARES Act.
- Give $300 to charity and take an “above the line” deduction from income – You must use the standard deduction to get this benefit as a provision of the CARES Act.
- If you itemize your deductions, you can now deduct up to 100% of income with a cash gift – Prior, you were only able to deduct 60% of income with a cash gift.
Questions? Contact me