The CARES Act, signed into law on March 27, 2020, provides several tax benefits for individuals, some will be seen immediately and others not until you file your 2020 taxes.
There are some specific rules about who qualifies for the tax credit and how much the credit is for:
- Individuals making $75,000 or less - $1,200
- Married filing jointly making $150,000 or less - $2,400
- Qualifying child - $500 each
For those with adjusted gross income above those limits, the total credit phases out at a rate of 5% of adjusted gross income above $75,000 ($112,500 for head of household filers and $150,000 for married filing jointly filers).
This is structured as a credit against 2020 taxes due, but individuals who have filed either a 2018 or 2019 tax return may receive the funds this calendar year. If no return has been filed, taxpayers may use information from their 2019 social security benefit statement. Otherwise, the credit can be claimed on a 2020 income tax return - meaning, you would not get a payment this year, you would just see a reduction in your taxes due when filed in 2020.
Individuals wanting to donate to charities during this difficult time will have a tax benefit for doing so when they file their 2020 taxes. During tax year 2020, an above-the-line deduction for cash contributions up to $300 will be available for taxpayers not itemizing deductions. Furthermore, the 50% of adjusted gross income limitation on charitable contributions (which is 60% for cash contributions) is suspended during 2020.
Under current law, employers can provide up to $5,250 per employee per year in educational assistance for tuition, fees and related supplies that is excluded from wages. The CARES Act expands the definition of employer’s sponsored educational assistance to include certain student loan payments made to employees in 2020 (whether paid to employees or directly to the lender directly). The cap on the amount paid still applies.
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