Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The largest economic bailout in U.S. history contains several tax provisions. The recovery rebates are well known, but here are some of the other important tax items:
- Recovery Rebates – Click here for chart of Recovery Rebates
- The 10% early withdrawal penalty for retirement distributions is waived for people diagnosed with coronavirus, who have a spouse diagnosed with coronavirus, or have other defined financial consequences due to the virus. The distributions are still taxable.
- Charitable contribution limitations have been increased to allow higher deductions.
- Payroll tax credits are available for certain businesses that retain employees even though they are shut down due to the virus.
- Delayed payment is allowed on the 6.2% Social Security tax paid by employers.
- Net operating losses (NOLs) from 2018, 2019, and 2020 are allowed to be carried back 5 years and can also be used 100% in the current year. Recent legislation had limited the deduction to 80% of income and denied the carryback.
- Businesses can now deduct 50% of interest expense, which was previously limited to 30%.
- Businesses can fully deduct certain property improvements (this was always the intention but was an error in the Tax Cuts and Jobs Act)
Other than the recovery rebates, none of these provisions are completely straightforward, therefore, we recommend consulting a tax professional for assistance and to continue to monitor updates from the IRS.