The new stimulus bill that was signed on Friday, March 27, 2020, known as the CARES Act is a massive and far ranging $2+ TRILLION bill, so it is probably best for us to break it down by sections or likely impacted group. This Act may be cited as the “Coronavirus Aid, Relief, and Economic Security Act.” This post will cover two big personal income tax changes.
Key Personal Tax Provisions
Recovery Rebate – Show Me the Money!!
All US residents with an adjusted gross income of up to $75,000 for individuals and $150,000 for couples will receive a cash rebate of $1,200 (individuals) or $2,400 (couples), plus $500 payments for children under 17. This includes all taxpayers with work-eligible SSN, including those with low or no income.
Based on your 2019 tax return or your 2018 tax return if 2019 has not been filed, the rebate amount is subject to a phase-out. The tax rebate amount decreases by $5 with for every $100 over the threshold, with individuals AGI over $99,000 completely phased out, and $198,000 for couples phased out. As you add children, the phase-out limit is upped by $10,000 for each additional child.
For the vast majority of Americans, no action on their part will be required in order to receive their rebate check from the IRS. They are trying to get these checks out by mid-April.
THIS IS A TAX REBATE SO YOU WILL SEE IT NEGATIVELY CHANGE YOUR 2020 TAX OWED/REFUND AMOUNT IN APRIL 2021. Please be aware.
When you file your 2020 tax return, and if it is determined that you should have received a bigger tax rebate, your credit will be trued up then. That is likely if you do not earn in 2020 what you have traditionally made. By our current reading, if you receive a check that is more than you should have earned, it does not appear that you will have to return that excess amount.
There is one other quick item that may be a help on your 2020 tax return. In 2020 for taxpayers who do not itemize their deductions, there will be an “above-the-line” deduction of up to $300 to qualified charitable organizations, i.e. a dollar for dollar reduction in Adjusted Gross Income (AGI).
Other Related CARES Act Blog Posts: