And who gets the $1200
Passed Friday, the CARES Act is making headlines for the check (or direct deposit, if the IRS has your banking info) many will receive soon. There are a few other details that may affect your investments, in a good way. Here’s what you need to know:
Individuals with adjusted gross incomes up to $75,000 a year will be eligible for the full $1,200 check. For every $100 earned over $75,000, the check will be reduced by $5. That means that at $99,000 and over, you get nothing. Double these numbers for married couples. And for every child under 17, add an extra $500.
Penalty-free distributions from IRAs and retirement plans:
You can take up to $100,000 out during 2020 without incurring the 10% premature distribution penalty (under age 59 ½), if:
- You, a spouse or a dependent has been officially diagnosed with the virus
- You experience, due to the virus, adverse financial consequences as a result of being quarantined, furloughed or laid off or having work hours reduced; being unable to work due to lack of child care; closing or reducing hours of your business; or other factors as determined by the Secretary of the Treasury.
While the penalty is waived, you’ll still need to pay income tax on your virus-related distribution, as usual.
Redepositing virus-related distributions from IRAs and retirement plans:
If you choose, you may put back any virus-related distributions within three years, and pay no taxes.
Required Minimum Distributions:
RMDs are waived for 2020. This includes not only RMDs for retirees (recently changed to age 72 and over), but also for those who inherited an IRA and are subject to the 5-year payout rule (effectively making it the 6-year rule now).
The April 15th deadline for making IRA contributions is moved to July 15th, to coincide with the extended tax return filing date.
Have any questions about how any of this will affect you? Give us a call. We’re here to help.
John, Bill, Mark & Melanie