What You NEED to Know!

Congress just passed two very important pieces of legislation- the SECURE Act & the CARES Act. Both have many important provisions. Some of the financial planning highlights are below*:

SECURE ACT (Setting Every Community Up for Retirement Enhancement) 12/20/2019:

• RMDs delayed to 72 from 70.5;

• IRA contributions may continue past age 70.5 (Earned income requirements still apply.);

• Most non-spouse IRA beneficiaries must distribute all funds by end of 10th year after IRA owner’s death;

• 401(k) plans may offer annuities;

• 529s may be used for apprenticeships, student loan payments, and other elementary & secondary education costs;

• Children’s unearned income taxed at parent’s marginal tax rate;

• Several changes to employer retirement plans making them more accessible and cost effective.

CARES ACT (Coronavirus Aid, Relief, and Economic Security) 3/27/2020:

• 2020 RMDs for IRAs & 401(k)s suspended;

• Based on the 2019 tax return (2018 if not filed), many individuals will receive up to $1,200 (phased out beginning at $75,000 of AGI for single filers & $150,000 for joint), plus $500 per child 16 or under.

  • Caveat- payment is an advance on a 2020 refundable tax credit;

• The April 15th tax filing deadline moved to July 15th (SWM ALL CLIENT EMAIL 3/27/2020);

• First quarter 2020 estimated tax payments are postponed to July 15th;

• For tax filers who itemize, 2020 charitable deduction limit increased; for those using the standard deduction, up to $300 may now be deducted for AGI;

• Unemployment benefits expanded to the self-employed, independent contractors, and others; increased by $600/week up to 4 months;

• 401(k) loan limit increased to $100,000 from $50,000;

• 10% early withdrawal (up to $100K) penalty from retirement plans waived for coronavirus-related purposes, retroactive to January 1st; may claim this income over 3-years;

• Coronavirus-related retirement fund distributions may be repaid within 3 years;

• Federal student loan payments & interest accrual suspended until September 30th;

• Paycheck Protection Program helps small businesses make payroll and cover other expenses (www.sba.gov).

*Please consult your tax preparer or CPA for guidance on your specific situation or for information on additional provisions.