COVID-19 and the CARES Act has created significant changes in the financial planning world. What can you do to adjust your strategy and ensure you’re optimizing your results for your financial future? Here are some of the top points to consider.
Required Minimum Distributions (RMDs)
Ordinarily, retirement account participants were required to begin taking RMDs no later than April 1 in the year which they reach age 70 ½. That has changed:
The CARES Act temporary suspends RMDs through 2020 for all types of retirement plans, including IRAs, 401(k)s, 403(b)s and inherited IRAs.
There are significant changes for retirement distributions:
- Taxpayers can take up to $100,000 in “coronavirus-related” distributions from their retirement plans.
- For those under age 59 ½, distributions are exempt from the 10% early withdrawal penalty.
- In addition, any distributions subject to taxes may be spread out over three years beginning in 2020.
- The qualifying distribution may be repaid to the retirement plan over 3 years.
- Distributions would need to be made before December 31, 2020.
Filing and Payment Postponements
- In addition to the tax filing and payment postponement date, the IRS has extended 2019 contributions to IRAs and HSAs to July 15th.
- Taxpayers still looking to decrease 2019 taxes have the option to contribute to these tax-deferred accounts up until July 15th.
Health Savings Accounts (HSAs)
- The list of eligible expenses for HSAs have been permanently expanded.
- Eligible expenses now include over-the-counter medications, pain relievers and much more. See the full list here.
- The rules for High-deductible plans (HDHPs) have been amended to allow plans to cover telehealth and other remote care services, without charging a deductible.
Student Loan Payments
- The Act suspends payments on federal student loans through September 30, 2020.
- The interest rate on all federally-held student loans is reduced to 0% through September 30, 2020.
- The CARES Act created an Above-the-line charitable deduction for 2020 (up to $300). (This means you can get a $300 charitable deduction, even if you take the Standard Deduction.)
- 2020 Charitable Contribution limits for individuals increased to 100% of AGI
Have questions about how the changes affect your financial planning or how you can maximize the benefits available to you? Contact a Barnes Dennig wealth management expert to help secure your financial future.
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