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Investors benefit from historic stimulus

Capitol

The $2 trillion emergency spending bill passed by Congress and signed by President Trump includes several provisions of interest to investors and retirees.

Chris Evers and Patrick Weyer compiled some highlights, based on what was known at the time the bill was signed into law. Some of the sources Chris and Patrick used are below.

To learn how any of the provisions apply to you individually, please consult with your investment advisor as well as a tax professional, if appropriate.

Summary of provisions

RMD holiday

  • Required minimum distributions have been suspended for 2020.
  • This applies to both participant IRAs and previously inherited IRAs using the so-called stretch provision.
    • Newly inherited IRAs are not affected because the distribution countdown does not begin until the year following original owner’s death.
    • Beneficiaries inheriting an IRA this year will still need to liquidate their entire inherited IRA by the end of 2030.
  • Individuals who turned 70½ in 2019 and delayed their first distribution into 2020 will not be required to take that distribution.
  • Individuals who already satisfied their 2020 RMD may be allowed to recontribute to their IRA, but the recontribution would be classified as a rollover. Specific details are pending.

Contribution deadline extended

The deadline for IRA contributions is extended to July 15, 2020.

  • This was not part of the bill, but a ruling from the IRS as part of a decision to delay the tax-filing deadline.
  • Both federal and Wisconsin state contribution deadlines are July 15, 2020.
  • Not all states have extended their deadlines so far.

Payments to taxpayers

  • The stimulus included a $1,200 payment per individual, $2,400 per joint tax filing. Payments are phased out between incomes of $75,000 and $99,000 for individuals and $150,000 to $198,000 for joint filers.
  • Heads of household receive $1,200 payments each, phased out between $112,500 and $136,500.
  • Payments include an additional $500 for each child 16 and younger.
  • Payments are based on 2019 income (or 2018, if 2019 is not available).
  • Credit can be claimed on 2020 tax returns if 2020 earnings would qualify someone who would not otherwise be eligible.

Charitable contribution change

  • A new deduction was created for up to $300 cash charitable contributions.
    • Taxpayers do not need to itemize in order to receive the deduction.
    • The contributions cannot be used to fund a donor-advised fund.
  • For filers who itemize, the law waives the 60% adjusted gross income limit on deductible cash contributions, excluding contributions to donor-advised funds.
Sources:
The Tax Foundation 
The Journal of Accountancy 
Senate Bill 3548

Chris Evers is a registered representative at Landaas & Company.

Patrick Weyer is a registered representative at Landaas & Company.

(initially posted March 27, 2020)

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