CARES Act – Tax Changes for Individuals & Businesses
By George C. Zumbano
The CARES Act signed March 27, 2020, providing $2 trillion in emergency relief, includes a number of business and individual tax provisions, including:
Business Tax Relief
- Permitting qualifying employers to delay payment of the employer’s share of social security taxes through December 31, 2020. Fifty percent of the deferred payments would be due by December 31, 2021, and the remaining 50% by December 31, 2022. The same provisions apply for payments of the self-employment tax by self-employed persons. Employers who receive Paycheck Protection Loans under the CARES Act are not eligible to defer their payroll tax obligations if the loans are forgiven under the provisions of the CARES Act.
- Allows qualifying employer payments of student loans on behalf of employees as an exclusion from the employees’ taxable income.
- Increases the limitation for charitable deductions by corporations from 10% to 25% of taxable income and increases the limitations on deductions for contributions of food inventory from 15% to 25%.
- Permits eligible employers (including non-profits) payroll tax credits for up to 50% of employee wages up to $10,000 per employee (a maximum credit of $5,000 per employee). For employers with fewer than 100 employees, the credit applies to all employees. For employers with more than 100 employees, the credit applies to employees who are retained but are not working.
Individual Tax Relief
- Permits a $300 above-the-line deduction for non-itemizing individuals beginning in tax year 2020 and, in the same year, begins suspending 60% limitation of adjusted gross income for individual charitable contributions.
- Provides a rebate of $1,200 for individuals of their 2019 adjusted gross income subject to a phase out beginning at $75,000. Provides rebates of $2,400 for joint filers of their 2019 adjusted gross income, subject to phase out beginning at $150,000.
This summary involves complex and evolving topics for which there are multiple exceptions and limitations (CARES Act is nearly 900 pages in length). You should consult your tax and legal advisors before implanting any of the strategies listed above.
The lawyers at Lamb McErlane are available to help you and your businesses with any questions and guidance regarding the CARES Act and COVID-19 issues. Contact us at 610-430-8000. www.lambmcerlane.com
George C. Zumbano focuses his practice representing businesses, individuals, and institutions in business and litigation matters. He practices in the fields of Commercial and Business Litigation, Personal Injury and Malpractice Litigation, Employment and Personnel Matters, Business Law, Estates and Trusts Litigation, Education Law, Estate Planning & Administration. firstname.lastname@example.org. 610-701-4435.
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