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Technical Tax Aspects of CARES Act

Posted by Admin Posted on Apr 07 2020

The CARES Act has changed the life of Qualified Improvement Property (QIP) from 39 years to 15 years, thus making it eligible for bonus depreciation.  This is a technical correction for the QIP issue and is a retroactive change, back to January 1, 2018. 

  • QIP is any improvement to an interior, non-structural portion of a commercial building.

 

IRA distributions up to $100,000 made in 2020 will not be subject to the 10% early withdrawal penalty if it’s a “coronavirus-related distribution”.  It is still subject to Federal and state income tax, however.

  • The CARES Act also removes the requirement for Required Minimum Distributions for 2020.

 

Starting in 2020, a taxpayer is able to deduct up to $300 for charitable contributions, even if they do not itemize deductions on their Federal income tax return.

  • This is a permanent change.
  • If they do itemize, then all of the charitable contributions must be deducted below the line and reported on Schedule A.

 

For 2020 only, donations made to charities that are subject to the 60% AGI limit are now allowed up to 100% of AGI for 2020.

  • For corporate donors, the limit is increased from 10% to 25%.

 

The Tax Cuts and Jobs Act (TCJA) changes to NOL loss carrybacks and carryforwards have been temporarily replaced.

  • Losses from 2018 - 2020 may be carried back for up to 5 years (instead of no carryback allowed by TCJA).
  • Losses carried forward to 2019 or 2020 may be used to offset 100% of taxable income (instead of the 80% rule put into place by the TCJA).

 

The TCJA rules regarding limitations on excess business losses have also been repealed for 2018 - 2020.

  • Instead of the limit to $250,000/$500,000 on losses, no limit exists.

 

The 30% limit on business interest expense is raised to a limit of 50% for 2019 and 2020.

  • In 2020, the adjusted taxable income calculation will be based on the higher of 2019 or 2020 adjusted taxable income.