The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, provides critical relief for many individuals and businesses. Additionally, state and local governments have responded in providing tax relief as well during these unique and challenging times. While there is a myriad of changes to keep track of, we want to highlight of some of the changes that may affect your individual tax and estate planning.

Retirement Accounts:

  • Required minimum distributions are waived for 2020.
  • The 10% excise tax otherwise levied on early distributions from retirement plans is waived for certain plans. This waiver applies to distributions made in 2020 and only when an individual, their spouse or dependent is diagnosed with COVID-19. The 10% tax is also waived for those experiencing financial hardship because of quarantine or other factors related to COVID-19.

Charitable Contributions:

  • For 2020, the deduction percentage limitation for charitable contributions of cash is removed for individual taxpayers. While charitable contributions were previously limited to a maximum of 60% of adjusted gross income, in 2020 qualified contributions of cash will be deductible to the extent that the aggregate of such contributions for the year does not exceed 100% of taxpayer’s AGI.
  • Taxpayers who do not itemize can take an above-the-line deduction of up to $300 for qualified charitable contributions in 2020.

Income, Gift Tax, and Generation-Skipping Transfer (GST) Tax Returns:

  • The due date for filing income tax, gift tax, and GST tax returns, and the payment of the taxes otherwise due on April 15, has been postponed to July 15, 2020. This postponement is automatic and an extension need not be filed. There will be no penalties or interest that typically apply when a person files or pays later than the usual deadline.
  • This extension does not apply to the filing of estate tax returns or the payment of estate tax owed.

Real Property Tax Payments:

  • King, Pierce, and Snohomish Counties (Washington State) have extended their real property tax payment deadline from April 30, 2020 to June 1, 2020. These new deadlines only apply to individual residential and commercial property owners who pay their taxes directly, not through their mortgage lender.