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Update on COVID-19 Tax Provisions for Individuals

For more information on how we can help you and your business, visit our COVID-19 Resource Center.

Many clients have contacted us inquiring about their estate plan. We want to assure you that we are fully functional during this time and available to assist you with your personal and business legal needs. We hope that you and your family are well.

We’d also like you to be aware of recent actions the federal and California governments have taken in response to the unprecedented challenges Americans are facing. See below for some of the key provisions of recent legislation, including from the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

1. Tax Return Filing and Payment

The federal government has extended the time to file income and gift tax returns and pay the related taxes until July 15. California has also extended the deadline to file and pay income taxes to July 15.

2. California Property Taxes

The deadline to pay California property tax installments generally remains April 10. However, some counties, including San Francisco and Kern, have extended the deadline to May 4, and many counties have announced procedures for waiving late payment penalties.

3. $1,200 Rebates/Checks for Individuals

The CARES Act provides for payments of a tax credit of up to $1,200 per individual, subject to income limitations.  The credit phases out above adjusted gross income of $75,000 ($112,500 for head of household filers, $150,000 for married joint returns).  The IRS intends to send these payments via direct deposit when possible, based on banking information as listed on taxpayers’ tax returns.

4. Special Rules for Use of Retirement Funds in 2020

For retirement plan distributions, the CARES Act provides an exception to the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-affected individuals. Income from such distributions will be recognized over three years, and taxpayers can recontribute funds to an eligible retirement plan in the first year or within three years without regard to the year’s contribution cap. For coronavirus-affected individuals, loan limits from retirement plans would be increased from $50,000 to $100,000 and the repayment deadline is delayed for loans that are due in 2020.

5. Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts

In general, required minimum distribution (“RMD”) rules require that taxpayers withdraw minimum amounts annually after reaching age 72 (70½ before 2020). The CARES Act waives the minimum distribution requirements for 2020. The CARES Act does not have provisions for distributions already taken in 2020.

6. New Above the Line Charitable Contribution Deduction for Non-Itemizers

The CARES Act provides for an above-the-line deduction for charitable cash contributions of up to $300 for taxpayers not itemizing deductions.

7. Modification of Limitations on Charitable Contributions During 2020

Income limits apply to both individual and corporate charitable contribution deductions. The CARES Act suspends income limit on cash contributions for individuals for 2020. The increased limits do not apply to contributions to private foundations and donor-advised funds.

This Client Alert is not intended to be an exhaustive list or description of all of the tax provisions in recent legislation and government action.

About JMBM’s Trusts & Estates Group
JMBM’s Trusts & Estates attorneys focus on estate planning, wealth transfer planning, trust administration and the resolution of trust disputes. Our firm has one of the most active trusts and estates practices in California and is recognized by U.S. News & World Report / Best Law Firms® with a National First-Tier ranking. Our trusts and estates clients include individuals and families, and their business interests. See for more information.