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Astoria Strategic Wealth

C.A.R.E.S. - Part V - Other Provisions

While the bulk of the C.A.R.E.S. Act addresses the recovery rebates, retirement account distributions, unemployment insurance and small business assistance, there are other changes and allowances made that will have an impact on many individuals. Some of those changes and items are explained below.

Charitable Contributions

In an effort to encourage charitable giving during this time of need, the C.A.R.E.S. Act has created new incentives in the hopes of leading to more giving.

The act has installed a new “qualified charitable contribution” element that permits Americans to deduct up to $300 in cash contributions as long as those contributions go directly to a 501(c)(3) charity. The deductions are not allowed if the contribution goes to a donor advised fund. This deduction is not limited to those that itemize. It is allowed for those that take the standard deduction.

The C.A.R.E.S. Act also changes the limit for charitable deductions for cash contributions to charities. Normally, individual taxpayers may only deduct cash contributions up to 60% of their adjusted gross income. The C.A.R.E.S. Act suspends the limit for 2020, allowing taxpayers to deduct cash contributions up to 100% of their adjusted gross income. Corporations also see a limit increase. Previously, corporations could deduct cash contributions to a charity only up to 10% of the corporation’s taxable income. This act increases that limit to 25% of taxable income.

The C.A.R.E.S. Act additionally increases the deduction limit for the charitable contribution of food from the taxpayer’s business. The limit, previously 15% of taxable income, has been increased to 25% of the taxpayer’s taxable income.

Student Loans

Among many concerns for Americans is the continued ability to pay back student loan(s) during the time of the pandemic.

The C.A.R.E.S. Act allows for the deferral of all student loan payments until September 30, 2020. Until that date, interest will not accrue to allow those with loans to redirect cash flow to living expenses if needed. This suspension is only for required payments. If automatic, voluntary payments are currently set up, it is the responsibility of the individual with the loan to stop those payments. Note that the months of the suspension will still count as qualifying payments for those working towards loan forgiveness. Debt collections for federal student loans are also suspended at this time.

Pells Grant recipients also see relief from this bill. There is no repayment required by the recipients as long as the student had to leave school due to the Coronavirus crisis. In addition, the term in which they left would not count towards the term limit on receiving the grant.

Finally, the C.A.R.E.S. Act allows employers to contribute up to $5,250 annually towards an employee’s student loans on a tax-free basis. This amount would be excluded form the employee’s income. This applies until January 1, 2021.

Healthcare

Healthcare has been at the front and center of all of our minds during this crisis. This includes not only concern for the health and safety of our healthcare providers and emergency response teams, but also for access to and affordability of healthcare for ourselves and our loved ones.

The biggest and most impactful change is the expansion of the term Medical Expenses. The term now encompasses over the counter medication and menstrual products and allows those enrolled in Health Savings Accounts (HSA), Flexible Spending Accounts (FSA), and Health Reimbursement Accounts (HRA) to pay for these items with funds from these accounts. The C.A.R.E.S. Act also allows High Deductible Health Plans to pay for telehealth services without impacting HSA eligibility. The telehealth eligibility without impact will extend through December 21,2021.

Finally, the act makes some changes to the current Medicare system as well. Participants enrolled in Medicare Advantage Part D will be able to receive a 90-day supply of their prescribed drugs that are covered under Part D. In addition, while it has not been developed yet, the COVID-19 vaccine will be available to those with Medicare at no cost.