New Tax Planning Opportunities 2020- Your Stimulus Check
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides a recovery rebate credit. In other words, a stimulus - $1,200 for individuals, $2,400 for Couples and $500 per child. If your Adjusted Gross Income (AGI) was under $150,000 for joint filers, $112,500 for Head of Household, or $75,000 for everyone else, you have probably already received a stimulus. If you made more than these AGI limits, you might have received a portion of the credit, because there is a phase-out provision at an interval of every 5% over said limits.
To expedite the delivery of these checks to taxpayers, the calculated amounts were projections, based on their respective AGI for 2018 or 2019, depending on when they filed their 2019 tax returns.
An important thing to note is that your eligibility is still based on your AGI for 2020! That means that if your AGI in 2020 is larger than the phase-out limitations, you might have received a larger credit than what you are eligible for, but take a deep breath - according to a Congressional Research Service Report , the CARES Act does not require that you repay any such advanced credit amounts!
If you had a higher income on your 2018 or 2019 returns, which phased out or completely disqualified you from receiving a stimulus, there is an exciting opportunity for you. Deploying tax planning strategies to reduce your 2020 AGI under the limitations could qualify you for a stimulus! This would be in the form of a credit on your 2020 tax filing!
One of the biggest opportunities that you have is to reduce your AGI and maximize your recovery refund - by increasing your retirement contributions. Some other options include forgoing your retirement distributions, claiming a college student as a dependent for an additional year and being more charitable in 2020.
To learn which tax planning opportunities for 2020 are available to you specifically and how they might affect you, call or e-mail us!