The Senate Coronavirus emergency relief legislation, known as the “Coronavirus Aid, Relief, and Economic Security (CARES) Act”, contains numerous tax cuts that will offer individuals and businesses much needed liquidity during the pandemic.
According to the Joint Committee on Taxation, the legislation reduces taxes for businesses by $275 billion over the budget window. In all, the bill cut taxes by almost $600 billion.
These broad-based tax cuts will give businesses the flexibility to meet expenses including payroll during this unprecedented economic and health crisis. Not only will this ensure individuals continue getting paid, but the tax cuts will also give Americans flexibility over retirement accounts and charitable contributions.
Specifically, the bill:
- Allows businesses to carryback losses incurred in 2018, 2019, and 2020 for five years.
- Broadens the ability of businesses to deduct net interest expenses from 30 percent of EBITDA (earnings before interest, tax, depreciation, and amortization) to 50 percent of EBITDA for 2019 and 2020.
- Fixes the “retail glitch” so that qualified improvement property can be immediately deducted instead of depreciated over 39.5 years.
- Allows companies to delay paying 50 percent of employer payroll taxes until 2021 and 2022.
- Creates a 50 percent employer payroll tax credit from March 13 to the end of 2020. Credit is capped at $10,000 of wages per employee per quarter.
- Creates an above the line charitable deduction of $300 for 2020.
- Waives required minimum distribution rules for 2020.
- Allows penalty free distribution of $100,000 from retirement account for coronavirus distributions.