Individual Highlights of COVID RELATED TAX RELIEF ACT OF
2020 (As passed by Congress with Veto Proof Majority)
[H.R. 133 Excerpt Summary]
Additional 2020 Recovery Rebates for Individuals. The provision provides a refundable tax credit in the amount of $600 per eligible family member. The credit is $600 per taxpayer ($1,200 for married filing jointly), in addition to $600 per qualifying child. The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married filing jointly) at a rate of $5 per $100 of additional income.
Educator Expense Tax Deduction Includes PPE. Includes personal protective equipment and other supplies used for the prevention of the spread of COVID-19 are treated as eligible expenses for purposes of the educator expense deduction. Retroactive to March 12, 2020.
Reduction in Medical Expense Deduction Floor. The provision makes permanent the lower threshold of 7.5 percent for all taxpayers, originally restored for 2017 and 2018 and then extended for 2019 and 2020.
Transition from Deduction for Qualified Tuition and Related Expenses to Increased Income Limitation for Lifetime Learning Credit. The qualified tuition deduction is capped at $4,000 for an individual whose AGI does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers). After 2020, the provision repeals the qualified tuition deduction and replaces it by increasing the phase-out limits on the Lifetime Learning credit from $58,000 ($116,000 for joint filers) to $80,000 ($160,000 for joint filers). In the vast majority of circumstances, these increased phase-out limits hold harmless those taxpayers who would have otherwise benefited from this deduction.
Benefits Provided to Volunteer Firefighters and Emergency Medical Responders. The provision makes permanent the exclusions for qualified state or local tax benefits and qualified reimbursement payments provided to members of qualified volunteer emergency response organizations and increases the exclusion for qualified reimbursement payments to $50 for each month during which a volunteer performs services. This provision was originally reinstated for 2020 in the SECURE Act.
Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness. The provision extends, through 2025, the exclusion from gross income for a discharge of qualified principal residence indebtedness. The provision reduces the maximum amount that may be excluded from $2,000,000 to $750,000. Generally, indebtedness must be the result of acquisition, construction, or substantial improvement of primary residence.
Nonbusiness Energy Property. The provision extends through 2021, a credit for purchases of nonbusiness energy property. The provision allows a credit of 10 percent of the amounts paid or incurred by the taxpayer for qualified energy improvements to the building envelope (windows, doors, skylights, and roofs) of principal residences. The provision allows credits of fixed dollar amounts ranging from $50 to $300 for energy-efficient property including furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners, and circulating fans, and is subject to a lifetime cap of $500.
Temporary Special Rule for Determination of Earned Income. The provision allows taxpayers to refer to earned income from the immediately preceding year for purposes of determining the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) in tax year 2020.
Modification of Limitations on Charitable Contributions. This provision extends for one year the increased limit (60% to 100% for certain cash donation to qualifying charities) from the CARES Act on deductible charitable contributions for corporations and taxpayers who itemize.
Certain Charitable Contributions Deductible by Non-Itemizers. This provision extends and modifies the non-itemizer charitable deduction for 2021. The provision increases the maximum amount that may be deducted such that married couples filing a joint return may deduct up to $600 (while non-married filers or married filers who file separately are limited to $300).
Special Disaster Related Rules for Use of Retirement Funds. The provision provides an exception to the 10 percent early retirement plan withdrawal penalty for qualified disaster relief distributions (not to exceed $100,000 in qualified disaster distributions cumulatively). Amounts withdrawn are included in income ratably over 3 years or may be re-contributed to a retirement plan to avoid taxable income and restore savings. It also allows for the re-contribution of retirement plan withdrawals for home purchases cancelled due to eligible disasters, and provides flexibility for loans from retirement plans for qualified disaster relief.
Source - Committee of Finance and HR 133
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