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Highlights of the CARES Act

Record bill passed to combat COVID-19 

By Nick Spoltore, Esq.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H.R. 748 (the Act)) was enacted into law on March 27, 2020. It contains many tax provisions that impacts your practice and life immediately as our nation and world combats the COVID-19 pandemic.
Here are highlights of the major tax law changes contained in the historic $2.2 trillion bill.


As you know, Qualified Improvement Property should have been provided a 15-year recovery period under the Tax Cuts and Jobs Act of 2017 (TCJA). The text was inadvertently left out and QIP was ineligible for 100% bonus depreciation. The Act fixes the TCJA error and designates QIP as 15-year property for depreciation purposes, a category eligible for 100% bonus depreciation. This change is effective for property placed in service after Dec. 31, 2017.
However, you’re out of luck on bonus depreciation if you elected out of Section163(j).

Increase of Section 163(j) limit 

The Act increases the limitation in Section163(j) from 30% to 50% for tax years beginning in 2019 and 2020. The limitation will not apply to partnership partners in 2019. Special rules apply for the treatment of excess business interest allocated to a partner in any tax year beginning in 2019. In addition, a taxpayer may elect to calculate the interest limitation for the tax year beginning in 2020, using the adjusted taxable income for the last tax year beginning in 2019 as the base. For partnerships, the election must be made by the partnership.

Section 461(l) deferral

The Act suspends the $250,000/$500,000 loss limitation for noncorporate taxpayers. Excess business losses arising in 2018, 2019 and 2020 can be deducted.


For tax years beginning after Dec. 31, 2017, the Act temporarily removes the 80% of taxable income limitation so that net operating loss (NOL) fully offsets income. In addition, NOLs arising in a tax year beginning after Dec. 31, 2018, and before Jan. 1, 2021, may be carried back five years.

Employer payroll taxes

The Act allows taxpayers to defer paying the employer portion of certain 2020 payroll taxes effective for payments due after the Act’s enactment. Half are due on Dec. 31, 2021, with the remainder due on Dec. 31, 2022.

Payroll tax credit

The Act provides a refundable payroll tax credit for 50% of wages paid by certain employers to certain employees during the COVID-19 crisis. The credit is available to employers whose operations have been fully or partially suspended or whose quarterly receipts declined more than 50% year over year.
Other restrictions apply, and the number of full-time employees is relevant. Wages include health benefits and are capped at the first $10,000. This credit applies to wages paid after March 12, 2020, and before Jan. 1, 2021.

Rebate checks

The Act provides a refundable credit for 2020 equal to $1,200 ($2,400 for individuals filing joint returns) plus $500 for each qualifying child of the taxpayer. Phaseout occurs at $75,000 to $99,000 for a single filer, $150,000 to $198,000 for a joint return with no children, and $112,500 to $146,500 for head of household with one child.
These direct payments are arguably the most talked about provision in the entire legislation. Receipt of unearned, untaxed money will undoubtedly be a pleasant topic welcomed by your clients and similarly will create goodwill to augment your bottom line.

No penalty for coronavirus-related retirement plan distributions

Any 2020 coronavirus-related distribution up to $100,000 from an eligible retirement plan will not incur the Section 72(t) 10% additional tax and may be included in income over three years. Distributions can also be contributed back to an eligible retirement plan within the three-year period.

No 2020 RMDs

IRAs and certain defined contribution plans will have no required minimum distributions for 2020.
There are other tax-related topics not covered in this short overview, including eligible student loan payments, donations of food inventory, limitations on cash contributions, and an above the line $300 charitable contribution, among others.

Time to dig in

This article was written with a broad brush due to the length and complexity of the Act. But more about the Act is forthcoming, including Surgent webinars through the MNCPA that will comprehensively present the Act’s topics with the full amount of detail they are due.
It’s imperative to understand the ins and outs of the Act so you have the info you need for your clients’ tax consultation, preparation, and planning.
Nick Spoltore is VP of tax & advisory content for Surgent CPE. Nick is a graduate of the University of Notre Dame and Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and Delaware.

CARES Act Webinars

The new Coronavirus Aid, Relief, and Economic Security (CARES) Act aims to offset the economic impact of COVID-19 and includes major tax changes for individuals and businesses. Learn the latest with these new webinars.
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