Coronavirus Tax Strategies

Review the lists of Short Term and Long Term Strategies

SHORT TERM

•  Farm tax losses – Realize capital losses and perhaps repurchase other securities to generate future tax deduction instead of letting the portfolio rebound and not have future losses to offset against future gains

•  Fund retirement plan while the market is low and recovering

• Businesses take advantage of payroll tax breaks

• Consider loans and withdrawals from retirement as source of cash

LONGER TERM

Additional Tax Deductions and Strategies

• Net operating losses (NOLs) arising in 2018, 2019 and 2020 to be carried back five years and suspending the 80% taxable income limit until 2021
• Increasing the taxable income threshold for the Section 163(j) limit on the interest deduction from 30% to 50% for tax years beginning in 2019 and 2020 and allowing taxpayers to use 2019 taxable income to calculate the 2020 limit
• Corporations to claim refunds for all remaining AMT credits in 2018 and 2019
• Correcting an error in TCJA that prevented qualified improvement property (QIP) from qualifying for 100% bonus depreciation
• Suspending payment requirements for the 6.2% employer portion of Social Security taxes from the date of enactment through the end of 2020, with half the balance due by the end of 2021, and the other half due by the end of 2022
• Creating a new refundable employee retention credit of up to $5,000 for paying wages while business operations are suspended, or if gross receipts for a business drop by 50%
• Increasing the taxable income limit on corporate charitable deductions from 10% to 25% and contributions of food inventory from 15% to 25%
• Suspending the limit on excess business loss deductions under Section 461(l) in 2018, 2019 and 2020 so that it takes effect for the first time in 2021
• Suspending 2020 funding obligations for single-employer defined benefit pension plans until Jan. 1, 2021 (with interest due) and allowing pensions to use the prior year’s status for certain benefit restrictions
• Waiving early withdrawal penalties for up to $100,000 in COVID-19-related withdrawals from qualified retirement accounts, and allowing it to paid back or included ratably in income over three years
• Doubling the amount taxpayers can borrow from certain qualified retirement accounts to $100,000
• Suspending required minimum distributions for 2020
• Allowing an above-the-line deduction for up to $300 in charitable contributions for taxpayers who do not itemize deductions in 2020
• Removing the AGI limit on individual itemized deductions for charitable contributions in 2020
• Excluding employer student loan repayment assistance of up to $5,250 from income in 2020
• Permanently restoring the ability for taxpayers to use health savings accounts and flexible spending arrangements to purchase over-the-counter medicine
• Delaying IRA and other retirement funding until 7/15/20
• Delaying HAS funding until 7/15/20

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