Some Notable CARES & SECURE Act Changes

September 23, 2020

The CARES Act and the SECURE Act (passed in December 2019) had provisions that could affect you in 2020.  This post reviews some of the changes for informational purposes only. You should discuss your impact with a qualified tax professional.


Under the Coronavirus Aid, Relief, and Economic Security (CARES)Act, many Americans received direct economic recovery rebate payments of $1,200 ($2,400 for couples filing jointly), plus $500 more for each child under age 17. The payments started to phase out for joint filers with adjusted gross incomes above $150,000, head-of-household filers with adjusted gross incomes (AGIs) above $112,500, and single filers with AGIs above $75,000. Technically, the rebate is an advance payment of a special 2020 tax credit. You'll reconcile your rebate on your 2020 return. If you received a rebate please alert your tax preparer!


There were several changes for retirement plans in 2020 from the SECURE Act which was signed into law late in 2019.  The CARES Act also included a few stipulations that affected retirement accounts. Both acts significantly impact required minimum distributions (RMDs). One notable change is that under the SECURE Act, the beginning age for taking RMDs changes from 70½ to 72. (This change only applies to account owners who turn 70½ after 2019.) Reminder:The CARES Act allowed you to not take your RMDs in 2020.  If you took an RMD in 2020, you had till August 31, 2020 to roll that distribution back into your IRA and this roll back was not subject to the 60 day or one per year rule.

The SECURE Act also provided that:

  • People with earned income can make contributions to Traditional IRAs past the age of 70½ starting in 2020.
  • Anyone having a baby or adopting a child can now take payouts from IRAs and 401(k)s of up to $5,000 without having to pay the 10% fine for pre-age-59½ withdrawals.
  • Beginning in 2020, fellowships, stipends or similar payments to graduate or post-doctoral students are treated as compensation for purposes of making IRA contributions.

Perhaps one of the biggest changes from the SECURE ACT was that the rules for withdrawing money from inherited IRAs and workplace retirement accounts were tightened and now most inherited retirement accounts need to be fully distributed within 10 years of the death of the IRA owner or 401(k) participant. This new rule is somewhat complex and requires some planning.  Also, there are some exceptions, so please call us or see a tax professional for details.  (Please note: Inherited IRAs from individuals who died before 2020 aren't affected by this change.)

In addition to the RMD suspension mentioned above, the CARES Act includes a few other key retirement-related tax breaks for 2020 including:

  • Waiving the 10% penalty on pre-age-59½ payouts from retirement accounts for up to $100,000 of coronavirus-related payouts. A coronavirus-related distribution can also be included in income in equal installments over a three-year period, and you have three years to put the money back into your retirement account and undo the tax consequences of the distribution.
  • Allowing eligible individuals to borrow more from workplace plans such as 401(k)s—up to the lesser of $100,000 or 100% of the account balance—until September 23, 2020. Repayments on retirement plan loans due in 2020 are also delayed for one year.


The CARES Act created a new charitable deduction available to taxpayers who do not itemize their deductions in 2020. This new benefit known as a universal deduction, allows for an above the line charitable deduction of up to $300 per individual ($600 for married filing jointly).  To qualify, the charitable gift must be cash (or cash equivalent) made to a qualified charity (501(c)(3)). This contribution must be made on or before 12/31/2020.

For those who are itemizing, in 2020, the CARES Act allow you to take deductions up to 100% of your 2020 AGI (up from 60%) for cash contributions to qualified charities.