Written By:  Amanda L. Herrick Smith, CFP®



The CARES Act along with the recent market volatility has led to some interesting tax planning opportunities for individuals to consider this year. The following are three recommendations that may help to ease the financial impact of the pandemic.


  1. Roth Conversions – As a result of the CARES Act, 2020 Required Minimum Distributions (RMDs) are not required for most retirement plans as noted in Section 2203 of the CARES Act. This means that if you were previously required to take RMDs you may now want to consider converting the portion you would have taken to a Roth IRA. Since taxes are paid on the amount converted to a Roth, in the tax year the conversion occurs, the withdrawals taken in retirement are not taxable. In addition, the growth of the Roth IRA is tax free creating a great opportunity to put away money for the next generation or establish another savings bucket in retirement to dip into where taxes will not be incurred.


  1. Stock Gifts – If you have highly appreciated stocks, gifting the shares of these stocks to a family or friend that are subject to the zero long term capital gains rates, can be a home run! According to the IRS’s website referenced below, “some or all net capital gains may be taxed at 0% if your taxable income is less than $78,750.” If the recipient of the gift also falls within the zero capital gains rate, then he or she can later sell the stock without incurring tax. Kiddie tax rules, and income and annual gifting limits should be considered when exploring this option.


  1. $300 Charitable Cash Donations – Section 2204 of the CARES Act has provided an allowance of a partial above the line deduction for cash charitable donations of no more than $300 that are made to a qualified charity. If you are unable to itemize your deduction because the standard deduction is higher this year, you will be able to reduce your income by any cash charitable donations up to $300. Records and receipts of your qualified charitable donations should be obtained for your 2020 income taxes.


It is important to work with a financial or tax professional to help guide you through these tax planning opportunities. Please consider reaching out to one of the professionals at John G. Ullman and Associates. Inc.



CARES Act:  https://www.congress.gov/bill/116th-congress/house-bill/748/text#toc-H6075B7A0B7B042399AEDB4812A9F51EB

IRS Website:  https://www.irs.gov/taxtopics/tc409