The CARES Act - Recap and Highlights

CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law on Friday, March 27th to help individuals, businesses, and other entities affected by the COVID-19 pandemic. Below highlights some of the provisions that will affect individuals.

Federal Rebates

The rebate distribution is a maximum of $1,200 per individual plus an additional $500 per child under 17. To qualify for the full rebate your adjusted gross income (AGI) must be under $150,000 for joint ($75,000 for single, $112,500 for Head of Household). If your income is over, the amount of the rebate will be reduced or eliminated. If you have no children under 17, and your income is over $198,000 joint ($99,00 for Single, $136,500 for Head of Household) you will not qualify for a rebate. Income information will come from your most recently filed tax return (2018 or 2019) or your Social Security reported income.

Your AGI can be found on 1040 line 8 (for 2018), line 7b (for 2019), or line 8b for the 1040-SR seniors). Direct deposits and checks are expected to be sent in three weeks.

No Required Minimum Distributions (RMDs) in 2020

Individuals will not be required to take money out of pre-tax retirement accounts (traditional IRAs, 401(k)s, etc.) or inherited retirement accounts (IRAs, Roth IRAs, 401(k)s, etc.) for 2020. Current-year distributions (except inherited retirement accounts) that have already been made can be returned if desired.

We are working through our client list to determine who may be impacted by this and will be reaching out to you in the upcoming weeks.

Retirement Account Distributions

Individuals impacted by coronavirus are allowed penalty-free distributions from retirement accounts (distributions before age 59 ½). If desired, the distributions can be paid back into the account within three years (2022) and the taxable income can be spread over three tax return years (2020, 2021, and 2022). The payback option doesn’t apply to inherited retirement account distributions.

“Impacted individuals” includes a wide array of people, including individuals (or their family) diagnosed with COVID-19 and individuals that lost hours or their job due to COVID-19.

Other Miscellaneous Individual Provisions

• Health insurance (including Medicare) cannot charge for COVID-19 testing or a vaccine (when a vaccine becomes available).
• Unemployment benefits have been adjusted to start earlier, have a higher maximum, and last longer than was previously the case. Contractors, self-employed, and freelancing individuals who normally would not qualify for unemployment benefits are now eligible.
• Federal student loan payments are not required through September 30th, 2019. No penalties or interest will be charged for these types of student loans.
• For individuals that do not itemize, they can deduct up to $300 of charitable donations from their income. The gift must be cash given directly to the charity.

Note: Not all the provisions of the CARES Act are covered here. NPR has an article that discusses other provisions:

https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-tri...