Coronavirus Aid, Relief, and Economic Security (CARES) Act — Summary

by Maureen Demers on

RECOVERY REBATES

$1,200 for individuals; $2,400 for married couples + $500 per child under 17

Phase-out based on income (AGI) on 2019 tax return; if 2019 tax return has not been filed, based on AGI on 2018 tax return

  • $150,000 for married filing jointly (phase-out to $0 at $198,000)
  • $75,000 for individuals (phase-out to $0 at $99,000)
  • To be paid “as soon as possible,” but not likely before May
  • Social Security recipients to where they get SS checks
  • Direct deposit to wherever taxpayer received 2018/2019 refund
  • Otherwise sent to last known address on file

If underpayment of rebate based on 2020 income/tax return, additional rebate paid next year. If overpayment, no adjustment on “excess” payment.

DISTRIBUTIONS FROM RETIREMENT ACCOUNTS

  • Allows withdrawals from IRA’s or employer retirement plans up to $100,000 in 2020 if experiencing adverse financial consequences of COVID-19
  • Exempt from 10% early withdrawal penalty
  • Not subject to mandatory tax withholding
  • Eligible to be repaid over 3 years
  • Withdrawals are taxable; income can be spread over 3 years

Loans from employer-sponsored retirement plans expanded

  • Maximum loan increased from $50,000 to $100,000
  • Repayments delayed for up to one year

Mandatory RMD’s suspended for 2020

  • Applies to IRA, 401(k), 403(b), Inherited IRA
  • RMD’s may be able to be “returned” : If RMD already taken within 60 days, RMD can be “returned”; If RMD taken beyond 60 days, RMD can be “returned” if individual can show negative impact from COVID-19; “Return” option not available for beneficiaries of Inherited IRA’s who have already taken their RMD in 2020

UNEMPLOYMENT COMPENSATION

Eligibility extended beyond W-2 employees to self-employed and contractors and people who have been furloughed

Elimination of 1-week waiting period

Regular” state unemployment benefit increased by $600/week for up to 4 months; paid by Federal government ($425 in DC pending)

Extension of benefits for additional 13 weeks

RELIEF FOR STUDENT BORROWERS

No payments required until September 30, 2020; no interest during the interim
Must be proactive to stop payments; not automatic
Employers can exclude student loan repayments from compensation

HEALTH-CARE RELATED RULES

Definition of medical expenses expanded for HSA’s and FSA’s —

  • Includes over-the-counter medication
  • Includes menstrual care products

Medicare beneficiaries eligible for COVID-19 vaccine (when available) at no cost

Telehealth services may be temporarily covered by an HSA-eligible HDHP before a participant has met their deductible

NEW “ABOVE-THE-LINE” CHARITABLE DEDUCTION

There is a new “above-the-line” deduction for up to $300 of qualified charitable deductions (for taxpayers who do not itemize)

SMALL BUSINESS PROVISIONS

There are a variety of provisions in the CARES Act pertaining to small business, but this summary focuses on those provisions that will have a direct impact on individuals.