The Coronavirus Aid, Relief and Economy Security Act (CARES Act) is a $2 trillion aid package that was signed into law on March 27, 2020. (Note: If you are a business owner or landlord, we've published an in-depth guide about the various provisions and economic incentives impacting business owners--make sure you request your copy here.)
Here's a summary of the key provisions impacting most individuals and families:
Increased Unemployment Assistance
Retirement Accounts: Early Withdrawals
Increase in Retirement Plan Loan Amount
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Stimulus Check
The CARES Act approved a stimulus check of up to $1,200 per individual plus $500 for every child aged 16 years or younger. There is an income phaseout as follows:
- Single Income Tax Filers: Phaseout begins at $75,000 of adjusted gross income (AGI) with no benefit for those with AGI above $99,000
- Married Joint Income Tax Filers with no children: Phaseout begins at $150,000 AGI with no benefit for those with AGI above $198,000
- Head of Household Income Tax Filers: Phaseout begins at $112,500 AGI with no benefit for those with AGI above $136,500
If you're subject to the phaseout, see this article to help determine what your stimulus benefit will be. We've posted a separate Stimulus Check FAQ here.
Mortgage Forbearance
For those with a federally-backed mortgage, you can ask your lender for a 6-month forbearance on making payments. You can also request a second forbearance. During the forberance period, your lender cannot charge any penalties, interest, or fees that would not have been charged if you had made your payments on time. CAUTION: Please be careful with this. Mortgage forbearance is when your lender allows you to temporarily suspend or lower your mortgage payments, however, the funds still have to be paid at the end of the forbearance!
If you need further guidance, the Consumer Financial Protection Bureau has a Guide to coronavirus mortgage relief options
Renter Protection
The CARES Act provides tenants with a 120-day moratorium on eviction proceedings if you are a tenant in federally-subsidized housing or a dwelling covered by a federally-backed mortgage loan. Landlords also cannot impost any fees or penalties related to nonpayment of rent.
Increased Unemployment Assistance
The CARES Act added an additional $600 per week payment for up to four months for recipients of unemployment. The Act also provides an additional 13 weeks of the $600 per week benefit through December 31, 2020 for those that exhaust state unemployment benefits.
Delayed Tax-Filing Deadlines
Income taxpayers now have until July 15, 2020 to file their 2019 income tax returns.
Student Loans
For those with federal student loans, loan payments are suspended through September 30, 2020 and no interest or penalties will accrue during the suspension period.
Retirement Accounts: Temporary Waiver of Required Minimum Distributions (RMDs) for Certain Retirement Accounts
For those already taking RMDS or that were due to begin RMDs in 2020: The CARES Act waives the RMD requirement for RMDs from 401(k) plans, 403(a) plans, 403(b) plans, 457(b) plans, and IRAs.
Retirement Accounts: Early Withdrawals
The CARES Act created some special withdrawal rules if you fall into one of two categories:
- If you, your spouse, or a dependent have been diagnosed with COVID-19, or
- You have experienced adverse financial consequences due to the pandemic. (Examples: Reduced income due to being quarantined or furloughed, having your hours reduced, being unable to work due to childcare issues, or other issues beyond your control arising from the pandemic.
Then you may withdraw up to $100,000 from retirement accounts such as 401(k) or IRA without having to pay the 10% early withdrawal penalty for withdrawing prior to age 59.5. This waiver is retroactive to January 1, 2020.
A couple of important notes:
- The distribution will still be subject to income taxes, it just won't be subject to the 10% early withdrawal penalty.
- You can spread the tax liability out over the next three years.
- You also have up to three years to "re-contribute" the funds back into your account and reduce some or all of the taxes on the withdrawal.
- 401(k) accounts are also subject to the rules of your particular plan administrator which must also allow the COVID-19 withdrawals.
Increase in Retirement Plan Loan Amount
The tax generally allows loans from 401(a), 401(k), and 403(b) plans up to the lesser of $50,000 or 50% of the participant's vested balance. If such loans are repaid within 5 years, they are not subject income taxes. Under the CARES Act, this threshold has been increased to allow loans of up to the lesser of $100,000 or 100% of the participant's vested balance. To qualify, the loans must be made within 180 days of the enactment of the CARES Act.
In addition, if you already have an outstanding loan and your original repayment was due between March 27, 2020 and December 30, 2020, you can delay your repayment for up to one year, however interest will continue to accrue on the delayed payments.
Download Our SPECIAL REPORT: Estate Planning & Coronavirus
Amid the current coronavirus pandemic, our office has been fielding a lot of questions, so threw together this guide to people understand proactive measures that they can take to protect themselves and their loved ones—even if you already have a plan or if you’re quarantined. Plus, we're sending out periodic updates regarding new laws, stimulus measures, and similar. Request your copy here.