Highlights of the CARES Act

Late last week the senate passed and the President signed the CARES stimulus package designed to, among many things, curb the financial turmoil created in the wake of the Coronavirus. This $2.2 trillion, 800+ page legislation offers meaningful help to investors, business owners, and those directly impacted by layoffs or the virus.

Using several sources we’ve compiled a list of some of these benefits that our clients might find most helpful. If one stands out to you, please reach out to us and we’ll be happy to walk through how it might apply to your situation. We’d also recommend connecting with your CPA regarding tax-related items.

Here are some of the highlights:

Retirement Accounts

Waived RMDs – Required Minimum Distributions (RMDs) will be waived for 2020 for retirees and beneficiary IRA Retirement Accounts, regardless of impact from Coronavirus. This applies to inherited retirement accounts, including inherited ROTHs.
No Early Withdrawal Penalties – The early withdrawal penalty of 10 percent for those under 59.5 taking a distribution will be waived (up to $100k). The income tax for those distributions can be spread out over three years.
Retirement Loan Amounts Increased – The available loan amount from a qualified retirement plan has increased from $50k to $100k for 2020.
Requirements – To qualify for these options, one must be experiencing lost income due to quarantine, furlough, laid off, or had hours significantly reduced due to the Coronavirus or lack of childcare. (We suggest keeping good records.)

Cash Payments & Unemployment Assistance

Government Checks – All U.S. residents with adjusted gross income less than $99k (single) or $198k (joint) will be eligible for “recovery” payments from the government. Those with an AGI of less than $75k are eligible to receive the full amount of $1,200 plus $500 per dependent child. The amount is reduced by $5 per $100 for income above $75k, fully phasing out at $99k. This is based on either your 2018 or 2019 tax return. Payments are not considered taxable income.
Unemployment Increased – Provides an additional $600 per week per applicant for up to four months. Stretches benefits another 13 weeks through Dec. 31, 2020 for those who remain unemployed after exhausting state benefits.
Unemployment Benefits for Gig Workers & Freelancers – Typically these groups cannot apply for unemployment. Now funding is available specifically to help these groups.

Charitable Giving

Deduct $300 in Cash Contributions – Available, regardless of whether the individual itemizes deductions
Changes in Limits – For individuals, the 50 percent of AGI is suspended. For corporations, the 10 percent limit has been increased to 25 percent.

Mortgages

Homeowners – Those with federally-backed mortgages may postpone payments if you can prove financial hardship. The initial postponement may be granted for up to 180 days, with an additional 180 available by request. Foreclosure cannot be initiated for at least 60 days beginning March 18.
Renters – For 120 days, landlords cannot pursue eviction if the property is backed by a federal loan, HUD, Fannie Mae or Freddie Mac. Landlords cannot charge any fees associated with non-payment for this time period.

Student Loans

Payment Suspension – Payment automatically suspended for federal student loans through Sept. 30 2020 with no interest accruing or penalties.
Employer Assistance – Employers can make tax-exempt contributions toward their employee’s student loan payments.
Provisions – Offers payment or reimbursement for several specific situations. For example, payments to students unable to complete work-study programs.

Small Business Owners

Loans Available – Many small businesses are eligible for relief loans from the Small Business Association. Depending on your situation and the use of the funds, repayment may be deferred or altogether forgiven.
Relief for Existing Loans – Money available to cover up to six months of existing loans with the SBA.
Provisions – Options available for employee retention tax credits, delaying payroll tax payments, temporary increases in limits on interest deductions, and many others.

Taxes

Tax Day Now July 15 – Delayed tax day until mid July, including the ability to contribute to IRAs for 2019.

Healthcare

Insurance Coverage – The bill requires private insurance to cover coronavirus related expenses including testing, treatments, and vaccines.

Other Resources

S. Congress – Full text of the bill
SBA – Small Business Guidance & Loan Resources
S. Treasury – How the Treasury Department is Taking Action
NPR – What’s Inside the Senate’s $2 Trillion Coronavirus Aid Package?
National Law Review – CARES Act Relevant Tax Summary

This is only a brief outline of some of the items in the legislation. If you are curious about how one or several might apply to you, we encourage you to give us, your CPA, or your banker, a call. We are happy to collaborate with them to help you make wise choices.

This is an unusual and volatile time for everyone: personally, professionally, and certainly in the markets. Though our team is working remotely, our goal is for your experience to be seamless. We are readily available by phone, email, or digital meeting. In the meantime, we will continue to work to find additional opportunities for you. We’re on your team.

Thank you for being a client of Prosperion Financial Advisors.