The CARES Act Individual Provisions

Here is a quick summary of the most important provisions of the CARES act for individuals.

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 IRAs 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 RMDs suspended for 2020
    • Applies to IRA, 401(k), 403(b), Inherited IRA
    • RMDs 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 IRAs 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 HSAs and FSAs —
    • 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)

“Coronavirus Aid, Relief, and Economic Security (CARES) Act – Summary” by Fran Goldman. Used with permission.

An earlier version of this article had $115,000 for the start of phase-outs for married couples. The corrected value is $150,000.

Speak Your Mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.