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The Cares Act and Your Finances Made Simple

The Cares Act and Your Finances Made Simple

April 07, 2020

There is a lot of information swirling around about the $2 trillion dollar relief act, The CARES Act. I wanted to provide you with the Bottom Line information that is important and an attempt to make it as simple as possible. If you have questions on how these items may impact or assist you in your planning please do not hesitate to reach out. My team is always here for you.

What is The CARES ACT?

The CARES (Coronavirus Aid, Relief and Economic Security) Act is designed to stimulate the economy and provide relief to individuals and businesses affected by COVID-19. While the bill includes provisions intended to support the health care system’s fight against the coronavirus, loans to small and large companies and support for state and local governments, it may also include measures that are important to your finances.

What is in in this act?

One-time direct payment

All tax-paying Americans, including Social Security recipients, with adjusted gross income up to $75,000 ($150,000 joint) are eligible for a $1,200 ($2,400 joint) payment. An additional $500 per dependent child will also be provided.

The payment amount is reduced by $5 for every $100 over the income limit and will be phased out for those with incomes over $99,000 (single) and $198,000 (joint) with no children.

Increased unemployment benefits

Unemployed workers will receive an additional $600 per week from March 27 until July 31, 2020. The Act provides an additional 13 weeks of unemployment benefits through Dec. 31, 2020, for those who remain unemployed after state-administered benefits are no longer available.

Gig workers, contractors, farmers and freelancers typically can’t apply for unemployment. The bill created a temporary Pandemic Unemployment Assistance program to help people who lose work through the end of the year.

RMDs suspended

Required Minimum Distributions (RMD) are suspended for retirement plans and IRAs in 2020, including those for inherited IRAs. This includes RMDs due in 2020 but attributable to 2019.

Retirement account changes

The following applies to qualifying individuals, including those diagnosed with COVID-19, have a spouse or dependent diagnosed with COVID-19, or experience financial consequences as a result of COVID-19, including being quarantined, furloughed, laid off, reduced hours or child care responsibilities.

The maximum loan from a qualified retirement plan has increased from $50,000 up to the fully vested value of the account or $100,000, whichever is less.

The 10% early withdrawal penalty for up to $100,000 from qualified retirement plans such as IRAs, 401(k)s and 403(b)s has been waived. Taxes due on the withdrawal will still be owed and must be paid over three years or by returning the amount to the account over three years.

Tax return extension

For those who have not filed their 2019 tax returns, the filing deadline has been extended to July 15, 2020.

2019 IRA, Roth IRA or Health Savings Account contributions have also been extended until July 15, 2020.

Health insurance coverage

The Act requires all private insurance plans to cover COVID-19 treatments and vaccines and makes all coronavirus tests free.

Mortgage and rent relief

All owners of federally backed mortgages, including those purchased by Fannie Mae and Freddie Mac, insured by the  departments of House and Urban Development or Veterans Affairs, have the option to request up to 180 days of forbearance. The Act prevents providers of federally backed mortgage loans from initiating any foreclosure process for at least 60 days beginning on March 18, 2020.

The CARES Act provides 120 days of eviction relief for tenants of federally-backed housing. During the 120-day eviction moratorium, the landlord may not charge late fees, penalties or other charges.

Student loan relief

All loan and interest payments will be deferred through Sept. 30, 2020 without penalty to the borrower for all federally owned student loans.

Employers can provide up to $5,250 in tax-free student loan repayment benefits. That means an employer could contribute to loan payments, and employees won’t have to include that money as income.

If you have any questions or would like to discuss this further, or just want to talk please give my office a call. We are here to support you and help in any way we can.