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  • Lavina Nagar, CFP®

Coronavirus Aid, Relief and Economic Security (CARES) Act

Updated: May 20, 2020

I hope you are keeping yourself, your loved ones, and your community safe from Coronavirus.

We are in uncharted territory, but it is also during times like these, that the best of human spirit shines. In the midst of this chaos, heroes have emerged. Medical professionals, police, firefighters, teachers, delivery personnel – all contributing beyond their roles and responsibilities to maintain some normalcy in this new abnormal. It is also heartening to see our elected representatives come together and focus on what is needed now. CARES (Coronavirus Aid, Relief and Economic Security) Act was signed on Friday March 27 2020.

The roughly $2 trillion coronavirus response bill is intended to keep businesses and individuals afloat during this unprecedented time. It is a relief bill, intended to provide relief for individuals and businesses that have been negatively impacted by the coronavirus outbreak. While this legislation addresses many problems arising from the pandemic, I want to focus on few aspects that could directly affect our individual financial plans.

  • Individuals earning up to $75,000/year will be eligible for a $1,200 check. This amount would be reduced by $5 for every $100 in income above $75,000 and is capped at individual income of $99,000. Married couples are eligible for a $2,400 check as long as their adjusted gross income is under $150,000/year. Amount is reduced similarly as for individuals and gets capped at $198,000 for married couples. Individuals and married couples will also receive an additional $500 for every child under 17. This is based off of either 2018 or 2019 tax filings.

  • CARES Act also provides an addition $600/week benefit to eligible employees receiving state unemployment benefits. Under this expansion, individuals who ordinarily would qualify for unemployment compensation benefits under State law are entitled to both the regular benefits under State law, and an additional amount of $600/week. This boosted payment will last for approximately four months and expires on July 31 2020.

  • Required Minimum Distributions (RMDs) are suspended for certain retirement plans and IRAs for 2020. This waiver applies to everyone and is not restricted to those affected financially by coronavirus illnesses. However, if you have already taken an RMD in 2020, this rule does not apply to you. There is no provision in the bill to put back a distribution already taken in 2020.

  • The 10% tax penalty on premature distributions of up to $100,000 from qualified retirement accounts has been waived for 2020 for “coronavirus-related” purposes. The regular taxes on these withdrawals can be paid over three years. In addition, any funds withdrawn may be re-contributed to the plan within three years regardless of contribution limits for that year.

  • For taxpayers not itemizing deductions, may deduct up to $300 of charitable contributions as an above the line deduction. This new rule applies to all years and not just 2020.

  • The 60% AGI limit on gifts to public charities is increased to 100% of AGI for 2020. All carryforward rules apply as normal.

CARES Act has a much broader scope, but I believe the provisions mentioned above are amongst the most pertinent to our planning.

Please stay safe and keep your loved ones safe until we are in a position to combat this virus.

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