CARES Act Summary

Curious about what the CARES act will mean for you? Read on for some of the highlights of the new federal stimulus package.

This summary is not all-inclusive; information is deemed reliable but not guaranteed.

LUMP SUM PAYMENT

  • The package includes direct payments of $1,200 per adult and $2,400 per couple.
  • If you have children, your payment will increase by $500 per child. However, payments could be reduced if you have adjusted gross income over a certain threshold.

The thresholds are:

  • $75,000 for single filers.
  • $112,500 for single heads of household.
  • $150,000 for married couples filing jointly.

For example: Say you’re a family of four and your adjusted gross income in 2019 was $135,000 (assuming you’ve filed your 2019 tax return—the IRS will use your 2018 tax return if you haven’t yet filed). You’d qualify for a payment of $3,400: $2,400 as a couple + $500 x 2 for each dependent child.


UNEMPLOYMENT BENEFITS

  • The plan wraps in far more workers than are usually eligible for unemployment benefits, including self-employed people and part-time workers.
  • Those who are unemployed, are partly unemployed or cannot work for a wide variety of coronavirus-related reasons will be more likely to receive benefits.

How much will I receive? It depends on your state:

  • Benefits will be expanded in an attempt to replace the average. The average worker earns about $1,000/week, and unemployment benefits typically replace roughly 40%–45% of that. The expansion will pay an extra amount to fill the gap.
  • Under the plan, eligible workers will get an extra $600/week on top of their state benefit. But some states are more generous than others.

BUSINESS LOANS

Generally, the plan will provide $350 billion in federally guaranteed loans to businesses with 500 or fewer employees. This program is available to sole proprietors and self-employed individuals, too.

  • The Small Business Administration will oversee this Paycheck Protection Program, which will distribute the loans via banks to small businesses.
  • The plan provides an expedited origination process and loans will be available during an emergency period ending June 30.
  • All or a portion of the loan can be forgiven, based on a formula related to the percentage of employees the employer keeps on the payroll
  • Each business can receive a loan up to $10 million. The actual amount is related to your payroll costs tested over different time periods
  • The loans have an interest rate cap of 4%

RETIREMENT ACCOUNTS

The law will waive the current 10% penalty on early withdrawals from IRAs and qualified plans for people who have been impacted by the coronavirus. In addition, it increases the ceiling on loans (401k loans i.e.) against a qualified plan to $100,000.

  • This no-penalty withdrawal applies to those who have been diagnosed with COVID-19 or have experienced financial hardship from being quarantined, laid off or furloughed, or having their hours reduced between now and the end of the year.
  • Distributions will still be included in gross income and subject to regular income tax, but you can spread the amount of tax you will owe over a three-year period.
  • Distributions also may be re-contributed within three years of withdrawal.
  • While this opens up a source of funding for many people, this might be considered as a last resort.

REQUIRED MINIMUM DISTRIBUTIONS (RMDs):

  • If you are subject to RMDs, you are not being forced to take them out this year.

STUDENT LOANS

  • No federal student loan payments due through Sept 30, 2020.
  • No interest on your federal student loans will accrue during that time.