On March 27th, Congress and the White House passed the 883-page CARES Act in order to give a boost to the struggling U.S. economy. This act, also casually known as the Coronavirus stimulus package, provides financial relief to American citizens and businesses during what has been a challenging time.
Below are the facts about the stimulus package that may provide important benefits for you, your family and/or your company. Here’s everything you need to know about the Coronavirus stimulus package and how it might apply to you.
How Does the Coronavirus Stimulus Package Affect Me?
The CARES Act affects nearly every American in some way or another. There are several provisions in the act that could impact you financially and otherwise. Here’s a brief rundown of some of the more prominent benefits of the bill.
Recovery Rebate Benefits
Lots of people are asking how the CARES Act will affect them directly. For many Americans, the Recovery Rebate portion of the act means extra cash in their pockets.
Here’s some information on whether or not you will get money as a part of the Recovery Rebate portion of the bill, and how much you might get.
Recovery Rebate check amounts and income limits are as follows:
- Up to a $1,200 rebate check for individuals and $2,400 rebate for couples
- $500 rebate for each qualifying child age 16 and under claimed on your tax return
There are income limits for the rebates as well. In order to qualify for the full individual or couples rebate, your income needs to be under:
- $75,000 for individuals
- $112,500 for heads of household
- $150,000 for joint taxpayers
If your income is higher than these amounts, you could receive reduced Recovery Rebate check amounts. The rebates phase out entirely at the following income amounts.
- $99,000 for single taxpayers with no children
- $198,000 for joint taxpayers with no children
- Varying income amounts for head of households or families with children based on the number of children you claim
The rebate money you get could be a much needed help if you’re struggling financially. Or you could use it to help you pay off some debt.
How is My Income Calculated?
The government is using your Adjusted Gross Income (AGI) numbers from your 2019 tax returns to base your rebate amount on. If you haven’t filed your taxes yet for 2019, they’ll use your 2018 tax amounts.
If by chance your income on your 2020 taxes is such that it would have qualified you for a larger rebate, you’ll get your qualifying credit on your 2020 tax return.
On the other hand, if you qualify for the rebate based on your previous tax return but make enough money in 2020 that you wouldn’t have qualified for the rebate, the rebate amount you “owe” will be forgiven, and you won’t have to pay it back.
Also, these one-time rebates are not counted as income for recipients. And if Congress deems it necessary, additional rebates may be handed out down the road.
Expanded Unemployment Insurance (UI) Benefits of the Act
The CARES Act provides important unemployment benefits to U.S. workers too. This means that those of us suffering a loss in income due to the economic downturn COVID-19 is causing will possibly get some additional financial relief.
Some of the expanded UI benefits include:
- A $600 per week increase in benefits for up to four months for those who qualify
- Federal funding of UI benefits for those who don’t typically qualify, such as independent contractors, the self-employed and those with a limited work history
The amount of unemployment income you qualify for as an employee is based on your state’s UI rules and regulations. However, the additional $600 a week provided by the federal government for those who qualify is a set number.
If you’re an independent contractor or self-employed, your UI benefits will be determined by your previous years’ income, based on calculations from a formula as described in the Disaster Unemployment Assistance Program.
The government is also giving individual states incentives to repeal any “waiting week” in place for those seeking unemployment benefits. This means that if you’re eligible for UI benefits under the act, you’ll start receiving those benefits as soon as you’re laid off.
As an added benefit of the provision, the federal government will provide an additional 13 weeks of UI benefits after your state benefits run out, through December of 2020.
Visit your state’s Unemployment Insurance website for more information about UI benefits as a part of the CARES Act. Or find the full text of the CARES Act here.
Paycheck Protection Program
The Paycheck Protection Program is a part of the act that’s designed to help small businesses cover payroll and other expenses during the pandemic period. A small business is defined as a company with fewer than 500 employees.
The pandemic period is defined as February 15 through June 30 of 2020. The stimulus package states that employers may be eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis.
There are additional stipulations to this credit based on the size of the small business. Possibly the most prominent feature of this part of the package is that businesses can take out loans to cover business expenses.
If the loan funds are used for crucial business expenses such as payroll, mortgage/rent payments, etc., the loan may be forgivable. The loan may be forgiven or be reduced based on employee numbers and compensation amounts as detailed in the bill.
There are also benefits provided in the bill for employers who pay a portion of their employees’ student loans.
Student Loan Benefits in the CARES Act
There’s a provision in the bill for student loan holders too. You might already know that federal student loan holders were already recipients of two months of waived payments and interest on their loans. See more on this from the US Department of Education.
The CARES Act provides additional benefits for federal student loan holders as well. All federal direct student loan holders with loans taken out within the last 10 years are released from making payments until September 30 of 2020.
There won’t be any interest charged to your qualifying federal loan during that time period either. Another benefit: If you’re earning working credits as a part of the Public Service Loan Forgiveness program, your qualifications will not be affected by this suspension of payments.
In other words, you’ll still get a one-month payment credit for each month during the payment suspension period.
Of course, you can still pay your student loans during this no payment-no-interest period if you want to pay down your student loans on schedule.
CARES Act Benefits for Retirement Accounts
The CARES Act includes benefits for retirees as well. For the entire year of 2020, there will be no minimum distribution requirement on retirement accounts.
Congress included this stipulation in the bill in order to prevent retirees from having to sell off investments that may have dropped in value due to the economic impact of COVID-19.
In addition, those who need to take early withdrawals from retirement accounts due to the impact of the virus will not have to pay the ten percent early withdrawal penalty.
Note that only early withdrawals of up to $100,000 for the year qualify for the penalty waiver. And it’s important to remember that the ten percent penalty waiver only applies if you had to make the early withdrawal due to the impact of COVID-19.
Another benefit: Any withdrawals you take out that require you to pay taxes are subject to an expanded tax payment program. You can take up to three years after the withdrawal to pay taxes you owe because of the withdrawal.
And if you can pay your retirement fund back within three years of the withdrawal, you’ll be free from paying taxes on the withdrawn amount. As with other benefits, you have to be directly affected by COVID-19 in order to qualify for this benefit.
However, your employer can give you permission to self-certify that the virus has directly affected you.
Benefits Applicable to Charitable Deductions
The CARES Act also includes benefits for those making charitable deductions. To start with, you can make a charitable deduction of up to $300 and use it to reduce your income IF you don’t itemize deductions on your return.
If you do itemize deductions on your tax return, you have access to special charitable donation rules under the CARES Act too. The main benefit is that if you donate to a public charity, you can donate and deduct up to 100 percent of your Adjusted Gross Income for that year.
The standard rule as it applies to charitable deductions says that your donations can’t exceed 50 percent of your AGI.
This portion of the bill could have huge benefits to those who itemize deductions on their annual tax return.
The $2 trillion CARES Act will no doubt have an impact on the national debt. However, experts are convinced that the benefits will outweigh the downsides.
Many individuals, families and businesses are struggling to make ends meet during this difficult time. The goal with the wide variety of benefits in the coronavirus stimulus package is that its benefits will carry citizens and businesses through until things are back to normal.