This Friday Congress passed and the president signed into law the CARES Act (the Coronavirus Aid, Relief and Economic Security Act). The bill is aimed to provide economic relief to both businesses and individuals affected by the coronavirus lockdown. In my video, I discuss in detail the most important key provisions of the law, including those for businesses. However, in this post, I’d like to talk about key provisions and reliefs relevant to individual taxpayers only.
Key Provisions of the CARES Act for Individuals
- The bill will provide 4 months of bolstered unemployment benefits due to rising jobless claims. The maximum unemployment benefit will go up by $600 a week on top of state benefits and will include gig economy workers, such as Uber drivers and other contractors. If you or your loved one happen to lose a job, know that you can rely on this help (although I hope you will not have to).
- If you have a Federal student loan, all payments were deferred by 6 months, through September 30, 2020. So please stop making any payments for now and save your cash – you may very well need it as tough times aren’t gone yet. Also, if your employer provides assistance in paying the loan – you won’t owe taxes on this assistance.
- The bill provides relief for homeowners with mortgages on their houses. If you have an FHA or VA loan, you are now eligible for forbearance (up to 180 days with an option to extend for another 180 days). If your mortgage loan is backed by Fannie Mae and Freddie Mac – you can skip payments too.
- Relief from retirement accounts withdrawal penalties through the end of 2020. If you were hit hard by the coronavirus global crisis, you can now take up to $100,000 from your workplace retirement account (a 401(k), 403(b), or 457 plan) or an IRA account without any penalties. Please use this option as your last resort only as you may be forced to sell in a down market and thus miss on the potential market recovery.
Free Money Checks
Finally, the government will be sending free money checks in the amount of $1,200 per individual and $2,400 per married couple filing taxes jointly. On top of it, if you have children you can expect to get an additional $500 per child. The money won’t be counted as taxable income and will be considered a credit instead. In order to be eligible the receive the full amount, you income has to be below:
- $75,000 for an individual
- $112,500 for the head of household
- $150,000 for a married couple filing jointly
The check is reduced by $5 for each $100 over the above threshold. The cutoff is:
- $99,000 for an individual
- $136,500 for the head of household
- $198,000 if you are married filing jointly
In order to determine your eligibility the government will look into your 2019 tax return first. If you haven’t filed it yet, they will look into the 2018 tax return. The payment will most likely be deposited into your bank account if you previously paid your taxes via direct debit. Otherwise, you will probably receive a regular check.
I think that the financial aid package can indeed bring economic relief to millions of Americans. So many people, especially those who already lost their jobs, either struggle or already can’t pay their mortgage, student debt, and other living expenses. However, this help, is obviously, not a panacea. The economy needs to get back on track as soon as possible and while we are all at the mercy of this invisible enemy, this financial aid may not be enough and can be short-lived. So be prudent on how you spend this money.