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The COVID-19 Stimulus bill and your Finances

| April 03, 2020
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As I’m sure you know, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was recently signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.1

To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis.1

The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:

Stimulus Check Details - Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment.1

Key point here: If you would qualify based on your 2018 tax return and not 2019 you may want to discuss delaying your return with your tax professional. 

Business Relief - The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities.1

Key point here: If you own a business, discuss the loan options with your business banker and CPA is key to make sure you apply for the grants and loans that are applicable to your business.

Here is the website for additional information on this and other loans: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources#section-header-0_

Inherited 401(k)s - People who have inherited 401(k)s or Individual Retirement Accounts can suspend distributions in 2020. Required distributions don’t apply to people with Roth IRAs; although, they do apply to investors who inherit Roth accounts.2

Suspended RMD - The CARES Act suspends the minimum required distributions most people must take from 401(k)s and IRAs in 2020. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions.2,3

Withdrawal Penalties - Account owners can take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally applies to money taken out before age 59½. But remember, you still owe the tax.4

Key point: If your job is impacted and you may need to withdraw from your retirement account, please reach out to me. 

The Coronavirus Aid, Relief and Economic Security (CARES) Act will let taxpayers deduct up to $300 in charitable donations from their taxable income. The rule will apply only to charitable contributions made in 2020. Taxpayers will be able to claim the deductions on their tax forms next year.

Key point: If you are in a position to donate this is an opportunity to do so and get a tax deduction. 

Many businesses and individuals within our community are struggling with the new realities that COVID-19 has created. The CARES Act, however, may provide some much-needed relief for our neighbors, friends, and loved ones.

If you’d like to chat about how the CARES Act impacts you or to see if these special 2020 distribution rules are appropriate for your situation, give us a call.

1. CNBC.com, March 25, 2020.

2. The Wall Street Journal, March 25, 2020.

3. The Wall Street Journal, March 25, 2020.

4. The Wall Street Journal, March 25, 2020.

 

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