What does the CARES Act mean to you and your family?

The CARES Act, more commonly called the stimulus bill, was passed unanimously by U.S. Congress last week — a $2.1 trillion emergency aid bill to help lessen the financial impact of those families and businesses negatively impacted by the coronavirus or COVID-19.

The CARES Act stands for Coronavirus Aid, Relief and Economic Security Act. It consists of loans to large and small businesses, supplemental funding to many organizations and direct financial relief to households, airlines and states. For the purposes of this article, I breakdown down the direct relief and potential benefits to households:

Tax Rebate

What: One-time rebate of $1,200 to single filers with adjusted gross income below $75,000; $2,400 to joint filers with AGI below $150,000. The government will add $500 for each dependent under the age of 17. These benefits will phase out at higher income levels. You can check the Kiplinger calculator online to see if you qualify. https://www.kiplinger.com/tool/taxes/T023-S001-stimulus-check-calculator...

When: U.S. Secretary of the Treasury Steve Mnuchin says checks will begin to go out from the IRS in three weeks. The payments will be determined based on 2019 income, or 2018 income if that is all that is available to the IRS, and the final amount of the benefits will be determined based on 2020 income and settled on the 2020 tax return.

Coronavirus Related Distributions

What: Distributions of up to $100,000, made from IRAs, employer-sponsored retirement plans, or a combination both, which are made in 2020 by an individual who has been impacted by the Coronavirus.

Who: Very broad list here. Those impacted could include those with the virus, a family member with the virus you need to care for, lost work or wages due to the virus, parent staying at home because of no day care for a child, the owner of a business who must close or operate part-time due to the virus, etc.

How: The 10% early withdrawal penalty is waived, no mandatory tax withholding, income can be spread over three years instead of in 2020, the year taken and the ability to repay the distribution over a three-year period — any taxes paid on the amount put back into the plan would be refunded. For loans from plans the maximum is now $100,000 regardless of the value of the account (most plans allow 50% of account value up to a certain dollar amount) and payment back on the loan may be delayed for up to a year.

Required Minimum Distributions: Waived for 2020. If you have already taken and wish to return, you are able to do so.

Charitable Donations

The Tax Cuts and Job Act took away most people’s ability to deduct charitable donations due to the higher standard deduction. The Cares Act introduces a $300 above the line deduction, which directly reduces income. In addition, the cash contribution limit of 60% of a person’s income was increased to 100%. This allows those that give to a qualified charity above the standard deduction, the potential to significantly reduce their taxable income in 2020.

Unemployment Assistance

What: Expanding unemployment benefits adds $600 per week for up to four months and extending benefits by 13 weeks, not to exceed 39 weeks in all.

Who: Unemployed from traditional employment, and expanded for the first time to include benefits for self-employed, gig workers and 501c(3) employees.

Small Business Owners

Who: For small business owners and their employees.

What: The Act creates a paycheck protection program that will provide eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small businesses who maintain their payroll.

Federal Student Loans

Requires federal student loan payments, principal, and interest be deferred for six months through September 30, 2020, without penalty to the student.

Health Savings Account

Allows the use of HSAs to cover telehealth and over the counter drugs without a prescription.

Sources: Wall Street Journal, Kiplinger and kitces.com.

Stephanie Mackara is a Daniel Island resident and Wealth Advisor at Charleston Investment Advisors. You can reach her at smackara@charlestonia.com.

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