THE CARES Act: What it Means for Your Personal Finances
The COVID-19 Pandemic, also referred to as the Coronavirus disease, has affected numerous facets of so many lives; from direct health and medical impacts to impacts on our education, finances – even some careers. On Friday, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES) which has several key impacts built-in to offset the impacts of COVID-19.
What to Know About the Stimulus Bill
The CARES Act has included several key elements to stimulate the economy. First off, the bill provides for a $150 billion dollar Coronavirus Relief Fund for states and local governments to use to offset costs associated with the virus. Also included in the bill is a $45 billion fund for Disaster Relief, created in an effort to help state and local governments properly respond to and recover from the impacts of COVID-19. In addition to these larger funds, the bill also provides additional funding for the CDC, the National Guard, and the transit systems, as well as $400 million in election security grants for the 2020 federal election cycle.
The most notable elements of the CARES Act for many individuals are the direct stimulus payments for individuals and children, the expansion of unemployment insurance, and the lending fund established for small businesses, cities and states
How Do I Know if I Get a Stimulus Check and How Much my Check Will Be?
Everyone likes free money, but for some people the stimulus check funds allocated through the CARES act are a lifeline for those who have experienced recent economic hardships due to the COVID-19 pandemic. To calculate how much your check will be, you will need to reference your income from your 2019 or 2018 tax return – depending on which is the most recent on file.
Single adults with an income under $75,000 will qualify for a $1,200 direct payment. Married Couples with income under $150,000 will qualify for $2,400, while individuals who filed as the head of household with incomes under $112,500 will also qualify for $2,400. This figure is reduced by $5 for every additional $100 of additional adjusted gross income. In the case that you are single and making more than $99,000 annually, you would not qualify for a stimulus check at this time. If you are married and filing jointly then this number doubles.
Children under the age of 16 would also qualify for a $500 check unless the household grosses more than $218,000. For children over the age of sixteen, you can not get a payment if someone is declaring you as a dependent on their return.
If your income has recently been reduced from your most recent filing, you may also qualify for a benefit when you file your 2020 taxes. To calculate exactly what you will get, you can also use a stimulus check calculator available online.
I Recently Lost my Job due to the COVID-19 Pandemic. How is Unemployment Impacted by the CARES Act?
Unemployment has been expanded to cover both part-time and self-employed workers. The actual benefits vary by the state, however, the attempt is to bridge the gap between standard unemployment benefits and actual salary, which typically have a disparity of upwards to 50%.
Under the CARES act, eligible workers will get hundreds of dollars extra on top of their state-provided benefits. However, the figure can vary depending on the state but should amount to roughly $600 a week. States may combine the typical check with the new allocation, or send two different payments.
In addition to the increased benefit monies, the CARES Act also increases the wingspan of unemployment in general. Part-time workers and self-employed that were previously ineligible for unemployment benefits are now covered based on previous income. They are also eligible for the benefit increase outlined above. There are also stipulations in place to account for individuals who had to quit a job due to a Coronavirus related sickness or day-care closure.
The bill provides a stipulation for an additional 13 weeks of unemployment benefits tacked onto the typical 26 weeks of benefits allocated by the state. The extended financial benefits will last up to four months.
Additional Provisions from the CARES Act to Note
Student Loan Relief
For student loans issued by the federal government, an automatic six month stay through September 30th has been put into place through the CARES act. While this is mostly comprehensive for federal student loans, it does exclude borrowers with Federal Family Education Loans or Perkins Loans. The pause does not apply to privately held student loans.
Retirement Account Rules
For the calendar year of 2020, retirees are no longer mandated to take required minimum distributions. This can prevent ‘locked in losses’ for those who are able to let their investments sit in an effort to let them recover. Furthermore, if you have already taken your required minimum distribution, then you have the option to put it back – but you have to act quickly (within 60 days of the distribution).
In addition to the changes in required minimum distributions, individuals are free to withdraw up to $100,000 during the 2020 calendar year without the standard 10% penalty provided that their reason for withdrawal is Coronavirus related. Individuals can also still borrow against their 401(k) as well, and borrowing quantities have been doubled by the act.
If you are wanting to make donations to those in need during this time, you can benefit more this year than ever before. The new CARES bill provides an additional $300 deduction for 501(c)(3) charitable donations, which can be subtracted directly from your income as an ‘above the line’ deduction. For taxpayers who itemize their deductions, the bill has expanded charitable deduction percentages to 100% from the original 60% deduction cap for the year 2020.
In addition to the above-outlined functions, the CARES Act also provides funding and support to small businesses through various loan opportunities. Stay tuned for Part II of the CARES Act blog series for our full breakdown of the business-related benefits.
In the meantime, if you have any additional questions about the CARES Act and how it will affect your financial outlook, be sure to contact Morris Financial Concepts today.
The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. Links to third-party websites have been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. This material is for informational purposes only and should not be considered investment advice. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees and objectives can be found in our ADV Part 2, which is available upon request. MFC-20-07.