The “CARES” Act Has Been Passed – Financial Relief for Consumers Is Coming

April 6th, 2020 by Jim Allen

With the COVID 19 pandemic rapidly spreading and the entire country on lock down, Congress finally passed the anticipated financial relief legislation and President Trump has signed it into law. The “CARES” Act will provide some needed cash influx to most citizens and provides financial support to businesses who are being clearly impacted by the nationwide shutdown.

While this is brand new legislation and we haven’t had the time to fully digest it yet, here are some of the highlights you need to know:

Recovery Rebates: These are the checks that have been the most visible component of this legislation. The “Recovery Rebates” are technically refundable tax credits against 2020 income but will be paid now. Single individuals will receive a $1,200 check if their adjusted gross income is below $75,000 and married couples will receive a $2,400 check if their adjusted gross income is below $150,000. In addition, there is a $500 per child payment again subject to the income thresholds. Above these income limits, the Recovery Rebates will be phased out. So, say John & Mary are married, have 2 children and have an income of $125,000. They would receive a recovery rebate of $3,400.

The Recovery Rebate income levels will be based on your 2019 income if you have already filed your tax return or your 2018 income if you have not yet filed your return.

IRA & 401(k) distribution & Loan Provisions: If you been affected by COVID 19 (subject to certain rules), you can take up to $100,000 from your IRA or retirement plan without the 10% early distribution penalty. While income tax would still be due, you will have the option to spread the income over 3 years or to actually return the money to the plan within 3 years. Finally, the 401(k) loan provisions have been loosened so that up to $100,000 or 100% of the pan balance can be borrowed with payments delayed for up to one year.

2020 RMDs are Suspended: Normally those over 70 ½ (now age 72) are required to take a minimum distribution from their retirement plan or face a 50% penalty. This requirement has been suspended for 2020, so no one is required to take an RMD this year.

Student Loan Payments Deferred Until September 30, 2020: Federal student loan payments are deferred until September 30 of this year and interest will not accrue on the suspended  payments during this time frame.

During this time of crisis, we will be reaching out to update and review your financial plan and the impact COVID 19 is having on your finances. As always, we are constantly monitoring your investment portfolio to navigate the volatility in the markets. Please don’t hesitate to contact us if you have questions or concerns.