CARES Act Highlights for Individuals
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, includes several provisions that may be available to you and your loved ones to mitigate some of the COVID-19 pandemic’s economic impact. Below is a brief summary of a few provisions as originally enacted into law.
- Federal income tax filing and payment due dates extended until July 15, 2020.
- “Economic Impact Payments” provisions provide direct payments of up to $1,200 per individual whose prior year’s income was less than $99,000 (or $198,000 for joint filers) plus $500 per child under the age of 17.
- Student loan payment suspension provisions automatically suspend payments for federally held student loans through Sept. 30, 2020, with no interest accruing or penalties during that period.
- Emergency-relief provisions related to education mitigate the financial impact on qualifying students (for example, work-study employees) sent home mid-semester.
- Mortgage relief requires servicers of federally backed mortgages to postpone for up to 360 days mortgage payments at the request of a borrower affirming financial hardship due to COVID-19. These servicers are also prevented from initiating foreclosure proceedings for at least 60 days beginning March 18, 2020.
- Eviction relief for renters requires landlords with mortgages backed by the U.S. Department of Housing and Urban Development (HUD), Fannie Mae, Freddie Mac, and other federal entities to postpone eviction proceedings for 120 days and cease charging fees and penalties related to rent nonpayment due to COVID-19.
- Unemployment insurance provisions augment state payments for eligible employees and create temporary coverage for self-employed, independent contractors, and gig economy workers not otherwise covered by state programs.
- Changes to retirement plan withdrawal rules include:
- Required Minimum Distributions (RMDs) from IRAs and most qualified plans are suspended for 2020.
- IRA contributions may be made until the earlier of July 15 or the date of the individual’s actual tax return filing.
- Loans from eligible plans are permitted to double from $50,000 to $100,000. Plans are not required to increase loan limits.
- The 10% early withdrawal penalty is waived for individuals under age 59½ who withdraw up to $100,000 in coronavirus-related distributions from eligible retirement plans. The income tax owed on the withdrawal may be paid over three years.
- Charitable giving incentives for 2020 include:
- A $300 above-the-line income adjustment for cash gifts to public charities for non-itemizers.
- An unlimited (100%) adjusted gross income deduction for cash gifts to public charities for itemizers. Unused amounts can be carried forward for up to an additional five years subject to the usual 60% AGI limitation.
The Internal Revenue Service is expected to issue guidance and clarification regarding CARES Act provisions. Please check the IRS’s Coronavirus Tax Relief and Economic Impact Payments website for updated information.