The Coronavirus Aid, Relief, and Economic Security Act passed the House and Senate last month. The act provides financial assistance for many American households. Below are a few important items to note in the CARES Act.
- Direct cash payments will be delivered to individuals and families based on your income on your most recent tax return. Individuals who made $75,000 or less will receive $1,200, and couples who made less than $150,000 will receive $2,400. An additional $500 is available per child up to two children. As you’re planning for how these payments can provide financial relief to your family, keep these factors in mind that could influence the amount you receive:
- The amount you receive is reduced $50 for every $1,000 earned over the $75,000 or $150,000 thresholds. Those who file taxes as head of household will start to experience the phase out at $112,500.
- Single taxpayers receive no payment if they make $99,000 or more. Couples with no children will not receive payments if they make $198,000 or more.
- Payments do not count as taxable income.
- If you made over the specified thresholds when you last filed your taxes (2018 or 2019), you won’t receive a payout. However, if your 2020 income is lower than 2019, you may receive a higher payment upon filing.
- You will not be penalized for withdrawing from retirement accounts early to compensate for the financial impact of COVID-19. However, this should be a last resort, and we’d welcome the chance to talk with you about alternative solutions first. For those who must tap into retirement resources, you can take up to $100,000 from retirement plans without penalty under the CARES Act. Taxes on your withdrawal can be paid over three years.
- There is no required minimum distribution for 2020, which could benefit you if the amount and tax calculated at the end of 2019 are much higher than your account values today given the recent market volatility.
- If you can continue supporting charitable causes, there may be some tax savings when you file your 2020 return. If you take the standard deduction, you can take advantage of an “above the line” credit up to $300.
- The CARES Act extends unemployment benefits by $600 per week for up to four months and adds 13 weeks of unemployment benefits through the end of 2020 if you’re still unemployed when state benefits expire. Additionally, unemployment benefits are now available to freelancers and self-employed “gig workers.”
Our team is here to answer any questions you have related to the CARES Act. Please reach out if you’d like to chat with one of our wealth advisors.