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On March 27, 2020, the CARES Act was signed as a response to the coronavirus crisis. This law can be very influential. This article dives into the sections of the CARES Act that are most relevant and impactful for individuals.
We created a special report summarizing the recent legislation. You can access it here.
Unemployment Benefits on Steroids
Expands coverage for workers to those who are unemployed, particularly unemployed, or who cannot work for a variety of COVID-19 reasons. Self-employed workers are also eligible for unemployment benefits.
Eligible workers will receive an extra $600 per week on top of normal unemployment benefits on top of their state benefit.
Employees who are able to work from home and those receiving paid sick leave or paid family leave will not be covered.
Stimulus Checks/Payments to Individuals
Provides one-time direct payment to individuals and families within the next three weeks.
For individuals with incomes up to $75,000, the Act provides a $1,200 payment, phasing out at a rate of $5 for every $100 in income above $75,000. The payment is phased out entirely for an individual making $99,000.
Married couples with combined incomes up to $150,000 would receive $2,400, subject to the same phaseout as that applying to individuals. The payment is phased out entirely for a married couple making more than $198,000.
The provision also provides an additional $500 per child which is also subject to the phase out.
Eligibility and benefit levels are based on 2019 income tax filings if the taxpayer has filed. 2018 tax data and Social Security data can be used in lieu of 2019 data if the taxpayer has note filed. Individuals will not be required to repay any overpayment when filing their 2020 taxes.
For individuals and families with low or zero net tax liabilities, including the disabled, the full benefit is refundable, which means that taxpayers with no income or income tax liability are eligible to receive the credit.
Foreclosure Moratorium and Consumer Right to Request Forbearance
During the covered period, a borrower with a Federally backed mortgage loan experiencing a financial hardship due directly or indirectly to COVID-19 may request forbearance on the Federally backed loan regardless of delinquency status.
Requests must be submitted in writing to the loan servicer affirming that the borrower is experiencing financial hardship during the COVID-19 pandemic. Upon submission of request for forbearance, the forbearance shall be granted for up to 180 days and can be extended for an additional 180 days.
The servicer needs nothing other than the borrower’s attestation of financial hardship in order to grant the forbearance of the loan.
During the period of forbearance, no fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract, will accrue on the borrower’s account.
Foreclosures cannot be initiated or executed for 60 days beginning March 18, 2020.
Temporary Moratorium on Eviction Filings
During a 120 day period beginning on the date the Act is signed into law, the landlord may not initiate legal action to recover possession of the property from the tenant for nonpayment of rent or other fees or charges. The landlord may also not charge fees, penalties, or other charges to the tenant related to the nonpayment of rent.
Additionally, the landlord may not require the tenant to vacate the unit before the data that is 30 days after the date on which the landlord provides the tenant with a notice to vacate. The landlord may not issue a notice to vacate until the 120 day period, after the Act has been signed into law, has passed.
Waiver of 10% Early Withdrawal Penalty for Retirement Account
The Act waives the 10% early withdrawal penalty for qualifying individuals, who may withdraw up to $100,000 from retirement accounts without facing penalty.
The Act allows you to spread the tax liability from the withdrawal over a three year window. Qualifying taxpayers would also be allowed to repay their retirement plans to make up for money withdrawn to pay coronavirus-related expenses.
The distribution must be a “coronavirus distribution” which means any distribution taken from a qualified retirement account between January 1, 2020 and December 31, 2020 to an individual who is (1) diagnosed with COVID by a CDC test; (2) whose spouse or dependent is diagnosed with COVID by a CDC test; or (3) who experiences adverse financial consequences as a result of being quarantine, furloughed, or laid off or having work hours reduced, being unable to work due to lack of child care, closing or reducing hours of a business owned or operated by the individual.
The Act temporarily waives required minimum distribution rules for retirement accounts, preventing retirees from having to sell retirement assets during the downtown.
Enhanced Charitable Giving
Beginning in 2020, the Act enhances charitable giving by providing individuals with a new $300 above-the-line deduction on charitable donations. This means you do not have to itemize in order to claim the deduction.
The Act also temporarily suspends limitations on charitable cash contributions and increases limits on contributions of food inventory.
Student Loans Flexibility
The Act allows colleges and universities to award emergency financial aid grants without regard to the usual need calculation. The Act also allows the Department of Education to exclude some loans for students who were unable to remain enrolled in school as a result of a qualifying emergency.
The Act suspends payments for student loans under the Federal Family Education Loan and Direct Loan programs - without interest - through September 30, 2020. Additionally, collection efforts for those loans will stop during that time.
Lastly, the Act creates an incentive allowing employers to provide up to $5,250 annually toward employee student loan payments on a tax-free basis for a period of one year.