Key Elements of the CARES Act
Congress recently passed the Coronavirus Aid, Relief and Economic Security (CARES) Act to support businesses and individuals during the current crisis. Several of its provisions might benefit you or someone you know.
The feature attracting the most headlines is the “Recovery Rebate” program under which individuals are entitled to receive up to a $1,200 refundable tax credit and married couples receive up to $2,400. Those with children under age 17 can receive an additional $500 for each child. The credit phases out depending on your aggregate gross income (AGI) on your 2019 taxes (or 2018 if you have not yet filed your 2019 return). The Tax Foundation has an excellent guide to the rebate program and a calculator that can help determine how much you will receive.
No RMDs for 2020
Under the CARES Act, individuals with Required Minimum Distributions (RMDs) for their own retirement accounts or those they have inherited are no longer required for 2020. This will provide a tax savings for those who will usually have to take RMDs and do not need the distributions for ongoing spending. Those who have already taken RMDs from their own retirement accounts in 2020 have the option of returning them to their account.
Enhanced Unemployment Benefits
The CARES Act extended unemployment benefits for an additional 13 weeks after standard state benefits end. The legislation also increased regular unemployment compensation by $600 per week through July 31. Self-employed workers and independent contractors are now eligible for unemployment and the one-week waiting period for benefits has been waived for all applicants.
Deferred Student Loan Payments
The CARES Act suspended required payments on federal student loans through September 30, 2020 and interest will not accrue on the loan during this time. Borrowers will need to stop any automatic payments for their federal student loans to take advantage of this provision. This time period also will continue to count for loan forgiveness programs, such as the Public Service Loan Forgiveness program.
Extended Federal Tax Filing and IRA Contribution Deadlines
Outside of the CARES Act, the IRS extended the deadline to file 2019 federal tax returns to July 15. This also means that contributions to IRAs for 2019 can also be made until July 15.
These are only some of the features of the government’s Coronavirus response, which also includes wide-ranging benefits for businesses. Here is the Tax Foundation’s detailed breakdown of the full CARES Act.