CARES Act – What You Should Know

March 30, 2020  |  

CARES Act – What You Should Know

The US Senate passed the Coronavirus Aid, Relief and Economic Security (C.A.R.E.S) Act last week, providing a $2 trillion economic stimulus package to help ease the impact of the Coronavirus pandemic.

At Independence Advisors, we understand that the recently passed CARES Act is complex. The Act provides for a wide range of benefits and planning opportunities.

To make it more understandable, we have compiled the following summary of the Act. In addition, we are available to answer any questions or to explore planning opportunities that the bill offers.

CARES Act – Summary of Most Relevant Items

Recovery Rebate

  • Direct payment to taxpayers of up to $2,400 for married couples, $1,200 for all other filers
  • Credit increases by up to $500 for each child taxpayer has under the age of 17
  • Adjusted Gross Income Thresholds:
    • Married Filing Jointly – $150,000
    • Head of Household – $112,500
    • All other filers – $75,000
      • Credit reduced by $50 for every $1,000 over threshold amount
    • AGI based on most recent tax return filed by taxpayer
      • Note: If taxpayer’s income was above AGI limits based on prior year tax-return, but taxpayer’s 2020 income drops below the thresholds above, then the taxpayer will receive a “tax credit” when filing their 2020 tax return
    • Must have a work eligible Social Security number to be eligible
    • Not required to have had reportable income on 2019 tax return

CARES ACT Economic Relief

No 2020 Required Minimum Distributions

Coronavirus-related retirement plan distributions

  • Must be directly impacted by the coronavirus to be eligible. Someone who is “impacted” is defined as the following:
    • Diagnosed with COVID-19
    • Spouse or dependent diagnosed with COVID-19
    • Experience adverse financial consequences due to being quarantined, furloughed, laid off, or having reduced hours due to COVID-19
    • Unable to work due to lack of childcare as a result of COVID-19
    • Own a business that has closed or reduced hours due to COVID-19
  • Up to $100,000 of distributions made from IRA’s, employer-sponsored retirement plans, or a combination of the two
  • Distributions are exempt from 10% early withdrawal penalty for those under age 59 ½
  • No mandatory tax withholding necessary
    • Eligible to be repaid over 3 years, and income may be spread over 3 years
  • 401(k)/403(b) loans
    • Increased from a maximum of $50,000 to $100,000 for impacted individuals
    • May delay repayment of loan for 1 year from date of borrowing

Other notable provisions

Charitable deduction

  • New “above the line” $300 deduction for qualified charitable contributions
  • “Above the line” means that up to $300 of charitable contributions will be deductible, regardless of whether a taxpayer itemizes deductions in 2020
  • Contributions must be made in cash, and cannot be made to Donor-Advised Funds

Federal Student loans

  • Payments can be deferred until September 30, 2020
  • No interest will accrue during deferment this period
  • Employers can exclude student loan repayments from compensation

Unemployment benefits

  • Regular benefits are increased to $600 per week
  • Benefit period is extended by 13 weeks
  • Benefits available in the first week of unemployment, waiving the normal one-week waiting period

Small business provisions

  • Certain businesses may qualify for loans up to $10 million or 2.5x average payroll costs to cover payroll, rent, utilities, mortgage interest, group insurance payments, etc.
  • Loans are eligible for full or partial forgiveness
  • Payroll tax credit for qualifying businesses not receiving a covered loan
  • Ability for employers to defer payroll taxes to future years


Thanks to Michael Kitces for the great summary.

About Patrick Runyen

As a Wealth Manager at Independence Advisors, Patrick Runyen, CPA/PFS, CFP® works closely with clients to implement wealth management solutions. He leverages his technical financial planning and consulting experience to assist clients with investment counseling, retirement planning, estate planning, wealth enhancement, asset protection, tax planning, and other personally significant financial decisions. CLICK HERE TO ASK PAT.
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