The CARES Act is chalk full of financial stimulus for both individuals and businesses. Here are some highlights and key points related to the individual side of the Act, and as always please contact your wealth manager for more specifics as needed.

Recovery Rebates

  • This is technically a refundable income tax credit based on adjusted gross income thresholds. Most Americans will receive this rebate as an upfront lump sum payment though.
  • The check is worth up to $1,200 per individual or $2,400 for married couples. There is an additional amount up to $500 per child possible as well.
  • Income phase out starts at $150,000 for married joint, $112,500 head of household, $75,000 for all other filers.
  • Check line 8b on your 2019 taxes if you are curious what number the IRS will use to see if you qualify.
  • Individuals who may not qualify based on 2019 (or 2018 income if they haven’t filed yet), may still be eligible for the rebate when they file their 2020 taxes.
  • Individuals must have a work eligible social security number, but they don’t have to reportable income and can also be eligible for other income benefit programs as well. Therefore, there are a large number of retirees that will still be able to receive this recovery rebate, despite not having a typical W2 setup.

Virus Related Distributions from Retirement Accounts

  • Individuals can pull up to $100,000 from employer sponsored plans, IRAs, or a combination of both and be exempt from early withdrawal penalties. There are stipulations and rules though around having to be impacted by the virus to qualify. These qualifications can be found on the IRS website.
  • Distributions can also be paid back over 3 years, with an additional option to spread income over 3 years or pay it all in 2020. For anyone considering this, please make sure you speak with your wealth manager at our firm, because planning this out properly will require extensive tax planning.
  • There have been questions on if this opens up a potentially large and efficient Roth Conversion scenario. There has been no IRS issued guidance on this issue yet, therefore it is not advised at this time.
  • These distributions are also not subject to mandatory withholding requirements.
  • Check with your employer sponsored plan, but in general, loan provisions have been increased for 2020. Payments for the plan loan could also be eligible to be delayed for up to one year.

RMD 2020 Exclusions and Rules

  • Required Minimum Distributions (RMDs) are waived in 2020. This includes inherited RMDs as well.
  • If anyone has taken their RMD already and does not need it, they have the option to return that amount back into their tax deferred account.
  • The “5 Year Rule” for non-designated beneficiaries does not apply for 2020.

Charitable Deduction and AGI Limit

  • A relatively small $300 above the line deduction is allowed for qualified 2020 contributions.
  • The AGI limit for charitable contributions has been repealed, so there are some potentially large implications for those with sizeable carry forwards. Up to 100% of 2020 AGI is allowed.

Unemployment Benefits

  • The usual amount has been bumped and also extended. The amount will vary depending on state and qualifications of the individual. Please lookup your state specific process if you are considering this. In California for example you would use the EDD state website.
  • Benefits have been extended to self-employed people as well, and the usual benefit waiting period has been waived.

Deferred Payments

  • Overall, certain lenders are allowing for deferral of payments that will not negatively impact a person’s credit score.
  • The most common examples of this are Student Loans and Mortgage payments.
  • Please check with your lender to confirm details of deferment and to make sure you are aware of any potential fees or negative impacts that could be lender specific.

Individual Healthcare

  • Medicare beneficiaries are eligible to receive the virus vaccine when available at no cost under section 3713.
  • Expanded use of HSA accounts may be able to temporarily cover telehealth services. In general, telehealth service rules have been relaxed and expanded for Medicare, Hospice Care, etc. under sections 3701-3706.
  • Medicare Part D recipients have the ability to request up to a 90 day supply of medication prescribed and filled under section 3714.

For more information, please visit IRS.gov.