For Individuals: New COVID-19 Federal Assistance – CARES Act

Summary of Keypoints

• Overview of the CARES Act for individuals: The CARES Act, enacted on March 27, 2020, provides economic relief aimed at helping individuals and families manage the financial effects of the COVID-19 pandemic, with provisions summarized as guidance available at the time.
• Retirement plan relief: Individuals may take coronavirus-related retirement plan distributions of up to $100,000 without the 10% early withdrawal penalty if they or their spouse were diagnosed with COVID-19 or experienced financial hardship due to quarantine, business closure, layoffs, or reduced work hours. Required minimum distributions are waived for all taxpayers in 2020.
• Charitable contribution incentive: The CARES Act allows an above-the-line charitable deduction of up to $300 for eligible charitable contributions, available even to taxpayers who do not itemize deductions.
• Recovery rebates (economic impact payments): The Act provides advance refundable tax credits of $1,200 for individuals, $2,500 for married joint filers, and $500 per qualifying child, subject to income-based phaseouts and eligibility requirements, including valid Social Security numbers.
• Additional individual benefits: Employers may pay up to $5,250 toward an employee’s student loans, with those payments excluded from the employee’s taxable income.

The Cares Act, passed March 27, 2020, provides economic relief to individuals to help families cope with the financial impact of the pandemic.

Below follows a summary of the provisions, with more to come as details unfold.

Provisions for Individuals

• Retirement Plans Withdrawals
  1. no 10% penalty on early withdrawals up to $100,000 for coronavirus-related distributions. Must be made to you or your spouse diagnosed with COVID-19 with CDC-approved test,
  2. you experienced adverse financial consequences as result of quarantine, business closure, layoff, or reduced hours due to virus
  3. Required minimum distributions are waived for 2020 regardless of impact by virus
• Charitable Contributions – allows deduction of up to $300 for charitable contributions with no limit (above-the-line so to speak.)
• Recovery Rebates – advance refunds of credits against 2020 taxes
  1. $1,200 for individuals
  2. $2,500 for married joint filers
  3. $500 credit for each child
  4. Rebate amounts will be phased out (reduced) by $5 for every $100 over adjusted gross income reported on your 2018 tax return (unless 2019 has been filed):
     • single $75,000,
     • head of household $112,500,
     • $150,000 joint filers
  5. Limits – Zero rebates if adjusted gross income is over
     • individuals (single filers) $99,000;
     • heads of household $136,500,
     • joint filers $198,000
  6. Eligibility – must have social security numbers
  7. Timing – Secretary directed to provide rebate as rapidly as possible.
• Student loans paid by Employers – Employer can pay for up to $5,250 of student not taxable to the employee