By Bleckley Dobbs, CFP®, RICP®
April 25, 2020
On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act) into law. The more than $2 trillion package seeks to address financial pressures facing individuals, businesses, and state and local governments due to the COVID-19 pandemic.
Below you will find a list of the CARES Act provisions we believe will most impact our clients. We have excluded the provisions that assist small businesses and instead only listed those that affect individuals. If you have any insights, feedback or questions, please give us a call at (512)-458-2517. We are here to help, and we always enjoy hearing from you.
Temporary Waiver of Required Minimum Distribution (RMD) Rules: Waives RMD rules for all types of defined contribution plans (including 401(k), 403(b), and governmental 457(b) plans) and IRAs for calendar year 2020, providing relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during an economic slowdown due to COVID-19.
Relief Checks: Provides for Recovery Rebate Checks of $1,200 for individuals ($2,400 for married couples) and $500 for dependent children under the age 17, up to an income level of $75,000 for single filers and $150,000 for married couples filing jointly. Above this income level, the payments are decreased by 5% of income until they phase out completely. If you have yet to receive this money, the IRS has set up a site for you to check on the status of your payment. Go to IRS Get My Payment to find out more.
Tax Deadline Extended: The deadline for filing a 2019 tax return and making 2019 IRA and HSA contributions (normally April 15, 2020) has been extended to July 15, 2020.
Charitable Contributions: Allows deduction of up to $300 for cash charitable contributions, without needing to itemize deductions. Contributions to donor advised funds are excluded. If you or someone you know has been considering a charitable contribution, now would be a great time to take action.
Federal Student Loan Payments Suspended: Automatically suspends federal student loan payments, including interest, through September 30, 2020. This does not apply to private student loans. You can find out more information by going to MyFedLoan.Com.
Loans & Early Withdrawals: Loosens rules for early withdrawals and loans from qualified retirement plans:
- Waives the 10% penalty for early withdrawals, allows the income from the withdrawals to be recognized and taxed over three years and allows the withdrawals to be repaid over three years.
- Increases the loan limit for qualified plans and extends the due date of the loan payments.
If you are interested in reading the CARES Act in its entirety, you can click here: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
Bleckley Dobbs, CFP®, RICP®
Director of Financial Planning