Highlights of the Coronavirus Aid, Relief, and Economic Security Act

The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on March 27, 2020. It provides $2 trillion in emergency economic aid with tax relief and cash payments for individuals. The bill also includes aid for small businesses and self-employed workers and increases support for individuals out of work. 

Your Ameriprise financial advisor is available to help you understand which provisions are most relevant to you and your financial situation. In summary, elements of the bill may help:

Learn more about the provisions available for small business owners.

Relief for individuals and families

This legislation is aimed at providing relief for individuals that have been negatively impacted by the COVID-19 outbreak. Key provisions include:

Recovery rebate checks 

Most individuals earning less than $75,000 adjusted gross income (AGI) will receive rebates of up to $1,200. Taxpayers married filing jointly will receive up to $2,400. 
Parents with children under 17 will receive an additional $500 for every child. There are no limits on the number of children that qualify. Individuals and families with income above their respective thresholds will see their relief payments reduced by $5 for every $100 in AGI.

Retirement account COVID-19 withdrawals

The act allows for hardship withdrawals of up to $100,000 from retirement plans and IRAs by individuals who have been impacted by COVID-19. The 10% premature withdrawal penalty is waived, and distributions may be taxed ratably over three years. These COVID-19 related distributions can be repaid into the retirement plan or IRA within three years. 

To qualify, individuals need to fall into one of two main categories:

  • The individual, their spouse or a dependent is diagnosed with COVID-19.
  • Someone has experienced adverse financial consequences as a result of:
    • being quarantined.
    • being furloughed, laid off, having work hours reduced.
    • or if is unable to work due to lack of childcare or other closures related to the coronavirus pandemic.

Charitable contributions 

The CARES Act provides opportunities for individuals to increase deductions for charitable contributions on their 2020 tax return.

  • Individuals who take the standard deduction can deduct up to $300 of cash donations to most charities.
  • For individuals who itemize, the CARES Act lifts the limitations on cash charitable contribution deductions from 60% of adjusted gross income (AGI) to 100% for most charities.

Student loans and education provisions

Individuals may defer federal student loan payments – including principal and interest – through September 30, 2020. 

Additionally, students whose universities have canceled classes are allowed to keep Pell Grants. 

Relief for individuals out of work

Expanded unemployment benefits

The package increases and extends unemployment benefits, including access to health insurance, for Americans who have lost jobs or been furloughed. Self-employed and contract workers, who are typically ineligible, can now qualify. 

  • Through July 31, 2020 the CARES Act will provide eligible employees an extra $600 per week in unemployment benefits in addition to what they are eligible for under existing state programs. 
  • The CARES Act also provides for an additional 13 weeks of continued $600 weekly payments for individuals who remain unemployed after exhausting their state unemployment benefits. This means eligible workers will be able to receive unemployment benefits for up to 39 weeks rather than the 26-week cap under most state programs.

Relief from foreclosure 

Foreclosures on all federally-backed mortgage loans for a 60-day period beginning on March 18, 2020 are prohibited. For individuals experiencing financial hardship due to COVID-19, there is up to 180 days of forbearance, meaning loan payments are postponed (or reduced) but interest continues to accrue.

Eviction relief 

There is a 120-day eviction moratorium for nonpayment of rent if the landlord has a mortgage on that property and the mortgage is insured by HUD, Fannie Mae, Freddie Mac. 

Credit reporting

If a financial institution agrees to delayed or modified payments due to COVID-19, they will continue to report the account as “current” or as the credit status the account was previously in. 

Relief for retirees

Individuals who must take Required Minimum Distributions (RMDs) from their retirement accounts or IRAs may be concerned about having to take those distributions with the market down. The CARES Act provides options:

  • RMDs for 401(k)s and IRAs in 2020 are suspended. This would include an RMD normally due by April 1 for individuals who turned 70 ½ in 2019, but only if the individual did not take their RMD in 2019.
  • At this time, it’s not clear if retirees will be able to roll over RMDs already taken without meeting the normal 60-day rollover rules. Ameriprise is seeking clarification from regulators.

We are here to help you 

An Ameriprise advisor can help you understand what the CARES Act means for you and your financial situation. We are here to help you navigate any short-term financial needs while we continue to support your long-term financial goals.