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  • Danielle Seurkamp, CFP®

Everything You Need to Know About the CARES Act Stimulus Legislation

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed in response to the economic impact of the COVID-19 pandemic. Here’s what you need to know about how the new legislation impacts you.


Individuals and Families


Stimulus checks

  • Checks are expected in mid-to-late April and will be delivered by direct deposit if either the Social Security Administration or the IRS has checking account information for you. If not, you will receive a check by mail.

  • Individuals may be eligible for up to $1,200 plus an additional $500 for each child who will be younger than 17 by the end of 2020. A single person’s adjusted gross income (AGI) must be less than $75,000, $112,500 for a head of household or $150,000 for married couples filing jointly. For income above these limits, $5 of stimulus is reduced for every $100 of income over the threshold. Use this formula to calculate how much your stimulus payment will be reduced:

  • Your adjusted gross income (line 8b of the 2019 tax return) MINUS your income threshold ($75k/$112.5k/$150k based on your filing status) DIVIDED by 100 and then MULTIPLIED by $5. Subtract the total from the total possible stimulus payment.



  • AGI numbers will ultimately be based on your income for 2020 but since the government won’t have this information until next spring, they are basing payments on your 2018 or 2019 tax return, whichever is the most recently filed.

  • ACTION ITEM: People will only receive checks in this initial round if they have filed either a 2018 or 2019 tax return. If 2018 was a lower-income year, you may want to hold off filing until after you get your check. Conversely, if you had less income or added a child to your family in 2019, you should consider filing your return ASAP.

  • Good news: If you would have qualified in 2018 or 2019 for a check but won’t based on your 2020 income, you will NOT have to pay it back! If you don’t qualify for a check based on recent income but you will in 2020, you will receive your stimulus payment next spring.

Required IRA distributions suspended for 2020

  • If you have an IRA or inherited IRA from which you are required to take money each year, you may skip that distribution in 2020.

  • You may be able to reverse distributions you have already taken from a traditional IRA, but not form an inherited IRA.

  • ACTION ITEM: If you no longer must take a required distribution from an IRA this year, consult with an advisor about how to utilize this opportunity to your maximum benefit.

Expanded access to retirement savings for living expenses

  • Distributions from IRAs and retirement plans like 401(k)s can be taken for Coronavirus hardships and will be exempt from the normal 10% early withdrawal penalty.

  • The amount you can borrow from your 401(k) has been doubled to $100k for 2020 and there are now more favorable repayment terms for these loans.

New $300 deduction for donations to charity

  • Many people no longer itemize deductions since the standard deduction was increased in the Tax Cuts and Jobs Act. This means many people no longer receive a tax benefit for donations to charity. A new $300 charitable deduction will now be available even if you take the standard deduction. Donations must be made in cash and made directly to a 501(c)(3) organization, not a donor-advised fund.

Federal student loan payments are suspended until September 30th, 2020

  • Mandatory payments will be automatically turned off for federal student loan borrowers. Private lenders have not changed their payment requirements.

  • ACTION ITEM: If you are making automatic extra payments on your federal student loans, you should turn those off for now.

Over-the-counter medication is now a qualified medical expense

  • You can now use flexible spending accounts (FSA) or health savings accounts (HSA) to purchase over-the-counter medications which include menstrual care products.

Greatly expanded unemployment assistance

  • Unemployment compensation has been extended from 26 to 39 weeks and the maximum weekly payment has been increased by $600 for up to four months.

  • Workers who don’t typically qualify for unemployment such as self-employed individuals, gig workers, or people who were laid off from new jobs are now eligible for benefits.

Self-employed individuals can wait to pay part of their self-employment tax in 2021 and 2022

  • For employees, Social Security and Medicare taxes, also known as payroll taxes, are paid half by the employee and half by the employer. Self-employed people pay both sides of payroll taxes via the self-employment tax. Self-employed (and other larger businesses) can now defer the employer portion of payroll taxes to 2021 and 2022.

Small Businesses


Small business loans have been made widely available through private lenders backed by the Small Business Administration

  • Businesses can access loans equal to around 2.5 times their payroll at a maximum interest rate of 4% (self-employed loan amounts will be based on different criteria). Credit scores will not be a primary determinant to qualify for a loan.

  • If the loans are used for rent, utilities, payroll or other similar operating expenses and the company retains or brings back their employees, the loans may be forgiven.

This is by no means a comprehensive list of what is included in the CARES Act, but these are likely to be the most relevant provisions for most people. Please don’t hesitate to reach out to us for more information or to better understand how this legislation impacts you. We’re here to help.

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