As it is, many of us either know someone who has been laid off or have been laid off ourselves because of the coronavirus and this can really make us worry about the future of our finances. This guide will help make clear what CARES means for you, your money, and your retirement.
While there are provisions for the public health sector, businesses, state and local governments, and the education sector, Congress has set aside $560 billion for individual American citizens.
So how does this affect you specifically? Well:
- There’s the recovery rebates which will put cash in your pocket
- The postponement of all loan payments
- Suspension on the collection of defaulted loans
- Extra unemployment benefits
- Work-study students will continue to receive pay
- Benefits for freelancers who may now be out of work
- Extended insurance coverage for the virus
- Breaks and benefits for those with retirement accounts and who are retired
- Greater tax breaks for people making donations to charities
- A deadline extension for filing your taxes.
There are a lot of great benefits here and I really want to dive into this further to make sure you guys are really getting the most out of this new stimulus package. So now let’s take a closer look at some of these benefits that Congress is rolling out with this new bill in more detail.
How are the Cash Payments Calculated? And Does Everyone Receive One?
Sadly, no, not everyone is going to receive a cash payment from the new stimulus package. Single filers having an adjusted gross income (AGI) of $75,000 or less will get $1,200. If you are head of household though your income can be up to $112,500 to receive the $1,200 check.
If you are married and filing jointly, with an AGI of $150,000 or less, you will receive $3,400. Furthermore, children bring an addition of $500 per child. The cash payments you receive taper off the more you make so some people will not be receiving a check in the mail.
Check out the table below to see an approximate of what you will get. For every $1000 more you earn, $50 is subtracted from the max amount paid out.
Single | Married Filing Jointly | Head of Household | |||
|---|---|---|---|---|---|
Income | Payment | Income | Payment | Income | Payment |
< $75,000 | $1,200 | < $150,000 | $3,400 | < $112,500 | $1,200 |
$80,000 | $950 | $180,000 | $1,900 | $120,000 | $825 |
$90,000 | $450 | $200,000 | $900 | $130,000 | $325 |
$99,000 | $0 | $218,000 | $0 | $136,500 | $0 |
*Note: These cash payments are not “free money.” They are more of an interest free advance that will be accounted for in your 2020 taxes.
How are My Student Loans and Mortgage Loans Affected By This?
I just recently wrote an in-depth post specifically about your student loans and all the great benefits this bill provides. You can find all that information here as well as my tips on how to take full advantage of your benefits.
As for your mortgage, you may request a forbearance from your provider if your loan is a federally backed mortgage loan. You will be given 180 days and should that not be enough time, you can request another 180 days.
In addition, foreclosure proceedings on your house cannot be initiated less than 60 days from March 18, 2020.
For renters, for 120 days followings March 27, 2020 landlords may not initiate an eviction nor charge fees or penalties for nonpayment of the rent.
What are the Extra Unemployment benefits?
For those of us who have lost our jobs because of the virus, this stimulus package does offer some much need relief. With the lowest average weekly payout just over $140 per week, that extra $600 is a godsend.
However, for some low-wage earners they may find, oddly enough, that they are making more in unemployment than they did working. Here are the benefits:
- An extra $600/week (in addition to your regular unemployment checks)
- 13 week extension added to length of unemployment benefits
- Expanded to include some self-employed workers and those who are quarantined.
So not only are you getting an extra boost to your income but you are now going to be able to collect unemployment longer. And hopefully that will be long enough to ride out this storm.
Note: The extra $600 payments lasts only until the end of July.
I am a Freelancer. What benefits Do I Receive?
If you are a freelancer, gig worker, contractors, or otherwise self-employed person who lost your job due to the virus will receive the same added benefits for unemployment. So you will qualify for $600 per week in unemployment. And it is available through the end of this year.
Will My Insurance Cover the Coronavirus?
Put simply, yes. For all those covered by group health plans or individual health plans, this bill requires that testing for the coronavirus, in order to stop its spread, be free and requires all private insurance companies to cover treatments and vaccinations ‘without cost-sharing’.
So if it’s a ‘qualifying coronavirus preventative’ service it should be covered.
How Will This Affect My Retirement Account and Required Minimum Distributions?
During this time, if it becomes necessary to withdraw money from your accounts due to the affects of the coronavirus, it will be penalty free. You may withdraw up to $100,000. These “coronavirus-related distributions” covers situations such as:
- You, your spouse, or a dependent being diagnosed with Covid-19 through testing approved by the Centers for Disease Control and Prevention.
- Financial hardships due to being quarantined, loss of employment, or a reduction in work hours
- Lack of child care
Any amount withdrawn from a retirement account will be treated as income and taxes must be paid on it over the next 3 years.
However, you do have the option to repay the amount you withdrew over the next 3 years from the date of distribution. Such amounts will not be taxed.
Also, all required minimum distributions (RMDs) will be temporarily suspended for the year as otherwise you would be forced to withdraw money in a down market which can be detrimental to your long term retirement plans.
Those who were supposed to take their RMDs in 2019 but have yet to do so will also be protected under this clause.
In addition, the CARES Act gives you more access to loans with potentially higher limits. The amount varies based on if you’ve already taken out loans and the amount of money in your account so I suggest contacting your provider for more details.
Also, if you have outstanding loans from your retirement plans with due dates this year on or after March 27, 2020, you will until next year to repay them.
Note: If loans and distributions were not already a part of your employer sponsored retirement account, it is up to the employer whether they will offer this benefit or not.
Extra Note: Employers may opt to forgo matching contributions this year though they would have quite a few hoops to jump through to do so.
What are the Added Tax Breaks for Making Charitable donations?
You may deduct up to $300 dollars for your charitable donations to qualified organizations. This deduction can be taken without itemizing it on your tax return but must be made in cash.
In addition, the limitations on annual cash contributions for those who do itemize have been temporarily lifted. You can now deduct 100% of your contributions.
So if you make cash donations this year the full amount is deductible (up to your adjusted gross income) on your taxes. If the amount you donate is more than you earned this year, you can carry it over to next year.
Donations must be made to public charities not private charities or donor advised funds.
How Will This Affect Filing 2019 Taxes?
If you have already filed your taxes this year, then great. If not, you have time. The deadline has been extended to July 15th. And no worries, you will receive your tax refund (if you’re supposed to get one) in addition to the cash payment.
Are Expats Eligible to Receive a Cash Payment?
Yes, expats are eligible to receive stimulus money from the government. In the bill it does say you are eligible to receive the cash payment as long as you have a US Social Security Number and have filed your taxes.
But they don’t go into the specifics of whether filing the Foreign Income Exclusion forms will affect whether you receive a payout or not.
The site, Taxes for Expats, has been more specific and writes that you can get the payment if you are receiving Social Security Income or Supplemental Security Income. You can check out the article here.
As an expat myself, I am quite excited about this one! Although I personally doubt I’ll be able to get one considering that my money isn’t taxed in the states, I will definitely give it a try! I will let you know how it goes! 😉
Questions or Concerns? Please drop a comment below. Thanks for reading!
Still curious about the new CARES Act? You can have a read through of the official document here. I do warn you though it is about 900 pages long.