Understanding the CARES Act

Investing Lifestyle Retirement Tax Planning
On Friday, Congress and President Trump passed the largest stimulus bill in history worth $2 trillion to the U.S. economy. This will have wide reach in our country in pursuit of calming investors and releasing assistance for those affected by COVID-19. Below is a summary of key components of the bill.


For Individuals

Checks Direct to U.S. Citizens

A widely publicized factor in this bill is payments of $1,200 to each individual and $500 for each child. There is an income phase-out for households (married filing joint) making between $150,000 and $198,000, with those making more than $198,000 ineligible for these payments. The IRS will use your Adjusted Gross Income (AGI) for 2019 to calculate your eligibility (if you have not yet filed for this year, they will use your 2018 AGI).


Charitable Giving Incentives

For those who take the Standard Deduction: An above-the-line deduction for charitable contributions. A max deduction of $300. In order to qualify the donation must be made in cash and not into a Donor Advised Fund.

For Itemizers: A temporary lift on the deduction limit for cash charitable donations from 60% of AGI to 100% of AGI. For those donating large amounts of cash to charity every year, you can now take a higher portion of the deduction in the year it is given. You can still carry the deduction forward for 5 years.


Students and those with Federal student loans

Payments on Federal student loans can be suspended until October 1, 2020. Interest will not accrue during this time. To take advantage of this you must opt-in with your loan provider.



For Retirees

Suspension of 2020 Required Minimum Distributions (RMD)

You may suspend taking your RMD for this year if you do not need this for income. This also includes those with Inherited IRAs. If you are giving to charity from your IRA, you should continue to do this or speak to your advisor. If you have already taken your distribution, some individuals may be able to roll the funds back into their IRA and not pay taxes on that distribution.



For Business Owners and Self-Employed Individuals

Expansion of Unemployment benefits

Will now include freelancers, self-employed individuals, and “gig” workers. Also, in several instances’ unemployment benefits will be larger, get to workers quicker, and be available to those who have had their working hours reduced.


Paycheck Protection Program Loans

Substantial loans are available to businesses with less than 500 employees to cover crucial expenses if they have been impacted by the uncertainty of the COVID-19 outbreak. If these are used to cover payroll, health insurance, rent, etc, and the business has not laid off employees, or reduced salaries significantly, the loan can be completely forgiven tax-free. The loan max is limited to the lessor of $10 million or 2.5x monthly payroll costs.


Economic Disaster Injury Loans

These are loans from the Small Business Administration with favorable terms that have been loosened given the economic conditions. You can also get an advance on the loan of $10,000 that is not required to be repaid.


Credits against employment taxes and deferral of employment tax payments

Some businesses will be able to receive a partial credit for paid employment taxes or defer payment of the employer portion of employment taxes. Speak to your CPA or advisor to discuss if your business qualifies.

For more information on the provisions for small businesses, please see this document from the Senate Small Business committee.


As always, please reach out to your WealthPoint advisor to discuss in further detail how this new law impacts your investment plan.

About the Author: Brie Black

Brie grew up in San Antonio, Texas and attended Texas A&M University where she obtained a Bachelor’s degree in Business with minors in Financial Planning and Communication. While in college she worked under a seasoned financial advisor who helped her recognize her passion for helping others understand and grow their financial life.