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Coronavirus Aid, Relief, and Economic Security Act (CARES Act): A Summary of Key Provisions and Planning Considerations for Individuals

By April 7, 2020 No Comments

The “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) is a $2 trillion relief package that Congress signed into effect on March 27, 2020. It is designed to provide economic relief to families and businesses through direct payments, tax relief guidelines and loan programs. While the act provided areas of relief for both businesses and individuals, we would like to highlight some of those relating specifically to individuals, as well as planning tactics to consider for each provision. Please note: all planning tactics should be viewed as considerations and may not apply to all circumstances. You should consult your advisor before taking any actions.

Rebate Checks

Rebate checks of $1,200 (single) or $2,400 (married) will be issued automatically to taxpayers with less than $75,000 (single) or $150,000 (married) of income, based on the taxpayer’s most recent return. An additional $500 will be issued for each child under age 17. Rebate checks are reduced by $5 for every $100 that income exceeds the threshold. For example, if a single person makes $75,100 annually, they will receive a $1,195 rebate check.

If a filer’s rebate check is reduced due to phaseout, but income drops in 2020 below the threshold, a refundable credit will be applied to the 2020 return. However, if a filer receives a full rebate check, but income increases in 2020 to above the threshold, no repayment is due. Rebate check proceeds are not taxable.

Potential Planning tactics for rebate checks include:

  • Accelerating filing 2019 tax return if income was lower or if you had a child during the year.


Required minimum distributions (RMDs) from retirement accounts have been suspended for 2020, including from inherited IRAs.  A distribution may be reversed if it was taken less than 60 days ago, unless it came from an inherited IRA or inherited Roth IRA account. This provision allows for an RMD-age investor to waive distributions from qualified accounts in 2020.

Potential Planning tactics for REQUIRED MINIMUM DISTRIBUTIONS include:

  • Reverse IRA distributions with a 60-day rollover if taken less than 60 days ago, as long as the account holder has not completed a separate 60-day rollover within 365 days.
  • Consider taking distributions for living expenses from non-retirement accounts.
  • Consider Roth conversions to take advantage of lower income in 2020.
  • Discuss with CPA estimated tax payments if RMD previously used for tax withholding.
  • Pause/Stop any automated RMD distributions with the custodian.

The CARES Act also includes special accommodations for those whose health or economic position have been directly impacted by the Coronavirus. These individuals may take Penalty-Free Distributions from Retirement Plans, up to $100,000 in 2020. Such distributions are exempt from the 10% penalty for withdrawals taken before age 59 ½ and are not subject to mandatory withholding requirements. These distributions may be partially or fully repaid over 3 years, or the tax may be paid over 3 years (ratably). Further, limits on retirement plan loans have increased. Retirement plans offering loans (such as 401(k) and 403(b)) now have a maximum loan amount of $100,000. Account holders can use 100% of Vested balance instead of 50%. Repayments may be delayed for up to 12 months.

Potential Planning tactics for RETIREMENT ACCOUNT DISTRIBUTION CHANGES include:

  • Utilize retirement savings for liquidity needs as an interest-free loan over 3 years.
  • Consult with CPA to pay tax on retirement plan distributions, may be advantageous to pay bulk of tax on the distribution in low income years, instead of evenly over 3 years.

Opportunities for CHARITABLE GIVERS 

For taxpayers itemizing their deductions, the 60% deduction limitation on cash gifts has been increased to 100% of the taxpayer’s adjusted gross income. There is also a $300 Above-the-line deduction available for those taking the standard deduction. Excess gifts can still be carried forward for up to 5 years. These donations must go directly to a qualified charity and may not be deposited to a Donor Advised Fund.

Potential Planning tactics for CHARITABLE GIVERS include:

  • Increase cash contributions to offset a higher proportion of taxable income.
  • Utilize the above the line deduction of $300 for standard filers if close to a bracket, deduction or credit threshold.

Opportunities for STUDENT LOANS

Individuals with federal student loans may suspend payments until September 30, 2020 and no interest will accrue during that time. Employers may pay up to $5,250 towards the student debt of an employee, tax-free.

Potential Planning tactics for STUDENT LOANS include:

  • Call lender to have payments paused until September 30, 2020, if additional liquidity is needed.
  • Continue to make payments and enjoy the interest holiday.



As a result of the CARES act, homeowners with federally backed mortgages who are experiencing a financial hardship due to the COVID-19 emergency have been given a right to forbearance for up 180 days, depending on their situation. Homeowners will also have the right to request another 180-day extension once the first is up.

Potential Planning tactics for HOMEOWNERS include:

  • Contact your lender as soon as possible to discuss forbearance and/or payment deferral options

Real Estate Investors and Multifamily Landlords

Section 4023 of the CARES Act requires loan services to provide forbearance for multifamily borrowers with federally backed multifamily mortgage loans who have experienced financial hardship due to the virus, provided they meet certain requirements.

Potential Planning tactics for REAL ESTATE INVESTORS include:

  • As much as 90-day forbearance options are available. We recommend investors contact their mortgage servicers as soon as possible.
  • If client has a commercial property, their tenant(s) may qualify for an SBA loan in which proceeds can be applied towards rental payments.
  • Property tenants could use retirement funds to pay for rent, as the bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to Jan. 1. (with three years to roll back the proceeds).

Opportunities for UNEMPLOYMENT

Employees who have been terminated, furloughed, lost work hours, or are self-employed and have lost income may now collect unemployment benefits. Unemployment benefits have been boosted by $600 per week from Federal aid and may be received for up to 4 months. The application process and income amounts will vary by state. Further, employees who have been unable to work because a child’s school or daycare closed may receive 12 weeks of paid leave through the Families First Act, and after that period, may file for unemployment.

Potential Planning tactics for UNEMPLOYMENT include:

  • File for unemployment benefits as soon as possible. If unemployment benefits have recently ended, reapply to receive augmented federal benefit through July 31.

Medical Provisions

Medical Expenses

Telehealth Services are temporarily covered by an HSA-eligible high deductible healthcare plan so that individuals can stay at home while seeking medical care for symptoms. HSA accounts will now also cover over-the-counter medicine as an eligible expense. Medicare enrollees are eligible to receive a free COVID-19 vaccine when one is available and Part D recipients can now request 90-Day medicine supplies.

Medical Professionals

Doctors providing volunteer medical services will have liability protections, if the services provided are within the scope of the practitioner’s license.

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