The $2 trillion coronavirus bill, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, has been signed into law.  The main question most Americans are asking is do I qualify for a stimulus check?  We will get into that detail of course.  We will also dive into the bill’s additional changes that may impact your personal financial situation including updates to student loan repayments, retirement account distributions, and unemployment benefits.  

Rather than asking you to read the 880 page bill, we thought it’d be best to summarize the changes below.

Stimulus Payment Details (Checks to Americans)

• Payment is based on 2019 adjusted gross income (AGI) if you have already filed a return.  If you have not filed a return then payment is based on your 2018 AGI.  Your AGI can be found on line 8b of your tax form 1040.
• Single adults with AGI of $75,000 or less will qualify for the full stimulus payment of $1,200.
• Married couples with AGI of $198,000 or less will qualify for the full stimulus payment of $2,400.
• Families with qualifying children age 16 or younger will receive an additional $500 per child.
• The Internal Revenue Service (IRS) will transfer your payment automatically by direct deposit.
• Treasury Secretary Steve Mnuchin stated payments are expected to be received within 3 weeks.
• Individuals current receiving Social Security and disability qualify for the stimulus payment as long as income requirements are met.
• US citizens currently living abroad will receive stimulus payment as long as income requirements are met and have a valid Social Security Number.

Updates to Student Loan Repayment 

• The federal government has waived six months of payments and interest for many federal student loan borrowers until September 30, 2020.
• No interest will accrue for the six month period ending September 30, 2020.
• Automatic payment suspension will occur.  We still recommend contacting your loan service to confirm or logging into your account online to confirm no payment is due.
• The six months of suspended payments count toward loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) and income repayment plans (PAYE, REPAYE, and IBR).
• Employers can provide up to $5,250 in tax-free student loan repayment benefits.

Updates to Retirement Plans

• You are eligible to withdraw up to $100,000 without the 10% penalty as long as the funds are used due to the outbreak (withdrawals from IRAs prior to age 59 ½ are typically assessed a 10% penalty).
• The income tax associated with the withdrawal from an IRA can be spread over a 3 year period from the date of distribution.
• Participants in 401(k) plans are now able to borrow up to $100,000 from their plan (the previous limit was $50,000; known as a 401(k) loan).

Updates to Unemployment Benefits

• Eligible participants will receive an extra $600 per week on top of the state provided benefit.
• Self-employed workers including gig workers, freelancers and independent contractors are eligible to claim unemployment benefits.
• Part-time workers that lost their job due to coronavirus may be eligible for unemployment benefits depending on the state.
• If you rely on a daycare facility or other facility to care for a child, other household member, or elderly parent so you can work and the facility shuts down you are eligible for unemployment benefits.

Updates to Charitable Contributions

• A new tax deduction is allowed for those that don’t itemize deductions.  You are eligible to deduct up to $300 in annual charitable contributions made to a qualified charity.  This amount is subtracted from your gross income.  Reducing taxable income is an important strategy to address before the end of the year.

Updates for Small Businesses

• The bill authorizes $10 billion in emergency grants for small businesses.  Up to $10,000 is available to provide emergency funds to cover immediate operating expenses.
• The bill authorizes $350 billion in forgivable loans to the Small Business Administration (SBA).  The SBA will provide loans of up to $10 million per business to cover payroll, rent, and mortgages.  These funds are forgivable as long as workers are employed through June 2020.

Other Updates

• $100 billion has been allocated for hospitals responding to the coronavirus.
• $58 billion has been allocated to help the airline industry.
• A temporary eviction moratorium is in effect for 120 days for renters that have landlords whose mortgages are backed by a federal entity such as Fannie Mae.
• Menstrual products are now eligible for reimbursement with Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA). This has been debated for over a decade.

We hope we saved you some time and provided greater clarity around the recent stimulus package. 

We truly believe that now, more than ever, is the time to start a financial plan or  revisit the plan that’s collecting dust on your shelf.  It’s time to put intention behind the money you’ve saved.

Please contact us if you and anyone you know has questions pertaining to the stimulus package. 

- Dan

Disclaimer:  This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.