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COVID-19 - Individuals

I’ll try to keep this page up to date as things come into better focus and as the House makes any of its changes. Updated 3/29/2020

The details in the CARES act, recently enacted. I thought I’d point out and then briefly discuss the parts that benefits individuals. 

INDIVIDUALS

Section 2201. 2020 recovery rebates for individuals

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All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as IRS. The IRS is going to take a look at your 2019 tax return. Fear not, if your 2019 return has not yet been filed, the Service will grab your 2018 return instead. And even better: if you haven’t filed a return for EITHER year — for example, you collected Social Security, but did not have enough taxable income to necessitate the filing of a return — the IRS will determine that you are eligible for a check based on your Form SSA-1099, Social Security Benefit Statement.

Once the IRS has either your 2019 return, 2018 return or Social Security Statement, its going to cut you a check for $1,200 (if single/$2,400 if married filing jointly) PLUS $500 for each child under the age of 17. 

Those on the higher end of the income scale will be shut out of the program because the payment phases out once your “adjusted gross income (AGI)” — think: total income minus a handful of deductions — exceeds $75,000 (if single, $150,000 if married). Once over those thresholds, you’ll lose $5 of your payment for every $100 your AGI exceeds those thresholds.

If you are single with no kids and would be due a payment of $1,200, it will be wiped out completely if your AGI exceeded $99,000 (($99,000 - $75,000) * 5% = $1,200).

If you are married with no kids and are due a payment of $2,400, it will be gone if your AGI exceeded $198,000 (($198,000-$150,000)*5% = $2,400).

If you’ve got kids, then obviously, it will take more income before all of the payment is wiped out. For example, a married couple with two children who is eligible for the maximum payment of $3,400 wouldn’t lose all of their payment until AGI exceeded $218,000.

The payments will be made between now and December 31, 2020 — in many cases, it will be paid electronically if you have provided direct deposit information to the IRS on your 2018 or 2019 tax returns — but it’s important to understand that any payment you receive acts as an advance payment of a credit you will compute AGAIN on your 2020 tax return.

For taxpayers who did not provide direct deposit information, in the coming weeks the Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online so that individuals can receive payments immediately as opposed to checks in the mail

Section 2202. Special rules for use of retirement funds

Consistent with previous disaster-related relief, the provision waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief. A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

Section 2203. Temporary Waiver of Required Minimum Distributions

Temporary waiver of required minimum distribution rules for certain retirement plans and accounts The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Section 2204. Above the line Deduction for Charity

Allowance of partial above the line deduction for charitable contributions The provision encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.

Section 2206. Exclusion for certain employer payments of student loans

The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.