Help is on the Way! COVID-19 Stimulus Package Basics

Mark Hume |

Congress has passed The CARES Act.  This stimulus package brings relief to the American people during an unprecedented time when portions of the economy have been brought to a screeching halt.  We will outline some of the very basics that have emerged from this bill.  Like the SECURE Act, it is a massive bill with plenty of interpretation still to trickle out. 

For those who have immediate cash-flow needs, here are the opportunities:

The Recovery Rebate:

It is estimated that 90% of Americans will be eligible to receive a rebate check based on their 2018/2019 income.  How much will you get and where does the phase out begin?

  • $1200 per taxpayer
  • $500 per child under the age of 17
  • Phase out begins at $150k (married filing jointly), $75k (single) of AGI (Adjusted Gross Income)
    • The phase out is 5% for every $1,000 over $150k

The early indications from the Treasury is that these checks may take until May to be distributed.

Unemployment Claim Enhancements:

There are a lot of enhancements to unemployment claims.  We will briefly touch on the highlights:

  • Self-Employed individuals are eligible due to the crisis
  • Maximum checks may be raised by $600 per week
  • Benefit period extended by 13 weeks from 26 to 39
  • The first week of unemployment is covered during this situation

Student Loan Payments:

Student loan payments can be deferred until September 30, 2020 and no interest will accrue during this period.  You will have to take the initiative to turn these payments off.

If you are pursuing student loan forgiveness through some of the various programs available, your time will continue to count despite deferring payment.  This makes the most sense for those in this specific situation.

Involuntary debt collections (wage garnishment) for loan repayments will cease during the deferral period.

Coronavirus-Related Distributions:

You can take a penalty-free distribution from your IRA and/or employer retirement plan in 2020 if you meet one of the following qualifiers:

  • You, your spouse, or a dependent has been diagnosed with COVID-19
  • Your income is negatively impacted due to a quarantine, layoff, furlough, reduced work hours or lack of childcare
  • You own a business that has closed or has had limited operating hours due to quarantine restrictions

These distributions are not subject to the typical mandatory withholding requirements.  The distributions can be paid back over the next three years.  This opportunity should be seized if possible once this storm has been weathered. 

You can also spread the ordinary income generated over three years.  A tax professional can help you determine what makes the most sense in your given circumstances.

These eligibility triggers are broad and should allow this opportunity to apply to many.  We would encourage anyone who does need to access these accounts to be mindful of their distributions.  Working with a financial professional to ensure responsible use of these assets could be very beneficial.

401(k) Loans:

401(k) loan maximums have been increased from $50k to $100k for those impacted by the virus.  You can also loan against 100% of the vested balance (typically only 50%).  Loan repayment may be deferred for up to one year. 

This is another opportunity that can be beneficial, but financial professionals can help you navigate these waters to make the best decision for you.

In Summary:

These are the provisions of the bill that address the needs of those in the most challenging circumstances right now.  There are additional, similar provisions for business owners that probably deserve their own post.  There are so many who need help navigating this difficult time, whether physically, emotionally, or financially.  We wish everyone the best of health during this pandemic and hope this sheds some light on opportunities to lessen your financial burden.


-Mark Hume