Sensible Perspectives

The CARES Act: How Will It Affect Individuals and Families?

Posted by on April 9, 2020

The CARES Act has provisions that may affect you and your family. In this article, we outline the CARES Act and other recent stimulus-related bills and their implications.

Amid the unprecedented disruption to our daily lives and economy that has resulted from the coronavirus, the federal government has passed three recent bills aimed at limiting the financial consequences of this disruption.

The three bills, which are the Coronavirus Aid, Relief, and Economic Security Act (CARES), the Families First Coronavirus Response Act, and the Coronavirus Preparedness and Response Supplemental Appropriations Act are broad in their reach and affect many parts of the US economy.  This article is intended to highlight and summarize the provisions that we think will most affect Sensible Financial clients.  It is focused primarily on the CARES Act and the provisions that will affect individuals and families; though we also include some brief mention of provisions that affect small businesses.

The article contains a lot of information – you may wish to skim the words in bold to find the sections that are most applicable to you.



The tax filing date for federal income taxes has been moved to July 15th.  No interest or penalties will start accruing until July 16th.  All 50 states have postponed their filing dates, though a few states[1] have selected filing dates different from July 15th.

First and second quarter estimated taxes are now due July 15th.

The act includes direct payments to individuals, in the form of a tax credit for 2020 (meaning that the payments will not be taxable income).  Payments are based on Adjusted Gross Income (AGI) and are as follows:


Married Filing Jointly Head of Household Other Adults
Credit amount $2,400 per couple $1,200 $1,200
Plus: $500 per child under 17 $500 per child under 17 $500 per child under 17
Income limitations: For AGI above $150,000, rebate is gradually reduced; fully eliminated for AGI above $198,000.  Full phaseout is an additional $10,000 higher for each child. For AGI above $112,500, rebate is gradually reduced; fully eliminated for AGI above $135,500.  Full phaseout is an additional $10,000 higher for each child.


For AGI above $75,000, rebate is gradually reduced; fully eliminated for AGI above $99,000.  Full phaseout is an additional $10,000 higher for each child.



The AGI will be based on the most recently filed tax returns – either 2018 or 2019.  There is an advantage in this case to having AGI below the phaseout amounts, so individuals may wish to speak with their tax accountant about either holding off on filing 2019 returns (if 2018 income is lower) or getting the return filed as soon as possible (if 2019 income is lower).  It is unclear when the IRS will calculate the rebate amount, and therefore on what date the IRS would need the 2019 return to be filed by in order to use that year’s AGI.

Taxpayers who are ineligible based on their 2018 and 2019 AGI but who will be eligible for the credit based on their 2020 income can still receive the tax credit, but not until they file their 2020 income tax return in 2021.

The stated goal of the government is to get the payments out in three weeks.  Payments will be sent to direct deposit accounts already established with the Social Security Administration or the IRS or, absent those, the latest mailing address on file with the IRS.  Individuals who qualify need not do anything to receive their payment.

The deadline for 2019 contributions to IRAs, Healthcare Savings Accounts (HSAs), and Coverdell Savings Accounts has been extended to July 15th.

Required Minimum Distributions (RMDs) from IRAs, employer-based plans, and Inherited IRAs are not required for 2020.  The purpose of this provision is to allow time for participants’ balances to potentially recover, after the sharp stock market decline.  For those who already took an RMD in 2020, they have 60 days in which to deposit the money back into the account[2].  It may be possible for those that took their RMD very early in the year to redeposit it even after 60-days under the “Coronavirus Distribution” provision.  If you do not need the money from your RMD this year, please speak with your advisor about whether it would be sensible to re-deposit your RMD within the 60-day window.  For those that took their first RMD (for 2019) in 2020, prior to April 1st, that RMD is also not required and similar provisions for replacing it apply.

Certain individuals younger than age 59 ½ will be able to take a distribution of up to $100,000 from an IRA or employer-based plan without the usual 10% age-based penalty.  This will apply to individuals affected by the coronavirus under a very broad definition:

This “Coronavirus Distribution” can either be re-deposited into a retirement account within three years or can be considered a taxable distribution, upon which the taxes can be paid over a three-year period (or all in 2020).  Tax withholding from the distribution is not required.  Clients that could benefit from additional cash should speak with their advisor about whether this could be a wise strategy for them.

Rules governing loans from employer-based plans have been loosened.  Young people (for instance) that do not have other financial assets may benefit from this added flexibility.

Taxpayers that do not itemize tax deductions in 2020 will nonetheless be able to take up to a $300 deduction from income for charitable contributions.  In addition, limits on the deductibility of cash charitable contributions (based on adjusted gross income) have been temporarily increased to 100% of AGI.  In both cases, donations must go directly to a charitable organization, not to a donor-advised fund (which is a charitable organization, but under a different section of the tax code).  Clients contemplating large charitable contributions in 2020 should consult with their advisor and their tax accountant.



Unemployment benefits are administered by the states and each state has its own rules for unemployment eligibility and the benefits paid.  For details, search for the Department of Unemployment Assistance, Department of Employment Security, or similar for your state.  In addition, the recent federal legislation supplements state programs, under the “Pandemic Unemployment Compensation” benefit, by broadening eligibility to include contract workers and those that are self-employed, eliminating the waiting period after losing one’s job before one is eligible for benefits, increasing the benefit amount, and extending the benefit period.  Benefits are available even for those that were laid off before the legislation was passed (any time after January 27th) or who are not laid off but who are unable to telework with pay or access paid leave benefits (see below).   In general, workers making up to $50,000 in annual compensation that become unemployed will be eligible to receive close to their full income for four months.

In addition to state websites, more details on unemployment insurance related to the Coronavirus can be found on these sites:

Sick and family leave will be available for employees of companies of 500 employees or less (business with 50 employees or less may be exempt) if the employee is diagnosed with COVID-19, if the employee is caring for someone with COVID-19, or to take care of a child whose school has been closed as a result of COVID-19.  More information can be found here:



Provisions meant to support small businesses are not covered comprehensively here, but the following are the major provisions.

The “Paycheck Protection Program” consists of loans that will help small businesses (generally less than 500 employees) keep employees on the payroll.  In many cases, the loans will be forgiven if the employer maintains or quickly rehires employees and maintains salary levels.  For this program, the “small business” can also be a nonprofit, self-employed individual, sole proprietorship or independent contractor.  A list of participating lenders and more information can be found at

The employee retention credit is a new credit against payroll taxes that is meant to encourage businesses to keep their employees.  For employers that have already laid off employees, there may be a window during which time they can rehire employees, qualify for this credit, and qualify for a Paycheck Protection Program loan (which could be forgiven).  More information is here: .

Payment of the employer portion of payroll taxes may be deferred, with 50% of the tax due by the end of 2021 and 50% by the end of 2022.  However, this deferral is not available to employers that receive forgiveness of Paycheck Protection Program loans.  See section three of this IRS notice:

Net operating losses for 2020, as well as for 2019 and 2018 can now be carried back to offset income for up to five years.

There is an increased limit on deductible business interest for 2019 and 2020.

Credits for prior year corporate AMT, previously made available as refundable credits over several years ending in 2021, can be claimed now.



Federal student loan payments are deferred until September 30th, with no interest.  This only applies to loans directly from the Federal government or that are Federal Family Education Loans (FFEL) currently owned by the Department of Education.  Perkins Loans, private loans, and commercially held FFEL loans are not eligible.

In addition, up to $5,250 of employer educational assistance (either loan payments or tuition assistance) can be deducted from taxable income for 2020.

More information is available at



Testing for COVID-19 must be covered by private health insurers without cost sharing.

Over-the-counter medicines and feminine products now count as qualified medications for purposes of reimbursement from Flexible Spending Accounts (FSA), Health Savings Accounts (HSA), or Health Reimbursement Arrangements (HRA).



Legislation passed in recent weeks, intended to help soften the economic blow from the coronavirus, is far-reaching.  There are many provisions in the CARES Act, and some of them will need further clarification from relevant government departments and agencies.  If you have questions about the CARES Act or other legislation or think aspects of it may affect you, please contact your advisor.


For more information on the CARES Act, see:


[1] IA (7/31), HI, (7/20), ID (6/15), NH (6/15) MS (5/15), OR (4/30), VA (6/1), WA (6/15)

[2] Those who took an RMD from an inherited IRA are not eligible to roll it back into the account.