To help shed some light on the CARES Act highlights that investors should know about, Inspire Investing has partnered with our tax advisors at Hayashi and Wayland to provide the following information about the CARES Act. (This information is provided for educational purposes only and should not be considered as tax or investment advice. Please consult your personal tax or investment advisor to discuss your individual situation.)
The $2.2 trillion Coronavirus Aid, Relief and Economic Security “CARES Act” represents the largest economic relief package in American history. The CARES Act contains sweeping provisions that have powerful implications for American families and the US economy at large, both because of the gargantuan amount of money that will be flooding the US economy and also because of certain investment related directives that temporarily change the rules for retirement accounts, charitable giving and more.
The CARES Act was designed to offer assistance to individual taxpayers, business owners, and the entire economy to try to revive itself from the downturn caused by the COVID-19 pandemic and the business closures, layoffs and economic suffering that has followed. This relief plan will offer assistance to tens of millions of American households affected by the coronavirus pandemic.
We have outlined the CARES Act highlights below:
These payments will be made to taxpayers whose adjusted gross income is under $75,000 (single), $112,500 (head of household) and $150,000 (married). Single or head of household taxpayers will get $1,200. Married taxpayers will get $2,400. In addition, for each child 16 years old or younger, you will get an additional $500. Above these income figures the payment decreases. Single taxpayers earning $99,000 or married taxpayers who have no children and earn $198,000 will not receive any payments. A family with two children will no longer be eligible for payments if its income surpassed $218,000. Payments received are not considered taxable income to the recipients.
You will not be able to get a payment if someone claims you as a dependent, even if you are an adult. In any given family and in most instances, everyone must have a valid Social Security number in order to be eligible. There is an exception for members of the military.
You can find your adjusted gross income on Line 8b of the 2019 1040 Federal tax return. And if you already filed your 2019 taxes and provided direct deposit information for a refund, it will be deposited that way into your account. If you have not filed your 2019 tax return, your 2018 return will be used for determination. If you would prefer to have your 2019 tax return considered over your 2018 tax return we would recommend that you file 2019 as soon as possible.
If you are ineligible for the payment due to your income being in excess of the limits for 2019, you may benefit once you file your 2020 taxes because the payment is technically an advance on a tax credit that is available for 2020.
It is not clear yet when and how physical checks will be mailed to those who will require that. Information from different sources at this time say anytime from the end of April to the end of May.
For the calendar year 2020, no one will be required to take a required minimum distribution from any retirement account. If you are under age 59 ½ and need to make a withdrawal due to the outbreak, the usual 10 percent penalty is waived for distributions up to $100,000 and you are able to spread the income taxes associated with this distribution over 3 years. You can also put the funds back into the account within 3 years even though the amount would exceed normal contribution limits. These exceptions only apply to coronavirus related withdrawals.
The bill makes a new deduction available for up to $300 of charitable deductions. All taxpayers can derive benefits from making up to $300 of charitable deductions even if you don’t take an itemized deduction. In addition, there is no cap on the amount of charitable deductions you can take as an itemized deduction for 2020.
The Federal Government will provide a temporary Federal Pandemic Unemployment Compensation (FPUC) through July 31, 2020. This compensation is $600 per week for any worker eligible for state or federal unemployment compensation benefits. The FPUC would be paid in addition to and at the same time as regular state or federal unemployment benefits. States have the option of providing the entire amount in one payment or sending the extra portion separately, but it must all be done on the same weekly basis.
Starting March 18, 2020, most mortgages are prohibited from foreclosure actions for 60 days for borrowers who request it and can demonstrate a COVID-19 related hardship.
Landlords are subject to a 120-day moratorium on filing eviction proceedings for the non-payment of rent. Unpaid rent will continue to accrue, but landlords may not charge fees or assess fines.
Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis. It would be available to employers whose businesses were disrupted due to virus-related shutdowns and firms experiencing a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit is available for employees retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.
Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50 percent owed on December 31, 2021, and the other half owed on December 31, 2022.
This program administered through the Small Business Administration is meant to help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses from February 15 to June 30. Notably, small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year. Loans may be forgiven if a company uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation.
Because of its size and scope, the CARES Act will likely make an historic, indelible mark upon the US economy and the hundreds of millions of Americans who both power and rely upon that economy. As such, investors should be educated about the highlights of the CARES Act and how it will affect them.
Additionally, as faith-based investors we should remind ourselves that although $2.2 trillion dollars is a staggering amount of money, our hope and trust is not in government stimulus but in the one true God who is sovereign over governments, and who is infinitely more great, powerful and yes, even more caring than the CARES Act.
These are unprecedented times full of uncertainty and trials of many kinds. There are many real reasons to fear and one can hardly be faulted for feeling afraid amidst the swirl of global pandemic. But for anyone finding themselves under a cloud of anxiety, the Bible reminds us to “cast all your anxieties upon Him for He cares for you” (1 Peter 5:7). And when you find yourself worrying about your earthly treasure, Jesus offers a peace that passes all understanding, and an “inheritance that is imperishable, undefiled, and unfading, kept in heaven for you, who by God’s power are being guarded through faith for a salvation ready to be revealed in the last time. In this you rejoice, though now for a little while, if necessary, you have been grieved by various trials, so that the tested genuineness of your faith—more precious than gold that perishes though it is tested by fire—may be found to result in praise and glory and honor at the revelation of Jesus Christ” (1 Peter 1:4-7).
Jesus cares for you. No matter what.
Trust in Him. No matter what.