CARES Act Relief Provisions benefitting Individuals

SEE ALSO >> Individual Tax

Most of us are familiar with the “Economic Impact Payments” for individuals provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. But there are other provisions of the CARES Act you might not be aware of that could benefit you. For example, it waives the required minimum distribution (RMD) rules for 401(k) plans and IRAs for 2020. Here’s an overview of other changes you might benefit from.

Easier access to retirement plans funds

The CARES Act allows tax-advantaged coronavirus (COVID-19)-related withdrawals of up to $100,000 from IRAs, 401(k) plans, and certain other retirement plans made on or after January 1, 2020, and before December 31, 2020.

Distributions made to an individual who’s diagnosed with COVID-19 or whose spouse or dependent is diagnosed with COVID-19 can qualify. So can distributions to someone who’s suffered adverse financial consequences related to certain COVID-19-related circumstances.

Eligible individuals can withdraw up to $100,000 with no immediate federal income tax consequences. They can recontribute withdrawn funds within three years without regard to the applicable cap on annual contributions. To the extent such distributions aren’t repaid within this period, the related income tax can be prorated over three years — but the 10% early withdrawal penalty that generally applies to distributions before age 59½ will be waived.

Expanded health care breaks

Beginning after December 31, 2019, the CARES Act allows tax-free payments from Health Savings Accounts and Archer Medical Savings Accounts for nonprescription drugs and menstrual care products. For reimbursements after December 31, 2019, the same rules apply to Flexible Spending Arrangements and Health Reimbursement Arrangements.

In addition, for plan years beginning before 2021, the CARES Act allows high deductible health plans to pay for expenses for telehealth and other remote services without regard to the deductible amount for the plan.

Increased deductions for donations

Individual taxpayers who don’t itemize deductions can take advantage of a new $300 above-the-line deduction for cash contributions to qualified charities in 2020. “Above-the-line” means the deduction reduces adjusted gross income (AGI).

The CARES Act also loosens the limitation on charitable deductions for cash contributions made to public charities in 2020, boosting it from 60% to 100% of AGI.

Help for those with student loan debt

Under the CARES Act, employers can provide up to $5,250 annually toward employee student loan payments on a tax-free basis before January 1, 2021. The payment can be made to the employee or the lender. (The employee can’t take a student loan interest deduction for any loan payment for which the exclusion is available.)

The CARES Act also allows individuals to stop making payments on federal student loans through September 30, 2020, without incurring penalties or late fees. In addition, no interest will accrue on federal student loans during this period. And the government is temporarily suspending garnishments to collect on federal student loans.

Protections for mortgage holders

The CARES Act allows eligible homeowners with federally backed mortgages to request forbearance, regardless of their delinquency status and without incurring penalties, fees or interest. Eligible homeowners must submit a request to their loan servicers and affirm financial hardship during the COVID-19 crisis. A servicer is required to grant forbearance for up to 180 days and to extend it for an additional period of up to 180 days at the borrower’s request.

Borrowers with federally backed mortgages on multifamily properties can request a forbearance for up to 30 days if they were current on their loans on February 1, 2020. They also can request two additional 30-day extensions.

Get expert advice

A health and financial crisis of this magnitude comes once in a generation — we hope! Extraordinary circumstances require a full and multifaceted response. Your Belfint advisor can assist you in navigating the CARES Act provisions that will be most useful to you, as well as apprise you of any subsequent relief legislation that you may benefit from.

Need Additional Information?

If you need more information, please contact us so we can connect you with one of our CPA advisors who will be committed to your business and personal success. BLS is here to help!