How the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 Can Affect You

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 is an estimated $2 trillion package signed on March 27, 2020 that includes a wide range of provisions for both loans and outright rebate payments or tax credits aimed at helping individuals, businesses, healthcare entities, and state and local governments meet short-term cash flow demands.

Here are some highlights that could affect your personal financial situation:


The CARES Act provides a refundable income tax credit against 2020 income of up to $2,400 for married couples filing a joint return, while all other filers begin with a refundable credit of up to $1,200. The credit amount is then increased by up to $500 for each child a taxpayer has under the age of 17.

As a taxpayer’s income begins to exceed their applicable threshold, their potential Recovery Rebate Payment (their credit) begins to phase out. More specifically, for every $100 a taxpayer’s income exceeds their credit, their potential Recovery Rebate will be reduced by $5.

The applicable adjusted gross income threshold amounts are as follows:

  • Married Filing Jointly: $150,000
  • Head of Household: $112,500
  • All Other Filers: $75,000

Note that the initial amount paid will be based on either a taxpayer’s 2018 or 2019 income tax return (whichever is the latest return that the IRS has on file), and you will be ‘made whole’ if a taxpayer is owed money based on their actual 2020 income.

If you had a life-changing event since your 2018 tax return – such as lower income that would put you in the qualifying thresholds or a new child – you should try to file your tax return as soon as possible. There has been no defined cutoff submission date defined by the IRS as to when they will calculate the rebate, so the sooner you file, the better your chances are of receiving the rebate based on reduced 2019 income.

The government has directed the IRS for these rebate payments to be released as soon as possible, it will probably take them a few weeks to send these payments your way.

You will receive a letter from the IRS in the next few weeks that would detail the method of calculating your rebate, the amount of rebate you qualify for and the method of disbursement to you. There are three ways they will send the funds:

  • If you receive Social Security benefits, you will receive the Recovery Rebate in the same account.
  • The Act also authorizes Recovery Rebate payments to be made to the account into which a taxpayer’s 2018/2019 refund was deposited.
  • Other payments will be sent to the last known address on file. In case you address has changed since you last filed your taxes, please use IRS form 8822 to update it.


You are not required to take required minimum distributions (RMDs) during 2020 from your Traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b), and Governmental 457(b) plans, and Beneficiary IRAs.

Please contact us if you would like to return any distributions that you have already taken in 2020 as this has to be evaluated on a case by case basis.

Note that RMDs will restart in 2021, based on the IRS tables.


The CARES Act has created a provision by which an individual can take distributions of up to $100,000, made from IRAs, employer-sponsored retirement plans, or a combination of both, which are made in 2020 by an individual who has been impacted by the Coronavirus.

These loans will not be subject to the mandatory withholding from an employer plan, and all distributions will be exempt from the 10% penalty. The repayment period has been deemed as three years after the receipt of the distribution and can be made via one or multiple payments.

The default rule is that this income from a Coronavirus-Related Distribution will be split evenly over 2020, 2021, and 2022, but in the event of a low income year in 2020, you can choose to have it taxed in the same year.


If your employer -sponsored retirement plans, such as 401(k)s and 403(b)s, offer participants the option of taking a loan of a portion of their retirement assets, there have been some modifications made for individuals who have been impacted by the coronavirus.

The regular plan for the employer has been modified in the following ways:

  • Maximum loan amount will be increased to $100,000
  • 100% of the vested amount is eligible for withdrawal
  • The repayment of the loan payments that may be owed from March 27, 2020 through December 31, 2020, may be delayed for up to one year.


These distributions will be allowed to those individuals who file their returns and claim the standard deduction. These charitable contributions must be made in cash to qualifying charities.

Note that contributions cannot be used to fund your Donor Advised Fund.


The CARES Act also suspends the payment towards any federal loan payments until September 30, 2020. Note that you will have to contact your loan provider to put a hold on the payments. They will not stop them by default.

Some other highlights are:

  • Over the counter expenses have been included in the definition of qualified medical expenses for Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), and Healthcare Flexible Spending Accounts (FSAs) by the CARES Act.
  • Medicare beneficiaries will be eligible to receive the COVID-19 vaccine at no cost when it becomes available.
  • Medicare Part D beneficiaries can also request their prescriptions to be prescribed and filled for 90 days per the CARES Act.

Presented by Sumedha Malhotra, CFP®