Mar 30, 2020

What Individuals Need to Know About The Coronavirus Stimulus Package

After the Senate passed a landmark economic relief plan on March 26, 2020, the House passed the legislation the next day (after some drama), and President Trump signed it into law that afternoon.  In short, it’s a total of $2 trillion stimulus package in response to the current Coronavirus pandemic intended to offer economic relief to American households and corporations.  This post focuses on the following individual benefits, as opposed to corporate: 

Individual Payments

The biggest feature of the plan is intended to provide $1,200 payments to most American adults, (as long as they are not claimed as a dependent by someone else) and an additional $500 for each qualifying child under 16.   Individuals with $75,000 of Adjusted Gross Income or less would receive the full benefit, with the payment amount phasing out until Adjusted Gross Income of $99,000 (the numbers are double for married couples).  The AGI figures will be based off of your most recently filed tax return (if you have yet to file for 2019, they will use your 2018 figures).  Payments are expected to arrive within three weeks. These payments are not subject to further taxation.

Unemployment Benefits

The bill would expand those eligible for unemployment benefits, including self-employed individuals and part time workers.  Since the increase is in addition to state unemployment benefits, the amounts will vary by state.  Generally speaking, it should be an additional $600 per week over and above state unemployment benefits.  In order to be eligible, however, your unemployment/inability to work needs to be Coronavirus related. Note that this is a broad definition, including having a COVID-19 diagnosis, caring for a family member that does, having child care and school options no longer available due to closures, and more.  These benefits will last through the remainder of 2020.

Student Loans

All federally held student loan payments will be suspended until September 30, 2020, with no interest to accrue during this suspension.

Retirement Accounts

Required Minimum Distributions have been suspended for 2020.  This benefit is intended to allow individuals to not have to sell assets during the current (and anticipated) market downturn, if they do not otherwise need the funds.  In addition, individuals can avoid the 10% penalty for early withdrawals (before age 59½), for up to $100,000 in withdrawals in 2020.   While you still need to pay taxes on the withdrawal, you have the option to spread those taxes over a three year period.  Again, the withdrawal has to be “Coronavirus related”.   401(k) and similar account loans are also allowed up to $100,000 for the next 180 days (typical limits are $50,000 or half of the balance, but both of those are done away with at this time).

Other Items

In order to encourage giving, for individuals who do not itemize deductions, they will still be allowed to deduct up to $300 of charitable contributions for 2020 and beyond.  If you take advantage of any payment modifications available from lenders or other institutions, your credit report will not suffer at least until 120 days after the national declaration of emergency is over. Finally, landlords with Fannie and Freddie backed mortgages will not be allowed to evict tenants for non-payment of rent until 120 days after the national declaration of emergency is over.

While times are difficult as we all maneuver through the Coronavirus, the government’s effort at offering relief is truly unprecedented.  Other than staying healthy, cash flow concerns are also at the top of many individual’s list.  This can be especially true for individuals going through a divorce.  What can be a very uncertain time is only compounded by the overall uncertainty we all face in dealing with the current pandemic.  The individual payments will help, but for those that are able, and have the need, the ability to borrow against your retirement account up to $100,000 could provide a lifeline.  Of course such loans should only be utilized as a last resort, and it is not something to take without serious consideration of the longer term ramifications, but simply being able to take advantage of such loans should provide some assurance of cash flow stability in otherwise uncertain times. 

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