CARES Act of 2020—Individual Benefits

Introduction

The CARES Act of 2020 (a.k.a. the coronavirus stimulus package) provides for certain benefits and entitlements for qualifying taxpayers and business entities. Here is a summary of the benefits to individual persons.

Individual/Personal Benefits

Overview

  • Tax Rebates — $1,200 per person with income caps from $75k-$99k, and $500 per child without income caps
  • IRA Withdrawals — up to $100k without 10% penalty or withholding applied, and claimable as income over three years if not repaid within one year
  • IRA Loans — limit increased to $100k, repayment date delayed one year
  • IRA Age-Required Distributions — delayed one year
  • Charitable Contributions — ATL limit raised to $300, food and medical supply contributions deductible up to 25% of taxable income over other charitable contributions limit
  • Employer Student Loan Payments — from the date of enactment until EOY 2020, employer payments of an employee's student loans is exempt from AGI and deductible

Tax Rebates

A tax "cash rebate" will be sent to individual tax payers whose income is at our below the qualifing level in the most recent of the last two years in which they filed a federal tax return or based on their Social Security earnings statement (SSA 1099) if they didn't file a federal tax return in 2019 or 2018.

As stated, this rebate is based on past income; there is no provision in the law to take into consideration current income or employment status. For example, even if a person filing single is earning less than $75,000 at this time, if they earned over $99,000 in the last qualifying year, they are ineligible for a rebate under this law. For individuals who are unemployed, there are other provisions in the CARES Act that extend the coverage of unemployment, and those provisions are in addition to those of the individual rebates.

Rebates will be disbursed to the account into or from which their last federal tax refund or payment was deposited or withdrawn or a check will be mailed to the last known address, with notice of the same mailed out within 15 days following said disbursement to the last known address; however, the actual method and mode of delivery is subject to change pending regulations that have yet to be determined and promulgated under this Act.

  • For individuals who earned up to $75,000 AGI, heads of households up to $125,000 AGI and couples filing jointly up to $150,000, the rebate is $1,200 per person.
  • For individuals who earned over the AGI limit, the rebate will be reduced by 5% of the amount over the limit.
  • For individuals who earned $24,000 or more or couples who earned more than $48,000 or more over the AGI limit, there will be no rebate.

Because of the "per person" nature of the rebate there is no "marriage penalty" in this benefit.

The $24,000/$48,000 AGI overage limit breakpoint is a consequence of the nature of the rebate reduction, given in the equation

\(\text{Rebate}-(\text{Overage})\times0.05\)


For a person filing single who earned $87,000, the rebate is $600.

\($1,200-($87,000-$75,000)\times0.05\\=$1,200-$12,000\times0.05\\=$1,200-$600\\=$600\)

For a person filing head of household who earned $135,000, the rebate is $700.

\($1,200-($135,000-$125,000)\times0.05\\=$1,200-$10,000\times0.05\\=$1,200-$500\\=$700\)

For a couple filing jointly who earned $165,000, the rebate is $1,650.

\($2,400-($165,000-$150,000)\times0.05\\=$2,400-$15,000\times0.05\\=$2,400-$750\\=$1,650\)


In addition to the individual cash rebate, there is a dependent rebate of $500 for qualifying children regardless of personal income level. There is no limit on the number of children that can be claimed. There is no provision in the law to distinguish between claimed dependents and legal custody for split households; payments will be based solely on dependents claimed in the last filed tax return.

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Jim

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