CARES Act Q&A


I have received several questions about the CARES Act, specifically regarding the provisions that apply to individuals. To help provide clarity, I’ve put together this Q&A. I hope it helps.


Q: Who is eligible for a rebate?

A: In general, U.S. citizens or residents who had an adjusted gross income of less than $75,000 (for individuals) or $150,000 (for couples).


Q: How will the government know how much I made?

A: They will use the adjusted gross income you reported on your 2019 tax return or, if you have yet to file a 2019 tax return, your 2018 tax return.


Q: How much do I get?

A: Individuals with an adjusted gross income of less than $75,000, will receive $1,200. Couples with an adjusted gross income of less than $150,000, will receive $2,400. You also receive $500 for each child under 17 years of age.


Q: What if I make more than the stated income thresholds? Do I get anything?

A: Maybe. For every $100 of adjusted income beyond the thresholds, a reduction of $5 is made to the rebate. As an example, individuals who made more than $99,000 are not eligible for a rebate. For couples without kids, the phase out is $198,000.


Q: My parents claim me as a dependent. Do I get anything?

A: Sorry, no money. But your parents’ love is priceless.


Q: People are losing their jobs. How does this help the unemployed?

A: The Cares Act increases unemployment benefits by $600 per week for four months. Both those who are about to apply for unemployment payments and those currently receiving them are eligible for the increase. 


Q: Help! I have student loans and can’t pay the bills!

A: Good news—there is help. First, employers can provide up to $5,250 to employees without it being considered income. Also, payment and interest on student loans can be suspended up to 6 months, but this provision only includes federal student loans.


Q: What about those with private student loans?

A: They will need to contact their lender to see if any payment options exist.


Q: How does the bill protect homeowners?

A: The CARES Act allows you to suspend payments up to 180 days without incurring late fees. The bill also prevents foreclosures or evictions of those with a federally backed loans for up to 60 days.


Q: What about renters whose financial situation has been impacted by the coronavirus?

A: Landlords with a federally backed mortgage on the rental property are not able to evict tenants for 120 days.


Q: I’ve heard something about retirement plans. What’s up?

A: The bill has provisions for those needing to access their retirement funds because of financial hardship caused by the coronavirus. For IRAs and defined contribution plans, the 10% early withdrawal penalty is waived for amounts up to $100k.


Q: Do I still pay taxes on money withdrawn from my IRA?

A: Yes, but it can be paid over three years.


Q: What about 401(k) loans?

A: The bill increases 401(k) loan amounts from $50,000 to $100,000. You can also now take out a loan up to 100% of your account value (as long as it’s no more than $100,000).


Q: Is withdrawing retirement funds or taking out a 401(k) loan a good idea?

A: It would be a last resort move.


Q: How does the CARES Act encourage generosity?

A: It temporarily creates a universal charitable deduction up to $300. This is an “above-the-line” deduction for those who still opt for the standard deduction. For those who itemize, the bill increases the cap on annual contributions from 60% to 100% of AGI.


Hopefully theses answer help you gain a better understanding of how the provision impact you and your finances. Be sure to take full advantage of what the CARES Act provides you.

© 2020 Art Rainer

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