Broker Check

CARES Act - Key Takeaways

March 31, 2020

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – Key Takeaways


Last week President Trump signed into law the CARES Act in response to the ongoing COVID – 19 pandemic. The CARES Act is a $2 Trillion emergency relief package aimed at helping relieve some of the economic damage created as a result of the disease. The CARES Act is a rather lengthy bill and rather than break down all provisions, this communication is intended to simply provide the key takeaways that may impact you, our valued Pegasus clients.


The CARES Act will provide payments directly to taxpayers that meet specific qualifications. Individuals with adjusted gross income of $75,000 or less in 2019 will receive a payment of $1,200 and couples filing joint tax returns with less than $150,000 in adjusted gross income for 2019 will receive $2,400. For those receiving payments, you will also receive up to $500 for each qualifying dependent child under age 17. If you are above these income thresholds the amount you receive is phased out by $5 for every $100 of income, therefore you become ineligible if you are single and your adjusted gross income exceeds $99,000 or your file jointly and your income exceeds $198,000.


If you have been impacted by the COVID – 19 pandemic and need to withdraw money from an IRA or employer sponsored retirement plan, the CARES Act allows you to distribute up to $100,000 from one or multiple accounts without penalty. Please note, these distributions are still taxed at your ordinary income tax rate, however, you can spread the tax impact over three years. In order to qualify you or your spouse has to be affected by COVID – 19 which could mean contracting COVID - 19, having your work situation impacted (furlough, layoff, reduced hours), having a business you own impacted financially, be unable to work due to childcare needs. In another unique twist you can avoid the tax impact on all or a portion of the distribution if you roll all or a portion of your distribution back into a retirement account. You may need to file an amended tax return to receive a refund of taxes paid.


Another key provision of the CARES Act is the waiver of required minimum distributions (RMD) from qualified retirement accounts for 2020. If you would still like to take your RMD you can do so, but some may choose to hold off until 2021 to take their next RMD, especially with hope that equity markets have recovered in time for your 2021 RMD.


There are many, many other provisions to the CARES Act for individuals, businesses, certain industries, as well as stake and local government. The scope of the bill is far to wide to cover in a short blog, but I trust this will give glimpse of a few provisions that may impact you or those around you. As always please let us know how you are doing and if you’d like to discuss the impact of this bill on your specific situation. Take care and wishing you the best of health.