Every day my morning starts with a news update followed by targeted financial headlines and then financial planning updates. Information is moving so fast, it’s hard to keep up.
Most recently, the government has passed multiple legislative acts to help American workers and small businesses during this unprecedented time. With that in mind, here is an overview of the relief that your family can expect as part of the CARES Act and other recent legislation.
As a bonus, we have a printable checklist for you as well!
Tax Relief
With the advent of the CARES Act, the government has made updates for taxpayers by providing rebates, additional credits, and upgraded deductions.
First, taxpayers who filed in 2018 or 2019 will receive a one-time emergency cash payment of $1200 per person, or $2400 per married couple filing jointly. Additionally, taxpayers will receive an additional $500 for each child under age 17. There are income limitations, so not everyone will receive a payment.
While this money is not a non-taxable credit, taxpayers who have a large increase in their adjusted gross income in 2020 may need to pay back some or all of their money next tax season.
If you haven’t received your money yet, check the IRS website for your status.
The Federal tax filing deadline for 2019 has been moved from April 15 to July 15, 2020, so you have extra time to file and pay any taxes due. This July 15th deadline applies to North and South Carolina state taxpayers as well.
To help spur giving during this time, there are additional deductions for Charitable Giving. If your family uses the Standard Deduction, like 90% of our population, you can take advantage of a new tax credit of $300 of your cash charitable contributions beginning in 2020.
There are additional benefits for wealthy taxpayers, corporations and other businesses; however the above tax incentives are the most common ones you will see.
Student Assistance
Students and graduates can expect benefits of college grants, work-study benefits, and loan relief within the CARES Act.
Colleges will receive government funding to be used for grants to students to pay for course materials, technology, food, housing and child care. The allocation of these funds is up to each individual college, so you should check with your school to determine if funds are available for your student.
Students who are in a work-study program can continue to be paid, even if they are not able to work, and provides additional flexibility for colleges and universities in determining aid eligibility.
As the student loan crisis continues to be problematic, the CARES Act provides help in two ways. First, employers can provide up to $5250 per employee in payments of student loan principal and interest which is not taxable to the employee. While this benefit is not the norm, if your employer has this program, it’s a good time to take advantage of it.
Next, the new legislation suspends student loan payments AND interest accrual through September 30, 2020. This can be a huge help to your cash flow if you have been laid off and are trying to decide whether to pay bills or make dinner.
Retirement Breaks
The government knows that in times of crisis, the biggest asset workers have available is their retirement account. Since the market value of our IRAs and 401(k)s have decreased, it’s a bad time to withdraw money too. Fortunately, if you are normally required to take a distribution, you can skip it this year.
If you have to take funds out, there are some additional rules that you need to follow. However, they allow you to take funds out before age 59 ½ without the usual 10% penalty.
- You, your spouse or a child has been diagnosed with COVID-19.
- You’ve experienced adverse financial consequences because you were quarantined, furloughed, or laid off, or because their employer reduced their working hours.
- You experienced adverse financial consequences because you were unable to work due to lack of child care.
While these distributions are still subject to income tax, you may spread the taxes over a three year period. Or, if the amount is repaid into an IRA or employer sponsored retirement plan within three years, no income taxes will be due.
Help from Your State
In addition to the Federal help, you may be eligible for assistance through your state’s aid programs. The CARES Act beefed up unemployment benefits by adding an additional $600 per week to the regular payments.
North Carolina provides up to $950 per week in unemployment benefits. South Carolina has a page devoted to unemployment information for individuals and businesses
Credit Breather
If you are concerned about making any payments for your loans, be sure to contact your lender. Whether you are struggling with your mortgage, car loan, or credit card payments, don’t hide from your creditor. They want to help!
And when you talk with them, they are required to report to the credit bureaus that you are in compliance with your payments.
Blessings
These benefits, and many others for businesses and non-profit organizations, are here to help you. Use them to help keep your family afloat until the job market returns.
I recently heard this: The storm wasn’t over when the boat got to the other side. It was over when Jesus got in the boat. Try not to become overwhelmed with the news. Hug your kids. Pray. And count your blessings.
Still unsure about the emergency relief options available to you as a result of the coronavirus pandemic? We’ve got you covered with a printable checklist — click here to download!
Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com