The CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law Friday March 27, 2020. The CARES Act delineates a series of relief measures to provide $2 trillion of financial stimulus in reaction to the current COVID-19 pandemic and the turmoil it has caused US businesses and the economy. Below we summarize key takeaways of the extensive bill and provide a brief overview of important near-term impacts to individuals and businesses during this uncertain time.

Impacts to Individuals

  • Stimulus checks to US residents: Eligible US residents will receive a tax rebate if their income is below certain levels. No action is needed on the part of taxpayers. Payments will be automatic.
    • Individuals with Adjusted Gross Income (AGI) less than $75,000 will receive a $1,200 check (phased out at $99,000 AGI).
    • Couples married filing jointly with AGI less than $150,000 will receive a check for $2,400 (phased out at $198,000 AGI).
    • There is an additional rebate of $500 per dependent child (under age 17) for tax filers who qualify.
    • Stimulus check eligibility is determined based on your most recent federal tax return filed, whether that be 2019 or 2018. The IRS has deferred the 2019 tax filing deadline to July 15, 2020, and most states have deferred their deadline to the same date. Stimulus checks are received via electronic deposit or mailed check based on your election on your most recent tax return (or you can provide your electronic deposit information on the IRS website). Funds are sent automatically to those who qualify, and you do not need to apply for the rebate.
  • Expansion of Unemployment Insurance: Unemployment insurance issued by states is expanded with federal pandemic unemployment assistance.
    • Eligible individuals now include those who are self-employed and independent contractors, as well as others not eligible to receive other unemployment benefits but who are unemployed or cannot work or telework due to the pandemic.
    • Qualifying individuals are eligible for 39 weeks of unemployment benefits (26 weeks state provided + an additional 13 weeks from federal funding).
    • The law provides federal funding to states to pay the first week of unemployment, removing typical one-week waiting periods for states who have implemented this.
    • The amount of unemployment coverage varies by state but is increased by $600/week for four months by additional federal funding.
    • Additional benefits listed above will be available to current unemployment insurance recipients as well as new applicants, and all benefits are counted as taxable income.
  • Forbearance of mortgages: for federally financed mortgages, mortgage payments can be suspended for 180 days with no additional penalties or fees being owed. Furthermore, banks cannot foreclose properties until 5/18/2020. Similarly, those who rent cannot be evicted during this time period.
  • Student Loan Payment Deferral: those who have federal student loans can request deferral of payments until 9/30/2020 with no interest or late fees.
  • Charitable Deductions: Multiple provisions are included to provide additional tax benefits to those who can give back during this crucial time to those in need.
    • The bill allows for an above the line tax deduction for charitable contributions up to $300 that are made in 2020 to qualified public charities, meaning that you do not have to itemize your deductions to have these contributions reduce your taxable income. This incentivizes small contributions to charities that otherwise may not provide a tax benefit if the donor takes a standard deduction.
    • For donors who do itemize, the maximum deductibility for individuals for tax year 2020 is increased to 100% of their AGI, as opposed to 60%, for cash contributions made to qualified public charities in 2020.
    • For corporations, the deductibility of charitable contributions is increased from 10% to 25% of the corporation’s 2020 taxable income.
  • COVID-19 Related Health Care Costs: All testing and potential vaccines for COVID-19 do not incur any out of pocket costs and are completely covered for those who need them.

Impacts to Retirement Plans  

  • Retirement Account Withdrawals: The disaster provisions for early withdrawals from 401k, IRA, and other qualified retirement plans is expanded to allow for more flexibility during 2020.
    • Distributions of up to $100,000 do not incur the typical 10% penalty if funds are withdrawn from a qualified retirement account before reaching age 59 ½.
    • Ordinary income tax is still owed on any retirement account withdrawals; however, this tax can be paid over the course of 3 years.
    • Withdrawals can be redeposited within this 3-year time period and treated as a rollover contribution, avoiding a taxable distribution altogether. This is essentially allowing you to take a 3-year, interest-free loan from your own retirement account if your cash flow is temporarily severely impacted by the recent events; however, given market reaction to the pandemic, impacts of a withdrawal on overall portfolio health should be carefully reviewed.
  • Employer-Sponsored Retirement Account Loans: The amount you can take as a loan from your employer-sponsored retirement account is increased during 2020 to the lesser of $100,000 or 100% of the vested account value.
    • This is increased from the previous maximum amount of $10,000 or up to 50% of your vested account value up to $50,000.
    • Current loan payments owed in 2020 are also extended by one year.
    • This strategy should be reviewed carefully as it could have adverse effects on your long-term retirement savings. However, this is offered as another option to help with additional short-term cash flow need related to the virus’s impact.
  • Required Minimum Distributions: Required minimum distributions (RMDs) are waived for 2020.
    • The IRS typically requires individuals over age 72 to withdraw a specified amount from their tax-deferred retirement accounts each year and pay ordinary income tax on these withdrawals. The amount is calculated annually based on your age and the value of your retirement account(s). Failure to take your RMD typically results in a substantial tax penalty. This requirement is completely waived for 2020 and no withdrawal must be taken. This allows you to avoid liquidating investments at a low point due to a required distribution and could be beneficial to your overall portfolio if your near-term cash flow is permitting.
    • It is common interpretation of the bill that RMDs for 2020 are also waived for beneficiaries of inherited retirement accounts (like Inherited IRAs) who are required to take distributions, but further guidance may need to be issued on this matter.

Impacts to Businesses

There are two SBA (Small Business Association) loans made available under the Act to small businesses (less than 500 employees)[1] that were operational as of 2/15/2020:

  1. The Paycheck Protection Program (PPP)[2]
    • These loans are in the amount of up to 2.5 months of payroll cost (excluding costs for salaries over $100k per employee) and are capped at $10 million. The interest rate is 1%. Initial loan fees are waived, and all interest and principal payments may be deferred by 6 months. The loan term is 2 years. No collateral and no personal guaranty are required. These loans are available until 6/30/2020.
    • Borrowers can apply for loan forgiveness for a period of 8 weeks after the loan is issued, and the full amount of the loan may be forgiven if applicable. The amount that is forgiven is calculated as equaling cumulative payroll costs, rent, utilities, and interest paid on mortgages (this includes interest paid on rented personal property as well). However, non-payroll costs cannot constitute more than 25% of the loan forgiveness amount. The amount of loan forgiveness is reduced using specific calculations if the number of employees and/or amount of cumulative salaries paid to employees is reduced relative to 2019 or 12-month-prior averages (whichever period is more beneficial may be used). However, if employees are rehired before 6/30/2020, this reduction is not be applied.[3]
    • Applications are being accepted 4/3/2020 through 6/30/2020. Benefits are first come first serve so applying as early as possible is advised, although there are discussions of additional funding being added to the program to help more businesses if there is a need.
    • Some of the information confirmed above was included in a new ruling issued on PPP loans only a week after the initial CARES Act was signed into law. The SBA may continue to provide further guidance if needed on PPP loans through their website
  2. The Economic Injury Disaster Loan (EIDL) Program
    • This program provides emergency loans up to $2 million, and the amount is based on economic injury suffered and financial need due to the pandemic as determined by the SBA. The interest rate is 3.75% for business and 2.75% for nonprofits, with a maximum loan term of 30 years. There is no requirement for personal guarantees on loans under $200,000 and no requirement that the borrower cannot obtain credit elsewhere. Initial loan fees are waived, and principal and interest payments may be deferred for all of 2020. These loans are available until 12/31/2020.
    • The program also allows for emergency grants to be issued by the SBA up to $10,000 to EIDL applicants who they determine need immediate funds. Applicants do not need to repay these grants. Grants are received within 3 days of the application, and if the loan application is later denied, recipients are not required to pay back the grant amount.
    • Unlike the PPP loan, there is no forgiveness provision for any portion of the EIDL loan amount. Another key difference is that the amount of the loan is not based on payroll cost, but overall financial need of the business to keep it operational.

Businesses are eligible to receive benefits from both the PPP and EIDL programs in conjunction with no impact to each other if the loans are not used towards the same expenses. On the other hand, if EIDL loans made between January 31, 2020 and April 3, 2020 were used for the same costs (e.g. payroll costs), the EIDL loan must be refinanced into the PPP loan.

In addition to the above loan programs, the CARES Act also provides a Payroll Credit & Deferral Program, which provides tax incentives for qualifying businesses to retain employees. It’s important to note that if a small business receives a PPP loan, the deferral program may not be taken. If a small business receives a PPP loan and that loan is forgiven, then both the tax credit and the deferral program may not be taken.

  1. The tax credit allows qualifying employers impacted by the pandemic to receive a payroll tax credit in the amount of 50% of wages paid from 3/13/2020 to 12/31/2020, with a cap at $10,000 of wages per employee (up to $5,000 per employee). This calculated amount offsets payroll taxes owed for 2020. If the credit ends up equaling more than the 2020 payroll tax liability, a refundable credit will be received.[4]
  2. The deferral program allows employers and self-employed individuals to defer the employer-paid share of payroll taxes owed on wages paid for the tax year ending 12/31/2020. This tax must be paid in equal installments by 12/31/2021 and 12/31/2022.

Note that the tax credit and deferrals are available to qualifying businesses regardless of size, while the PPP and EIDL loans are only available to qualifying small businesses.

Mid-sized and large businesses as well as public companies are also receiving substantial federal stimulus if they meet certain requirements, for example specific sectors such as airlines and national security businesses, but these provisions are outside the scope of this article. There are also extensive provisions surrounding healthcare research, funding, and support to hospitals that are not included in the scope of this article.


The CARES Act is the third law signed in response to the COVID-19 pandemic and is the most comprehensive and highly funded. It follows the Coronavirus Preparedness and Response Supplemental Appropriations Act (3/6/2020) and the Families First Coronavirus Response Act (3/18/2020) that also provided medical research and supplies as well as preliminary law changes to help employees, individuals, and families affected by the virus. It’s important to note that the above represents current rulings and common interpretation of the CARES Act, and that certain aspects of the law may change as additional guidance and clarification is still being issued. The CARES Act was rapidly enacted in response to the worsening pandemic and its effects and we will continue to monitor updates as the implementation of the Act continues to unfold.

The above is only a general summary of the provisions of The CARES Act that we think will be most relevant to our clients and their friends, family, businesses, and communities. We hope that this brief overview helps to spread awareness surrounding available relief for those who need it. We encourage you to pass this article along to anyone you know who you think would benefit from this information.

There are many nuances as well as additional provisions of the law that are not covered above. We recommend you reach out to your Round Table Wealth Advisor for a more comprehensive look at how the CARES Act can help your unique circumstances and to review the actions that should be taken to receive needed relief.


[1]While the 500 or less employee rule is generally used to qualify small businesses, various nuances and exceptions apply and should be reviewed in conjunction with your specific circumstances. There are additional provisions in the bill addressing stimulus to larger businesses that should be reviewed if applicable.
[2]Updates were issued from the original CARES Act to reflect interim final rule on the Paycheck Protection Program
[3]Applications for forgiveness require proper documentation so it is important to keep careful record of all expenses during this time.
[4] To qualify for the tax credit, businesses must be fully or partially suspended due to government requirements or have a 50% reduction in gross receipts during a calendar quarter in 2020 relative to the same quarter in 2019.
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