Individual Mandates from CARES Act

April 1, 2020 - The President signed the Coronavirus Aid, Relief and Economic Security (CARES) Act into law on March 27, 2020. This stimulus package provides economic relief to individuals and businesses. The following are the highlights for the individual relief.

Recovery rebate for Individuals.  A one-time payment of up to $1,200 for individuals and $2,400 for joint filers AND $500 additional for each qualifying child dependent under age 17. The rebate starts to phase out above $75,000 in adjusted gross income for individuals and $150,000 for joint filers, up to a threshold of $99,000 for individuals and $198,000 for joint filers.

The rebates will be paid out in the form of checks or direct deposits. Most individuals won’t have to take any action to receive a rebate. IRS will compute the rebate based on a taxpayer’s tax year 2019 return (or tax year 2018, if no 2019 return has yet been filed). If no 2018 return has been filed, IRS will use information for 2019 provided in Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement.  Rebates are payable whether or not tax is owed.

Emergency increase in Unemployment Compensation benefits.  Increases payments by $600 per week for 12 weeks and expanded eligibility from 26 to 39 weeks. This also includes self-employed people and independent contractors, such as “gig economy” workers like Uber drivers.

$300 above the line charitable contribution. Individuals will be able to claim a $300 above-the-line deduction for cash contributions made, generally, to public charities in 2020. This rule effectively allows a limited charitable deduction to taxpayers claiming the standard deduction.

Exclusion for employer payments of student loans. An employee currently may exclude $5,250 from income for benefits from an employer-sponsored educational assistance program. The CARES Act expands the definition of expenses qualifying for the exclusion to include employer payments of student loan debt made before January 1, 2021.

Break for remote care services provided by high deductible health plans. For plan years beginning before 2021, the CARES Act allows high deductible health plans to pay for expenses for tele-health and other remote services without regard to the deductible amount for the plan.

Break for nonprescription medical products. For amounts paid after December 31, 2019, the CARES Act allows amounts paid from Health Savings Accounts and Archer Medical Savings Accounts to be treated as paid for medical care even if they aren’t paid under a prescription. Amounts paid for menstrual care products are treated as amounts paid for medical care. For reimbursements after December 31, 2019, the same rules apply to Flexible Spending Arrangements and Health Reimbursement Arrangements.

Student Loan Repayment.  This suspends federal student loan payments and interest accrual through Sept. 30, 2020. Each month that payments are suspended would be treated as if on-time payments were made for purposes of federal loan forgiveness programs. Involuntary collections related to student loans, such as wage garnishments or tax refund reductions, as well as negative credit reporting would also be suspended for the same period.

Please feel free to contact your Dermody, Burke & Brown tax advisor to further discuss any questions you may have.


The information reflected in this article was current at the time of publication.  This article will not be modified or updated for any subsequent tax law changes, if any.