The stimulus package known as the CARES action has passed and should help millions of American’s weather the COVID-19 economic storm and ensure rents and bills will get paid and big screen televisions get purchased in the month of April.
Here are the highlights of the CARES act:
- Hard working tax paying American’s should received a one-time payment of up to $1,200 for individual tax filers. Married couples will receive $2,400 plus $500 for each child. These payments begin to phase out for incomes higher than $75,000 for individuals and $150,000 for married couples. Those receiving social security or disability payments are also eligible.
- Unemployment payments are expanded $600 per week for four months in addition to what your state already pays. Depending on your state, this could mean over $1000 a week for up to four months. Not bad. This applies to eligible workers including self-employed, independent contractors and gig economy workers.
- Businesses are allowed to delay their portion of 2020 payroll taxes until 2021 and 2022. This should free up cash for some business to continue paying employees and keeping the lights on in the short-term.
- Interest rates on federal student loans will be set to zero and required payments suspended through September 2020.
- Fees and penalties for early withdrawal from retirement saving accounts are waived for distributions up to $100,000 for COVID-19 related or caused expenses. The distributions however are still taxed.
- New deduction provisions for charitable contributions including higher limits. This should encourage all of us to give freely when we are able knowing we will get a tax benefit for doing so.
- Small business are receiving $350 billion dollars to prevent layoffs and keep the lights on. Small businesses with less than 500 employees that maintain their payroll during the COVID-19 crisis can receive 8-weeks of cash flow assistance. This should provide some comfort to employees so long as the funds are used judiciously by small businesses.
- 500 billion dollars is going to large corporations in the form of loans, loan guarantees and investments. These are 5 year loans which cannot be forgiving. This is a bailout, pure and simple. Time will tell if this will benefit workers or to pad executive bonuses.
Make no mistake, this is a short-term band aid. Keeping or regaining employment should still be at the forefront of everyone’s focus. Overall I’m optimistic about the future. If successful, I fully expect a second or third round of stimulus, especially since this is an election year.
Dale