Amidst a pandemic that has the entire nation struggling with the effects of COVID-19, the federal government has approved a $2.2 trillion relief package aimed at helping millions of Americans.The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes provisions for unemployment, cash stimulus payments, student loan debt, retirement accounts, and more. Here are the highlights:
1. Grace Periods for Mortgages
Homeowners with federally backed mortgages can apply for grace periods of up to 180 days if they suffer a coronavirus-related hardship. During any forbearance period, no fees, penalties, or additional interest will accrue. There is a 60-day foreclosure moratorium that began March 18 for federally backed loans. Contact your lender for more details.
2. Eligibility for Cash Payments
Every adult earning $75,000 or less per year ($150,000 for married couples) will receive a one-time stimulus payment of $1,200 each.For every child under 16, households will receive an additional $500. For example, a family of four earning less than $150,000 a year would receive $3,400. Qualification is based on adjusted gross income on your 2019 tax filing. If you haven’t yet filed for 2019, your 2018 return will be used.
3. Enhanced Unemployment Benefits
Those who have lost jobs remain eligible for state unemployment benefits. In addition, the CARES Act will add $600 per week in federal aid to the state benefit for a period of four months. Unemployment benefits have been expanded to include independent contractors and freelancers—groups that are normally not eligible for unemployment. The expanded coverage will continue through the end of the year.
4. Deferred Student Loans
Approximately 90 percent of all current student loans are federally-backed loans and are eligible for deferral. The government is already deferring payments and interest on student loans and the CARES act will extend the grace period through September 30.
5. Relief for Small Businesses
The Paycheck Protection Program, which is intended to help businesses retain their employees through the crisis, will provide loans for up to two and a half months of payroll, and full loan forgiveness if the loan is used for payroll, mortgage, rent and utilities. The loans will come from banks and will be backed by the Small Business Administration.
6. Changes to the IRA Regulations
If you have a tax-deferred individual retirement account (IRA) or workplace plan such as a 401(k), you’ll be able to withdraw up to $100,000 in 2020 without the usual 10% penalty. Any taxes triggered by a withdrawal can be paid over three years.