In the late evening of March 25th, the Senate produced one of the largest economic stimulus packages in U.S. history, the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). The bill itself ended up at a whopping 883 pages but that’s not what makes it so historic. The main portions of the bill itself will have a cost of ~$2.0T (T as in Trillion), which is approximately 10% of the Gross Domestic Product of the United States. With over 10 Million Americans filing for unemployment benefits in the month of March, lawmakers in the Senate acted with speed and cooperation passing the bill unanimously.

The bill has 4 main components:

1.      Direct payments to Individuals with additional individual tax relief items,
2.      Small business loans and tax benefits,
3.      Unemployment insurance benefits, and lastly,
4.      Loans for distressed companies.


To answer the most common question, “Will I be getting money?”, it depends…

Section 2201, Recovery Rebates for Individuals, outlines that individuals will be entitled to receive $1,200 while joint filers will receive $2,400. In addition, taxpayers will receive $500 for each qualifying child. A qualifying child is a dependent child age 16 or under.
BUT, and you know there is always a but with tax law, high-income taxpayers will receive either a reduced amount or the rebate will be fully eliminated.

Those under the following income limits (Adjusted Gross Income) will receive the full rebate:
• $150,000 AGI – Joint Filers
• $112,500 AGI – Head of Household
• $75,000 AGI – Everyone Else

For every $100 over the above threshold, you will lose $5 of the rebate. Which means for those with no qualifying children, once you hit the following amounts you will receive no rebate:
• $198,000 AGI – Joint Filers
• $136,500 AGI – Head of Household
• $99,000 AGI – Everyone Else

Let’s use an example: Rick and Karen had a 2019 AGI of $160,000 and have 3 children, ages 17, 15, and 12. Their maximum Recovery Rebate is $2,400 + $500 + $500 = $3,400. (Note that only children under 17 qualify) Since their AGI was over the threshold of $150,000 it is reduced by $5 for every $100 over the income limit:
$160,000 – $150,000 = $10,000. $10,000 / $100 = $100. $100 x $5 = $500.

Rick and Karen qualify for a recovery rebate of $2,900. ($3,400 – $500)

To clarify, your rebate is a non-taxable, refundable income tax credit against your 2020 income. Since the government cannot possibly know your 2020 AGI, it is using your 2019 tax return to estimate it. Now, you may be asking yourself, I haven’t filed my 2019 taxes yet, can I still get a rebate?

The answer is yes, the IRS will use your 2018 AGI to determine your eligibility. The rebate will be sent electronically to the account on file, i.e. the one you listed on your return for a refund, or you will receive a check in the mail.


Tax Filing and Tax Payment
The tax filing date and tax payment date for 2019 have been delayed from April 15, 2020 to July 15, 2020. Also, the Q1 estimated tax payments for 2020 have also been delayed to July 15, 2020. The IRS is encouraging those who are to receive a refund for their 2019 tax return to file as soon as possible. They are letting taxpayers know they should receive the refund within 21 days.

Required Minimum Distributions
Required Minimum Distributions are to be waived for the year 2020. This waives RMDs for Inherited IRAs as well.

New Exception to 10% Early Distribution Penalty from Retirement Accounts
A new exception to the 10% early distribution penalty has been created called the “Coronavirus-Related Distribution”. A few details: it can be from an IRA or an employer retirement plan such as a 401(k), 403(b), etc, the distribution can be up to $100,000, and it must be taken in 2020.

To be eligible, you must be diagnosed w/ the Coronavirus or have a spouse or dependent diagnosed OR experience adverse financial consequences as a result of being quarantined, furloughed, laid off, reduced hours, unable to work because of childcare issues, and multiple other reasons.

The taxation for taking the distribution, normally 100% ordinary income in the year of distribution, may be spread over 3 years.

Also, an individual has up to 3 years to repay the amount as a qualified rollover contribution. This is advantageous due to the current $6,000 contribution limit on IRAs.

New Charitable Contribution Deduction
A new above-the-line deduction has been added for certain taxpayers who make charitable contributions up to $300 for the 2020 tax year. This is great news since most charitable contributions are not deductible with the current standard deduction being $24,400 MFT / $12,200 Single. The contribution must be in cash and must be to a 501(c)(3) qualified organization.

Student Loan Payments
For those with federal student loans, federal loan payments are automatically suspended through 9/30/2020. During this time no interest will accrue. You may continue pay if you wish, allowing you to make headway on the principal. This does not apply to private student loans.

Employer Student Loan Payment
For employers who are paying down employees’ student loans, employers can pay up to $5,250 of an employee’s student debt without it being included as income to the employee. This only applies to the year 2020.


Costs from COVID-19
COVID-19 tests must be covered by your insurance and once a vaccine is created, the vaccine must be covered as well. This includes those on Medicare.

New HSA and FSA Qualified Medical Expenses
Unrelated to Coronavirus, those of you with HSAs and FSAs are now able to purchase over-the-counter medications and feminine healthcare products as qualified medical expenses.

TeleMedicine Costs
Participants in high-deductible health plans can now receive telemedicine services at reduced cost (or no cost) prior to reaching their deductible.

G&S Perspective: 

The CARES Act is getting money into individuals, families, and businesses pockets during one of the most uncertain times in recent memory. Whether or not this stimulus package is enough to prop up the economy will remain to be seen.
At G&S Capital our mission is to be one of the most valued professional relationships our clients have by providing in-depth education, effective communication, and a level of personal attention that exceeds expectations. Our office will remain diligent in monitoring and evaluating the changing legislation and the markets to do what is in your best interests.
If you have any questions regarding the CARES Act and how this bill will affect you, your family, or your business, please give us a call and we will be happy to discuss these changes with you.
If you know of someone that could benefit from our services or would like to be added to our market commentary and updates, please let us know. Your referrals are always appreciated.

“No one is useless in this world who lightens the burdens of another.”
― Charles Dickens

At G&S Capital, we build dynamic portfolios and risk management strategies for each of our clients. Our client projects are led by knowledgeable, dedicated financial planners and supported by the G&S Capital team of specialists to provide personalized portfolios, unparalleled service, and independent advice