CARES Act: What You Need To Know

April 9, 2020

Michael Syer, CFP®


On Friday March 27th, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. The massive $2 trillion stimulus bill is designed to provide financial relief to those directly affected by the Coronavirus pandemic.  The law spans from providing cash directly to individuals and businesses to various tax provisions.  We wanted to provide a summary and highlight our understanding of how the bill might affect you.

Stimulus Checks:

The most publicized piece of the bill are the cash payments that many will receive; $1,200 per individual or $2,400 per couple. An additional $500 will be paid for each qualifying child.  The amount will be subject to an income phase-out based on adjusted gross income (AGI); beginning at $75,000 per individual and $150,000 per couple.  The income will be based on the individual’s or couple’s most recently filed taxed return.

If the cash is not needed for immediate short-term expenses, it can be used to pay down high interest debt, invest in the stock market, or can be donated to a charity, local business, or a family member who may need it during this challenging time.

Retirement Planning:

The deadline for individuals to file income tax returns has been delayed to July 15th.  As a result, the deadline to make an IRA contribution has also been delayed to the same date, allowing individuals to keep cash ($6,000 + $1,000 catch-up if over 50) until the extended IRA contribution deadline of July 15th.  This may provide some immediate cash flow relief for those planning on making an IRA contribution.

In addition, Required Minimum Distributions (RMD’s) are suspended for 2020.  This will allow individuals to keep their assets invested in retirement accounts, rather than having to sell or distribute the assets at potentially lower values. The bill also includes Inherited IRA RMD’s, which are also not required for 2020.

While there is no provision that allows individuals to retroactively put a distribution back into their account, there still may be an opportunity to do so. For those who have taken their 2020 RMD within the last 60 days, you can do a 60-day rollover to an IRA and it will not be treated as a taxable distribution.

Charitable Contributions:

To incentivize additional charitable contributions to those most affected, there have been some changes to charitable deduction limits:

  • Up to $300 of charitable cash contributions can be taken as a deduction against adjusted gross income (AGI), regardless of whether or not the individual itemizes.
  • For 2020, the 50% AGI limitation has been eliminated and individuals can receive a charitable contribution deduction for up to 100% of their AGI, for cash contributions.

It is important to note that the expanded charitable contribution limits only apply to cash contributions and do not apply to Donor Advised Funds.  The donation of long-term appreciated securities are often a more effective way to achieve charitable goals.

Small Businesses:

Small businesses have been some of the hardest hit as a result of the Coronavirus pandemic.  The CARES Act introduced many provisions to assist these small businesses, including:

  • Employers receive a credit for their portion of the payroll tax (7.65%) up to $10,000 of wages per employee if the business has been impacted by COVID-19 or if revenue is 50% lower than the same quarter in 2019.
  • Payment of the 2020 payroll tax can be delayed; with 50% of the payroll tax due paid in 2021 and 50% in 2022.
  • Economic Injury Disaster Loans (EIDL): business loans for up to $2M at an annual interest rate of 3.75%, with the first payment not due for one full year. If you apply for an EIDL loan, you can also apply for a $10,000 grant towards working capital.  These loans can be used to pay and retain employees, make lease payments, pay operating costs, etc.
  • Small business owners may be able to qualify for tax-free loan forgiveness for the portion of the loan between March 1st-June 30th. It could be forgiven if the funds are used to maintain payroll.

Business Tax Provisions:

Below are some of the ways that the CARES Act could affect a business:

  • The Act suspends all rules that relate to the Net Operating Losses (NOL) created under the 2017 Tax Cuts and Jobs Act (TCJA). Under the TCJA, NOL’s were limited to 80% of taxable income and could not be carried back.  NOL’s can now be carried back up to five tax years with no income limit.
  • Loss limitations that were imposed under the TCJA have been suspended; $250,000 for single and $500,000 for joint filings. These losses can offset non-business income.
  • Business interest deductibility has been increased from 30% of adjusted taxable income to 50%.

Cash Flow Relief:

For those looking for immediate cash relief, below are some options that may be available:

  • Defer mortgage or rent payments
  • Suspend Federal student loan payments until September 30th
  • Delay income tax payments until July 15th
  • Defer auto loan payments


The CARES Act introduces a number of changes and there is certainly a lot to digest.  Feel free to contact Robert or Mike in our Wealth Strategies group if you have questions or want to know how you and your family may be affected.

Want to Learn More?

Feel free to contact our Wealth Strategies group if you have questions on this estate planning topics or would like help connecting to an estate attorney.

Robert Katz, CFP® – Partner, Director of Wealth Strategies – 617.986.5145 

Michael Syer, CFP® Wealth Strategies Advisor – 617.986.5157


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