What's in the 2020 Coronavirus Relief Law (CARES Act)?

On March 27, 2020, the president signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The $2 trillion aid package provides financial aid to families and businesses impacted by the COVID-19 coronavirus pandemic. 

What’s In It for You?

The CARES Act sends direct payments to eligible adults, expands unemployment insurance, and gives borrowers of home and student loans more time to make payments. The Act also:

• Extends the Real ID deadline from Oct. 1, 2020, to Sept. 30, 2021.
• Expands deductions for charitable contributions for non-itemizers. It also waives the 10% early withdrawal penalties on up to $100,000 of 401(k) or IRA distributions. 
• Creates a $150 billion Coronavirus Relief Fund for state and local governments.

Direct Payments

The CARES Act sends a $1,200 stimulus check to eligible adults earning up to $75,000. Couples earning up to $150,000 will receive $2,400. This is based on 2019 adjusted gross income (or 2018 AGI if you haven’t yet filed your 2019 tax return). Eligible families receive an additional $500 for each child under the age of 17.

Checks sent via mail will take longer, potentially months. They are being sent to the address listed on your most recent tax return. You can file a change of address with the IRS if you have moved since then. 

Payment amounts decline after $75,000 of income for individuals ($150,000 for couples) and phases out completely at $99,000 for singles ($198,000 for couples).

You can make sure you get your stimulus payment from the IRS by using its tool called “Get My Payment.” You can also use the link to submit your bank information if you haven’t done so already. 

Enhanced Unemployment Insurance

Those receiving unemployment insurance through their states’ unemployment insurance receive an additional $600 a week for four months. That’s in addition to what states already pay, which has been extended an additional 13 weeks.

The Act notably extends unemployment insurance benefits to the self-employed and independent contractors. These groups typically don’t qualify for assistance. It allows anyone who couldn’t work because of coronavirus to receive benefits. That includes those who were laid off, became ill, or had to care for someone else with coronavirus.

In addition, the federal government will provide temporary full funding for the first week of unemployment. Typically, the first week is not covered.

Forbearance of Mortgages

Holders of federally backed mortgages can request forbearance if they have been affected by COVID-19. If approved by the bank, the borrower won’t have to pay the mortgage for 180 days. The bank can’t impose any penalties or other fees. This can be extended another 180 days. Banks must halt foreclosure proceedings until May 18, 2020. You can contact your mortgage holder to request forbearance.

Student Loan Payments 

Borrowers can request to delay payments on federal student loans until Sept. 30, 2020. All federally-owned student loans will automatically have a 0% interest rate until then. Contact your federal student loan servicer to request forbearance.

What’s In It for Businesses?

All businesses, regardless of size, are eligible for a 50% refundable payroll tax credit. The credit is applied toward the first $10,000 of an employee’s wages. The business must demonstrate a 50% reduction in receipts compared to the same quarter in 2019. Employers’ portion of the Social Security payroll tax can be delayed until Jan. 1, 2021.

Small Businesses

The $350 billion Paycheck Protection Program lends up to $10 million to small businesses with fewer than 500 employees. The loan amount is tied to payroll costs. It covers employees making up to $100,000 a year. 

The loan program is for payroll and other expenses between Feb. 15 and June 30, 2020. Loans may be forgiven if used for payroll, mortgage interest payments, rent, and utilities.

Mid-Size Businesses

The Treasury Department will create a lending program for U.S.-based, mid-size businesses, and nonprofits between 500 and 10,000 employees. They must retain 90% of their workforce. Payments and interest are waived for the first six months. 

Big Businesses

The Act contains $500 billion in business and local government lending. The largest amount of $454 billion supports Federal Reserve lending. The rest is divided as follows:

• Passenger airlines would receive $25 billion in loans. 
• Cargo air carriers would receive $4 billion.
• Boeing and other companies deemed crucial for national security would receive $17 billion in assistance.

Businesses that receive the loans may not issue dividends or buy back their own stocks. They must maintain at least 90% of their employment levels as of March 24, 2020. The loans must be for less than five years. 

What’s In It for the Rest of Us?

The CARES Act appropriates almost $180 billion for health care.

Assistance to Hospitals

The Act provides at least $127 billion to hospitals. Specifically, it: 

• Allocates $100 billion to reimburse hospitals for COVID-19 expenses
• Provides $27 billion to develop vaccines 
• Improves the supply chain, including access to masks and drugs
• Expands coverage for COVID-19 testing 
• Expands the use of telemedicine by waiving many regulations. For example, it allows High Deductible Health Plans to cover telehealth services before you reach your deductible.
• Increases Medicare payments to hospitals by 20% for COVID-19 patients
• Eliminates an $8 billion scheduled payment reduction to hospitals treating Medicaid patients. This was part of the 2012 sequester.
• Increases the number of hospitals that may receive accelerated Medicare payments

Impact on the Economy

The CARES Act’s spending on businesses should encourage them to rehire some of the record 3.3 million people who filed for unemployment insurance the week ending March 21, 2020—and keep more workers on their payrolls in the weeks ahead. This will shore up demand, which is necessary to keep the economy afloat.

On the other hand, the CARES Act will add to the national debt. For example, the stimulus checks will decrease federal revenue by about $301 billion in 2020, according to the Tax Foundation. 

The Joint Committee on Taxation estimates the Act will reduce federal revenue by $706 billion in 2020 and $254 billion in 2021. Most of that is due to the stimulus checks and delay in payroll tax payments.

Other Government Coronavirus Rescue Efforts

The CARES Act follows two other laws responding to the COVID-19 pandemic.

On March 6, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 - H.R. 6074 became law. It provided $8.3 billion to federal agencies to respond to the pandemic. Of that, $6.2 billion went to the Department of Health and Human Services for research into vaccines and other uses, including $1.9 billion to the Centers for Disease Control and Prevention (CDC) to distribute to states.

On March 18, 2020, the president signed the $3.471 billion H.R. 6201 - Families First Coronavirus Response Act. It provided paid sick leave, insurance coverage of coronavirus testing, and unemployment benefits. It also expanded food assistance for the poor and increased Medicaid funding.

On April 24, 2020, President Trump signed into law H.R.266 - the Paycheck Protection Program and Health Care Enhancement Act. This act allocated $483.4 billion for small businesses, hospitals, and testing.