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How to Get Help from the New Stimulus Package

By Rachel Sanborn Lawrence

On Friday, March 27, Congress approved a $2 trillion stimulus package designed to help Americans. Earlier this week, a staggering 3.28 million workers applied for unemployment benefits as the coronavirus pandemic continues to bring the economy to a standstill. This is the biggest stimulus in modern history — including a $1 billion fund to hospitals and $17 billion to companies and organizations deemed critical for national security.

Most provisions start April 1. Here’s a rundown of what’s inside the stimulus package and what it could mean for you.

A $1,200 stimulus check sent directly to eligible Americans

If you’re eligible, you’ll automatically receive $1,200 directly from the government — either via your bank account if they have that information, or via check. The target timing is within three weeks.

It’s based on your most recent tax filing, either from 2019 if you’ve filed it already or from 2018 if you haven’t. Here’s more info on the check and how we recommend you think about spending it.

Are you eligible?

  • If you made $75,000 or less as a single tax filer (that’s $150,000 or less for married filing jointly, and $112,500 or less for head of household), you’ll get $1,200.

  • Families will get $500 extra for each child under 17.

  • You’ll receive $5 less for every extra $100 you make.

  • If you made more than $99,000 ($198,000 for married filing jointly, and $136,500 for head of household), you won’t be eligible for the $1,200 check, but you may still be eligible for some or all of the $500 check per child.

  • If you made greater than the above limit on your 2019 tax return but are expecting less income in 2020, you won’t receive a check with this package. You’ll get a tax rebate with your 2020 tax return next year instead. (Which is rough, and hopefully Congress can act to make up the gap sometime soon.)

  • “Nonresident aliens,” aka noncitizens without green cards, and people who are dependents on someone else’s tax return also aren’t eligible.

More unemployment benefits in 2020

If you’re unemployed, partly unemployed, or unable to work for reasons related to the coronavirus, you may be eligible for expanded unemployment benefits — even if you’re a freelancer, gig worker, performing artist, or had a contract canceled because of the pandemic — and even if you own your own business. Usually, unemployment benefits don’t apply to those groups, so this is a big change to address the current crisis.

Not only does the law expand eligibility, but it also gives all jobless workers an extra $600 a week in unemployment benefits through July 31 and adds 13 weeks of unemployment benefits for workers who have run out their other unemployment already. It also expands “work sharing” assistance for people who are still working but have reduced hours. How much you’ll receive in total depends on your state.

Protection for renters and homeowners

The law places a mandatory, nationwide four-month halt on evictions if your landlord has a mortgage backed by a federal organization like Fannie Mae or Freddie Mac. Landlords also can’t charge fees for nonpayment of rent.

For homeowners, no foreclosures will be allowed during the 60-day period following March 18, 2020. All federally backed mortgage providers are required to give a forbearance of 180 days plus an extension of another 180 days without any extra fees beyond their normal interest accruing, if a borrower requested due to the financial impact of COVID-19. (Borrowers of multi-family property loans, aka landlords, may take up to 90 days total.)

Help with student loans

Payment of most federal student loans will be automatically suspended through September 30, 2020, with interest waived during that time. A minimum of six notices will be sent when it's time to start paying again — they’ll detail repayment options for the loans. (FFEL and Perkins loans that are held by private institutions don’t qualify — you can see if yours is eligible here. If you hold state or other private loans, you should check with your loan provider, as many of them are offering similar arrangements.)

The legislation also makes it so that employers can contribute up to $5,250 annually directly toward their employees’ student loans as a benefit — without that money counting as income for the employee. Right now, that only applies to 2020, but since they phrased it with “annually,” some think it might get extended.

A pink tax break

Yes, really! All menstrual products can now be treated as medical products and can be reimbursed under a pretax employer health spending arrangement like an HSA or FSA.

Credit reports

Credit reporting companies are not allowed to ding your credit if you’ve taken advantage of any of the relief programs or if you made individual arrangements with a creditor to change the terms of your loan, miss payments, or pay late.

Retirement account regulations

Required minimum distributions are waived

For 2020, the required minimum distributions (RMDs) for most retirement accounts have been waived. RMDs are the minimum amount you’re usually required to withdraw from a traditional IRA, 401(k), 403(b), SEP IRA, or SIMPLE IRA once you turn 72. This also includes any RMDs you might have deferred from 2019 (since April 1 was the deadline), and RMDs from inherited IRAs.

This doesn’t mean that you can’t make withdrawals from your account, if you’re retired — it just means you don’t have to. That’s so you aren’t forced to sell any investments that may have lost value during the recent market drop. You can (and should) continue to withdraw money that you need to live on. But if you don’t need the money right now, it might be better to let it sit and give your investments the chance to recover.

If you’re older than 59 1/2, any withdrawals you make from your retirement accounts this year will be included in your taxable income (except, as usual, any money that you already paid taxes on or money that you can withdraw tax-free, like from a Roth account).

You can withdraw your money early if you really need it

There’s typically a 10% penalty for withdrawing money from your retirement accounts before you turn 59½. However, under this legislation, you can withdraw up to $100,000 without penalty if you need that money for “coronavirus-related purposes” — though this should be a very last resort.

If you were to do that, your withdrawals would be taxed (unless you already paid tax or can take that particular money tax-free) over the next three years. The legislation also allows you to replace the funds over the next three years, even if that puts you over the annual contribution limit for your account. That would help you to catch back up to where you were before faster, if you’re able.

Charitable contributions

This legislation includes a permanent change to tax deductions for charitable donations: If you claim the standard deduction (meaning you don’t itemize your taxes), you can now deduct up to $300 for qualifying charitable donations “above the line,” which means they lower your total taxable income by the amount you’re deducting.

If you do itemize your taxes, the usual limit on deducting charitable cash donations is 60% of your adjusted gross income. This legislation waives that limit for 2020 (although limits on donations of non-cash assets, like stock, still apply). And the limit for corporations is being increased from 10% to 25%.

Small business loans

The Small Business Administration will distribute $350 billion via loans to companies with 500 or fewer employees. The loans are to be used to keep workers employed and paid, or to pay mortgage or rent and utility bills. If companies use the loans for those purposes and maintain their average full-time employee count, they will only have to pay interest, which is very low (4% at the max). The principal will be forgiven.

Payroll taxes and Social Security

If you’re an employer and your business was affected by coronavirus, you could be eligible for 2020 tax credit equal to 50% of the wages you pay your employees.

The credit will be given for the first $10,000 of salary, including health benefits, paid to each eligible employee, and applies to qualified employee wages from March 13, 2020 through December 31, 2020.

To be eligible, your business had to have shut down during the pandemic, or your gross receipts to have gone down by more than 50% compared to the same quarter last year. If your business has 100 or fewer full-time employees, it doesn’t matter if you shut down or not.

Employers and self-employed people can also defer payment of the 6.2% employer share of the Social Security tax over two years. Half of it will need to be repaid by December 31, 2021 and the other half by December 31, 2022.

If you’re struggling right now, we’re here to help. Email us at questions@ellevest.com and we’ll answer your question personally. I’ll also be hosting live Office Hours on Instagram next Thursday, April 2, at 3 PM ET to answer questions about this new legislation as well as the recent Families First Coronavirus Response Act, which expands sick and family leave for people affected by the pandemic.

We’re in this together.


Disclosures

© 2020 Ellevest, Inc. All Rights Reserved.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.

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Rachel Sanborn Lawrence

Rachel Sanborn is the Director of Advisory Services at Ellevest and a CFP® Professional. She oversees Ellevest’s career and financial planning teams and works with Ellevest clients to help them be the boss of their money.