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What the CARES Act stimulus package means for you

The CARES Act includes personal checks, expanded unemployment benefits, business financing and more.

The groundbreaking Coronavirus Aid, Relief and Economic Security (CARES) Act is a $2 trillion stimulus package aimed to boost the dwindling economy in the wake of the coronavirus outbreak. It includes provisions to put money back in the hands of individuals and more funding options for small businesses.

What’s in the second stimulus package?

Alongside new stimulus checks, there has also been an extension of unemployment benefits, rental assistance, nutrition programs and more options for business owners. However, it doesn’t include relief for student loans — which could impact your finances in the coming year.

You can read more about the $900 billion second stimulus to see what new or expanded programs you could qualify for.

Coronavirus stimulus package — at a glance

Here’s what individuals and business owners have to look forward to, thanks to the CARES Act:

WATCH: How the coronavirus stimulus package helps your small business

Government checks to individuals and families

  • How you get it: Check or prepaid debit card mailed to your home or money deposited into your bank account.

The stimulus package includes economic impact payments sent to Americans to give a much-needed boost to the economy. Individuals can receive up to $1,200, married couples can get up to $2,400 and families will get an extra $500 for each child under 17.

How much you receive is based on the income you reported in your most recent tax returns or Social Security benefits. The government is offering full checks to individuals who make up to $75,000 and reduced amounts by 5% of your income to those who make up to $99,000. Couples who filed jointly are eligible for double the income for individuals, while families with one head of household can bring in up to $112,500 and still qualify for the full amount.

If you qualify, you’ll receive a check or prepaid Visa debit card in the mail to your last known address or have the funds deposited into your bank account — it depends on whether you signed up for direct deposit with the IRS on or after January 1, 2018.

If you receive your payment on a prepaid debit card, check out our guide with tips to avoid fees eating away at your funds.

While the government claims Americans might see a check or debit card in just three weeks, this isn’t mentioned in the bill. All checks or debit cards will be mailed out by December 31, 2020.

Eligibility requirements

To qualify, you need to meet the following criteria:

  • Make no more than $99,000 as an individual, $198,000 as a couple filing jointly or $112,500 as the head of household
  • Have a Social Security number
  • Not a nonresident alien
  • Not a dependent claimed by a parent or guardian
  • Not an estate or trust

Will I qualify if I’m not a US citizen?

It depends. Anyone with a Social Security number who has filed taxes in 2018 or 2019 qualifies, including green card holders and resident aliens. It also means that DACA recipients, immigrants with temporary visas and immigrants with Temporary Protected Status (TPS) may be eligible for the stimulus check.

Undocumented workers — or anyone without a Social Security number — won’t qualify. Many members of mixed-status households are also disqualified from receiving the stimulus check. This is because every person claimed on your taxes must have a Social Security number — an Individual Taxpayer Identification number (ITIN) doesn’t count.

Learn to manage your finances during the coronavirus

Expanded unemployment insurance benefits

The federal government is extending the amount of time you can qualify for unemployment by 13 weeks — for a total of 39 weeks through the end of 2020.

The stimulus package also makes more types of employees eligible for unemployment through the federal government, including freelancers, gig workers, independent contractors and self-employed individuals.

It’s also given states the option of extending unemployment benefits to workers who normally don’t qualify, like independent contractors and self-employed individuals. For example, California just announced its new Pandemic Unemployment Assistance program that offers a minimum weekly benefit of $167 to freelancers, self-employed individuals and other workers that are typically ineligible.

You’re eligible for benefits not only if you contract COVID-19 yourself, but if you’re forced to quit your job or reduce hours to care for a family member or relative who gets the coronavirus. You also qualify for benefits if you’re forced to stop working to take care of your child whose school or day care has shut down due to the pandemic.

As for compensation, the federal government is offering an additional $600 per week for up to four months, in addition to the benefits you receive from your state.

Keep in mind you won’t qualify for these benefits if you’re:

  • Working remotely with pay
  • Getting paid sick leave, family leave or other paid benefits

Because of the strain unemployment offices have seen on their systems — with a record-breaking 22 million individuals filing nationwide in just four weeks — you can self-certify that you qualify for benefits.

This means you don’t need to provide documentation like you normally would, speeding up the application process and funding turnaround. States are also allowed to waive the waiting period to receive benefits so that you don’t experience gaps in income.

Financial assistance for people affected by the COVID-19 outbreak

Expanded health insurance coverage

The CARES Act not only expands coverage for COVID-19 testing and immunizations, but also adds telemedicine as a standard expense for Medicare, among other changes.

Coverage of COVID-19 testing and immunizations

Health insurance companies are required to cover any COVID-19 testing and preventative services, like immunizations, for both individual and group policies. Medicare recipients are also eligible for coverage — with no deductible. Uninsured individuals will also be covered through the Medicaid program.

Expanded coverage of telehealth services

The federal government expanded Medicare coverage to include telehealth services at qualified federal health centers and rural clinics, home health services and hospice services.

The bill also includes full coverage of telehealth services for families and individuals with private health insurance and a health savings account (HSA) — regardless of whether you’ve met your annual deductible.

Medicare recipients qualify for a 90-day supply of medication

To ensure you have access to your prescription medication during the coronavirus crisis, Medicare applicants are eligible for a 90-day supply of fills or refills.

Menstrual products now covered by your HSA

Menstrual products like panty liners, pads, cups and tampons are now eligible medical items to purchase using funds in your HSA or flexible spending account (FSA).

Retirement account benefits

Retirees might also be able to take advantage of some of the provisions in the CARES Act, including:

Fees waived for early withdrawal from retirement accounts

You typically have to pay a 10% penalty fee if you withdraw money from a qualified retirement account — like an IRA or 401(k) — before age 59 and a half.

Under the CARES Act, this penalty fee is waived for up to $100,000 in withdrawals if you, your spouse or dependent test positive for COVID-19 or experience financial hardship due to reduced hours at work, layoffs, self-quarantine or lack of child care.

However, your employer or plan sponsor has to opt in by agreeing to follow the CARES Act provisions. And many aren’t doing that.

You also have the option to spread out any income taxes you have to pay on the amount you withdraw over three years.

And if you’re able to pay back the amount you withdraw within three years, you won’t be restricted to annual contribution limits.

This applies to withdrawals until December 31, 2020. The government also suspended the mandatory 20% income tax withholding for rollover distributions during this time.

Increased borrowing limits for 401(k) loans

Similarly, the CARES Act doubles the amount you’re allowed to borrow from your 401(k) — from $50,000 up to $100,000 — or 100% of your vested account balance, whichever is lower. The due date for the loan is also extended by one year.

However, like with early withdrawals, the loan you take out must be used to offset the negative financial impact of the coronavirus. And you’re only eligible for the increased amount for 180 days after the bill was signed into law — or until September 23, 2020.

Required minimum distribution fees waived for 2020

The required minimum distributions (RMDs) from your retirement account — including inherited and traditional IRAs — are also suspended through the end of 2020.

Charitable contributions can be deducted from income

Under the CARES Act, you can deduct $300 in charitable donations in 2020 from your gross annual income if you claim the standard deduction.

Student loan relief

From suspended payments on federal student loans to federal work-study funding — even if you’re unable to complete your work commitment — here are a few student loan relief programs available:

Paused federal student loan payments

While the federal government had already dropped the interest rate on federal student loans down to 0%, this bill introduces new relief. It suspends payments for all federal student loans held by the Department of Education (DoE) — with no interest accruing at this time.

Originally repayments were slated to restart in October 2020. But this relief has been extended until January 31, 2021.

And this won’t affect your progress toward earning loan forgiveness or loan rehabilitation. Each month, any nonpayment will still count toward these programs.

In fact, these nonpayments are being treated as regular, on-time payments by the three major credit bureaus, meaning you could see an increase in your credit score by the time this is all over.

The federal government has also prohibited student loan servicers from:

  • Garnishing your wages, tax refund or government benefits
  • Reporting any delinquent accounts to collections

You should be notified by April 10, 2020 of these changes to your federal student loans.

Then, by August 1, 2020, you should receive no less than six notices by mail, telephone or through email letting you know your normal payments will begin and giving you the option to switch to an income-driven repayment plan.

Relaxed service obligations for student loan forgiveness programs

If you’re unable to perform the service obligation required for your student loan forgiveness program due to the coronavirus outbreak, you’re still able to count these next few months toward your service requirement.

Here’s how it works for different programs:

  • AmeriCorps loan forgiveness. If you’re required to leave your position early, you’ll still be counted as if you completed the required hours and receive the full value of your forgiveness award.
  • AmeriCorps grants. You’re not required to return any grant funds if you have to leave, suspend or limit your hours worked due to the outbreak.
  • TEACH grants. If your teaching service was temporarily interrupted or dropped to part time due to the coronavirus outbreak, it will still be considered as full-time service and count toward your service obligations.
  • Teacher loan forgiveness. Even if your teaching commitment has been interrupted, it will still be considered a consecutive year as long as you resume your teaching service after the coronavirus outbreak ends.

Tax relief for employers offering student loan repayment benefits

Under the CARES Act, employers are able to make up to $5,250 in annual tax-free contributions per employee toward their student debt load without raising the employee’s taxable income in 2020.

This means you might see an increase in companies that offer student loan repayment benefits as a perk.

Emergency financial aid available

The Department of Education is extending emergency financial aid to students — up to the maximum Federal Pell Grant, which is $6,195 for the 2019–2020 academic year — regardless of individual need.

Federal work-study payments will continue

Did your school close early or move online due to the COVID-19 pandemic? The federal government has given schools the green light to continue offering federal work-study to students in the form of a one-time grant or multiple payments — regardless of whether you were able to complete your work commitment.

Eligibility requirements

To qualify, you need to meet the following criteria:

  • Received award for the 2019–2020 academic year
  • Already earned some federal work-study wages
  • Prevented from fulfilling work-study obligation for all or part of the academic year

Federal Pell Grants for current students don’t need to be returned

If you’re unable to complete the semester because of the coronavirus pandemic, the funding you received won’t count toward your Pell Grant lifetime limit.

And if you need to withdraw from courses due to the coronavirus, you don’t need to return your Pell Grant funds.

Federal loans for current students can be canceled

If you’re unable to complete the semester or forced to withdraw from school due to the coronavirus pandemic, you can cancel your student loans and may not need to repay the entire amount you borrowed. Reach out to your servicer to find out more.

Attempted credits won’t count toward your satisfactory academic progress

Courses not completed won’t count toward your satisfactory academic progress.

Increased funding for higher education in healthcare fields

More funding for teaching health centers that operate graduate medical education programs, fellowships and internships will be coming to support:

  • Health professionals in geriatrics
  • Home healthcare workers
  • Registered nurses
  • Nurse anesthetists
  • Clinical nurse specialists

We might also see additional federal loan repayment programs for nurses as a direct result of this bill.

Student loans and the coronavirus: Where to find help

Mortgage relief

Worried about making your mortgage payment during the pandemic? If you have a federally backed mortgage, you can submit a forbearance request to your servicer — even if your account is delinquent. This will pause repayments for 180 days with no extra fees, penalties or interest charges beyond what’s already outlined in your agreement.

Plus, you have the option for file an extension once those six months are up for another 180-day period.

You don’t need to provide any additional documentation other than your own attestation that you’re experiencing financial hardship due to the coronavirus outbreak.

The CARES Act also prohibits foreclosures unless the property is vacant for at least 60 days following March 18, 2020.

Mortgage assistance programs for people affected by the coronavirus

Relief for renters

Whether you signed a lease or not, your landlord can’t evict you if you live in an apartment or home financed with a government-backed mortgage, rural housing voucher or another qualifying federal housing program.

Starting March 27, 2020, your landlord can’t:

  • File legal action to evict you for nonpayment
  • Charge fees or penalties for nonpayment
  • Require you to vacate for the next 120 days

And even after that 120-day period is up, your landlord needs to give you at least 30 days notice before beginning eviction proceedings.

Expanded funding for health and nutrition programs

With the CARES Act comes more funding for health and nutrition programs across the country.

State nutrition services

States are able to use federal funds to offer home-delivered nutritional assistance to older Americans and those with a disability who are unable to leave their home and shop for groceries due to social distancing amid the COVID-19 crisis.

Dietary guidelines for those meals are also waived. Reach out to your state’s department of elder affairs to find out how to apply.

Other health programs extended

The coronavirus stimulus bill also extends several federally funded health and nutrition programs, including:

  • Healthy Start program. This free home-visiting program that provides support, education and care to pregnant women and families with children under the age of 3 is reinstated for the next four years — if not longer.
  • Sex education programs in schools get extended. Both the abstinence-only and sex education programs in public schools are extended through November 2020.
  • Temporary Assistance for Needy Families program. This federally funded state program that provides child care, financial assistance and career support to underserved families is extended through November 2020.

New SBA Paycheck Protection Loan program

The stimulus package includes $349 billion to create a new emergency Small Business Administration (SBA) lending program to help small businesses retain employees during the COVID-19 outbreak.

Here’s how it breaks down:

  • Maximum loan amount: $10 million, based on payroll expenses
  • Interest rate: 1%
  • Term: 2 or 5 years, with payments deferred until forgiveness is issued or 10 months following the end of your covered period
  • Fees: Waived guarantee and annual fees
  • SBA guarantee: 100% of loan amount
  • Collateral: No collateral or personal guarantee required
  • Turnaround: Faster than a 7(a) loan — lenders don’t have to wait for SBA approval
  • Other criteria: Not required to prove you’ve tried and failed to find funding elsewhere
  • Application deadline: August 8, 2020

The program works like a combination of a grant and loan. Essentially, you apply for a loan to cover operating expenses between February 15, 2020 and December 31, 2021.

Originally, your lender would defer repayments for six months after your loan was issued. After the Paycheck Protection Program Flexibility Act passed that got extended to when your lender gets the funds from forgiveness. You can apply to have eligible operating costs forgiven for the first 24 weeks after your loan is issued —or eight weeks if you applied before June 5, 2020. If you don’t apply for forgiveness within 10 months of the covered period, deferral will end.

Any remaining balance that isn’t forgiven gets repaid over a period of two years if your loan was issued before June 5, 2020. You can extend that to five years if you work with your lender. PPP loans made from June 5th on have a repayment period of five years.

Who qualifies

Unlike the typical SBA 7(a) and Express loans, the Paycheck Protection Loan is open to the following types of businesses — as long as you have fewer than 500 employees or otherwise meet SBA size standards:

  • Nonprofits
  • Independent contractors
  • Sole proprietorships
  • Veterans organizations
  • Tribal organizations
  • Service industry businesses with more than one location
  • Franchises

Even if your business was forced to shut down due to the coronavirus outbreak, you can still qualify if you were operating on February 15, 2020.

How to apply

You can apply for the Paycheck Protection Loan through any lender that’s authorized to offer SBA 7(a) or Express loans, and some lenders that don’t currently offer government-backed loans. The program will be available until May 31, 2021.

Everything you need to know about the PPP

Tax credits and relief for small businesses

The CARES Act also includes tax credits for qualifying employers, as well as a temporary repeal of net operating loss (NOL) limitations, among other benefits.

Tax credit for employment taxes

Small businesses can get a credit against employment taxes for up to 50% of qualified wages — up to $10,000 — per employee per quarter.

Eligible employers include businesses that were operating in 2020 and either:

  • Were forced to partially or fully shut down by government order due to the COVID-19 pandemic
  • Experienced at least a 50% drop in sales for the quarter starting on January 1, 2020 compared to the previous year

You’re no longer eligible for this tax credit when your losses are less than 20% compared to the same calendar quarter the previous year. And if you’re taking advantage of the SBA Paycheck Protection Loan, you won’t qualify for this tax credit.

Deferred payment of payroll taxes

Under the CARES Act, most small businesses can defer paying employment taxes through December 31, 2020. After this, half of the deferred amount is due by the end of 2021, and the other half is due by the end of 2022.

Temporary repeal of net operating loss and interest limitations

To support businesses that have been negatively impacted by the COVID-19 pandemic, the IRS temporarily repealed the rule that limits the amount of net operating losses (NOLs) a business can utilize to 80% of its taxable income.

For tax years 2018 through 2020, small businesses can use 100% of their net losses to offset their taxable income, and NOLs can be carried back five years.

The CARES Act also increases the interest expense limitation from 30% to 50% for tax years beginning in 2019 and 2020.

Expanded eligibility for Economic Injury Disaster Loans

In addition to nonprofits, small businesses and agricultural cooperatives, the following types of businesses are now eligible for Economic Injury Disaster Loans (EIDLs) to combat the coronavirus outbreak:

  • Businesses with more than 500 employees
  • Sole proprietorships and individual contractors
  • Cooperatives with no more than 500 employees
  • Employee stock ownership plans (ESOPs) with no more than 500 employees
  • Tribal businesses with no more than 500 employees

Aside from being open to more businesses, you also don’t need to provide a personal guarantee on loans up to $200,000 like you normally do. And businesses are no longer required to be around for one year — though you need to have been in operation since at least January 31, 2020. Additionally, you don’t need to prove that you’ve struggled to find credit elsewhere.

The SBA will also use multiple ways to determine your eligibility. Rather than just considering your tax records, it might determine your eligibility by looking at your personal credit score.

These expanded eligibility requirements will be in effect until December 31, 2020.

Even more small business loans to help during the coronavirus outbreak

SBA Emergency Economic Injury Grants no longer available

Previously, you could also apply for a grant as an advance of your Economic Injury Disaster Loan three days after you submitted your EIDL application. While the grants were slated to remain open until December 31, 2020, the SBA has closed grant applications as of July 11.

The program may resume again, but it depends on if Congress approves additional funding.

SBA emergency rulemaking authority created

The SBA was given the authority to issue clear guidance on how it plans on enacting these programs — including the new Paycheck Protection Loan. It has continually issued guidelines on these program since the stimulus package was signed into law. This includes changes to the interest rate, issued application guidelines and other elements of the program.

Check with the SBA before you apply for any coronavirus program to make sure your information is up to date.

SBA loan payment subsidies

The SBA might offer payment relief and encourages lenders to offer deferment and extended loan terms during the period the US is under a national emergency due to the coronavirus outbreak.

The SBA Debt Relief Program is also now in force. It covers the principal, interest and any fees for six months on the following types of loans:

  • SBA 7(a) loans, including Community Advantage loans
  • SBA 504 loans
  • SBA microloans outside of the 7(a) program

This covers loans that your business already has and new eligible loans. It also includes loans in deferment — the SBA will cover six months of repayments after you get out of the deferment period. However, it doesn’t include Paycheck Protection Loans.

The SBA will provide payment subsidies directly to your lender no later than 30 days after your first payment is due. SBA loans that go into deferment will also get a one-year loan term extension.

Expanded languages for SBA resources

Aside from covering loan payments, the SBA also plans on making resources available in the 10 most commonly spoken languages in the US, including Mandarin, Cantonese, Japanese and Korean.

Grants for business education centers

The Small Business Administration is offering grants to businesses that provide education, training and advice on how small businesses can apply for SBA funding and topics relating to the coronavirus outbreak.

The SBA says 80% of this will go toward small business development centers (SBDCs) and 20% will go toward women’s business centers.

It’s unclear how much funding is allocated to this small business grants program.

What this means for small businesses

There will be a lot more resources for small businesses, specifically on how to handle the COVID-19 outbreak. Now more than ever, you can rely on your SBDC to point you toward financing and other resources to help.

The SBA is also offering $10 million in grants to business centers that serve and train minority business owners. They also must provide training on topics related to the coronavirus outbreak.

9+ business grants for those affected by the COVID-19 pandemic

Trade grants

Businesses that received a grant through the SBA State Trade Expansion Program will continue to get the same funding they received for the 2018–2019 fiscal year through the end of the 2020–2021 fiscal year.

Plus, any businesses that experienced a financial loss due to a canceled foreign trip or trade show could get reimbursed through the SBA, as long as it’s not worth more than the grant itself.

Expanded eligibility for business bankruptcy

Businesses up to $7.5 million in debt can apply for an expedited Chapter 11 bankruptcy proceeding — previously it was limited to businesses with $2.8 million of debt.

Business financing for specific industries

The stimulus package also includes funding for specific industries that have been hit hard by the crisis, including:

  • Medical and hospital industries — $100 billion
  • Passenger airlines — $25 billion
  • Businesses critical to maintaining national security — $17 billion
  • Cargo airlines — $4 billion

State and local government funding

The federal government is also giving state and local governments a total of $150 billion in funding to help with their efforts to combat the coronavirus.

You won’t see any of this money directly, but it could mean that more states are able to offer loans, grants and other financial assistance to individuals.

When did the bill go into effect?

President Trump signed the CARES Act on March 27, 2020 — which is when it went into effect.

What exactly is the CARES Act?

The Coronavirus Aid, Relief and Economic Security (CARES) Act is a $2 trillion stimulus fund to help the US combat the economic impact of the coronavirus outbreak. It’s meant to help stimulate the economy by putting money back into the hands of businesses and individuals. It also provides states and hospitals with the funding they need to take the necessary steps to treat individuals with COVID-19 and prevent further spread.

This is the second stimulus package the country has passed in response to the outbreak.

Bottom line

The CARES Act offers more financial assistance if you’re unemployed, working reduced hours or are trying to keep a small business alive during the COVID-19 pandemic. Stay up to date on the latest coronavirus news with our guide.

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Frequently asked questions

Answers to commonly asked questions about the CARES Act.

Do low-income households get smaller checks than others?

No. A previous draft of the bill offered reduced payments to low-income individuals. But the current stimulus package offers the same amount to everyone who makes $75,000 or less.

If I file taxes separately from my spouse, does the government count me as an individual?

It’s likely. The government bases its direct payment amounts on your tax filings from 2019 or 2018. So if you chose to file as an individual, you’ll receive a check based on your personal income rather than your combined income.

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