The She Spends Guide to the CARES Act

The United States government passed the Coronavirus Aid, Relief, and Economic Security Act last week, which provides some help to regular workers, and quite a bit to big businesses.

We’ve read through the bill, and supplemental information on it, over the past week and have done our best to digest the ways it may help your personal financial situation. What follows is our guide to the CARES Act. 

The Checks
The most exciting part of the bill? Probably. The U.S. government is sending -- on a one-time basis -- $1200 in cold hard cash to certain Americans. Whether or not you’ll get this check is based on your most recent tax filing. 

If you filed as single in 2018 or 2019 (whichever is most recent), and your adjusted gross income for the year was under $75,000, you’ll get the recovery check in full. If you and your partner filed together as married filing jointly, and your adjusted gross income for the year was under $150,000, you’ll each get a check. If you file as head of household, your upper limit is $112,500. You’ll receive a $1200 check if your adjusted gross income is lower than that.

If you have children, you’ll receive an extra $500 per child. 

Things get trickier if you made more money than the upper limit. For every $100 you made over the limit, your payment will be reduced by $5. 

If you made over the limit in 2018 or 2019, but will make less than the limit in 2020, the recovery rebate will be applied to your 2020 tax return. In other words, you won’t receive it until 2021. If your 2020 income will exceed the threshold, but your 2019 or 2018 income was below it, you’ll get to keep the payout in full. 

It’s unclear when these checks will actually arrive. Some estimates are three weeks from now, others are over a month. These payments will be deposited into the same account that your most recent tax refund was. If you received that refund in the mail, it will go to the last known address on file. 

Unemployment Insurance
The CARES act expanded unemployment insurance to include freelance, gig, and other self-employed workers. These workers can access unemployment insurance for 39 weeks. 

States can increase their unemployment benefits by up to $600 per week with federally-funded dollars. In other words, unemployment checks will be larger than they normally are. They will also come sooner than usual: the bill eliminated the one-week waiting period applicants previously had to wait out. 

Student Loans
Student loan payments have been deferred through September 30, which means that during this time, no new interest will accrue on the debt. You’ll have to call your loan provider and ask them to put things on pause for you. Otherwise, your payments will continue. 

If you’re participating in a loan forgiveness program, this time still counts! This means that even if you pause your payments for the next few months, they will still count toward the amount of time necessary for you to wait for the debt to be erased. 

Retirement Accounts
If you’re low on cash, tapping your retirement savings account is something financial professionals wouldn’t normally recommend. There are tax implications and you’d normally be charged a penalty of 10% for early withdrawal. 

However, the CARES act now allows distributions from your IRA or employer-sponsored retirement plan of up to $100,000 in certain situations. You are eligible for this provision if you, a spouse, or dependent have been diagnosed with coronavirus; you were laid off, furloughed, or had work hours reduced; you can’t operate your business as you normally would; or you can’t access child care because of the disease.

If this is your situation, you have two options. You can treat this as a loan that you pay back within three years. Or you can take the money to keep penalty-free and pay income taxes on it over the next three years.