8 Ways the Stimulus Bill May Impact You

Feb 25

We hope you're all staying healthy and sane during these strange times. We wanted to share a few quick highlights of the recent stimulus bill that passed and how it may apply to you as an individual. This is by no means meant to be comprehensive or detailed, but it should give you a good idea for how it may impact you.

#1 recovery rebates

The primary thing that most people are asking about is the recovery rebates. These are the stimulus checks that you've probably heard about. If you're a Single taxpayer, you may be eligible to receive a one-time payment of up to $1,200, IF your adjusted gross income is below $75,000. If your AGI is between $75,000 and $99,000, you might receive something but not the full amount. And if your AGI is over $99,000, you won't receive anything.

For Married taxpayers filing Jointly, take everything I just said for the Single taxpayer and multiply it by 2. You may be eligible to receive a one-time payment of up to $2,400, IF your adjusted gross income is below $150,000. If your AGI is between $150,000 and $198,000, you might receive something but not the full amount. And if your AGI is over $198,000, you won't receive anything.

For parents, you may be able to receive $500 per child under the age of 17. This is all based on your Adjusted Gross Income from either your 2018 or 2019 tax return, depending on which was most recently filed. If you're curious as to what your Adjusted Gross Income is, you can find it one line 7 of page 1 of your most recently filed tax return.

At this point, there's really nothing for you to do. If you're eligible, the IRS will deposit the money into your bank account, or they will send you a check based on the address they have on file. If you're interested in learning more, you can go to irs.gov/coronavirus. It's a great resource, and they have everything there that you need to know.

#2 Unemployment Benefits

As expected, there were also some expansions to unemployment benefits. Now, self-employed individuals can also file for unemployment, which was previously not the case. Unemployment compensation was also bumped up, giving states the opportunity to potentially increase benefits by up to $600 per week. And the amount of time that you can be on unemployment was extended by 13 weeks. While all of this varies by state, this bill should result in wider benefits at the state level.

#3 Coronavirus-related Distributions

For those negatively impacted by COVID-19, which is essentially everyone, you can now take out up to $100,000 out of your retirement accounts without penalty (think your IRAs, 401ks, 403bs, etc.). Previously, if you took money out of these accounts before 59 1/2, there would be a 10% penalty. That penalty is waived for 2020 up to $100,000; however, you do have to pay taxes on the money you withdraw from those accounts, but those taxes can be paid over the course of the next three years. You also have the opportunity to replenish those withdrawals over the course of the next three years.

#4 Loans from Employer-Sponsored Retirement Plans

For those of you with employer-sponsored retirement plans that allow for loans, the maximum loan amount has been increased from $50,000 to $100,000. Also, the amount of your vested balance that you can use for a loan has been increased from 50% to 100%. Additionally, payments on plan loans may be delayed for up to a year.

#5 required minimum distributions

Typically, when somebody reaches the age of 72 (previously age 70 1/2), they're required to take money out of their retirement accounts. This is referred to as Required Minimum Distributions (RMDs). These have been waived for 2020. This not only prevents older individuals from being forced to take money out of their retirement account during a volatile stock market, but it also gives them the opportunity to reduce their tax liability since anything they take out of those accounts will be taxable.

#6 federal student loans

For those of you with Federal student loans, required minimum payments and accrued interest has been paused until September 30, 2020; however, you may need to call your loan provider in order to stop payments. One of the great things about this is that it won't negatively impact your credit or your loan forgiveness program. For the purposes of credit reporting and your loan forgiveness program, it'll be as if you made those payments on time. Now, keep in mind, this only applies to federal loans. If you have private loans, you'll need to reach out to your loan provider and see if they're offering any benefits during this time.

#7 health-related provisions

Given that this is a health crisis, it's no surprise that there were some health-related provisions in this bill. HSAs, FSAs, and MSAs can now be used to purchase over-the-counter medications, where this was previously excluded. There were also some expansions to Medicare as it relates to COVID-19. For more information on that, you can go to medicare.gov/medicare-coronavirus.

There were also some expansions to telehealth services as well. Those on a high deductible plan can actually get telehealth services covered prior to reaching their deductible, and they can do this without any HSA tax consequences that one would normally encounter on a lower deductible plan.

#8 tax provisions

Finally, the deadline to file and pay federal income taxes has been extended to July 15, 2020. But do your CPA a favor and get all your documents together now so that they're not completely slammed in the summer. In addition to tax deadlines being extended, the cutoff for 2019 IRA and Roth Contributions has also been extended to July 15, 2020.

There were also some expansions to charitable contribution deductions, offering a greater tax benefit to those making charitable donations, not only for those that itemized deductions on their tax return but also those taking the standard deduction. So it's a great reason to support your local community during this difficult time, if you can afford to do so.

There's a lot more in this bill that I didn't cover here and more information is forthcoming, but I hope it was helpful nonetheless. Over the next few weeks, we’ll be putting together some videos going into more detail on each of these topics, but in the meantime, stay informed, stay healthy, and have a good week!