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What you need to know about the CARES Act and your finances

From stimulus payments to help for newly unemployed, there are a range of ways the CARES Act may affect your life.

A young couple reviewing paperwork in front of a computer.

The Coronavirus Aid, Relief, and Economic Security Act — or CARES Act — was designed to get funds into the hands of people and businesses to help them navigate the coronavirus crisis. Here’s how it may impact you.

Providing relief with CARES Act stimulus checks

The stimulus payment may be as much as $1,200 for an individual or $2,400 per married couple filing jointly as stipulated in the CARES Act. The amount is reduced for individual filers with an adjusted gross income of more than $75,000 and for married couples filing jointly making more than $150,000. The payment amount drops down to $0 for individuals who earn more than $99,000 or married couples filing jointly with income of $198,000 or higher.

Extra CARES Act stimulus funds for those with children

The CARES Act also includes a payment of $500  for each child under the age of 17. The math will depend on your specific situation. For instance, a married couple filing jointly with an adjusted gross income of $150,000 and one child is eligible for a stimulus check of $2,900.

Receiving a CARES Act stimulus check

If you filed a tax return for 2018 or 2019, you should get your payment automatically through direct deposit (if the IRS has your banking information) or check. People who receive Social Security retirement, disability (SSDI) or survivor benefits, as well as Railroad Retirement and Survivor Benefits, should also automatically receive their payments. However, other non-filers must apply for their payment with the IRS. If you haven’t already received your payment, you can track it with the IRS’s Get My Payment tool.

CARES Act help for homeowners and credit card payments

Many people may find themselves temporarily or permanently out of work as a result of the economic slowdown. For mortgage holders with a government-backed mortgage who are having difficulty making payments, the CARES Act includes an ability to request a mortgage deferral. Those with federally backed mortgages (Fannie Mae, Freddie Mac, FHA, VA, HUD, or USDA loans) can request the deferral for up to 180 days.  During this period, borrowers will not incur fees, penalties or interest due to not making their mortgage payments.

Individuals with a credit card balance may also be able to work out a new payment plan and still maintain a credit report that indicates transactions are satisfactory. However, the act doesn’t prohibit companies from assessing interest or freezing accounts.

CARES Act student loan relief provisions

Payments on federal student loans have been suspended from March 13, 2020, through September 30, 2020. No payments are due and interest will not accrue during that time either.

CARES Act 401(k) / IRA withdrawal guidelines

Generally, early withdrawals from an IRA or employer sponsored retirement savings account are penalized by 10 percent, in addition to whatever taxes are assessed. The CARES Act, however, includes a provision allowing people impacted by financial hardship due to the coronavirus to withdraw the lesser of either up to 100 percent of the vested account balance or $100,000 without penalty. In addition to avoiding the 10% penalty, you would be eligible to pay the taxes on your distribution over three years. However, there are certain requirements that must be met for the distribution to qualify as coronavirus related.

CARES Act help for small businesses

The CARES Act includes a number of provisions for small businesses experiencing hardship. These include the Paycheck Protection Program, which offers federally guaranteed loans with forgiveness of up to eight weeks of payroll.

CARES Act help for the unemployed

The CARES Act expands traditional unemployment compensation in a couple of ways. For one, states have the option of extending unemployment benefits to independent contractors and other workers who aren’t normally eligible for benefits. The relief package also provides recipients with an additional $600 per week in unemployment benefits until July 31, 2020. You can apply for benefits through your state unemployment insurance office. Benefits may extend if you are partially unemployed or unable to work because of COVID-19.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm nor its agents provide tax or legal advice.

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