Key Wealth Planning Provisions for Individuals in the COVID-19 Relief Act

5 min

The relief package known as the Coronavirus Aid, Relief and Economic Security Act (H.R. 748), or the CARES Act (the "Act"), was passed by unanimous vote (96-0) in the Senate late Wednesday, March 25. The Act was then considered and passed by voice vote in the House on Friday, March 27. It was immediately sent to the President who signed it upon receipt. This alert describes the key provisions in the Act related to relief for individuals. For summaries of other provisions in the Act, see House Passes CARES Act: Breakdown of the COVID-19 Stimulus Measure.

I. 2020 Recovery Rebates for Taxpayers

Title II of the Act, named the "Relief for Workers Affected by Coronavirus Act," contains the rebates and other individual provisions of the stimulus package. The Act provides that all "eligible individuals" with adjusted gross income (AGI) up to $75,000 (or $112,500 for a taxpayer filing as head of household, or $150,000 if married filing jointly) are eligible for the full rebate of $1,200 ($2,400 if married filing jointly). Furthermore, those taxpayers are also eligible for an additional $500 per qualifying child (meaning a child who has not attained the age of 17). The rebate amount is reduced by $5 for each $100 that a taxpayer's qualified income exceeds the phase-out threshold, with the rebate amount being completely phased out for single-filing taxpayers with no children whose income exceeds $99,000, for head-of-household filers with one child whose income exceeds $146,500, and for joint filers with no children whose income exceeds $198,000.

"Eligible individual" is defined under the Act to mean any individual other than (1) a nonresident alien individual, (2) an individual with respect to whom a deduction under IRC Section 151 is allowable to another taxpayer (meaning an individual who is a dependent of another taxpayer), and (3) an estate or trust.

Pursuant to the Act's provisions, for many taxpayers, no affirmative action is required in order to receive the appropriate rebate amount, since the IRS will use the taxpayer's 2019 tax return to determine the taxpayer's income level. However, if the 2019 tax return has not yet been filed, then the IRS will base the income level on the 2018 tax return. However, if a tax return was not filed in 2018, the IRS will use information provided on Form SSA-1099 Social Security Benefit Statement with respect to such taxpayer for calendar year 2019. If a taxpayer has filed a 2018 or 2019 tax return, the appropriate rebate amount will be automatically directly deposited into the taxpayer's account associated with the filed tax return or, otherwise, mailed to the taxpayer's last known address.

Furthermore, the provisions of the Act provide that not later than 15 days after the date on which the rebates are distributed to a taxpayer, notice shall be sent by mail to such taxpayer's last known address. The notice will indicate the method by which such rebate was made, the amount of such rebate, and a phone number for the appropriate IRS point of contact to report any failure to receive such payment.

The following charts provide an estimated rebate calculation based on income level:

Single Taxpayers
Income Level
Your Check

$75,000 or less




 $85,00 $700 





$99,000 +


Married Taxpayers Filing Jointly
Income Level
Your Check

$150,000 or less




 $17000 $1,400





$198,000 +


II. Charitable Contributions

The Act includes provisions to encourage taxpayers to contribute to charitable organizations in 2020. A taxpayer may deduct up to $300 of qualified charitable contributions made to charitable organizations in 2020, whether or not the taxpayer itemizes deductions on the federal tax return. A "qualified charitable contribution" means a contribution that is (1) made in cash, (2) for which an income tax charitable deduction is allowable under IRC Section 170, and (3) made to a qualified charitable organization (including charities described under IRC Sections 170(b)(1)(A) and 509(a)(3) and contributions to donor-advised funds).

The Act also modifies the limitation on charitable contributions during 2020 by increasing the limitation on deductions for charitable contributions for taxpayers who itemize. For such taxpayers, the 50 percent AGI limit for contributions of cash is suspended for tax year 2020.

III. Retirement Provisions

The 10 percent additional tax on early distributions from qualified retirement plans such as an IRA or 401(k) will not apply to up to $100,000 of coronavirus-related distributions in 2020. A distribution is coronavirus-related if the individual, a spouse, or dependent was diagnosed with COVID-19, or if the individual experienced certain financial hardships as a result of the pandemic. In addition, the coronavirus-related distribution may be taken into income ratably over three years. The amount distributed as a coronavirus-related distribution may be repaid to an eligible retirement plan of which the individual is a beneficiary that would allow contribution of the amount as a rollover. The Act also relaxes certain rules associated with loans from qualified plans made within 180 days of enactment.

A required minimum distribution otherwise required in 2020 from defined contribution plans (such as a 401(k) plan, certain 457 plans, and IRAs) does not have to be made.

IV. Other Provisions of Note

The Act expanded the types of educational expenses paid by an employer that can be excluded from the employee's income. With certain limitations, the employer's payment of the employee's student loans in 2020 can qualify as excluded income.

For any questions or concerns, feel free to reach out to your wealth planning counsel at Venable to discuss further. For further reading, please refer to our prior alerts: Taking Advantage of Estate Planning Opportunities in Light of Coronavirus and Market Plunge, Estate Planning and Coronavirus (COVID-19) Further Tips, and COVID-19's Impact on Federal Tax Filings and Extensions.