Economic Relief in the Time of COVID-19
The coronavirus pandemic has been devastating to the economy, shuttering businesses and causing unemployment to skyrocket. Fortunately, federal and state governments have rolled out assistance programs to provide relief during these trying times. Learn what this means for your personal finances.
What Is the CARES Act?
- The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on March 27, 2020
- This $2 trillion economic relief package involves direct payments to taxpayers, funding for businesses, an expansion of unemployment benefits and more
Tax Filing & Payment Extensions
- The deadline to file and pay all federal income taxes has been extended to July 15, 2020
- If you need more time to file, you can request an additional extension through the IRS. If approved, this would push the tax filing deadline to October 15, 2020, although payments are still due July 15
- The deadlines for 2019 IRA, HSA, Archer MSA and Coverdell ESA contributions have also been pushed from April 15 to July 15, 2020 to reflect the tax filing extension
- Many states have extended their tax return and payment deadlines as well
Unemployment Assistance
- The Pandemic Unemployment Assistance (PUA) Program supplements state unemployment benefits
- This provides an additional $600 per week from March 29 through July 31, 2020
- State unemployment benefits have also been extended by 13 weeks
- Self-employed workers, independent contractors and others who don't typically qualify for unemployment may be eligible for relief
- Contact your state’s unemployment insurance program to file a claim
The country's unemployment rate hit 14.7% in April 2020, its highest since the Great Depression
Healthcare & Insurance Benefits
- The Families First Coronavirus Response Act provides free COVID-19 testing and waives copayments for related services and vaccines
- It allows for up to 80 hours of paid sick leave in addition to employer-provided leave
- Employees on leave who are seeking a COVID diagnosis, undergoing treatment or quarantined will be paid at their regular rate. This is capped at $511 per day and $5,100 total
- Employees who can't work for other qualifying reasons, such as caring for a quarantined individual or experiencing a “substantially similar condition” to COVID-19, are paid at two-thirds their regular rate. This is capped at $200 per day and $2,000 total
- Employees who must stay home with a child can receive an additional 10 weeks of paid leave at two-thirds their regular rate, provided they have worked for their employer for at least 30 days
- Some copays, coinsurance and deductibles may also be waived or reduced for capabilities such as telemedicine, depending on your employer and provider
- If you’re furloughed or lose your employer-provided insurance, you may qualify for a Special Enrollment Period to purchase coverage through the health insurance marketplace
Early Withdrawal From Retirement Savings
- If you’re experiencing financial hardship as a result of COVID-19, you can withdraw up to $100,000 from your 401(k) or IRA without penalty through December 31, 2020
- Income tax on early withdrawals is still owed but can be paid over a period of 3 years
- You can avoid or recoup taxes on early withdrawals by redepositing the money as a rollover contribution within 3 years
- You'll qualify for early withdrawal if:
- You, a spouse or a dependent have tested positive for COVID-19
- You’ve suffered financial loss due to quarantine, furlough, a layoff or reduced hours
- You’re unable to work due to a lack of childcare
- You’re unable to work because your business has closed or cut its hours
Relief for Homeowners & Renters
- For mortgage loans backed by the federal government, homeowners can get deferred or reduced payments for up to 180 days, with an additional 180-day extension possible
- This applies to Fannie Mae, Freddie Mac, HUD, FHA, VA and USDA loans
- You must contact your loan servicer to request a deferral
- Foreclosures on these homes are suspended for at least 60 days starting March 18, 2020
- Evictions are suspended for at least 120 days starting March 27, 2020 for renters who live in federally subsidized housing or homes with federally backed mortgages
- During this period, landlords may not charge penalties or fees for nonpayment
- Some states have provided further relief, including broader protection against evictions and funding to help qualifying tenants pay rent
Help With Student Loan Payments
- Payments on federal student loans are automatically suspended through September 30, 2020 and the interest rate is set to 0%
- If you’d like to opt out and continue making regular payments, contact your loan servicer
- Private loans, Federal Family Education Loans and federal Perkins loans not backed by the U.S. Department of Education do not qualify
- Employers can now contribute up to $5,250 tax free toward an employee’s student loan debt through the end of the year
DID YOU KNOW? The interest rate on new federal student loans will drop to a historic low of 2.75% on July 1, 2020, marking a 40% decline year over year
Sources:
U.S. Department of Labor, U.S. Department of the Treasury, International Revenue Service, Healthcare.gov, AHIP, Forbes, U.S. News, Credit Karma, National Law Review, Consumer Finance, USA Today, Fidelity
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