Here are four major ways that the Coronavirus Aid, Relief, and Economic Security (CARES) Act benefits homeowners and buyers:
1 – “Economic Impact” Checks of $1,200
Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child. Social Security recipients are also eligible and will not be required to file a return. Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. More details on this and other coronavirus tax relief can be found here: https://www.irs.gov/coronavirus
2 – Mortgage Payment Relief
If you’ve lost your job or income due to the coronavirus crisis you can ask your lender for a “mortgage forbearance.” Many lenders are allowing homeowners to defer their monthly payments for a short while until the national emergency is over. This is specific to home loans owned by Fannie Mae and Freddie Mac, and home loans insured by the FHA. Keep in mind that you’d still need to pay back the funds, often in a lump sum, and that loans in forbearance are generally not eligible for a refinance. Contact your mortgage servicer for more details. If you haven’t lost your job or income, you may benefit from a mortgage refinance, which has immediate and long-term benefits. In that case, contact me for more info.
3 – No Penalty on Early Withdrawals from Retirement Accounts in 2020
The 10% early withdrawal penalty is waived on up to $100,000 of 2020 distributions from company retirement plans and IRAs if you need to access to the funds due to economic hardship. You still would need to pay income taxes on the withdrawal, but the taxes can be spread evenly over three years. You can also pay back the funds over the three years to avoid the tax. Individuals over 59 ½ can still take advantage of the three-year income tax deferral and payback.
4 – Required Minimum Distributions Waived for 2020
You are not required to take a minimum distribution from your retirement account this year if you don’t want to. This also applies to inherited IRAs, meaning that beneficiaries can skip minimum distributions this year, and they now have six years to empty the account instead of five years.
PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.