The CARES Act: Understanding How the Stimulus Bill Affects Individuals

The CARES Act provides an estimated $2 Trillion in fiscal stimulus to combat the negative impact of COVID-19. It is intended to guard against economic risks associated with a slowdown in personal spending and assists businesses of all sizes in avoiding closures and employee layoffs. This is an overview of the Act’s major provisions and how it might affect you and your family.

Recovery Rebates

The most widely publicized provision is a tax credit advancement to individuals and families (within certain income limits).  Individuals will receive $1,200 and married couples $2,400.  Also, for each qualifying child under the age of 17, a credit of $500 will also be included.  However, this credit will phase out by 5% for each $1,000 of income over $75,000 for individuals and $150,000 for couples and fully eliminated at $99,000 and $198,000 respectively.  The IRS will base these credits from a household’s most recent tax return.

Penalty Free Retirement Plan Distributions

Historically, an individual would be penalized by 10% for withdrawing from a retirement account (401k, IRA, Roth IRA, 403b etc.) before the age of 59 1/2.  In 2020, a Coronavirus distribution of up to $100,000 can be withdrawn penalty free.  Please note: all pre-tax withdrawals will still be subject to federal income tax**.   A taxpayer can elect to include all distributed pre-tax income on their 2020 tax return or elect to spread the income over 3 years (2020, 2021, 2022).

Qualified Plan Loans

Employer sponsored retirement plans normally allow loans of up to 50% of the vested balance of an employee’s account.  Now, that limit has been increased to 100% of the vested balance.  This rule applies to loans made within 6 months or 180 days of the bill’s enactment.

401k/IRA Required Minimum Distribution Waiver

Required minimum distributions from qualified or inherited retirement accounts are eliminated in 2020.  For those that have already taken their 2020 RMD, the funds can be returned within a 60-day rollover window.  Qualified Charitable distributions are still allowed, but will not count towards an individual’s 2020 RMD.

Charitable Contributions

In previous years, a charitably inclined individual could deduct up to 60% of their adjusted gross income for cash gifts donated to a non-profit or 501(c)3. That amount has been increased in 2020 to 100% of AGI.  Excess contributions may still be carried forward over five years.

Small Business Loans

Many small businesses have fully or partially closed until further notice, due to the COVID-19 lockdown, which has caused a decline in gross receipts by more than 50% for most. Such businesses are eligible for a refundable credit against payroll taxes that equals 50% of qualified wages paid to employees. The credit is limited to $10,000 of wages per employee (depending on the number of employees) from March 13 through December 31 and must be reduced by any credits claimed under the Families First Coronavirus Response Act.

Employee Protection for Small Businesses

The CARES Act provides the Payroll Protection Program, which guarantees payroll loans for small businesses with 500 employees or fewer. Under this plan, small business owners can borrow up to $10 million with up to a 4% interest rate, as long as certain conditions are met. This program also applies to sole proprietors, independent contractors, and others who are defined as self-employed. In addition to payroll protection, employers are now required to provide employees with paid sick or family leave if those employees are staying home due to coronavirus-related reasons.

Extended Tax Deadline

The IRS has extended the tax filing and payment deadline from April 15, 2020, to July 15, 2020. Additionally, if you are paying estimated tax payments, the due date for the first payment is delayed, along with the annual tax deadline. The remaining payments are due as usual on June 15, September 15, and January 15.

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Jeffrey T. Dobyns


President, SageSpring | Financial Advisor, RJFS 

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Beyond crunching numbers and investment strategies, at SageSpring, we’re about building relationships. When you encounter Founder & President of SageSpring, Jeff Dobyns, it’s easy to understand why this is at the very heart of who we are as a firm. You won’t find stuffy formalities with Jeff; instead, you can expect to find him sharing a warm smile, communicating a compelling vision, or patiently untangling life’s complex challenges with clients. He believes in truly getting to know clients, understanding their aspirations and priorities, and navigating their financial plans with a tailored, comprehensive approach. Our team members have often been caught taking notes on Jeff’s effortless relationship skills from a distance, and we admire them for striving to learn from one of the best. 

Jeff’s financial expertise and wisdom are the perfect match to his innate people skills. Jeff holds the prestigious CERTIFIED FINANCIAL PLANNERTM certification, Chartered Life Underwriter (CLU®), and Chartered Financial Consultant (ChLU®) designations, and has held executive positions with financial planning firms for more than two decades. 

His dedication extends beyond the office to the boardroom and the local community, where Jeff is passionate about giving back. He serves as Chairman of the Board of Men of Valor, a prison ministry and mentoring program. Jeff also serves on the board of Send Musicians to Prison, which shares hope, healing and restoration with the imprisoned through musicians & artists. Jeff actively supports other initiatives in the community by sitting on the board of The Signatry of Middle Tennessee and the Halftime Institute of Nashville. 

Witnessing his four children, Gracyn, Hunter, Tanner, and Logan, excel on the field is almost just as rewarding, if not more, than celebrating the victories of seeing his clients overcome obstacles and build wealth. Spending weekends boating on the lake, hiking mountain trails, and fishing with his family are the moments Jeff cherishes most. It’s this grounded perspective that reveals the true meaning of wealth for Jeff: not just numbers on a page, but the freedom to create experiences that enrich your life and the lives of those you love. When you choose the Dobyns McMillin Wealth Team, you choose more than financial expertise. You choose a partner who champions your dreams, celebrates your victories, and walks besides you on the path to achieving your unique goals.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER TM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.