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Everything You Need to Know About The CARES Act

April 24, 2020 | 7 min read | The beginning of 2020 has been quite a ride so far. I wanted to let you know that I’m still here for you during this difficult time. Even if my office is closed for a while, I’ll still be working from my home and just as available to you as always.

Part of why I’m here is to help you navigate through uncertain periods, even during “social distancing.” While many of us are collectively pausing face-to-face contact, there are plenty of other ways of staying connected.

The following highlights the pertinent pieces of the CARES Act. There is quite a bit here, so feel free to scroll down to the parts that are relevant for you. And if you have any questions on this, or just want to talk further about what’s going on in the financial markets or anything else, feel free to schedule a call with me in this link here. 

What’s covered:

  • Recovery Rebates
  • Small Business Benefits: PPP and EIDL programs
  • Student Loan Benefits
  • Required Minimum Distributions Waived
  • Unemployment Benefits Enhanced
  • Charitable Contributions
  • New Healthcare Provisions

Recovery Rebates: 

$1,200 per person and $500 per child under age 17.

To check the status of your check and potentially request direct deposit, you can go to the Get My Payment website. Note that you will receive the check based on how you filed your last tax return, so if your address or bank info has changed, you will want to rectify that as quickly as possible.

Additionally, income phaseouts for the checks start at these levels:

Single: $75,000

Head of Household: $112,500

Married Joint: $150,000

Small Business Help: PPP and EIDL programs (includes self-employed individuals)


Note: as of 4/16, funds for these programs have run out, though lawmakers are trying to add additional funds. I still urge you to apply if you are otherwise eligible.

Paycheck Protection Program (PPP) for small businesses

Small businesses affected by the pandemic (and frankly, what business hasn’t been affected?) can be eligible for a loan under the Paycheck Protection Program, or PPP. You must apply by June 30, 2020 and funds are available until they run out on a first come, first served basis.You apply for this loan through your bank, or other SBA-approved lender.

The loan size available is generally 2.5 times the average monthly payroll costs of the previous year.  If you use the loan to cover payroll and/or some other specified costs during the first 8 weeks after the loan is made, the amount will be forgiven. Otherwise, the loan needs to be repaid within 2 years, and it has a 1% interest rate. This is still cheap money.

Economic Injury Disaster Loan (EIDL) and $10,000 grant for small businesses

This program is much like the PPP loan program above, with similar forgiveness rules. However, an important difference here is the additional ability to request a grant of up to $1,000 per employee, up to a $10,000 limit. The grant is not considered a loan, and thus, you don’t have to pay it back. You can apply for this directly through the SBA website. 

Student Loan Borrower Benefits

All federally held student loans will suspend payments and interest from the period of March 13 to September 30, 2020. Furthermore, you will still accrue credit towards forgiveness as normal during this time.

On your end, there shouldn’t be anything you have to do to stop payments. However, you really should check to make sure. And, if you notice a payment was taken out after March 13, call your servicer to have that payment refunded.

Another thing to note is that if you see FFEL loans on your balance sheet, you need to track who owns them, as only federally held loans carry the above benefits. Most FFEL loans are actually held by private lenders.

So, should you take the $0 payment offer or continue to pay down your loans during this period? In almost all circumstances, I say take the $0 payment. Especially if you are going for forgiveness, the last thing you want to do is make a payment on a loan that is going to be forgiven anyway.

Forgiveness aside, you are essentially getting an interest-free loan for a while. From a pure numbers perspective, this means you shouldn’t pay it down until you absolutely have to. There are so much more things you can do with your money instead:

  • Work on your emergency fund
  • Pay down other loans that have higher-than-zero interest (credit cards especially)
  • Put your money in a high-yield savings account (Ally Bank for example has 1.5% interest rates on their savings accounts, which nets you more money if you park your student loan payments in there until you need to pay). You can then use that built-up pool of money to pay down your loans in a lump sum once payments and interest are turned back on by the government

Required Minimum Distributions (RMDs) are waived in 2020

If you needed to take an RMD in 2020, you get to skip that this year. The following accounts apply for this:

  • Traditional IRAs
  • SEP IRAs,
  • SIMPLE IRAs
  • 401(k)s
  • 403(b)s
  • 457(b)s

*Note: this also includes inherited, or beneficiary, IRAs as well!

Unemployment Benefits Enhanced

The bill passed a lot of enhancements to the current unemployment system:

  • The first week of unemployment is now covered for payment
  • Self-employed individuals are now eligible for Pandemic Unemployment Assistance
  • Unemployment compensation is now increased by $600 per week for up to four months
  • The length of benefits was extended by 13 weeks

Here is Wisconsin’s unemployment benefits website if you want to apply or have questions.

New $300 “above-the-line” deduction for charitable contributions

If you take the standard deduction on your tax return, you can now deduct $300 from your income for contributions to charity. This directly affects AGI, the part of your tax return before the standard or itemized deduction is applied.

*Note: an “above-the-line” deduction is better than a “below-the-line” deduction.

And in further news, based on the language of the CARES Act, this appears to be a permanent change!

A further benefit that the CARES Act created was that, if you so choose, you can deduct your charitable contributions up to 100% of your income in 2020.

New Healthcare Provisions

Since the CARES Act is being passed in the midst of a pandemic, we would expect to see some healthcare features in the bill, right? Well there are quite a few. Here are a few:

  • OTC Medications are now included, at least for now, as a qualified medical expense for HSAs and FSAs
  • Those on Medicare can receive the COVID vaccine for free when it becomes available
  • Those on Medicare have the ability to request up to a 90-day supply of medication rather than a 30-day supply to limit visits to the pharmacy

Erik Kroll is a Fee- Only Fiduciary Financial Planner in Milwaukee, Wisconsin. His mission is to help people across their whole financial picture. With a specialization in student loans, he has advised on over $5 million in student debt.

Erik is always on the journey of being a better father, husband, and listener.