Earlier this week we were talking about the possibilities of checks coming to Americans in this time of world-wide hardship. The US Congress passed, and the President signed, the CARES act into law today.

We’ve talked previously about how major tax reform only comes around every ~20 years, and how from a planning perspective it’s interesting that we’ve had both the Tax Cuts and Jobs Act and the SECURE act within the same 4 year presidential term. I’m not sure that you’d call this tax reform, but it definitely has tax implications.

This new act is 880 pages long, so obviously some of the implications of its complexity will need time to be studied by a variety of experts. But there are a couple of items that jump out as being relevant to those of us in Rochester and the surrounding area.

The first is the widely hoped for checks’ amount, and qualification criteria. These checks are called ” Recovery Rebates For Individuals “.

• The adult filers in your tax return are worth $1,200 each
  • If you are filing married filing jointly, that’s $2,400
  • If you are any other filing status, then that’s $1,200
• The dependent children UNDER age 17 are worth $500 each.
• There’s an income phase out window. Below that you get the full amount, above which you get nothing, and in the window you’re getting progressively less.

So if you’re a single person, earning $50k, no kids, look for $1,200. But if you’re a married couple with 5 younger kids, and earned $140k, look for $1200*2 + $500*5 = $4,900.

Opportunity Alert!! If you had an AGI over $150k married filing jointly in 2018, but less than that in 2019, it behooves you to get that 2019 tax return submitted to the IRS as soon as possible! Similarly if you’re filing any other status, then your magic number for AGI is $75k. So get those federal tax returns filed! The date of relevance is not specified in the Act, but it’ll obviously be functionally determined soon, so go go go.

If you earned more than that in 2018 or 2019, but your income is drastically affected in 2020, you’ll have an opportunity to get a tax credit on your 2020 return in early 2021; unfortunately that doesn’t help you now. And if your income goes up in 2020, for instance if you were a purveyor of hand sanitizer (who didn’t price gouge, but did have a great volume of business), your recovery rebate isn’t clawed back when you file your 2020 return in early 2021.

The second is the checks’ distribution method. If you are already receiving Social Security, the money will show up that way. If you received direct deposit of recent tax return refunds, then the money will show up that way. And if they aren’t sure, they’ll try to send you a paper check, at their last known address on file for you.

Thirdly, timing of the checks. Obviously the members of the American public would prefer immediately. But governmental “as soon as possible”, if 2008 is a relevant example, will still be weeks if not 2 months. So you have to hold on on your own until then.

Another minor bonus for Americans is that now as of the beginning of 2020, you can use your HCFSA or HSA funds for menstrual products or over the counter medications.

One more bonus: HSA-eligible high deductible health plans (HDHPs) may temporarily cover telehealth services at dollar 1 of care (so you don’t need to have met your deductible yet). Your health insurance carrier would need to elect to do so, and this provision is only temporary, lasting through 2021.

Then there’s the implications of funding a bill this large. Will this send us into spiraling inflation? The current thought is no, because right now money generally is not moving. If money can be started to flow again, it’s thought that the economic kinks will work themselves out.

Courtesy of NPR, the full text of the bill can be read here.