CARES Act: Tax Provisions for Individuals


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Recovery Rebate for Individual Taxpayers

The CARES Act provides up to a $1,200 rebate in the form of a refundable tax credit for individuals ($2,400 for joint taxpayers). 

Taxpayers with children will receive an additional $500 per child. 

This tax credit begins to phase out for taxpayers with income at $75,000 for singles, $112,500 for heads of households, and $150,000 for joint taxpayers. 

This rebate is available even if the taxpayer does not have income.

The IRS will use a taxpayer’s 2019 tax return, if filed, or alternatively the taxpayer’s 2018 return. 

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Retirement Plan Provisions

Penalty Free Withdrawals

  • Individuals may take a coronavirus related distribution from an eligible retirement plan of up to $100,000 without being subject to the 10% early withdrawal penalty for individuals who are younger than 59 ½ years of age.  The distribution must qualify as a “coronavirus-related distribution” which means any distribution from an eligible retirement plan made between January 1, 2020 and December 31, 2020 to an individual who meets one of the following:
    • A participant, spouse, or dependent has been diagnosed with SARS-CoV-2 or COVID-19 with a CDC approved test; or
    • A participant who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced business hours due to the virus.
  • Income attributable to a coronavirus related distribution is subject to income tax over a three-year period.
    • Within three years from the date an individual receives a coronavirus related distribution, such individual may recontribute the amount withdrawn without regard to the annual caps on retirement plan contributions.

Loans from Qualified Plans

  • The CARES Act increases the limit from $50,000 to $100,000 for loans from qualified plans made within 180 days from the date the CARES Act is enacted.
  • The CARES Act also increase the percentage limit for loans from 50% of the present value of the participants account to 100% of the participants account.
  • If a qualified plan loan due date occurs within the time period between the date the CARES Act is enacted and December 31, 2020 then there is a one-year extension of time to repay such loan.

Required Minimum Distributions

  • The CARES Act includes a waiver of required minimum distributions for certain retirement plans, including 401(k), 403(b), 457(b), and individual retirement accounts for calendar year 2020. 

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Charitable Contributions

The CARES Act creates a $300 partial above-the-line deduction for charitable contributions made by Individuals who take the standard deduction.  The charitable deduction limit for individuals who itemize is also expanded.

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Student Loans

The CARES Act provides that the definition of employer provided assistance that is excluded from income to include up to $5,2050 in student loan payments made by an employer during the time period beginning on the date of enactment of the CARES Act and December 31, 2020.

The CARES Act also suspends the involuntary collection on student loans.

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The provisions provided on this webpage are not legal advice.  For specific legal advice related to the CARES Act, contact Jonathan Osborne.