What The Coronavirus Stimulus Bill Means For You

12/28/2020

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The $900 billion stimulus package was passed last week by Congress and signed by President Trump over the weekend. This bill follows the $2.2 trillion CARES Act that was passed by Congress in March of this year.

This bill will provide much needed relief to households and businesses across America. So what does this all mean for you? Here are the key provisions.

Please note that this is not a comprehensive recap of the entire bill. We highly recommend talking to your tax professional and Facet Wealth financial planner before making decisions or taking action on any information provided in this blog post.

Direct Payments

The portion of the bill that’s received the most interest is the direct payments for qualifying individuals. Here’s what we know.

Payments are based on your adjusted gross income (AGI) as shown on your 2019 tax return. The full payment amount is reduced, or phased out, beginning at certain income levels. For every $100 of income you report above these numbers, your payment will be reduced by $5.

Full payments are:

  • $600 per person (married couple could receive up to $1,200)
  • $600 per qualifying child

Phase-outs begin at:

  • Single filers: $75,000
  • Head of household: $112,500
  • Married filing jointly (or someone whose spouse died in 2020): $150,000

So, for example, if you’re a married couple with an adjusted gross income of $95,000 in 2020, you’ll receive $1,200. If you have two children, you’ll receive $2,400. There are some other provisions in the bill that could affect your stimulus payment, so please consult your tax preparer or financial planner about your specific situation.

One change that will enable more taxpayers to qualify for payments: citizens who are married to someone without a social security number will be able to claim the benefit this time around.

Stimulus payments are not taxable as income.

Here is a tool you can use to calculate your payment.

Treasury Secretary Steven Mnuchin says payments could begin as soon as next week. As with the CARES Act earlier this year, though, delays are likely for some taxpayers.

Unemployment

The bill extends the federal government unemployment supplement that was set to expire at the end of December. The supplement is in addition to any state unemployment benefits.

There are three pieces to this:

Pandemic Unemployment Assistance (PUA) that extends benefits to gig workers and self-employed individuals that were previously not eligible for state unemployment benefits.

Pandemic Emergency Unemployment Compensation (PEUC) which extended state level unemployment benefits to a maximum of 50 weeks. Typically, states offer benefits for 12-30 weeks. As unemployment insurance benefits are run on a state-by-state basis, we encourage you to contact your state’s UI department to determine your eligibility and length of benefits.

Here’s a good resource to find local benefit information.

Federal Pandemic Unemployment Assistance (FPUA) will provide an extra $300 per week on top of traditional state benefits. Weekly benefits amounts vary by state so the amount a worker qualifies for will be different in each state.

Because the bill was just signed, there may be some delays before unemployment payments (and the supplemental federal payment) are sent. However, for those on unemployment, this is welcome news.

Evictions

A federal moratorium protecting renters from losing their homes due to nonpayment was set to expire at the end of the year. The bill extends the moratorium to January 31. President-elect Joseph Biden can extend the moratorium further by executive order after taking office on January 20, if he chooses.

Some states, such as New York, are extending the moratorium even further.

When the moratorium ends, renters will still be on the hook for back rent, and will have to make up missed rent payments (or negotiate with the landlord). In many cases, though, renters should be shielded from penalties for late payments. Because this could affect as many as 40 million Americans, more legislation may be coming in 2021.

Surprise Medical Bills

The bill will also help Americans avoid unexpected, and often sizable, medical bills from hospital visits.

The bill will make it illegal for hospitals to charge patients for services such as emergency treatment by out-of-network doctors or transport in air ambulances that patients had no say in accepting.

Starting in 2022, patients will only be required to pay the normal in-network deductibles and copayments they would otherwise under their insurance. It’s up to healthcare providers to negotiate with insurers for the difference.

Small Business

The bill includes $284 billion for a second round of the paycheck protection program (PPP). Businesses can get a second loan under this program, but there are limits based on the size of the business. Please talk to your tax professional regarding these provisions.

Loans can now be used to pay for expenses beyond payroll. This means business owners can spend PPP funds on other business expenses and still qualify for partial or full loan forgiveness.

The amount of the loan forgiven does not have to be reported as taxable income. Business owners can still deduct expenses even if they use PPP funds to pay for them. This applies to forgiven amounts as well.

Check with the Small Business Administration for the latest information and updates.

Charitable Contributions

Individuals can deduct up to $300 in cash contributions (check and credit card payments count) in 2020 even if you don’t itemize your deductions. For 2021, individuals will be able to deduct up to $300, and married couples that file jointly will be able to deduct up to $600.

Flexible Spending Accounts (FSAs)

Flexible Spending Accounts, which are often used to cover medical expenses, just became more flexible. Any money leftover at the end of the year can be rolled into 2021 (and used in the 2021 tax year) without penalty. Leftover balances can also be rolled from 2021 into 2022. Both healthcare and dependent care FSAs are eligible.

What Wasn’t Included

Two major items that have been the subject of much discussion were not included in the final version of the bill.

Families and students hoping for student loan forbearance will not have their wishes granted, meaning they’ll still be responsible for student loan debt.

There also was no funding for state and local governments. Because many state and local governments saw revenues decrease due to the general economic slowdown this year, many may have to cut services, raise taxes, or both in 2021.

Other Provisions

Want to know more about this bill? Facet Wealth Co-founder and Chief Evangelist Brent Weiss, CFP®, ChFC® has a new Ask Us Anything video, “Five Things You Need to Know About the Coronavirus Relief Bill.

The bill also contains funding for coronavirus vaccine distribution, money for nutrition programs and mass transit, support for nursing homes and clean energy, and other funding within its 5,593 pages. We expect to see more information about these and other items as the bill is implemented.

Please consult your tax advisor or Facet Wealth CFP® Professional before making any financial or tax decisions based on this information.

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