Coronavirus Aid, Relief, and Economic Security (CARES) Act
President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. Its purpose is to ease some of the most immediate economic effects of the coronavirus pandemic on individuals and businesses. Among other provisions, the Act includes one-time payments to individuals, strengthened unemployment insurance, additional health-care funding, and loans and grants to businesses to deter layoffs.
It’s my goal with this post to highlight some of the provisions that will be most important to you if you are a homeowner, displaced employee, or small business owner. NOTE: This is by no means an exhaustive list, and I am not a tax professional or attorney. The full text of the Act is available on the Congress.gov website, and I encourage you to consult with professionals regarding your own specific situation.
With that said, there are some sections in the Act of special importance to most individuals, homeowners, employees, and business owners. They include the following (scroll through, or click on a bulleted item below to jump to that section):
- Economic impact payments/tax credits
- Extended deadline for federal tax filing
- Mortgage help for loans backed by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)
- Federal student loan forbearance
- Expanded unemployment eligibility and benefits
- Economic assistance for small businesses
Economic Impact Payments/Tax Credits
As shown in the summary chart below from the Internal Revenue Service, economic impact payments will be made to eligible individuals subject to income limits and other qualifications. In general:
- Eligible individuals with adjusted gross income (AGI) of up to $75,000 will automatically receive the full $1,200 payment.
- Eligible married couples filing a joint return with AGI up to $150,000 will automatically receive the full $2,400 payment.
- Parents will also receive a payment of $500 for each eligible child under 17.
The payments phase out once your AGI exceeds:
- $99,000 for single filers
- $198,000 for joint filers
- $148,000 for head of household filers
The distribution of economic
impact payments will begin in the next three weeks and will be distributed automatically,
with no action required for most people. Social Security beneficiaries who are
not typically required to file tax returns will not need to file to receive a
payment. Instead, payments will be automatically deposited into their bank
accounts. However, some people who typically do not file returns will need to
submit a simple tax return to receive the stimulus payment. For full details,
see the IRS web page: “Filing
and Payment Deadlines Questions and Answers”.
Extended Deadline for Federal Tax Filing
The IRS has extended the deadline to file and pay federal taxes by 3 months. Instead of being due on April 15, 2020, your federal taxes will now be due July 15, 2020. For full details, see the updated statement from the IRS.
Mortgage Help for Loans Backed by Fannie Mac and Freddie Mac
A March 21, 2020 article on MarketWatch cited statistics from the Urban Institute showing that approximately 46% of all home loans originated in 2018 were backed by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Both of these agencies have issued guidance to loan servicing companies in recent days designed to help homeowners. The guidance includes:
- Ensuring payment relief by providing forbearance for up to 12 months
- Waiving assessments of penalties or late fees
- Halting all foreclosure sales and evictions of borrowers living in homes owned by the company until at least May 17, 2020
- Suspending reporting to credit bureaus of past due payments of borrowers who are in a forbearance plan as a result of hardships attributable to this national emergency
- Offering loan modification options to provide mortgage payment relief or keep those payments the same after the forbearance period
Borrowers are eligible for forbearance regardless of whether their property is owner occupied, a second home or an investment property.
If your mortgage is NOT backed by Fannie Mae or Freddie Mac, you may still be able to get help. We anticipate that almost every lender will follow the lead of these agencies and offer similar accommodations to their borrowers.
It’s important to note that none of this mortgage assistance is automatic! If you are struggling to make your mortgage payments or believe you may fall behind on your payments soon, don’t wait – contact your loan servicer now.
Separately, the Department of Housing and Urban Development (HUD) announced it would suspend foreclosures and evictions through the end of April.
Federal Student Loan Forbearance
According to StudentAid.gov, the official government website for federal student aid, federal student loan borrowers are automatically being placed in an administrative forbearance, which allows you to temporarily stop making your monthly loan payment. This suspension of payments will last until September 30, 2020, but you can still make payments if you choose. Read the borrower Q&As to learn more.
Expanded Unemployment Eligibility and Benefits
With stay-at-home orders and the mandated shutdown of businesses classified as nonessential, a staggering number of Coloradans are unexpectedly out of work. Some of the most critical portions of the CARES Act are designed to provide assistance to employees.
- Section 2104 of the CARES Act provides most individuals an emergency increase in traditional unemployment insurance (UI) benefits of $600 per week through July 31, 2020.
- Section 210 – known as the Pandemic Unemployment Assistance program — provides up to 26 weeks of regular UI to people not otherwise eligible for regular UI compensation, including the self-employed and those who have exhausted their regular and extended benefits.
- Section 2107 creates the Pandemic Emergency Unemployment Compensation program to provide 13 weeks of emergency UI for people who remain unemployed after they have exhausted their benefits or are not otherwise eligible for benefits.
The chart below, from the Colorado Department of Labor and Employment (CDLE), provides a summary of the benefits for which may be eligible. It also helps you to know whether you should file a regular unemployment claim now or whether you should wait to file a Pandemic Unemployment Assistance claim (which will be available soon). You can check the CDLE Unemployment page regularly for updates.
Economic Assistance for Small Businesses
The Small Business Administration (SBA) is making multiple relief programs available for business owners. They include but are not limited to:
- Economic Injury Disaster Loans and Loan Advance
- Paycheck Protection Program
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000 and/or an Economic Injury Disaster Loan of up to $2 million.
- The loan provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%. The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay. Apply for the loan here.
- The advance provides business owners who are experiencing a temporary loss of revenue with up to $10,000. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid. Apply for the advance here (same application used for advance and for loan.
The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses. Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards. Under this program:
- Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
- Loan payments will be deferred for six months.
- If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
I’m Here to Help
No matter if you’re a current client or past client or someone who’s never done business with me…I’m here to help! If you have questions related to real estate and the effects of the coronavirus pandemic on buying, selling, or keeping your home, please reach out to me. If I don’t know the answer, I will do everything I can to connect you to the best resources who do. The best way to reach me at this time is by email to firstname.lastname@example.org.