CARES Act: What You Need to Know

Ken Weingarten |

In order to help combat the COVID-19 pandemic, the $2 trillion+ federal aid package includes several provisions intended to help ease the financial burden that retirees and working individuals may face during these uncertain times. While the biggest provision is a $1,200 stimulus check, there are other provisions under the CARES Act that one should be aware of. Below we go over what they are and how they could affect you.

  • Stimulus Checks: Most individuals will receive $1,200 and couples $2,400. If your Adjusted Gross Income is above a certain amount, a phaseout range kicks in. Above that phaseout range, individuals/couples will not be eligible for the stimulus checks. Below is a handy chart to explain this. It should also be noted that if the IRS has your banking information on file, you will likely receive these stimulus grants much faster. We are hearing these checks could arrive as soon as the 2nd half of April.

  • 2020 Required Minimum Distributions: Retirees who have been taking RMDs from their retirement accounts will find 2020’s RMD have been waived. The main benefit is that you can give your account(s) time to recover from the anomalous market volatility as a result of this pandemic. Below are a few other points to keep in mind as to what this RMD waiver means for you:
    • RMDs Already Taken: Depending on how periodically you take RMDs, you may be in luck. One can roll over the distribution into an IRA or eligible retirement plan only if it can be rolled over within 60 days of the when the distribution took place. Individuals who take their entire RMD for the year in the beginning of the year may be out of luck as they will not have the ability to “pay back” the distribution in their retirement account.
    • Inherited IRA RMD: Just like with normal RMDs, beneficiaries of an inherited IRA, will also have their RMDs waived. However, beneficiaries will not be eligible for the 60-day rollover option available to retirees as mentioned in the point above.

Additionally, this bill has an exception for individuals who chose to take distributions over a 5-year period. Because individuals must empty the account over a 5-year period, this bill has suspended 2020’s RMD and have added another year to this distribution period, effectively making it a 6-year period.

  • Charitable Contributions: Because this pandemic has hit non-profit organizations especially hard (i.e. cancelled fundraising events), donations from individuals will likely decrease due market drops. To help ensure that donations keep flowing in, starting this 2020 tax year, the IRS is allowing a $300 above-the-line deduction for charitable cash donations, whether or not you itemize on your tax return.

Another major change which can help accelerate the pace at which donations are made is the AGI limitation on which donations may be deducted when itemizing. While the 2017 TCJA tax reform bill made itemizing less attractive, one could still itemize charitable deductions up to 60% of one’s AGI. The CARES act has temporarily done away with this limit. In theory, one could reduce 2020’s tax liability down to zero with charitable contribution. One should keep in mind that donations to donor advised funds will not qualify as a charitable contribution. Donations must be made in cash directly to qualified charitable organizations.


Everything considered this creates some planning opportunities for individuals. Retirees who find they do not have to take RMDs this year can consider Roth conversions as they will not have the requirement of RMDs pushing up their ordinary income. It is highly recommended that you speak with a financial advisor or tax advisor to get a better understanding of how this affects you.

Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.