We know many of our clients are working through dealing with the implications of Covid-19 on their businesses and day–to-day realities of managing work at a time like this. It is easy to succumb to the stress undoubtedly brought on by the uncertainty and unpredictability that current events present us with day by day – even minute by minute. We hope you and your family are staying healthy, safe and are remembering to take the time to practice self-care in all it’s forms: physically, emotionally, spiritually and financially. 

Yesterday, the Senate passed a historic $2 trillion deal, the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides economic relief for Americans, businesses and many industries in response to the growing coronavirus pandemic.  It is a comprehensive package that includes many provisions intended to mitigate the economic downturn the country is currently facing.  The CARES Act builds upon the Families First Coronavirus Response Act which was passed two weeks ago.  Notable for our clients are several changes to the 2020 tax code.

Below are some highlights we feel might be relevant to you and your families:

Checks to Individuals:  The bill provides for direct payments of $1200 per adult or $2400 for married couples filing jointly and an additional $500 per child.  These grants start to phase out for individuals with an adjusted gross income above $75,000 ($150,000 for joint filers and $112,500 for heads of household).  These recovery rebates are being treated as advance refunds of a 2020 tax credit. This credit is one-time, but policymakers may consider additional rebates if the downturn is prolonged.  Read more here.

Unemployment Benefits: A temporary Pandemic Unemployment Assistance program extends benefits from 26 to 39 weeks in most states.  There is also a provision included for an additional $600 a week increase for the first four months.  Benefits are extended to contract workers, freelancers and other nontraditional workers who are unemployed, partially unemployed or unable to work because of Covid-19.

Small Business Interruption Loans:  The bill expands small business eligibility for business under 500 employees.  Loans can be used for payroll as well as paid sick, medical or family leave, mortgage and rent payments, utilities and other debts. There are also provisions for payroll tax delays

Special Rules for Retirement:  The bill allows for tax favored “coronavirus-related distributions from certain retirement plans of up to $100,000 (10% early withdrawal penalty does not apply).  Income attributable to those distributions would be subject to tax over three years (as opposed to one).  In addition, Required Minimum Distributions are waived for 2020. This is a major provision for those not needing the cash flow in 2020.

Charitable Contributions:  Allows for contributions up to $300 to be treated as above-the-line deductions meaning that you do not have to itemize deductions in order to claim first $300 of charitable contributions.  Limits on cash donations are also temporarily suspended for individuals and corporations.  There is no longer a 50% AGI limit for individuals and the 10% limit for corporations is increased to 255 of taxable income.

Student Loans:  Students are allowed to suspend their monthly payments through Sept 30th 2020 without any interest accruing.

The expansive bill also provides for many other benefits such as a payroll tax credit for employers, payroll tax payment delays, corporate tax payment delays and modified net operating losses limitations.   We anticipate many of our clients will have questions and welcome your calls.  We are here to help.  Please do not hesitate to reach out with any questions or concerns.  We will continue to keep you updated.

Remember, there is nothing permanent except change. Take some time for yourself, filter out the noise, stay the course.

Bear markets are NO fun and test the long-term investor. This crisis is even more distributing because the coronavirus has thrown our lives upside down and we don’t know the impact of how it will change our lives potential forever.

Things we recommend you do –

  1. Review your emergency reserve
  2. Review your short & long-term spending plan (Is the plan in line with your goals)
  3. Make sure you are maxing your 401K, all new contributions should be directed to stocks
  4. Rebalance your portfolio – I have no idea where the bottom is, but it is at least 36% closer than Feb 19th when the DOW was at 29,500
    1. Rebalancing worked really well in 2002 “DOT COM” & 2008 “Lehman”
    2. As Warren Buffett stated: ‘Be fearful when others are greedy, and be greedy when others are fearful.’
    3. The price of most equities has become much lower, giving equities more room to grow before they reach what we’d consider to be their fair value.
  5. Tax Loss harvest – can deduct up to $3,000 of losses on Federal & most state returns. NJ doesn’t allow losses & tax loss carry forwards so you have to be more strategic if you live in the Garden State.
  6. Get rid of Individual stock holding that were hard to sell before
  7. Remember the Stock market is made up of companies who all want to survive and thrive