The $2 Trillion Economic Stimulus Bill Has Passed: Here's What it Means to South Carolinians

On March 27, 2020, the White House and Congress came to an agreement and passed the largest relief package in recent United States history, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES act spreads $2 trillion among businesses, hospitals, families and individuals. The goal is to bring relief to those experiencing economic turmoil due to to COVID-19 virus.

The bipartisan effort far surpasses the $168 billion offered to Americans in the Economic Stimulus Act of 2008.

How will this impact individuals and businesses in the Carolinas? We’ve gathered up the important numbers to know in this overview.

Healthcare Aid

Hospitals will receive around $117 billion in aid.² Healthcare workers on the front line of the COVID-19 pandemic should gain better access to protective equipment and testing supplies. There will be greater resources to provide construction or facilities to house the growing number of patients in need.

Healthcare providers will see a 20 percent increase in Medicare payments for treating those with coronavirus.²

Stimulus Checks

Most American taxpayers will be receiving direct stimulus payments of $1,200 as part of the new bill.

Individuals with incomes up to $75,000 will receive the full $1,200. Couples with incomes up to $150,000 will receive $2400. These amount lowering and phasing out for those who earn more than $99,000 or couples earning more than $198,000. Individuals earning $99,000 or couples earning $198,000 or more will not receive checks. Families who qualify receive an extra $500 in direct payments per child.²The Government hopes to have these checks to the American people within the next few weeks.

Unless you have already filed for 2019, your income will be based on your 2018 return. As a reminder, the IRS extended the tax filing deadline for 2019 to July 15, 2020.²

Small Business Grants & Loans

A large portion of this stimulus bill will go toward assisting small businesses affected by the COVID-19 pandemic. $500 billion will go toward assisting businesses and corporations. Of that, $29 billion will go to the aviation industry and $17 billion to businesses that work in national security.

The Small Business Administration will oversee the Paycheck Protection Program. The program will distribute $350 billion in loans to small businesses. These loans can be partially forgiven if companies meet certain requirements. The loans will be available to companies with 500 or fewer employees.⁴

The loan amount is the lesser of $10 million or the average total monthly payroll costs during the one year before the loan multiplied by a 2.5x factor. Qualifying borrowers would be eligible for loan forgiveness for equal to the amount spent during eight weeks after the origination date of the loan on operating costs, including employee payroll (and other forms of compensation), employee health care, mortgage, rent, utilities, and debt payments.⁴

Loan paybacks could be deferred for one year and then go to a 10 year note with a maximum of 4% interest.

Companies that choose to take this government assistance must agree to stop any stock buybacks for the length of the loan plus a year. Also, these companies must retain at least 90 percent of their employee levels between March 24 and September 30, 2020.²

Find more resources for those affected HERE and HERE

Any businesses run (at least 20 percent stake in the company) by the Trump family, or other senior government officials, will not be eligible.²

401k, 403b & IRA Distrubutions

The bill provides relief from early withdrawal penalties and taxes on retirement plan distributions in certain cases. It also increases available loan amounts from 401ks and eliminates Required Minimum Distributions for 2020.

WITHDRAWALS- If you have a legitimate hardship due to COVID-19, the IRS will wave the 10% early withdrawal penalty from retirement accounts. This applies to those under age 59.5 for amounts up to $100,000. You will also have up to three years to pay back the distribution, potentially eliminating any tax liability.⁵ Alternatively, you can choose to spread the tax liability over three years.

Tapping your retirement account is always a risky move, especially in light of recent downturns in the market. There are also potential penalties and tax liabilities if you make a mistake. Consult your Tax Professional before making any decisions to withdraw from a retirement account.

LOANS - You can now borrow up to $100,000 dollars from your 401k. This is an increase from the previous limit of $50,000. You may be able to suspend payments for up to one year.

RMDS- If you have a Required Minimium Distrubtion due in 2020, you will not have to take it. This applies to Inherited IRAs as well. This could open up the door for things like Roth Conversions. Consult with your Financial Advisor and Tax Professional to determine the strategy that is best for you.

Unemployment Benefits

Eligible Americans on unemployment will receive an extra $600 per week for four months.²

Unemployed individuals affected by the pandemic will be able to receive unemployment insurance for an extended 13 weeks.

What does this mean for us in Greenville, Charleston and other areas of South Carolina?

In the week ending March 21, there were 31,054 unemployment claims filed in the state. That’s an increase of approximately 1600% from the previous week’s count of 1,996.³

This means that there were 31,054 individuals who both live and work in the state of South Carolina who filed an initial claim during that week. These enhancements will provide direct support for these individuals.

Also, the bill has called for the creation of a pandemic unemployment assistant program. The program would offer unemployment benefits to those who have previously not been eligible - including furloughed workers, freelancers and gig workers (such as Uber or Lyft drivers).

Education

Millions of educators and students from K-12 through college have been ordered to self-isolate. To assist school systems and institutions across the country, the government is granting $30 billion in emergency education funding.²

The Department of Education will also be suspending payments. Borrowers could put off paying their federal student loan payments without penalty until September 30th.²

Local Government

State and local governments haven’t been immune to the financial hardships this global pandemic has caused. The stimulus package is offering $150 billion for state and local governments that have been working to combat the effects of COVID-19.²

According to a press conference with South Carolina state senators Tim Scott and Lindsey Graham, the amount each state receives will be determined by a government formula. Each state will receive at least $1.25 Billion.

Food Assistance Programs

Anticipating a rise in demand for food banks as a result of the increasing unemployment rate, the bill has provided the Emergency Food Assistance Program with $450 million. Approximately $350 million would go toward purchasing food, with the remaining $100 million spent on the distribution of food to those in need. Puerto Rico and other U.S. territories will receive $200 million for food assistance, and American Indian reservations will receive $100 million for food distribution.²

While the news seems to be changing every day surrounding COVID-19 in America, this stimulus act is coming at a time when families and business owners alike are fearful of their financial future.

Still have questions? We are here for you. Schedule a call to discuss your individual situation and how this bill impacts you. Schedule a Phone Call

Together, we can sort through expectations of what’s to come and the right next steps to take.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.