Bars and restaurants are closed, people are working from home, and the country sits glued to news outlets as they get the latest on the COVID-19 pandemic. These unprecedented times have led to unprecedented actions from both a monetary and fiscal policy standpoint. From a monetary policy standpoint, interest rates are at record lows as the Federal Funds rate will likely sit between 0% and 0.25% for the near future. What does this mean for you? While we likely won’t see 0% interest rates for mortgages or car loans anytime soon, we should see a drop in interest rates in the near term. If you’re looking to refinance a home purchase (say through a VA loan IRRRL) doing so now might be worth consideration. We certainly owe you a post on this process in the near future (please email us if you have done so and would like to highlight your experience for others).
From a fiscal policy standpoint, on March 27, the President signed a $2 trillion stimulus package to help the country weather this storm. Of the $2 trillion, $250 billion are set aside for direct payment to individuals and families while $250 billion are set aside for unemployment insurance. The rest is largely allocated to loans for distressed companies. Let’s take a look at the direct payment allocations portion of the bill below (Additionally, a stimulus calculator can be found here):
- The package provides a maximum of $1,200 for individual tax filers and $2,400 for joint filers (couples) plus a maximum of $500 per child.
- The payments begin to decline at $75,000 adjusted gross income (AGI) for single filers and $150,000 AGI for married couples filing jointly.
- Payment is reduced by 5% of every dollar above the $75,000 AGI mark.
- Payments phase out to $0 at $99,000 AGI for single filers (with no children) and $198,000 AGI for couples (with no children).
MILITARY AND FAMILY ELIGIBILITY
Active duty service members are eligible for the stimulus and it is based on adjusted gross income … your nontaxable benefits such as BAH are not included in your AGI (special pay is taxable). Based on 2019 military pay charts, service members ranked below E-8 or O-3 with fewer than 8 years of service are eligible for the full $1,200 (pending special pays). O-5s and higher with greater than 14 years of active duty service are not eligible for any compensation. Please check your tax returns from 2018 and 2019 to see if you are eligible. A few other considerations for you and your family are listed below:
- Va Benefit Recipients: VA benefit recipients are treated just like those receiving social security benefits and do qualify for stimulus checks unless they are the dependent of another taxpayer.
- College Students: If your kid is in college and is not considered a dependent, they qualify for a stimulus check. Talk to your tax advisor about dependent status for college students.
- Babies and Newborns: Parents who had a child in 2019 are eligible for the $500 tax credit. Unfortunately those who had children in 2020 are not eligible.
- Unemployed Personnel: Individuals laid off during the pandemic may be eligible for an additional $600 in unemployment insurance (Plus what the state pays) under the CARES act. This increase lasts until July 31, 2020.
HOW DO I GET PAID?
The IRS has said that the majority of people do not need to take action at all to get paid unless they don’t typically file tax returns. Most people will receive payment starting in the next three weeks and payments will automatically be deposited into the account which you use for your tax refund. If your direct deposit is not on file, the IRS intends to develop a web-based portal so that individuals can provide banking information to the IRS online. Economic impact payments will be available through the end of the year.
For those of you that are not aware, the tax deadline to file and pay your 2019 taxes has been moved to July 15, 2020. You can get the latest updates on coronavirus related tax impacts at https://www.irs.gov/coronavirus.
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Any accounting, business or tax advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.
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