What's in the CARES Act? Part One - Individual Tax Provisions

On Friday, March 27, 2020, the President signed into law H.R. 748, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act contains a number of relief provisions—including tax provisions—designed to sustain Americans during the COVID-19 health and economic crisis. The law is complex, but this post provides an overview of key individual tax provisions included in the law. Future posts will detail the business tax provisions, as well as special provisions impacting rural America.

Rebates for Individuals (§ 2201)

The most wide-reaching provision in the law provides “2020 recovery rebates for individuals.” These rebates, which are characterized as credits against 2020 taxable income, will be issued in the amount of $1,200 for “eligible individuals” or $2,400 for “eligible individuals” filing a joint return.  In addition, “eligible individuals” will receive $500 for each “qualifying child,” as defined by IRC § 24(c), for purposes of the child tax credit. This generally includes dependent children under the age of 17 for whom the individual has a social security number.
“Eligible individuals” include “any individual” except for:

• Nonresident alien individuals
• Individuals who can be considered a dependent of another individual
• An Estate or Trust

AGI Phaseout

The amount of the recovery rebate credit is reduced by five percent of the amount by which a taxpayer’s adjusted gross income exceeds $150,000 for joint return filers, $112,500 for those filing head of household, or $75,000 for other taxpayers.
The recovery rebate is to be “treated as allowed” as a refundable tax credit.

Note: Although called a “credit against 2020 taxable income,” recovery rebate credits are wholly refundable credits for which no taxable income is required.

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