CARES Act Overview
Signed into law: March 27, 2020
Total funding: $2.2 trillion
Purpose: To provide emergency financial relief during the COVID-19 pandemic for individuals, businesses, healthcare providers, and state/local governments.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was a federal stimulus law enacted on March 27, 2020, in response to the COVID‑19 pandemic. It included temporary tax relief provisions for individuals and businesses.
Important:
Most CARES Act provisions have expired and do not apply to current‑year tax returns. This law primarily affected 2020 and 2021 tax filings.
How the CARES Act Affected Individuals
Economic Impact Payments (Stimulus Checks)
Between 2020 and 2021, the federal government issued three rounds of stimulus payments to eligible individuals.
- Taxpayers who did not receive the full amount were able to claim the Recovery Rebate Credit
- This credit was available only on 2020 or 2021 federal tax returns
- Stimulus payments are no longer available to claim
Current Status: Expired
Unemployment Compensation (2020 Only)
For tax year 2020 only, the CARES Act allowed eligible taxpayers to exclude up to $10,200 of unemployment benefits from taxable income.
This exclusion:
- Applied only to 2020
- Does not apply to unemployment income in later years
Current Status: Expired
Retirement Plan Withdrawals
The CARES Act allowed certain individuals affected by COVID‑19 to:
- Withdraw up to $100,000 from qualified retirement plans
- Avoid the 10% early‑withdrawal penalty
- Choose to spread the income over three years or repay the amount
These rules:
- Applied only to pandemic‑related distributions
- Had strict eligibility requirements
- Are no longer available
Current Status: Expired
Charitable Contributions
Temporary changes were made to encourage charitable giving, including:
- An above‑the‑line deduction for cash gifts (even if not itemizing)
- Increased limits for itemized charitable contributions based on AGI
These rules applied only during specific pandemic‑era tax years.
Current Status: Expired (normal charitable deduction rules now apply)
How the CARES Act Affected Businesses
Employee Retention Credit (ERC)
The CARES Act introduced the Employee Retention Credit, a refundable payroll tax credit for eligible employers who retained employees during COVID‑19 shutdowns.
- The ERC ended in 2021
- Businesses cannot claim ERC on current payroll
- Amended payroll returns (Form 941‑X) may still be filed to claim it retroactively, if eligible
This is a business‑only provision and is not entered on individual tax returns.
Net Operating Loss (NOL) Carrybacks
Temporary rules allowed certain businesses to:
- Carry back NOLs from 2018–2020 for up to five years
These carryback rules have expired