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