What qualifies as a “coronavirus-related distribution” from a retirement plan?

As you may have heard, the Coronavirus Aid, Relief and Economic Security (CARES) Act allows “qualified” people to take certain “coronavirus-related distributions” from their retirement plans without paying tax.

So how do you qualify? In other words, what’s a coronavirus-related distribution?

Early distribution basics

In general, if you withdraw money from an IRA or eligible retirement plan before you reach age 59½, you must pay a 10% early withdrawal tax. This is in addition to any tax you may owe on the income from the withdrawal. There are several exceptions to the general rule. For example, you don’t owe the additional 10% tax if you become totally and permanently disabled or if you use the money to pay qualified higher education costs or medical expenses

New exception

Under the CARES Act, you can take up to $100,000 in coronavirus-related distributions made from an eligible retirement plan between January 1 and December 30, 2020. These coronavirus-related distributions aren’t subject to the 10% additional tax that otherwise generally applies to distributions made before you reach age 59½.

What’s more, a coronavirus-related distribution can be included in income in installments over a three-year period, and you have three years to repay it to an IRA or plan. If you recontribute the distribution back into your IRA or plan within three years of the withdrawal date, you can treat the withdrawal and later recontribution as a totally tax-free rollover.

In new guidance (Notice 2020-50), the IRS explains who qualifies to take a coronavirus-related distribution. A qualified individual is someone who:

Is diagnosed (or whose spouse or dependent is diagnosed) with COVID-19 after taking a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or
Experiences adverse financial consequences as a result of certain events. To qualify under this test, the individual (or his or her spouse or member of his or her household sharing his or her principal residence) must:
- Be quarantined, be furloughed or laid off, or have work hours reduced due to COVID-19;
- Be unable to work due to a lack of childcare because of COVID-19;
- Experience a business that he or she owns or operates due to COVID-19 close or have reduced hours;
- Have pay or self-employment income reduced because of COVID-19; or
- Have a job offer rescinded or start date for a job delayed due to COVID-19.

Favorable rules

As you can see, the rules allow many people — but not everyone — to take retirement plan distributions under the new exception. If you decide to take advantage of it, be sure to keep good records to show that you qualify. Be careful: You’ll be taxed on the coronavirus-related distribution amount that you don’t recontribute within the three-year window. But you won’t have to worry about owing the 10% early withdrawal penalty if you’re under 59½. Other rules and restrictions apply. Contact us if you have questions or need assistance.

IRS raises the standard mileage rates for the second half of 2026

Sep 22, 2026

The IRS raised the standard mileage rates for the second half of 2026, effective July 1, with the business rate increasing from 72.5 cents to 76 cents per mile. Taxpayers who use their vehicle for business, medical, or qualifying moving purposes will need to track mileage separately for each half of the year. Learn what the new rates mean for your deductions, reimbursement policies, and recordkeeping.

Form 990 filing mistakes that can undermine your nonprofit’s credibility

Sep 15, 2026

Form 990 is more than a tax return; it’s a public document that donors, grantmakers, and regulators use to evaluate your nonprofit. Common mistakes in filing, reconciliation, and narrative disclosures can raise questions about financial stewardship or put your tax-exempt status at risk. This article outlines the key errors to avoid and how to build a more reliable year-over-year filing process.

Divorce and your tax return: what the settlement may not resolve

Sep 9, 2026

A divorce settlement divides assets and establishes legal rights, but it does not resolve every tax question that follows. Filing status, child-related benefits, property basis, retirement transfers, and prior joint return liability all require a separate tax review. Understanding where the settlement ends and tax law begins can help you avoid costly surprises after the divorce is final.

< Back to COVID-19 Updates Page

Today’s Individual Tax Topic – June 24, 2020