• Nate Baim, MBA, CFP®

What You Need to Know about Stimulus 2.0


Enjoy this week's edition of the Planner's Beta


Beta (n) - climber's jargon that designates information about a climb This digest's purpose is to share observations, ideas, and treasures found this week which you may also find insightful. Sharing does not mean it's an endorsement. I am endorsing the pursuit of knowledge and exploration.



Becky and I made it out to the Tualatin River Wildlife Refuge to walk off some Christmas pounds. While we were walking, a small group of deer allowed us to take their photo.


Coronavirus Stimulus 2.0


With the President's signature, the Consolidated Appropriations Act of 2021 and the tacked-on 5,000+ page stimulus language becomes the law of the land. The law provides relief for businesses, state and local governments, and individuals. Here are the critical points of the law important for individuals.


Economic Recovery Rebates: For this newest round of stimulus, the base amount for rebates is $600, subject to income limits. Individual taxpayers and children eligible for a Child Tax Credit (they must be younger than age 17) may claim the rebate. The stimulus checks begin to phaseout for those whose adjusted gross income is above a certain threshold, dependent upon their filing status. Those limits are:

  • Single Filer: $75,000

  • Joint Filer: $150,000

  • Head of Household Filer: $112,500

These are the same limits used for the first round of stimulus checks dispersed earlier this year. Once a filer's AGI reaches a limit, the rebate benefit decreases. Thus, for every $100 of AGI a taxpayer exceeds their applicable limit, the rebate reduces by $5. Refer to the graph below provided by Kitces.com to understand how the phaseout changes with AGI and different filling scenarios.

Source: Kitces.com, Michael Kitces at Nerd’s Eye View, Coronavirus Stimulus 2.0: Analysis & Planning Opportunities In The Consolidated Appropriations Act of 2021


Extended Federal Unemployment Benefits: Three essential items regarding the unemployment benefits came from the bill. First, unemployment benefits for eligible individuals extend an additional 11 weeks through the middle of March 2021. Second, funds for those who typically do not qualify for unemployment (self-employed and gig workers) will extend through the end of March into early April. For the self-employed, these funds come from a program titled Pandemic Unemployment Assistance. Third, regular unemployment is increased by $300 per week for 11 weeks. Those who received help from Pandemic Unemployment Assistance will also receive the additional $300 on top of what their state may typically pay.

Student Loan Assistance: Notably excluded from the law is any further student loan relief. Although the law does allow employers to receive tax benefits for helping employees pay off student loans, there is no action taken to forgive student loans. Furthermore, the act does not extend the moratorium on defaults, payments, and interest. These benefits are set to expire on February 1, 2021, assuming no further action is taken by policymakers.

Increased Lifetime Learning Tax Credit Limits: Going back to school or supporting a child through school? The Lifetime Learning Tax Credit helps taxpayers offset the cost of eligible education expenses. This tax credit phased out for higher-income earning households. However, starting in 2021, the limits are increased to $80,000-$90,000 for single filers and $160,000-$180,000 for joint filers.

Above the Line Charitable Contributions Extended and Expanded: Have you contributed cash to a charitable organization this year? If so, be sure to keep track of those receipts. Single and joint filers for 2020 can deduct $300 from income for a cash contribution to eligible charities. For 2021 only, married couples will be able to write off $600. Before the CARES Act, individuals taking a standard deduction were unable to write-off small charitable contributions. With the passage of these two laws, individuals making small contributions will be able to take an above the line deduction for charitable contributions and the standard deduction.

FSA Carryforwards: Have an FSA with your employer? Typically, at the end of each year, the balance in the FSA is forfeited. However, the federal government is allowing employers to roll unused funds for 2020 into 2021. However, there is no language requiring plan administrators to move those funds. Be sure to check with your HR department to see if they will be taking advantage of this provision.

Permanent reduction in AGI limit for medical expense deductions: The new law restores the AGI hurdle rate for medical expense deductions to 7.5% of AGI. This benefits someone who has suffered a significant medical situation with large bills, and when an individuals' medical expenses assist in warranting an itemized deduction.

No new provisions for Required Minimum Distributions: The CARES act allowed a temporary suspension of RMDs from retirement accounts. Individuals should be prepared to resume taking RMDs for 2021.



Monthly Financial Planning Item


This checklist covers several planning issues that you should consider before updating your estate plan.


All too often, I see folks with no estate plan. Estate planning is the process of determining how your wealth will pass on to your heirs. Even those who are young need to create an estate plan. This vital task often gets pushed off. Doing so can result in stress and pain for your heirs in the unfortunate event you pass away. Whether you are single or have a young and growing family, I encourage you to review this guide. Use this guide to identify areas you need to address so that your estate's transfer is as smooth as possible. This checklist covers 18 of the most critical planning issues to identify and consider before updating your estate plan. The checklist includes:

  • Beneficiary & Fiduciary Issues

  • Assets & Property Related Issues

  • Minors & Children Related Issues

  • And More

Take the time to consider the items on this list to uncover any items needed to be included in your estate plan. Having a systematic process helps you better identify planning elements that could benefit you and your heirs this year and beyond. If needed, feel free to place time on my calendar.




Quote of the Week


"Never confuse a single defeat with a final defeat." - S. Scott Fitzgerald

 

Click here to subscribe.


Have something on your mind? Schedule a free call with Nate.

 

Pursuit Planning and Investments, LLC is an Investment Adviser registered with the State of Oregon. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past results do not guarantee future results. Please contact us at 971-803-5948 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.  Additionally, we recommend you compare any account reports from PPI with the account statements from your Custodian.  Please notify us if you do not receive statements from your Custodian on at least a quarterly basis.  Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on our website, www.planyourpursuit.com. This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.


Investing involves risk. Past results do not guarantee future returns. This content should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice. The performance of an index is not representative of any particular investment, as you cannot invest directly in an index.