Video Insights from FI-nancial Planner

2021 Covid Stimulus Bill Summary

Here’s a summary of the main planning opportunities with the Covid Stimulus Bill – American Recovery Act which recently passed the Senate and went back to the House to finalize.

Bulletpoint summary:

  • $1,400 stimulus payment for taxpayers and dependents, on income up to 75-80k for single filers and 150-160k for joint filers.  This is based on the latest filed tax return, so consider accelerating your filing (if income is dropping below threshold) or delaying filing (if income is increasing)
  • COBRA Health insurance – the government will cover the premiums from April 1 to September 30th if you qualify for coverage.
  • Child/Dependent Care Credit – expanded benefit from 3k/6k to 4k/8k, up to 50% of expenses.  Full benefit expanded for households earning up to 125k, and phases out up to 400k of income.
  • Child Tax Credit – increased from 2k per child to 3k per child (3,600 if 5 or under).  Half of the credit will be advanced to taxpayers, to be paid starting in July.
  • Dependent care flexible spending account – contribution limit increased to 10,500 from 5,000.  Employers must allow employees to update their contribution amounts!
  • Student loan debt forgiveness – any loans that are forgiven or cancelled between 2021 and 2025 will not be taxable.
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Financial Planning for President-Elect Joe Biden’s Tax Proposals

In this video, I walk through Biden’s proposed tax changes and some planning opportunities if each of them became law. It’s important to note the likelihood of passage of any of these proposals is small at the current moment given that control of the Senate is still up for a runoff in Georgia, and that the proposals are from the Executive branch vs the Legislative branch where laws are actually made!

Here’s a bullet point summary:

  • Significant changes for those earning over ~400k – both on the tax rate side and on tax deductions:
    • Top tax bracket back to 39.6% (as it was in the Obama years), but now applies to taxable income over 400k (whether single or married filer) – net impact +2.6-4.6%
    • Wage earnings above 400k (per earner) would be subject to FICA again, whereas it phases out at 137k now – net impact +6.2%
    • QBI deduction (20% reduction on business income) above 400k – net impact +10-11.6% (was previously 80% of 37% = 29.6% effective marginal rate)
    • Cap the value of itemized deductions at 28% – net impact +11.6% on deductible expenses

Planning strategies – to the extent possible, pull income and deductions forward to be taxed at a lower marginal rate and to preserve deductions

  • Other proposals:
    • Long Term Capital Gains with income over $1m would be subject to ordinary tax rates (i.e. 39.6% vs 23.8% previously)
    • Tax deferral on 1031 exchanges eliminated if income over 400k
    • Flat tax credit to replace reduction in taxable income from traditional retirement account contributions

Planning strategies – manage controllable income for capital gains and losses and sales of real estate where possible.  On retirement contributions, you should compare your current and future projected tax rates to the 26% proposed cap.  We would try to determine whether it’s worth taking a 26% credit now compared to paying a higher rate in the future combined with today’s rate.  Higher income taxpayers would likely be better with a Roth account whereas lower income earners would likely be better off with a traditional account and a 26% tax benefit.  I’d be more than happy to talk through the nuances of this with you!

Here’s a link to the Michael Kitces summary I mentioned.

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Does the President Impact the Stock Market?

Here’s a short video showing how the presidential party impacts (or not) the stock market over the long term.  Since we are – or should be – long term investors, we should not be concerned about which party holds the White House from an investment perspective!

Over the last 100 years and 15 presidencies, there are three presidents that ended their terms with a lower market valuation than when they started.  Overall, the stock market has a steady rise upward over time.  Therefore, do not fret about the upcoming election, the debates or anything else political when thinking about your investments.  Building a long term investment plan and allocation that we can stick with through ups, downs and everything in between is the most important part of investing.  By also keeping costs down and systematically buying in over time, you will likely need to have to sit down when you open those brokerage statements at retirement!

I hope this is an informative take on the current situation and I hope it helps you be a little bit less concerned about politics over the next month or so.


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Recent Brokerage Mailers – Form CRS and Retirement Account Changes

I recenly received several mailers from TD Ameritrade where I hold my investment accounts and also where I custody client assets.  Both documents were in response to recent legislation or regulations from the Securities and Exchange Commission.  In this video, I walk through those two statements and talk to how it impacts my clients.  On the Form CRS, I am not required to complete this form and provide it to my clients, so I talked through it providing my answers to the questions on the form, comparing those to TD Ameritrade.

Here are links to the two forms I shared on my screen:

TDA Rules & Disclosure form: https://tinyurl.com/y3j4ks6w

TDA Form CRS: https://tinyurl.com/y5fmanen

Links to my service descriptions:

Financial Planning

Portfolio Management

Legal and Disciplinary History:

CFP Board


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