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Consolidated Appropriations Act Provides Relief to Individuals and Businesses

The $900 billion emergency relief package represents a bipartisan effort to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis.

What you need to know about the Consolidated Appropriations Act 2021

On Sunday, December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA 2021) was signed into law. A $900 billion emergency relief package is included as part of this omnibus spending bill. It is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis. Major relief provisions are summarized here, as well as some additional tax provisions.

Unemployment provisions

The legislation provides an extension to expanded unemployment benefit assistance (although at a lower amount):

  • An additional $300 weekly benefit to those collecting unemployment benefits, through March 14, 2021
  • An additional 11-week extension of federally funded unemployment benefits for individuals who exhaust their state unemployment benefits
  • Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits (allowing individuals to receive a maximum 50 weeks of benefits)
  • Unemployment benefits through March 14, 2021, for many who would not otherwise qualify, including independent contractors and part-time workers

Recovery rebates

Most individuals will receive another direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.

The amount of the recovery rebate is $600 ($1,200 if married filing a joint return) plus $600 for each qualifying child under age 17. Recovery rebates are phased out for those with an adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGIs exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold.

Rebate Amounts and Phaseout Ranges
Filing Status Payment Amount Phaseout Threshold Phaseout Completed
Married Filing Jointly $1,200 $150,000 $174,000
+ 1 Child $1,800 $150,000 $186,000
+ 2 Children $2,400 $150,000 $198,000
Head of Household $600 $112,500 $124,500
+ 1 Child $1,200 $112,500 $136,500
+ 2 Children $1,800 $112,500 $148,500
All Others $600 $75,000 $87,000

Business relief

  • The employee retention tax credit has been extended through June 30, 2021. It is available to employers that were significantly impacted by the crisis and is applied to offset Social Security payroll taxes. As extended, the credit is increased to 70% of qualified wages, up to a certain maximum per quarter.
  • Paycheck protection program (PPP) loans have been extended and the allowable uses (eligible expenses) of the loan expanded. A PPP loan amount can be forgiven for paying certain expenses, and such amount is not included in income. It is clarified that no deduction will be denied, no tax attribute reduced, and no basis increase denied by reason of the exclusion from gross income.
  • Repayment of employee payroll taxes deferred in 2020 was originally scheduled for the period January 1, 2021, through April 30, 2021. The period for repayment has been expanded to January 1, 2021, through December 31, 2021.
  • The employer tax credit for providing emergency sick and family leave has been extended through March 31, 2021.
  • A full deduction is now allowed for business meals provided by a restaurant for expenses paid or incurred in 2021 and 2022.

Rent relief

  • The legislation allocates funds to state and local governments to provide emergency rental assistance through December 31, 2021.
  • The legislation extends an eviction moratorium originally issued by the Centers for Disease Control and Prevention, but only through January 31, 2021.

Charitable giving

Enhancements to the normal charitable gifts deduction rules in 2020 have been extended through 2021.

  • For those who itemize deductions, the limit on the charitable gifts deduction has been increased to 100% of AGI for direct cash gifts to public charities.
  • For nonitemizers, a $300 (increased to $600 in 2021 for joint returns) charitable deduction for direct cash gifts to public charities is available (in addition to the standard deduction).

Other tax provisions

The floor for deducting medical expenses has been permanently lowered to 7.5% of AGI (it was scheduled to increase to 10% in 2021).

Starting in 2021, the deduction for qualified tuition and related expenses has been repealed. To make up for it, the modified adjusted gross income (MAGI) phaseout range for the Lifetime Learning Credit has been increased to be the same as the phaseout range for the American Opportunity Tax Credit.

A number of provisions that are periodically extended (often a year at a time) have been extended through 2025, including:

  • The exclusion from gross income of discharge of qualified principal residence indebtedness
  • The employer credit for paid family and medical leave
  • The exclusion from income for certain employer payments of student loans

A number of other provisions have been extended (generally through 2021), including:

  • The treatment of mortgage insurance premiums as qualified residence interest for purposes of the interest deduction
  • The energy efficient home credit

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

Year-End Charitable Giving

Even if you don’t itemize deductions on your federal income tax return, you can receive a $300 charitable deduction for 2020 direct cash gifts to public charities (in addition to the standard deduction).

With the holiday season upon us and the end of the year approaching, we pause to give thanks for our blessings and the people in our lives. It is also a time when charitable giving often comes to mind. The tax benefits associated with charitable giving could potentially enhance your ability to give and should be considered as part of your year-end tax planning.

Tax deduction for charitable gifts

If you itemize deductions on your federal income tax return, you can generally deduct your gifts to qualified charities. This may also help you potentially increase your gift.

Assume you want to make a charitable gift of $1,000. One way to potentially enhance the gift is to increase it by the amount of any income taxes you save with the charitable deduction for the gift. At a 24% tax rate, you might be able to give $1,316 to charity [$1,000 ÷ (1 – 24%) = $1,316; $1,316 x 24% = $316 taxes saved]. On the other hand, at a 32% tax rate, you might be able to give $1,471 to charity [$1,000 ÷ (1 – 32%) = $1,471; $1,471 x 32% = $471 taxes saved].

However, keep in mind that the amount of your deduction may be limited to certain percentages of your adjusted gross income (AGI). For example, your deduction for gifts of cash to public charities is generally limited to 60% of your AGI for the year, and other gifts to charity are typically limited to 30% or 20% of your AGI. Charitable deductions that exceed the AGI limits may generally be carried over and deducted over the next five years, subject to the income percentage limits in those years.

For 2020 charitable gifts, the normal rules have been enhanced: The limit is increased to 100% of AGI for direct cash gifts to public charities. And even if you don’t itemize deductions, you can receive a $300 charitable deduction for direct cash gifts to public charities (in addition to the standard deduction).

Make sure to retain proper substantiation of your charitable contribution. In order to claim a charitable deduction for any contribution of cash, a check, or other monetary gift, you must maintain a record of such contributions through a bank record (such as a cancelled check, a bank or credit union statement, or a credit card statement) or a written communication (such as a receipt or letter) from the charity showing the name of the charity, the date of the contribution, and the amount of the contribution. If you claim a charitable deduction for any contribution of $250 or more, you must substantiate the contribution with a contemporaneous written acknowledgment of the contribution from the charity. If you make any noncash contributions, there are additional requirements.

Year-end tax planning

When making charitable gifts at the end of a year, you should consider them as part of your year-end tax planning. Typically, you have a certain amount of control over the timing of income and expenses. You generally want to time your recognition of income so that it will be taxed at the lowest rate possible, and time your deductible expenses so they can be claimed in years when you are in a higher tax bracket.

For example, if you expect to be in a higher tax bracket next year, it may make sense to wait and make the charitable contribution in January so that you can take the deduction next year when the deduction results in a greater tax benefit. Or you might shift the charitable contribution, along with other deductions, into a year when your itemized deductions would be greater than the standard deduction amount. And if the income percentage limits above are a concern in one year, you might consider ways to shift income into that year or shift deductions out of that year, so that a larger charitable deduction is available for that year. A tax professional can help you evaluate your individual tax situation.

A word of caution

Be sure to deal with recognized charities and be wary of charities with similar-sounding names. It is common for scam artists to impersonate charities using bogus websites, email, phone calls, social media, and in-person solicitations. Check out the charity on the IRS website, irs.gov, using the Tax Exempt Organization Search tool. And don’t send cash; contribute by check or credit card.

 

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.

5 Things Every Woman Should Know  About Social Security 

Information provided by www.socialsecurity.gov 

There are many things a woman should know about Social Security. Here are five of the  most important Social Security messages every woman should know. 5 things every woman needs to know about social security

1. Nothing keeps you from getting your own Social Security benefit

  • If you’ve worked for at least 10 years and earned a minimum of 40 work credits, you  are vested in the Social Security system. 
  •  Once you reach age 62, you will be eligible for your own Social Security benefit  whether you’re married or not and whether your spouse collects Social Security or  not. 
  • Your retirement benefit is figured the same way a man’s retirement benefit is figured.  It’s based on a percentage of your average monthly wage using a 35-year base of  earnings. If you don’t have 35 years of earnings, we must substitute “zero” years to  reach the 35-year base. 
  • If you become disabled before your full retirement age, you might qualify for Social  Security disability benefits if you’ve worked and paid Social Security taxes in five of  the preceding ten years. 
  •  If you also get a pension from a job where you didn’t pay Social Security taxes (e.g.,  a civil service or teacher’s pension), your Social Security benefit might be reduced. 

2. There is no marriage penalty or limit to benefits paid to a married couple 

  • If you are married and both you and your spouse have worked, you will each be  paid your own Social Security benefit. 
  •  A working woman is not limited to one-half of her spouse’s Social Security. (That  rate applies to women who never worked outside the home.) 
  •  So, for example, if you are due a Social Security benefit of $1,200 per month and  your spouse is due a Social Security benefit of $1,400 per month, you will be paid  $2,600 per month in retirement benefits.

3. If you’re due two benefits, you get the one that pays the higher rate, not both 

  • Most women are potentially due two benefits: your own retirement benefit and spousal benefit on your spouse’s record. 
  • But you only get the one that pays the higher rate, not both. 
  • A wife is due between one-third and one-half of her spouse’s Social Security.
  •  Most working women who reach retirement age get their own Social Security benefit  because it’s more than one-third to one-half of the spouse’s rate. 
  • But if your spouse dies before you, you can apply for the higher widow’s rate. (See  number 5 below). 

what women need to know about social security

4. If you’re divorced and were married at least 10 years,  you’re eligible for some of your ex’s Social Security

  • Divorced women married at least 10 years are eligible for Social Security on the ex’s record if they are unmarried at the time they become eligible for Social  Security. 
  •  Some women sign divorce decrees relinquishing their rights to Social Security on  their ex’s record. If you were married at least 10 years, those clauses in  divorce decrees are worthless and are never enforced.  
  • Any benefits paid to a divorced spouse DO NOT reduce payments made to the ex or  any payments due the ex’s current spouse if he/she remarried. 
  • Generally, the same payment rules apply to divorced wives and widows as to current  wives and widows. That means most divorced women collect their own Social  Security while the ex is alive, but can apply for higher widow’s rates when he/she dies. 

5. When your husband or ex dies, you’re probably due a widow’s benefit 

  • Widows are due between 71 percent (at age 60) and 100 percent (at full retirement  age) of what the spouse was getting before he/she died. 
  • But we must pay your own retirement benefit first, then supplement it with whatever  extra benefits you are due as a widow, to take your Social Security benefit up to the  widow’s rate. 
  • We also can pay you a $255 one-time death benefit if you were living with your  spouse when he/she died. 
  •  If you made more money than your spouse, then he/she might be due a widower’s  benefit on your record if you die before he/she does.

 

For more information on how Ballast Advisors helps women discover their financial needs and goals, contact Ballast Advisors for a complimentary consultation at a location near you:

Ballast Advisors – Woodbury
683 Bielenberg Dr., Suite 208
Woodbury, MN  55125-1705
Tel: 651.478.4644

 Ballast Advisors – St. Paul
3820 Cleveland Ave. N, Ste. 500
St. Paul, MN  55112-3298
Tel: 651.200.3100

Ballast Advisors – Punta Gorda
223 Taylor Street, Suite 1214
Punta Gorda, FL  33950-3901
Tel: 941.621.4015

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. This material is for informational purposes only and should not be considered investment advice. This material concerns information regarding tax matters, and is not intended or written to be used,and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm,including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request. circumstances.