The American Rescue Plan Act has cleared the House of Representatives, Senate and has been signed by President Biden. There are many benefits that may impact your family. If your income is above $75K Individually or $150K Married Filing Jointly in 2019 or 2020, your benefits could be cut substantially. Please speak with your CPA or tax preparer as there could be strategies to reduce your income to qualify. Below are bullets from a special webcast by Jeffrey Levine and Michael Kitces. Click below for the PDF.
Payments of $1,400/person, including dependents
Single filers: $75,000 - $80,000
Head of Household filers: $112,500 - $120,000
Married-Joint filers with income below $150,000 - $160,000
AGI will be reviewed from either 2019 or 2020 tax return (if filed)
Clients who have NOT yet have filed their 2020 tax return have until September 1st, 2021, to have their 2020 income reviewed. If the income assessed is lower in 2020, they may be entitled to a higher recovery rebate check.
Child Tax Credit
$3,600/child under age 6
$3,000/child for age 6-17
Extra 2021 amounts are subject to lower than usual phaseouts based on 2019/2020 tax returns
Joint filers: $150,000
HoH filers: $112,500
All other filers: $75,000
A portion of the credit may be paid in advance, beginning in July
The credit is subject to clawback
Child & Dependent Care Tax Credit
Maximum of $4,000/child or $8,000 for two or more children for 2021 only
Unemployment & Healthcare-Related Updates
Benefits set to expire March 14th would be extended to September 6th, 2021
The ‘extra’ unemployment (on top of state benefits) is $300/week
Pandemic Emergency Unemployment Comp (for self-employed individuals) has also been extended
The Act allows those who have been laid off to maintain current employer-sponsored health coverage, via COBRA, for both individuals and their families through the end of September 2021
Premiums for such coverage are to be paid by the former employer and are reimbursable to the employer in the form of a refundable payroll tax credit
$10,200/person of unemployment compensation received in 2020 will be tax-free
AGI must be under $150,000
The Employee Retention Credit (ERC) is extended through the end of 2021
The Paycheck Protection Program (PPP) Second Draw deadline is March 31st, 2021
Student Loans Updates
Section 9675 of the American Rescue Plan Act amends Section 108 of the Internal Revenue Code to exclude the discharge of student debt from income. However, the debt must be forgiven between 2021 and 2025.
The market has been very volatile over the last few weeks. Many investors were convinced that the rising 10 Year Treasury Yield (see table below) would end the massive tech rally that has occurred since the market bottom in March. In my opinion, the treasury yield increasing is a positive sign that our economy is recovering faster than anticipated. The investors that made a lot of money buying tech at the bottom in March were selling their tech holdings and investing in beaten-down sectors such as financial and oil stocks. I believe the tech market volatility will continue as investors reposition their accounts from tech to other market sectors that have lagged.
Last week the 10-Year Treasury Yield jumped to 1.64% on Friday, which is higher than the prior week. However, all the major equity markets ended the week higher (see ETF of the week below). This is a good sign that investors are getting more comfortable with the idea that companies can thrive in a higher interest rate environment.
The rising interest rate environment is problematic for bonds as bond prices tend to move inversely to interest rates. The 10-Year Treasury Yield hit an all-time low on August 4th at .54%, so unless rates go to zero or we have negative-yielding bonds like Europe, bond prices will continue to be pressured.
ETF of the Week
iShares Core Small Capitalized ETF (IJR)was the best performing ETF last week at 6.41%. IJR invests in companies with a market capitalization of $600 million to $2.4 billion. Small Capitalized Stocks are much more volatile than Large Cap Stocks.