As you are probably aware, there was a third Covid Relief Plan completed in Washington, D.C. this week and we wanted to share some highlights.
Here are 10 Things You Might Want to Know About the Covid Relief Plan:
- $1,400 stimulus checks will be given to individuals making under $75,000 and under $150,000 for married couples. That means direct payment per person will occur and will also include $1,400/dependent. Income cap is $80,000 for individuals and $160,000 for married couples.
- Quick Example: A married couple with 3 children making $100,000 would receive a stimulus check totaling $7,000
- Who qualifies will be based on either your 2019 or 2020 tax return, whichever is on file by the time checks would begin to be processed. For more details, read the Kiplinger article referenced below.
- The current $300/week in extra unemployment benefit would continue until September 2021
- Federal income taxes are waived for the first $10,200 of unemployment benefits received in 2020 for households earning below $150,000. If you had unemployment benefits paid to you in 2020, and already filed your 2020 tax return, you may want to consider amending that return.
- The child tax credit is increased from $2,000 to a maximum of $3,600 for children under the age of 6 and a maximum $3,000 for children 6-17.
- This only applies to the 2021 tax year, not 2020
- Any income from student loan forgiveness would be tax-free through 2025
- Important note: no student loan forgiveness was included in this bill, but it sets the stage for future legislation
- The above-the-line charitable contribution deduction up to $300 for single filers and up to $600 for married couples has remained for the 2021 tax year
- Please keep good records though as the penalty has increased from 20% to 50%
- People who itemize can still essentially get their Adjusted Gross Income (AGI) to zero by giving to charities
- A combination of cash gifts to public charities and investments can get to this goal if it’s a tax strategy you’re interested in using. For more specifics, please refer to https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
- The Bill will provide 100% subsidy of COBRA health insurance premiums for people laid off so they can remain on their plan at no cost until the end of September 2021
There are a few things that didn’t make it through the package:
- Individuals have to take their Required Minimum Distributions in 2021 that was waived in 2020
- Increasing the minimum wage from $7.25/hr to $15/hr did not pass, as proposed
As always, if you have questions or concerns, give us a call!
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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