How the Latest Act of Congress May Affect You
At 5,593 pages, the newly enacted Consolidated Appropriations Act (CAA) of 2021 is the longest bill Congress ever passed … so far. Here are some highlights for individuals (not including relief for business owners).
Stimulus checks: A maximum of $600 per adult ($1,200 per married couple), plus $600 for each eligible child. These amounts phase out beginning with 2019 income levels of $75,000 if filing single and $150,000 if filing jointly. As with the stimulus checks from last spring, if your payment was phased out, but your 2020 income was lower than in 2019, you may be able to report a credit on your 2020 return.
Unemployment benefits: An extra $300/week on top of normal state unemployment.
Medical expenses: Permanently lowered threshold for medical expense deductibility from 10% to 7.5% of adjusted gross income.
Charitable donations: The 2020 CARES Act created a $300 above-the-line deduction for cash charitable donations for 2020 tax filers who don’t itemize deductions. The CAA increased this to $600 for married couples, and extended the deduction through 2021.
Tax ramifications of forgiven mortgage: If you receive debt forgiveness on your primary residence mortgage, you can now exclude this break from taxable income through 2025 (instead of only through 2020), but the maximum exclusion has been reduced from $2 million to $750,000.
Mortgage insurance premium deduction: Extended through 2021.
Qualified fuel cell motor vehicle AND residential energy efficient property credits: Extended through 2021.
Qualified disaster distributions: Regardless of your age, you can withdraw up to $100,000 from a retirement account without incurring the usual 10% penalty if you resided in a qualified disaster area and were affected by the disaster. The distribution is taxed over three years, and can be repaid during that period. This provision is permanent.
Flexible spending accounts (FSAs): Your employer can elect to modify your plan to let you use any unused 2020 FSA balance in 2021, and any unused 2021 balance in 2022.
That’s a one-page summary. With 5,592 pages left, we could cover a lot more, but these are the highlights for individuals. If you can, consult with a tax specialist to learn more.
John A. Frisch, CPA/PFS, CFP®, AIF®, PPC™ founded Alliant Wealth Advisors in 1995 and has over 30 years of experience as a financial professional. In his free time, he’s an avid long-distance runner, a sport that requires discipline, patience and vision. John applies these same skills to his professional pursuits: He helps families and retirement plan sponsors adopt a patient, disciplined approach to overcoming financial challenges and reaching their distant goals along a clear path. Learn more at www.alliantwealth.com.