OPINION

JUST PLAIN TALK: New laws, new directions

Buz Livingston
Buz Livingston

Congress included a pandemic relief package as part of the Consolidated Appropriations Act, 2021. Direct payments to individuals, $600 versus $2,000, garnered most of the press, but the bill tweaked the tax code to boost the economy. Some were targeted like the one-year extension of a tax break for racehorses benefitted states, like Kentucky, with horse tracks and breeders. Others were more broad-based. The act made business meal expenses, but not entertainment, 100% deductible, up from 50%. The provision ends in 2022; hopefully, by then, the virus will be an unpleasant memory. 

In addition to being half of the amount approved last spring, $600 per qualified individual versus $1,200, the act scaled back the phaseout level. Individuals with adjusted gross income (AGI) up to $75,000 will receive the full $600. Reduced checks will go out, on a sliding scale, for those with AGI up to $87,000. Last spring, the upper limit was $99,000. Married couples filing jointly can expect full benefits beginning at $150,000. But the upper limit ends at $174,000 compared with $199,000 earlier this year. Lawmakers boosted the amount available for children under age 17 by $100 to $600.

Laid-off workers or those with reduced 2020 income may find themselves ineligible. Don't despair. These payments are refundable tax credits, so it is essential to file your 2020 return and claim the credit quickly. Taxpayers with different income levels may have qualified for full payment in the spring, based on 2018 income, but a reduced payment now if their 2019 income was higher. Anyone complaining about higher income ought to think it through, but if you can't figure it out, I'll spill the beans. More income is always better. For those whose 2020 income exceeds the threshold, you can keep any stimulus payments received. 

The act included the Pandemic Unemployment Relief Program, which provides an additional $300 unemployment benefit for 11 weeks. Given the recent spike in unemployment numbers, I see Congress looking for ways to mitigate the economic hardship. Along with providing needed financial assistance for unemployed workers, these payments stimulate the economy. Money doesn't trickle down; it trickles up. Give an unemployed person an extra $300, they spend it on basic needs, Google multiplier effect on the economy. 

Congress looked after businesses, too, by enhancing the Payroll Protection Program (PPP). For small businesses, loans of $150,000 or less have more flexibility on spending and a simplified procedure for loan forgiveness. Don't worry about "giving money away." With job losses soaring, we risk a double-dip recession. When your house is on fire, you don't worry about water damage to the carpet. 

Given last year's hurricane season, the new law allows for penalty-free retirement plan distributions in federally designated disaster areas. Amounts withdrawn can be spread over three years, minimizing the tax bite. Also, individuals with a net disaster loss, expenses above insurance payments, can increase their standard deduction amount. 

You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.