Strategic Wealth Partners was acquired by Kovitz Investment Group Partners, LLC ("Kovitz"), a registered investment adviser with the SEC on May 1, 2024. Strategic Wealth Partners is now a division of Kovitz and its registered investment adviser. Materials created prior to this date were created by Strategic Wealth Partners and are accurate as of the time of publishing.

A New Year with New Tax Provisions

While there was a lot of press coverage on whether or not the new Coronavirus stimulus relief bill, known as the Consolidated Appropriations Act of 2021 (Act), would be passed and signed into law, there was not much coverage of what actually is included in the 5,593-page package.  In the new Act, which was signed into law on December 27, 2020, there are significant provisions for a new round of stimulus checks (subject to income limits), an extension of unemployment benefits, and a second round of the Paycheck Protection Program (PPP).  Additionally, there were several personal income tax relief provisions that we would like to highlight, which may affect you or your family directly, and have not received as much attention.

First, let’s discuss what’s NOT included:

  • Required Minimum Distributions (RMDs) – There is no further waiver of Required Minimum Distributions (RMDs) that was enjoyed during 2020.  As of this article, we expect that everyone subject to RMDs will need to resume taking them in 2021.
  • Student Loans –The benefits for student loan relief that include the suspension of collection efforts and loan payments and the 0% interest rate, all end on 1/31/2021.

Now, for some of the “extras” that Congress added:

  • Medical Expense Deduction – If you itemize your deductions, you can deduct medical expenses when exceeding 7.5% of your Adjusted Gross Income (AGI).  This “hurdle rate” of 7.5% has changed throughout the years, but the new legislation makes it a permanent change for everyone.
  • Education Tax Benefit – The Tuition and Related Expenses above-the-line deduction is gone after 2020 but is being replaced by a Lifetime Learning Credit for undergraduate, graduate, and career development classes.  .
  • Charitable Contributions – The above-the-line deduction for cash contributions made to charitable organizations of $300 (for both single and joint filers) allowed in 2020 has been extended for 2021, and the marriage penalty was eliminated, so joint filers can deduct up to $600.  Also, the Act extended the ability to deduct up to 100% of AGI as a qualified contribution when making an all-cash contribution to a charity through 2021.  This does not apply to contributions made to a Donor Advised Fund.
  • Meal Expense Deduction – To encourage business spending at restaurants, the Act provides for 100% deduction for food or beverages provided by a restaurant.  This will apply in 2021 and 2022 but is not retroactive for 2020.
  • Flexible Spending Accounts (FSAs) – A FSA account with a remaining balance as of 12/31/2020 can roll forward to 2021.  There is a similar provision allowing 2021 remaining balances to roll forward to 2022.  Also, during 2021 only, employees can elect to change their contribution amounts for their FSA.  All of these provisions are dependent on your employer adopting this relief, so we advise you to check with your HR department to see if these changes are being implemented at your company.
  • Curbing Surprise Medical Bills – Starting in 2022, you will not get a bill for the balance due if you are treated at a hospital in your network, but you are unknowingly treated by an out-of-network doctor or lab.  You are still responsible for the deductibles and copayment amounts following the in-network terms of your insurance plan.

The Act contains additional provisions to help small businesses with the second round of the Paycheck     Protection Program (PPP).  Small businesses that did not apply for a loan under the original PPP are still allowed to apply.  If a business did receive a loan under the first round of PPP, they might be eligible to receive a second loan under PPP2.  Note that you will want to check with your tax professional as PPP2 has more stringent qualification requirements.

Since the Act contains a historic 5,593 pages, it is impossible to provide a complete summary. Still, we have tried to highlight those items that may be relevant to your tax situation and will continue to alert our clients as the landscape changes. As always, please feel free to contact your SWP advisor if you have any questions and contact your tax professional for advice specific to your situation. 

This article contains general information that is not suitable for everyone. The information contained herein should not be constructed as personalized investment advice. Past performance is no guarantee of future results. Reading or utilizing this information does not create an advisory relationship. An advisory relationship can be established only after the following two events have been completed (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement. There is no guarantee that the views and opinions expressed in this article will come to pass.  Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Strategic Wealth Partners (‘SWP’) is an SEC registered investment advisor with its principal place of business in the State of Illinois. The brochure is limited to the dissemination of general information pertaining to its investment advisory services, views on the market, and investment philosophy. Any subsequent, direct communication by SWP with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of SWP, please contact SWP or refer to the Investment Advisor Public Disclosure website (www.adviserinfo.sec.gov). For additional information about SWP, including fees and services, send for our disclosure brochure as set forth on Form ADV from SWP using the contact information herein. Please read the disclosure brochure carefully before you invest or send money (http://www.stratwealth.com/legal).

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