Some employees that work for large companies have an employee benefit where they can purchase company stock at a discount. This is known as an Employee Stock Purchase Plan (ESPP).Continue reading
What inspires you to give? Most of us give for the same basic reasons. We want to help others, make a positive difference in the world—and giving feels good. It makes us happy and connects us to the causes we care about. Studies show that most charitable folks give according to their values or to support causes they care about. But they don’t always have a strategy around giving or a way to monitor for impact.Continue reading
If you are charitably inclined, what is the most tax efficient way to give to those charities?
Let us start with standard deduction versus itemized deductions. Your itemized deductions must exceed your standard deduction for any tax benefit. There is a caveat for 2021, cash donations up to $300 for single filers and $600 for Married Filing Joint are allowed as above the line deductions.Continue reading
Following are some highlights from Biden’s Tax Plan. Some have been enacted with proposals for extension and others are still proposals.
Child Tax Credit
- Enacted for 2021 (starts phasing out for single tax filers at $75K and married filing joint at $150K)
- $3600 for children under 6
- $3000 for children ages 6-17 (previously children aged 17 were excluded)
- 50% of the eligible credit can be received with monthly installments from July thru December of 2021
- Proposal to extend this thru 2025
Child & Dependent Care Credit
- Enacted for 2021
- Up to $4000 for one child
- Up to $8000 for two or more children
- Proposal to extend permanently
Federal Income Tax Rates
- Current Top Tier is 37% Federal. The proposal is to make the top tier 39.6%
Capital Gains Tax Rates-Proposed
- For individual earning more than $1M, the top 20% would be the same as the ordinary income rate of 39.6% PLUS the existing net investment income surcharge of 3.8% PLUS state tax
- Qualified Dividends for high earners would also be at this new capital gains rate
- This CAN be passed retroactively
No Step Up In Basis
- This proposal has to do with inherited assets. For example, if your parent passes away with a house currently worth $500K, under current law the beneficiary’s new basis in the inherited house is the current date of death value–$500K.
- The proposed change is to not increase the basis. So in the same house scenario above, the basis would be whatever the parent paid for the home. So if the parent paid $100K for it, that would be the basis. This matters when you sell the home. You will have to pay tax on the gain. In the first scenario, there would be no tax. In the second scenario, there would be tax on $400K.
We will have to see what sticks with Congress and plan accordingly. Taxes are just one piece of your financial plan that you navigate through on your Financial Journey. Every situation is different and some of these will not affect you. The important part is sticking to your plan and revisiting it on a regular basis to make sure you are on track with your goals and what is most important for you.
Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.