As we enter into a new year, we wanted to provide our perspective on a few current topics and reminders for your financial life for you to think about over the coming months.
We will see a new administration in 2021 and in light of this transition there will inevitably be many changes coming that will impact not only the country at large, but individual taxpayers, most notably the Biden Stimulus plan.
While it’s hard to give a brief treatment of everything that is being proposed, one notable element that impacts many taxpayers is the proposal for additional stimulus payments. For those of you that have received payments previously, please keep these records for when we file your tax return. Similarly, if you haven’t received stimulus payments but were due them, it will be rectified on your tax return when we file your 2020 return.
For those of you with children, in President Biden’s plan he is proposing an increase to the Child tax credit from $2,000 per child to $3,600 for every child under 6 and $3,000 for those between 6 and 17 for a year. A tax credit is a dollar-for-dollar reduction of your tax liability and if this goes into it effect, we will discuss adjusting your withholding allowances to lower the amount you have withheld to avoid a big refund for 2021.
President Biden is also proposing an increase in the child care tax credit for one year so families will get back as much as half of their spending on child care for children under the age of 13.
In the coming months, there will be more information that will likely come out regarding planned and proposed tax changes with the new Biden administration.
We will make sure to keep you informed of any planning opportunities that will be available to your regarding these changes and answer any questions that you may have.
Retirement contribution limits for 401k and 403b’s in 2021 remain unchanged and the maximum contribution for someone under 50 is $19,500 and $26,000 for those over 50.
As a reminder, you have up until April 15th to make Traditional and Roth IRA contributions for tax year 2020 if your income is under a certain threshold. The maximum contribution remains $6,000 for under 50 and $7,000 for those over 50.
The Federal Reserve has continued to keep interest rates low going into 2021. In our opinion, this presents an opportunity to consider if refinancing your mortgage makes sense in order to lock in these historically low rates.
We look forward to helping you navigate these changes, along with hopefully a healthy and happy new year.
Please feel free to reach out to us at Accruent Wealth Advisors if you have any questions about the content of this article or any other financially challenging issues you may be facing.
