How You May Benefit from Another Government Stimulus Plan
For the second time in 10 months, the US Congress has approved a fiscal stimulus plan that is designed to provide a financial boost to a wide range of Americans in response to hardships created by the COVID-19 pandemic. This includes individuals, businesses and other organizations. The legislation was part of a comprehensive package that passed both the House and Senate on December 21, 2020 and was signed into law on December 27.
While the $900 billion+ package is structured somewhat similarly to a stimulus program put forward in March 2020, the level of benefits are generally reduced from that time. Nevertheless, it does offer some help for those struggling due to the economic fallout from the continuation of the pandemic. Here are five key areas of support included in the plan:
#1 Direct payments of up to $600 per person
Economic impact payments of $600 will be made for individuals earning up to $75,000 per year based on adjusted gross income (AGI) in 2019. Married couples with AGI of up to $150,000 will receive $1,200. In addition, a $600 payment is provided for each dependent child. Payments phase out for those with higher incomes. Single taxpayers with a 2019 AGI of $87,000+ or married couples with a 2019 AGI of $174,000+ are not eligible for any payments under this plan. If the IRS has direct deposit information for one of your bank accounts, you will receive the money that way. Others will receive a physical check in the mail.
#2 Added unemployment benefits
With millions of Americans still unemployed, Congress has approved a modest expansion of benefits by up to $300 per week. This added benefit is scheduled to run until mid-March 2021. Provisions also extend the Pandemic Unemployment Assistance program that offers benefits to those in non-traditional employment such as gig workers and the self-employed.
#3 Rental assistance
The legislation addresses what has been touted as a potential avalanche of evictions of renters. It extends until January 31, 2021 a moratorium on evictions that was slated to expire at the end of 2020. It is possible that the federal government will extend the deadline beyond that date. Included in the bill is $25 billion in emergency assistance to renters to help cover their rental costs. These funds can be used to pay past due and future rent payments as well as utility bills. It is not clear exactly how that money will be distributed.
#4 Childcare assistance
Additional funding is provided to give states the flexibility to provide child care assistance to families. The bill also includes funding (managed by each state) for direct financial support to childcare providers to help cover their operating expenses.
#5 More financial backing for business owners
The Paycheck Protection Program (PPP), which provides forgivable loans to eligible businesses, is included in this package. $284 billion of funding is earmarked for first and second PPP loans. While small businesses are a primary target, the funds are also available to non-profit organizations, churches and faith-based organizations. An additional $15 billion was set aside to support live performance venues, independent movie theaters and cultural institutions.
Also included under the business-related provisions is a clarification on tax treatment of expenses covered by PPP loans. Businesses that received loans and had them forgiven are still allowed to deduct the costs covered by those loans on their federal tax returns.An additional provision in the measure reinstates a full tax deduction for corporate meal expenses. This had been limited to a 50 percent deduction under previous law.
This is a time when you want to be sure to balance decisions that address your short-term financial obstacles with your long-term financial plan. Touch base with your financial advisor to discuss your situation and best strategies to cope with this challenging time.
About the Author
Supal Vora, AAMS®, APMA® CRPC®is a Private Wealth Advisor Chief Executive Officer with Pahal, Vora and Associates a private wealth advisory practice of Ameriprise Financial Services, LLC. He specializes in fee-based financial planning and asset management strategies and has been in practice for 18 years. Visit www.pahalvoraandassociates.com or call (904) 571-1495.