Financial Blog | Bend Oregon | Eagle Wealth Management

Rescue bill (what's inside)

Eagle Wealth Management | Mar 15, 2021

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Hello Eagle Wealth Community,

So, the next (final?) round of stimulus was signed into law by President Biden.

Let’s dive in.

The $1.9 trillion bill called the American Rescue Plan Act of 2021 includes stimulus checks, child tax credits, jobless help, vaccine-distribution money, healthcare subsidies, and aid for struggling restaurants. What’s not inside? A higher minimum wage.

Here's a quick visual of how it compares to prior rounds of stimulus.

Here are some immediate takeaways:

More stimulus checks are coming: $1,400 checks could be hitting bank accounts and mailboxes this month, going out to adults, children, and adult dependents such as college students and elders. These adult dependents did not qualify for previous payments, so that’s good news for many.¹

Who gets paid? Individual filers who earn as much as $75,000 (or joint filers making $150,000), plus their household members, qualify for the full $1,400 per person.¹

Folks filing as a head of household can earn up to $112,500 and still qualify for the full payment. Phaseouts kick in quickly this round, and an individual with an income of $80,000 or a couple earning $160,000 get nothing.¹

Not sure if you qualify? The Washington Post put out a handy calculator to help you figure it out. (Accuracy not assured, etc., etc.)

If you’ve filed your 2020 taxes, your check would be based on that income. If not, it would be based on your 2019 tax filing. If you’re waiting for a missed payment, individual tax returns have an extra line called “recovery rebate credit” to claim your stimulus payment.

Enhanced unemployment benefits are extended through Sept. 6: Folks claiming jobless benefits will receive $300/week on top of what they already get from their state through the fall.²

Some unemployment income is now tax-free: Individuals who earned less than $150,000 in 2020 can shield up to $10,200 in unemployment benefits from taxes. For married couples filing jointly who both received unemployment, the tax-free amount goes up to $20,400, but the $150,000 income cap still applies. Unfortunately, if you earn over $150,000, it currently appears that all of the unemployment benefits become taxable with no phaseout.³

If this applies to you or someone you love, our advice is to wait to file or update your tax return until the IRS issues guidance on what to do.

The child tax credit is larger: The bill increases the child tax credit for one year to $3,600 for kids under 6, and $3,000 for kids between 6 and 17 (the current credit is a flat $2,000 per child under 17). 50% of the credit would be available as advance monthly payments that the IRS will start sending to families in July 2021.⁴

Unfortunately, not all families will qualify. Phaseouts begin at $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers. However, families who earn less than $200,000 ($400,000 for joint filers) could still claim the regular $2,000 credit.⁴

Health insurance costs could drop on health exchanges/marketplaces: The bill removes the income cap on insurance premium tax credits for folks who purchase insurance on the federal health exchange or state marketplace (for two years). That means the amount you would pay for health insurance would be limited to 8.5% of your income as calculated by the exchange.⁵

Final thoughts

A lot of rules have changed in the last year, throwing an already complex tax season into a bit of confusion.

Could there be more stimulus passed this year? It seems unlikely if the U.S. economy continues to expand.

According to a fresh estimate, our economy will expand nearly twice as fast as originally expected, growing at an estimated 6.5% in 2021 versus the 3.2% projected in December.⁶

Obviously, these projections rest on a lot of assumptions about vaccination rates, reopening, and consumer spending.

Let’s hope we stay on track.

That was a lot of information to absorb. Have questions?

We’re here for them. Just hit “reply” to this email or give us a call at (541) 330-0220.

Until next time,

Your Eagle Wealth Team

P.S. Markets have hit new highs as fears of out-of-control inflation faded and hopes about the recovery surged. The usual caveats apply; we're in a roaring bull market and any time stocks reach new highs, pullbacks and corrections are possible. Keep calm, cool, and focused. ⁷

We’re getting close to our first Invested in Community drawing, this Wednesday, March 18^th. Do you know a teacher, healthcare worker, or anyone on the frontlines that deserves a thoughtful gesture? There’s still time to sign up. If you haven’t read the details yet, please head over to our Invested in Community page to learn more.

Survey Reminder

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Your Chance to Win One of The Following

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Survey Details

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The Week on Wall Street

Stocks touched new record highs last week as bond yields steadied, a fiscal relief bill was signed into law, and confidence in a strong economic recovery grew.

The Dow Jones Industrial Average gained 4.07%, while the Standard & Poor’s 500 tacked on 2.64%. The Nasdaq Composite index rose 3.09% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.01%.^1,2,3

Dow 32,000
Stocks marched higher as bond yields leveled off and the $1.9 trillion stimulus bill moved through the legislative process. A muted inflation number and a better-than-expected jobless claims report evidenced an improving economy absent an attendant rise in inflation.4

The technology sector was particularly volatile, with the Nasdaq Composite falling into correction territory to start the week as investors rotated into cyclical opportunities.

Technology rebounded strongly as bond yields stabilized and bargain hunters purchased tech names at reduced prices. The bounceback propelled the S&P 500 to a record high, while the reopening trade drove the Dow Industrials above 32,000 for the first time.5,6

The week ended on a mixed note, with the Dow and S&P 500 adding to their record closes and the Nasdaq Composite trimming its weekly gain.

Treasury Auctions

Treasury auctions to finance federal spending are usually staid affairs, but investor trepidation was high ahead of last week’s auctions of 10-year and 30-year Treasuries. Investors were concerned that lukewarm demand amid a huge supply had the potential to drive yields higher and take the pressure on stock prices lower.

As it turned out, Wednesday’s auction of 10-year Notes was received with adequate demand, helped by a tame February inflation number and strong overseas interest. The following day’s 30-year auction also went relatively smoothly, though the auction yield was 36.2 basis points higher than last month’s auction. Despite $120 billion of federal debt issuance last week, yields steadied, easing investors’ interest rate concerns for the moment.⁷

THE WEEK AHEAD:

KEY ECONOMIC DATA

Tuesday: Retail Sales. Industrial Production.
Wednesday: Housing Starts. Federal Open Market Committee (FOMC) Meeting Announcement.
Thursday: Jobless Claims. Index of Leading Economic Indicators.

Source: Econoday, March 12, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD:

COMPANIES REPORTING EARNINGS

Tuesday: Coupa Software (COUP).
Wednesday: Five Below (FIVE), Cintas Corporation (CTAS).
Thursday: FedEx Corporation (FDX), Nike, Inc. (NKE), Dollar General (DG).

Source: Zacks, March 12, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.