Category: General

Equity compensation is an alternative compensation strategy designed to provide employees with investment opportunities through company-based stock options. Over the years, this strategy has become more popular. In fact, according to Harvard Law School, roughly 58 percent of CEO compensation is a mix of equity and cash as of 2019.¹

An equity compensation strategy is typically utilized in businesses seeking growth without drawing on a larger budget. This creates long-term ownership incentives at the cost of some income stability. Let’s dive into how equity compensation works and examine some of the different options available to employees.

What Is a Vesting Schedule?

Equity compensation typically comes with a vesting schedule, a period of time in which stocks fully become yours. This schedule will depend on the company and equity type. Some companies may not require a vesting schedule, though this is either a business choice or a result of their available stock option.

Types of Equity Compensation

Each equity option has a different set of opportunities, costs and taxes associated with it. Also, be aware of the term “exercise,” as this is used often in equity compensation and stocks, but actually refers to purchasing a stock.

Consider these differences when deciding whether equity compensation is right for you.

Stock Options

With stock options, you will have the opportunity to purchase a limited number of stocks at a reduced price. After your vesting period, these stocks fully become yours, allowing you to keep or sell them. Be aware, stock options are typically available for a limited amount of time and follow different tax rules between pre-vested and vested stocks. It’s important to note that an employee is not considered a stockholder if they take this option.

Non-Qualified Stock Options (NSOs)

Non-qualified stock options are similar to standard stock options, but with a few tax differences for employees. Owners of NSOs may have to pay taxes under two circumstances:

• Income tax when they purchase a non-qualified stock.
• Capital gains tax if the stock is held for a year or more.

Incentivized Stocks

Like non-qualified stock options, incentivized stocks are similar in function to standard stock options, with a different set of tax rules. You will only need to pay capital gains taxes on this stock if it is sold after a set window of time. Otherwise, you may come across additional tax penalties.

Restricted Stocks

Unlike other stock options, which you may receive before your vesting schedule provides full control, restricted stocks are limited by the employer based on your vesting schedule. Instead, you will receive these stocks when they vest. The rate at which restricted stocks are received will depend on the company, just as the vesting schedule does.

Performance Stocks

As the name implies, employees receive performance-based stocks according to a set of goals. These goals may vary and will depend on your company.

Understanding the differences between stocks can help you determine the value and tax implications of equity compensation. Remember to keep this list in mind when offered stock options by an employer. If you’re unsure of what the best move may be for your current and future financial needs, your financial advisor or partner can help unpack your options.

1. https://corpgov.law.harvard.edu/2019/04/16/2019-u-s-executive-compensation-trends/#:~:text=Overall%2C%20cash%20and%20equity%20performance,concerns%20about%20a%20potential%20reversal

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Smartphone usage increased dramatically during pandemic as more people lost their jobs, were furloughed or adhering to stay-at-home orders.

While smartphones can provide endless entertainment, they can also be bad news for your budget. In fact, the combined global monthly amount that consumers spent on apps and games peaked in May 2020 at $9.4 billion, a 25 percent gain on the monthly average in 2019.¹ 

While that’s all fun and games (no pun intended), it may be time to do a “digital detox.” Here’s why it could be good for you mentally and financially, plus five tips to help yourself unplug.

5 Ways a Digital Detox Can Save You Money

Way #1: You’re Exposed to Fewer Ads

If there’s a screen in front of you, you can’t avoid being exposed to advertisements. From sponsored content on social media to well-targeted email campaigns, advertisements are everywhere.

According to a recent report, 2018 was the first year that people around the world spent more time-consuming media on their computers and smartphones than on television.² Because of this, companies have changed the way they advertise. More marketing efforts are being geared toward grabbing the attention of those who shop online, game on their phone and scroll through social media regularly.

By spending less time online, you’re automatically reducing the amount of ad exposure you’re receiving every day. Less exposure to ads means less temptation to purchase impulsively.

Way #2: It Builds Your Impulse Control

When you’re exposed to the same brand or product over and over and over, it can wear down your impulse control over time. The more often you’re exposed to something, the less “impulsive” the purchase will feel. Recognizing this fact is an important part of resisting any purchasing temptations.

In fact, studies on smartphone usage have shown that your impulse control is lessened with excessive use of your phone.³ With everything right at your fingertips, it can be harder to say “no.” Therefore, more time away from your phone can help build up your impulse control and remove the temptation altogether.

Way #3: You Won’t Experience FOMO (Fear of Missing Out)

By logging onto Facebook or any social media platform, you are exposing yourself to the ongoings of others’ lives. Social media influencers flaunt new products or share their latest travels, friends post about taking weekend trips and wearing fashionable clothing, whatever it is your connections are doing right now, you’re seeing. This exposure could easily trigger the feeling of wanting to do the same thing or buy the same things as those who are sharing on social media. FOMO is short for “fear of missing out,” and it’s a very real phenomenon. You start to envy the people that you see living these lives and want the same for yourself. 

Of course, most of these experiences or products aren’t free. Therefore, your FOMO could soon translate to a need to spend money to achieve a similar result. If you didn’t log on in the first place, you wouldn’t experience those feelings, which will save you money by removing the temptation from your life. 

Way #4: It Can Help Realign Your Priorities

Do you find yourself mindlessly perusing shopping websites, and the next thing you know you have unnecessary items in your cart? If so, you’re not alone. While this can be harmless, it causes unnecessary temptation.

Spending time away from your phone or computer frees you up for more time spent with your family and friends, learning a new hobby or reading a book. These types of activities can bring you a much-needed mental break as you realign your priorities and reassess what’s most important to you.

Way #5: It Gives You Back Your Free Time

Think of all that you could do with more hours back in your day? You could get more exercise or start a side hustle, focus on home improvement projects and more. 

5 Steps to Start Your Digital Detox

How do you begin this process? A digital detox can be quite a lifestyle change, but there are ways to get started and continue on with the new habits you are forming. 

Step #1: Write Down Your Hobbies & Interests

Make a list of all the things that you like to do that don’t involve a device.

Are there things you’ve always wanted to accomplish but never seemed to have the time to do so? Listing out what you’re interested in can serve as motivation to stay off of your phone. Maybe the money you’d normally spend online shopping or gaming can be put towards a new hobby or project. 

Step #2: Count Your Screens

Doing a digital detox doesn’t just refer to your smartphone. It can include every screen in your life – your tablet, Ereader, smartwatch, gaming device, etc. It might come as a shock just how connected you really are. 

Step #3: Ease Into Your Detox

For most, there are some logistical issues with trying to quit technology “cold turkey.” You need to connect with your families, friends, schedule meetings, work from home and complete other important tasks on your devices.

Start by setting specific times when you want to avoid screens, such as first thing in the morning or right before bed. In fact, studies have shown that the blue light is harmful to your eyes and increases your alertness at night, making it harder to fall asleep and ultimately to wake up in the morning.⁴ 

Step #4: Determine Your Screen Allowance

As mentioned above, there are instances in which you simply have to use your device to work or connect with others. If this is the case, you may find it useful to utilize an app, there are apps that can limit your screen time and allowance.

These can help you to focus on the moment and quit mindless scrolling once you have sent that email or important text message. 

Step #5: Get Back to Basics

Think about what you did before the era of smartphones and devices. Put away your Apple watch for a while and use a regular wristwatch. Switch to an analog alarm clock in the morning, so that you don’t have to have your phone alarm right next to your bed. Instead of reading books on your Kindle or Tablet, go back to the library and get the hard copies. It’s going to be a lifestyle change, but it will set the tone for your digital detox, making it easier to disconnect. 

While there is more involved when it comes to improving your finances, a digital detox can be an effective place to start. Utilize these tips and slowly but surely, your finances should start to improve.

1. https://www.marketingcharts.com/digital/mobile-phone-114746
2. https://www.wpp.com/wpp-iq/the-state-of-digital
3. https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0241383
4. https://www.sclhealth.org/blog/2019/09/why-it-is-time-to-ditch-the-phone-before-bed/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Founded in 2012, Coinbase is a San Francisco-based central cryptocurrency exchange space. The company’s shares began trading on Wednesday, March 14 with a direct listing on NASDAQ. For many investors, this was an important event in cryptocurrency’s long-standing battle toward mainstream acceptance.

At the same time, this big move for Coinbase is turning heads for another reason – the decision to forgo the more traditional IPO process for a direct listing. 

Why Is Coinbase Going Public Important?

This is the first time a cryptocurrency-based company has gone public on the stock exchange. It listed on the NASDAQ with a reference price of $250 per share, valuing the company at around $65 billion based on its number of shares.

This was a historic day for cryptocurrency, marking its “official” entrance into mainstream trading platforms. Cryptocurrency has been around for over a decade, but investors may have been wary to put money towards this unregulated asset. With Coinbase now a publicly traded company, investors may be more comfortable with the idea of owning stock in an SEC-reviewed company. Cryptocurrency like Bitcoin and Ethereum may have been viewed with skepticism and speculation, but this move for Coinbase may be considered another step towards legitimizing and demystifying this asset type.

A Reminder About Cryptocurrency

It’s important to remember that cryptocurrency is not a currency at all. It’s a speculative asset class that is not appropriate for everyone. Only people with a high-risk tolerance should consider cryptocurrency assets.

Like other alternative assets, cryptocurrency can be illiquid at times, and its current values may fluctuate from the purchase price. Cryptocurrency assets can be significantly affected by a variety of forces, including economic conditions and simple supply and demand. Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe and risk tolerance.

IPO vs. Direct Listing

Coinbase isn’t the first well-known company to do a direct listing, as larger companies including Slack, Spotify and Asana all chose this method as well. But compared to those who choose to do an IPO, the direct listing method is rarely used.

IPO

If a company chooses to do an IPO, there is a well-traveled path to follow. It must file documentation with the SEC and work with an investment bank (or banks), which guides the company through the entire process. The work that goes into an IPO before a company officially goes public can often draw attention to the company, drumming up interest amidst investors before its debut on the NYSE or NASDAQ.

Direct Listing

If a company chooses to do a direct listing, the process tends to be more straightforward than an IPO. The company’s shareholders sell stock directly to the public through the exchange, which works with professional traders to set a reference price for the initial offering. With a direct listing, financial institutions aren’t as involved as they are with an IPO – they aren’t acting as the underwriter. This method of going public is typically reserved for larger companies with good brand recognition.

Direct Listing Considerations

Because of its more streamlined process, doing a direct listing may cost a company fewer fees while allowing them to maintain control over the initial stock price. But doing a direct listing can be tricky and leave companies open to potential complications.

Volatility

The financial institutions that underwrite an IPO help support the stock price of the company’s shares, at least in the short term. During the initial process, they set the IPO price and drum up interest amongst investors beforehand. With a direct listing, there is no underlying support by an investment bank. The stock may fluctuate significantly during its first few days, creating levels of volatility that make investors wary.

Misjudging the Market

The hype that banks can create surrounding a traditional IPO can help attract interest and give a company an idea of how many investors are expected to buy shares. With a direct listing, the initial supply and demand is unknown, as it’s at the mercy of those on the inside who are willing to sell and those investors on the outside looking to buy in. There is no indication ahead of time, and no bank advocating to institutional investors on your behalf. This can make it harder for a company to predict demand during the first few weeks of trading.

What does this all mean for investors? Coinbase has made significant headway for cryptocurrency, making this an exciting time for investors interested in Bitcoin or interested in investing in Coinbase itself. If you’re curious about your own portfolio and how this news plays into it, contact your investment advisor right away. They can help break down this news further while offering insights based on your unique financial standings and tolerance for risk.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Following a year of economic instability, it appears that many of us are turning our attention to something that’s been around for decades, but has recently piqued national interest – inflation. In fact, a recent study found that people are Googling the word “inflation” at a rapid rate, with a peak not seen since 2008.¹   

Since the start of the COVID-19 pandemic, six major stimulus bills totaling around $5.3 trillion have passed. With these efforts to alleviate pandemic-fueled financial strife, are inflation levels being impacted?

Fed Chair Jerome Powell has said that inflation is likely to pick up as the economy recovers from the pandemic, but he believes it will be temporary. Powell has also stated that the central bank plans to keep short-term rates anchored near zero through 2023.²  

As you consider any potential changes to inflation we may be seeing this year, here’s a reminder about what inflation is and how it can affect you and your investments.

What Is Inflation?

Inflation is defined as an upward movement in the average level of prices. Each month, the Bureau of Labor Statistics releases a report called the Consumer Price Index (CPI) to track these fluctuations.

Understanding the Consumer Price Index

The CPI was developed based on information provided by families and individuals on purchases made in the following categories:³  

• Food and beverages
• Housing
• Apparel
• Transportation
• Medical care
• Recreation
• Education and communication
• Other groups and services

While it’s the commonly used indicator of inflation, the CPI has come under scrutiny. For example, the CPI rose 1.4 percent between January 2020 and January 2021 – a relatively small increase. A closer look at the report, however, shows the movement in prices on various goods tells a different story. Used car and truck prices, for example, rose 10 percent during those 12 months.⁴ 

Investments & Inflation

Inflation can affect investments in several ways. Most notably, it can reduce the rate of return, risk purchasing power and influence the Federal Reserve.

Rate of Return

Inflation reduces the real rate of return on investments. Say an investment earned six percent over a 12-month period. During that time, let’s say inflation averaged about 1.5 percent. That would mean that your investment’s real rate of return would have been 4.5 percent – not six percent.

Purchasing Power

Inflation puts your purchasing power at risk. When prices rise, a fixed amount of money has the power to purchase fewer goods and services.

The Federal Reserve

In addition, inflation can influence the actions of the Federal Reserve. If they want to control inflation, the Federal Reserve has several ways in which it can reduce the amount of money in circulation. Hypothetically speaking, a smaller supply of money means less spending – which could equal lower prices and lower inflation.

With so many changes over the past year or so, it’s no wonder investors and consumers are concerned about the rate of inflation today. When inflation is low, it’s easy to overlook how rising prices are affecting a household budget. And when inflation is high, it may be tempting to make changes to your financial standings and portfolio. If you’re concerned about the inflation rates we’re seeing in 2021, your trusted financial partner can help determine if changes need to be made or if you and your portfolio are already well-prepared.

1. https://www.yahoo.com/entertainment/google-searches-reveal-people-are-growing-very-worried-about-inflation-163908703.html?guccounter=1
2. https://www.cnbc.com/2021/03/17/fed-decision-march-2021-fed-sees-stronger-economy-higher-inflation-but-no-rate-hikes.html
3. https://www.bls.gov/cpi/
4. https://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp?reloaded=true

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

It feels like we could all benefit from a couple million in the bank, but is entering the lottery worth it? In general, your odds of winning any jackpot prize are always slim. Take the Powerball, for example. Your chances of winning any prize with the Powerball are one in 24.9, but your chances of winning the jackpot are a mere one in 292.2 million.¹ To put it in perspective, you’re actually more likely to be killed by lightning than you are to win the lottery. Yet, millions of Americans gamble – with many purchasing lottery tickets every week (or every day).

 Let’s take a look into who gambles, and why the appeal is so great while the odds are so slim.

Who Plays The Lottery?

Even with a small chance of winning, nearly half of all U.S. adults have played the state lottery.² 

Recent studies suggest, however, that the majority of lottery ticket purchasers tend to have a low socioeconomic status.

According to a recent survey, the bottom three groups on the socioeconomic scale spent the most on lottery tickets, while the highest socioeconomic group spent the least amount. Furthermore, the study found that Black survey participants spent significantly more on the lottery than any other racial or ethnic group surveyed.³   

Another study found that 40 percent of lower-income Americans have reported buying a lottery ticket in the past year, and 11 percent of them admit that they sometimes gamble more than they should.²   

The Chances of Winning Are Slim

You may think that by playing in multiple lottery games, you’re increasing your chances of taking home the prize. In reality, gambling doesn’t work that way.

The only way to increase your odds of winning is by purchasing multiple lottery tickets for the same lottery game. But, unfortunately, if your odds of winning are one in a million, two in a million is not much of an increase. To significantly improve your chances of winning, you would need to purchase a lot of tickets – which, of course, can get expensive. It’s also important to note that as more and more people buy into a lottery game, the chances of winning decrease for everyone. 

At that point, it’d be up to you to decide – is it really worth it?

Why Play?

If the people who have the least disposable income to spend statistically spend the most on lottery tickets – why? They know their chances of winning are slim to none, yet they continue to spend their hard-earned money on lottery tickets. There are a few potential reasons why this may be.

Hope

People are hopeful that winning the jackpot could change their lives. Whether they want to pay off debt, quit their job or buy their dream home, some people see the small chance of winning the lottery as an easy way to accomplish their financial goals. And for many, the opportunity to be hopeful for a day or two is worth the price of a ticket.

Affordability

Lottery tickets are cheap. When you spend $2 on a ticket, it doesn’t feel like a big waste of money. Plus, if you do win, there’s a huge payoff. Of course, the reality of the situation paints a much different story. Low-income families end up spending hundreds of dollars a year on lottery tickets – turning that harmless $2 ticket into a much bigger financial burden.

Habit

Entering the lottery becomes habitual. Eventually, grabbing a lottery ticket at the store is like getting your morning coffee or buying milk each week. Once you get into it, it’s hard to give up on the chance of buying the lucky ticket.

When you combine all these motivations, you can see why people can get sucked into gambling a percentage of their income each year. If you find yourself purchasing more lottery tickets than you know you should, consider a more profitable alternative like investing that money or putting it towards your retirement account. Your financial advisor can help you determine if your habit may be hurting your ability to reach your bigger financial goals.

1. https://www.powerball.com/about
2. https://news.gallup.com/poll/193874/half-americans-play-state-lotteries.aspx
3. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4103646/#:~:text=The%20bottom%20three%20quintiles%20in,other%20specific%20racial%2Fethnic%20group

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

When you see successful people who have done well for themselves and achieved a great deal, you may wonder just exactly how they did it.  Here are eight tips we can glean from some of the world’s most successful people. 

1. Visualize Your Ideal Future

Setting goals can be abstract, and as humans, the more something is abstract, the harder it is for us to focus on it. Instead of writing down goals like “retire at 50”, try and visualize exactly what you want your future to hold, and plan it out in as much detail as possible. So “retire at 50” might be “Build a successful engineering firm. Retire at 50, but still sit on the board. Pay off your home in New York and have second vacation home in Florida. Be able to fund all children’s college accounts in full”, etc.

Once you can really visualize the specifics of your ideal future, that’s when you will gain the clarity you need. The goal-setting process becomes the framework for creating the kind of bigger future you are looking to achieve. 

2. Work Backwards From Your Goal 

If you don’t know what you want, then how will you achieve it? Once you lay out exactly what you want to achieve, then simply work backward to get there. Try setting quarterly goals or 90-day goals and evaluate them accordingly, while constantly reviewing them as you move forward. Clearly outlining goals will make them seem much more realistic. It’s a good idea to have a mix of goals such as financial, strategic, relationship and personal goals.

3. Hold Yourself Accountable

Staying accountable to yourself is incredibly important but incredibly difficult. Working with a business coach, a life coach, or even just sharing your goals with others can provide a real incentive to continue on your path and work hard to achieve the outcome you desire. Additionally, consider surrounding yourself with others who will lift you up and share with them what you hope to do. This will help you push yourself and come up with new ideas since you’ll be surrounded by people that you respect. 

4. Set Clear Deadlines 

Make sure that you set clear measurements with realistic deadlines when setting your goals. When the goal is realistic, you will feel more properly and emotionally invested in the outcome. It should feel challenging yet also achievable. 

5. Write Down Your Goals

Studies show that we become 42 percent more likely to achieve our goals and dreams, simply by writing them down on a regular basis.¹ There is more of a personal commitment when you put pen to paper and physically write your goals down. When a goal is embedded in your mind, subconsciously you are looking at every opportunity to achieve that goal. Also, if something is written down, then you can look back for motivation when you need it.  As mentioned previously, holding yourself accountable is so important, and writing something down is another way to do that. 

6. Break Your Goals Down 

Every successful person knows that you must break your goals down into action items. Setting a big goal helps you to picture the end result, but small goals are easier to work toward. Think of your goals a “pyramid” – your main, over-arching goal is at the top, but in order to reach it, there are a series of smaller goals you must first work to achieve. 

Breaking your goals down into smaller, actionable items not only feels more “doable” from a psychological standpoint, but there is something to be said about checking those smaller goals off you list – you’ll feel empowered every time you hit another milestone, and your success will propel you to keep going.  

7. Own Your Future

As the saying goes “A dream without a plan is just a wish.” If you’re not in charge of where you spend your time and energy it’s easy to become distracted. Keep in mind that you are personally responsible for your future and only you can change and work towards a better outcome. It’s important to work in the present but still have a strong plan for the future. 

8. Use Your Goals in Every Aspect of Your Life

Goal setting is obviously pertinent to your business, however, it’s important that you set goals in every aspect of your life, not just in your business. What is the motivation or desire for why you set your goals? Think about: 

• Why are These Goals Important?
• How Will you Achieve Them?
• How Will They Make a Difference?

Once you know the answer to these questions, it will really help you to strive for a stronger future and understand what you need to change to achieve your dreams. 

When we get busy with work and everyday life, we often put our big dreams and goals on the back burner. Many times that free time doesn’t often come, so it’s important to find the time to work towards and achieve your dreams. These eight steps can help you to visualize and work towards achieving what you really want, as they have helped highly successful people for many years. 

1. https://www.huffpost.com/entry/the-power-of-writing-down_b_12002348

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

One year into the pandemic, Americans are continuing to strike a balance between staying safe and handling their day-to-day responsibilities. One major challenge we all face this time of year (pandemic or no pandemic) is filing our taxes on time. On March 17, less than one month until Tax Day, the IRS announced an extension for the 2021 tax filing season. Here’s what you need to know about filing your 2020 taxes.

2021 Deadline Extension

The IRS has announced that the tax filing deadline will be pushed back one month, until May 17, 2021.

The delay follows continued disruption from COVID-19. As a reminder, we saw a delayed start to the 2021 tax season as well. While tax season typically begins on the first of the year, the IRS delayed the start until February 12.

As a reminder about tax extensions, there will no late penalties or fees for tax returns filed up through May 17, 2021 – regardless of how much you may owe. To receive your refund in a timely manner, the IRS recommends filing electronically and setting up a direct deposit. 

While this extension isn’t unexpected, it may be a welcomed change to many still coping with what is becoming one of the most complicated tax seasons in decades.

Why Was the Deadline Extended?

According to a statement released by the IRS, “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities.”¹

In addition, the American Rescue Plan Act passed in early March, promising eligible Americans $1,400 stimulus payments. The timing of this legislation is tricky, as it fell right in the middle of tax season – many Americans have already filed, while many others haven’t. Because the stimulus payments are actually considered tax credits, any indiscretions or missing payments were initially meant to be resolved when a tax return was filed. It’s possible the extension of the tax filing deadline could, in part, have to do with helping eligible Americans receive or request their latest stimulus payment – although this reason was not specifically given by the IRS in their official statement. If you’re concerned about receiving your stimulus payment, your CPA can answer any questions you may have regarding that process.

A Reminder About Texas, Oklahoma  & Louisiana

Several southern states faced severe weather towards the end of February, causing mass power outages, food shortages, destruction to homes and more. In response to the natural disaster, the IRS extended the tax deadline to June 15 for the 2021 filing season.¹ This extension is for Texas, Oklahoma & Louisiana residents only. If you live in these states, your local and state tax deadlines may have been extended as well.

For those who have already filed their taxes, this likely won’t change much. And while a deadline extension can be helpful for many, it’s still important to get your tax return taken care of. If you haven’t already, get in touch with your financial advisor or CPA to review the necessary paperwork for the 2020 tax year.  

1. https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

In one of his first major moves in office, President Biden has signed the American Rescue Plan Act – a $1.9 trillion stimulus plan meant to extend, renew and implement relief for those affected by COVID-19.

Below is a breakdown of some important components to this legislation, including what business owners, families and struggling individuals may need to know.

Unemployment Benefits

Eligible unemployed individuals may continue receiving an additional $300 in federal unemployment benefits through early September 2021.¹

Small Businesses & The PPP

Overall, the bill allocates around $50 billion toward assisting small businesses affected by COVID-19.¹

The Paycheck Protection Program will receive $7.25 billion, but the new legislation does not change the PPP’s end date of March 31, 2021.¹ Bars, restaurants and entertainment venues heavily impacted by the pandemic will also be eligible to receive grants from the government.

Low-income communities have been some of the hardest hit financially during the pandemic. In response, the government will be allocating $15 billion toward Economic Injury Disaster Loan (EIDL) Advanced Grants. Eligible businesses in low-income communities may be able to receive up to $10,000 each.¹

Employee Retention Credit

The Employee Retention Credit (ERC) will be extended through the end of 2021. With this refundable tax credit, business owners may claim up to $7,000 per employee per quarter.¹

Stimulus Checks

Similar to previous relief bills, eligible American taxpayers will be receiving direct stimulus payments of $1,400 as part of the new bill. Similar to previous checks, those with incomes up to $75,000 will receive $1,400 payments, while families with children will receive $1,400 per dependent. Married couples with an income of $150,000 or less will receive $2,800.¹

There will be a phase-out and income cap for individuals and couples who make more. Individuals earning between $75,000 and $80,000 will receive a lesser amount, with those making above $80,000 receiving no stimulus payment. The same applies for couples earning between $150,000 and $200,000 – with $200,000 being the cap.¹

Child Tax Credit

Previously, the child tax credit offered eligible families a $2,000 tax credit per child under the age of 17. With changes made under the new legislation, the child tax credit is temporarily expanding for 2021. Eligible families may receive up to $3,600 for children 5 and under and up to $3,000 for children ages six to 17.¹

Here is how the American Rescue Plan is changing conditions and stipulations regarding the child tax credit:¹

• The $2,500 earning floor will be waived.
• The credit will be fully refundable.
• The federal government will send eligible families credit in advance between July and December 2021.

COVID-19 Vaccination Distribution & Testing

Similar to previous legislation, a portion of the American Rescue Plan will designate funding for COVID relief. Around $15.05 billion will go toward vaccine production and distribution, while $50.8 billion will go towards testing, contact tracing, genome sequencing and global health response initiatives.¹

The Federal Emergency Management Agency will receive a portion of the funds as well.

State & Local Government Assistance

States, tribal governments, and cities will receive $350 billion in federal assistance.

Florida will receive $10.2 billion, cities across the state will receive $1.4 billion, counties will get $4.1 billion and other local governments will get $1.3 billion. ²

In addition, this legislation includes a $10 billion infrastructure program to help local government continue capital projects.¹

FEMA Emergency Food and Shelter Program

FEMA’s Emergency Food and Shelter Program will receive $510 million to support initiatives for homeless and struggling families including:¹

• Shelter and meals
• One month’s rent
• Mortgage assistance
• One month’s utility payments

Wondering how this recent legislation and other COVID-relief initiatives may benefit you? Your trusted financial professional can offer additional assistance and insight as we all continue to combat the economic instability caused by COVID-19.

1. https://www.congress.gov/bill/117th-congress/house-bill/1319
2. https://www.miamiherald.com/news/politics-government/article249812298.html

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Buying a home is one of the biggest financial decisions that you will make in adulthood and for many people, this may be seen as a part of the “American Dream.” While it can feel good to own something rather than rent, it’s not for everybody and can come with costs and limitations.

If you’re having a hard time deciding which option is best for you, consider the pros and cons of owning a home versus renting. 

Advantages of Homeownership

Owning a home is a hefty goal for many people, but it can come with several important advantages. 

#1: Long-Term Investment

It’s important to think long-term during the homebuying process. As a general rule of thumb, people are encouraged to purchase a home if you plan on staying there for five years or longer – as this gives your property time to grow in value.

Plan on maintaining or improving the condition of your property, as this is what makes for a good long-term investment. Even if the value of your home depreciates over time, it’s possible the land could become more valuable. 

#2: Building Equity

Equity is the difference in the value of your home and what you still owe on it. Every time you put a payment toward your mortgage, your home equity grows. Equity is important to have, as it can help you build wealth over time.

#3: Stability & Consistency

Obtaining a fixed-rate mortgage means that you will pay the same amount each month for interest and principal until the mortgage has been paid off. Conversely, rent can increase with every lease renewal or move. Having a stable mortgage payment can help you avoid increases in your housing expenses.

#4: Customization

Since you own the property, you can renovate it however you want. Renters do not enjoy this benefit, meaning any landscaping or home alterations wouldn’t be up to them. Being able to renovate and update your home gives you the potential to increase its property value and overall satisfaction while living in your home. 

Disadvantages to Homeownership

There are some notable disadvantages to homeownership that any potential home buyer should keep in mind.

#1: Upfront Costs

Closing costs on a mortgage generally run between two percent and five percent of the purchase price. Depending on the price of the home, this can be a significant amount of money.

Some closing costs include:

• Property taxes
• Mortgage insurance (if less than a 20 percent down payment is made)
• Home inspection
• First-year insurance premiums
• Title search
• Title insurance

While a downpayment is important, it’s not the only cash you’ll need upfront in order to purchase a home. If you’re purchasing a $300,000 home, closing costs could easily range between $6,000 and $15,000.

#2: Less Flexibility

If you have a job that requires you to move often, going through the process of homebuying may not make financial sense. It can take weeks or months to buy and sell a home. If you must relocate quickly, this can mean paying multiple mortgages as you work to sell your home. 

#3: Maintenance Costs

If something breaks in your home, you are the one that has to pay for the repairs. There is no property manager or landlord involved when you own your own home. 

#4: Property Values Can Fall

If you do not maintain your home – or if the housing market takes a downturn – your property value may fall. There is no guarantee that your home’s value will increase. There are a number of factors both in your control and outside of it that could affect this.

#5: Home Costs Lack Liquidity

While houses do have value, they usually do not sell as quickly as stocks or other assets. Even if you are in the process of trying to sell your home, you still have to maintain your home and make mortgage payments.

Advantages of Renting a Home

Depending on what you are trying to achieve, renting may be the right option for you. 

#1: Costs May Be Lower

Depending on your living needs and current financial situation, it may be more cost-effective to rent a room in a shared home or a modestly sized apartment. You may also find rentals already furnished, meaning they already include furniture.

#2: You Aren’t Responsible for Repairs

If you are maintaining a budget, then you won’t need to factor in-home repairs, as that is paid for by the property owner or landlord. 

#3: Flexibility

Relocation for something such as a job change can be much more difficult with a mortgage. If you do not sell your house as quickly as you would like, you will be paying a mortgage at your old home plus the new one. With rentals, you have the freedom to leave once your lease is up, or your landlord may allow you to find someone to take over your lease for you.

#4: Lower Upfront Costs

In order to secure a rental, you’ll likely be asked to put down a security deposit. This is usually equivalent to first month’s rent or several months’ worth of rent. Unlike obtaining a mortgage, you don’t have closing costs and you may avoid other fees like HOA dues, painting supplies or other renovation costs.

Disadvantages of Renting

While there are many advantages, there are some things to keep in mind if you are looking to rent.

#1: No Renovations or Alterations

Even if you would like to make updates or additions to the rental property, you are not able to since you don’t own it. Some landlords may allow you to paint or make minor adjustments, but these would need to be approved beforehand.

#2: Your Rent May Increase

If you have been budgeting and factoring in a certain amount of rent each month, this amount may change when it’s time to renew your lease. Landlords have the right to increase your rent when it’s time to renew your lease, although you may be able to renegotiate the terms.

#3: It Won’t Improve Your Credit Score

Paying your mortgage on time every month can be an effective way to improve or maintain your credit score. Paying your rent on time each month is important, but it won’t necessarily improve your credit score.

#4: Your Home Isn’t Building Value

Because the home you are renting isn’t yours, the money you pay in rent isn’t working toward building equity.

Every individual has a situation that is unique to them, so for some people, it may make sense to purchase a home while others will benefit from renting. The pandemic has certainly changed the way that we live, so this can come into play when trying to decide what your next move should be.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.