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November 28, 2021

3 Reasons Why Your Bank Account is Frozen

Your bank account may be frozen if your bank suspects fraud or illegal activity, or if they’re complying with a court order due to unpaid debts. The government can also request an account freeze for any unpaid taxes or student loans.

Whatever the reason for the lock-up, finding out your bank account is frozen can be both alarming and frustrating. It often comes with no warning, and suddenly being separated from all of your funds can leave you scrambling to find another method of payment.

Bank accounts are frozen for a number of different reasons, and each one requires a specific set of steps to get the bank to unlock the account. Read on to learn how to get to the bottom of a frozen bank account.

Recommended: How To Open a Free Checking Account

What is a Frozen Bank Account?

When a bank account is frozen it means the bank will no longer let you perform certain transactions. You can still access your account information and monitor your account. You will still be able to make deposits, including manual or direct deposit of your paycheck.

However, you won’t be able to make any withdrawals from the account or transfer money from the account to a different account.

Typically, any previously authorized payments or transfers will not go through either. That means that any bills you have set up on auto-pay likely won’t get paid.

Why A Bank Would Freeze Your Account

Banks have the authority to freeze, or even close, a bank account for a range of reasons. These reasons generally fall into the following three categories.

1. Suspected Fraud

A bank’s reputation relies heavily on its ability to keep money safe, so account security is typically taken very seriously.

Banks are familiar with how you tend to spend your money, so an unusually large purchase or cash withdrawal can indicate fraud and trigger an account freeze.

Banks are also familiar with where you typically spend your money. A transaction that occurs in a different city or, especially, a different country can be a red flag that could trigger an account freeze.

It can be a good idea to inform your bank about travel plans both nationally and internationally to help prevent any account freezes during a trip.

If your bank flags suspicious behavior you’re certain you weren’t responsible for, it could be due to identity theft.

2. Unpaid Debts

Missing a single bill payment isn’t generally something that would disrupt access to your bank account, but a longstanding overdue bill might.

Collection agencies that purchase unpaid debts can secure court judgments for those debts, giving them the power to freeze (or “attach”) the bank accounts of debtors until they paid the money they are owed.

Most creditors can not have your account frozen unless they have a judgment against you. However, not all. Government agencies that collect federal and state taxes, child support, and student loans do not need to have a court judgement to attach your account.

Recommended: Debt Buyers vs. Debt Collectors

Any of the following types of outstanding debt could be the cause of a frozen account.

• Unpaid Taxes

• Student Loans

• Mortgages

• Car Loans

• Personal Loans

• Civil Lawsuits

• Divorce Settlements

• Child Support

3. Illegal Activity

A bank account that is used to conduct criminal activity, or shared with someone who might be, can lead to the account being frozen.

Banks also work directly with law enforcement agencies and will freeze accounts of individuals that have been convicted of a crime, or are under investigation.

Some specific activities that could lead to an account freeze include:

Writing Bad Checks. A single bounced check isn’t cause for alarm, but knowingly writing multiple checks from a bank account that doesn’t hold the funds to support them is illegal. If a bank observes too many bad check transactions, they may be inclined to freeze the account and alert the police.

Money Laundering. This is the process of generating money through illegal activity, and attempting to make it appear legal via multiple financial transactions. All banks and financial institutions are required to comply with federal anti-money laundering regulations and report any suspected activity directly to the authorities.

Terrorist Financing. Funding or organizing funds for terrorist groups and organizations is an illegal activity that can also result in an account freeze. Banks comply with federal laws that help prevent terrorism by freezing and reporting any accounts that exhibit suspicious activity related to terrorists.

How Long Can A Bank Account Be Frozen?

Banks don’t typically follow any set rules regarding how long an account can be frozen. The length of time generally depends on how long it takes for the account holder to notice the freeze, contact the bank, and can resolve the issue that caused the freeze.

How Does a Frozen Bank Account Affect You?

Having a frozen bank account essentially means not having access to your money, and it can be especially difficult if it is your primary bank account.

Frozen funds means not being able to make purchases with a debit card, or withdrawals from an ATM. It can also mean that any auto-payments linked to that account will likely not be fulfilled, and any scheduled transfers won’t be completed.

Because these payments can bounce, you could also incur a non-sufficient funds charge, which may be deducted from your account.

If you don’t have enough in the account to cover it, you could end up with a negative balance, putting you into an overdraft. In this case, you could end up having to pay additional bank fees and interest to cover the shortfall.

Recommended: How to Avoid Overdraft Fees

Those with frozen accounts often must resort to using credit cards and can end up accumulating debt in order to cover their expenses while they sort out the issue with their bank.

If the bank suspects you’ve been using the account illegally for any reason, it could close your account completely. It can also report your account activity to authorities.

Recommended: Bank Fees You Should Never Pay

How Do You Unfreeze a Bank Account?

It can be a good idea to contact your bank as soon as you notice a freeze on your account. When discussing the issue, it can help to have a clear account of your most recent locations and transactions, and be prepared to share any information and supplemental documentation that can help clear up the issue.

If you can show that there’s no reason for the freeze, the bank will likely release the suspension and grant you full access to the account again.

If your account is frozen over unpaid debts, it can be a good idea to get the creditor’s contact information from your bank and then reach out to them directly. Once you have a better idea of what’s going on with your account, you may be able to work out a payment arrangement.

The Takeaway

When a bank freezes your account, it can mean there is something wrong with your account or that someone has a judgment against you to collect on an unpaid debt.

The government can also request an account freeze for any unpaid taxes or student loans.

Once the bank account is frozen, you cannot make withdrawals but can only put money in your account until the freeze is lifted.

If your account is suddenly inaccessible, it can be a good idea to contact your bank immediately to find a resolution.

Looking for Something Different?

If you’re on the hunt for a new type of money account, you may want to consider opening a SoFi Money® cash management account.

With SoFi Money, you can earn competitive interest, save, and spend all in one place — and you won’t pay any monthly fees, or other common account fees. Plus, you can easily monitor and manage your account right from your phone with the SoFi app.

Check all the perks of having a SoFi Money cash management account today.

Photo credit: iStock/happyphoton

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

November 27, 2021

Fixed Expense vs Variable Expense

Budgeting is the best way to get a better handle on where your money is going — which can help you get a better handle on where you’d like to see your money go.

But before you dive into the nitty-gritty of each individual line item on your ledger, you first need to understand the difference between fixed expenses and variable expenses.

As their name suggests, fixed expenses are those that are fixed, or unchanging, each month, while variable expenses are the ones with which you can expect a little more wiggle room. However, it’s possible to make cuts on items in both the fixed and variable expense category to save money toward bigger financial goals, whether that’s an epic vacation or your eventual retirement.

Let’s take a closer look.

What Is a Fixed Expense?

Fixed expenses are those costs that you pay in the same amount each month — items like your rent or mortgage payment, insurance premiums, and your gym membership. It’s all the stuff whose amounts you know ahead of time, and which don’t change.

Fixed expenses tend to make up a large percentage of a monthly budget since housing costs, typically the largest part of a household budget, are generally fixed expenses. This means that fixed expenses present a great opportunity for saving large amounts of money on a recurring basis if you can find ways to reduce their costs, though cutting costs on fixed expenses may require bigger life changes, like moving to a different apartment — or even a different city.

Keep in mind, too, that not all fixed expenses are necessities — or big budget line items. For example, an online TV streaming service subscription, which is withdrawn in the same amount every month, is a fixed expense, but it’s also a want as opposed to a need. Subscription services can seem affordable until they start accumulating and perhaps become unaffordable.

Recommended: Are Monthly Subscriptions Ruining Your Budget?

What Is a Variable Expense?

Variable expenses, on the other hand, are those whose amounts can vary each month, depending on factors like your personal choices and behaviors as well as external circumstances like the weather.
For example, in areas with cold winters, electricity or gas bills are likely to increase during the winter months because it takes more energy to keep a house comfortably warm. Grocery costs are also variable expenses since the amount you spend on groceries can vary considerably depending on what kind of items you purchase and how much you eat.

You’ll notice, though, that both of these examples of variable costs are still necessary expenses — basic utility costs and food. The amount of money you spend on other nonessential line items, like fashion or restaurant meals, is also a variable expense. In either case, variable simply means that it’s an expense that fluctuates on a month-to-month basis, as opposed to a fixed-cost bill you expect to see in the same amount each month.

To review:

• Fixed expenses are those that cost the same amount each month, like rent or mortgage payments, insurance premiums, and subscription services.

• Variable expenses are those that fluctuate on a month-to-month basis, like groceries, utilities, restaurant meals, and movie theater tickets.

• Both fixed and variable utilities can be either wants or needs — you can have fixed-expense wants, like a gym membership, and variable-expense needs, like groceries.

When budgeting, it’s possible to make cuts on both fixed and variable expenses.

Recommended: Grocery Shopping on a Budget

Benefits of Saving Money on Fixed Expenses

If you’re trying to find ways to stash some cash, finding places in your budget to make cuts is a big key. And while you can make cuts on both fixed and variable expenses, lowering your fixed expenses can pack a hefty punch, since these tend to be big line items — and since the savings automatically replicate themselves each month when that bill comes due again. (Even businesses calculate the ratio of their fixed expenses to their variable expense, for this reason, yielding a measure known as operating leverage.)

Think about it this way: if you quit your morning latte habit (a variable expense), you might save a grand total of $150 over the course of a month — not too shabby, considering its just coffee. But if you recruit a roommate or move to a less trendy neighborhood, you might slash your rent (a fixed expense) in half. Those are big savings, and savings you don’t have to think about once you’ve made the adjustment: they just automatically rack up each month.

Other ways to save money on your fixed expenses include refinancing your car (or other debt) to see if you can qualify for a lower payment… or foregoing a car entirely in favor of a bicycle if your commute allows it. Can you pare down on those multiple streaming subscriptions or hit the road for a run instead of patronizing a gym? Even small savings can add up over time when they’re consistent and effort-free — it’s like automatic savings.

Of course, orchestrating it in the first place does take effort (and sometimes considerable effort, at that — pretty much no one names moving as their favorite activity). The benefits you might reap thereafter can make it all worthwhile, though.

Saving Money on Variable Expenses

Of course, as valuable as it is to make cuts to fixed expenses, saving money on variable expenses is still useful — and depending on your habits, it could be fairly easy to make significant slashes. For example, by adjusting your grocery shopping behaviors and aiming at fresh, bulk ingredients over-packaged convenience foods, you might decrease your monthly food bill. You could even get really serious and spend a few hours each weekend scoping out the weekly flyer for sales.

If you have a spendy habit like eating out regularly or shopping for clothes frequently, it can also be possible to find places to make cuts in your variable expenses. You can also find frugal alternatives for your favorite spendy activities, whether that means DIYing your biweekly manicure to learning to whip up that gourmet pizza at home. (Or maybe you’ll find a way to save enough on fixed expenses that you won’t have to worry as much about these habits!)

The Takeaway

Fixed expenses are those costs that are in the same amount each month, whereas variable expenses can vary. Both can be trimmed if you’re trying to save money in your budget, but cutting from fixed expenses can yield bigger savings for less ongoing effort.

Great budgeting starts with a great money management platform — and a SoFi Money® cash management account can give you a bird’s-eye view that puts everything into perspective. You’ll also have access to the Vaults feature, which helps you set aside money for specific savings purposes, no matter which goals are the most important to you, all in one account.

Check out SoFi Money and how it can help you manage your financial goals.

Photo credit: iStock/LaylaBird

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
The SoFi Money® Annual Percentage Yield as of 03/15/2020 is 0.20% (0.20% interest rate). Interest rates are variable subject to change at our discretion, at any time. No minimum balance required. SoFi doesn’t charge any ATM fees and will reimburse ATM fees charged by other institutions when a SoFi Money™ Mastercard® Debit Card is used at any ATM displaying the Mastercard®, Plus®, or NYCE® logo. SoFi reserves the right to limit or revoke ATM reimbursements at any time without notice.
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Source: sofi.com

November 26, 2021

[Update] Cheese Checking Account Review: No SSN Required, 0.3-3% APY Savings, Debit Card Rewards

Update 11/25/21: Existing customers can get a $100 bonus when they spend $1,000 – $3,000 or a $300 bonus when they spend $3,000+ between 11/1/21 – 11/30/21. Maximum of $100,000 in prizes and first come first served. Hat tip to Dheeraj

Update 9/30/21: You can also get $20 from Swagbucks for signing up and depositing $10. Hat tip to reader Davis

Update 7/25/21: Android now available. Also, no SSN applications are now available: international students and immigrants can apply with their U.S. address, passports, and valid Visa. Updated below.

Update: This review has been revamped and reposted on 5/13/21. Originally posted on 1/6/2020. These have been written by Evan Mullen. See his prior posts here.

Cheese Checking

Cheese is targeted for immigrants and Asian Americans, but the account actually offers several competitive banking features. Here are the major highlights of the account:

No SSN required to open account; International students and immigrants can apply with their U.S. address, passports, and valid Visa.
FDIC-insured up to $250,000
No Fees
Paycheck up to 2 days early
Cashback debit card
Interest checking

They are also currently donating $10 for every new user until June 10th, up to $90,000.

Cashback Debit Card

There is a base 0.25% cashback rate on the debit card. They also have higher cashback offers from Dosh, and some additional exclusive cashback offers which they plan to continue to grow. Here are the current exclusive offers:

5% on phone bills (AT&T, T-Mobile, Sprint, Verizon, Mint Mobile, Cricket)
1% on pay later services (Klarna, Affirm, Afterpay)
5% at McDonald’s
2% at Target
2% at Uber Eats
2% at Instacart
2% at Wendy’s
5% at Asian Lifestyle: Chowbus
3% at Weee!
3% at Yamibuy
2% at Fantuan
2% at HungryPanda
2% at Doordash
2% at 99 Ranch
2% at H Mart
2% at MINISO

There is a $25 minimum cashback redemption and a $10 daily maximum for the 0.25% and exclusive offers. (Dosh maximums are separate.)

Interest Checking

The basic APY is 0.3%. If you are referred, you and the person who referred you will both receive a boost to 3% APY for 30 days. The referrer stacks on another 30 days to the 3% boost for each additional referral. The 0.3% APY has no cap, but the 3% APY has a monthly cap of $25. So if you have the 3% boost for the month, anything over about $10,000 would only earn 0.3% APY.

Final Thoughts

Though targeted for immigrants and Asian Americans, this account could also be very useful to international students and people with poor or no credit history. Even if you don’t fall into any of these categories, the account still has some unique aspects. The current features that stand out the most for me are the 5% cashback categories and the 1% on pay later services. It will be interesting to see what other exclusive offers get added in the future.

Source: doctorofcredit.com

November 25, 2021

Cost of Goods Sold Formula: A Step-by-Step Guide

Cost Of Goods Sold Definition

Cost of goods sold (COGS) is the cost of producing the goods sold by a company. It accounts for the cost of materials and labor directly related to that good and for a designated accounting period.

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As a company selling products, you need to know the costs of creating those products. That’s where the cost of goods sold (COGS) formula comes in. Beyond calculating the costs to produce a good, the COGS formula can also unveil profits for an accounting period, if price changes are necessary, or whether you need to cut down on production costs.

Whether you fancy yourself as a business owner or a consumer or both, understanding how to calculate cost of goods sold can help you feel more informed about the products you’re purchasing — or producing.

What Is Cost of Goods Sold?

Cost of goods sold is the cost of producing the goods sold by a company. It includes the cost of materials and labor directly related to that good. However, it excludes indirect expenses such as distribution and sales force costs.

What Is the Cost of Goods Sold Formula?

When selling a product, you need to understand the production costs associated with it in a given period, which could be a month, quarter, or year. You can do that by using the cost of goods sold formula. It’s a straightforward calculation that accounts for the beginning and ending inventory, and purchases during the accounting period. Here is a simple breakdown of the cost of goods sold formula:

COGS = beginning inventory + purchases during the period – ending inventory

How Do You Calculate Cost of Goods Sold?

To calculate cost of goods sold, you have to determine your beginning inventory — meaning your merchandise, including raw materials and supplies, for instance — at the beginning of your accounting period. Then add in the new inventory purchased during that period and subtract the ending inventory — meaning the inventory leftover at the end for your accounting period. The extended COGS formula also accounts for returns, allowances, discounts, and freight charges, but we’re sticking to the basics in this explanation.

Taking it one step at a time can help you understand the COGS formula and find the true cost behind the goods being sold. Here is how you do it:

Step 1: Identify Direct and Indirect Costs

Whether you manufacture or resell products, the COGS formula allows you to deduct all of the costs associated with them. The first step is to differentiate the direct costs, which are included in the COGS calculation, from indirect costs, which are not.

Direct Costs

Direct costs are the costs tied to the production or purchase of a product. These costs can fluctuate depending on the production level. Here are some direct costs examples:

Direct labor
Direct materials
Manufacturing supplies
Fuel consumption
Power consumption
Production staff wages

Indirect Costs

Indirect costs go beyond costs tied to the production of a product. They include the costs involved in maintaining and running the company. There can be fixed indirect costs, such as rent, and fluctuating costs, such as electricity. Indirect costs are not included in the COGS calculation. Here are some examples:

Utilities
Marketing campaigns
Office supplies
Accounting and payroll services
Insurance costs
Employee benefits and perks

Step 2: Determine Beginning Inventory

Now it’s time to determine your beginning inventory. The beginning inventory will be the amount of inventory leftover from the previous time period, which could be a month, quarter, or year. Beginning inventory is your merchandise, including raw materials, supplies, and finished and unfinished products that were not sold in the previous period.

Keep in mind that your beginning inventory cost for that time period should be exactly the same as the ending inventory from the previous period.

Step 3: Tally Up Items Added to Your Inventory

After determining your beginning inventory, you also have to account for any inventory purchases throughout the period. It’s important to keep track of the cost of shipment and manufacturing for each product, which adds to the inventory costs during the period.

Step 4: Determine Ending Inventory

The ending inventory is the cost of merchandise leftover in the current period. It can be determined by taking a physical inventory of products or estimating that amount. The ending inventory costs can also be reduced if any inventory is damaged, obsolete, or worthless.

Step 5: Plug It Into the Cost of Goods Sold Equation

Now that you have all the information to calculate cost of goods sold, all there’s left to do is plug it into the COGS formula.

An Example of The Cost of Goods Sold Formula

Let’s say you want to calculate the cost of goods sold in a monthly period. After accounting for the direct costs, you find out that you have a beginning inventory amounting to $30,000. Throughout the month, you purchase an additional $5,000 worth of inventory. Finally, after taking inventory of the products you have at the end of the month, you find that there’s $2,000 worth of ending inventory.

Using the cost of goods sold equation, you can plug those numbers in as such and discover your cost of goods sold is $33,000:

COGS = beginning inventory + purchases during the period – ending inventory

COGS = $30,000 + $5,000 – $2,000

COGS = $33,000

Accounting for Cost of Goods Sold

There are different accounting methods used to record the level of inventory during an accounting period. The accounting method chosen can influence the value of the cost of goods sold. The three main methods of accounting for the cost of goods sold are FIFO, LIFO, and the average cost method.

FIFO: First In, First Out

The first in, first out method, also known as FIFO, is when the earliest goods that were purchased are sold first. Since merchandise prices have a tendency of going up, by using the FIFO method, the company would be selling the least expensive item first. This translates into a lower COGS compared to the LIFO method. In this case, the net income will increase over time.

LIFO: Last In, First Out

The last in, first out method, also known as LIFO, is when the most recent goods added to the inventory are sold first. If there’s a rise in prices, a company using the LIFO method would be essentially selling the goods with the highest cost first. This leads to a higher COGS compared to the FIFO method. By using this method, the net income tends to decrease over time.

Average Cost Method

The average cost method is when a company uses the average price of all goods in stock to calculate the beginning and ending inventory costs. This means that there will be less of an impact in the COGS by higher costs when purchasing inventory.

Considerations for Cost of Goods Sold

When calculating cost of goods sold, there are a few other factors to consider.

COGS vs. Operating Expenses

Business owners are likely familiar with the term “operating expenses.” However, this shouldn’t be confused with the cost of goods sold. Although they are both company expenditures, operating expenses are not directly tied to the production of goods.

Operating expenses are indirect costs that keep a company up and running, and can include rent, equipment, insurance, salaries, marketing, and office supplies.

COGS and Inventory

The COGS calculation focuses on the inventory of your business. Inventory can be items purchased or made yourself, which is why manufacturing costs are only sometimes considered in the direct costs associated with your COGS.

Cost of Revenue vs. COGS

Another thing to consider when calculating COGS is that it’s not the same as cost of revenue. Cost of revenue takes into consideration some of the indirect costs associated with sales, such as marketing and distribution, while COGS does not take any indirect costs into consideration.

Exclusions From COGS Deduction

Since service companies do not have an inventory to sell and COGS accounts for the cost of inventory, they can’t use COGS because they don’t sell a product — they would instead calculate the cost of services. Examples of service companies are accounting firms, law offices, consultants, and real estate appraisers.

salary, business owners should have a well-rounded view of the costs associated with their goods sold. Following this step-by-step guide to learn how to use the cost of goods sold formula is a good starting point. As always, it’s important to consult an expert, such as an accountant, when doing these calculations to make sure everything is accounted for.

Sources: QuickBooks

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Source: mint.intuit.com

November 24, 2021

Accredited Debt Relief Review

You’ll also need to stop using credit cards or drawing on that line of credit. This will help the debt relief program negotiators build your case.
For people who are drowning in credit card debt and dodging phone calls from creditors, it’s easy to feel trapped. Helpless.
Accredited Debt Relief is working with him on a debt-settlement plan and has been negotiating his credit card balances down by 50%.
Source: thepennyhoarder.com
How long this process takes varies, but the average person enrolled in the program is debt-free within two to four years.
If you have at least ,000 in unsecured debt, meaning there’s nothing your lenders can repossess, such as a car, this debt relief company can help. You can get help paying off payday loans, credit card debt, medical bills, personal loans and other unsecured loans — student loans are excluded.

So, What Is Accredited Debt Relief?

An Accredited Debt Relief debt specialist reviews each person’s individual situation — the initial consultation is free — and figures out the best path out of debt, whether that’s a debt settlement or one of their debt-relief programs.
Ready to stop worrying about money?
He bought and started remodeling a duplex in Olympia, Washington. To save money, he tried doing it himself with a home renovation loan, but he still ended up owing tens of thousands of dollars to his Home Depot and Lowe’s credit cards.
By the time he reached out to Accredited Debt Relief in late 2019, he was ,000 in the hole.
Get the Penny Hoarder Daily “That’s how I got into this spot,” he says. “It wasn’t that we were out buying Gucci or designer threads or anything like that. I was just trying to do right by my family.”
Then, the negotiators will work with the creditors to secure a settlement, a lump sum that’s less than the owed amount. That’s how they save people money. Once you approve the deal, you’ll pay the settlement out of your savings account.
The only other requirement for Accredited Debt Relief’s debt consolidation program is a stable source of income. You’ll need to consistently make your monthly payments in order to qualify for their debt relief options.
Accredited Debt Relief generally works with people who owe more than ,000. The idea is to help people out of debt without declaring bankruptcy.
The truth is, many Americans are in the same predicament. But there are ways out, including debt relief.
When Smith retired from the U.S. Army after 21 years, he was ready to try something different, so the married father of three got into real estate investing.

Pros and Cons of Accredited Debt Relief’s Service

Like what you learned in this Accredited Debt Relief review? It takes less than a minute to sign up for a free initial consultation.

Pros:

They work with a wide variety of unsecured debt: medical bills, payday loans, debts owed to credit card companies and much more.
Accredited Debt Relief’s clients get out of debt in 46 months on average.
They offer free consultations on debt relief.
They have an A+ rating from the Better Business Bureau and are accredited by the American Fair Credit Council.
Debt settlement with Accredited Debt Relief may be as low as 50% of what you originally owed.

Cons:

Secured debts and student loans aren’t eligible for Accredited Debt Relief’s program.
You’ll need to owe at least $10,000 in order to qualify for debt relief.
It’s not available in every state.
Not everyone qualifies for a debt settlement.

Frequently Asked Questions

Is this a debt-settlement program?

Take Kerry Smith, for instance. He was a Green Beret who did four combat tours in Iraq and four more in Afghanistan. He fought terrorists and insurgents, dodged grenades and roadside bombs.

What if a creditor won’t work with Accredited Debt Relief?

After he retired from the Army due to combat wounds, Smith, now 42, tried his hand at real estate. But he got overwhelmed with ,000 worth of debt from deals that went south.

How much will a debt-relief program cost me?

Accredited Debt Relief doesn’t directly service the following states: CT, DE, GA, HI, IL, KS, ME, ND, NH, NJ, OR, OH, RI, SC, VT, WA, WV and WY.

How This Green Beret is Saving $700 a Month on His Debts

If you or someone you know is in serious debt, Accredited Debt Relief deserves serious consideration. If you qualify, it can help turn finances around and help you reclaim your life from debt.
There’s a lot to like about Accredited Debt Relief’s service, but why should you go with them instead of one of the other debt relief companies? Check out the pros and cons of this service, compared to other debt relief companies, to see why you should pick their pathway out of serious debt:
Looking for help, he found a debt relief company called Accredited Debt Relief. He was wary of scams and ripoffs, but he decided to give it a try because of its A-plus rating from the Better Business Bureau.
Still, it’s worth it for Smith and his family and is a huge relief. He’s making his monthly debt payments to Accredited Debt Relief instead of his creditors, which leaves him more money to take care of his family.
Your monthly payments won’t go to any creditor that declines to work with you on debt settlement. Many other debt-relief companies ask for payment before an agreement is reached.
Yes, Accredited Debt Relief’s certified debt specialists will work with your creditors to negotiate a lower amount on the debt you owe.
Fees range from 15% to 25% of the debt you owe. Accredited Debt Relief won’t charge you until after you’ve been enrolled in the debt settlement program and your creditors have come to terms.
The company charges for its services. For debt settlement, it typically charges 18% to 25% of the total debt, which is standard in the industry.
This debt-relief program is all about setting people up for future success. That’s why it’ll have you open a savings account in your name that you’ll control. That’s where you’ll send monthly deposits that’ll go toward paying off your debts.
While Accredited Debt Relief can help consolidate your debt into a single monthly payment, their debt relief services don’t require a good credit score or personal loans.
They’ll explain all the options and spell out a strategy for lowering your payments and maximizing savings.
“I started missing payments, and then it was a massive snowball,” he says. “It was just a maelstrom of different things in my life.”

Getting Started With a Free Consultation

In this Accredited Debt Relief review, you’ll find out how this company works and why this retired vet has been floored by how much of a difference it’s making.

Everyone’s debt is unique, and paying it off involves a lot of strategy.
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“I give them 0 a month, which is 0 less than I was paying before,” he says. “We haven’t been getting any more phone calls from creditors — which is nice.”
Accredited Debt Relief creates custom debt consolidation plans for people who have serious debt and have trouble making payments. The company works with each client to create a personalized repayment plan.
If you meet the basic requirements, you could notice your credit score start to rise after you start making consistent payments through Accredited Debt Relief. <!–

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Accredited Debt Relief’s reviews are overwhelmingly positive, and the numbers don’t lie — this company has a track record of getting people out of serious debt in just a few years.

November 24, 2021

The Basics of Required Minimum Distributions: 12 Things You Must Know About RMDs

After decades of squirreling away money in tax-advantaged retirement accounts, investors entering their 70s have to flip the script. Starting at age 72, Uncle Sam requires taxpayers to draw down their retirement account savings through annual required minimum distributions. Not only do you need to calculate how much must be withdrawn each year, you must pay the tax on the distributions.

There’s no time like the present to get up to speed on the RMD rules. Once you know the basic rules, you can use smart strategies to minimize taxable distributions and make the most of the money that you must withdraw.

Here are 12 things you should consider regarding required minimum withdrawals.

When You Must Start Taking RMDs

The SECURE Act changed when you must start taking RMDs. Under the 2019 legislation, if you turned 70 ½ in 2019, then you should have taken your first RMD by April 1, 2020. If you turned 70 ½ in 2020 or later, you should take your first RMD by April 1 of the year after you turn 72. All subsequent ones must be taken by December 31 of each year.

This generally applies to the original owner of a traditional IRA, SIMPLE IRA, SEP IRA or a retirement plan, such as a 401(k) or 403(b). Roth IRAs do not have RMDs.

The RMD is taxed as ordinary income, with a top tax rate of 37% for 2021 and 2022.

An account owner who delays the first RMD will have to take two distributions in one year. For instance, a taxpayer who turns 72 in March 2021 has until April 1, 2022, to take his first RMD. But he’ll have to take his second RMD by December 31, 2022.

Taking two RMDs in one year can have important tax implications. This could push you into a higher tax bracket, meaning a larger portion of your Social Security income could be subject to taxes, or you could also end up paying more for Medicare Part B or Part D.

To determine the best time to take your first RMD, compare your tax bills under two scenarios: taking the first RMD in the year you hit 72, and delaying until the following year and doubling up RMDs.

How to Calculate RMDs

To calculate your RMD, divide your year-end account balance from the previous year by the IRS life-expectancy factor based on your birthday in the current year.

If you own multiple IRAs, you need to calculate the RMD for each account, but you can take the total RMD from just one IRA or any combination of IRAs. For instance, if you have an IRA that’s smaller than your total RMD, you can empty out the small IRA and take the remainder of the RMD from a larger IRA.

A retiree who owns 401(k)s at age 72 is subject to RMDs on those accounts, too. But unlike IRAs, if you own multiple 401(k)s, you must calculate and take each 401(k)’s RMD separately.

You can take your annual RMD in a lump sum or piecemeal, perhaps in monthly or quarterly payments. Delaying the RMD until year-end, however, gives your money more time to grow tax-deferred. Either way, be sure to withdraw the total amount by the deadline.

Penalties for Missing RMD Deadlines

What happens if you miss the deadline? You could get hit with one of Uncle Sam’s harshest penalties—50% of the shortfall. If you were supposed to take out $15,000 but only took $11,000, for example, you’d owe a $2,000 penalty plus income tax on the shortfall.

But this harshest of penalties may be forgiven—if you ask for relief—and the IRS is known to be relatively lenient in these situations. You can request relief by filing Form 5329, with a letter of explanation including the action you took to fix the mistake.

One way to avoid forgetting: Ask your IRA custodian to automatically withdraw RMDs.

Work Waiver for RMDs

There are a number of instances where you can reduce RMDs—or avoid them altogether. If you are still working beyond age 72 and don’t own 5% or more of the company, you can avoid taking RMDs from your current employer’s 401(k) until you retire.

However, you would still need to take RMDs from old 401(k)s you own. But there is a workaround for that. If your current employer’s 401(k) allows for money to be rolled into the plan, you could do that. Doing that means you won’t need to take an RMD from a 401(k) until you actually retire. (You would still need to take RMDs from any traditional IRAs.)

Rollover to a Roth Account to Avoid RMDs

For those who own Roth 401(k)s, there’s a no-brainer RMD solution: Roll the money into a Roth IRA, which has no RMDs for the original owner. Assuming you are 59½ or older and have owned at least one Roth IRA for at least five years, the money rolled to the Roth IRA can be tapped tax-free.

Another solution to avoid RMDs would be to convert traditional IRA money to a Roth IRA. You will owe tax on the conversion at your ordinary income tax rate. But lowering your traditional IRA balance reduces its future RMDs, and the money in the Roth IRA can stay put as long as you like.

Converting IRA money to a Roth is a great strategy to start early, but you can do conversions even after you turn 72, though you must take your RMD first. Then you can convert all or part of the remaining balance to a Roth IRA. You can smooth out the conversion tax bill by converting smaller amounts over a number of years.

This can help you prevent paying more in taxes in the future. For instance, while traditional IRA distributions count when calculating taxation of Social Security benefits and Medicare premium surcharges for high-income taxpayers, Roth IRA distributions do not. And if you need extra income unexpectedly, tapping your Roth won’t increase your taxable income.

Consider a Qualified Longevity Annuity Contract

A qualified longevity annuity contract, or QLAC, is an option to lower RMDs and defer the related taxes. You can carve out up to $130,000 or 25% of your retirement account balance, whichever is less, and invest that money in this special type of deferred income annuity. Compared with an immediate annuity, a QLAC requires a smaller upfront investment for larger payouts that start years later. The money invested in the QLAC is no longer included in the IRA balance and is not subject to RMDs. Payments from the QLAC will be taxable, but because it is longevity insurance, those payments won’t kick in until about age 85.

Another carve-out strategy applies to 401(k)s. If your 401(k) holds company stock, you could take advantage of a tax-saving opportunity known as net unrealized appreciation. You roll all the money out of the 401(k) to a traditional IRA, but move the employer stock to a taxable account. You will immediately pay ordinary income tax on the cost basis of the employer stock. You will also still have RMDs from the traditional IRA, but they will be lower since you removed the company stock from the mix. And any profit from selling the shares in the taxable account now qualifies for lower long-term capital-gains tax rates.

The Younger Spouse Rule

In the beginning of this story, we gave you the standard RMD calculation that most original owners will use—but original owners with younger spouses can trim their RMDs. If you are married to someone who is more than 10 years younger, divide your year-end account balance by the IRS life-expectancy factor at the intersection of your age and your spouse’s age in Table II of IRS Publication 590-B.

Pro Rata Payout for RMDs

If you can’t reduce your RMD, you may be able to reduce the tax bill on the RMD—that is, if you have made and kept records of nondeductible contributions to your traditional IRA. In that case, a portion of the RMD can be considered as coming from those nondeductible contributions—and will therefore be tax-free.

Figure the ratio of your nondeductible contributions to your entire IRA balance. For example, if your IRA holds $200,000 with $20,000 of nondeductible contributions, 10% of a distribution from the IRA will be tax-free. Each time you take a distribution, you’ll need to recalculate the tax-free portion until all the nondeductible contributions have been accounted for.

Reinvest Your RMD

If you can’t reduce or avoid your RMD, look for ways to make the most of that required distribution. You can build the RMD into your cash flow as an income source. But if your expenses are covered with other sources, such as Social Security benefits and pension payouts, put those distributions to work for you.

While you can’t reinvest the RMD in a tax-advantaged retirement account, you can stash it in a deposit account or reinvest it in a taxable brokerage account. If your liquid cash cushion is sufficient, consider tax-efficient investing options, such as municipal bonds. Index funds don’t throw off a lot of capital gains and can help keep your future tax bills in check.

Make an In-Kind Transfer of Your RMD

Remember that the RMD doesn’t have to be in cash. You can ask your IRA custodian to transfer shares to a taxable brokerage account. So you could move $10,000 worth of shares over to a brokerage account to satisfy a $10,000 RMD. Be sure the value of the shares on the date of the transfer covers the RMD amount. The date of transfer value serves as the shares’ cost basis in the taxable account.

The in-kind transfer strategy is particularly useful when the market is down. You avoid locking in a loss on an investment that may be suffering a temporary price decline. But the strategy is also useful when the market is in positive territory if you feel the investment will continue to grow in value in the future, or if it’s an investment that you just can’t bear to sell. In any case, if the investment falls in value while in the taxable account, you could harvest a tax loss.

Donate Your RMD to Charity

If you are charitably inclined, consider a qualified charitable distribution, or QCD. This move allows IRA owners age 70½ or older to transfer up to $100,000 directly to charity each year. The QCD can count as some or all of the owner’s RMD, and the QCD amount won’t show up in adjusted gross income.

The QCD is a particularly smart move for those who take the standard deduction and would miss out on writing off charitable contributions. But even itemizers can benefit from a QCD. Lower adjusted gross income makes it easier to take advantage of certain deductions, such as the write-off for medical expenses that exceed 7.5% of AGI in 2020. Because the QCD’s taxable amount is zero, the move can help any taxpayer mitigate tax on Social Security or surcharges on Medicare premiums.

Say your RMD is $20,000. You could transfer the whole $20,000 to charity and satisfy your RMD while adding $0 to your AGI. Or you could do a nontaxable QCD of $15,000 and then take a taxable $5,000 distribution to satisfy the RMD.

The first dollars out of an IRA are considered to be the RMD until that amount is met. If you want to do a QCD of $10,000 that will count toward a $20,000 RMD, be sure to make the QCD move before taking the full RMD out.

Of course, you can do QCDs in excess of your RMD up to that $100,000 limit per year.

Use Your RMD to Pay Your Taxes

You can also use your RMD to simplify tax payments. With the “RMD solution,” you can ask your IRA custodian to withhold enough money from your RMD to pay your entire tax bill on all your income sources for the year. That saves you the hassle of making quarterly estimated tax payments and can help you avoid underpayment penalties.

Because withholding is considered to be evenly paid throughout the year, this strategy works even if you wait to take your RMD in December. By waiting until later in the year to take the RMD, you’ll have a better estimate of your actual tax bill and can fine-tune how much to withhold to cover that bill.

Source: kiplinger.com

November 24, 2021

6 Budget Friendly Ways to Support Small Businesses

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When it comes to helping out small businesses, cash is king. The best way to make sure your local mom-and-pop bookstore or coffee shop stays in business is by shopping there as possible.

But for those of us on a budget, extravagant spending sprees aren’t always an option. So let’s take a look at some budget-friendly strategies to support your favorite small businesses.

Write Positive Reviews

During the height of the Covid-19 pandemic, one of my favorite local restaurants requested that customers leave positive reviews on Google and Yelp. Several people had recently left negative reviews, complaining about the restaurant’s mask policy. These negative reviews were dragging down their rating average.

I went online, left a five-star review and noticed that several other people had also left positive reviews. Pretty soon, their average rating was higher than it had ever been. Posting positive reviews can have huge implications for a small business to attract more visitors, especially if they’ve just opened.

If you want to support your favorite businesses without dropping massive amounts of cash, leave a review on Google, Yelp, Facebook and TripAdvisor. If you’re reviewing a restaurant, you can also go to delivery apps like DoorDash, GrubHub and PostMates to leave a review there as well.

Search for the business on Google and see where they’re listed, then post a review on as many of those platforms as possible. For example, if you bought a pair of earrings from a local maker at a craft fair, find their Etsy site and leave a review.

Make sure to be descriptive and post pictures if possible. Encourage your friends, neighbors and coworkers to also leave reviews. In a time when many small businesses are struggling to stay afloat, a few positive reviews can make a huge difference.

Share on Social Media

When you buy something from a small business, one of the best things you can do is to post a photo of the item and tag them on social media. This strategy may encourage your followers to check out the small business, follow them and even buy something.

You can try this out even if it’s been weeks or months since you purchased something. For example, if you bought a novel at your local bookstore, post a picture of you with a caption like, “Just finished this amazing book. Thanks to My Local Bookstore for always having my favorite authors in stock!”

Sometimes a business will even offer you a special coupon if you tag them, so it can help you save money on your next purchase. Not every business will offer a discount so don’t expect a special reward, but every once and awhile you may get a nice surprise or thank you from the business.

Interact with Their Social Media

Social media platforms like Facebook and Instagram don’t show posts in a linear order. They only show them based on relevancy. If Instagram thinks you won’t like a post, they may not show it to you.

Unfortunately, social media algorithms can make it hard for small businesses, especially new ones, to gain new followers. It’s much harder for them to successfully advertise if potential customers don’t see their posts.

One of the best ways to help a small business for free is to interact with them on social media. Regularly engaging with a business will show the social media algorithms that their posts deserve to be shown to more people.

You can engage by following the account, liking their posts, leaving a comment, tagging friends, watching their videos and more. Find out which social channels your favorite business uses and follow them on all of those sites.

Mention this strategy to others, because the more people that engage, the more traffic will be driven to their posts.

Answer Google Review Questions

If you ever look at Google Reviews, you may see questions from users about local businesses. If you know the answer, you can respond to the question and help drive more customers to that business. For example, if someone asks if a restaurant offers vegan entrees, you can respond if you know the answer.

Replying to these questions may seem trivial, but it spreads more information about the business and makes hesitant customers more likely to give them a try. At the very least, it can prevent the kind of unnecessary confusion that ultimately leads to a negative review.

Buy Gift Certificates

If you want to support small businesses but don’t need anything from them right now, you can buy a gift card to use later on. Before doing this, make sure their gift certificates don’t have a strict expiration date.

If you’re shopping for a friend’s bridal shower, birthday or baby shower, consider getting them a gift certificate to a small business. With the holidays coming up, you can even implement this strategy with your loved ones. They may actually appreciate the chance to pick out their own gift.

Offer Help

One of the best ways to help a small business is to volunteer your time. For example, if you’re a graphic designer, you could ask if they have design needs. Make it clear you don’t expect to be paid for your work, though they may offer you a gift card or store credit in exchange.

Sometimes you don’t even need to have special skills. Recently, a local record store needed help moving boxes from its basement to a storage unit. Anyone could come and help, and it was a free way to support the business.

What are your favorite ways to support small businesses? Let us know below in the comments!

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Source: mint.intuit.com

November 24, 2021

Money Personality Quiz: Learn How Your Beliefs Affect Your Budget

Take this money personality quiz to learn how your subconscious beliefs about money impact your day-to-day spending decisions.

Ted Klontz knew he should save for retirement. He claimed he wanted to save, and he even hired a financial advisor to help him create a plan. But when the time came to direct funds into his retirement account, he didn’t do it.

Frustrated with himself, Klontz—researcher, author and co-founder of the Financial Psychology Institute^®—asked a friend for advice. The friend asked what retirement would mean for Klontz, and he instantly responded: It means you quit.

“In my family history, people who retired never did anything related to their entire work career—that part of their life just stopped. I loved what I was doing and couldn’t imagine ever quitting,” Klontz says.

After saying it out loud, Klontz, who has a doctorate in psychology, realized what had been holding him back. His internalized beliefs about retirement didn’t reflect his true vision for his future, but they shaped his actions in the present. By making that realization, he was able to imagine his dream retirement. In that dream, he would do work that inspired him, complete it on his schedule and live where he wanted to live.

Once this vision was clear to Klontz, he began catching up on his retirement savings. He put a plan together for selling his business so he could create the retirement he imagined for himself and his family.

“Evolving my belief about retirement shifted everything for me,” he says. “Sometimes those massive changes happen just by getting another piece of information, either from inside you or from somebody from the outside.”

Try this money personality quiz

A desire to understand how money shapes people’s beliefs and actions has informed the last 25 years of Klontz’s career. He has come to realize the importance of decoding people’s money beliefs—the subconscious ideas, typically learned in childhood, that drive their actions. Along with a team of researchers, he has developed a rigorous assessment to help people determine which money belief they are most impacted by.

What’s your money personality? Uncover how your own beliefs are shaping your financial behaviors by taking this money personality quiz, inspired by Klontz’s research.

Let’s explore why it’s important to understand your money beliefs and dive into the most common financial personalities:

What’s the value of knowing your money personality?

As a leader in the emerging discipline of financial psychology, Klontz—along with others in his field—has made the case that in order to improve your financial outlook, you need to understand your underlying financial beliefs.

Once you understand what your financial personality is, you can begin to change your behaviors, whether that’s your everyday spending habits or your long-term savings plan, Klontz says.

“The best financial plan, or the best investment advice in the world, isn’t a substitute for understanding one’s own relationship with money,” says Deborah Price, CEO and founder of The Money Coaching Institute and author of “Money Magic: Unleashing Your True Potential for Prosperity and Fulfillment.”

Understanding your relationship with money means digging deep into your money patterns and behaviors as well as what you learned growing up, where most behaviors are formed, Price says. The problem is that many people have blind spots and cannot easily understand these dynamics without guidance and support, she adds.

Maybe you say you are focused on building up your emergency savings, but you still overspend on clothes or travel instead of diverting that cash to your emergency fund. Or perhaps you want to prioritize saving for long-term financial goals, but you’re leaving extra cash in your checking account instead of transferring it over to your online savings account.

Learning to understand your financial behaviors can help you to spot ways in which you may unconsciously undermine your best efforts to improve your financial life, such as by saving or investing, Price says.

As you learn what your financial personality is and reflect on what type of spender you are, you can begin to understand why you spend a certain way, even though you say you want to do otherwise.

You can also transform your beliefs into steps that will help you manage your finances.

Uncover the most common financial personalities

It’s this gulf—the difference between what people say and what they do—that has motivated Klontz in his research over the years. He has worked with fellow researchers to collect data from thousands of people to analyze their subconscious beliefs about money. From that data, Klontz says they identified four primary financial behavioral patterns.

No one person will match one of these belief systems 100%. But by learning about the attributes of the common financial personalities, you can reveal your own tendencies and be able to answer the question: What’s my financial personality?

Here’s a rundown on these four behavioral patterns. You can see which one resonates with you by taking the money personality quiz above.

Money Avoidance

People with this pattern tend to believe money itself is bad and that people with too much money are ostentatious, Klontz says. “They don’t even bring the subject of money up,” Klontz adds. Money Avoidance may also mean not checking in on your bank account and avoiding a regular review of your bills, Klontz says. If you’re this type of spender and saver, you may believe there’s virtue in living with less money.

Money Worship

If you relate to Money Worship, you may feel that more money will mean greater happiness, Klontz says. You might believe that money can help solve the problems you encounter. Someone with this trait may be wary of other people managing their money. This type of spender is also more likely to carry credit card debt if they are spending to find fulfillment.

Money Status

With this pattern, people connect their self-worth with their financial success, Klontz says. While there are similarities with Money Worship, people with this trait focus more energy on outward displays of wealth. This type of spender may buy more than they can afford as a result.

Money Vigilance

Money Vigilance is defined as being careful about finances and being focused on saving. These beliefs can lead to positive behaviors, such as saving for a rainy day and planning for your financial future. At the same time, however, this type of spender may be anxious about money, Klontz says, and potentially even embarrassed by their financial success. These feelings may limit their ability to enjoy the benefits of financial security.

Learn which type of spender you are with a money personality quiz.

Tap into your own money personality to reach your goals

As you examine your deep-seated beliefs about money, you’ll learn a lot about yourself and be able to answer: What is your financial personality? This process will help you understand what type of spender you are today, and also shape how you spend and save for your future.

Once you’ve taken the money personality quiz, continue your journey with a financial vision board, which can help you align your financial decisions to your priorities in life.

Learn how creating a financial vision board can empower you to realize your major life goals—and even have some fun along the way.

Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.

This content is for illustrative and informational purposes only and may not apply to your individual circumstances.

Source: discover.com

November 23, 2021

12 Best Monthly Dividend Stocks and Funds to Buy for 2022

For all the changes we’ve experienced in recent years, some things remain regrettably the same. We all have bills to pay, and those bills generally come monthly. Whether it’s your mortgage, your car payment or even your regular phone and utility bills, you’re generally expected to pay every month.

While we’re in our working years, that’s not necessarily a problem, as paychecks generally come every two weeks. And even for those in retirement, Social Security and (if you’re lucky enough to have one) pension payments also come on a regular monthly schedule. But unfortunately, it doesn’t work that way in our investment portfolios.

That’s where monthly dividend stocks come into play.

Dividend-paying stocks generally pay quarterly, and most bonds pay semiannually, or twice per year. This has a way of making portfolio income lumpy, as dividend and interest payments often come in clusters.

Well, monthly dividend stocks can help smooth out that income stream and better align your inflows with your outflows.

“We’d never recommend buying a stock purely because it has a monthly dividend,” says Rachel Klinger, president of McCann Wealth Strategies, an investment adviser based in State College, Pennsylvania. “But monthly dividend stocks can be a nice addition to a portfolio and can add a little regularity to an investor’s income stream.”

Today, we’re going to look at 12 of the best monthly dividend stocks and funds to buy as we get ready to start 2022. You’ll see some similarities across the selections as monthly dividend stocks tend to be concentrated in a small handful of sectors such as real estate investment trusts (REITs), closed-end funds (CEFs) and business development companies (BDCs). These sectors tend to be more income-focused than growth-focused and sport yields that are vastly higher than the market average.

But in a market where the yield on the S&P 500 is currently 1.25%, that’s certainly welcome.

The list isn’t particularly diversified, so it doesn’t make a complete portfolio. In other words, you don’t want to overload your portfolio with monthly dividend stocks. But they do allow exposure to a handful of niche sectors that add some income stability, so take a look and see if any of these monthly payers align with your investment style.

Data is as of Nov. 21. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Fund discount/premium to NAV and expense ratio provided by CEF Connect.

1 of 12

Realty Income

Market value: $40.1 billion
Dividend yield: 4.2%

Perhaps no stock in history has been more associated with monthly dividends than conservative triple-net retail REIT Realty Income (O, $70.91). The company went so far as to trademark the “The Monthly Dividend Company” as its official nickname.

Realty Income is a stock, of course, and its share price can be just as volatile as any other stock. But it’s still as close to a bond as you’re going to get in the stock market. It has stable recurring rental cash flows from its empire of more than 7,000 properties spread across roughly 650 tenants.

Realty Income focuses on high-traffic retail properties that are generally recession-proof and, perhaps more importantly, “Amazon.com-proof.” Perhaps no business is completely free of risk of competition from Amazon.com (AMZN) and other e-commerce titans, but Realty Income comes close.

Its largest tenants include 7-Eleven, Walgreens Boots Alliance (WBA), FedEx (FDX) and Home Depot (HD), among others. The portfolio had relatively high exposure to gyms and movie theaters, which made the pandemic painful. But as the world gets closer to normal with every passing day, Realty Income’s COVID-19 risk gets reduced that much more.

At current prices, Realty Income yields about 4.2%. While that’s not a monster yield, remember that the 10-year Treasury yields only 1.6%.

It’s not the raw yield we’re looking for here, but rather income consistency and growth. As of this writing, Realty Income has made 616 consecutive monthly dividend payments and has raised its dividend for 96 consecutive quarters – making it a proud member of the S&P 500 Dividend Aristocrats. Since going public in 1994, Realty Income has grown its dividend at a compound annual growth rate of 4.5%, well ahead of inflation.

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Stag Industrial

Market value: $7.6 billion
Dividend yield: 3.4%

Realty Income was pretty darn close to “Amazon.com-proof.” But fellow monthly payer STAG Industrial (STAG, $42.77) proactively benefits from the rise of internet commerce.

STAG invests in logistics and light industrial properties. You know those gritty warehouse properties you might see near the airport with 18-wheelers constantly coming and going? That’s exactly the kind of property that STAG buys and holds.

It’s a foregone conclusion that e-commerce is growing by leaps and bounds, and STAG is positioned to profit from it. Approximately 40% of STAG’s portfolio handles e-commerce fulfillment or other activity, and Amazon.com is its largest tenant.

E-commerce spiked during the pandemic for obvious reasons. As stores have reopened, the effects of that spike have dissipated somewhat, but the trend here is clear. We’re making a larger percentage of our purchases online.

Yet there’s still plenty of room for growth. As crazy as this might sound, only about 15% of retail sales are made online, according to Statista. Furthermore, the logistical space is highly fragmented, and Stag’s management estimates the value of their market to be around $1 trillion. In other words, it’s unlikely STAG will be running out of opportunities any time soon.

STAG isn’t sexy. But it’s one of the best monthly dividend stocks to buy in 2022, with a long road of growth in front of it. And its 3.4% yield is competitive in this market.

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Gladstone Commercial

Market value: $838.2 million
Dividend yield: 6.7%

For another gritty industrial play, consider the shares of Gladstone Commercial (GOOD, $22.49). Gladstone Commercial, like STAG, has a large portfolio of logistical and light industrial properties. Approximately 48% of its rental revenues come from industrial properties with another 48% coming from office properties. The remaining 4% is split between retail properties, at 3%, and medical offices at 1%.

It’s a diversified portfolio that has had little difficulty navigating the crazy volatility of the past few years. As of Sept. 30, 2021, the REIT had a portfolio of 127 properties spread across 27 states and leased to 109 distinct tenants. In management’s own words, “We have grown our portfolio 18% per year in a consistent, disciplined manner since our IPO in 2003. Our occupancy stands at 97.7% and has never dipped below 95.0%.”

That’s not a bad run.

Gladstone Commercial has also been one of the most consistent monthly dividend stocks, paying one uninterrupted since January 2005. GOOD currently yields an attractive 6.7%.

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EPR Properties

Market value: $3.7 billion
Dividend yield: 6.1%

The COVID-19 pandemic was rough on a lot of landlords. But few were as uniquely battered as EPR Properties (EPR, $49.21). EPR owns a diverse and eclectic portfolio of movie theaters, amusement parks, ski parks, “eat and play” properties like Topgolf, and a host of others.

EPR specializes in experiences over things … which is just about the worst way to be positioned at a time when social distancing was the norm. Essentially every property EPR owned was closed for at least a time, and crowds still haven’t returned to pre-COVID levels across much of the portfolio.

But the key here is that the worst is long behind EPR Properties, and the more normal life becomes, the better the outlook for EPR’s tenants.

EPR was a consistent dividend payer and raiser pre-pandemic. But with its tenants facing an existential crisis, the REIT cut its dividend in 2020. With business conditions massively improving in 2021, EPR reinstated its monthly dividend in July, and the shares now yield an attractive 6.1%. If you believe in life after COVID, EPR is one of the best monthly dividend stocks to play it.

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LTC Properties

Market value: $1.3 billion
Dividend yield: 6.7%

For one final “traditional” REIT, consider the shares of LTC Properties (LTC, $34.24).

LTC faces some short-term headwinds due to the lingering effects of the pandemic, but its longer-term outlook is bright. LTC is a REIT with a portfolio roughly split equally between senior living properties and skilled nursing facilities.

Needless to say, COVID-19 was hard on this sector. Nursing homes were particularly susceptible to outbreaks, and nursing home residents were at particularly high risk given their age.

Senior living properties are different in that the tenants are generally younger and live independently without medical care. But a lot of would-be tenants were reluctant to move out of their homes and into a more densely populated building during a raging pandemic. And many still are.

These lingering effects won’t disappear tomorrow. But ultimately, senior living facilities offer an attractive, active lifestyle for many seniors, and that hasn’t fundamentally changed. And home care might be a viable option for many seniors in need of skilled nursing. Ultimately there comes a point where there are few alternatives to the care of a nursing home.

Importantly, the longer-term demographic trends here are all but unstoppable. The peak of the Baby Boomer generation are in their early-to-mid-60s today, far too young to need long-term care. But over the course of the next two decades, demand will continue to build as more and more boomers age into the proper age bracket for these services.

At 6.7%, LTC is one of the higher-yielding monthly dividend stocks on this list.

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AGNC Investment

couple going over financials with mortgage broker

Market value: $8.4 billion
Dividend yield: 9.0%

AGNC Investment (AGNC, $15.98) is a REIT, strictly speaking, but it’s very different from the likes of Realty Income, STAG or any of the others covered on this list of monthly dividend stocks. Rather than own properties, AGNC owns a portfolio of mortgage securities. This gives it the same tax benefits of a REIT – no federal income taxes so long as the company distributes at least 90% of its net income as dividends – but a very different return profile.

Mortgage REITs (mREITs) are designed to be income vehicles with capital gains not really much of a priority. As such, they tend to be monster yielders. Case in point: AGNC yields 9%.

Say “AGNC” out loud. It sounds a lot like “agency,” right?

There’s a reason for that. AGNC invests exclusively in agency mortgage-backed securities, meaning bonds and other securities issued by Fannie Mae, Freddie Mac, Ginnie Mae or the Federal Home Loan Banks. This makes it one of the safest plays in this space.

And here’s a nice kicker: AGNC almost always trades at a premium to book value, which makes sense. You and I lack the capacity to replicate what AGNC does in house and lack access to financing on the same terms. Those benefits have value, which show up in a premium share price. Yet today, AGNC trades at a 9% discount to book value. That’s a fantastic price for the stock in this space.

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Dynex Capital

Market value: $640.6 million
Dividend yield: 8.9%

Along the same lines, let’s take a look at Dynex Capital (DX, $17.47). Like AGNC, Dynex is a mortgage REIT, though its portfolio is a little more diverse. Approximately 85% of its portfolio is invested in agency residential mortgage-backed securities – bonds made out of the mortgages of ordinary Americans – but it also has exposure to commercial mortgage-backed securities and a small allocation to non-agency securities.

It’s important to remember that the mortgage REIT sector was eviscerated by the COVID-19 bear market. When the world first went under lockdown, it wasn’t immediately clear that millions of Americans would be able to continue paying their mortgages, which led investors to sell first and ask questions later. In the bloodbath that followed, many mortgage REITs took catastrophic losses and some failed altogether.

Dynex is one of the survivors. And frankly, any mortgage REIT that could survive the upheaval of 2020 is one that can likely survive the apocalypse. Your risk of ruin should be very modest here.

Dynex trades at a slight discount to book value and sports a juicy 8.9% yield. We could see some volatility in the space if the Fed ever gets around to raising rates, but for now this looks like one of the best monthly dividend stocks to buy if you’re looking to really pick up some yield.

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Broadmark Realty

Market value: $1.3 billion
Dividend yield: 8.6%

Broadmark Realty (BRMK, $9.75) isn’t a “mortgage REIT,” per se, as it doesn’t own mortgages or mortgage-backed securities. But it does something awfully similar. Broadmark manages a portfolio of deed of trust loans for the purpose of funding development or investment in real estate.

This is a little different than AGNC or Dynex. These mortgage REITs primarily trade standardized mortgage-backed securities. Broadmark instead deals with the less-liquid world of construction loans.

Still, BRMK runs a conservative book. The weighted average loan-to-value of its portfolio is a very modest 60%. In other words, Broadmark would lend no more than $60,000 for a property valued at $100,000. This gives the company a wide margin of error in the event of a default by a borrower.

At current prices, Broadmark yields an attractive 8.6%. The company initiated its monthly dividend in late 2019 and sailed through the pandemic with no major issues.

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Main Street Capital

Market value: $3.2 billion
Dividend yield: 5.5%

We know that the pandemic hit Main Street a lot harder than Wall Street. It is what it is.

But what about business development companies. This is where the proverbial Main Street means the proverbial Wall Street. BDCs provide debt and equity capital mostly to middle-market companies. These are entities that have gotten a little big to get financing from bank loans and retained earnings but aren’t quite big enough yet to warrant a stock or bond IPO. BDCs exist to bridge that gap.

The appropriately named Main Street Capital (MAIN, $46.61) is a best-in-class BDC based in Houston, Texas. The last two years were not particularly easy for Main Street’s portfolio companies, as many smaller firms were less able to navigate the lockdowns. But the company persevered, and its share price recently climbed above its pre-pandemic highs.

Main Street has a conservative monthly dividend model in that it pays a relatively modest monthly dividend, but then uses any excess earnings to issue special dividends twice per year. This keeps Main Street out of trouble and prevents it from suffering the embarrassment of a dividend cut in years where earnings might be temporarily depressed.

As far as monthly dividend stocks go, Main Street’s regular payout works out to a respectable 5.6%, and this does not include the special dividends.

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Prospect Capital

Market value: $3.5 billion
Dividend yield: 8.0%

For another high-yielding, monthly-paying BDC, consider the shares of Prospect Capital (PSEC, $8.97).

Like most BDCs, Prospect Capital provides debt and equity financing to middle-market companies. The company has been publicly traded since 2004, so it’s proven to be a survivor in what has been a wildly volatile two decades.

Prospect Capital is objectively cheap, as it trades at just 89% of book value. Book value itself can be somewhat subjective, of course. But the 11% gives us a good degree of wiggle room. It’s safe to say the company, even under conservative assumptions, is selling for less than the value of its underlying portfolio. It also yields a very healthy 8.0%.

As a general rule, insider buying is a good sign. When the management team is using their own money to buy shares, that shows a commitment to the company and an alignment of interests. Well, over the course of the past two years, the management team bought more than 29 million PSEC shares combined. These weren’t stock options or executive stock grants. These are shares that the insiders bought themselves in their brokerage accounts.

That’s commitment.

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Ecofin Sustainable and Social Impact Term Fund

Assets under management: $269.7 million
Distribution Rate: 6.0%*
Discount/premium to NAV: -14.3%
Expense ratio: 2.28%**

There’s something to be said for orphan stocks. There are certain stocks or funds that simply don’t have a “normal” go-to buying clientele.

As a case in point, consider the Ecofin Sustainable and Social Impact Term Fund (TEAF, $15.00). This is a fund that straddles the divide between traditional energy infrastructure like pipelines and green energy projects like solar panels. It also invests in “social impact” sectors like education and senior living. Approximately 68% of the portfolio is dedicated to sustainable infrastructure with energy infrastructure and social impact investments making up 13% and 19%, respectively.

But this isn’t the only way the fund is eclectic. It’s also a unique mixture of public and private investments. 52% is invested in publicly traded stocks with the remaining 48% invested in private, non-traded companies.

Is it any wonder that Wall Street has no idea what to do with this thing?

This lack of obvious buying clientele helps to explain why the fund trades at a large discount to net asset value of 15%.

That’s okay. We can buy this orphan stock, enjoy its 6% yield, and wait for that discount to NAV to close. And close it will. The fund is scheduled to liquidate in about 10 years, meaning the assets will be sold off and cash will be distributed to investors. Buying and holding this position at a deep discount would seem like a no-brainer of a strategy.

Learn more about TEAF at the Ecofin provider site.

* Distribution rate is an annualized reflection of the most recent payout and is a standard measure for CEFs. Distributions can be a combination of dividends, interest income, realized capital gains and return of capital.

** Includes 1.50% in management fees, 0.28% in other expenses and 0.50% in interest expenses.

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BlackRock Municipal 2030 Target Term

Assets under management: $1.9 billion
Distribution rate: 2.9%
Discount/premium to NAV: -4.6%
Expense ratio: 1.01%**

We’ll wrap this up with another term fund, the BlackRock Municipal 2030 Target Term Fund (BTT, $25.49).

As its name suggests, the fund is designed to be liquidated in 2030, roughly eight years from now. A lot can happen in eight years, of course. But buying a portfolio of safe municipal bonds trading at a more than 4% discount to book value would seem like a smart move.

The biggest selling point of muni bonds is, of course, the tax-free income. The bond interest isn’t subject to federal income taxes. And while city, state and local bonds aren’t “risk free” – only the U.S. government can make that claim – defaults and financial distress in this space is rare. So, you’re getting a safe, tax-free payout. That’s not too shabby.

As of Oct. 29, 2021, BTT’s portfolio was spread across 633 holdings with its largest holding accounting for about 3.4%.

BTT sports a dividend yield of 2.9%. That’s not “high yield” by any stretch of the imagination. But remember, the payout is tax free, and if you’re in the 37% tax bracket, your tax-equivalent yield is a much more palatable 4.6%.

Learn more about BTT at the BlackRock provider site.

** Includes 0.40% in management fees, 0.61% in interest and other expenses

Source: kiplinger.com

November 20, 2021

Biden Tax Plan Passed by House: How the Build Back Better Act Could Affect Your Tax Bill

President Biden’s “Build Back Better” social spending and tax bill is slowly working its way through Congress. It was just passed by the House of Representatives and is now on its way to the Senate. While there’s still plenty of political wrangling to come, and additional changes are expected in the Senate, we now have a better sense of where the Democrats are headed with this budget reconciliation bill. The president’s plan calls for sharp spending increases for a wide variety of social programs that would impact childcare, health care, higher education, climate change, and more. The package also contains a number of tax law changes that would boost taxes for some people and cut them for others.

How might these changes affect your future income tax bills if the Build Back Better Act ultimately becomes law? First, the proposed legislation calls for higher taxes and fewer tax breaks for the wealthy. That’s no surprise, because Biden and Congressional Democrats have said for months that they want to make the rich pay their “fair share” of taxes and use the additional revenue to strengthen the social safety net. The bill would also extend enhancements to certain tax credits for lower- and middle-income families. These enhancements were designed to help ordinary Americans pay for some of the day-to-day expenses they incur. There are also new or improved tax breaks for higher education costs, clean energy initiatives, and expenses paid by certain workers.

At this point, it’s impossible to say which (if any) of the proposed tax law changes will survive and be enacted into law. Additional tax provisions could be added later, too. Nothing is set in stone yet. However, smart taxpayers will get up-to-speed on the Build Back Better bill’s tax proposals now, so they’re prepared if/when they make it through the legislative process. To get you started, we’ve identified some of the most common ways the Build Back Better plan could either raise or lower your taxes. After all, what you know now could save you big bucks down the road.

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Imposing a Surtax on Wealthy Americans

picture of young rich couple outside their home

Negotiations over how to pay for the planned social spending provisions were contentious at times. There always seemed to be general agreement among the president and most Congressional Democrats that higher taxes on the wealthiest Americans should be part of the plan. But nailing down exactly how to tax them proved to be difficult. The Democrats bounced back and forth between a laundry list of proposals, including raising the top income tax rate, taxing capital gains at ordinary rates, eliminating stepped-up basis on inherited property, and a “billionaires tax” on the value of unsold assets.

The Build Back Better plan passed by the House settles on a “surtax” on millionaires and billionaires starting in 2022. The extra tax would equal 5% of modified adjusted gross income from $10 million to $25 million ($5 million to $12.5 million for married taxpayers filing a separate return). It would then jump to 8% for modified AGI above $25 million ($12.5 million for married taxpayers filing separately). Modified AGI would mean regular AGI reduced by any deduction allowed for investment interest.

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Expanding the Surtax on Net Investment Income

picture of three stock traders looking at computer screens

In addition to the capital gains tax, wealthier Americans may also be hit with an additional 3.8% surtax on net investment income (NII includes, among other things, taxable interest, dividends, gains, passive rents, annuities, and royalties.) This surtax only applies if you’re a single or head-of-household filer with a modified AGI over $200,000, a joint filer with a modified AGI over $250,000, or a married person filing a separate return with a modified AGI over $125,000.

Starting in 2022, the Build Back Better Act would expand the surtax to cover net investment income derived in the ordinary course of a trade or business for single or head-of-household filer with a modified AGI over $400,000, a joint filer with a modified AGI over $500,000, or a married person filing a separate return with a modified AGI over $250,000.

The legislation also clarifies that the surtax doesn’t apply to wages on which Social Security and Medicare payroll taxes (i.e., FICA taxes) are already imposed.

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Permanently Disallowing Excess Business Loss Deduction

picture of worried businessman looking at negative charts and graphs

Another provision in the Build Back Better Act to limit business loss deductions would heap more taxes (mostly) on the rich. Under current law, non-corporate business owners can’t deduct losses exceeding $250,000 ($500,000 for joint filers) on Schedule C. Any excess losses can be treated as a net operating loss in later tax years, though.

This business loss limitation rule is currently set to expire in 2027. However, under the Build Back Better Act, the rule would be made permanent retroactively beginning with the 2021 tax year. In addition, the legislation would only allow excess losses to be treated as a deduction for the next tax year and repeal the limit on excess farm losses by farmers who received certain subsidies.

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Denying Tax Break for Sale of Small Business Stock by Wealthy Taxpayers

President Biden’s proposal would also choke off a tax break for higher-income Americans who invest in small businesses. Currently, there’s no tax on any gain from the sale or exchange of certain small business stock if you acquired the stock after September 27, 2010, and held it for more than five years. (For qualifying stock acquired from February 18, 2009, to September 27, 2010, 75% of the gain is tax-free.)

The Build Back Better Act would deny wealthier investors this tax break. Under the bill, the exclusion from gross income generally wouldn’t be allowed for gains from the sale or exchange of qualified small business stock after September 13, 2021, if your modified AGI is $400,000 or more. There would be one exception, though. The new rule wouldn’t apply to any sale or exchange made pursuant to a written binding contract that was in effect on September 13, 2021, and not modified in any material respect after that date.

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Curbing Mega-IRAs, Backdoor Roths and Other Retirement Savings for the Rich

picture of three eggs with IRA, Roth and 401k written on them

If enacted, the Build Back Better package would curb a wealth person’s ability to stuff money in tax-advantage retirement savings accounts in a few ways. First, beginning in 2029, a new limit on IRA contributions would kick in if the total value of your IRA and defined contribution plans (e.g., 401(k), 403(b), and 457 plans) hits $10 million and your modified AGI exceeds:

$400,000 for single filers;
$425,000 for head-of-household filers; or
$450,000 for joint filers.

A new “required minimum distribution” (RMD) rule would be put in place for mega-IRAs and 401(k) plans starting in 2029, too. Under the proposal, a retirement plan distribution would be required if the combined total of your IRAs and defined contribution plans reached $10 million and your income exceeded the applicable threshold listed above ($400,000, $425,000, or $450,000). Generally, the distribution would equal 50% of the retirement savings over $10 million, but larger distributions could be required if savings surpass $20 million.

The Build Back Better plan would also restrict Roth conversions for wealthier Americans. First, beginning in 2022, it would put a stop to “backdoor” Roth IRA conversions. This popular tactic allows wealthier people avoid the Roth IRA contribution limits by making nondeductible contributions to a traditional IRA and then transferring those contributions to a Roth IRA later. However, under the proposed legislation, you won’t be able to convert after-tax contributions in an IRA or qualified retirement plan to a Roth account, regardless of your income. Then, starting in 2032, the proposed plan would eliminate all Roth conversions if your income exceeded the applicable threshold provided above ($400,000, $425,000, or $450,000).

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Modifying the SALT Deduction Cap

picture of a salt shaker on its side with salt spilling out of it

Here’s a proposed change that goes against the grain – rolling back the state and local tax (SALT) deduction limit. It’s odd because the change would, for the most part, provide a tax cut for wealthy people.

The 2017 tax reform law placed a temporary $10,000 cap on the itemized deduction for state and local taxes until 2026. By limiting the deduction, the cap tends to increase taxes paid by wealthier people, who typically pay more state and local taxes and tend to itemize instead of claiming the standard deduction. Under the Build Back Better Act, the cap would be extended through 2031. It would also be increased from $10,000 to $80,000 for 2021 to 2030 (it would go back down to $10,000 for 2031).

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Extending the Earned Income Tax Credit Enhancements

picture of dishwasher working in a restaurant

The Build Back Better plan doesn’t just focus on rich people. Jumping to the other end of the income spectrum, the enhancements made to the 2021 earned income tax credit (EITC) that benefit childless workers would be extended for one more year under the plan. The EITC is only available to low- to middle-income workers and families, and the enhancements that would stretch into 2022 were part of the American Rescue Plan, which was enacted in March 2021.

In a nutshell, the EITC improvements for workers with no qualifying children that would be extended to 2022 include:

Lowering the minimum age from 25 to 19 (except for certain full-time students);
Eliminating the maximum age limit (65), so older people without qualifying children can also claim the credit;
Increasing the maximum credit from $543 to $1,502 for the 2021 tax year (the maximum would be adjusted for inflation for the 2022 tax year); and
Expanding eligibility rules for former foster youth and homeless youth.

You would also be allowed to base your 2022 EITC on your 2021 income (instead of your 2022 income) if that would increase your credit amount. That’s similar to the rules applicable to the 2020 and 2021 EITC that permitted use of a person’s 2019 income to calculate the credit. This would help people who are laid off, furloughed, or otherwise experienced a loss of income in 2022.

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Extending Child Tax Credit Enhancements and Monthly Payments

President Biden also wants to extend enhancements to another popular tax credit for American families – the child tax credit. That would mean monthly advance payments in 2022, too. The credit would also be made fully refundable on a permanent basis. It’s fully refundable for 2021, but normally only up to $1,400-per-child is refundable, and you must have at least $2,500 of earned income. (With refundable credits, the IRS will send you a refund check if the credit is worth more than your income tax liability.) The president wants to repeal the requirement that each qualifying child have a Social Security number, too.

The American Rescue Plan pushed the amount of the child tax credit for the 2021 tax year from $2,000 to $3,000-per-child for most kids – and to $3,600 for children 5 years old and younger. Those higher credit amounts would continue through 2022 under the president’s plan. However, as with the 2021 credit, the extra $1,000 or $1,600 for 2022 would be phased-out for families with higher incomes. For people filing their tax return as a single person, the additional amount would be reduced if their AGI is above $75,000. The phase-out would start at $112,500 of AGI for head-of-household filers and $150,000 of AGI for married couples filing a joint return. The 2022 credit amount would be reduced further using the pre-2021 phase-out rules if AGI exceeds $400,000 on joint tax returns or $200,000 on single and head-of-household returns. Your 2021 AGI (rather than your 2022 income) would be used for phase-out rule purposes if you so elected.

Under the Biden plan, monthly child tax credit payments during 2022 would max out at $250-per-month for each child between six and 17 years of age, and $300-per-month for each child five years old or younger. However, unlike payments in 2021, monthly payments generally wouldn’t be sent to families in 2022 if their AGI exceeds $75,000 (single filers), $112,500 (head-of-household filers), or $150,000 (joint filers).

With regard to the “safe harbor” rules that let lower-income families keep any excess advance payments, the president’s plan calls for an exception if a child is taken into account for purposes of the advance payments through fraud or the intentional disregard of rules and regulations. The safe harbor amount would also increase from $2,000 to $3,000 ($3,600 for a child five years old or younger).

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Extending Premium Tax Credit Enhancements

The American Rescue Plan made temporary improvements to the premiums tax credit, too. This credit helps people pay premiums for health insurance purchased through an Obamacare exchange (e.g., HealthCare.gov). The current Build Back Better Act aims to extend the current enhancements from one to four years.

Provisions that are up for extension under the plan would:

Lower the percentage of annual income that eligible Americans must contribute toward their premium (extend through 2025);
Permit people with an income above 400% of the federal poverty line to claim the credit (extend through 2025); and

Disregard household income exceeding 150% of the federal poverty line for people receiving unemployment benefits (extend through 2022; income exceeding 133% of the federal poverty line is disregarded for the 2021 tax year).

There are new enhancements for the 2022 to 2025 tax years in the president’s plan, too. For instance, there are various provisions in the plan that would temporarily modifies certain eligibility rules and requirements to help lower-income people qualify for the credit. The president also wants to lower the threshold used to determine whether a taxpayer has access to affordable insurance through an employer-sponsored plan or a qualified small employer health reimbursement arrangement. Under Biden’s plan, an employee’s required contribution with respect to such a plan or arrangement couldn’t exceeds 8.5% of his or her household income from 2022 to 2025 (instead of 9.5%). Other provisions would exclude certain lump-sum Social Security benefit payments and the modified AGI of certain dependents 23 years old or younger from the calculation of household income.

In a related move, the Build Back Better plan would also make the health coverage tax credit permanent (the credit currently doesn’t apply after 2021). This credit is only available if you’re (1) eligible for Trade Adjustment Assistance allowances because of a qualifying job loss, or (2) between 55 and 64 years of age with a defined-benefit pension plans that was taken over by the Pension Benefit Guaranty Corporation. The Biden plan would also increase the amount of the credit from 72.5% to 80% of the amount paid for qualified health insurance coverage.

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Adding Tax Breaks for Education

picture of small, paper graduation cap sitting on money

College students would get a few additional tax breaks under President Biden’s plan. First, it would exclude federal Pell grants from gross income.

In addition, tuition and related expenses wouldn’t be reduced by the amount of any Pell grant for purposes of calculating the American Opportunity Credit or the Lifetime Learning Credit.

And, finally, students convicted of a state or felony drug offense would be allowed to claim the American Opportunity Credit. These changes would apply beginning in 2022.

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Adding or Improving Tax Breaks for Clean Energy and Energy Efficiency

picture of solar panels on the roof of a house

One of the main goals of the president’s Build Back Better plan is to address climate change. This clearly shows up in the many tax provisions in the plan designed to encourage clean energy and energy efficiency. For instance, the credit for nonbusiness energy property added to your home would be extended through 2031 (it’s currently set to expire at the end of this year). In addition, the credit amount would jump from 10% to 30% of the cost of installing qualified energy efficiency improvements, the $500 lifetime cap would be replaced by a $1,200 annual credit limit, a $600-per-item limit would be placed on credits for qualified energy property, the credit would apply to the costs of home energy audits, and more.

The credit for residential energy efficiency property would also be extended under the current Build Back Better Act – this time through 2033 (it’s current set to expire after 2023).This credit applies to the cost of solar, wind, geothermal or fuel cell technology used to generate power in your home. The president’s plan would extend the credit to cover battery storage technology. The full 30% credit would also apply through the end of 2031, then the credit would drop to 26% in 2032 and 22% in 2033. It would also be made refundable beginning in 2024.

Other green energy or conservation tax proposals that would help individuals (as opposed to businesses) include:

Excluding water conservation, storm water management, and wastewater management subsidies provided by public utilities, state or local governments, or storm water management providers from gross income;
Creating a 30% tax credit for qualified wildfire mitigation expenditures;
Establishing a tax credit of up to $12,500 (but not more than the cost of the car) for the purchase of a new plug-in electric motor vehicle;
Creating a tax credit of up to $4,000 (but not more than the cost of the car) for the purchase of a used plug-in electric motor vehicle;
Extending the tax credit for the purchase of a qualified fuel cell motor vehicle through 2031, but only with respect to vehicles not subject to depreciation;
Reinstating the exclusion from gross income for bicycle commuting benefits (they are currently suspended until 2026), and increasing the maximum benefit from $20 to $81 per month (based on 2021 inflation adjusted amounts); and
Establishing a tax credit of up to $900 for the purchase of an electric bicycle.

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Adding Deductions for Union Dues and Work Uniforms

Workers would get two temporary above-the-line deductions if the Build Back Better Act is signed into law. The first would be for up to $250 of union dues. This deduction would be available from 2022 to 2025.

The second deduction would be for up to $250 uniforms or other work clothes that are required as a condition of employment and not suitable for everyday wear. This write-off would be available from 2022 to 2024.

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Subjecting Cryptocurrency and Other Assets to Wash Sale Rules

picture of a bitcoin smashing through a dollar bill

People investing in commodities, currencies, and digital assets such as cryptocurrency would be subject to the “wash sale” rule if the Build Back Better Act becomes law. Currently, trading in those types of assets isn’t covered by the rule.

Basically, the rule states that you can’t deduct a loss from the sale or other disposition of stock or securities if you buy the same asset within 30 days before or after you sell it. Fortunately, though, if a deduction is denied because of the rule, the loss is added to the cost basis of the newly purchased stock. So, when you sell the new stock later, the tax on any gains will be lower.

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Extending Time for Same-Sex Couples to File Amended Tax Returns

picture of same-sex couple working on taxes

In 2013, the IRS began allowing same-sex couples who were legally married under state law to file joint tax returns. The tax agency also allowed same sex-couples to amend their tax returns to change their filing status to married filing jointly if they were married before 2013. However, they were generally only allowed to file amended returns going back to 2010.

Under the Build Back Better Act, same-sex couples who were lawfully married prior to 2010 would be able to change their filing status on pre-2010 returns if they were married during the tax year at issue. This would enable many couples, who were legally married as far back as 2004, to claim or increase credits, deductions, and other tax breaks that were not fully available to them on previous tax returns because they couldn’t file a joint return.

Source: kiplinger.com