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As the year ends, Congress has passed a spending bill¹, signed by President Trump last night, which includes $900 billion of economic stimulus relief.  At almost 6,000 pages in length, some say it represents a page for each day 2020 has seemingly lasted!


Just over one year ago, Congress passed The SECURE Act, a sweeping bill that made significant changes to both tax and retirement planning.  Then, in response to the COVID-19 crisis, Congress again passed another round of legislation known as the CARES Act to aid individuals, small businesses and establish a lending fund for industries, cities, and states (including the airline industry, state and local emergency aid, and hospitals).


This bill, known as the Consolidated Appropriates Act, 2021, has some familiar provisions as its CARES Act stimulus relief predecessor in March.  Within the bill is billions of dollars allocated for small businesses (via the Paycheck Protection Program (PPP) loans), billions for schools and universities, agriculture, transportation, childcare centers, as well as the purchase and distribution of the COVID-19 vaccines.


At 5,593 pages, this bill funds the government for another year and provides COVID-19 relief, however not all areas of the bill will be reviewed in this piece. These areas range from establishing two new Smithsonian Museums, making illegal streaming a felony punishable up to 10 years in prison, reducing the penalty for unauthorized use of the U.S. Forest Service’s “Smokey Bear,” to confirmation of the U.S. position on choosing the next Dalai Lama.  


However, the most prominent aspects for individuals and families are the $300 weekly federal unemployment supplement and the next round of direct payments. The latter has some critical differences from the March 2020 payments. And though not in the headlines, there are a few more personal financial planning issues the bill addresses, along with some it ultimately did not.


Who receives Stimulus “Checks,” and how much will they receive?

These payments, classified as “rebates,” will once again be sent to individuals and eligible dependents.


Under the March 2020 CARES Act, adults got $1,200 each and received $500 for dependent children under 17 years old. The December 2020 bill retains the condition that a child is under age 17 but changes the payment amounts to $600 for both adults and children.


For example, in March, a married couple with two children under age 17 would have received $3,400 ($1,200 for each parent, $500 for each child). The December payment would be $2,400 ($600 for each parent, $600 for each child).


Who does NOT receive a Stimulus “Check?”

As was the case with the March 2020 payments, not everyone will receive a rebate immediately, as the criteria are based on the 2019 tax return. Just as with the March 2020 payments, individual taxpayers earning in excess of $75,000, head-of-household filers earning above $112,500, and couples earning in excess of $150,000 will see their payments reduced. For those with incomes above these amounts, the phase-out is $5 for every $100 over the limit.


This reduction process results in the amounts phasing out completely for individuals earning $99,000, those filing as Head of Household at $136,500, and joint taxpayers at $198,000.


Impact of varying income on your Rebate

If your income was above the phase-out ranges on your 2019 tax return, you will not receive a rebate. However, if your 2020 income ultimately falls below these thresholds, then you will be able to claim the rebate when filing your 2020 tax return in April 2021. As was the case with the March 2020 payments, if you receive a rebate in 2020 and your 2020 income ultimately falls above the thresholds, you will not be responsible for repaying. 


Because the payments are classified as rebates, they will not be taxable to the recipient(s).


How will you receive the Stimulus Rebate?

The upcoming payment will be received in the same manner as the March 2020 payments. First in line will be those receiving the payment via direct deposit (for those with direct deposit information on file with the IRS). Next, physical checks will be mailed to eligible recipients without direct deposit information on file.


When will you receive the Stimulus Rebate?

The March 2020 payment took 19 days to be delivered to the initial recipients. This round of payments is expected to be distributed more quickly, as soon as the week of December 28, according to Treasury Secretary Steve Mnuchin. However, no definite timeframe has been announced.


Medical Expense Deductibility

The rules surrounding taxpayers’ ability to deduct medical expenses have varied since the Tax Cuts. The Jobs Act of 2017 lowered the threshold from 10% of Adjusted Gross Income to 7.5% of Adjusted Gross Income. In 2019, the threshold was scheduled to jump back to 10%, but the Taxpayer Certainty and Disaster Relief Act of 2019 extended the 7.5% through 2020. Now, this month’s bill has made the 7.5% threshold permanent.


Charitable Deduction

The CARES Act included a $300 above-the-line deduction for those claiming the standard deduction for the 2020 tax year (i.e., the deduction is not available for those that itemize deductions on their federal tax return for 2020).


The $300 amount is the cap for both individuals and joint filers in 2020. The new relief bill tweaks this provision by increasing the amount to $600 for Married Filing Jointly taxpayers, but that increase will not take effect until the 2021 tax year. Note the donation must be in cash (no securities or in-kind contributions) and made directly to the charity (not to a donor-advised fund, for example).


Flexible Spending Account (FSAs) Changes

The new bill allows both dependent care and healthcare FSA funds unused in 2020 to be carried over 2021. Many workers have already made FSA elections for the 2021 calendar year, and to address this, the bill makes two allowances: first, this carryover of dollars can take place from 2021 to 2022. Secondly, the bill allows employers to modify an employee’s 2021 FSA election (typically not permitted).

Ultimately the ability to take advantage of this carryover will rest with individual employers, with each having the freedom to participate (or not).


Student Loans and the FAFSA 

The FAFSA (Free Application for Federal Student Aid) will now be streamlined thanks to the “FAFSA Simplification Act” included in the new bill. This change, which is reported to reduce the number of questions on the FAFSA by as much as two thirds, will begin taking place on July 1, 2023.


Many anticipated the bill might address student loans after the relief provided in March 2020, allowing suspension of loan payments through September 30, 2020. However, the latest bill does not address student loans, either from a “forgiveness” standpoint or extension of the payment deferral.



Now with three significant pieces of tax legislation within the past 368 days, it has never been more important to coordinate your tax planning with your Bridgeworth advisor along with your personal tax planning professional.

Any discussion pertaining to taxes in this communication may be part of a promotion or marketing effort. As provided for in government regulations, advice related to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue code. Individuals should seek advice based on their own particular circumstances from an independent tax advisor.”

Bridgeworth is now a part of Savant Wealth Management as of 11/30/2023. Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois.