Employee Spotlight – Aaron B. Coers

What year did you join Slattery & Holman?
1991

Where did you attend college?
I graduated from Indiana State University in May 1991.

Tell us a little about your family.
Jennifer and I got married in August 1994 after we had known each other for 11 months. I have two daughters, Morgan is 21 and a junior at Purdue majoring in Industrial Engineering, and Madison is 18 and a freshman at Hope College majoring in History. In August I will have a son-in-law, Adam.

What is your favorite activity?
I have been a Pacers season ticket holder for 11 years. I really enjoy attending the games with my family, but I enjoy going with anyone willing to go. Rumor has it I have been seen dancing on the Jumbotron during timeouts of games.  (Picture courtesy of USA Today)

pacers

Where is your favorite vacation spot?
Princeville, Kauai, Hawaii. The green mountains and dark blue waters are gorgeous.

What is a new skill that you would like to master?
I would love to be able to speak Spanish. I have been on 4 mission trips to Honduras and the Dominican Republic. I have really enjoyed my time being there, but it would have been so much better if I could speak Spanish.

What would you be doing if you were not working at Slattery & Holman?
I think I would enjoy being a college professor teaching accounting.

What was your first job?
Mowing yards during the summer. It was a good job. I was making on average $8 an hour when the minimum wage was $3.35.

 

Sold or Thinking of Selling Your Home?

In spite of (or in some cases, because of) the COVID-19 pandemic, and with near-record-low home mortgage interest rates, the housing market has been booming. September 2020 existing home sales were up 9.4% from August 2020 and 20.9% from 2019, according to the National Association of Realtors. If you sold your home this year or are thinking about selling it, there are many tax-related issues that could apply to the sale. If you are in the “thinking about” stage, you may already be aware of the issues you may face in reporting the sale. This article covers the tax basics and some special situations related to home sales and the home-sale gain exclusion.

Home Sale Exclusion- For decades, Congress has encouraged home ownership, including providing a tax break for taxpayers selling their homes. Under the current version of the tax code, you are allowed an exclusion of up to $250,000 ($500,000 for married couples) of gain from the sale of your primary residence if you owned and lived in it for at least 2 of the 5 years previous to the sale. You also cannot have previously taken a home-sale exclusion within the 2 years immediately preceding the sale. There is no limit on the number of times you can use the exclusion as long as you meet these time requirements; however, extenuating circumstances can reduce the amount of the exclusion. The home-sale gain exclusion only applies to your main home, not to a second home or a rental property.

2 out of 5 Rule -As noted above, you must have used and owned the home for 2 out of the 5 years immediately preceding the sale. The years don’t have to be consecutive or the closest to the sale date. Vacations, short absences and short rental periods do not reduce the use period. If you are married, to qualify for the $500,000 exclusion, both you and your spouse must have used the home for 2 out of the 5 years prior to the sale, but only one of you needs to meet the ownership requirement. When only one spouse in a married couple qualifies, the maximum exclusion is limited to $250,000 instead of $500,000.

Although this situation is quite rare, if you acquired the home as part of a tax-deferred exchange (sometimes referred to as a 1031exchange), then you must have owned the home for a minimum of 5 years before the home-gain exclusion can apply.

If you don’t meet the ownership and use requirements, there are some situations in which a prorated exclusion amount may be possible. An example of this situation is if you were required to sell the home because of extenuating circumstances, such as a job-related move, a health crisis or other unforeseen events. Another rule extends the 5-year period to account for the deployment of military members and certain other government employees. Please call us if you have not met the 2 out of 5 rules to see if you qualify for a reduced exclusion.

Business Use of the Home – If you used your home for business and claimed a tax deduction-for instance, for a home office, storing inventory in the home or using it as a day care center-that deduction probably included an amount to account for the home’s depreciation. In that case, up to the extent of the gain, the claimed depreciation cannot be excluded.

Figuring Gain or Loss from a Sale -The first step is to determine how much the home cost by combining the purchase price and the cost of improvements. From this total cost, subtract any claimed casualty loss deductions and any depreciation taken on the home. The result is your tax basis. Next, subtract the sale expenses and this tax basis from the sale price. The result is your net gain or loss on the sale of the home.

If the result is negative, the sale is a loss; losses on personal-use property, such as homes, cannot be claimed for tax purposes. If the result is a gain, however, subtract any home-gain exclusion (discussed above) up to the extent of the gain. This is your taxable gain, which is, unfortunately, subject to income tax. If you owned the home for at least a year and a day, the gain will be a long-term capital gain. As such, it will be taxed at the special capital gains rate, which ranges from zero for low-income taxpayers to 20% for high-income taxpayers. Depending on the amount of all of your income, the gain may also be subject to the 3.8% net investment income surtax that was added as part of the Affordable Care Act. The tax computation can be rather complicated, so please call us for assistance.

Another issue that can affect your home’s tax basis (discussed above) applies if you purchased your home before May 7, 1997, after selling another home. Prior to that date, instead of a home-gain exclusion, any gain from a sale was deferred to the replacement home. Although this is now rare, if it matches your situation, the deferred gain would reduce your current home’s tax basis and add to any gain for the current sale.

Prior Use as a Rental – If you previously used your home as a rental property, the law includes a provision that prevents you from excluding any gain attributable to the home’s appreciation while it was a rental. The law’s effective date was the beginning of 2009, which means you only need to account for rental appreciation starting in that year. This law was passed to prevent landlords moving into their rentals for 2 years so they could exclude the gains from those properties. Prior to the law change, some landlords had done this repeatedly.

Form 1099-S – Usually, the settlement agent-typically an escrow or title company-prepares IRS Form 1099-S, Proceeds from Real Estate Transactions, which reports the home seller’s name, tax ID number, proceeds of the sale, date of the sale, etc. This form is provided to both the IRS and the seller. Note this form only includes information from the sale; it doesn’t provide any basis information to the IRS. Sometimes, sellers think if the home sale gain exclusion eliminates all of their gain from the sale of their home, they don’t need to report the transaction on their tax return. Unfortunately, this thinking could lead to correspondence (i.e., a bill for tax due) from the IRS as it attempts to match the sales price shown on the 1099-5 to the seller’s tax return. To avoid this interaction with the IRS, you should report the home’s sale on your income tax return for the year of the sale. In doing so, you will be including your basis and exclusion information for the IRS.

Records -Assets worth hundreds of thousands of dollars, including your home, need your attention, particularly regarding records. When figuring your gain or loss, you will, at a minimum, need the escrow statement from the purchase, a list of improvements (not maintenance work) with receipts and the final escrow (settlement) statement from the sale. If you encounter any of the issues discussed in this article, you may need additional documentation.

A few other rare home-sale rules are not included here. As you can see, home-sale computations and tax reporting can be very complicated, so please call us if you need assistance.

Biden’s Proposed COVID Relief Package

President Biden released his “American Rescue Plan” on January 14. It is a wish list of proposals he wants Congress to enact to address the COVID-19 pandemic and associated economic crisis. While some of the proposals are intended to be in effect for just one year, it is possible these could later be extended or made permanent, as many of them have been on the Democrats’ agenda for some time. The anticipated cost of the American Rescue Plan, if all of the proposals are agreed to by Congress, is $1.9 trillion. None of Biden’s proposals are revenue raisers, and according to a Wall Street Journal report from January 15, 2021, he intends to use government borrowing to pay for his plan. The following are some of the tax-related proposals:

Stimulus (Economic Impact) Payments: Biden’s plan requests that Congress provide an additional stimulus payment of $1,400 to qualified lower-income households. Combined with the $600 that Congress authorized in December, this will bring the latest total direct assistance to $2,000 per person. The prior stimulus distributions included stipends for dependent children under the age of 17, whereas the proposed payments will be provided for all dependents regardless of age.

So far, the payments have counted as advances toward a 2020 Recovery Rebate Credit. This includes the second round of payments that didn’t reach recipients until early January 2021. Individuals will need to reconcile the payments they received and the credits they are entitled to on their 2020 returns. Whether the proposed additional payments will be considered part of the 2020 credit (which could delay some 2020 return filings) or as an advance toward a new 2021 credit will need to be clarified in the legislation.

Unemployment Compensation: This part of the plan requests that Congress provide a $400-per-week unemployment insurance supplement through September 2021, and extend the unemployment benefits to self-employed workers such as ride-share drivers and grocery delivery workers, who do not typically qualify for regular unemployment compensation. Presumably, the $400-per-week enhancement would be in lieu of the $300-per-week benefit passed in the Consolidated Appropriations Act in December. In any event, the unemployment benefits are taxable income for federal purposes; most states also tax this income, but a few do not.

Minimum Wage: Biden’s proposal requests that Congress progressively raise the minimum wage from $7.25 to $15 per hour by 2025.

Education Assistance: The CARES Act, passed in late March 2020, included a Higher Education Emergency Relief Fund that provides funding to institutions to grant emergency financial aid to students whose lives have been disrupted by the COVID-19 pandemic. Emergency financial aid grants to students are nontaxable and can be used for expenses related to the disruption of campus operations due to coronavirus (including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care and child care). Biden’s proposal would increase funding for the Higher Education Emergency Relief Fund, including providing college and university students with up to an additional $1,700 in financial assistance from their institutions.

Families First Coronavirus Response Act: This part of the American Rescue Plan requests that Congress fund an extension of sick leave through September 30, 2021, which would provide over 14 weeks (up from 12) of paid sick and family and medical leave to help parents with additional caregiving responsibilities when a child or loved one’s school or care center is closed; for people who have or are caring for people with COVID-19 symptoms, or who are quarantining due to exposure; and for people needing to take time off to receive the vaccine. The maximum payment would be increased from $1,000 per week to $1,400 per week.

Under Biden’s plan, the exemptions for businesses with over 500 employees and those with fewer than 50 employees would be eliminated, making the program mandatory for all businesses, regardless of size. The government will reimburse employers with fewer than 500 employees for 100% of the cost.

Increase the Child Care Tax Credit: Currently, a nonrefundable tax credit is available to some taxpayers for the expenses they incur for the care of a child, spouse or other dependent while the taxpayer is gainfully employed (or is seeking a job). The maximum expenses that can be used to determine the credit are $3,000 for one child and $6,000 for two or more children. The credit rate ranges from 20% to 35% depending on income (the higher the income, the lower the credit rate).

Biden’s plan requests Congress to authorize an increase in the child care credit and make it refundable for one year. The credit would be a full 50% of the expenses, with maximum expenses of $4,000 for one child and $8,000 for two or more children (under age 13). The credit would be phased out for those whose income ranges from $125,000 to $400,000.

Child Tax Credit: For years 2018 through 2025, the child tax credit is a maximum of $2,000 per dependent child under the age of 17. In some cases, up to $1,400 of the credit is refundable. The credit phases out when the taxpayer’s modified adjusted gross income exceeds $200,000 ($400,000 for married joint filers). Biden is asking Congress, for a period of one year, to include children through age 17 in the child tax credit and increase it to $3,000 ($3,600 for children under the age of 6).

Earned Income Tax Credit (EITC): Childless adults are eligible for a lesser earned income tax credit amount than if they had a qualifying child. Biden’s plan requests that Congress make a one-year increase in the EITC for childless adults from roughly $530 to $1,500 and increase these individuals’ income limit for the credit from roughly $16,000 to $21,000. Biden would also like Congress to eliminate the age cap so that older workers without a qualifying child can claim the credit. Currently, a childless individual cannot claim the credit after reaching age 65.

Healthcare Coverage: Individuals who purchase their health insurance through the government marketplace may be eligible for a premium tax credit. An advance premium tax credit (APTC) may be used to reduce monthly premiums. The advance and actual credits are then reconciled on their income tax return each year. Biden’s plan asks Congress to increase the premium tax credit so that workers will pay no more than 8.5% of their income for coverage.

Although not tax-related, other issues in the plan affecting individuals include:

Evictions and Foreclosures: President Biden is calling on Congress to extend the eviction and foreclosure moratoriums and continue applications for forbearance on federally guaranteed mortgages until September 30, 2021, as well as to provide funds for legal assistance for households facing eviction or foreclosure.

Homelessness: The plan requests that Congress provide $5 billion to help secure housing for homeless individuals and families.

Remember, these are only Biden’s proposed changes; quite often, what Congress passes is not the same as the originally proposed legislation. If you need assistance or have questions regarding tax issues, please give us a call.

Don’t Miss the Opportunity for a Spousal IRA

One frequently overlooked tax benefit is the spousal IRA. Generally, IRA contributions are only allowed for taxpayers who have compensation (the term “compensation” includes wages, tips, bonuses, professional fees, commissions, taxable alimony received, and net income from self-employment).

Spousal IRAs are the exception to that rule and allow a non-working or low-earning spouse to contribute to his or her own IRA, otherwise known as a spousal IRA, as long as the spouse has adequate compensation.

The maximum amount that a non-working or low-earning spouse can contribute is the same as the limit for a working spouse, which is $6,000 for 2020. If the non-working spouse’s age is 50 or older, that spouse can also make “catch-up”  contributions (limited to $1,000), raising the overall contribution limit to $7,000. These limits apply provided that the couple together has compensation equal to or greater than their combined IRA contributions.

Example: Tony is employed and his W-2for 2020 is $100,000. His wife, Rosa, age 45, has a small income from a part-time job totaling $900. Since her own compensation is less than the contribution limit for the year, she can base her contribution on their combined compensation of $100,900. Thus, Rosa can contribute up to $6,000 to an IRA/or 2020.

The contributions for both spouses can be made either to a traditional or Roth IRA, or split between them as long as the combined contributions don’t exceed the annual contribution limit. Caution: The deductibility of the traditional IRA and the ability to make a Roth IRA contribution are generally based on the taxpayer’s income:

  • Traditional IRAs – There is no income limit restricting contributions to a traditional IRA. However, if the working spouse is an active participant in any other qualified retirement plan, a tax-deductible contribution can be made to the IRA of the non-participant spouse only if the couple’s adjusted gross income (AGI) doesn’t exceed $196,000 in 2020 (up from $193,000 in 2019).
  • Roth IRAs – Roth IRA contributions are never tax-deductible. Contributions to Roth IRAs are allowed in full if the couple’s AGI doesn’t exceed $196,000 in 2020 (up from $193,000 in 2019). The contribution is rateably phased out for AGls between $196,000 and $206,000 (up from a range of $193,000 to $203,000 in 2019). Thus, no contribution is allowed to a Roth IRA once the AGI exceeds $206,000.

Example: Rosa from the previous example can designate her IRA contribution as either a deductible traditional IRA or a nondeductible Roth IRA because the couple’s AGI is under $196,000. Had the couple’s AGI been $201,000, Rosa’s allowable contribution to a deductible traditional or Roth IRA would have been limited to $3,000 because of the phase-out. The other $3,000 could have been contributed to a traditional IRA and designated as nondeductible.

Please give our office a call if you would like to discuss IRAs or need assistance with your retirement planning.

Finally, The COVID Relief Package Is Law

After several months of the Republicans and Democrats not being able to agree on additional COVID­ related tax relief and other matters, as 2020 was coming to an end, horses were traded and deals were made so that Congress could put together the much-needed legislation. The result is a nearly 5,600- page omnibus bill, the Consolidated Appropriations Act, 2021. Included in that legislation are the “COVID-Related Tax Relief Act of 2020” (COVIDTRA) and the “Taxpayer Certainty and Disaster Tax Relief Act of 2020.” The bill was signed by the President on December 27.

This article provides an overview of the many tax provisions included in the legislation, including the 2nd round of economic impact payments, another round of targeted PPP loans for businesses, favorable tax treatment of expenses paid with forgiven loan proceeds, temporary expanded deduction for business meals, and modifications to charitable contributions-along with an excess of  30 new, altered and extended tax provisions.

Additional 2020 Recovery Rebates 

An additional round of economic impact payments (EIPs) is included in the legislation but the amount is substantially less than the first round, which was $1,200 per eligible adult and $500 per dependent child under age 17. This new round will be $600 per eligible adult and $600 per dependent child under 17. Also, eligible this time are the so-called mixed-status households, for example where one of the spouses is a noncitizen, which were previously excluded from receiving payments.

Maximum Payment Amounts:

  • Each eligible adult: $600
  • Married couple (both eligible) filing jointly: $1,200
  • Each dependent child under age 17: $600

Payment Phaseout- The payment is phased out by 5% of the taxpayer’s 2019 AGI that exceeds the filing status threshold.

CREDIT PHASEOUT THRESHOLD
Filing Status Threshold
Single (as well as Married Filing Separately) $75,000
Head of Household $112,500
Married Filing Jointly (as well as Surviving Spouse) $150,000

Payment Due Date -Although the Act includes a January 15, 2021, deadline for advance payments to be made, President Trump’s delay in signing the bill may delay the payments.

No Social Security Number – In general, taxpayers without an eligible Social Security Number are not eligible for the payment. However, married taxpayers filing jointly, and otherwise eligible, where one spouse has a Social Security Number and one spouse does not, are eligible for a payment of $600, in addition to $600 per child under age 17 with a Social Security Number.

Deceased Taxpayers – There was considerable confusion related to the first round when the IRS issued EIPs to deceased individuals. This time around, they have specified that anyone who was deceased before January 1, 2020, is not eligible for an EIP.

The payments will be treated as a refundable 2020 tax credit and reconciled to the correct amount on the 2020 return. Any excess payment will not be required to be repaid and if the payment was less than qualified for, the difference will be paid as a refundable credit when the 2020 return is filed.

Paycheck Protection Program (PPP) Loans & Small Business Support 

The legislation includes over $300 billion for first and second forgivable PPP loans. Unlike the prior loan program, this round will truly be limited to small businesses that incurred a loss of revenue. Eligibility is limited to:

  • Businesses with 300 or fewer employees that have sustained a 25% revenue loss in any quarter of 2020, as compared with the same period in 2019.
  • Small 501(c)(6) organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations and tourism offices.
  • Certain 501(c)(6) nonprofits and destination marketing organizations with 300 or fewer employees that do not receive more than 15 percent of their revenue from lobbying.
  • Local newspapers and TV and radio stations previously made ineligible by their affiliation with other Forgivable expenses will be expanded to include covered (COVIDTRA Sec 304):
    • Payroll costs – Including additional group insurance payments, inclusive of vision, dental, disability and life insurance.
    • Operational costs.
    • Property damage costs.
    • Supplier costs on existing contracts and purchase orders, including the cost for perishable goods at any time.
    • Investments in facility modifications and personal protective equipment needed to operate safely, and technology operations expenditures.

Loan Size – Establishes a maximum loan size of 2.5 times the average monthly payroll costs, up to $2 million.

  • Allows small businesses assigned to the industry NAICS code 72 (Accommodation and Food Services) to receive PPP second draw loans equal to 3.5 times their average monthly payroll costs in order to help these businesses combat onerous state and local restrictions.
  • Maintains existing expansions in eligibility for businesses assigned to the industry NAICS code 72 (Accommodation and Food Services).

Loan Forgiveness – Full loan forgiveness is available if the borrower spends at least 60% of the second draw on payroll costs over either an 8-week or 24-week period selected by the borrower.

Simplified Loan Forgiveness – The loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. (This means another version of the SBA’s loan forgiveness application form will be forthcoming.)

Churches and Religious Organizations -Are eligible for loans. Future administrations are prevented from making them ineligible.

Planned Parenthood – Is ineligible.

Set-Asides – $41 billion is set aside to ensure that smaller borrowers and under-served communities get the help they need, such as:

  • Small businesses with 10 or fewer employees.
  • Small community lenders.
  • Independent live venue operators, including eligible independent movie theaters and museums affected by COVID-19 stay-at-home orders.

Clarification of Tax Treatment of Covered Loan Forgiveness Expenses 

The CARES Act provides that a recipient of a PPP loan may use the loan proceeds to pay payroll costs, certain employee benefits relating to healthcare, interest on mortgage obligations, rent, utilities and interest on any other existing debt obligations. If a PPP loan recipient uses their PPP loan to pay those costs, they can have their loan forgiven in an amount equal to those costs. PPP loan forgiveness doesn’t give rise to taxable income and the Code generally doesn’t allow a taxpayer to deduct expenses that are paid with tax exempt income.

The IRS had issued a ruling essentially saying that since businesses aren’t taxed on the proceeds of a forgiven PPP loan, the expenses aren’t deductible. However, members of Congress have been saying all along that was not the Congressional intent.

In a rebuttal to the IRS, Congress made it crystal clear in the Act that taxpayers whose PPP loans are forgiven, are allowed deductions for otherwise deductible expenses paid with the proceeds of a PPP loan, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness.

Business Meals 

The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the deduction for entertainment and curtailed the expense deduction for meals. In a very business friendly transitional guidance (Notice 2018-76) on the deductibility of business meals, the IRS announced that taxpayers generally may continue to deduct the food and beverage expenses associated with operating their trade or business. Under this notice, taxpayers may deduct 50% of an otherwise allowable business meal expense.

Under Sec. 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, for 2021 and 2022, taxpayers will be able to deduct 100% of business meal expenses where the food or beverages is provided by a restaurant, provided:

  • The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business.
  • The expense is not lavish or extravagant under the circumstances.
  • The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages.
  • The food and beverages are provided to a current or potential business customer, client, consultant, or similar business Final regulation 1.274-12(b)(3) defines “business associate” as a “person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer’s trade or business such as the taxpayer’s customer, client, supplier, employee, agent, partner or professional adviser, whether established or prospective.

Educator Expense 

The Act specifies that the $250 above-the-line educator expense deduction shall include personal protective equipment (PPE), disinfectant and other supplies used for the prevention of the spread of COVID-19, effective for expenditures after March 12, 2020.

Unemployment Assistance 

All Federal supplemental unemployment insurance benefits, which had already expired or would end on December 31, 2020, will be extended through March 14, 2021. However, the supplemental amount will only be $300 per week instead of the $600 that the CARES Act authorized.

Earned Income Tax Credit (EITC) & Child Tax Credit (CTC) 

These credits are based upon earned income. Because families may have had reduced income during 2020 that would adversely affect the amount of these credits, the legislation allows the 2019 earned income to be used to compute the credits for 2020. However, this affects the computation of the EITC and CTC only and does not affect the 2020 gross income for tax purposes. This is temporary for 2020 only.

Cash Charitable Contributions for Non-Itemizers 

For 2020, the CARES Act allows non-itemizers to deduct $300 of cash contributions, regardless of filing status. The Act of 2020 changes that for 2021, and allows an above-the-line deduction for cash contributions of $600 for joint filers and $300 for all other filing statuses. However, Congress is concerned that taxpayers will abuse this provision and added a 50% underpayment of tax penalty where the contribution cannot be properly documented.  For cash charitable contributions for itemizers, the 60% limit on cash contributions was suspended for 2020, thus allowing larger cash contributions during the COVID crisis. Under the Act, the suspension of the 60% limit has been extended to 2021.

Flexible Spending Arrangements Carryover 

Under current law, cafeteria plans may only permit a carryover of unused amounts remaining in a health FSA as of the end of a plan year in an amount of no more than $550.

The Act extends the carryover period to 12 months after the end of such plan year for unused benefits and contributions to health flexible spending and dependent care flexible spending arrangements for 2020 and 2021.

An employer may also allow an employee who ceases to participate in the plan during calendar year 2020 or 2021 to continue to receive reimbursements from unused benefits or contributions through the end of the plan year in which the employee’s participation ceased, including any extended grace period.

Reduction in Medical Deduction 

AGI Floor-The medical deduction AGI threshold was scheduled to increase to 10% beginning in 2020. The Act makes the 7.5% threshold permanent.

Volunteer Firefighters and Emergency Medical Responders 

Benefits – Under prior law, for tax years beginning in 2020 for any member of a “qualified volunteer emergency response organization,” gross income excluded certain state or local tax relief provided for performing volunteer emergency response services or any payments provided by state or local governments on account of performing volunteer emergency response services. The Act makes this exclusion permanent. (IRC 1398 as amended by Act Sec. 103).

Education Credits Phaseouts Consolidated 

Under prior law, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) each had a different phaseout range. Effective for years after December 31, 2020, the Act replaces the dual phaseouts with a single one that applies to both credits. This increases the AGI at which the LLC phaseout begins, which allows more individuals to qualify for the LLC. The phaseout ranges will not be adjusted for inflation in future years.

Filing Status Phaseout Range
Single $80,000 – $90,000
Married Filing Jointly $160,000 – $180,000
Married Filing Separately No Credit Allowed

Discharge of Qualified Principal Residence Indebtedness 

For several years going back to 2008, taxpayers have been able to exclude from income up to $2 Million ($1 Million for Married Filing Separately taxpayers) of home debt forgiveness income. This provision has been previously extended and was scheduled to sunset after 2020. Because so many homeowners are behind in their home mortgage and property tax payments and may lose their homes, the Act extends the provision through 2025, but reduces the maximum exclusion for years after 2020 to $750,000 ($375,000 MFS).

Employer-Provided Educational Assistance 

Educational assistance provided under an employer’s qualified educational assistance program, up to an annual maximum of $5,250, is excluded from the employee’s income. The CARES Act expanded the definition of expenses to include employer payments of the employee’s student loan debt. But this special allowance was only available for payments made between March 27, 2020, through December 31, 2020. The Act extends the exclusion for loan repayments made through 2025.

Mortgage Insurance Premiums 

For tax years 2007 through 2020, taxpayers could deduct, as an itemized deduction, the cost of premiums for mortgage insurance paid in connection with acquisition debt on a qualified personal residence. The deductible amount of the premiums phases out ratably by 10% for each $1,000 by which the taxpayer’s AGI exceeds $100,000 (10% for each $500 by which a married filing separately taxpayer’s AGI exceeds $50,000). If AGI is over $109,000 ($54,500 MFS), the deduction is totally phased out. The Act extends this provision for one year through 2021.

Nonbusiness Energy Credit 

Since 2006, taxpayers have been able to claim a credit for making qualifying energy saving improvements to their existing homes. The dollar limits and credit percentages have been modified several times since the credit first became available. The credit of 10% of the amounts paid or incurred by the taxpayer for qualified energy improvements to the building envelope (windows, doors, skylights and roofs) of principal residences ranges from $50 to $300 for energy-efficient property, including furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners and circulating fans, and is subject to a lifetime cap of $500. The Act extends this credit through 2021.

2-Wheeled Plug-In Electric Vehicle Credit 

The Code provides a 10% credit for highway-capable, two-wheeled, plug-in electric vehicles (capped at $2,500). Battery capacity within the vehicles must be greater than or equal to 2.5 kilowatt-hours. The Act extends this credit for one year so that it applies to property placed in service through 2021.

If you have questions about how this COVID-19 tax legislation might apply in your situation, please give our office a call.

Employee Spotlight – Michelle A. Kerr

Michelle Kerr

Get to Know Michelle

What year did you join Slattery & Holman?
2004

Tell me a little about where you attended college and the degree(s) you earned. Any special accomplishments?
I started at IU Bloomington for my first two years and finished my last year at IUPUI after coming to Indy for a summer to live with a friend. I got a full-time job in my field of study that summer and ended up staying for the fall semester while taking a full load of evening classes so I could gain experience. I finished undergrad in 3 ½ years.

What is your favorite thing about living in Indiana?
I was born and raised in Indiana. The best things about living here are the people, the experience of having all four seasons. I love the lush green leaves in the spring and the beautiful colors of the fall.  Winter is last on the list, but it works out well for those of us who are CPAs. Not sure I could do a tax season in Hawaii or another place where there are cool things to do outdoors during the busy season.

If you didn’t have to sleep, what would you do with the extra time?
Well, I actually like to sleep as that is a beautiful time when our bodies rest, restore and recover. But, if I had extra time, I would love to be outside more, I love all things movement; hiking, biking, kayaking, tennis, pilates, yoga, paddleboarding. I would love to learn to play piano or the guitar.

What fictional place would you most like to visit?
Neverland

What is a new skill that you would like to master?
Self-mastery, staying present.

What do you wish you knew more about?
The science of the mind and how powerful it is…the mind is the government that runs the body.

What’s the farthest you’ve ever been from home?
Bali, Indonesia

What question would you most like to know the answer to?
Taxes! Hahaha

What is the most impressive thing you know how to do?
Taxes

What was the best compliment you’ve ever received?
The best compliment is when people say I have a huge heart, I’m all heart.

What is your favorite childhood memory?
My brother and I had a lemonade stand that landed in the local newspaper for our entrepreneurial spirit.

Lemonade Stand

What is your favorite smell?
Stress Away essential oil, homemade cookies, the smell of the ocean.

If you had a clock that would countdown to any one event of your choosing, what event would you want it to countdown to?
A countdown to my next travel excursion.

When was the last time you climbed a tree?
I am not sure I have ever climbed a tree! Maybe a treehouse when I was a little kid.

What’s the most unusual thing you’ve ever eaten?
I was not an adventurous eater up through my 20s, but I have tried lots of new things in my travels…probably octopus.

What was your first job?
My first job (other than babysitting, cleaning my 7th-grade teacher’s house through high school and college, and working in my dad’s insurance and real estate business), was a bank teller at Old National Bank in Terre Haute, IN.

If you could have any superpower, what would it be?
Time travel

12 Financial Metrics Small Business Owners Should Track

Operating a small business is an exhilarating and, at times, overwhelming endeavor. There are so many details to keep track of that it’s easy to forget about the nuts and bolts of your organization’s finances – especially if you didn’t start out as a “numbers person.” Whether you’re the one assembling your financial reports or you’ve hired a professional to do it, it’s important for you to know which of the numbers are most important and what they mean in terms of the decisions you make and your assessment of your business’s overall health. Below is our list of 12 of the most important elements of your financial report and what you can do with the information.

1. Profit and Loss

Every quarter, you should refresh your business’s profit and loss report to understand both your bank and tax reporting needs. It is the snapshot of your bottom line that you can use to drive your decisions and show to an outsider for them to gauge your strength. If you have a reconciled balance sheet, it will ensure that everything in your P & L has been captured.

2. Average Cost of Customer Acquisition

We all want customers, especially customers who keep spending or who spend big. Though it’s tempting to assume a “whatever it takes” attitude, you need to know the average cost of acquiring profitable customers and then assess whether you can cut those costs in order to make them even more profitable. Knowing the average cost of customer acquisition can also help you figure out how much to spend on customer retention.

3. Budget Versus Actual

Think you’re sticking to the plan based on what you see in terms of your bank account? The truth is that if you compare what you’ve budgeted to what you’ve actually spent, it will give you a far better sense of whether you’re staying on track and what kind of adjustments you need to make.

4. Cash Flow

Most people consider cash flow the most telling metric of all, and cash certainly is the lifeblood of any company. If you’re not keeping an eye on cash flow, you could find yourself caught off guard when it comes to making essential payments. Make measuring your cash flow, cash burn (the amount you go through monthly) and runway (how much you can operate based on your cash on hand) part of your regular business health check.

5. Fixed Burn Rate

No matter how well you’re doing, there is always the chance that you’re going to encounter some unforeseen circumstance or drop in business that is going to drive the need to cut costs. The best way to do that is to take a close look at your fixed burn rate and make sure it isn’t too high. As tempting as it may be to sign on to a long-term contract to save a little money, if you commit yourself to a payment you can’t afford at all in the future, you may be sorry. You might be better off removing some of those expenses from a contracted status so that you can eliminate them should the need arise.

6. Employee Productivity

Though it’s a given that your employees are your most valuable asset, that doesn’t mean you should be operating without ensuring you’re getting enough value out of them to justify what you’re spending. The best way to do that is to actually monitor each employee’s productivity to make sure everybody is pulling their weight.

7. Operating Cash Cycle

When a business wants to expand, they can’t move forward blindly. They need to have a good handle on how long it takes for cash to become available after their capital investment so they can feel confident in their ability to go through with the plans. Those who fail to understand their operating cash cycle risk joining the ranks of the 82% of businesses that fail due to poor cash flow management (according to U.S. Bank).

8. Churn Rate

When you think about how hard you work to acquire new customers, it’s no wonder that knowing how long you’re holding on to them is a key metric. If you’re churning through customers too quickly, it means that your product or service isn’t valuable enough to them to stick around for more. Understanding how soon they’re leaving, and the reason for it, is the first step in stopping the bleeding and making your business more profitable for the long term.

9. Regulatory Requirements for Your Industry

It’s easy to forget about regulatory requirements such as renewing your industry license or maintaining minimum capital, but failing to keep track of them leads to unnecessarily having to pay noncompliance penalties. Make sure that you include these elements within your financial report and calendar.

10. Projected Profit Loss Versus Actual

A big part of your annual financial plan should include a projection of what you believe your profit and loss will be, as well as a budget for each of your expense areas. Having this will allow you to compare what you projected to what your actual profit and loss is, and to then review where things went askew. Some discrepancies may be explainable and worthwhile, while others may be warnings of things getting out of control.

11. Profit Goals and Profit Per Customer

One of the most effective ways to promote profitability is to take a granular, analytical approach to your profit goals. By determining your short-term and long-term profit goals, you can then break it down to what your profit goal is, per customer, based on either your existing customers or the number of new customers you need to acquire. All of these numbers can drive internal processes and help you get where you want to go.

12. Financial Ratios

Ratios are among the most useful metrics that a small business owner can use to determine the overall financial health of their organization. Among the most important are their liquidity ratio (how much cash you have on hand to pay the monies you owe), efficiency ratio (how much it is costing you to bring in a single dollar) and profitability ratio (profit as it compares to revenue).

Each of these elements is extremely beneficial in helping you understand where your money is at any time. If you’d like to discuss how our services can help you run a successful business, please contact us for more information.

The SBA Issues a Simplified PPP Loan Forgiveness Application

If you are the owner of a small business that obtained a Paycheck Protection Program (PPP) loan, you are most likely aware that the loan can be partially or totally forgiven if you used the loan proceeds for the required purposes. Loan forgiveness is not automatic and must be applied for. The borrower must submit a request to the lender or, if different, the lender who is servicing the loan, who then must make a decision upon the amount of forgiveness within 60 days.

The request must include documents to verify the number of full-time equivalent (FTE) employees and pay rates, as well as the payments on eligible mortgage, lease and utility obligations. The borrower must certify that the documents are true and that the borrower used the forgiveness amount to keep employees and make eligible mortgage interest, rent and utility payments.

The process of obtaining a PPP loan and applying for forgiveness has been complicated from the start, with guidance from the Small Business Administration (SBA) and the IRS coming in dribs and drabs; for a while, it seemed that the rules were modified every week. The original forgiveness application provided by the SBA was horrendously complicated and one almost needed an accounting degree to figure it out. It required the applicant to complete numerous complicated side computations and did not provide any corresponding worksheets.

To clarify the process, Congress stepped in and passed the Paycheck Protection Program Flexibility Act. As part of that legislation, the SBA was required to simplify the forgiveness application. In response, the SBA did somewhat simplify Form 3508, the original forgiveness application, and created an easier version: Form 3508EZ.

The 3508EZ is for use by:

  • Self-employed borrowers with no employees.
  • Generally, borrowers with employees who, during the covered period,
    • Did not reduce the annual salary or hourly wages of any employee by more than 25%;
    • Did not reduce the number of employees or the average paid hours of employees; and
    • Was unable to operate during the covered period at the same level of business activity as it did before February 15, 2020, due to compliance with requirements established or guidance issued by the Department of Health and Human Services, Centers for Disease Control and Prevention or Occupational Safety and Health Administration.

During the week of October 5th, the SBA released yet another simplified application, SBA Form 3508S, along with instructions for its use. This form can only be used if the total PPP loan amount the borrower received from their lender was $50,000 or less.

A borrower who qualifies for and uses SBA Form 3508S (or their lender’s equivalent form) is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in FTE employees or employee salaries or wages from the CARES Act that would otherwise apply.

While SBA Form 3508S does not require borrowers to show the calculations they used to determine their loan forgiveness amount, the SBA may request information and documents to review those calculations as part of its loan review process. Accordingly, the borrower must retain, for 6 years from the date when the loan is forgiven or repaid, all documentation submitted with the loan application to prove the borrower’s certification of eligibility for the PPP loan and material compliance with the PPP’s requirements, and to back up the loan forgiveness application.

Keep in mind that the application for forgiveness, which can be submitted electronically, must be submitted within 10 months after the end of the covered period to the borrower’s lender or the lender servicing the borrower’s loan.

If you have questions about how these changes might apply to your situation or need assistance with completing your forgiveness application, please give our office a call.

Don’t Miss Out on Year-End Tax Planning Opportunities

To say COVID-19 has made 2020 a disastrous year for just about everyone would be an understatement. In response to the economic slowdown and losses of income, Congress passed several extensive laws to benefit individuals and businesses that suffered financial hardship because of COVID-19. However, 2020 has given rise to more than the usual tax planning opportunities. Thus, you may find it appropriate to schedule a tax planning appointment before the close of the year to take advantage of the tax benefits and strategies available for 2020. Although everyone’s situation is unique, the following are examples of tax opportunities and strategies that may apply to you.

Individual Planning Opportunities

Did You Collect Unemployment Income This Year? If you did, you should be aware that it is taxable for federal purposes and that most states also tax unemployment benefits. Even if you had taxes withheld from the unemployment payments, don’t be misled into thinking it will be enough. Generally, the tax withheld from unemployment compensation is insufficient, especially when the extra $600 weekly amount of federal pandemic benefits is considered. It may be appropriate to see what effects the unemployment income will have on your taxes and avoid any unpleasant surprises next year when your return is prepared.

Did You Skip the Required Minimum Distribution (RMD) for 2020? Taxpayers were allowed to skip their RMD from their IRAs and most other retirement plans for 2020. But that might not be your best tax move, especially if you can take a distribution that will result in no or minimal taxes for this year. It may be appropriate to discuss whether you should take a distribution or not. We might be able to determine an amount that can be withdrawn tax-free.

Are You the Charitable Type? If so, 2020 offers a variety of ways to make contributions, including donating unused time off from work (if your employer participates in the program). The AGI limitation for deducting cash contributions has been increased significantly, and non-itemizers can make a deductible contribution of up to $300 (pending legislation may change the amount). Of course, a taxpayer over age 70½ can make contributions directly from a traditional IRA to a qualified charity. We can determine the method or combination of methods best suited to your particular circumstances.

Did You Have a Large Increase in Income This Year? If so, you might want to explore the benefits of a donor-advised fund, which will allow you to make a large deductible charitable contribution this year and meet your future charitable obligations by distributing the funds in upcoming years.

Divorced or Separated This Year? Divorce creates numerous issues that can have profound implications on your tax return and the amount of your tax liability. For example, who takes credit for the kids, allocating taxable income, who benefits from tax credits and deduction carryovers, alimony and who is responsible for the tax liabilities are just a few issues to consider. It might be appropriate to project your tax liability in advance, so you can prepare for the outcome.

Do You Have Health Insurance? Although the federal government no longer penalizes individuals for not having minimal essential health insurance, some states do. The penalties can be a substantial amount of money and should be considered in year-end tax planning.

Did You Suffer a Disaster Loss in 2020? There are special rules related to evaluating the losses incurred as the result of a disaster, and the results are likely quite different from what you might imagine.

Did Your Child File a Tax Return in 2018 or 2019 Under the Kiddie Tax Rules? If so, Congress has retroactively provided an alternative computation that could result in a substantial refund.

Congress Extended Tax Benefits That Expired After 2017. Some of those benefits may apply to you for 2020. Or, you can amend your returns for 2018 and 2019 (as appropriate) to take advantage of the following benefits: forgiveness of qualified principal residence debt income; deduction of mortgage insurance premiums; credit for energy-efficient home improvements; and credits for fuel cell vehicles, two-wheeled electric vehicles and alternative fuel refueling property.

Did You Sell Your Home This Year? If so, and you meet the ownership and occupancy tests, the gain from selling your main home will not be taxed up to $250,000 ($500,000 if you file a joint return with your spouse). If you don’t meet the requirements of both owning and using your home for at least 2 years in the 5 years prior to the sale date, you may still qualify for a partial home sale gain exclusion. For example, you may qualify for a reduced exclusion if you sold your home to relocate this year because of a change in employment or due to health. We can determine the amounts of excluded income and taxable gain, and project how your taxes will be impacted.

Have You Prepaid Enough Tax for 2020? One of the reasons for doing year-end tax planning is to determine if the tax you’ve already paid through withholding or estimated tax payments will be sufficient to cover your tax for the year in order to avoid a penalty for underpayment of estimated tax. If there’s a shortfall, we can see what steps you can take either to reduce the tax (perhaps by increasing your retirement plan contributions or bunching deductions) or increase your withholding for the rest of the year.

Business Planning Opportunities

Did You Place Qualified Improvement Property in Service During 2018, 2019 or 2020? Congress made a retroactive law change that allows a business owner to expense the costs of qualified improvement property in the year when it goes into service. This is instead of depreciating the cost of the improvement and claiming that deduction over a number of years. Qualified improvement property generally means any improvement to an interior portion of a building that is nonresidential real property, if the improvement is placed in service after the date the building was first placed in service.

Did You Have a Business Loss in 2018 or 2019? If you incurred a net operating loss (NOL) in 2018 or 2019, changes made by the CARES Act retroactively allow taxpayers to carry those losses back 5 years. This entails amending your returns for the earlier years to deduct the loss being carried back in order to get a refund on income taxes paid in those years.

Are You a Working Shareholder in an S Corporation? If so, you may not be aware of the IRS’s “reasonable compensation” requirements, which can influence your Section 199A (qualified business income) deduction and payroll taxes. Reviewing the requirements as they apply to your particular circumstances may avoid future problems with the IRS.

Did You Secure a Paycheck Protection Program Loan From the SBA? If so, you will need to apply for loan forgiveness if you haven’t already. The SBA forgiveness applications can be quite challenging. We can assist with completing the application and help you maximize your forgiveness.

Did You Have a Large Capital Gain in 2020? If so, you may want to consult with us about investing in a Qualified Opportunity Fund (QOF) to defer the taxable gain until 2026. Unlike Section 1031 tax-deferred exchanges, only the profits need to be invested in a QOF, not all the proceeds from the sale that resulted in the capital gain.

Other Planning Ideas
In addition to the situations above, some customary tax planning issues may also apply to you in 2020. Here are some examples:

  • You could bunch deductions to itemize in one year and take the standard deduction in the subsequent year.
  • Depending on your 2020 income, it may be appropriate to accelerate or defer your income and deductions. This will be especially crucial during 2020.
  • Are you considering marriage or divorce? Some circumstances might warrant waiting until after the end of the year.
  • If you expect your income to be abnormally low in 2020, this may be an opportunity to cash in on stock gains or exercise stock options while incurring little or no tax liability.
  • As always, those with large estates may find it appropriate to make annual gifts of $15,000 per recipient (no limit on the number of recipients) to reduce the value of the estate. Married couples can gift $30,000 to each recipient. Giving appreciated assets will transfer the taxable gain to the recipient.

Opportunities for tax benefits and reducing your tax liability abound for 2020. Please contact our office for a virtual tax planning appointment and continue to be safe during these trying times.

Are You Reaping the Full Benefits of Your HSA?

The Health Savings Account (HSA) is one of the most misunderstood and underused benefits in the Internal Revenue Code. Congress created HSAs as a way for individuals with high-deductible health plans (HDHPs) to save for medical expenses that are not covered by insurance due to the high-deductible provisions of their insurance coverage.

HSA as a Retirement Vehicle – Although the tax code refers to these plans as “health” savings accounts, an HSA can act as more than just a vehicle to pay medical expenses; it can also serve as a retirement account. For some taxpayers who have maxed out their retirement plan options, an HSA provides another resource for retirement savings—one that isn’t limited by income restrictions in the way that IRA contributions are.

Since there is no requirement that the funds be used to pay medical expenses, a taxpayer can pay medical expenses with other funds, allowing the HSA to grow (through account earnings and further tax-deductible contributions) until retirement. In addition, should the need arise, the taxpayer can still take tax-free distributions from the HSA to pay medical expenses. Unlike traditional IRAs, no minimum distributions are required from HSAs at any specific age.

Withdrawals from an HSA that aren’t used for medical expenses are taxable and subject to a 20% penalty, with one exception: an individual age 65 or older will pay income tax on non-medical related distributions from their HSA, but won’t owe a penalty for using the funds for non-medical expenses.

Example: Henry, age 70, has an HSA account from which he withdraws $10,000 during the year. He also has unreimbursed medical expenses of $4,000. Of his $10,000 withdrawal, $6,000 ($10,000 – $4,000) is added to Henry’s income for the year, and the other $4,000 is both tax-free and penalty-free. If Henry had been 64 years old or younger, he’d be taxed on the $6,000 and pay a penalty of $1,200 (20% of $6,000).

Eligible Individual – To be eligible for an HSA in a given month, an individual:

  1. Must be covered under an HDHP on the first day of the month;
  2. Must NOT also be covered by any other health plan (although there are some exceptions);
  3. Must NOT be entitled to Medicare benefits (i.e., generally must be younger than age 65); and
  4. Must NOT be claimed as a dependent on someone else’s return.

Any eligible individual—whether employed, unemployed or self-employed—can contribute to an HSA. Unlike an IRA, there is no requirement that the individual have compensation, and there are no phase-out rules for high-income taxpayers. If an HSA is established by an employer, then the employee and/or the employer can contribute. Anyone, not just family members, can make contributions to HSAs on behalf of eligible individuals. Both employer and employee contributions made via the employer’s cafeteria plan are excluded from the employee’s gross income. Employees who make HSA contributions outside of their employers’ arrangements are eligible to take above-the-line deductions—that is, they don’t need to itemize deductions—for those contributions.

The Monetary Qualifications for an HDHP:

Minimum Annual Deductible Maximum Annual Out-Of-Pocket Expenses
Coverage 2020 2021 2020 2021
Self-Only $1,400 $1,400 $6,900 $7,000
Family $2,800 $2,800 $13,800 $14,000

Example: Family Plan Does Not Qualify: Joe has purchased a medical insurance plan for himself and his family. The plan pays the covered medical expenses of any member of Joe’s family if that family member has incurred covered medical expenses of over $1,000 during the year, even if the family as a whole has not incurred medical expenses of over $2,800 during that year. Thus, if Joe’s medical expenses are $1,500 during the year, the plan would pay $500. This plan does not qualify as an HDHP because it provides family coverage with an annual deductible of less than $2,800.

Example: Family Plan Qualifies: If the coverage for Joe and his family from the example above included a $5,000 family deductible and provided payments for covered medical expenses only if any member of Joe’s family incurred over $2,800 of expenses, the plan would then qualify as an HDHP.

Maximum Contribution Amounts – The amounts that can be contributed are determined on a monthly basis and are calculated by dividing the annual amounts shown below by 12. Thus, if an individual’s health plan only qualified that person for an HSA for 6 months out of the year, then that person’s contribution amount would be half of the amount shown.

Maximum Annual Contribution
Year 2020 2021
Self-Only $3,550 $3,600
Family  $7,100 $7,200

In addition to the amounts shown, an eligible individual who is age 55 or older can contribute an additional $1,000 per year.

How HSAs are Established – An eligible individual can establish one or more HSAs via a qualified HSA trustee or custodian (an insurance company, bank or similar financial institution) in much the same way that an individual would establish an IRA. No permission or authorization from the IRS is required. The individual also is not required to have earned income. If employed, any eligible individual can establish an HSA with or without the employer’s involvement. Joint HSAs between a husband and wife are not allowed; however, each spouse may have a separate HSA (and only if eligible).

Qualified Medical Expenses – To be non-taxable and penalty-free, distributions must be for unreimbursed expenses paid by the HSA account owner, their spouse or dependents for medical expenses that have the same definition as medical expenses for purposes of the medical itemized deduction.

Amounts paid for medicine or drugs are qualified medical expenses for HSA distribution purposes only if the medicine or drug is prescribed (determined without regard to whether such a drug is available without a prescription) or insulin.

The qualified medical expenses must be incurred only after the HSA has been established, and medical expenses paid or reimbursed by HSA distributions cannot also be claimed as medical expenses for itemized deduction purposes.

Generally, health insurance premiums are NOT qualified medical expenses for HSA purposes, except for the following:

  • Qualified long-term care insurance (but only up to the amount of the annual age-based limit that applies for deducting long-term care premiums as medical expenses);
  • COBRA health care continuation coverage;
  • Health care coverage while receiving unemployment compensation; and
  • For individuals age 65 or over, premiums for Medicare A, B or D, Medicare HMO and the employee share of premiums for employer-sponsored health insurance, including premiums for employer-sponsored retiree health insurance (but not Medigap policies).

Menstrual Products – Effective for tax years 2020 and later, the CARES Act added a provision that permits tax-free reimbursement from health savings accounts for costs of menstrual products.

Telehealth – The rule has been that taxpayers may only make contributions to HSAs while they are covered by a high-deductible health plan. However, the CARES Act allows a high-deductible health plan to provide telehealth and remote care services without a deductible for 2020 and 2021.

If you have questions related to the medical tax benefits of an HSA or how an HSA can supplement your retirement planning, please call our office.