October 10, 2021
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On this podcast, we go to Suze School for a lesson about the rise of crypto currencies, inflation, student loan forgiveness and what you need to know now about the proposed new tax bill.
October 10th, 2021. Hello everybody. Well, we're going to go to Suze school today and I have to just say that Suze school today is gonna be chockablock ful because we are going to talk about Bitcoin and why are the cryptocurrencies rising? We're going to talk about public student loan forgiveness and we're going to talk about a new tax bill that could affect many of you out there that you need to know about. So, but before I begin, here's what's really important. It is October 10. That means there are three days left until the Alliant Credit Union Sweepstakes is over. So, if you do not go to myalliant.com right here and right now today, it is going to be impossible. And I'm talking about October 10th, 2021. If you're listening to this tomorrow or, then it's probably already too late. But if you are listening today, today absolutely will probably be the last day, that if you apply that you will be able to become a member and be entered into the sweepstakes, where as I say in the beginning of this podcast, one of you is going to win $10,000, somebody else is gonna win $5,000, and five of you are going to win $1,000. Just go to myalliant.com and become a member. It's just that simple. If you pass this up, what can I say? All right, let's start right now with what's making crypto rise because as you know, I've been talking about Bitcoin lately and I've told you that I really like Bitcoin that I myself own it. Again, I always put in the caveat that really at this point you still can't invest in something like cryptocurrency with money you cannot afford to lose. However, if you have a little amount of money or any amount of money that you feel you can afford to lose. I really love Cryptocurrency in particular. I like Bitcoin as well as a few others that are more speculative. But I do feel the safest at this point in time with Bitcoin. So, what is making Bitcoin go up? Well about four things seriously are contributing to the factor of its rise in this past week. Number one, some analysts, they are totally optimistic that Bitcoin is going to have Bitcoin ETFs approved. Which means that you're going to be able to buy Bitcoin ETFs through conventional brokerage firms. And that will mean that a lot of you will feel far safer because you still don't quite understand Coinbase or PayPal or FTX. Again, my favorite of all Cryptocurrency exchanges and by the way I just have to say yes, I'm aware that if you're in New York, you cannot get an account yet at FTX. In about another six months you will be able to, but every single place else in the United States of America you can use FTX, okay. Many of you however aren't comfortable doing that. You still want to stick with major brokerage firms where you can see it, you can buy, you can sell it and you understand exchange traded funds, you see that it's a share that's in your account and that makes you feel comfortable. And even though that ETF, exchange traded fund, maybe purchasing actual Bitcoins, it still makes you feel more comfortable. Like for KT for instance, she doesn't feel comfortable because she's like who owns Bitcoin, where is Bitcoin? She drives me crazy. However, that's who she is. Not that she drives me crazy but who she is, is somebody who wants to know where her money is, is it safe? She needs to know that. So, this may really help somebody like KT and possibly you, feel more comfortable in investing in Bitcoin. Also recently the Federal Reserve Chairman Jerome Powell, he issued a statement that he said he has no intention to ban crypto. The day that he said that, you saw Bitcoin rise 10% in that day alone. Next everybody is scared to death of inflation, and they should be scared to death of inflation because inflation is going up and up and up. Your cost of living is going up and up and even though if you go into a grocery store and you buy something you may think that you're not spending more money but look at the size of your box that you're purchasing or the container. It could be 20-30% smaller so you are paying the same amount that you were spending but for less goods that you get to receive. So, inflation is absolutely rearing its head and I don't see it going anywhere, because of that. Inflation is making Bitcoin even more enticing to everybody as like gold. You know people when they get afraid of inflation they usually go into gold, because gold you know stores value in their head. It's something that's solid it’s there, a lot of people now are turning to Bitcoin instead of gold that's making it go up. Also last but not least, Bitcoin and Ethereum all of them are studying to adopt, you know a lightning network and what that means is that, it's like if you're on the road you know how you sometimes are on freeways and you have the passenger lane that everybody is in and then you have the hover lane which you can get in and you can go a whole lot faster. And a lot of you wish only I could be in that hover lane, I can get to where I want to go quicker. that's what's happening with Bitcoin, the lightning networks are allowing them to do transactions far, far faster than before. So, now crypto may be able to be used as a currency and really has a whole lot more uses at that point in time. That my friends is why Crypto is going up now. I'm going to be going fast because I have so much to talk to you about. But I know, I know that you can take it and that you can understand it. And again, the great thing about a podcast is you can listen to it over and over again. This next piece of news is something that makes me so happy, I can't even stand it. Because for all the years that I've been doing this well at least you know for since 2007. People were so excited that way back in 2007 the government came out with a thing called public student loan forgiveness. And this is where if you came out of school in the University, of college and you had a lot of debt if you simply went to work in the public service sector, then after 10 years of 120 payments, if you had federal student loans and you were under a qualifying repayment program, your student loan would be forgiven with absolutely no tax consequences whatsoever. However, do you know that since 2007, only 16,000 borrowers, only 16,000 and there's like a half a million or a million borrowers that were doing this, have had their student loans forgiven under this program. That is because this program became so screwed up. It's not even funny. A few years after it came out, they made this regulation that it had to be a direct student loan. There couldn't be anything else but a federal student loan, which was a direct student loan. And if you weren't on the correct repayment program, you got disqualified even though you never knew that that was going to disqualify you. So, what's really fabulous is that the education department now, is going to make major changes in this program starting in about two weeks. So, it's not gonna matter now if you had an FFEL loan, I call them ffel loans which happened to be federal family education loans or if you had debt from a Perkins loan, then those loans are going to count. Prior to this, they did not count towards public student loan forgiveness. Are you hearing me? But it's really important that if you have a FFEL or Perkins loan and any other non-direct loan program. You first have to apply to consolidate those loans into a direct loan program and then submit a PSL F form. I love that, by the way, for those of you who are wondering parent plus loans do not count. So, for those of you who were denied in the past, there is absolutely hope for all of you because as I said, since this has been happening, do not many thousands of emails that I've gotten say Suze, please help me. I thought I was doing this right. Now, I'm almost into this for 10 years and now they tell me my loan is not going to be discharged and it was such a heartbreak for these people. So, hopefully the Department of Education will be reaching out to all of you who are disqualified. But if I were you, I would not wait for that. If I'm speaking to you right now and this is affecting you, pick up the phone, write your lender, do anything you can do to make sure, that you now qualify for the public student loan forgiveness program. Because chances are I have a feeling that about close to 500,000 of you at least are going to be helped by this. So, don't let this pass you by. All right, those two things were good news if you ask me, why crypto is going up, public student loan forgiveness. And now I don't know, I don't know if I think this is good news or bad news, but I have to say if I was going to categorize it. I'm not exactly sure I would do so as good news. All right. On September 13th of this year, not that long ago, almost a month ago. The House Ways and Means committee entered a tax proposal that could affect all of us if it is enacted and it could do at least five things. So, are you ready for this everybody? It could absolutely crack down on after-tax, backdoor, and Roth conversions. Do you know how I've been telling you always do a Roth always do a Roth, always do a Roth. And a lot of you thought, oh it's okay, I'll just do that. I'll convert when I'm in a lower tax bracket, might not be able to do so. So, listen closely and I'll go into more detail in this, in just a few minutes. All right. They're also going to roll back the estate and gift tax exemption to pre 2017 levels. That again is a big deal that could affect far more of you than you have any idea. It's going to increase the top ordinary income tax bracket for many people out there. Again, most of you may not be affected, but many of you will be affected. It's also going to increase capital gains tax for a specific group of people. It is going to extend the child tax credit which I like. It is going to eliminate grantor trust, I'll get to that in a second and it is going to put into effect the wash rule for cryptocurrencies. Now, it's going to do a whole lot more than just that. But I picked the few things that I thought could absolutely affect all of you. Let's start with, eliminating the backdoor after-tax Roth contributions starting when, in 2022. So, for those of you who took advantage of all the information that I've given you in the past, about how to do a back door Roth and again, what is a backdoor Roth? Remember for you to contribute annually to a Roth IRA, your income has to be under a specific amount and those amounts are for a single person filing in single on their taxes is $125,000 of adjusted gross income for the full maximum contribution of $6,000 if you're under 50, $7,000, if you're 50 or older, that goes away at 140,000 of adjusted gross income. Married filing jointly $198,000 for a full contribution that goes away at $208,000 and if you made more than that and you wanted to contribute to a Roth IRA. The only way that you could do it or one of the ways that you could do it anyway is by going through the back door. The way that you got to go through the back door is very simple. You would open up a traditional IRA, fund it with money you have already paid taxes on. So, it's an after-tax contribution into your traditional IRA, you made it non-deductible because you had already paid taxes on it and then you converted it to a Roth and you were able to do that because conversions have no income limitations on them at all. So, people were doing that and people were doing that and people were doing that. Well guess what if this passes, starting in 2022 you will no longer be able to do after-tax backdoor Roth IRAs totally. So, you have between now and the end of the year to figure that out. So, if you don't happen to qualify for a contributory Roth IRA. And you have money sitting out there that you were thinking, oh I'll get around to converting it, I'll wait until the markets go down a little bit. I'm not subject to the pro-rata rule and again I talk about this all the time, the pro-rata rule is when you have after tax money that you're putting into a traditional IRA, and you want to convert it and you have other traditional IRAs or pretax retirement accounts outside of your 401K. Then you're subjected to the pro-rata rule, which means you're going to pay taxes on that money again so many of you don't want to do that. Trust me it's not worth it in my opinion in most cases but you should check with your CPAs. But if you have been procrastinating about converting money into a Roth trying to figure out the best time to do it with money that you put in to a traditional IRA with after tax money. And you wanted to convert it to a Roth, you best do that before the end of this year because chances are starting in 2022, you're not gonna be able to. Now absolutely, you should be talking to your tax person about this because this is a major change. It's a lot more complicated than what I'm talking about because there are exceptions, if you make a lot of money and you have mega, it's so complicated. It's not even funny, but for many of you, you may be affected by this. Now get it clear everybody this is for after-tax contributions. So, it would shut down backdoor Roth IRAs, it would shut that down. Got that. So, don't go freaking out thinking that you can't convert money to a Roth. You absolutely can. But that's going to be with money that you are going to owe taxes on. Not with after tax money, I hope I just didn't confuse the hell out of you but anyway, it's something to just be aware of. It's also something for you to be aware of which is why forever I have been saying to you don't think that they can't change the laws take advantage of a Roth IRA right now, with as much money as you possibly can because eventually you knew they were going to have to crack down on these laws. Now, if you didn't have the income to be able to qualify for a contributory Roth, you shouldn't be able to have one. And now they are seriously cracking down. All right next, the roll back of a state and gift tax exemption to pre-2017 levels. What does that mean? Now, a lot of you are going to think that this isn't going to affect you, but don't be surprised because it absolutely can. The original tax law said, that you would be able to gift or leave $11.7 million dollars per individual to anybody you wanted without a state tax. That was a big deal, and that was going to stay into effect Until 2025. Well starting in 2022, if this bill passes, they are going to reduce that to 5.85 million per person. Now, that's a gift tax or estate tax. So, for many of you who might want a gift, something to your children, a multimillion dollar building or whatever it is. Be aware, your estate tax limit now is only $5.85 million dollars per person. Why could that affect many of you? So here you are, and maybe you buy a $2 or $3 million dollars term life insurance policy. Maybe you buy it on yourself, your spouse buys it on themselves and now you have between you $4 or $5 million dollars of life insurance and you think you've covered everything. And now what's happened is that you did it in your individual names. So, you're the owner of the policy, you are the insured and probably your spouse or your children are the beneficiaries or however else you've set it up or the trust, hopefully is the beneficiary. And besides that life insurance policy, you also own a home and it is not that unlikely that you own a home today worth $500,000 worth a million. Real estate has gone up considerably. Or maybe you own two homes, and those two homes together are over $1 million. You also have money in your retirement accounts, the stock market has been going up. You may have money in cash, an emergency fund, but you probably have more money if you have any money at all. Seriously because there's a lot of you that all you have is debt. But there are so many of you out there that really have far more money than you have any idea. And then let's say next year it's 2022. This bill has been enacted and you and your spouse are in a car crash, you both have died. Everything now is being left to the kids, and your life insurance proceeds alone are going to be possibly eating up the entire estate tax benefit that you could leave tax free. So, it it's absolutely possible depending on how much insurance, you have, all kinds of things that you may have that you may be over that $5.85 million dollar mark. So, you need to check it out. And if you happen to be way over that mark, you might want to absolutely make sure that you see an estate lawyer right now and do some estate planning with it, because that really is a big deal. You know, so many times people don't even have a clue, don't they don't even have a clue what they're really worth. And then when sometimes I sit down with them or I talked to them on the phone, they go, oh I didn't know that my life insurance was going to be taxable. The way that you are to purchase life insurance, if it is a large amount of money and you already have a multi-million dollar estate, you want to make sure that you purchase it in a life insurance trust. If you purchase it in a life insurance trust, then the death proceeds are not part of your estate. These are things you have to know about. The next thing is that they are going to increase the top ordinary income tax bracket on many people out there. Now, you do not have to worry about this right now on any level, unless you're those that are making $400,000 a year or more if you're single or $450,000 a year, if you're married filing jointly. Because that is the income range that everything now is being aimed at, to get more money from. While it is true that they are going to increase the top tax bracket to 39.6, from 37% where it is right now. The true people that are going to be affected are the people making over $400,000 and $450,000. Because currently this year, if you make over that amount of money and you could make it all the way up to us quite a bit more like $600,000 you were in the 35% tax bracket. Now, once you make more than $400 or $450,000 you are going to be in the 39.6% tax bracket. So that's almost a 5% increase. And I know a lot of you say, well that's not my problem. But you see the trend that's happening here because one day it could be your problem. I'll never forget back when I got in such a fight with the government over this thing, is that they were saying if you made more than $250,000 a year you are going to have to pay this and do this. And I wrote them, I said $250,000 a year is fine depending on where you live. But if you live in San Francisco, if you live in LA, if you live in New York City after everything, sending your kids to school, you might not have any money to live on. And that is the reality of life. So, at least they raised it to 400 and 450,000. But that still is something that everybody should think about, because when tax brackets start to go up and people start to spend more in taxes and maybe those people have businesses or whatever, you never know how they pass what they have to spend more on down to all of you, if your customers or whatever it may be. Next, the capital gains tax is going up to 25% as the top bracket. And that is going to be the highest capital gains tax rate that we have paid since 1997. Again, this will not affect you unless your income is $400,000 or more if you're single, or $450,000 if you're married filing jointly. But again, I ask you to think about this because this is the one thing that concerns me about this one part of the bill. This goes into effect September 14, 2021. It's not even going to wait, if they pass this bill very shortly until 2022. They are going to make it happen on any sales that you have made after in most cases September 14, 2021. Next, they are going to extend the child tax credit. Now, this one I love a lot. So, I hope this passes. And starting in 2023 they are going to distribute it to you in monthly income. So, rather than give you giving you a lump sum of money and then some monthly income. It will all be given to you monthly, $300 a month you will be getting if your child is under 6, $250 a month if your child is six or older. Now, as many of you may know that there is phase out for income limits and currently that's at $150,000 a year for married couples, $112,500 a year for head of household and $75,000 for individual filers. And that's going to continue with everything through 2022. However, beginning in 2023 the child tax credit, the phase out may be changed. So, in the future, starting in 2023 remember I said that because if you don't qualify right now for the child tax credit you very well may qualify for it starting in 2023. There's a whole lot of other things with the child tax credit now, who can qualify and who can't but really all of it is to your benefit. Next, grantor trusts are going to be eliminated. I am not going to spend a lot of time on this one at all. But there are many ways that when you do have money and you want to avoid a state tax on it you put it into something called a grantor Trust, you are the grantor you're the owner, but it's in this trust and you cannot touch the principle of that trust. But when the principle of that trust throws out income to you, you simply pay income tax on it. No big deal, but then on your death what was in that trust would pass down to your beneficiaries but it would not be included in your trust. That's all you need to know for now, because guess what they're getting rid of it everybody. So, you better check with your CPA, your estate lawyer, do you are you okay? Are you going to be able? What else can you do to protect yourself against estate taxes and things like that? And last but not least, and I know that we're going to go a little long here, but you can take it everybody. It makes up for the two best of’s that we did a little bit ago. Okay, I want to talk to you about something called the 30-day wash rule and what this means is, let's just say you had a stock and this is in effect right now. And you really like that stock but it's gone down considerably. You bought it at 100, it's now at 50 and you need a loss on your taxes. So, you decide that you think it's going to stay there at 50 for a little bit. Why not sell it, take the losses that can help you on your income and then buy it right back. Why not? You sell it today, you buy it tomorrow. The IRS says no, you cannot do that. You have got to wait 30 days from the time that you have sold something that you've taken a loss, in until you can buy it back. So, that keeps you from selling something and being able to take a loss buying it right back again. You know at $50 a share in this example IRS says no you cannot do that. Well guess what? That wasn't true for cryptocurrencies, you really could have purchased let's say Bitcoin at $65,000 it went down a little bit ago to $40,000. You could have sold it if you wanted to at $40,000 you took the losses off your taxes and immediately you bought it back at 40,000 and here now we're up at around 50,000. You could have done that. Well guess what, if this passes starting next year, the wash-rule is going to be an effect for cryptocurrency so you're no longer going to be able to do that. These are all things that you need to know about. Now, I know I could have gone on and on with all of this because this could have been in our Suze school but it should be a warning sign, a warning sign that anything can change at any time. They absolutely one day could come back and say you know what, you're not going to be able to do Roth IRAs anymore. We’ll grandfather in what you have done, but from now on people can only do traditional IRAs, don't think it can't happen. It absolutely can. So, I'm just asking you to be careful here and to take advantage of a Roth IRA if you can, to make sure that your contributions are absolutely going into your Roth retirement account at your employers. Take advantage of the things you can take advantage of this year, because possibly starting next year, it's going to be a whole different story. All right, that's Suze School for now and don't miss this opportunity to open up an account at Alliant Credit Union by going to myalliant.com, do it today. So, number one, you can become part of the sweepstakes and number two, it's such a great place to be keeping your money. Where they're giving you .55% interest, are you kidding me? Not to mention the $100 if you do $100 a month for 12 consecutive months. Alright until Thursday, Mrs. Travis will be back. But until then I want you to stay safe, stay smart and stay secure. Talk to you soon. Bye bye.
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