The Finatical
Week of March 1st - Tax Deductions and Refunds, Growing U.S Healthcare Costs, COVID Unemployment Insurance
Past Events
This past weekend we held the Youth Financial Summit, the first-ever all-inclusive event for finance enthusiasts featuring over $2000 in prizes. We are proud to say that we had over 140 unique participants from 6 continents! We want to thank all those who participated and helped make this event possible. The summit included a professor presentation from Avanidhar Subrahmanyam, Distinguished Professor of Finance at UCLA and the Q&A with Howard Marks, Co-Founder and Co-Chairman of Oaktree Capital. Check out recordings from both events below!
Professor Presentation:
Speaker Event with Howard Marks:
We will be hosting more events like this in the near future and are looking forward to seeing you all there!
Topic Breakdown - Learn about Tax Deductions and Refunds
In the United States, taxes are collected by the government in order to finance its plans. Taxes fall into three main categories: income tax, property tax, and sales tax. In this article, we will be covering tax deductions and refunds. Simply put, a tax deduction is where the amount of income that you have to pay taxes on is reduced. A tax refund is a rebate for the buyer if they pay more tax than they need to. Tax deductions and refunds are mostly available when considering income tax and property tax, and only in some cases can you get deductions for your sales tax payments. First, we will be analyzing the process of getting a tax refund, then learning about deductions on income tax, and lastly, deductions on property tax.
Tax Refunds
Tax refunds are issued by the government in the circumstance that you paid more taxes than you owed. Although getting this money back seems like great news, it is really only due to an overestimate of the taxes you owed, and not actually free money. Keep in mind that this system also works the other way around, and if you underestimate the amount you owe, you will end up owing the government money instead. When you pay the exact amount you owe, you do not get refunds back except for tax credits in certain situations. For example, Child Tax Credit allows taxpayers to gain up to $3,600 per child. This is used towards paying off taxes, and any extra credit will be sent directly to the payer. Other examples of tax credits include Earned Income Tax Credit for some low to middle income households, and the American Opportunity Tax Credit, which gives tax refunds to eligible households paying for college education.
Income Tax Deductions
Deductions on income tax simply reduce the amount of income that you are taxed on. These deductions will help lessen your tax bill, and can be utilized through various methods. The two main methods are itemizing, and using the standard deduction. Itemizing can be done by donating to charity, paying medical fees, paying interest on a home mortgage, paying student loans, and many business-related costs. The standard deduction is another method used to reduce tax bills. This refers to the standard part of your income that isn’t taxed. The IRS sets the standard deduction amount every year to account for rising inflation, and is also based on some other factors. You will receive a higher standard deduction on taxes if you are blind, if you are over 65, and also if you are dependent on another person.
Property Tax Deductions
Finally, let's go over deductions on property tax. Just like income tax, you can also lessen the amount of property that you have to pay taxes on. Although, it is important to keep in mind that the maximum amount of money deductible from property taxes is $10,000 in the US. Property taxes also go by the name, Real Estate Tax. These taxes are assessed based on the estimated value of your home/property. There are some exceptions to property tax deductions. For example, if you pay HOA fees, you cannot deduct them. You also cannot deduct home improvements with energy-saving purposes, such as solar panels. Keep in mind that property taxes fall under the category of itemized deductions, so if you do file for a deduction on property tax, make sure that you are getting more money back than if you were to do standard deduction, because you cannot do both.
Financial Trends
Growing U.S Healthcare Costs
In the U.S., the administrative healthcare workers and health insurance employees that don't have a direct role in providing patient care, costs the average American $2,487 every year. Whereas in Canada, there has been a single-payer system established since 1962 and the cost of administering health care is only $551 per person. This difference in the relative efficiency of public and private healthcare programs between the U.S. and other countries could eventually become a hot political debate, as presidential candidates continue debate on the pros and cons of government-funded universal health insurance.
Despite the average Canadian having to pay less for health care than the average American, the overall health of Americans and Candians are roughly the same, reported by a study from Canada’s health authority and the U.S.’s Centers for Disease Control and Prevention. For the U.S. to administer public and private healthcare programs, it costs them $812 billion each year and despite spending this much of money, in 2018 27.9 million Americans remain insured, as they weren’t able to afford any of the healthcare programs. In the U.S, states that retained full control over their health care programs, showed that the growth of administrative costs were negligible, which was also true for Canada's healthcare programs. However, states that shifted the majority of their healthcare programs to private, saw that their administrative costs were twice as high.
Unemployment Insurance During COVID
The main objective of unemployment insurance (UI) was to provide temporary and limited benefits to assist individuals that are unemployed while searching for work. However, this entire concept went haywire when COVID-19 occurred and how Congress dealt with it. Due to Congress implementing a $600 weekly bonus UI bonus in the CARES Act, it led to discouraging work and opened the floodgates to flood, leading to inflation. Even after the UI bonus in the CARES Act expired showed negative results in the nation’s economy, Congress resurrected and continued to issue additional stimulus checks as a part of President Biden’s “American Rescue Plan Act”-- that essentially continued the harmful impact to plummet the nation’s economy.
Once the cases of COVID-19 started to decline in the U.S., businesses started to reopen but faced challenges in bringing their employees back to work. The reasoning for employees not going back to work at their jobs is because the stimulus checks that Biden and Congress were issuing to the unemployed was more than the base salary of the employees, incentivizing them to no longer work. This led to small businesses struggling to compete with the larger corporations and unemployment benefits, leading them to eventually having to shut down their business. The unemployment bonuses also led to a lot of fraud occurring in the nation as international crime rings attacked state unemployment systems, where millions of dollars were stolen.
Financial Guidance
"Invest in yourself. Your career is the engine of your wealth." - Paul Clitheroe
Ultimately, you are the one who is going to undertake your financial journey. It’s imperative that you invest in yourself—through expanding your career, making connections through networking opportunities, and continuing to learn, even as a professional.
Money Fact
Do you know what a penny looks like? You may think you do, but chances are that you aren’t!
A study was carried out where subjects were asked to draw a penny from memory, and researchers found that most people failed to do so. This study revealed that we only remember things to the extent of relevance, rather than the full content.