Biden’s budget proposal: how it could impact your wallet
President Joe Biden proposed his $ 6 trillion budget on Friday, outlining his plan to rebuild America’s infrastructure. It focuses on financing affordable housing, education and health care, while increasing capital gains taxes on high-income households.
If passed, the budget would make sweeping changes to the way the federal government issues and collects money, and some of those changes could affect your personal finances. Make sure your decisions are well informed by using an online financial marketplace like Credible.
Here’s what you should watch out for, from college debt to mortgage forbearance.
Taxes will rise for richest Americans
Biden’s proposed budget aims to close tax loopholes that “reward wealth over work,” such as lowering the capital gains tax. Financial planners say that if this version of the budget passes, Americans earning more than $ 400,000 a year will see higher taxes on income, assets and investments. Households earning more than $ 1 million would pay a 43.4% capital gains tax.
Devin Pope, a certified financial planner (CFP) in Salt Lake City, Utah, said it could “hurt the entrepreneurial spirit that our country has embraced for decades.”
Capital gains tax would be retroactive, taking effect at the end of April. “It doesn’t allow people to plan ahead or prepare for what’s to come,” said Monica Dwyer, CFP and heritage advisor based in West Chester, Ohio.
“If we had known this was going to happen, the clients and I would have made a few transactions to take advantage of the tax cut last year,” said Rose Swanger, CFP in Knoxville, Tennessee. “It may be a moot point now, but overall clients and I will be very careful about how we invest in their taxable account over the next several years.”
The future of investing for high income earners may turn to tax-efficient retirement accounts rather than other investment accounts.
HOW A BIDEN ADMINISTRATION COULD AFFECT YOUR MORTGAGE
More affordable housing will be added to the market
In an effort to address the affordable housing crisis, Biden’s budget allocates nearly $ 212 billion over the next 10 years to build, preserve and renovate more than two million homes and commercial buildings. Here are some of the proposals and how much they will cost by 2031:
- Renovation of housing and urban development of multi-family properties: $ 500 million
- Invest in the social housing stock: 40 billion dollars
- Building housing for the elderly: $ 1.96 billion
- Stimulate additional grants, loans and loan guarantees for rural housing: $ 2 billion
- Extension of the housing tax credit for low-income people: $ 31.9 billion
Despite efforts to increase access to affordable housing, home prices are unlikely to drop anytime soon, even if this budget is passed. Take advantage of low mortgage rates and increased home equity with cash refinancing. Explore your options on Credible.
Students would have access to two years of community college tuition-free
The rising cost of obtaining a college education has led many graduates to seek alternatives to a four-year university, such as community colleges and trade schools. Biden’s proposed budget would make community colleges free for two years.
Funding a free community college would cost $ 55.7 billion between 2022 and 2026, and $ 108.5 billion by 2031.
WHAT QUALIFIES YOU FOR A FREE COLLEGE?
FHA borrowers could benefit from extended relief from COVID-19 pandemic
The Federal Housing Agency (FHA) will continue to “provide urgent assistance to homeowners who are financially suffering due to the COVID-19 pandemic,” the budget said. However, the document does not spell out the details of this plan, and the deadline for homeowners to request COVID-19 forbearance from their mortgage agent is still June 30, 2021.
COVID-19 mortgage forbearance may be a lifeline for mortgages who cannot afford a monthly mortgage payment, but it may be a better long-term option for borrowers to refinance since rates are historically low.
If you’re thinking about refinancing your mortgage to save money, look for the lowest possible mortgage rate for your situation on Credible. It will not affect your credit score.
FIXED-RATE STUDENT LOAN REFINANCING RATES CONTINUE AT HISTORIC LOWS
Your federal student loans won’t be canceled anytime soon
Is there anything missing from Biden’s budget proposal? Student loan forgiveness.
The president has supported the cancellation of up to $ 10,000 in student loan debt for each borrower. He says he thinks it is important that Congress enact this legislation rather than relying on an executive order. However, Biden’s budget proposal to Congress – which allocates federal spending for the next 10 years – does not include college debt cancellation. This can leave some borrowers wondering what to do with their student loan balances.
Federal student loan borrowers can continue to take advantage of the zero interest forbearance period, which expires September 30, 2021. Borrowers can still make payments during this period to reduce the loan principal balance. Since interest does not accrue during this time, borrowers may consider using the extra money to pay off high interest debt or save for future student loan payments.
Private student loan borrowers are unlikely to be affected by university debt forgiveness and are not protected by the federal forbearance moratorium. These borrowers should continue to make payments and consider refinancing their student loans when rates are historically low.
Refinancing a student loan can help you save thousands of dollars on your college debt. Borrowers saved on average $ 17,344 when they refinanced a shorter term loan on Credible. A student loan refinance calculator can help you decide if this is the right decision for you.
THE EFFECT OF BIDEN’S STIMULUS BILL ON STUDENT LOANS: WHAT YOU NEED TO KNOW
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