November 25, 2020

It’s Easier to Get a Tax Deduction for Donations This Year

The average donation at a fund-raising gala might be $125 to $150, said Afi Tengue, vice president of philanthropy and impact at Giving Compass, which helps donors research issues and make contributions. In that context, she said, “$300 is a big deal.”

Here are some questions and answers about charitable donations.

Is the $300 universal deduction in the CARES Act permanent?

The deduction is temporary, for tax year 2020 only, said Cari Weston, director of tax practice and ethics at the American Institute of C.P.A.s. (Congress sometimes extends temporary tax provisions, and nonprofit organizations would like to see that happen, so stay tuned.)

If my spouse and I file a joint tax return, can we deduct up to $600?

The I.R.S. has not yet made clear whether the law allows a $300 deduction per taxpayer or per tax return. Though some legal firms have written that it is “reasonable” to assume that the deduction is $600 per couple, Ms. Weston said that most tax professionals would probably advise clients to be “conservative” and deduct no more than $300 per return.

How should I decide where to donate?

Choosing where to spend your money is a personal decision, but there are tools available to help you decide.

Phil Buchanan, president of the Center for Effective Philanthropy and author of the book “Giving Done Right,” suggested supporting community foundations, which are deeply familiar with local needs and probably have funds dedicated to dealing with the coronavirus. To find one in your area, the Council on Foundations offers an online search tool.

If you are looking toward rebuilding beyond the current crisis, he suggested that you consider supporting local performing-arts organizations, which have been hit hard by the evaporation of ticket sales.

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Time to Take a Pledge: No Stocks if You’re a Member of Congress

The evidence is everywhere, and someone ought to spend 15 minutes shoving it under the nose of every member of Congress who shows up in Washington for the first time. Where to start?

Extremely active investors, as Ms. Loeffler and Mr. Perdue were, might begin with the classic 2000 paper “Trading Is Hazardous to Your Wealth,” which used the records of over 66,000 households to show that the annual returns of people who traded the most were 6.5 percentage points lower than the overall market.

Next, they could move on to what a different set of academics believed was the first-ever analysis of the actual portfolios of members of Congress between 2004 and 2008. It turned out they weren’t great at this investing thing and would have done better in basic index funds. If they had invested $100 that way, they would have ended that harrowing period with $80. Instead, the average member who felt above average ended up with $69.

Stocks bounce around a lot. Past performance is no indication of future success. If you don’t believe it, check out the Stock Pickers chart on the site of a firm called Index Fund Advisors. It re-ranks the performance of 18 household-name stocks over each of 20 years, before your very eyes.

To take this thought further, consider a bit of analysis from Dimensional Fund Advisors: If you examine the entire top 10 percent of stocks each year since 1994, fewer than a fifth, on average, make the top 10 the next year. “Investors with concentrated portfolios may actually miss out on the very stocks that deliver the best of what the market has to offer,” the firm notes.

In fact, according to a different bit of research, the best-performing 4 percent of stocks contributed the stock market’s entire net gain since 1926. Buy index funds, the logic of which is apparent in several research notes on Vanguard’s website, and you’ll get every security that makes up whatever the 4 percent might be for the next 100 years.

So why do so many individuals use other strategies instead? One reason could be ignorance. Or hubris born of the past decade, when stocks have mostly gone up. Also, plenty of people like gambling. And now that companies like Robinhood have lowered the transaction costs of active trading, it’s just so tempting to press one’s luck, especially when you’re bored during a pandemic.

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Demands on Nonprofit Groups Rose in the Pandemic, Even as Volunteering Fell

That all came to a halt when the pandemic took hold in the Pacific Northwest in March. When the clinic reopened in June, Mr. Hill stayed home, worried about contracting the virus or bringing it home to his wife, who has chronic asthma.

“It’s left a huge hole in my schedule and my heart,” he said. “I just loved it so much.”

A study released on Wednesday by Fidelity Charitable, a nonprofit organization created by Fidelity Investments, found that two-thirds of all volunteers had either decreased or stopped their volunteering because of the pandemic.

A small number were interested in virtual volunteering — doing remote counseling, talking to homebound people or writing letters — which helps the people being served but not the nonprofit organizations themselves. According to the Independent Sector, a nonprofit membership organization, the average value of a donor’s time is $27.20 an hour.

“Many of the nonprofits are thinking, ‘We’re in this for the long haul, and we need to think of different ways to use our volunteers,’” said Amy Pirozzolo, the head of donor engagement of Fidelity Charitable. For example, many shelters that serve food have encouraged their volunteers to cook the meals at home and bring them in, she said.

Meals on Wheels, which delivers meals to the elderly in their homes and at senior centers, has helped 47 percent more clients and provided 77 percent more meals since the pandemic started, because many older people feel less comfortable going to a grocery store, said Ellie Hollander, the organization’s president and chief executive.

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Obamacare Enrollment Opens, With Costs Generally Lower

During oral arguments on Tuesday, two conservative justices seemed to indicate support for the act, but the outcome of the suit is uncertain. The court isn’t expected to announce a decision until the middle of next year.

“We don’t know what will happen,” said Cynthia Cox, director of the Kaiser foundation’s Program on the A.C.A. But there’s no reason not to enroll if you need health insurance. If you sign up for coverage and plan subsidies are then eliminated, there’s no risk, she said, that you would have to continue paying premiums if you can’t afford them.

“You might as well have coverage while you can,” Ms. Cox said, especially given the risk of illness from the coronavirus. At the very least, plans compliant with the law have caps on out-of-pocket costs, limiting what patients must pay for a stay in the hospital. There is no guarantee that hospitals will waive the cost of treatment for uninsured patients with Covid-19, meaning people without coverage could face large medical bills.

Open enrollment on continues through Dec. 15 for coverage that begins on Jan. 1. (Some state marketplaces allow enrollment for much longer periods.) People affected by wildfires, hurricanes or other disasters may qualify for more time.

If you miss the open-enrollment deadline, you’ll have to wait a year to enroll unless you have a qualifying change in circumstances, like losing your health coverage, getting married or having a baby.

Here are a few things to know about open enrollment for Obamacare plans.

Where can I get help choosing a plan?

Enrollment help is available, but may be hard to come by in some areas, according to the Kaiser foundation, because federal funding for trained, independent “navigators” is limited. For federal marketplace plans, you can use the “find local help” tool, or call 1-800-318-2596.

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Medicare’s Choices Have Grown, but Many Americans Don’t Review Options

The indifference can’t be chalked up to a shortage of information.

Each September, Medicare sends an Annual Notice of Change document (via mail or email), which lists the changes in a person’s current coverage for the year ahead, such as the premium and co-pays. Medicare also mails a thick handbook, “Medicare You,” containing detailed information about plan options. A flurry of email alerts urging enrollees to shop their coverage using the Medicare Plan Finder website also go out each fall.

Insurance companies flood the airwaves and mailboxes with advertisements and brochures.

None of it is working very well. The Kaiser study found that 44 percent of enrollees had never visited the Medicare website, with another 18 percent reporting that they did not have access to the internet or had no one to go online for them. Only half reported that they had reviewed “Medicare You.” Just 28 percent have ever called the Medicare help line (800-MEDICARE) for information; the rest have never called or were not even aware the line exists.

If you’re enrolled only in original Medicare with a Medigap supplemental plan, and don’t use a drug plan, there’s no need to re-evaluate your coverage, experts say. But Part D drug plans should be reviewed annually. The same applies to Advantage plans, which often wrap in prescription coverage and can make changes to their rosters of in-network health care providers.

“Plans can not only change the monthly premium but the list of covered drugs,” said Frederic Riccardi, president of the Medicare Rights Center. “And they can change the rules around your access to drugs, or impose quantity limits or require prior authorizations.”

Complexity is a key issue. Kaiser found that 30 percent of enrollees said the Medicare program was either “somewhat difficult” or “very difficult” to understand, and those percentages were higher among younger people on Medicare who have disabilities or are in poor health.

These plans are required to meet federal requirements in terms of covered benefits, cost sharing and other features. But drug plans have tiers with varying co-payments, coinsurance, and preferred options for brand-name drugs, generics and pharmacies.

“The amount of information that consumers need to grasp is dizzying, and it turns them off from doing a search,” Mr. Riccardi said. “They feel paralyzed about making a choice, and some just don’t think there is a more affordable plan out there for them.”

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For Millions Deep in Student Loan Debt, Bankruptcy Is No Easy Fix

For Ms. DeLaet, the process was worth it: She has married her boyfriend, had two children and bought a home. Her mother is an “amazing” grandmother, she said, although they still cannot discuss the past.

“It is an untouchable subject,” she said.

The transformation in the bankruptcy rules began in 1976, with unfounded rumors.

A handful of legislators claimed to have heard about a parade of young doctors and lawyers who were trying to game the system and shed their debts while embarking on lucrative careers. The lawmakers toughened the rules, largely preventing borrowers from seeking a discharge within five years of graduation. The rules only got tougher over the next three decades.

Borrowers must show that their student loans are an “undue hardship” — a standard interpreted differently, depending on where you live. Some judicial circuits, including those in Nebraska, where Ms. DeLaet filed, have the judge review a “totality of the circumstances” for the debtor and make a decision.

Other jurisdictions employ a less flexible standard, the Brunner test, named for the case that established it. Judges must answer three questions affirmatively to discharge the debt. First, has the debtor made a good-faith effort to repay the loans? Second, is the debtor unable to maintain a minimal standard of living while making the payments? And, finally, is the debtor’s situation likely to persist?

But even jurisdictions that use the Brunner test apply it differently. Some require the judge to find that the borrowers have a “certainty of hopelessness” in paying off their debt. Other jurisdictions do not.

Here, the Johnsons may have benefited from geographic good fortune.

Lawyers for the Educational Credit Management Corporation — a nonprofit that collects defaulted loans on behalf of the federal government — examined how the Johnsons spent their $2,100 monthly income.

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More Workers Get Help in Building Rainy Day Savings

“The hard part in changing behavior is reducing the friction,” said George Barany, director of America Saves, a campaign of the Consumer Federation of America. “The easier it is to start to save, the better.”

Workplace savings programs vary in their approach. Some employers, like UPS, let workers contribute after-tax money into a savings account as part of their 401(k) retirement plan. UPS’s program, developed with Commonwealth and managed by Voya Financial, is available to the company’s 90,000 nonunion employees in the United States. UPS declined to discuss details of the program.

In a statement announcing the program last month, B.J. Dorfman, UPS’s director of global retirement strategy, said, “We value our workers and understand that their financial security is an important element of their success in the workplace and our success as a company.”

Other programs work as stand-alone options. For instance, a program from SaverLife, a financial technology nonprofit group, offers employees at Alorica, a global customer service provider, a $20 sign-up bonus and then matches employee contributions up to $40 a month. So a worker who saves $240 over six months will end up with a balance of $500. The employee must save at least $10 a month to get the match.

Participants link the SaverLife program to their own savings account and choose how much they want to save, said Letisha Lamb, director of employee experience at Alorica. The program encourages seasonal goals, like saving refunds during tax time or saving for gifts during the holidays.

Becky Dillon, 30, a customer service representative at Alorica, said that she had struggled to save, but that SaverLife helped get her in the habit. “I realized I needed to save money,” she said, so she cut out fast food meals and saved the money instead.

Ms. Dillon said she liked that SaverLife let her choose the amount to save — typically, $50 a month — and that there was no penalty if she had to skip a month. Before the pandemic hit, she had saved more than $300. The funds helped cover extra expenses that cropped up during the shutdown, like the cost of faster internet service so that her 9-year-old daughter could take classes at home.

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Investing for the Future in the United States of Agita

First, a maxim of sorts about our collective state of anxiety — whether you’re pulling for four more years or a new occupant in the Oval Office. “Emotions are really good at raising questions and really bad at answering them,” said Zach Teutsch, a financial planner in Washington, D.C. It’s true in life, and it’s certainly true with financial decisions. Try not to make any big ones anytime soon.

Second, it’s easy to overestimate how much change is possible in the first year of any presidential term, especially for things that can hit you squarely in the wallet, like taxes, retirement rules or health care. Mr. Teutsch learned all about that during his time at the Consumer Financial Protection Bureau, where he worked from 2013 to 2017.

As Mr. Teutsch tells it, many people working in government spend their careers focused on a single problem within a specific policy area that they would love to fix. They make plans and have memos in their back pockets and are ready when the legislative, executive or judicial clouds part.

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“Mostly, what you do is think and wait for those brief moments when you can move the thing to fix the problem that you’ve been obsessed with,” he said. It tried his patience enough that he found another line of work.

But here’s the problem for those policy lifers and for those of us who pay the taxes that keep them employed: Only a tiny fraction of them finally get to do their thing during any presidential administration, and it isn’t possible to predict who will get their shot or how successful they will be. It would be foolish to, say, fundamentally alter your retirement savings strategy in anticipation of a change to some or another tax rule.

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Stressed About the Election? Don’t Take It Out on Your Investments

What you’ve been feeling: If you were feeling deeply pessimistic about your investments in the spring, even after the market rallied, you were exhibiting signs of what the behavioral economists call “extrapolation bias.” But guess what. If you decided to become a day trader in April when the stock market rebounded, and you’re thrilled with the gains you’ve made, you are under the same effect now.

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Extrapolation bias occurs when people give added weight to current events in the belief that those events will continue. Stefano Giglio, a professor of finance at the Yale School of Management, conducted surveys of investors as the pandemic began. In February, as the coronavirus was just beginning its spread in the United States, investors expected a 6 percent return this year for the SP 500. By mid-March, investors were expecting just a 1 percent return, and that expectation stayed there through April — even though stocks had begun to rebound.

“People across the board became more pessimistic,” Professor Giglio said.

Yet new investors who had little experience in investing have found themselves performing like hedge fund stars if they started investing in the spring, Mr. Maguire, of Boston Private, said. Since late March, stocks have generally gone up, although they’ve been more choppy recently. But if those investors think their returns are the result of immense skill and not a bit of good market timing, they could suffer mightily in a market correction.

“I fully intend people to keep doing this, but it could end badly for them,” Mr. Maguire said. “It’s a change in behavior that’s explained by the anticipation of gains, which triggers a dopamine response in the brain.”

Another contributor to anxiety about investing is the availability bias, which means the more you see information repeated, the more you think that information will be true in the long term — without examining other potential outcomes.

With the pandemic, many people could not help but draw lessons from them previous pandemics, said Michael Liersch, head of advice and planning for Wells Fargo’s wealth and investment management division. But, he said, that kind of thinking doesn’t work in the long run, even if it makes us feel better in the moment.

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Reasons to Sign Up for a Health Savings Account

Some employers contribute seed money to H.S.A.s — about $572 on average for single coverage, according to the Kaiser Family Foundation — and cover monthly bank maintenance fees for workers. For 2021, H.S.A. contribution limits are $3,600 for an individual and $7,200 for family coverage. (People 55 and older can save an extra $1,000.)

Nor do you need to have health insurance through an employer to have an H.S.A. Many plans available through, the federal health insurance marketplace.

If you need help in choosing an H.S.A., the research firm Morningstar recently evaluated accounts from about a dozen prominent providers. Accounts from Fidelity, Lively, Health Equity and HSA Authority topped the recommendations for savers, while Fidelity, HSA Authority, Health Equity and Bank of America were recommended for investors.

Look for a plan with no maintenance fee, a low minimum balance threshold for investments and a manageable selection of investment funds, said Leo Acheson, director of multi-asset ratings at Morningstar. Interest rates on savings are so low these days that it really isn’t a factor in choosing an account, he said. But you’ll want to avoid accounts that charge extra fees, like those for mailing paper statements.

If your health plan qualifies for an H.S.A., don’t assume that one will be opened for you. Just a third of employers automatically enroll workers in an H.S.A. if they choose an eligible health plan, according to the Plan Sponsor Council of America, an industry group.

Here are some questions and answers about health savings accounts:

Can I use my H.S.A. to buy masks and other personal protective equipment?

Masks and other types of personal protective equipment aren’t eligible, and neither is hand sanitizer, said Rida Wong, president of Health-E Commerce, which oversees and, online sellers of eligible health items.

Health-E Commerce is participating in a campaign to put those items on the “approved” list, including support for federal legislation, introduced as House Resolution 8450. The outlook for the measure, however, is uncertain.

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