Reshoring: What's the Future for Products & Services Made in America?

According to a recent survey of supply chain professionals, the COVID-19 pandemic interrupted 98% of global supply chains. Among the most disruptive supply challenges was the procurement of personal protective equipment, pharmaceuticals and semiconductors. Companies that had outsourced manufacturing to other countries experienced firsthand the types of risks associated with offshoring.

The previous administration placed a huge emphasis on reshoring U.S. manufacturing, and the current administration is reiterating that call. Within days of his inauguration, President Biden signed an executive order that increased the domestic threshold for companies to meet to win federal contracts. The order also is designed to limit Chinese clean-tech exports and encourage offshore manufacturers specializing in clean-tech supply chains to relocate to the U.S. The objective is to enable America to produce and scale its own solar, electric vehicle and battery production by bringing supply chains closer to U.S. customers, or at least to rely on countries considered allies. Tech experts consider data to be “the new oil” and therefore it is vital that the U.S. become more self-sufficient in developing and manufacturing semiconductor technology.1

The call for reshoring to generate domestic jobs, data and energy independence is popular, bipartisan and likely inevitable to some extent. Market sectors poised to benefit include construction engineering and machinery, factory automation and robotics, electrical and electronic equipment manufacturing, application software and other auxiliary services. Moreover, North American, European and South Asian banks should see enhanced economic activity associated with reshoring.2 If you’re interested in ways to incorporate reshoring growth potential into your portfolio, please give us a call.

With that said, the decision to bring operations back to the U.S. involves a lot of considerations. These include the risks of running out of inventory, potential labor strikes, tariffs, intellectual property rights, government incentives and the value of the Made in USA label — not to mention the impact of future pandemics. One of the biggest challenges is reskilling the U.S. labor force to manufacture things like semiconductor chips used in mobile phones. We do not currently possess that level of expertise on a mass scale, so it will take time and resources to train our labor pool to the level of Germany, Switzerland, Japan and other countries.3

Companies (and by extension, shareholders) also need to see a return on their reshoring investments. In addition to corporate management exploring ways to offset the higher operating costs associated with reshoring, policymakers are expected to facilitate this effort via tax breaks, low-cost loans and other subsidies.

The “State of North American Manufacturing 2021 Annual Report” found that manufacturers are more concerned with the higher costs associated with reshoring than they are with other risks, such as supply chain shortages, proximity to market, demand for U.S.-made products and potential shipping disruptions.4 In other words, the carrot for reshoring needs to be worth their effort from a strictly financial perspective. That will be much harder to achieve given the lack of skilled workers, higher cost of wages and potential labor shortages in the U.S.

The other factor is that Asia not only showed supply chain resiliency during the pandemic, but its growing population represents a tremendous market for U.S. companies. This means they are less inclined to move operations to the U.S. and subsequently incur higher shipping costs to get the goods back to the lucrative Asian consumer market.5

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

1 Bank of America Merrill Lynch. 2021. “Made in America.” https://www.bofaml.com/en-us/content/reshoring/made-in-america.html. Accessed June 22, 2021.

2 Bank of America Merrill Lynch. July 23, 2020. “The USD 1 trillion cost of remaking supply chains: Significant but not prohibitive.” https://www.bofaml.com/content/dam/boamlimages/documents/articles/ID20_0734/cost_of_remaking_supply_chains.pdf. Accessed June 16, 2021.

3 Deborah Abrams Kaplan. Supply Chain Dive. April 8, 2021. “Supply chains do the math on reshoring’s pros and cons.” https://www.supplychaindive.com/news/supply-chains-reshoring-decisions-sourcing-manufacturing-china/597596/. Accessed June 22, 2021.

4 Edwin Lopez. Supply Chain Dive. June 7, 2021. “Supply chain managers shift reshoring focus to total cost of ownership.” https://www.supplychaindive.com/news/inventory-supply-chain-managers-TCO-reshoring-Thomas/601148/. Accessed June 22, 2021.

5 Matt Leonard. Supply Chain Dive. June 17, 2021. “Tariffs, pandemic may not be enough to drive reshoring.” https://www.supplychaindive.com/news/reshoring-china-north-america-supply-chain-biden-forecast/601971/. Accessed June 22, 2021. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

Midyear Market Outlooks

In its midyear review, market analysts at Charles Schwab say that economic growth in the United States may have peaked in the second quarter of this year, and it believes China experienced its peak in the fourth quarter of 2020. However, Schwab is bullish on Europe’s prospects for the rest of this year. It notes that the rollout of Europe’s largest-ever stimulus plan should aid growth and the region still has some way to go before peaking — meaning eurozone stocks could deliver further gains.1

Consider that, because the overall stock market performed well in the first half of the year while bonds underperformed, it’s possible your asset allocation may be skewed. Feel free to contact us for advice on rebalancing your portfolio midyear. This will enable you to cash in on gains and reassess how to potentially position your equity allocation given market projections for the second half of 2021.

Morgan Stanley is bullish on sustained growth in the U.S., citing three factors that appear to be driving the economy. The first is the high savings and consumer spending rate. Despite job losses throughout 2020, U.S. households were bolstered by stimulus payments and supplemental unemployment benefits. As a result, the average household income has already exceeded its pre-COVID level. Consumer demand fuels corporate prospects, so the money manager expects capital spending to continue here and in other developed countries throughout the globe. And finally, Morgan Stanley economists predict that the nation’s core inflation will rise above 2% by year’s end, but not enough to trigger the Federal Reserve to raise interest rates.2

At JP Morgan, economists believe that robust growth and rising inflation in the U.S. will prompt the Fed to taper bond purchases by the end of this year and begin to raise short-term rates as early as the fourth quarter of 2022. Investors should consider that rising rates will produce higher yields that will increase pressure equity valuations. Furthermore, the falling dollar will benefit international equities. The money manager recommends investors consider higher allocations to international equities and alternatives in the near-term.3

In the fixed income market, Raymond James emphasizes the importance of strategic asset allocation to maintain portfolio balance, regardless of the current interest rate environment. The firm’s fixed income experts believe the 10-year Treasury will end the year in the range of 1.25% to 1.80%. By diversifying assets with a balanced approach, investors can preserve principal and allocate for growth in assets expected in appreciate in price.4

In the stock market, given the reopening of the U.S. economy, Ameriprise Financial expects continued price growth among cyclical value stocks, improving business trends and strong year-over-year profit growth. While stock fundamentals remain strong, they suffer more from investor views that the market isn’t performing as strong as it could be, which can damper enthusiasm. Going forward, Ameriprise analysts caution that share prices may fluctuate due to changes in growth expectations. Given the uncertainties related to higher inflation and supply shortages, they recognize that short-term conditions may be volatile through the summer but, in the long term, the current environment favors stocks.5

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

1 Charles Schwab. June 15, 2021. “2021 Mid-Year Market Outlook: Peak or Pause?” https://www.schwab.com/resource-center/insights/content/quarterly-market-outlook. Accessed June 16, 2021.

2 Morgan Stanley. June 9, 2021. “2021 Midyear Economic Outlook: A Business Investment Surge Ahead.” https://www.morganstanley.com/ideas/global-economy-midyear-outlook-2021. Accessed June 16, 2021.

3 JP Morgan. 2021. “The Investment Outlook for 2021: A Midyear Review.” https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/investment-outlook-2021-us.pdf. Accessed June 16, 2021.

4 Doug Drabik. Raymond James. June 14, 2021. “Midyear Rate Review: Markets and Investing.” https://www.raymondjames.com/commentary-and-insights/markets-investing/2021/06/14/bond-market-commentary. Accessed June 16, 2021.

5 Anthony Saglimbene. Ameriprise Financial. June 15, 2021. “Midyear market review: What’s ahead for stocks.” https://www.ameriprise.com/financial-news-research/insights/midyear-market-review. Accessed June 16, 2021. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

Demographics Differing on Retirement Plans

According to PwC’s recent Retirement in America report, the median retirement savings among people ages 55 to 64 is $120,000. Unfortunately, that likely would provide less than $1,000 per month for a retiree, for only 15 years.¹

There’s an interesting dichotomy among demographics when it comes to retirement planning these days. There are those who believe they will work beyond age 70, or even never retire. Some believe they’ll need to keep working for financial reasons, while others simply want to stay engaged.² But then there’s another cohort (one-third of workers younger than 54) who aspire to retire by age 55, according to a 2020 survey by the research firm Hearts & Wallets.³

Clearly, the pandemic affected some households’ financial situation more than others. But the primary way to successfully fund retirement is to have a plan, and those who want to retire early generally do. Those who think they’ll never be able to stop working may have either failed to plan adequately or circumstances conspired to send those plans awry. Wherever you are in your planning stage, it never hurts to get advice. We’d be happy to review your current finances — and your retirement plan if you already have one — to either get you on track or ensure you’re still on the right path to retiring when and how you want.

Bear in mind that approximately 40 million people do not have the advantage of investing in an employer-sponsored retirement plan because they work for a small business. There appears to be a growing trend to address this situation, as multi-employer and pooled-employer plans (MEP/ PEP) are starting to come on board. These plans are designed to allow small employers to share investment and administrative costs.⁴

A 2019 survey of retirement plan participants by American Century Investments found that the number one regret among retirees was not saving enough money for retirement. Not saving enough could lead to working longer than you wanted or scaling back to a lower-cost retirement lifestyle.⁵ 

For current retirees or those expecting to retire soon, recognize that the recent rise in inflation is not without its advantages. For example, in April the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased to 4.7% over 12 months ago. This inflation measure is the one that Social Security uses to make annual cost of living adjustments (COLA) to benefits — which means the next COLA increase could reflect that 4.7% increase next year. For context, Social Security benefits rose by only 1.3% in 2021. The actual adjustment will be calculated later this year based on how inflation continues to perform, with the final determination generally announced after the third quarter.⁶

  

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

Content prepared by Kara Stefan Communications.

 

¹ PwC. 2021. “Retirement in America: Time to rethink and retool.” https://www.pwc.com/us/en/industries/asset-wealth-management/library/retirement-in-america.html. Accessed June 15, 2021.

² American Advisors Group. May 6, 2021. “Nearly One in Three Seniors Plan to Work Past 70 or Never Retire, According to AAG Survey.” https://www.prnewswire.com/news-releases/nearly-one-in-three-seniors-plan-to-work-past-70-or-never-retire-according-to-aag-survey-301285256.html. Accessed May 31, 2021.

³ Hearts & Wallets. March 16, 2021. “Retirement Resurgence: Americans Who ‘Aspire to Retire by 55;’ Anticipation of Increasing Number of Income Sources.” https://www.heartsandwallets.com/docs/press/press_release_2021-03-16_Retirement_Resurgence_Americans_Who_Aspire_to_Retire_by_55_Goal_More_Income_Sources.pdf. Accessed June 15, 2021.

⁴ Stephen Miller, CEBS. Nov. 16, 2020. “DOL Final Rule Paves the Way for 2021 Launch of Pooled 401(k) Plans.” https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/dol-final-rule-paves-way-for-2021-launch-of-pooled-401k-plans.aspx. Accessed June 29, 2021.

⁵ Brian Mayfield. American Century Investments. 2021. “4 Reasons to Rethink Cashing Out Your Retirement.” https://www.americancentury.com/content/direct/en/insights/guidance-planning/retirement/saving-for-retirement/rollover-options/cashing-out-retirement-401k-ira-four-considerations.html. Accessed May 31, 2021.

⁶ David Payne. Kiplinger. June 28, 2021. “What is the Social Security COLA?” https://www.kiplinger.com/article/retirement/t051-c000-s010-what-is-the-social-security-cola.html. Accessed June 29, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

 

 

Ranking the World's Nations

 

What’s the best country? After several years at No. 2, Canada leads the globe, according to U.S. News & World Report’s “Best Countries” rankings for 2021. It’s followed by Japan, Germany, Switzerland, Australia and the United States.¹

 

The criteria used to make Best Country determinations included quality of life, agility, entrepreneurship, an “open for business” climate, a strong job market and commitment to social justice and human rights. At No. 6, the United States received high marks in power and cultural influence, and scored highest in agility, which represents traits such as adaptability and responsiveness.²

 

Agility is an important trait for individuals and families, too, because it means you can pivot, adapt and respond to life’s challenges and move forward. Please call us if you’d like us to help make sure your financial picture remains agile no matter what challenges you may encounter.

 

Over the past year, the global perception of “best countries” has in many ways been shaped by responses to the pandemic. According to the Global Health Security Index, the U.S. has traditionally ranked highest in preparedness in terms of its ability to prevent, detect and respond to infectious disease threats. Unfortunately, that preparedness apparently wasn’t an advantage with COVID-19, as the U.S. ranked worst globally in terms of case numbers and deaths since the onset of the pandemic.³

 

Fortunately, the U.S. has picked up in more positive perceptions as it rolled out vaccinations this spring. In April, it advanced to No. 17 in Bloomberg’s Covid Resilience Ranking. Singapore, New Zealand and Australia top that list as the best places to live during the pandemic. By tracking recovery rates in the 53 major economies across the globe, the Bloomberg index is designed to help predict how they may grow in the future.⁴

 

For now, global travel remains tenuous. Countries still struggling with outbreaks and low vaccine rates are largely off limits, while countries doing well in these areas are restricting citizens from traveling places where they might return with a new strain of the virus. In April, the U.S. State Department updated its travel advisory guidelines, warning Americas not to travel to about 80% of the world.⁵

 

All in all, 2020 was not a great year anywhere on the globe. Even countries that had success containing the virus suffered economically due to lockdowns, while the opposite was true for economies that stayed open. Still, the World Economic Forum published its annual World Competitiveness Ranking in December 2020, albeit without country competitiveness rankings due to incomplete data. Based on the indicators of reviving and transforming the enabling environment, human capital, markets and the innovation ecosystem, the U.S. led in areas such as digital legal framework and new business creation.⁶

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

¹ Knowledge@Wharton. April 20, 2021. “Why Canada Took the Top Spot on This Year’s ‘Best Countries’ List.” https://knowledge.wharton.upenn.edu/article/canada-took-top-spot-on-this-years-best-countries-list/. Accessed April 26, 2021.

² Ibid.

³ National Center for Biotechnology Information. Oct. 7, 2020. “The Global Health Security Index is not predictive of coronavirus pandemic responses among Organization for Economic Cooperation and Development countries.” https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7540886/. Accessed April 26, 2021.

⁴ Jinshan Hong, Rachel Chang and Kevin Varley. Bloomberg. April 26, 2021. “The Best and Worst Places to Be as Variants Outrace Vaccinations.” https://www.bloomberg.com/graphics/covid-resilience-ranking/. Accessed April 26, 2021.

⁵ Kenneth Kiesnoski. U.S. News & World Report. April 24, 2021. “State Department has warned against travel to 80% of the world. Here’s what you need to know.” https://www.cnbc.com/2021/04/24/covid-80-percent-of-world-is-unsafe-for-travel-amid-pandemic-state-dept-warns.html. Accessed May 14, 2021.

⁶ Klaus Schwab and Saadia Zahidi. World Economic Forum. 2020. “The Global Competitiveness Report. Special Edition 2020.” http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2020.pdf. Accessed April 26, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

New Status on Pension Plans

 

Financial professionals and economists have been talking about the “graying of America” and the retirement crisis for at least a couple of decades. Now, it seems, things have reached a tipping point.

Even labor union workers, largely beneficiaries of rich benefits and pension plans, have been hit hard. Throughout the past century, unions set up multiple-employer pension plans so that unionized workers in the trucking, trade, construction, ironworking, carpentry and other industries could change employers throughout their career while staying with the same union and continue accruing pension benefits from job to job.¹ Despite that effort, more than 1,400 multiemployer pension plans covering about 11 million U.S. workers have fallen into a financial hole.

For example, a worker who retired in 2009 with 37 years paid into his pension fund was due $4,265 per month for life. However, in 2015 his pension benefit was slashed to $2,217 per month due to underfunding.²

This problem doesn’t just affect pensioners, it affects the nation’s overall economy. According to the National Institute of Retirement Security, each $1 spent on pension benefits supports $2.19 in economic output. In some coal-mining areas, entire towns are supported by union pensioners. In Detroit, nearly a third of income comes from pensions, union retiree health, Medicare and Social Security. If pension plans fail, communities throughout the heartland, including Ohio, Kansas, Pennsylvania, Michigan and Indiana, will suffer immeasurably.³

Union pensions are not the only plans under financial pressure. According to the 2020 Social Security Trustee report, the Social Security retirement trust fund was scheduled to run out of money by 2034. But that estimate was before the pandemic, when unemployment and suspended FICA payroll taxes significantly reduced Social Security revenues while at the same time millions of people retired early and began tapping their benefits. The new trustee report, due in a few months, will likely update that depletion date to 2032 or sooner. Without changes, Social Security benefits soon will be funded solely by current payroll taxes, which would reduce benefits by as much as a quarter of previous estimates.⁴

It may be a good time to review your individual retirement plan to shore up any gaps that may be affected by reduced pension and government benefits. Feel free to contact us to discuss your situation and explore tax-efficient ways to provide more financial confidence to your retirement plans.

The recent $1.9 trillion stimulus bill took a first step to help stabilize pension plans. It authorized funding by the Pension Benefit Guaranty Corporation (PBGC) for eligible multiemployer plans to enable them to pay benefits at plan levels and remain solvent. The funding is being paid out from general revenues of the U.S. Treasury.⁵

 

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

¹ Martha C. White. NBC News. Feb. 8, 2021. “Stimulus checks that don’t get used right away are still ¹ Chris Farrell. Marketwatch. March 15, 2021. “The new stimulus bill will help shore up some shaky pension plans.” https://www.marketwatch.com/story/the-new-stimulus-bill-will-help-shore-up-some-shaky-pension-plans-11615586775?mod=home-page. Accessed March 22, 2021.

² Teresa Ghilarducci. Forbes. March 15, 2021. “What Is The Pension Provision In The Stimulus Package? An Explainer.” https://www.forbes.com/sites/teresaghilarducci/2021/03/15/what-is-the-pension-provision-in-the-stimulus-package-an-explainer/?sh=7fdbc4c257d1. Accessed March 22, 2021.

³ Ibid.

⁴ Bob Carlson. Forbes. Feb. 22, 2021. “Changes Must Come To Social Security.” https://www.forbes.com/sites/bobcarlson/2021/02/22/changes-must-come-to-social-security/?sh=44501abc15e4. Accessed March 22, 2021.

⁵ Pension Benefit Guaranty Corporation. March 12, 2021. “American Rescue Plan Act of 2021.” https://www.pbgc.gov/american-rescue-plan-act-of-2021. Accessed March 22, 2021.

⁶ Jory Heckman. Federal News Network. Feb. 24, 2021. “USPS 10-year plan looks to redefine ‘unachievable’ service standards.” https://federalnewsnetwork.com/agency-oversight/2021/02/usps-10-year-plan-looks-to-redefine-unachievable-service-standards/. Accessed March 22, 2021.

⁷ Govtrack. Feb. 2, 2021. “H.R. 695: USPS Fairness Act.” https://www.govtrack.us/congress/bills/117/hr695. Accessed March 22, 2021.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

 

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

 

Tax Topic: Qualified Business Income Deduction

 

One of the provisions included in the Tax Cuts and Jobs Act of 2017 was the Qualified Business Income (QBI) deduction. It is designed as a tax break for small businesses or self-employed individuals and is comparable to the enhanced tax breaks legislated for larger companies. However, while the corporate tax changes are made permanent, the QBI is scheduled to end in 2025 – along with a host of other individual tax-return breaks.

 

The QBI applies to revenues that are “passed through the business,” so the owner actually pays taxes on that money on his or her individual tax return at their individual tax rate. Since they do not benefit from the substantially reduced corporate tax rate, S Corp or sole proprietors can claim up to 20% of their “qualified business income” as a deduction.¹

 

The IRS defines QBI as income, gains, deductions and losses from a qualified trade or business – including income from partnerships, S corporations and sole proprietorships – minus business deductions such as half the self-employment tax, self-employed health insurance and qualified retirement plan contributions.²

 

To qualify, the taxpayer’s income must be at or below $163,300 for single filers or $326,600 for married filers ($164,900 / $329,800 in 2021). If income is above those thresholds, the taxpayer may still qualify for the QBI, but it gets tricky, particularly if he or she works in a specified service trade or business. This generally includes high-income professions such as a doctor or a lawyer.³ It’s a good idea to consult with a financial professional to help you understand if you qualify for this deduction.

 

A taxpayer with several different entrepreneurial ventures can combine those multiple sources of income to calculate his total QBI. The higher the qualified income, the higher the deduction (as long as it remains below the threshold for the individual’s filing status). When income looks to be higher than the limit, these tactics can be used to help reduce it to qualify for the QBI deduction:⁴

 

Be aware that a taxpayer who claims business losses may still qualify for the QBI but, here too, it gets very complicated.⁵ It’s important to work with a qualified tax professional who is familiar with the ins and outs of this deduction.

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

¹ Stephen Fishman. Nolo. 2021. “The 20% Pass-Through Tax Deduction for Business Owners.” https://www.nolo.com/legal-encyclopedia/the-new-pass-through-tax-deduction.html. Accessed March 9, 2021.

² IRS. April 8, 2019. “Facts About the Qualified Business Income Deduction.” https://www.irs.gov/newsroom/facts-about-the-qualified-business-income-deduction. Accessed March 9, 2021.

³ Andrea Coombes and Tina Orem. Nerdwallet. Nov. 13, 2020. “Qualified Business Income Deduction (QBI): What It Is & Who Qualifies.” https://www.nerdwallet.com/blog/taxes/pass-through-income-tax-deduction/. Accessed March 9, 2021.

⁴ Paul Chaney. Small Business Trends. March 3, 2021. “What’s the Qualified Business Income Deduction and Can You Claim It?” https://smallbiztrends.com/2020/08/qualified-business-income-deduction.html. Accessed March 9, 2021.

⁵ Michael T. Odom. The Tax Adviser. Dec. 1, 2020. “QBI deduction: Interaction with various Code provisions.” https://www.thetaxadviser.com/issues/2020/dec/qbi-deduction-interaction-code-provisions.html. Accessed March 9, 2021.

 

Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies