Markets slip from record highs. What to know about filing your taxes if you collected unemployment benefits last year. Plus, steps to take before investing your stimulus check. Here's how the headlines could affect your money.
All three major indexes declined Thursday. The Nasdaq dropped 3% and the S&P 500 fell 1.5%. The Dow slipped 0.5%, after hitting an intraday high.
The markets were mixed Friday morning as traders reacted to news that the Federal Reserve will not extend a pandemic-era rule that lets banks hold less capital.
The American Rescue Plan waives federal taxes on unemployment benefits worth up to $10,200 for 2020. To qualify, filers must have earned under $150,000. This change is one reason why the IRS extended the federal tax filing deadline to May 17.
If you received unemployment last year and have not yet filed your taxes, experts suggest waiting a bit: The IRS and software providers are making updates to incorporate the tax break.
Video by Stephen Parkhurst
The IRS is also working on a solution for affected taxpayers who have already filed. "We believe that we will be able to automatically issue refunds associated with the $10,200," IRS Commissioner Charles Rettig said during a congressional hearing Thursday. So don't prepare an amended return just yet.
Thinking of investing your stimulus check? Experts say first make sure you have an adequate emergency fund and that you've paid down any high-interest debt. You should also have a diversified core portfolio.
Once those boxes are checked, invest in ideas you're excited about. Even then, it's smart to lower your risk by investing in a thematic ETF instead of a single company or asset.
Video by Jason Armesto
A thematic ETF is a kind of exchange-traded fund that tracks an array of assets related to a specific trend, such as online gaming or blockchain. More commonly, ETFs track an underlying index such as the S&P 500, or specific sectors or commodities.
Although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.
More from Grow:
- Suze Orman: Don't buy stocks with your third stimulus check unless you've done this first
- $1,400 stimulus check calculator: Find out how much money you could get under the American Rescue Plan
- A 'typical family of 4 might be bringing in $10,000' in stimulus and tax refunds — here's what to do with the money