This is the first episode of the Red Barn Financial podcast.
We talk about the most recent legislative updates. One this week was the Student Loan Forgiveness program that was signed by executive order this week. Last week we saw the Inflation Reduction Act (IRA) which is designed to promote green initiatives as well as reduce inflation over the next 10 years.
Full Transcript of this podcast below.
Disclaimer: Information in this podcast is for informational purposes only and cannot be relied upon as financial advice. Everyone's financial situation is different and not all investments and financial planning strategies are applicable to all people. Consult your financial advisor for how information you learn may apply to your situation.
Learn more about Red Barn Financial at www.redbarnfinancial.com
5:19 PM Transcript
Hi, this is Sean Moran, and this is the Red Barn Financial podcast. This is our first episode and my thought was, I'll just get it started and then we'll make tweaks along the way and make it even better. On this podcast we will talk about all things financial related and share things on saving money through setting up emergency funds to more advanced topics on how to save taxes. and how to properly structure your finances to meet your financial goals.
So that's the goal of this podcast and it's going to over time develop and get even better. We'll probably bring on some guests as well so we'll be able to do that. But today I'll just kick it off by giving it update on some of the things that happened this week andthe last week or so.
One of those things is the Inflation Reduction Act (IRA) and this podcast is not political at all, but I want to say that generally speaking whatever comes from the government, they just make up a term and whatever that term is, we have to assume that that's what's going to happen. So there's a couple key provisions to the Inflation Reduction Act and we'll talk about those real quickly, and then we'll talk about the Student Loan forgiveness, and we'll talk, and we'll get a little bit of depth on that also. So, let's talk first about the debt forgiveness. Basically the president signed into law, through executive order, a situation where if you make less than $125,000 per year you could qualify for a $10,000 dollar reduction of your student loan debt. Now if you had gotten a Pell Grant which is for individuals with financial need, then that could be as much as $20 thousand dollars. Now keep in mind that because it was enacted by executive order some say that the president - any president - doesn't have the right to do that because the Constitution says that Congress controls the purse strings and so it is possible that there may be some legal challenges to this. So it may be a little bit of time before we find out whether it really happens or not. But we'll talk about the provisions of it. So basically as I said if you make less than $125,000 you get $10 grand. If you had a Pell Grant, it could be twenty thousand dollars wiped off their student loans as I understand it, that would actually be something you have to apply for, it wouldn't happen automatically. The other thing that they did, was they extended the pause in paying back your student loans through the end of December 31st, 2022. So really payments will not be required until 2023 at this point. Now, if you have a small balance you know maybe it's fifteen thousand dollars and you're thinking okay well I'll get ten thousand dollars off you may want to pay off some of that extra five thousand dollars or at least put the money aside until such time as interest starts accruing again and then at that point, you may consider starting to pay those off with the that fun that you've created and reduce the amount of interest that you owe. So that could be a good way to save yourself some money. For context on this, the government is not sure yet how much this would cost. So the estimate right now is somewhere between $500 billion and $800 billion and it does depend on how many people would apply for the forgiveness.
If there are more people that apply obviously it can be higher in the spectrum or less, but it hasn't been quantified yet which is interesting. By way of comparison, when the deficit reduction Act was passed - which we'll talk about in a minute - last week and signed passed by Congress and signed off by the President that had in it that it would reduce the deficit by 300 billion over 10 years. So just by pure observation, I would say if we're going to save $300 billion by paying off debt, under the deficit reduction act, well, we just added back to it with the $500 to $800 billion in student loan. So that's just commentary and then we'll switch over here and talk about the deficit reduction act that happened last week. Apologies. I was saying and deficit reduction act but the Inflation Reduction Act and again that's probably another law that you say the name of it and it doesn't necessarily mean that that's what's going to happen. But again just
color commentary there. So here are some of the key provisions of the Inflation Reduction Act. It's rebates for energy-efficient, appliances in your home. And that's up to fourteen thousand dollars per household. So if you buy an HVAC, maybe a new refrigerator or other qualifying appliances in your home, you can get up to fourteen thousand dollars in credits for that. There's also a electric electric vehicle tax credit which would give up to $7,500 dollars when you buy a new car or four thousand dollars, when you buy a used electric vehicle. So that could definitely reduce the amount of cost out of your pocket. If you're looking to buy one of those vehicles, keep that in mind that this part the Inflation Reduction Act and it is Law and it's not likely to be challenged. So I think we're good to go to move forward on these things. It also extends the subsidies for the Affordable Care Act and what that means is during the pandemic, they decided that there's going to be heavier subsidies for people, depending on your income.
That you can actually pay less for your medical insurance through, you know, Obamacare through the through the healthcare exchange. And so that's one thing that will continue until you know potentially next year and the government will obviously be paying the difference. The new provision I think is really cool. Is that Medicare can negotiate for lower prescription drug prices. Currently they just pay what the prescription drug. Prices are And I think it's probably a good thing that they get to negotiate with the pharmaceutical companies for, you know, again, if they're making bulk purchases, why shouldn't they get a reduced rate? So, you know, again just my opinion here but I think that's probably a good one.
Also, it allocates 80 billion dollars for the IRS to hire double the number of agents. A lot of people are thinking that that would potentially result in many more audits for us. You know, the other thing to keep in mind is even though that that's an allocation yet, they actually have to go out and find these people to be IRS agents so we'll see, you know, see what happens there. There's also three hundred billion dollars, allocated for energy and climate reform. We'll see how that pans out whether that's so
Panels windows or other type of things or Innovations will see where that 300 billion ends up going. Also, there's a 15% in minimum corporate tax that's going to be required. So, the corporation's regardless of where they are, they would have to pay a minimum of fifteen percent. They couldn't necessarily have a, you know, a negative tax to pay based on some net operating losses and so on, if they're profitable, is that that's how I understand it, but more detail will, come on, that The future. And then, as I mentioned earlier, is projected to reduce the deficit by about 300 billion over 10 years. So you decide whether you think that's significant or not, the idea of what it in my opinion is that some of the spending probably doesn't impact the reduction in inflation. For example, if people are going out and buying more cars or the buying household, appliances, that stimulating the economy, probably not really reducing the deficit, although the 300 billion that they talk,
Out would be money, going directly to reducing the deficit and then obviously interest wouldn't be paid on that amount if it's paid down and that could definitely leave money for other things. So that part of, it's a good thing. There's our first episode, just wanted to get this started and I hope it to other people that you consider. If you're going to do something, just get it going and build on it, make it better over time. Definitely subscribe on your favorite. Podcast platform. And I look forward to bringing you more content and better content over time expect to see uploads about once a week. Thanks so much for listening to the Red Barn Financial podcast, and we'll talk to you next episode.
