Updated: May 16, 2022
It’s 12:22pm on a Saturday as I sit down at my favorite café and I’ve already come across Jeff Bezos’ name, three or four times today - it’s hard to keep track. Unsurprisingly, his name appeared in my normal Saturday morning business reading, once or maybe twice. Less usual, he again popped up on my way to the gym. This time it was an NPR interview regarding the low amount of taxes that he pays in relation to his increasing wealth. We covered this topic in another blog post, Billionaire Tax Strategies to Help Your Divorce. I was able to hear all about him again at the gym, on one of my favorite podcasts by Bloomberg – unbeknownst to me, it was actually waiting in queue (I didn’t select it). A new book is being peddled by the guest author, starring Mr. Bezos. Such is life when you’re the wealthiest human. I apologize for further saturating the world with him, but there are some important points here that may be helpful for your divorce, especially if you have children.
Jeff Bezos and Child Tax Credits
In 2011, Jeff Bezos did not pay federal income taxes as he reported a loss while his wealth was maintained at around $18 billion. His relatively modest reported income (in relation to his wealth) for the year was offset by various deductions and credits, one of which was the Child Tax Credit, usually assumed for the less affluent. Bezos received $4,000 in child tax credits that year, $1,000 for each of his four children.(1) If he had invested the proceeds wisely, what might the credits be worth? An investment in Amazon stock would have turned that $4,000 into over $77,000 today.(2) Admittedly, it would be extremely difficult to replicate the returns of Amazon stock during this period. Regardless, some of the keys here can apply to your wealth creation too, including stock selection, investing for the long term, and wisely utilizing the tax system to avoid unnecessary expenses.
Better Tax Credits than Bezos
The American Rescue Plan Act of 2021, also called the COVID-19 Stimulus Package or American Rescue Plan, was enacted to ease the strain of the pandemic. In addition to stimulus checks, many also qualify for various tax enhancements for 2021, including the Child Tax Credit. For this year, the Child Tax Credit can be worth up to $3,600 for each child for a divorcing parent earning $112,000 or less annually. Remember, this compares to Bezos only receiving $1,000 per child in 2011. Additionally, for working parents, the Child Care Credit can be worth up to $4,000 this year for each child for childcare expenses.(3)
This knowledge and tapping into these enhanced tax benefits for 2021 can help your negotiations and ease the financial strain of divorce. We are here to guide you through the process. Contact us to schedule a free initial consultation.
(1) “Opinion: On Claiming The Child Tax Credit,” NPR, Scott Simon, 6/12/21. Accessed 6/12/21. https://www.npr.org/2021/06/12/1005758347/opinion-on-claiming-the-child-tax-credit
(2) Amazon’s stock price on 12/31/11 was $173.10, and on 6/11/21 was $3,346.83. Nasdaq.com, accessed 6/12/21. https://www.nasdaq.com/market-activity/stocks/amzn/historical
(3) “American Rescue Plan Act of 2021,” National Council of State Legislatures, accessed 6/12/21. https://www.ncsl.org/ncsl-in-dc/publications-and-resources/american-rescue-plan-act-of-2021.aspx
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