Tax Update

In his 2015 State of the Union address, President Obama introduced a number of tax proposals which would affect individuals and families.

At this time, due to the Republican control of both the House and Senate, we do not feel that any of the major proposals that the President discussed have a chance of being approved by Congress. Thus, they will never make it to the President’s desk to become law.

If you have read articles that have discussed these proposals, which range from an increase on the tax for capital gains  and dividends for high income taxpayers to changes in how assets are handled upon an inheritance, we recommend that you NOT be concerned about these at this time.

While it is possible that there will be some kind of tax reform or changes passed during 2015 or 2016, there is no planning that we would recommend now, based on the President’s speech.

What you can focus on

During the past week, my partner Keith Rybak attended the AICPA Personal Financial Planning Conference for 3 days. I attended a number of these sessions virtually, through the Internet. This is one of the largest advanced planning conferences in the country, with over 1,450 CPAs who specialize in investment management attending in person or online.

Some of the major tax takeaways from this conference, which may be beneficial to you, are:

  • Multi-year tax projections, if you think you will have taxable income above $200,000 in one of the next few years. With the introduction of the  3.8% Net Investment Income Tax (NIIT) in 2013, planning should be done if your income will fluctuate above and below the $200,000 level, depending on whether you are single or married. If possible, planning may be done to time certain sources of income to minimize or eliminate the impact of this tax.
  • A review of trusts and estate planning should be done in relation to the same 3.8% NIIT tax, as the taxable income level that trusts are impacted by this surtax are much lower than for people. If you have established trusts for your descendants, it may be valuable to review your documents to see if it would be beneficial to enable the dividends and capital gains from the trust to be passed through to your descendants, who may have a much lower tax rate.
  • Asset location of certain investments:  This is a topic that we have written about previously, as it is so important. Certain investments and mutual funds holding different types of assets can cause different types and amounts of taxable income to you. In planning your investment portfolio, it is beneficial to determine “where” your investments should be located, meaning whether they should be held within a taxable or retirement account, if you have the opportunity. A mutual fund that tends to generate more dividends than others should be held in a retirement account, not a taxable account. This will save you taxes, simply by where the fund is held.


If you have a questions about one of these technical matters, please contact us.

But almost more importantly, we want to talk with you about your goals, your dreams and concerns, as well as about your money. By doing this, we will be better able to work with you, to understand you better, and be able to plan and advise you more effectively.





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