Tax Change Update

Blog # 492

Tax Change Update

Since President Biden was elected last November, significant changes have been made from his campaign tax proposals to what is currently being discussed on Capitol Hill. Many of the current proposals have moderated from what was discussed before the election.

As a firm philosophy, we do not think you should generally make investment policy decisions based on proposed legislation, or even based on politics. Stock markets are mostly correlated over the long-term with the earnings of companies and changes in their future earnings expectations, not based on what political party is in control or the direction of individual or corporate tax policy.

We want to update you on what is currently being discussed, in very broad terms. Just as we said last fall, proposals rarely become tax law. There is still a long way to go before tax legislation is enacted, so we are not going to address the many details of the House proposal that was released this week in this post. As the Democratic margin is razor thin, they will need to compromise even within their own party to get any measures enacted.

We encourage you to focus on the trends of the proposals, from what Biden discussed on the campaign to what the House is currently discussing, as well as the historical change/trends of a few major areas of taxes. Viewing tax rates with a historical perspective is quite valuable, as you will see below.

Top Individual income tax rates, for ordinary income: for married filing jointly, for selected years

1980: 70% for income > $215,400

1981: 50%, for income > $86,000

1987: 38.5%, for income > $90,000

1993-2002: 39.6% for income > $250,000, indexed each year higher

2003-2012: 35% for income > $312,000, indexed each year higher

2013 – 2017: 39.6%, for income > $450,000, indexed each year higher

2018-2021: 37%, income > $600,000, indexed (35% for income $400-600K)

Congressional proposal: 39.6%, for income > $450,000; surtax of 3% above $5 million (effective in 2022)

While the Congressional proposed top personal income tax rates are an increase from the Trump personal income tax rates for 2018-present, they would be comparable to the personal income tax rates from 2013-2017 (not including the surtax for earners above $5 million).

Personal top long-term Capital Gains tax rates:

1981-1986: 20%

1987-1992: 28%

1993-2003: 20%

2003-2012: 15%

2013- current: 20%

Biden proposal: same as top ordinary income tax, which would be 39.6%

Congressional proposal: much lower rate than Biden proposal

  • 15%, if your joint income is between $81,000-$450,000 (similar to current law)
  • 25%, if your joint income is > $450K (and potential surtaxes for higher earners to be determined). The 25% tax rate is an increase from the current top capital gains rate of 20%
  • Significantly, the current House proposal has an effective date of September 14, 2021, except for transactions that have already been entered into prior to 9/14/21 and close by the end of the year.
    • This means that if enacted, and that’s a big if, stock sales after 9/14/21 for high income taxpayers would be subject to this higher capital gains rate.

There will be further negotiation and details to be resolved regarding capital gains rates and effective dates, but it appears as of now that the Biden campaign proposal of a 39.6% capital gain tax rate will not be enacted. It appears that Congress will not pass anywhere near that level for long-term capital gains, which is positive for investors and the stock market in general.

Estate taxes (and related matters)

Currently, each person gets around $11 million of estate tax deductions. For a married couple, this means more than $22 million. If your estate is far below these amounts, you don’t need to worry about incurring any estate tax. If no changes in tax laws were made before January 2026, the exemption amounts were to return to $5 million plus inflation adjustments, per person.
House Proposal: inflation adjusted exemption amount of approx. $6 million per person (down from current $11 million+ per person)

  • Under the House proposal, a married couple would not be subject to the estate tax unless their assets were above $12 million, down from the current $22+ million, which was set to expire at the end of 2025.
  • Historically, the House proposed exemption amounts are still relatively high, compared to the past.

Notably, the Congressional proposal does NOT include any change in the current step-up in basis upon death, which had been widely discussed. This is positive for estates and beneficiaries of all sizes.

Remember, good estate planning is not just about tax avoidance. The more important aspect of estate planning is making sure that your documents properly reflect your wishes of what happens to your assets when you die. This may not be easy to deal with, but it is vitally important and should be addressed properly and reviewed every 5 years or so. Contact us if you want to discuss this further.

Corporate Income Taxes:

Reagan: 46% to 40% (starting in 1987)

Reagan: 40% to 34% (starting in 1988)

Clinton: 34% and 35% (1990s)

Bush II: 35%

Obama: 35%

Trump: 21%

Biden proposal: 28%

Congressional proposal: 26.5%

While Biden and Congressional Democrats are proposing increases in the top corporate tax rate, the rates being discussed are still way lower than corporate tax rates over most of the past 4 decades.


As stated at the beginning of this post, the House proposal covers many other areas, which could impact many clients and taxpayers. As this is just a proposal now, there is no way to know what of the proposed legislation will become law, or what changes will be made before enactment.

  • We will be carefully monitoring this proposal and future changes on behalf of our clients.
  • We suggest that you consult with your tax advisor regarding your specific situation.

We hope that this post provides you with valuable and timely information, which is always our goal. Please feel free to forward this information to others who you think would find this helpful.

Talk to us. We want to listen. We want to assist you, your family members and friends.

If you would like to read our previous blog posts, click here.

Let us know what you think. If you would like to contact us, please email or call Brad Wasserman ( or Keith Rybak (; or 248-626-3900 (or visit the Contact Us section of our website).

~ Developing Relationships by Doing the Right Thing ~

Wasserman Wealth Management, 31700 Middlebelt Road, Suite 130, Farmington Hills, MI 48334

Mortgage Planning with Low Interest Rate

Blog #491

Mortgage Planning with Low Interest Rates

Mortgage interest rates have been quite low for many years. This should change the way you think and plan for your mortgage and your long-term financial strategy.

For some people, one of their top financial goals is to pay off their mortgage earlier than expected. This may be a reasonable objective, but it may not be the best long-term financial strategy. With mortgage rates as low as they are (and have been), paying off your mortgage quickly may be a financial mistake.

Let’s consider the current facts. You should be able to get a mortgage with a 15 or 30 year maturity in the 3% range, or even around 2.5%, depending on your specific situation (size of your mortgage, your credit score, etc.).

  • If you still have a mortgage with an interest rate higher than these rates, you should seriously consider refinancing, if you plan to remain in your home for 5 years or longer. Please give us a call to discuss this further.

For sake of this example, let’s use 3% as your mortgage rate. For most taxpayers with a home and mortgage, some of your mortgage payments will be tax deductible as interest, so the after-tax cost of your monthly mortgage payment would be even less than 3%, say 2-2.5%.

Compare the mortgage interest rate cost of 2-3% to the long term 10% historical rate of return in the US stock market (with dividends reinvested). Even if future stock market returns are less going forward, say an average of 8%, that would still be far in excess of the mortgage interest cost.

If you can earn around 10% annually over a long period of time in the stock market, why would you make additional principal payments towards your mortgage? By paying down your low rate mortgage, you are giving up the opportunity to get much greater growth from your money by investing those dollars in the stock market.

Investing and stock market returns are not guaranteed. There is no way to know what returns you will get over the next 1, 3 or 5 years. However, if your mortgage is for longer than that, say 10-20-30 years, stock market returns of the past 50-100 years teach us that you will likely be more financially successful by investing money in the stock market than paying down your mortgage faster.

  • If you invest in a well-diversified portfolio of stocks for the long-term, your investment returns should far exceed your mortgage cost of 3%.
  • Investing the money provides you greater growth opportunities and greater liquidity. Once you pay down your mortgage, you don’t have use of that money, unless you borrow again through a refinance.
  • While stock market returns can be volatile in the short-term, there has not been any 10 year period where a globally diversified portfolio has been negative. You may need to be patient during the down periods, which will certainly occur.
  • Even if you invested money in the S&P 500 (US Large company stocks) in October, 2007, just before the Global Financial Crisis, which caused the S&P 500 to decline by 57% by March of 2009, if you remained invested in the S&P 500through July, 2021 you would have had an average annual return of 10% (with dividends reinvested).*

Our general recommendation is clear: you should not pre-pay or make additional principal payments to accelerate paying down your mortgage.

However, everyone’s financial situation is different. We recommend that you consult with us regarding your mortgage payment strategy. This is one of many services that we can provide to our valued clients, beyond providing investment advice.

We can assist you when you are purchasing a new home, to determine how much of a down payment and mortgage makes sense for you.

As you get older, we can help you evaluate whether a 15 year mortgage may make more sense than a 30 year mortgage. While a 30 year mortgage may be more financially advantageous based on the discussion above, there are very real psychological reasons that people like to know that their mortgage is paid off (or close to being paid off), as they enter the retirement phase of their life.

Times change. Interest rates change. My first mortgage was in 1990 with an interest rate of 10%. Today I’m in a different house, with an interest rate that is well below 3%.

Financial advice and strategies must be flexible and change as financial conditions, tax rates and other factors change. We are here and very willing to talk to you about these matters, to help you evaluate and make the best strategic decisions at the time.

Talk to us. We want to listen. We want to assist you, your family members and friends.


“A Study in the Virtue of Patience”, Nick Murray Interactive (Newsletter), September 2021. Data was obtained from, with dividend reinvested. This return data does not include any trading costs, fees of any mutual funds or ETF’s, or any advisory fees such as WWM charges.


WWM recommends globally diversified investments to our clients, not just investing in only the S&P 500 Index, which is comprised of US based large companies. The companies in the Index change over time. The Index data used in the essay above are for illustrative purposes only. See above for further disclosures.


If you would like to read our previous blog posts, click here.

Let us know what you think. If you would like to contact us, please email or call Brad Wasserman ( or Keith Rybak (; or 248-626-3900 (or visit the Contact Us section of our website).

~ Developing Relationships by Doing the Right Thing ~

Wasserman Wealth Management, 31700 Middlebelt Road, Suite 130, Farmington Hills, MI 48334