New Tax Proposal Summary

 

May 21, 2021

 
Our colleagues at Blue Bell Private Wealth Management have put together a summary on Biden’s Infrastructure Plan. With their permission, we are sharing it here. Keep in mind these numbers may change. 
 
The recent tax proposal from the Biden Administration has made headlines as a way to help pay for the near $2.3 Trillion dollar infrastructure plan. While this is still just a proposal and many of the details remain fuzzy, we wanted to provide you with a summary of some of the changes that have been reported.
 
  • The top individual federal income tax rate would increase from 37% to 39.6%.
xxxxxxxxx - The income threshold is currently around $525,000 for individuals and
xxxxxxxxxx $628,000 for joint filers.
 
  • Increase the corporate tax rate from 21% to 28%. A 15% minimum tax would apply to corporate book income. 
 
  • Long-term capital gains and qualified dividends would be taxed at the ordinary income tax rate of 39.6% on income above $1 million and eliminates step-up in basis for capital gains taxation.
xxxxxxxxx - This is believed to be $1 million for joint filers.
 
  • Imposes additional social security taxes on wages or self-employment income over $400,000.
xxxxxxxxx - The current wage cap of $137,700 would remain in place but those
xxxxxxxxxx making more than $400,000 would pay additional tax into Social
xxxxxxxxxx Security.
 
  • The Biden proposal could expand the estate and gift tax by reducing the exemption amount to $3.5 million (per individual) and increasing the top rate for the estate tax to 45%. Biden would consider eliminating step-up in basis for inherited property.
xxxxxxxxx - The current exemption is $11.7 million per individual or $23.4 per couple.
 
  • Retain the current like-kind exchange rules for taxpayers earning less than $400,000. Taxpayers with income greater than $400,000 will be ineligible for capital gains deferral.
xxxxxxxxx - This would eliminate the current 1031 exchange for those making over
xxxxxxxxxx $400,000.
 
Keep in mind that this is still all a proposal with the final details still not worked out. We will continue to keep you updated as more details are released and discuss planning opportunities should they arise. 
 
Remember: Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients. 
 

Sincerely,

 Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

Sources:

https://taxfoundation.org/joe-biden-tax-plan-2020/

https://rsmus.com/what-we-do/services/tax/federal-tax/president-bidens-tax-plan.html

 

Continue reading
106 Hits

What’s Taxable? What’s Not?

August 12, 2020

 

People are receiving money from all sorts of sources these days: unemployment compensation because they’re out of work, government stimulus checks, bartered services with other service providers—and how do you know what is taxable, and what is not?   A recent article outlines different types of compensation and whether you should include them on your tax return.

 

The first: unemployment compensation.  You may be surprised to learn that unemployment insurance payments, even if they stem from the pandemic fund, have to be reported as taxable income.  Future legislation may change that, but for now: taxable.

 

The value of free services you received, even if you bartered for them, is also taxable.  So is jury duty pay: taxable as ordinary income.  Prizes received must be reported as ordinary income using the fair market value of the item received—a surprise to contestants on game shows.  Alimony is a mixed bag.  For divorce decrees prior to 2019, the money is taxable to the person who receives it, and deductible to the person who pays it.  For divorces taking place after January 2019, alimony is neither deductible by the person who paid it nor deemed additional income by the person receiving it.

 

Not taxable: the stimulus checks themselves, child support payments, and life insurance proceeds.  The article also notes that any income you might have received from illegal activities—including the fair market value of anything you stole on the date you stole it, should also be included on your tax form.  We’re going to go out on a limb and assume that provision doesn’t apply to you.

 

As always, it’s best to consult with your CPA about any tax advice or specific questions you have about your personal tax situation.

 

We wish you all continued health and safety as we continue to navigate this pandemic.  Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients. 

 

Sincerely,

 

Edward J. Kohlhepp, Jr., CFP®, MBA

President  

 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

 

 

Source:

 

https://tips.resourcesforclients.com/T74ctGwcsp3d/5467

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

 

Continue reading
967 Hits

The Depth of the Recession

August 7, 2020

 

The current recession officially started in the first quarter, with a 5% decline before the country was slammed by the COVID-19 pandemic.  But the pandemic has definitely made itself felt in the economy.  Most of us, by now, saw that the U.S. economy’s second quarter lost (according to the headlines) 32.9% of economic activity—the worst single-quarter drop since World War II.  By way of perspective, the previous record was a 10% drop in 1958, and the worst of the Great Recession saw an 8.4% annualized GDP drop in the fourth quarter of 2008.

 

What was NOT widely reported is that this is an annualized figure, meaning that the economy would actually lose roughly 33% of its total only if all four quarters declined at that same rate.  The actual economic shrinkage was 9.5%; that is, the overall economy in the second quarter was 9.5% smaller than during the previous quarter.

 

And you probably didn’t see it reported that economic activity actually began to rebound in May and June, after a disastrous March and April.  Factory production and construction appear to be rebounding, although travel and leisure, including airline travel and visits to amusement parks, continue to struggle.  The unemployment rate has also fallen, from nearly 15% in April to 11.1% currently.  However, it should be noted that today’s unemployment rate is higher than it was at any time during the Great Recession.  The last week in July marked the 19th consecutive week in which initial jobless claims totaled at least 1 million.

 

This is not an attempt to sugar coat the current recessionary environment; the chart speaks for itself.  We have experienced slow economic growth in the years since the Great Recession, and now growth has turned decisively negative as the country deals with shutdowns, social distancing and increased hospitalizations.  States like Florida, Texas, California and Arizona may have to reimpose lockdown orders to stem the out-of-control spread of the virus, and some other states that have largely escaped the worst impact could suddenly become coronavirus victims. 

 

But we should not ignore the positive data in the midst of the downturn.  Congress is debating another bailout package for families at risk, and the Bureau of Economic Analysis reported that disposable personal income and the savings rate both jumped in the second quarter.  In fact, the personal savings rate has risen from 9.5% in the first quarter (already an unusually high number for Americans) to 25.7% in the second quarter.  This suggests that the CARES Act relief worked as intended. (See our previous newsletter about this very topic here).

 

Other figures have nowhere to go but up.  Consumer spending contracted at almost exactly the same rate as the economy (down 34.6% annualized) over the second quarter, and investment in new housing dropped 38.7%.  Both are now rising again, though whether that continues may depend on the next stimulus package.  The inflation rate dropped 1.9% in the second quarter as companies cut prices to boost sales.

 

It is impossible to predict whether the worst of the economic devastation caused by the pandemic is behind us.  There seems no question that other countries have done a better job of containing the virus than we have in the U.S., and we all know that economic recovery will depend on getting people safely back to work.  This downturn will leave a permanent scar on many businesses and workers, and nobody expects the economy to get back fully on its feet until we find a vaccine that provides herd immunity.  But it also seems unlikely that the rest of the year will be as downright depressing as what we experienced in March and April.  Reports of U.S. economic demise are almost certainly premature.

 

As always, we wish you all continued health and safety as we continue to navigate this pandemic.  Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients. 

 

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA

President  

 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

Sources:

https://www.npr.org/sections/coronavirus-live-updates/2020/07/30/896714437/3-months-of-hell-u-s-economys-worst-quarter-ever

https://www.forbes.com/sites/robertberger/2020/07/30/gdp-plunged-329-heres-why-it-matters/#73eaaf975943

https://www.marketwatch.com/story/economy-suffers-titanic-329-plunge-in-2nd-quarter-gdp-shows-and-points-to-drawn-out-recovery-2020-07-30

https://www.cnbc.com/2020/07/30/us-gdp-q2-2020-first-reading.html

https://www.bloomberg.com/news/articles/2020-07-30/u-s-economy-shrinks-at-record-32-9-pace-in-second-quarter

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Continue reading
194 Hits

Stimulus Spending

August 4, 2020

 

You’ve probably seen the debate over the second round of stimulus checks that are being delayed now due to a certain amount of squabbling in Congress.  Some economists say that this next payment will be an important lifeline to many families, and that the checks will stimulate the economy.  Others have said that the money is simply put in the bank and never gets to the economy at all.

Who’s right?

It turns out the U.S. Census Bureau’s Household Pulse Survey for June 11-16 includes actual data on how the CARES Act $1,200 ($2,400 to married couples; an extra $500 per child) checks were spent, collecting 73,472 total responses and extrapolating across the entire population of 160 million recipients.  The government agency estimates that 59.35% of households used the stimulus check to pay expenses, and another 13.32% used it to pay off debt.  Only 11.98% said they have or would use the money to add to their savings.  So the first thing that tells us is that the stimulus checks were, to at least some extent, a lifeline to 88% of households, and superfluous to about 10% of wealthier recipients.

Of those 127.8 million households (projected) who used the check mostly for expenses, 52.3 million spent at least a portion on rent, and another 40.6 million spent a portion on a mortgage payment.  91.3 million spent at least part of their check on utilities.  23.3 million spent some of their stimulus funds to pay down credit card or other debt, including student loans.  The conclusion: many Americans used the government money simply to keep a roof over their heads.

When asked about other expenditures that might have stimulated the economy, the survey found that 55.72% of households spent some of the payment on food, 14.16% on clothing, 39.5% on household supplies or personal care products, and just 5.52% on household items.

The survey found that, in aggregate, 70.81% of households that make less than $75,000 a year spent their check mostly on expenses.

Another survey, conducted by economic professors at the Columbia Business School and the University of Chicago’s Booth School of Business, looked at real-time spending data from a nonprofit that helps people create budgets via an app.  They found that those in the lowest income group, who earned less than $1,000 per month, spent about 40% of their checks in the first ten days.  Those who earned more than $5,000 a month, meanwhile, spent closer to 20% of the check in that brief period. 

The group’s report found that most of the money was spent on food, household items, bill payments and rent—but interestingly, compared with past stimulus payments, recipients spent about three times as much on food, including restaurant takeout delivery.  Meanwhile, people receiving stimulus checks were much less likely to spend on durable goods like electronics, furniture or cars.  The conclusion is the same: the “stimulus” appears to have been more of a lifeline than a boost to U.S. consumer expenditures.  The researchers concluded that the increase in unemployment insurance might have had a larger effect on consumer spending per dollar than the stimulus.

As always, we wish you all continued health and safety as we continue to navigate this pandemic.  Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients. 

Sincerely,

 

Edward J. Kohlhepp, Jr., CFP®, MBA

President  

 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

 

Sources:

 

https://www.forbes.com/sites/jimwang/2020/06/25/how-are-americans-spending-stimulus-checks/#16703fe8e311https://insight.kellogg.northwestern.edu/article/stimulus-checks-spending-data-2020-coronavirus-covidhttps://www.marketwatch.com/story/the-no-1-thing-americans-are-spending-their-stimulus-checks-on-even-more-than-splurging-in-costco-walmart-and-target-2020-05-23

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Continue reading
624 Hits

Record-Low Mortgage Rates

July 31, 2020
 
When people look back on the tumultuous 2020 economic landscape, they might pause a moment to check out home mortgage rates. Over the last three months, these rates have managed to achieve five (!) all-time lows. Currently, Freddie Mac, which buys mortgages from banks, reports an average 3.03% rate on 30-year fixed-rate mortgages, and there is a chance that we could see rates below 3% between now and the end of August. 
 
You can see the remarkable downward trend in mortgages from late 2018 through the end of June on this chart, and then the light-blue-shaded part of the chart shows projected rates going forward. Compare these rates to 18% fixed-rates back in the early 1980s, or 5% as recently as 18 months ago. You can take the projections with a grain of salt (nobody knows what will happen next week or next month, much less out to the end of the year), but it’s pretty clear that today’s 3% rate is pretty extraordinary. 
 
Does that mean that most people should be refinancing their home loans? That depends on a number of factors, including their current mortgage rate and how long they expect to own their house. But it may be worth exploring!
 
As always, we wish you all continued health and safety as we continue to navigate this pandemic. Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients.  
 
 
Sincerely,
 
Edward J. Kohlhepp, Jr., CFP®, MBA
President
 
Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA
Founder & CEO

Source:

https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional

https://fred.stlouisfed.org/series/MORTGAGE30US

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

 

Continue reading
230 Hits

Archived Newsletters


Investment Updates

Newsletters Sign Up

Account Login

Contact Info

Kohlhepp Investment Advisors, Ltd.
3655 Route 202, Suite 100
Doylestown, PA 18902
Phone: 215-340-5777
Fax: 215-340-5788
Email: Info@KohlheppAdvisors.com

Securities offered through Cambridge Investment Research, Inc. a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Kohlhepp Investment Advisors, Ltd., a Registered Investment Advisor. Kohlhepp Investment Advisors, Ltd. and Cambridge Investment Research Advisors, Inc. are not affiliated.

Due to various state regulations and registration requirements concerning the dissemination of information regarding investment products and services, we are currently required to limit access of the following pages to individuals residing in states where we are currently registered. We are licensed in the following states: AZ, CA, CO, DE, FL, GA, IN, KY, LA, MA, MD, NC, NJ, NY, OR, PA, RI, SC, TX, VA, VT, WA


Check the background of this firm on FINRA's BrokerCheck