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Tax Law Awareness

Wealth Management Insights

Portfolio managers are accustomed to uncertainty; it is a core tenet in the pursuit of competitive returns.  We weigh the potential upside of each investment against risk, research the economic, industry and company-specific data to anticipate impacts, and monitor developments on an ongoing basis.  We diversify for good reason:  no one gets every selection right.

Financial planning, relatively speaking, deals with more long-term predictability.  Assuming we get reliable income and spending data, financial planners can use long-term average investment returns and current tax rates to generate trustworthy reports to guide your decision-making.

The current landscape is not as clear, however, because the current tax rates expire at the end of 2025 and default back to the tax rates that applied in 2017.  The table below shows the difference.  As you can see, the increase is largest for taxpayers with less than $384,000 in income.   This is enough of a change to impact your planning.

Congress may act to change this course of events, but that will take considerable debate and compromise.  Our financial plans assume the default changes above take place, which is hopefully a ‘worst case’ scenario.  The tax rates are not the only item to reset; the standard deduction will be significantly reduced.  On a brighter note, the $10,000 deduction cap on state and local income tax (SALT) will also expire and the personal exemption will return.

As we work through this uncertainty together, you can help by making sure the income, spending and outside account information you provided during the planning process is accurate and up to date.  Please give us a call if you have changes to report.

These changes in tax law will also impact your strategies for charitable giving.  We are happy to discuss how you can be ready for each possible outcome.


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