Notes From the Fieldby Martin Weil

Posts Tagged ‘taxes’

July 8, 2014

Really Unexpected Magazine Cover

Bigtime companies are moving their “headquarters” overseas to dodge billions in taxes … that means the rest of us pay their share.

This is is not Mother Jones, the Nation or Rolling Stone, but Fortune magazine decrying Corporate America on their cover as “Un-American.”  The optics of these practices aside, overhauling our tax code is way overdue.

April 14, 2014

An Insurance Company with an Army

It is not the first time this observation has been made of our US Federal Government.  See chart of Federal outlays below. (from Vox)


November 4, 2013

A Shot Across The Bow?

Bill Gross in his most recent monthly Scrooge McDucks joins Stan Druckenmiller (formerly of Soros’ Quantum Fund) and Warren Buffett in calling for the end of the preferential tax rates for capital gains. Saying that the widening income disparity in the US is crushing the investment required for America’s future, Gross argues that the lower rates levied on capital vs. labor income are a major cause of our stagnant growth.

While an increase in any income tax rate would seem highly unlikely in today’s environment in Washington DC, political winds can and do change. Such a development would have obvious implications for those holding securities with sizable embedded long term gains. And it would also change the calculus of the expected after-tax return on stocks versus bonds.

November 1, 2013

Q: Other than 529 accounts, are there any other investment vehicles I should be considering to help take care of my children in the future?

Martin's Answer:

Assuming you are on track with your own retirement funding needs, then a 529 plan, Coverdell education Savings account, or even a Roth IRA is a great way to help fund a younger child’s college education. All have broadly similar tax-free benefits with the major differences that 529 plans have a $14,000 (2013) annual tax-free funding limit while the Coverdell is fixed at an annual funding limit of $2,000. A custodial Roth IRA in the younger child’s name may be used to fund education expenses but contributions are limited to the amount of the minor child’s earned income, or $5,000 per year, whichever is less.

Once your retirement is secure and you have fully funded the projected costs of college, it may be time to talk to an estate planning attorney to discuss the options suited to your situation. Any individual can make gifts, tax free, of up to $14,000 per year (2013) to anyone, including a minor or adult child. For children under the age of 18, custodial Gifts to Minors accounts (UGMA or UTMA) are a wealth transfer vehicle often employed by parents and relatives. I caution parents about these accounts because the child gains full control of the account generally between the ages of 18-21, depending on your state’s laws. Once the full owner, the now-adult child is free to use the funds as he or she pleases, and is under no obligation to use the funds for college or any other purpose intended by the original contributors. There is also a gift tax exemption for an unlimited amount of college education or medical expenses paid on behalf of any third party. But you must make the payments yourself directly to the college or medical provider to qualify for the exemption.

The last big ticket item that clients consider is helping a child purchase a home. A great idea as this provides them with a steady roof over their heads, can help their credit and gives them some equity of their own. The usual caveats apply regarding making sure your own needs are taken care of first, with the addition of some major cautions around gift tax, credit and ownership issues that are too complex for this short article. If considering this option, consult with your tax advisor and/or attorney first.

A version of this answer was originally published at Nerdwallet

Have a question you'd like Martin to answer? Send to and we'll let you know when it's been posted. To find answers to your specific and/or confidential questions, please call Martin at 1-877-442-8777 for a no obligation phone consultation.

August 31, 2013

IRS Broadens Recognition of Same-Sex Marriage

The NY Times reports that the IRS will now formally recognize all legal marriages of same-sex couples, regardless of whether their state of residence recognizes the marriage.  The Social Security Administration, as of now however, will follow the lead of the state of residence when determining whether a same-sex couple is eligible for spousal benefits.

June 28, 2013

Same sex spouses, call your tax advisor

Legally married same-sex couples should plan on calling their tax-preparers in the wake of the Supreme Court’s historic decision striking down DOMA. Advantages that should now accrue to all legally married couples include those Federal tax benefits (and drawbacks) associated with filing a joint tax return, eligibility for spousal and survivor Social Security benefits, and the Federal estate and gift tax benefits available to married spouses. This latter change may require a discussion with your estate tax planner as well.

USA Today lists some of the advantages. Reuters has a list of cautions. While the Supreme Court ruling has simplified many of the uncertainties at the Federal level for same sex couples, other issues remain. Divergent state laws will continue to pose unique challenges for same sex couple financial planning.

January 17, 2013

IRA Direct to Charity – Last Call

For those over 70 1/2, a minor feature of the December tax deal from Congress allows individuals to use their 2012 RMD as a direct contribution to a charity (and thus excluding it from income calculations).  But only under two circumstances and both must be completed by January 31, 2013:

  • For those who took an RMD in December 2012, the individual can make a cash contribution to a charity up to the amount of the RMD
  • Individuals who missed taking their 2012 RMD can direct that directly to a charity from their IRA.

But again, either must be accomplished by January 31 to treat it under this provision.

January 2, 2013

Everyone is Going to Pay More Taxes in 2013

While all the attention has been on the tax increases for earners over $400K, the 2% “payroll tax holiday” enacted two years ago was let to expire in the deadline negotiations in Congress. Credit Suisse provides the chart below of the average increase in tax burden, by various income brackets.

Chart courtesy Matt Yglesias.

November 17, 2012

Debt & Taxes

Federal income tax rates were last this low during the 1920s. Then came the Great Depression, WWII and a debt-to-GDP ratio that rose from 30% to 120% in a decade. Sounds familiar. It took marginal  income tax rates rising to 90% before the back was broken on our national debt.

Since the early 1980s, US income tax rates have been in a long steady decline. And Federal debt has once again risen to a level that demands the attention of the nation.

Winston Churchill famously quipped “You can always count on Americans to do the right thing… after they have tried everything else.” Irrespective of any potential budget cuts, investors should plan for Federal tax rates to begin a steady rise. Given the historical record, this will not be a temporary change of direction, but a significant shift in trend that could last decades, until we have once again overcome 30 years of increasing indebtedness.

Chart courtesy of dShort.

October 13, 2012

We Expect Increased Capital Gains Tax Rates

Regardless of who wins in November, and in spite of Governor Romney’s pledge to eliminate capital gains taxes on those earning less than $250K, we think it inevitable that taxes on capital gains will rise, perhaps substantially, in the years ahead.  The US budget imbalances can just not be tamed by cuts alone, and capital gains tax rates are already at historical lows.

This Bloomberg Businessweek article, discussing recent findings that lower rates do nothing to stimulate economic growth and a recent hearing in Congress, add fuel to that conviction.  Once the Presidential election is decided, we are going to make some very quick decisions with clients who may be sitting on large unrecognized gains in their portfolios.

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