May 2021 Update

Welcome to the new April. As we scramble to get our returns, or at least our tax filing extensions ready, there is the unfortunate discussion of new Federal tax increases circulating. The biggest noise has been around the concept of further taxing capital gains, or more properly stated, the returns investors receive by taking risks.

Since 1921, long-term capital gain tax rates have normally been lower than the top ordinary income tax rates. This was to incentivize citizens to invest in corporations, real estate, and other assets to help grow the economy and build wealth. Currently, most investments held more than one year are taxed from 15% to 20%, with a 0% rate for those with an ordinary income tax rate of 15% or less. In addition, for those in higher income brackets, the Medicare tax of 3.8% applies.

What is being proposed, is that for the higher tax brackets, a combined rate of 43.4% would apply, an increase of 82%! In order to finance this massive deficit before us, there will be a constant pressure to not only raise taxes, but also find new fees and value-added levies.

What does this mean to you? Probably more taxes, but for now, we all should be grateful for the best safe havens: an IRA, HSA, and other tax-deferred accounts. We do not need to worry about capital gains inside the wrapper of a NuView Trust IRA, HSA, or Qualified Retirement Account. Better yet, with a Roth IRA, while others will be taking distributions with likely higher tax rates, you can spend yours tax-free.

Trust me, we will continue to monitor what is going on in Washington with regards to IRAs and join with each of you to keep these amazing benefits for wealth creation available. Meanwhile, you have a few days until the May 17th deadline to fund your IRA contributions for 2020, and keep those funds away from the capital gain tax snatch! 

Meanwhile, all the best in your investments!
Glen Mather, CEO