Cynthia, welcome to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior of Empower Wealth and Tax and to our viewers at home. As you know, this is part two of the show that we started last week, and what we’re talking about are the proposed changes from the Biden administration and how they can affect retirees, but also just your legacy planning and really your life overall. This is a very important subject that we’re tackling, and this is not a political show in any way. We are not choosing sides. We’re just giving the facts of what could occur in your personal economy. Phil, wow, this is part two, and I know Part one was received so very well from the viewers at home. They had so many questions after that episode ran that you knew we were going to have to do two shows back-to-back.
After the episode ran, I knew it was too much content to do in one show, but after that episode ran my office, the office phone rang, ran off. Rang off the hook. My staff was like. The phone lines were blowing up. I said, Well, of course, you know, folks, this is, you know, I’ve been talking now for years, okay, over 10 years, but especially over the last five years, since we’ve been on TV and radio about the importance of tax efficient retirement income planning. It’s extremely important for you to understand you need to work with more than just a CPA, even if you have a complicated tax return or business return, your investment advisor has to be a tax planner. They have to specialize in distribution planning. They have to help you to structure a retirement plan that keeps gives more money to you and your family and less money to the government. Now I’m going to be a little sarcastic if you feel after paying taxes for 50 years and raising your children and with your grandchildren, spending time with your grandchildren, you want to pay more. Great. Write a check to the IRS. Don’t impose it on all of us. Understand our retirement accounts, 401, case, these qualified accounts, these government retirement accounts, are going to be taxed. There’s a huge bullseye on them. And if you have not implemented a tax reduction strategy, you better start now and understand we are the experts. If you call our office, we understand, and not only that, we can help you plan. We’re going to get into the second part of this, Bill Cynthia. But you know, what amazes me is there’s so much to unpack, absolutely. It’s hard to it’s hard not to choke on your words when you’re discussing this thing.
I know, and its information that the viewers at home need to hear, because there’s a lot of confusion about what these changes could be to the viewers at home. You may remember that when these changes were first talked about, we were basically focused in on those earners that were $400,000 or more. That is what we thought would be the main demographic, if you will, of people that were impacted. What we’re finding out as we unpack and we dive a little deeper, this is affecting everyone’s personal economy. And I know you can see it. When you go to the grocery store, prices are high. They’re saying inflation is coming down. But is it really? Is it affecting you? So, Phil, this information we really have to talk about. It’s important and it’s timely, yeah.
So, this is where it really gets pretty intense. We talked about primarily the corporate tax increases making us less competitive in the global market, increasing prices. Okay? Because again, when taxes go up, when you give more, my dad used to have a saying, Philip, there are 10 dimes in $1 there is only 10 in $1 if you give four dimes to the government, you only have six dimes left. If you have $1 and you have 10 dimes, don’t you want to be able to spend all 10 dimes in retirement? And the answer is yes, yeah, I love that. There’s 10 dimes in $1 that’s what you get. You don’t get 11. You get 10. So again, the more you get to keep, the less you give to the government, the more you get to keep and spend for your family. And I think we’ve earned it. So, we talked about the corporate taxes last week, and how these new proposed tax changes, if implemented, will cause, not only cause inflation, but it’s a trick. Down effect to everyone. I’m talking about, the person on welfare, to the person on Social Security, and the person who has multiple pensions and Social Security, or is what we would consider wealthy. So, let’s dive into it. Okay, get ready. Grab your notepad, and again, this information comes directly from the Tax Foundation under the major individual capital gains and estate tax provisions model, and that’s what it stated, okay, in this proposed administration, Biden administration bill, they want to expand the base of net investment income tax, that’s the NIIT to include non-passive business income and increases in rates. What they want to do, and how do they want to go about it? Well, right now, you know, Medicare was having issues back 10, about 15 years ago. And so, what they did was they came up with, in addition to Social Security, because that funds Social Security, and Medicare is part of social security. You see, they started a Medicare tax. Okay, so the Medicare tax is 1.8% an employee pays point nine. Your employer pays the other point nine, okay? If you are self-employed, you pay all 1.8 what they want to do is now expand it. More and more people are going on to Medicare for two different reasons. More and more baby boomers are retiring, and they’re putting more and more people on Medicare that, frankly, haven’t even paid into the system. That’s another topic. What they want to do, folks, is they want to increase the Medicare tax based on what you’re earning, up to 5% now think about that from 1.8 I’m paying point nine. I pay point nine for my employees, to 5% so again, for Medicare. So that’s one, and that’s not a big one, but it’s big enough. When you add it to your federal taxes. They want to take and by the way, they want to make this effective, 2024 all of these changes, the majority of them, they don’t want to start them in January 1, 2025 they want to backdate these changes to 2024 this year. So, when you go to file your income tax return next year, of course, if it’s personal, it has to be filed by April 15. If you’re a business, by March 15. This is going to be included in that new bill. So, it’s kind of being blindsided. So, the other thing they want to do is they want to get take they want to increase the top individual tax to 39 point- from 39.6%- they want to increase that to 39.6%. Now, when you eliminate long term capital gains and make it ordinary income tax, let’s not be, let’s not be naive. If you’re eliminating long term capital gains and making an ordinary income tax, how many people are going to fall into this $400,000 bracket? I believe anyone that owns a home, owns property, owns a business, owns real estate, owns a ranch, owns a farm, falls into this whenever you sell an asset, you’re going to look at now we pay a long term capital gains on the asset, okay, based on what we paid for it and what we sell it for, if we make that ordinary income, guess what? We’re all going to be over the $400,000 even in retirement when you sell off parts of your portfolio. So, with that being said, I’m reading this and I’m thinking they’re coming after everybody.
Everyone, everyone,
Everyone that owns property, whether it would be your home, whether it would be real estate, whether it would be your portfolio, whether it would be a 401(k). So, when I’m looking at this, and I’m digging into it a little more Cynthia, and now I’m reading, they want to increase distributions on higher net worth individuals. Now that sounds good to the common purse. Person, some person, some people say, Well, you know, I’m a little high net worth. And others say, I won’t affect me, but it, but when you start to read into it, what are they saying? What they’re saying is, we’re going to force you to take more out of your retirement accounts. We’re going to limit the amount you can put into your retirement account based on what you’re earning, and then we’re going to force you to take more out of the retirement account when you retire. Code. Let me unpack the code for you. We’re going to change the. Uniform life expectancy code, by reducing the amount of years in the uniform life expectancy code, that will automatically increase each distribution every single year. Now, depending on when you’re born, my first RMD comes at 73 that’s a long ways away. Absolutely. Your RMD, 75 right? Because you’re much younger than I am, right? You’re- if you’re born 1960, 1965 your RMD age is either 74, 75 so they’re giving us a chance to build up these 401(k)’s by great returns, great and now by reducing the amount of years that we want to, and that’s the factor, folks, you have to multiply the uniform life expectancy code into the value of your 401, K at the end of the year to determine how much you must take out to be taxed if you haven’t implemented a Roth conversion. Give us a call right now the number is 888-818-6557, thanks for listening. I know this is a boring topic, and I know I’m probably not delivering it the best way I know how.
Yes, you are.
But, but I’m just passionate.
It’s great.
Thank you, Cynthia, I appreciate that.
You’re welcome. Now, How many spots do we have this week? Last week, it was five. What do you
Yeah, we only have five. And here’s what happened. We opened up this Horseshoe Bay office. I am getting calls from Spicewood, from Marble Falls, Horseshoe Bay, the whole entire area. So now it’s really kind of neat, because this office is really starting to become independent. A lot of folks are calling. We have people calling from Canyon Lake all the way down to San Marcos. They’re seeing us. So, at any rate, give us a call. Five spots available, 888-818-6557, let’s see if your retirement plan is tax efficient, and let’s see if your plan implements reducing taxes because of this new proposed legislation, Phil.
Thank you so much to our viewers at home. We are going to take a very short commercial break. We are a little short on time, but I really want to give you this number one more time, because it’s imperative to your financial future. That number is 888-818-6557, or please click on that QR code at the bottom corner of your screen that will take you right to Phil’s landing page. You can book your time with him accordingly. Again, we’re talking all about the tax implications, how it’s going to affect your economy overall. We know you need a little bit of time to either refill your cup of coffee or perhaps an Alka-Seltzer during this episode, we’ll be right back momentarily.
Our office is in Cedar Park. We employ 14 people. We have experts and professionals. Everyone is licensed. If you fit into our company, you love people, you care people, you’re service oriented. So that’s our home office. We just opened a satellite office in Horseshoe Bay. Within the next 12 to 15 months, we’re opening up another satellite office in Sun City in Georgetown. I told my wife. I said, we’re going to open up. She said, What? Open up another office? When are you going to retire? I said, Honey, I am retired. This is what retirement looks like to us, and you better. Might as well hold on to your hold on your skirt, honey, because we’re probably going to open one up in Dripping Springs to my son Philip, he and his wife is also involved. Erica, she’s wonderful. Will probably end up running Cedar Park office. My son Parker, he may run the Horseshoe Bay office. My daughter Lisa is going to be running the Sun City office, and I guess I’m going to need a grandchild to run the other Dripping Springs office. But at any rate, I was really blessed in that out of my five children, three are in the industry. Two directly work for us. This is really their legacy as well.
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior of Empower Wealth and Tax. And we’re talking all about proposed changes that the Biden administration want to make, and how this is going to affect your retirement, your lifestyle, everything overall. Phil, wow. What a show we have today, and I know that we’ve broken into two parts. Actually, starting last week, we could probably do like six shows about this, because there’s so much to cover.
We probably could. And I said, we’re going to make it. I was thinking we need to make it a two-part series. We could really go on and talk about this. When you really start to dig into it, the I’m going to shift gears and kind of bring the temperature down just a little bit, where, when we look at personal income tax, one of the new proposed changes also we talked about eliminating long term capital gains and making everything ordinary income. One of the other changes that they want to implement. Is they want to tax unrealized capital gains. Okay, so let me just explain to the audience what that is at the end of the year. Okay, so give me an example. We’ve been doing extremely well in the stock market. If you’re invested in the stock market and you’re for 1k or any you’ve done well last year, you probably made about 30, 33, 35% with the implementation of AI and technology, we’re really seeing a boon. No doubt about it. Absolutely, this year the taping of this show, most of our clients are up over 24% just so far halfway through the year. So, the point is, I’m not trying to talk about returns. I want to refer to unrealized capital gains. So, what unrealized capital gains are is, let’s assume for a moment I have a stock portfolio of a million dollars. Let’s assume for a moment, by the end of the year, that stock portfolio is worth 1.3 million, okay? Or 1.2 pick the number, okay. I still hold the stock. I have not sold the company. I love the company. They’re doing well. I will be forced to pay taxes on the unrealized gain at the end of the year. Wow. So, what that means is, let’s say you have a portfolio of a million dollars. Okay, great. And you made 200,000 well, that 200,000 now considered ordinary income tax, even though you have not received the income. It’s unrealized, meaning you don’t have the money. It’s a paper. It’s a paper gain. Goodness. So, I’m scratching my head, I’m like, who’s coming up with this stuff?
Exactly. Great question.
I mean, is they? Are they trying to break the country? Is that what the goal of this is? So, what that does is it forces you, unless you have the liquidity, it forces you to sell assets, to pay the taxes. So how is this supposed to help inflation? I’m not getting, I’m not getting it. So that’s, that’s one of the little codicils in this thing. The other thing is, they want to on these capital gains. They want to eliminate, step up in basis when our children inherit our property. Oh, wow. So, for instance, folks, if you’re not clear on what we’re talking about, let’s assume for a moment, I have several million dollars I want to pass off to my kids, my wife and I, we’re going to enjoy our retirement. We are we do whatever we want to do when we want to do it, as often as we’d like to do it, okay? And that’s the whole idea. And so, I told all of my five children, expect nothing. Okay? Now, of course, I didn’t expect to give it to the government instead of my children, but I said, expect nothing. Okay, you all got great education. You’re all doing extremely well. Three of you are part of the company. You’ll probably continue the company. Don’t expect anything. As far as I’m concerned, my beautiful bride and I should spend every penny before we go.
Enjoy your life.
Let’s assume we don’t. Let’s assume we can’t, as much as we try. Let’s assume we can’t. Okay, okay, so now when my children, our children, you and our children inherit what’s left off, left over based on what our basis was. Let’s say we bought an asset. Let’s say that home in Leander, we bought it for 400,000, it’s worth 1.6 million. I want to give that to my daughter, Dana. Let’s say and we’re going to give her that one. Okay? Now she would normally, under the code today, she would receive that without having to pay income tax on it. She would get a step up in basis, meaning, I spent 400,000 Yeah, we put improvements. She inherited it. It’s worth 1.6 if she sells it for 2 million, she only pays the gain of 400,000 okay, what they want to do is, when she inherits that home, she needs to pay the taxes on the difference between the 400,000 my wife and I paid for it and the 1.6 million that is worth 1.2 million and looking at this bill, and I’m reading this bill, and I’m like, no way they’re not really saying that. Are they? As a matter of fact, that’s why I said it appears to me that this bill is quite draconian. I’ve never seen anything like it. You normally see things like this in other countries, okay, where the state and the government own you and everything, but it appears as though they have some highfalutin ideas. The point here is to be prepared. The point is to understand that as. These tax codes change, there are financial vehicles we can implement to make sure that our children and grandchildren aren’t harmed by these changes. If you’re not thinking about tax efficiency and retirement, believe me when I tell you, as God is my judge, you will see increased taxes like you’ve never seen before in retirement, not just from their retirement accounts, but from passing on property to our children. When we come back, we’re going to talk about the estate tax. So, I’m looking at that, and that means my stock portfolio, that means everything our homes, that means the ranch and land passes that Mike that my wife’s parents left hiring her sisters. Yeah. At any rate, folks call 888-818-6557, come on in for number one your portfolio review, because if you have not been doing extremely well over the last two, three years in the market, come in and find out exactly what your risk is, what your returns are, and let us structure a tax efficient retirement income plan for you, as well as helping you understand how to maximize your Social Security and minimize or eliminate the taxes on your social security by executing Roth conversions today.
Phil, thank you so much to our viewers at home. That number to call is on your screen, 888-818-6557, we realize you’re in the viewing audience today and you’re hearing a lot of this information for the very first time. You might be feeling confused, bewildered, unsure of what to do. Well, Phil is offering you the solution, just call in, grab one of those five spots he has opened today. 888-818-6557, or go ahead. Grab your smartphone, click on that QR code at the bottom core of your screen that will take you right to Empower Wealth and Tax landing page, and you can schedule your time accordingly. Don’t go anywhere. We’re going to talk a little bit more in depth about how this will affect your estate planning when we return. Hello.
My name is Phil Capriotti. You know, some of the folks that come into our office are concerned that they might outlive their money in retirement. At Empower Wealth and Tax we’re able to address those concerns by answering your questions and by developing a comprehensive, tax efficient retirement income plan now this includes a cash flow analysis, a tax and risk assessment, as well as a comprehensive investment portfolio review. Remember, this is a complete and comprehensive analysis, and it’s prepared by one of our licensed fiduciaries, absolutely free. As you know, we never accept compensation for this service. We simply want you to be educated and informed. So, call us today or select one of the options below and start empowering your retirement, right now.
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriati senior of Empower Wealth and Tax. And as our viewers already know at home, this show is very important, very impactful. We’re talking about the proposed changes that could occur if with the Biden administration, if they are elected in office. And again, this is not a political show. We are not picking sides. We are just delivering you, the viewers at home, the facts. You can make your own decisions. Phil, this is a very important show, obviously. And there’s you’re want to say something right now, and I keep cutting you off.
My thought is, it’s not political it’s simply an American issue. I don’t care if you’re Democrat, Republican, Independent, whatever you are. Don’t care what religion you are, irrelevant. We all have one thing in common. We’re either taxpayers or tax recipients, true, and if you’ve been a taxpayer and you’re saving for retirement, this really has no political agenda. It’s simply, how much more do we want to give the government to blow? I mean, spend, okay, on different types of programs, right? So, I’m going to finish this, and then we, we’re going to discuss it. I just actually want to give it to you again. This information comes from the Tax Foundation major individual capital gains and estate tax proposed changes. Okay? So, we talked about taxing long term capital gains and qualified dividends as ordinary income. And we talked about selling property, step up in basis, eliminating that and so forth. They want to let they want to limit retirement account contributions for high income taxpayers that have a large retirement account. What you heard me? Yeah, that is crazy. So, if you have a large retirement account, now, who’s going to determine what’s large? I’m not quite sure. Okay, so if you have and again yet to be determined, that’s why I say this stuff’s draconian. I’m not making it up. I’m reading it right from the bill. We want to limit retirement account contributions for high income taxpayers with large individual retirement accounts. IRA balances is the is the hyphen. Wow. Okay. We want to tighten rules and estate taxes right now you have federal taxes, folks. And then you have federal estate tax. They are different. Federal Income Tax we pay each and every year. If you are taxpaying citizen, we have been paying them for decades. Okay? Estate tax is commonly known of as the death tax. That is the tax you leave to that is the tax you pay if your estate is over a certain amount. Right now, that amount is 13.8 million. Next year, I believe it goes to maybe 14.1 and then it sunsets. January 1, 2026 it sunsets. Okay, if Congress doesn’t act, it reverts back to the way it was when, when? 20 years ago, back at the end of Reagan’s administration, okay, that’s when they started this thing, late 90s. They, they- and early 2000 they made it index for inflation. What that means is that if you’re in a state where 3.5 million and you’re a single individual, you don’t have to pay a tax. Your children will have to pay a tax between 45 and 50% of any amount over that Wow. So, let’s say, and we’re talking about everything your portfolios, your real estate, everything the watch you’re wearing, everything. Okay? So, if you’re married, filing joint, okay, if you’re married, anything over 5 million. Now think about this. You worked extremely hard build up a retirement plan. Now I have a retirement plan almost comfortable enough to retire. I’m going to restrict to your contributions, because you have, say, over a million dollars in your IRA, and I don’t, I’m not saying that’s the amount. What I’m saying is some amount. So, between that, between eliminating step up and basis, eliminating long term capital gains, making an ordinary income, eliminate the current estate tax issues, they’re coming after all of the wealth, unless you’re prepared.
Unless you’re prepared. Unless you’re prepared, perfect time for tax planning to our viewers at home. As you can see, there’s never been a better time, or a more important time for you to do tax planning. This is what Phil and his office specializes in. This is your opportunity to call in and claim one of those spots today. 888-818-6557, 888-818-6557, or snap on that QR code at the bottom corner of your screen, be safe, be happy and be blessed. We’ll see you back one week from today. On Retire Smart Austin with Phil Capriotti, Sr.
Thank you, Cynthia.
Thank you, Phil.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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