Photo of Eric Ebbert CFP®, MBA Eric Ebbert CFP®, MBA Nov 30, 2021


Earlier this year, the President was pressing Congress to pass his social infrastructure and climate change bill which totaled $3.5 trillion, and the tax increases to pay for it. You ask for everything and hope you get something but know it will be less. On November 19th, the House Democrats finally agreed on a compromise bill that was significantly scaled back at “only” $2 trillion and the removal of many of the tax increases (increase in the top income tax rate, capital gains increase, increase in estates that would be taxed, and a billionaire tax on unrealized gains) thanks in large measure to moderate Democrats. But some tax changes are still in this Build Back Better bill, especially for the uber-rich. There is a surtax of 5% for those making more than $10 million and another 3% for those making more than $25 million. The “back door” Roth is eliminated beginning in 2022 for both IRAs and 401(k)s. Roth conversions are prohibited for singles making over $400,000 and for couples making over $450,000 starting in 2032. In another punch at the ultra-rich, any taxpayer with an aggregate amount of $10 million or more in retirement plans and who has an income of $400,000 or more can no longer make contributions to IRAs and has to take a Required Minimum Distribution (RMD), regardless of age, of 50% of the value over $10 million and 100% of the value over $20 million but not until 2029. In a tip of the hat to “tax relief” the State and Local Tax (SALT) deduction is raised from $10,000 to $80,000. On the corporate side, there is a minimum tax of 15%.



Within the next three days, Congress must either do a continuing resolution or pass a budget. Otherwise, the government will have to shut down. Don’t count on the budget, as it will likely be another continuing resolution and the only question will be for how long. We believe it will be something that goes through mid-January, giving Congress time to be home for the holidays. This should be a bipartisan effort as neither side is interested in this happening, but given Washington these days, don’t be surprised at anything. Considering the news over the past weekend of a new variant emerging out of South Africa the double whammy of a government shutdown would be a major blow. Then by December 15, Congress must once again raise the debt ceiling in order to avoid the U.S. defaulting on its debt. This issue is even more partisan. Once again, it should be easy for Congress to do this. The Republicans want the Democrats to do this on their own in order to use the “big spender” tag on Democrats in the mid-term elections next year. Defaulting on our debt even for a day or two is a game of chicken that should not be played. Then it is important for Congress to pass a spending bill for the Defense Department. Finally, there is that $2 trillion social infrastructure bill which we mentioned above in the Senate that the House passed a few weeks ago. It is going to get changed in the Senate if there is any chance (only 50/50 now) of passage and if it does, then it has to go back to the House. Depending on how much is changed, it may have difficulty getting passed a second time in the House. In short, one word for December could be–VOLATILITY! Just hang on.



While it’s not good that we have experienced higher inflation this year than we have in 30 years, there are a few bright spots. Because many tax provisions are adjusted for inflation, it will help reduce taxes in 2022 payable in April 2023. However, the government seems to always win because the increases are not keeping up with the Consumer Price Index. Here are just a few of the highlights. The standard deduction increases by $800 to $ $25,900 next year for a married couple filing jointly and by $400 for a single taxpayer for a total of $12,950.

Here are tax brackets for 2022:

                                                    Single            Married Jointly

37% taxable income over       $539,900         $647,850

35% taxable income over       $215,950          $431,900

32% taxable income over       $170,050          $340,100

24% taxable income                $  89,075          $178,150

22% taxable income                $  41,775           $  83,550

12% taxable income                $  10,275           $  20,550


In addition, the annual gift tax exclusion for 2022 was raised to $16,000. This means a married couple can give up to $32,000 to each child and grandchild without owing a gift tax. Substantial gifting over time can significantly lower the estate tax owed. Speaking of the estate tax, for those dying in 2022 they can pass $12.06 million estate tax-free.



With the passage of the 2017 tax act under President Trump, the estate tax exemption was essentially doubled. With inflation adjustments since then, a married couple can now pass $23.4 million to their heirs’ estate tax-free, and a single individual can pass $11.7 million. This provision sunsets in 2026 when the exemption goes back to the pre-2017 values including adjustments for inflation. In the meantime, however, the doubling of the exemption has had its desired effect. In 2018, 5,500 people paid estate taxes and cumulatively it added up to $20 billion. In 2020, however, only 1,275 people paid estate taxes for a grand total of $8 billion. When you consider that the government collected about $4 trillion in revenue the same year, the estate tax has become insignificant. Of course, there are those in Congress that want to make changes, but the appetite to do so just doesn’t seem to be there, especially in the Senate. Time will tell. The most estate taxes were paid by those in California followed by Florida, New York, and Texas. No surprise there because they are the most populous states.



In the good old days, one of the main objectives for retirement was to go into it with little or no debt, including a mortgage. But the Baby Boomers are not buying into this approach like their parents did. MagnifyMoney, a personal finance website, in a recent survey found that 46% of future retirees expect to have some level of debt in retirement. Based on information from the Federal Reserve Bank of New York, the debt of those over age 70 increased 614% from 1999 to 2021 for a total of $1.27 trillion. As we advise clients on their retirement, we must admit to being a little old-fashioned. Retirement financial success could be enhanced by no debt, or at worse, carrying manageable debt which doesn’t include having an unpaid balance month-to-month on credit cards.



The Center for Retirement Research at Boston College released a study finding that marital status impacts whether you can cover future care needs without exhausting your resources. Only 31% of married individuals between ages 65–69 were unable to cover minimal care while 56% of unmarried women were able to cover that same amount of care. What support systems do you and your family have in place to provide for your long-term health needs?



We have the opportunity to have up to four tickets to the SEC basketball tournament at the Amalie Arena March 9-13 in the Loge section. You can purchase either 2 or 4 tickets. Tickets are a package for all 13 games over seven sessions at a cost of $1,100 each. If you have an interest, contact us before December 10th. First come, first served.