Tax Day is Upon Us
Are you ready to file your taxes? While most of us are still waiting for our 1099s and other tax information, the IRS opened tax filing season on January 26th. Speaking of 1099s, please keep in mind that sometimes you will get one and then a few weeks later get a “corrected” version. As a result, we always advise clients to wait until at least the middle of February before filing. This year, we expect a bump up in tax refunds due to the One Big Beautiful Bill Act (OBBBA).
There are several new provisions that kicked in for 2025, including a larger standard deduction, a special exemption for seniors, no taxes on a portion of tip income and overtime pay, and, of course, a much higher deduction for state and local taxes. It is estimated that this will result in as much as $100 billion more in tax refunds than last year, which will then be used by taxpayers for savings, paying down debt, and spending… all of which could provide an additional boost to the economy.
Powell Investigation — Be Careful What You Wish For
Over the past few weeks, the Department of Justice has begun an investigation into the testimony of Jerome Powell before Congress last summer. According to news reports, the investigation centers on whether he was not forthright about the expenses for the new Federal Reserve Office Building. Powell has stated that the investigation is not about his testimony or the renovation project but rather about the Federal Reserve not lowering interest rates fast enough for the President, and he views the investigation as political pressure. A bipartisan group of legislators has been very critical of the move, and some Republican Senators have indicated they will not approve a new Chair until the investigation ends. Many former chairs of the Fed and other world central bankers also came to Powell’s defense, stressing the importance of an independent Fed.
The backlash may lead to the Fed not lowering interest rates for fear of appearing to kowtow to the President and may keep Powell in the Chair position longer if a new Chair is not confirmed by the June meeting. In any event, we are only concerned about the effect on the economy and none of this is helpful. The markets do not like uncertainty.
New Tax Rules Could Mean a Bigger Refund For You This Year
With the passing of the One Big Beautiful Bill Act (OBBBA), many taxpayers can expect a smaller tax bill, and potentially a larger refund for 2025. Below is an overview of some of the most meaningful changes that may affect you.
The standard deduction has increased to $15,750 for single filers and $31,500 for married couples, a boost of $750 and $1,500 respectively, which is larger than the usual inflation adjustment the IRS typically applies. Taxpayers age 65 and older can take an additional deduction of $2,000 if single or $1,600 if married. For roughly 90% of Americans, the standard deduction will continue to be the most beneficial option. However, if you live in a high‑tax state or pay significant mortgage interest, it may be worth revisiting whether itemizing makes more sense this year, especially in light of the major increase in the state and local tax (SALT) deduction.
The SALT deduction cap has jumped from $10,000 in 2024 to $40,000 for 2025, creating a substantial opportunity for those with higher property or income taxes. However, there is a key limitation. Once your modified adjusted gross income exceeds $500,000, the enhanced SALT limit begins to phase down until it returns to the original $10,000.
Families with children will see an additional advantage as well. The child tax credit increases to $2,200 per child in 2025, up $200 from last year. The credit begins to phase out at $200,000 of MAGI for single filers and $400,000 for joint filers, with the full phaseout level depending on how many children are claimed.
These are just a few of the key changes introduced under the OBBBA. Because every situation is unique, it’s a good idea to review your specific circumstances with your CPA to determine which provisions may offer the greatest benefit to you.
Are Activist Investors Good for Stocks?
The financial media loves to follow activist investors and their next move, but are these activists truly good for stocks? Activist investors are known for taking large stakes in public companies with the intent to enhance profitability and shareholder value. These experienced investors believe their ideas can help companies create operational efficiencies and use their assets in more strategic ways.
While activists’ ideas don’t always prove to be right, they can target many different aspects of a business. They typically propose changes to the board of directors, upper management, dividend policies, spinoff plans, and acquisition targets. When activists start these campaigns, they often gain media attention and can lead to short-term price gains as other investors anticipate they will enhance shareholder value. If an activist campaign results in long-term profitability, it could potentially have a positive impact on a company’s share price over time.
Keep in mind, activist investors typically look out for their own best interests, and their investment horizon can differ from the average investor. For instance, an activist investor might push for a sale or other strategic transaction that ultimately harms the company or push ideas that are focused on boosting short-term performance, such as aggressive cost-cutting or leverage, both of which can be unfavorable for long-term investors.
Overall, whether activist investors are good for stocks depends on each situation. If an activist investor brings compelling ideas that will increase companies’ long-term profitability and enhance shareholder value, they can be positive for stocks. On the other hand, if an activist investor proposes poor ideas or is focused on short-term price gains, they can be harmful for stocks.
Up Your Assets™ Podcast
Episode 25 – Estate Planning After the One Big Beautiful Bill: New Rules, New Strategies
In this episode of the Up Your Assets podcast, Ray Ferrara, CFP® is joined by estate planning attorney Nick Grimaudo! The two discuss recent changes in estate planning, which made estate tax rules permanent… Ever wondered what $15 million per person means for you? Or how the new laws actually help you keep more of your wealth? Here’s the truth: with the One Big Beautiful Bill, your estate exemption is now permanent at $15 million, which is an enormous difference from the sunset cliffhanger we faced earlier. However, what about protecting your assets before and after death? From proper asset titling to the strategic use of trusts, there’s more than one way to slash probate costs, guard against creditors, and shape your legacy. Even if you’re below the exemption threshold, there are income tax benefits and planning tactics that could save you big. Are you taking the right steps now? Or leaving your future to chance? This session is definitely worth a listen!
Acknowledgements and Important Disclosures
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