Broadcast EView

Wide Ranging Perspectives and Views for Managing Retirement Assets.

LayLine Broadcast EView

LayLine Asset Management Inc

Harry J. Campbell III, CMT

11/18/25

Capital Gains Taxes, Revisited

As stated in the disclosures below, neither LayLine nor myself provide tax advice.  This Broadcast EView is aimed at providing some basic background on the taxation of Capital gains.  Two things to consider for this topic: this conversation only pertains to capital gains on stocks and bonds and it only considers tax rates for single and married filers.  Go to IRS Topic # 409 Capital Gains and Losses for more information. 

Capital gains taxes have two major attributes (there are many others) to consider; the length of time a position is held, and the annual taxable AGI (adjusted gross income) of the investor.  

(Capital gains are included in Taxable AGI)

 Length of Time Position Held:

• Short-term Capital gains are considered gains on assets sold that were held for less than one year.  They are taxed as ordinary income.

• Long-term Capital gains are considered gains on assets sold that were held for more than one year.  They are taxed at specific Capital gains rates based on a taxpayers taxable AGI.

The time determining whether a sale is long or short term is measured from the day after a position is bought to the day it is actually sold.

Long Term Capital Gains Tax Rates for 2025:

• 0% Capital gains tax applies if taxable AGI is less than;

  • $48,350 for single filers.

  • $96,700 for married filers. 

• 15% Capital gains tax applies if taxable AGI is between;

  • $48,351 and  $533,400 for single filers.

  • $96,701 and  $600,050 for married filers. 

• 20% Capital gains tax applies when taxable AGI is above the maximum 15% taxable income level. 

An important aspect of Capital gains is that you net losses and gains to determine the total capital gains or losses to report on the tax form.  First, long-term Capital gains and losses are netted together, then short-term Capital gains and losses are netted together.  If both long-term and short-term capital gains are positive, short-term gains are taxed at full income rates and long-term gains are taxed at the Capital gains rate according to your AGI.  If there is a loss for one and a gain for the other, they are netted together, lowering the overall Capital gain. If after netting there is a Capital gain, the tax rate that applies is based on whether the net gain is from long-term or short-term capital gains.  If there is a Capital loss, either short or long term, only $3,000 of loss can be deducted on the IRS Form 1040, line 7, in a year, even if there are $30,000 in Capital gains losses that year.  Capital losses above $3,000 can be carried forward and taken in future years.

The major take away from this is that for taxable AGI less than $48,350 for single filers and $96,700 for joint filers, there is no capital gains tax on assets held for more than a year.  As always, before embarking on any tax managed strategy, seek qualified advice from a tax and financial professional that knows your situation.  

Harry

LayLine Asset Management Inc

Harry J. Campbell III, CMT

10/21/25

 Taxing

            With the OBBB (one big beautiful bill) now in place, here are a few (certainly not comprehensive) of the new tax aspects of the bill that go into effect for 2025.  Needless to say, but I will, the information provided is not enough to use for preparing tax returns or to be relied on for tax planning.  It’s just to shed some light on a couple of the bills new taxing provisions.

Taxes on Social Security

While social security benefits are still technically “taxable”, to some degree, there is a new temporary bonus deduction for seniors for 2025 that will reduce the tax burden.  The bonus deduction for seniors, 65 and older, is $6,000 for an individual and $12,000 for couples who are both collecting social security benefits.  The bonus deduction is in addition to standard or itemized deductions.  The deduction phases out for single filers with modified adjusted gross income (MAGI) over $75,000 and for joint filers with MAGI over $150,000. 

Keep in mind that not all of one’s social security benefits are taxable under current law.  While the specific calculation to determine the tax on social security benefits is fairly complicated (see IRS publication 915 for the complete calculation), the following provides a rough approximation of the percent of social security benefits that are federally taxed based on various combined income levels. (Combined income = adjusted gross income + tax-exempt income + ½ of your social security benefits).

• Social security benefits are not taxed for single filers with a combined income below $25,000 and for joint filers with combined income below $32,000.

• Up to 50% of social security benefits are taxable for single fliers with a combined income between $25,000 and $34,000 and for joint filers with combined income of between $32,000 and $44,000.

• Up to 85% of social security benefits are taxable for single fliers with a combined income above $34,000 and for joint filers with combined income above $44,000.

Taxes on Tips

There is no tax on “qualified tips” with a maximum annual deduction of $25,000.  The deduction phases out with MAGI above $150,000 for single filers and above $300,000 for joint filers.

Taxes on Overtime

There is no tax on “qualified overtime compensation” with a maximum annual deduction of $12,500 for single filers and $25,000 for joint filers.  The deduction phases out with MAGI above $150,000 for single filers and above $300,000 for joint filers.

Car Loan Interest

Interest paid on a loan to purchase a “qualified vehicle” may be deducted up to a maximum annual deduction of $10,000.  There are several requirements for the vehicle to be “qualified” (search IRS for qualified vehicle) and this deduction does not apply to used vehicles purchased.  Deduction phases out with MAGI above $100,000 for single filers and $200,000 for joint filers.

Harry

LayLine Asset Management Inc

Harry J. Campbell III, CMT

9/16/25

Another Important FED Meeting

            Tomorrow the FED will tell us whether they decided to lower the FED Funds Rate and by how much.  There is near unanimous consensus that they will lower the FED Funds Rate by .25%, with a small holdout for a .50% cut.  With inflation stalled above the FED target, the markets have concluded that the FED is now more concerned about the full employment side of the FED dual mandate.

The issue the FED faces is if they lower the FED Funds Rate, in theory, that it would stimulate hiring but it will also stimulate growth putting upward pressure on inflation which is still well above their 2% target.  Last month at the FED Jackson Hole Symposium we did not get much in the way of specifics. However, most of us that were listening came away with the feeling that the FED Chair shifted towards supporting the full employment side of their dual mandate and decided to place less emphasis on the price stability (inflation) side of the FED dual mandate.   

One possible reason for the shift to an emphasis on the employment side of their mandate  was the dramatic revision lower, announced August 1^st, in number of jobs reported by the BLS (Bureau of Labor Statistic).  They revised the number of new jobs created lower for the 12 months up to March 2025 by a record ~-911,000 fewer jobs (with more revisions coming).  This led to quite a firestorm, putting it mildly.  But the reality is that with a labor force of ~135 million, a ~1 million job count error is less than 1% and most of us would consider a 1% error rate statistically tolerable.  However, that might be fine in the macro scheme of statistical analysis, but in the micro arena of investing, and apparently the setting of the FED Funds Rate, current employment levels are followed very closely in hopes of gaining some valuable insight into how fast, or slow, the economy as a whole is growing.  To go from what we thought were good numbers to all of a sudden quite low numbers was quite jarring.

The BLS estimates the nonfarm payroll employment data monthly and adjusts it two times over the following months.  For example in January the initial estimate was that 143,000 jobs were created, then it was adjusted down to 125,000 and then down to 111,000.  The April 1^st initial estimate was 177,000, then down to 147,000, and then up to 158,000.  Outside of a recession these numbers are historically a little on the light side.  (For example jobs created:  Jan 2012 275,000, Jan 2017 216,000, Jan 2024 256,000) When the most recent revision was announced in August, we quickly went from what was already historically somewhat low numbers, to concerningly low numbers of jobs created in the economy.  

Nonfarm Payroll Employment Numbers

June: after three adjustments is now              -13,000 (lost jobs)

July: with one adjustment is now                   79,000

August: with no adjustments is                       22,000

With numbers like this (and before future adjustments and revisions), one can see why the FED altered their emphasis away from the inflation fighting side of their dual mandate to the supporting employment side of their dual mandate.   

How concerned the FED is about the employment side of their mandate depends on whether they cut the FED Funds Rate by .25%, a little concerned, or by .50%, quite concerned.  We will see tomorrow.

Harry

LayLine Asset Management Inc

Harry J. Campbell III, CMT

8/19/25

FED Jackson Hole Symposium

  This years FED (Federal Reserve Board) annual symposium, titled “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy" will be held this week in Jackson Hole (8/21-8/23).  Chairmen Powell will be speaking Friday AM.  This will give Powell the opportunity to comment on changes the FED is considering on how they operate monetary policy in what is commonly referred to as a “Framework Review”.  Here are a couple of thoughts going into the symposium and Powells speech.

First, consider the overall focus of the symposium (subject title was set last year) is on the full employment side of the FED dual mandate, price stability and full employment.  In the last framework review, concluded back in 2020, the FED softened their view on how their full employment mandate interacts with inflation, specifically, that a tight labor market was not a single reason to raise rates to counteract inflation.  Tight labor markets tend to create upward pressure on inflation as wages rise due to a shortage of workers, the crux of a tight labor market.  This change in the FED framework likely held them back from raising interest rates as unemployment dropped below 4% in 2022, reasonably considered a fairly tight labor market, even as inflation was on the rise. 

Second thought, Powells speech on Friday is likely to include a summary of the FED monetary framework review that’s been ongoing for some time now.  In the last framework review in 2020, the FED decided to take an “average” view on inflation, allowing inflation to run above target for a period of time after a period of running below target, rather than targeting a specific number, i.e. 2%.  That change appears to have allowed the FED to delay raising interest rates as inflation started to quickly rise in the spring of 2021.  The FED used the word “transitory” in describing its reaction function to the rise in inflation and the word will always be associated with that time period.  History shows that inflation was not transitory and rose significantly at the same time the labor market dramatically tightened.  Worth noting, inflation hit its high of 9.1% in June of 2022, while unemployment went below 4% early in 2022, and the FED did not start to raise the FED Funds rate until spring of 2022.  The phrase “the horse is already out of the barn” comes to mind.

            It will be interesting (for economic geeks) to hear how the FED plans on adjusting their monetary “Framework” based on their, not so great, experiences between 2020 and 2025.  My hope is that they will signal a return to more specific inflation targets and reframe the concept of what a tight labor market means regarding inflation and the economy.  We will see.

Harry

LayLine Asset Management Inc

Harry J. Campbell III, CMT

7/15/25

 Tariffs and Inflation

            Inflation numbers were out this AM and while not at the high levels that many folks predicted when tariffs were originally announced in April, inflation has started to, on an annual rate, rise just a bit.  In the last couple of months, not only has headline inflation risen, but so has core inflation (less food and energy) and super core inflation (less food and energy and shelter costs) and you guessed it, the rise, albeit less than overwhelming, in inflation started when the tariffs were announced in April.

On the surface, tariffs increase the costs of products imported into the US.  It is paid by the US importer and the tariff dollars are sent to the Federal government.  Tariffs are designed to act as a consumption tax, with the desired outcome to change US consumers consumption habits, i.e. buy goods produced in the US rather than abroad. The primary argument that tariffs are inflationary revolves around the idea that either consumers will pay the tariff resulting in higher consumer prices, or US companies will pay the tariff resulting in lower profit margins that will require higher prices at some point in time, or a combination of the two.  An argument against tariffs being inflationary that is not being presented very well is that the exporting company can reduce their prices to negate the tariffs increase on US consumer prices.  In other words, they will eat the tariff to continue to sell into the US, hoping to make up the difference by increasing market share against companies that do not, or cannot, eat the tariffs.  For example, let’s say the tariff on a widget is 10% and the imported cost is 100.  With the tariff that makes the cost 110 to the importer.  If the exporting company reduces the imported cost to 90, this would result in the price paid by the importing company to be closer to the original pre-tariff cost of 100.  Under these conditions there is no inflationary cost of the tariff to US consumers.  This very complicated process of deciding who pays what portion of the tariff is ongoing, and it won’t be figured out until the actual tariff levels have been established and fully implemented.

There are many possible explanations for the current muted level of inflation, rather than earlier predictions for much higher inflation at this time.  One of the possible reasons for the slower than expected rise in tariff induced inflation is that companies bought a lot of inventory from overseas ahead of tariffs being implemented and have continued to add to inventory levels as many of the tariffs have been delayed until August 1^st.  Companies have not had to raise prices b/c they are still selling inventory they purchased before most of the tariffs were implemented.  Until that inventory is gone companies don’t need to raise prices to maintain profit margins.  The inflationary results from tariffs will not be fully incapsulated in prices to consumers for some time to come and therefore it will not fully show up in the reported inflation numbers until fall, at the earliest. 

An important concept to consider is that of substitution. Tariffs don’t directly affect prices for locally produced goods, only imported goods.  Consumers can substitute US goods for imported goods, i.e. buy California wines rather than European wines, changing the consumption habits of US consumers as tariffs, a consumption tax, intend.  Regarding inflation, watch what consumers are doing with their spending for an indication of the actual effects of tariffs on consumer prices.  Finally, regarding the actual level and implementation of tariffs, wait and see are the operative words.

Harry

CMT: Chartered Market Technician

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