Broadcast EView
- HJC
- Jan 20
- 10 min read
Wide Ranging Perspectives and Views for Managing Retirement Assets.
LayLine Broadcast EView
LayLine Asset Management Inc
Harry J. Campbell III, CMT
1/20/26
Effective Income Tax Rates
(originally published 4/15/25, updated for the 2025 senior deduction)
I thought it would be appropriate as we approach tax day to examine what we actually pay as a percentage of our income in Federal taxes, referred to as an effective tax rate. With so many variabilities to the tax code, for this discussion, only the standard deduction, the 2025 senior deduction, married filing status, and published tax brackets rates will be considered. This discussion is only meant to provide some understanding of what an effective tax rate is, and not to provide a thorough understanding of effective tax rates. Please contact an accountant for your specific circumstances. Income brackets, tax bracket rates, senior and standard deduction are for 2025.
Starting with the income and tax bracket rates. It’s important to recognize that a particular tax rate only applies to the income in that tax bracket. I.e., the 12% tax bracket rate only applies to income between $23,851 to $96,950. Here are the first two tax brackets for a married filer for 2025 and the taxes on the maximum income of that income bracket.
Income Bracket Tax Bracket Rate Taxes
$0 to $23,850 10% $2,385 ($23,850*.10)
$23,851 to $96,950 12% $8,772 ($73,100*.12)
So, before considering the effect of the standard and senior deduction on effective tax rates, consider on an income of $96,950, the taxes due would be $11,157 ($2,385+$8,772). This results in an effective tax rate of 11.5% ($11,157/$96,950)
Now let’s consider the effect of the standard deduction, and for seniors (65 and older) the $6,000 senior deduction, on the effective tax rate. The standard deduction in 2025 for those filing as married is $30,000. Married seniors filing joint get an additional $12,000 deduction ($6,000 for each spouse), for a total of $42,000 deduction. For all intents and purposes this means that married filers don’t pay federal income taxes on the first $30,000 of income and married senior filers don’t pay on the first $42,000 of income.
On an income of $96,950 used in the above example, taking the standard deduction for married filers of $30,000 would leave a taxable income of $66,950 ($96,950-$30,000) and taxes of about $7,557 ($2,385 plus 12% on $43,100 ($66,950 - $23,850) = $5,172), resulting in an effective tax rate of 7.8% ($7,557/$96,950). For seniors with an income of $96,950, taking the $42,000 deduction would reduce taxable income to $54,950 ($96,950-$42,000) and taxes of about $6,116, resulting in an effective tax rate of 6.3% using the same math.
In summary, without any deductions on $96,950 the effective tax rate for a married filer would be 11.5%. Figuring in the standard deduction it moves down to about 7.8% and with both the standard deduction and the senior deduction the effective tax rate is around 6.3%, substantially lower than the 12% stated tax rate for an income of $96,950.
Take a look for yourself. When you get your 1040 Tax Return back, divided your adjusted gross income (line 11a on IRS Form 1040) by your taxable income (line 15 on IRS Form 1040). This is a close and simple approximation of your effective tax rate.
Harry
LayLine Broadcast EView
LayLine Asset Management Inc
Harry J. Campbell III, CMT
12/16/25
Happy Holidays and Best Wishes to You and
Your Family in the New Year!
This will be the last EView for 2025, I'm looking forward to getting back at it in the New Year.
Thanks,
Be safe!
Harry
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 1st, 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 1st 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
CMT: Chartered Market Technician
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