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March 2, 2021
clock 19 MIN READ

Episode 14: Tax talk 

Dean Mioli and Steve Wittenberg join Leslie Wojcik to talk tax planning in preparation for the 2021 tax season. Listen as they share their thoughts and ideas on potential legislation that could affect tax payer’s planning decisions.

“It’s important to not only consider the numbers, but to consider the psychological aspect of tax decisions too.”


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Speaker 1: Hi, everyone. Thanks for joining us back at the Intersection, a podcast that brings you candid conversations with members of our community and leaders in our industry. Enjoy today's episode.

Leslie Wojcik: Hello and welcome. I'm Leslie Wojcik, Head of Global Communications at SEI. Today, we're joined by Director of Investment Planning, Dean Mioli, and Director of Legacy Planning, Steve Wittenberg, who are here to discuss tax planning. Dean and Steve, we're really excited to have you.

Dean Mioli: Glad to be here, Leslie.

Steve Wittenberg: Thank you, Leslie.

Leslie Wojcik: All right, we're just going to jump right in. What are the biggest factors that might impact tax changes and tax planning in 2021 and even beyond?

Dean Mioli: Well, Leslie, we just had the elections, and what do we have? We have a Democratic House, we have a Democratic sentence with Vice-president Kamala Harris the deciding vote for the Democrats, and we have a Democratic president. And we feel that that lines up that tax increases are in our future. Tax history will tell you taxes are very volatile. The last president, tax rates went down, and it wouldn't surprise us in any way, shape or form based on what was campaigned by President Biden that they're looking to increase taxes. And they have the necessary votes all over Congress and in the Presidency, so we think it's a matter of when, not if. Steve, what are your thoughts?

Steve Wittenberg: Dean, the political environment is the obvious starting point here, but we have COVID-19. This is what we're dealing with, this is what the world is dealing with. And COVID-19 is going to be impactful in a few diverging ways. On the one hand, there's going to be a focus of the new administration to battle COVID-19. This could distract from traditional political battles that we've seen in the past. But on the other hand, COVID is creating a real revenue need for the federal government. They need to support the COVID vaccine distribution rollout, related state bailouts, a stimulus package, these pretty expensive undertakings, on top of the normal funding initiatives like green energy and Medicare For all that Biden would like to get through.

Leslie Wojcik: If the Biden campaign tax plan proposals are enacted by Congress, how do you guys perceive them affecting basic income tax planning?

Dean Mioli: It's really going to shake it up in a huge way. Basic tax planning would suggest deferring income. Why pay tax now? Pay tax later. And accelerating deductions into the current year. Well, this year, if you're looking at the future and saying, "Well, we could have changes to the way itemized deductions are handled and income rates, tax rates going up," worth suggesting or thinking about bringing income into this year and also accelerating deductions into this year.

 Let's talk about why. I'll start with deductions. The Biden campaign talked about limiting the value of itemized deductions to 28% of your income. Right now, the top tax rate is 37%. So you might be in the 37% bracket, but your deductions are only worth 28 cents on the dollar. So you're getting quite a haircut there. And there's a possibility that they could bring back the peace adjustment, which is another haircut on the value of itemized deductions. So the itemized deductions could go down significantly from a tax standpoint in the future. So if you want the full value of your itemized deductions, you want to be thinking about accelerating deductions into this year.

One obvious area to do that would be charitable contributions, lumping your charitable contributions into this year, instead of spreading them out over a few years. Very tax-smart idea. Now, when it comes to income, the markets have been strong the last 10 or 11 years, so you have these large gains in your portfolio. You could pay top tax rate today if you harvested those gains on a 20% top federal tax rate on long gains, whereas potentially in the future, the rate could essentially double. So there's a timing issue here, whether I should take gains now and pay it at lower rate or potentially at a much higher rate in the future. Which also brings up another interesting aspect, which is, what do you do about tax loss harvesting?

Now, that's something that we've always preached and done, but if tax rates are going up, those losses will actually be more valuable in the future than they are now. So you actually want to defer your tax loss harvesting to future years because they'd be worth more in the future if you feel rates are going up.

The other thing is, some of us have some control over our income, meaning you may have stock options, non-qualified stocks options, non-qualified divert comp, where you could push the income into the year that makes the most sense. So potentially accelerating that income into this year, you know the top rate is going to be 37%, and, of course, that income is all subject to payroll taxes as well. But under the Biden campaign, once you're over 400,000, you're not only into a higher income tax bracket, but the payroll taxes start back up. So you could be paying exceedingly much higher taxes on that type of income. So to quick review, this is the year to certainly think about accelerating not only deductions in this year to get full value, but also bringing up income into this year, knowing that potentially there could be higher future tax rates on that income in the future. Steve, what do you think?

Steve Wittenberg: It sounds like you're saying that traditional planning advice is going to be turned on its head here. We have to kind of wait and see. We'll see what laws are passed, if passed at all, when they're going to be passed and which year they're going to impact, 2021, 2022 or beyond. The one area where it could be another big it depends is, there could be an opportunity for certain taxpayers, as opposed to bringing deductions into this year, would be to defer deductions later on. If tax rates are going up for the future, some taxpayers might think about bunching or deferring their deductions to future years to get a better bang for their buck, more power of the deduction and a higher tax rate year, which would be maybe in 2022.

 This is all going to be where you are in your wealth level, how much income you generate. And ultimately, as you know, we always recommend getting projections done with your CPA sometime this year, maybe multiple times this year, depending on what we hear out there in the law changes, to prepare for that. Either do end-of-year tax planning this year, or prepare for 2022 tax planning early.

Dean Mioli: Steve, you made a great point. We are talking about tax planning, always good to consult your tax advisor. And another important point here is that when you're looking at taxes, it's a multi-year exercise. You're not looking at trying to save tax in any one year, you're trying to save taxes over multiple years. And that's why it's required to do these projections and kind of do the iterations and the what ifs.

Leslie Wojcik: Steve, when you're speaking with clients, what misconceptions do they have about potential tax law changes?

Steve Wittenberg: So as a tax planner and estate planner, in my day-to-day job, I'm working with wealthier clients, and they feel pressure that now is finally the time, this year is finally time to gift, to plan around gifting because of the possibility that the estate and generation skipping tax exemption is going to drop. It's currently 11.7 million per person, and they're worried it's going to be cut in half. So the misconception they have is around timing. The concept that the need to start planning is now. In other words, if laws are passed, that's what's motivating the need to plan. But in reality, I've always said that estate planning is a perpetual process. It should be considered whether or not there's going to be changes in the estate tax laws.

Many people don't even realize that the exemption is scheduled to be cut in half in 2025 anyway. So there are many reasons to be planning now, regardless of whether there's going to be an estate tax change. We have low interest rates, we have low business valuations, we have discounting of assets out there. These are all really great taxpayer-friendly opportunities to shift wealth out of your estate now, regardless of whether the estate laws are going to change.

Another misconception is that income tax, as Dean was talking about, and estate taxes do not impact each other, but there are distinct intersections between both taxing regimes. Building off of this theme that we were talking about of alternate tax planning, certain changes to the income tax laws for individuals may result in changes in the way we recommend estate planning, whether they should be managing their trust income in a certain way. And while this could sound a little technical, historically, we view grantor trusts. These are trusts where the creator or the grantor is going to be on the hook for the income taxes. And we look at that as a good thing. We've recommended that if they create a grantor trust, they can pay the income taxes on those trusts to further reduce their estate. But if individual income taxes significantly increase, they significantly rise, there may be a need to change that advice and even terminate grantor trust status to shift tax consequences to the trust itself, or the beneficiaries who might be falling to lower tax brackets.

Leslie Wojcik: Dean, what are your one or two top planning ideas for this year?

Dean Mioli: One of my top planning ideas is actually a repeat from 2020, and it's the Roth conversion. I think this is something that anyone, any taxpayer should think about. It's very digestible. When I look at the current tax rate schedule, I think it's a no-brainer to be thinking about Roth conversions in the 10, 12 to 22, even the 24% tax bracket. You're still in the 24% tax bracket, married couple, up to $329,850 of income, that covers quite a few Americans. And when you're thinking about a Roth conversion, which is essentially taking your traditional IRA, which has pre-tax money, and converting it to a Roth. And normally there's a tax bill that's associated with converting your traditional to a Roth. But I would argue the most important consideration in considering a Roth conversion is, what's the tax rate today and what's the tax rate going to be in the future?

And if you're in the camp that you're in a low bracket today and your tax bracket is going up, then that's a strong incentive to pay the taxmen now on the Roth conversion and get the taxmen out of the way for their future. Now, there are ways to mitigate the cost of a conversion. One is accelerating deductions into this year. Increase your charitable contributions, or you can increase your deduction, that's going to mitigate some of the Roth conversion costs. You might have a net operating loss carry forward. A lot of people suffered around this pandemic. Businesses got hurt. Could be a restaurant business, could be a hotel business, whatever the business might be, they may not have a big income to share, their income could be considerably down, maybe even a loss. Now would be the time because their tax rate is artificially low right now. Those businesses are going to come back, Leslie, we know that, but take advantage of those low tax rates right now and make these conversions happen.

And there's a lot of benefits to a Roth IRA. When you're the owner, you can take distributions, that's not taxable income, that comes out tax-free. Roth distributions are not subject to the Medicare surtax of 3.8%, they don't increase the tax liability of your social security benefits and they don't affect future Medicare premiums. Now, it all sounds pretty rosy when I'm talking about, but one thing to remember with a Roth conversion is it's a one-way street. So if you do a Roth conversion, there's no saying, "Oh, I changed my mind. I want to take the money back, I don't want a Roth conversion." So you're going to do a Roth conversion, think about it long and hard, talk to your tax professional and run the numbers. But the tax break's the most important thing.

Steve Wittenberg: Yeah, Dean, I hate to say the same thing, but my 2021 ideas are really an extension from 2020 as well. We were hearing about these tax law changes or possible tax law changes last year and clients were worried about retroactivity. So we began talking about wealth transfer techniques, estate planning techniques last year to help prevent the loss of the exemption dropping, and we talk about gifting into your revocable trust for estate tax purposes. That continues to be a hot topic. Clients speak about similar concerns. What if they need access to assets later in life and they've now executed an irrevocable gift? That might not be a great thing.

So one idea that we pitch is what's called the spousal lifetime access trust. I'm adding to the alphabet soup here, but they're called SLATs. It's a flexible way of gifting outside your state, but retaining some access, though indirect access, but still some access to the trust. Because in reality, you're setting up this trust for your spouse, who can have income and principal distributions should you want. So therefore, you're shifting outside your estate, you're taking advantage of the exemption now before it could go away, but you're giving your spouse the flexible access to income and principal down the line, should they need it, and not losing that access and control altogether.

There are certainly other types of irrevocable trusts that have flexible access to income that we recommend as well. These are also potentially under attack by Congress, but we'll see how that unfolds. And in the end, there's definitely ways to take advantage now by locking in gifts, using your exemption and shifting wealth that could create significant estate tax benefits down the line.

Dean Mioli: I would add one to that if you're going to get into the trust world. If you follow the Chinese New Year, we just had the Chinese New Year, it was celebrated, I believe, February 12, it's the year of the ox. But in trust world, I would say it's the year of the CRUT, which is a charitable remainder unitrust. And the reason why I like this strategy is, again, if you're anticipating a big sale in the future, maybe you're selling your business, you're selling real estate, you're selling highly-appreciated securities, and you feel as though that's going to bring your taxable income above a million dollars, well, you're not going to be getting the favorable long-term capital gain rate of 20%. They're talking that those gains would be taxed at 39.6%. So one way to control that gain is to contribute the asset to the charitable remainder trust, sell it inside their trust, and then pick up taxable income over a number of years, really smoothing out your tax volatility.

 You'll get a tax-efficient cashflow, you'll get some type of charitable deduction upfront, some really nice benefits. There's some downsides to it too, right? If you contribute property to the CRT, buyer's remorse, you can't come back a year later and say, "I changed my mind." It's in there. So these things need to be evaluated in your longterm plans, but I think it's a very powerful strategy and it needs to be looked at if you're looking to recognize a big gain. You've got to run through these different ideas, and one of them would definitely be the charitable remainder unitrust. Very powerful.

Steve Wittenberg: Dean, what I like about that is that's the type of trust that is providing for two purposes and two goals. You're providing for family potentially down the line, a beneficiary that could be a family member, but you're also providing for charity. And those are two goals that many clients want to tackle at once, and this is a type of trust that can make that happen.

Leslie Wojcik: How might the proposed Biden campaign tax plan affect how taxpayers look at safer retirement?

Dean Mioli: President Biden during his campaign has suggested some changes to the 401K plans. And this would also apply to 403B, 457, all types of retirement plans. And here's his change, he would take away the tax deduction for 401K contributions. Instead, people who contribute to their 401K would get actually a tax credit. And let's talk about this a little deeper, the president and his camp believe that higher-income earners receive a bigger tax benefit than lower-income earners for their contributions to the 401K plans. Why? Because of the rate differential. If someone's in the 37% bracket and they're putting money into a 401K, they save 37 cents on the dollar, whereas someone's in the 12% bracket, they only get 12 cents on the dollar tax break. So what they're proposing is a way to equalize that playing field, and they're talking about a credit of 26%. So regardless of your tax bracket, you would get this credit of 26%.

So the one problem here is it's very difficult to project what marginal tax rates will be in the future, and even more difficult for you personally in the future. But with that said, I think taxpayers would want to consider hedging their bets and start contributing to a Roth 401K. Not every plan, not every 401K plan offers the Roth option. So I expect plans who currently do not will have employees banging at their door to bring that up as an option.

And I think it's a great idea for not only high-income earners, because now they might say, "Well, the tax deduction isn't worth it on the 401K contributions or the pre-tax money, I'll start doing Roth," and I think that's a great idea, but even for low-income earners, for instance, if I was in the 12% bracket, I wouldn't be doing a deductible IRA contribution, nor would I want to make the deductible 401K contributions. The tax deductions, the juices that worth the squeeze, Leslie, I would rather put the money away tax-free knowing that I can tap into that in retirement gross tax-free, which is better than tax deferral. I love tax-free. I get a very warm and fuzzy feeling when I hear those two words together, tax-free.

I much rather have tax-free savings than tax-deferred savings. So if you have that option, I think it needs to be evaluated. Especially even people in their 50s and 60s where they're starting getting into their high-income years and they're saving for retirement, and most of these people do not have that tax-free bucket. All they have is the tax deferred and their taxable account. And if you want to really do good financial planning, you need all three tax buckets, tax rate, tax deferred and taxable. Otherwise, you'll never get the tax temperature right. You will get burned.

Steve Wittenberg: Just to add a little flavor to this idea, the goal here of making a change, if it goes through, is really to incentivize workers of all levels to save for retirement. Certainly a focus on middle or lower-income individuals who don't usually take advantage of deductions, this could help stimulate saving for retirement, but it really is hard to say what the impact would be. First off, many people really don't have the excess cash to save, regardless of tax incentives. But you nailed it on the head, if you do have excess cash, if you're a higher-income individual, if you want to save for retirement, this could be a great way to put away some more or consider other options, planning again, plan with your professionals to come up with the best retirement saving alternative that gives you the maximum tax benefits. Whether it's a Roth conversion or just traditional 401K saving, you're going to get some benefits regardless of your wealth level.

Dean Mioli: Yeah, that's a great point, Steve. It's not one or the other, you might do some pre-tax and some Roth, it's just, what is the optimal mix, so to speak, of the two depending on your personal situation? Because taxes are personal, and there's going to be a different answer for different people. So you've got to work through not only the numbers, but also the psychological aspects of all this stuff too.

Leslie Wojcik: Well guys, thank you so much for joining us today. Really insightful. We definitely look forward to having you back on to share more tax tips throughout the year, but thanks for taking the time today and sharing your insights with our listeners.

Dean Mioli: My pleasure. Always like working with Steve. You put two far brain together, watch out, it's a tax savings powerhouse.

Steve Wittenberg: Dean, thank you for that. And Leslie, thanks for giving us the opportunity to speak on tax planning tips today.

Speaker 1: We're so happy you stopped by the Intersection. Please note that information provided in this podcast is for educational purposes only and should not be interpreted as legal opinion or advice. Neither SEI nor its subsidiaries provide financial estate planning or tax advice. Always check with your tax professional. Please see important information for additional information on this topic. You can also find additional resources on our web page at We hope you enjoyed today's episode. Stay tuned for more conversations with members of our community and leaders in our industry. Until next time, stay well. And, of course, we hope you'll meet us back at the Intersection soon.

Important Information

Neither SEI nor its subsidiaries provide financial estate planning or tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.

Neither SEI nor its subsidiaries provide estate planning services unless you have otherwise separately entered into a written agreement for the provision of certain estate planning services.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only and should not be interpreted as legal opinion or advice.


The Pease limitation put a cap on how much certain taxpayers could claim in the way of itemized deductions before it was repealed when President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law on December 22, 2017. It could potentially return after 2025 if Congress doesn’t intervene when the TCJA expires at that time.

Tax loss harvesting is a strategy of selling securities at a loss to offset a capital gains tax liability. It is typically used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains, though it is also used for long-term capital gains.

An irrevocable trust is a type of trust where its terms cannot be modified, amended or terminated without the permission of the grantor's named beneficiary or beneficiaries. A CRUT (charitable remainder unitrust trust) is an irrevocable trust that provides income to a named beneficiary or beneficiaries during the grantor's life and then the remainder of the trust to a charitable cause. The Spousal Lifetime access Trust (SLAT) is an irrevocable trust where one spouse makes a gift into a trust to benefit the other spouse (and potentially other family members) while removing the assets from their combined estates.

For more information on the Biden campaign tax proposals, please visit

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