Tax Freedom Day 2015 (April 24th) 

The Tax Foundation calculates the 2015 Tax Freedom Day as April 24, 2015.

This is calculated as the day of the year when the nation as a whole has earned enough money to pay its total tax bill for that year.

Tax Foundation Key Findings:

  • Americans will spend more on 2015 taxes than they will on "food, clothing, and housing combined."
  • Americans will pay 31% of the nation's income in taxes.
  • Americans will pay $3.3 Trillion in federal taxes, $1.5 Trillion in state and local.
  • Washington residents Tax Freedom day: April 29, 2015
  • Idaho residents Tax Freedom day: April 14, 2015.


Graphic from the Tax Foundation:




Rubio Tax Reform Plan 

Presidential hopeful Senator Marco Rubio has released his proposed "Rubio-Lee Tax Reform Plan." The Tax Foundation has conducted thorough research and analysis on the plan. The key findings are included below. The plan attempts to drive growth by creating lower cost of investment (i.e. full expensing, corporate integration, lower tax rates on business) and by increasing incentives for people to work (in the form of lower rates on personal income).

The key features of Rubio-Lee plan as reported by the Tax Foundation:

  • Personal Income Taxes
    • New child tax credit ($2,500) no income cap.
    • Two brackets (15% and 35%).
    • Eliminate all itemized deductions except charitable contributions & mortgage interest deduction.
    • Replace standard deduction and personal exemption with refundable personal credit.
  • Business Taxes
    • Top tax rate of 25% for both corporate and noncorporate business income.
    • Full expensing for businesses (i.e. business may deduct 100% of the cost of investment in the year it occurs.)
    • Integrate corporate and shareholder dividend taxes to eliminate the "double taxation" applicable to C-Corporations.
    • Eliminate most business tax credits and special deductions.
  • Estate Tax
    • Eliminate the Estate Tax.

Key Findings of The Tax Foundation's Analysis"

  • Economic Growth: Once the economy has adjusted to improved incentives of the Rubio-Lee plan, annual gross domestic product (GDP) will be 15% higher than it would otherwise (equivalent to an extra $2.7 Trillion in terms of 2015 GDP).
  • Rubio-Lee plan would boost business investment by nearly 49%.
  • Rubio-Lee plan would boost wages by 12.5%
  • Rubio-Lee plan would raise level of employment by 2.7 million jobs.
  • Implementation of the Rubio-Lee plan would reduce federal revenue by about $414 Billion annually (on a static basis).
  • On a "dynamic basis", the Rubio-Lee plan will increase federal revenue by an annual $94 Billion in the long run, but there will be an estimated $1.7 Trillion revenue loss over the first 10 years.
  • Plan would also benefit low-income earnings who will receive a large boost in after-tax incomes.

How to Make your IRAs Outlast You

Recently Jess had an article included in the Covenant Investment Advisors Quarterly Newsletter.

The text of the article is below:



How to Make Your IRAs Outlast You

Jess R. Monnette

In previous newsletters, we've discussed the basics of Individual Retirement Accounts, or, IRAs. The tax benefits associated with IRAs (tax deferral for Traditional IRAs, tax-free distribution for Roth IRAs) make these accounts a very powerful investment and savings tool. Although questions regarding eligibility and investment decisions should be referred to your advisor, I want to use this article to explore how an IRA can factor into your estate plan.

In both kinds of IRA, the owner can name his own beneficiary to inherit the IRA at the time of his death. If the beneficiary designation is properly made, an IRA owner can defer income taxes on a Traditional IRA well beyond the time of his death. In a Traditional IRA, IRS rules require that every IRA owner must begin taking "required minimum distributions" (hereafter "RMDs") when he turns 70½. In a Roth IRA, the RMDs do not apply during the Roth IRA owner's lifetime, but RMDs do apply to any person (e.g. their child) who inherits the Roth IRA. RMDs are calculated by dividing your account value by the IRS's Uniform Lifetime Table. For example, the divisor for a 70 year old is 27.4, so if the owner's account balance is $100,000, the RMD for that year is $3,649.64 ($100,000/27.4). Under the IRS table, the divisor gets smaller each year (resulting in a larger RMD), but it never goes to zero. The rationale behind these RMD rules is that Congress wants tax-favored retirement plans to be used for the individual's retirement, not estate-building wealth transfer vehicles.

However, despite this goal, Congress does allow you to pass on your Traditional IRA or Roth IRA to a beneficiary, thus allowing these accounts to continue long after the original owner's death—indeed, potentially all the way to the beneficiary's death. The beneficiary too will have to take RMDs, but, if he is younger, the divisor will be lower, leaving the vast majority of the assets to continue to grow tax-free within the account. Extending tax deferral decades into the future can produce huge investment benefits.

To do this properly requires careful planning, planning that must be done while the IRA owner is still alive and healthy. The planning must include a review of the IRA plan documents to verify that the plan allows for stretch treatment, and a verification that proper beneficiary designations and elections have been made. If, for example, an IRA owner names his "estate" as IRA beneficiary (or he simply fails to list a beneficiary), then his children will not be able to "stretch" the IRA's tax benefits by using their own life-expectancy in the IRS tables. Similar treatment will occur if the IRA owner names a non-qualifying trust as beneficiary of an IRA. Depending on the circumstances, a child may be required to take distributions from the account based on the IRA owner's age (resulting in a faster distribution schedule), or, the IRS regulations may require that the full account balance must be distributed within five (5) years of the IRA owner's death.

There are many significant traps for the unwary when using IRA planning as part of an estate plan—ever-evolving tax law, IRS regulation, and each family's normal growth and change. IRA owners should consult with knowledgeable professionals who can review the IRA Plan documents and provide competent advice (both tax and non-tax) on how to achieve the IRA owner's goals and integrate those into the rest of the estate plan. Finally, every IRA owner should periodically review his IRA beneficiary designations to make sure that his beneficiary designation coordinates with the rest of his estate plan and will accomplish his goals.


Jess R. Monnette is an attorney at Monnette & Cawley, P.S., in Wenatchee Washington. Jess's practice areas include estate and tax planning. Jess is licensed to practice in the states of Washington and Idaho, he is also licensed before the U.S. Tax Court. Jess holds a J.D. from Regent University, and an LL.M. in Taxation from the University of Washington. The contents of this article are for general information purposes only and are not meant as either legal or tax advice and should not be relied upon as such.


2 "For example, a 38 year-old beneficiary who inherits a $500,000 traditional IRA and withdraws it using the life expectancy method will have $1,696,000 inside the IRA plus $1,432,000 outside the IRA in 30 years; if he cashes out the entire account when he inherits it, he will have (outside the IRA) only $1,470,000. This example assumes an 8% constant investment return for all assets and a 36% tax rate on all plan distributions and outside investment income; projections were prepared using Brentmark Retirement Plan Analyzer® and NumberCruncher® software (Appendix C)." Natalie B. Choate, Life and Death Planning for Retirement Benefits, 7th ed. (Boston, MA: Ataxplan Publications, 2011), 30.




2015 Tax Brackets! 

The Tax Foundation has calculated the 2015 tax brackets and calculated deduction credit limits for inflation.

The Tax Foundation's article by Kyle Pomerleau can be found here.

Table 1. 2015 Taxable Income Brackets and Rates (Estimate)


Single Filers

Married Joint Filers

Head of Household Filers


$0 to $9,225

$0 to $18,450

$0 to $13,150


$9,225 to $37,450

$18,450 to $74,900

$13,150 to $50,200


$37,450 to $90,750

$74,900 to $151,200

$50,200 to $129,600


$90,750 to $189,300

$151,200 to $230,450

$129,600 to $209,850


$189,300 to $411,500

$230,450 to $411,500

$209,850 to $411,500


$411,500 to $413,200

$411,500 to $464,850

$411,500 to $439,000






Table 2. 2015 Standard Deduction and Personal Exemption (Estimate)

Filing Status

Deduction Amount


 $                            6,300.00

Married Filing Jointly

 $                          12,600.00

Head of Household

 $                            9,250.00

Personal Exemption

 $                            4,000.00


Table 5. 2015 Alternative Minimum Tax Exemptions (Estimate)

Filing Status

Exemption Amount


 $            53,600.00

Married Filing Jointly

 $            83,400.00

Married Filing Separately

 $            41,700.00


Table 6. 2015 Earned Income Tax Credit Parameters (Estimate)

Filing Status


No Children

One Child

Two Children

Three or More Children

Single or Head of Household

Income at Max Credit






Maximum Credit






Phaseout Begins






Phaseout Ends (Credit Equals Zero)











Married Filing Jointly

Income at Max Credit






Maximum Credit






Phaseout Begins






Phaseout Ends (Credit Equals Zero)







Washington State: Lowest Marginal Tax Rates for Pass-Through Businesses

According to the Tax Foundation, Washington State has the lowest marginal tax rate for "pass-through businesses." A "pass-through" business includes sole proprietors, S Corporations, limited liability companies (LLCs) and partnerships.

The Tax Foundation calculates Washington State's "Top Marginal Tax Rate" for Sole Proprietorships and Partnerships (including LLC's which have no made an "S election") at 42.6%. It calculates the "Top Marginal Rate" for S-Corporations at 39.6%.

The rates calculated for Idaho are 48.2% for Sole Proprietorships and Partnerships and 45.3% for S-Corporations. The rates calculated for Oregon are 49.8% for Sole Proprietorships and Partnerships and 46.8% for S-Corporations. 

The reason that Washington rate is lower than other states is because Washington State does not have an income tax.

Additionally, the Tax Foundation reports that 95% of businesses nationwide are "pass-through" entities. This means that Washington State has a significant edge over other states. 

The Tax Foundation's report can be found here.