Tax Reform 2017 – what does it mean for tax-exempt investments?


While the current tax reform proposal by the White House lacks details, the outline released does include several items meaningful to the individual tax payer:

  • Reduction of the current seven tax brackets to three: 10%, 25% and 35%. However, the proposal does not indicate the levels of income for each bracket.
  • Deductions would change: the standard deduction would be nearly doubled to $24,000. Itemized deductions would be capped at $100,000 for single filers and $200,000 for married couples filing jointly. Tax breaks for charitable giving, mortgage interest and retirement savings would remain, however, the administration would like to eliminate the deduction for state and local taxes (SALT), which is one of the largest federal tax expenditures.
  • The administration would also like to end the Alternative Minimum Tax (AMT) and eliminate the 3.8% Net Income Investment Tax (NIIT) which applies to investment income of taxpayers with a modified adjust gross income (MAGI) of more than $200,000 for single filers and $250,000 for married couples filing jointly. This would bring the capital gains rate down for high earners from 23.8% to 20%

The proposal is still in its initial stages and will likely have many changes prior to enactment. There are questions as to whether the proposal could influence the municipal bond market and the value of tax-free investing. The following charts display the current federal tax brackets and the initially proposed tax brackets using a hypothetical taxable investment yielding 3% to illustrate Taxable Equivalent Yields.


The benefit of tax-exempt income remains, even at the proposed tax rates, although it is reduced slightly by the lower tax brackets. Tax-exempt income continues to provide a significant incentive to consider municipal bonds as an alternative to taxable income investments, particularly for the higher income taxpayer.

*Current taxable equivalent yields are based on 2017 federal tax rates and do not include the 3.8% NIIT where applicable.

These are hypothetical illustrations and do not represent an actual investment, interest rate or return on any investment.


Are You Free of Your Tax Bill for the Year?


Tax return form with pen and calculator

Today is Tax Day and as you send in your 2016 tax forms, you might be surprised to learn that the nation will still be working to pay this year’s taxes.

Every year the Tax Foundation calculates Tax Freedom Day®, which determines the day the country has earned enough money collectively to pay its total tax bill. The calculation considers all federal, state, and local taxes and divides them by the nation’s income. For 2017, Tax Freedom Day falls on April 23rd. So, the average taxpayer will spend 113 days working to pay their taxes.

In another calculation, the Tax Foundation incorporates the federal deficit. When that is included, we will have to work another 14 days; until May 7th, to reach Tax Freedom Day.

The Foundation figures that America will spend more on taxes in 2017 than on food, clothing and housing combined. 

Read more “Are You Free of Your Tax Bill for the Year?”


2016 Shareholder Tax Forms Have Been Mailed Early


Every year, mutual fund companies must mail IRS Form 1099-B to their customers by February 15th.  Forms going out to Aquila Group of Funds direct shareholders were in the mail the week of February 6, 2017.

In the fall of 2008, the IRS enacted a new law which changed the 1099-B mailing deadline from January 31 to February 15.

The prompt delivery of year-end tax forms is just one example of the ways in which we strive to be exceptionally shareholder oriented in everything we do.


Tax-Exempt Assets Looking for a Home


In 2016, a record $201 billion in municipal bonds will mature. The bulk of maturing bonds are expected in the June to July time frame. And, a total of $402 billion – the 4th highest annual amount in history – will come from the combination of municipal bonds being called, municipal bond coupon payments, and maturing bonds, over the course of 2016.

Begin making plans to reinvest those assets for tax-exempt income. Yields in the municipal bond market have recently returned to historical norms in which municipal bonds trade at yields of approximately 80% of comparable Treasuries, and taxable equivalent yields remain attractive, particularly for investors in the upper tax brackets.

You will find complete information on Aquila Group of Funds seven state-specific municipal bond funds, exempt from both Federal and State income tax, on this site.

Shares of the Funds may only be sold by offering the Funds’ Prospectus. Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectus is available on this site, from your financial adviser, and when you call 800-437-1020.


2014 IRS Tax Forms


Each year, the IRS specifies mailing deadlines for a variety of tax forms.

February 17, 2015 is the mailing deadline for 2014 IRS forms 1099-B (Proceeds from Brokerage and Barter Exchange Transactions) and 1099-DIV (Dividends and Distributions).  Forms being sent to Fund shareholders will be mailed by the February 17, 2015 deadline, and may be mailed prior to the deadline.


2014 Capital Gain Distributions


2014 capital gain distributions have been declared by five funds with a record date of December 30, 2014, an ex-date of December 31, 2014, a payable date of December 31, 2014, and a reinvestment date of December 31, 2014.

Shares of the Funds may only be sold by offering the Funds’ Prospectus. Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectus is available on this site, from your financial adviser, and when you call 800-437-1020.


Moving Retirement Plan Assets in 2015? Exercise Caution


The IRS has announced that “beginning as early as January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own”.

There are some terms to be familiar with here:

  • Rollover – in the context used here, this means that you have “constructive receipt” of assets from a retirement plan – i.e. they come into your possession.  You then have 60 days to complete a rollover into your IRA account.
  • Trustee-to-trustee transfer – assets from your retirement plan account are sent directly from the current trustee for your plan to the trustee for your IRA account, without coming into your possession. Read more “Moving Retirement Plan Assets in 2015? Exercise Caution”

Municipal Bonds: Better Than You Think


For many years, the municipal bond market has provided investors with the benefit of earning income that is generally exempt from both federal and state income taxes. While several headline topics have raised concerns among municipal bond investors in recent years, our evaluation of current economic and market factors indicates to us that the condition of the municipal bond market may be better than you think.

Our new white paper, Municipal Bonds Better Than You Think, takes a look at the economic and market factors that have influenced the municipal bond market over the past several years, and reviews why we follow our specific investment approach in managing municipal bond funds. Read more “Municipal Bonds: Better Than You Think”


One Hundred Years of the Federal Income Tax


It was 100 years ago this year that the first Form 1040 was Sixteenth Amendmentsent out to taxpayers as ratification of the Sixteenth Amendment to the US Constitution made it possible for the federal government to tax personal incomes.

The new tax started at 1% on personal incomes of more than $3,000 (over $71,000 in today’s dollars) for single filers or $4,000 for couples and included a surtax of 6% on incomes over $500,000. Read more “One Hundred Years of the Federal Income Tax”