Published Articles

"529 Plan Distributions and Federal Tax Credits" by Gregory Geisler and Rebecca Bischoff. Published in Journal of Financial Service Professionals, November, 2015: pages 1-6(tentative)

Summary: A common misperception among some financial service professionals is that an individual with a 529 plan who is paying for higher education costs should pay the first $4,000 of tuition and fees per year either out of a checking or savings account or out of a loan in order to take full advantage of the federal income tax credit or deduction and then pay the remainder out of the 529 plan. This article explains that the full amount of higher education costs can be paid out of a 529 plan and the maximum federal tax credit or deduction will still be received.

"Understand the Key Differences in Missouri, Illinois, and Kansas When Advising Clients on 529 Plans," by Greg Geisler and Stephen Moehrle. Published in The Asset, January, 2015: pages 24-25

Summary: If you have clients subject to tax in neighboring states, make sure you are aware of the variations in each state's 529 college savings plans to ensure your clients receive maximum tax savings.

"Missouri Tax Savings Are the MOST," by Greg Geisler and Stephen Moehrle. Published in The Asset, November, 2011: pages 18-20

Summary: The tax advantages of a 529 account are better than a Roth retirement account: Earnings on the investments are exempt from all income taxes; withdrawals are tax-free if used for the beneficiary's expenses at any higher education institution in the U.S. where students are eligible to receive federal financial aid; there is no income limitation on who can contribute to a Missouri 529 account; a larger annual amount can be contributed than to a Roth IRA; and it generates Missouri income tax savings.

"MO$T is a MUST" by Tim Farmer and Greg Geisler. Published in The Asset, March, 2007: page 7

Summary: Missouri's 529 college savings plan, called MOST, can save the owner $480 of state income tax per year ($960 if married).

"Taking Stock of ESPPs" by Tim Farmer and Greg Geisler. Published in Journal of Accountancy, May, 2007: pages 44 – 48.

Summary: Millions of American workers are "leaving money on the table" because they don't take full advantage of employee stock purchase plans (ESPPs). Employees should purchase the maximum number of shares (at a discount) allowed under the plan and the most conservative strategy is to sell them immediately. This will increase the employee's wealth.

"The Effect of State Taxes on Baseball Free Agents" by Greg Geisler and Stephen Moehrle. Published in State Tax Notes, March 18, 2013: pages 869-878

Summary: In 2012, Albert Pujols's Total Income Taxes as a percentage of salary was 40% with the Los Angeles Angels of Anaheim. If he had resigned with his previous team, the St. Louis Cardinals, the percentage would have been only 36%. Mark Buehrle's Total Income Taxes as a percentage of salary dropped to only 33% with the Miami Marlins. If he had resigned with his previous team, the Chicago White Sox, the percentage would have been only 37%.

"Federal income tax laws that cause individuals' marginal and statutory tax rates to differ" by Greg Geisler. Published in Journal of Accounting Education, 2013: pages 430 - 460.

Summary: This article presents a "phaseouts table" (Table 2 in the article on pages 432-436) that compiles and summarizes the phaseouts of and limitations on deductions, credits, exclusions from income, and allowed contributions for individual U.S. federal income taxpayers in 2013. Phaseouts can cause individual taxpayers' marginal tax rate (MTR) to be higher than their statutory tax rate (STR) (i.e., "bracket" based on taxable income). For each phaseout, the table includes how the phaseout works, the adjusted gross income (AGI) range for the phaseout, and the related formula to compute MTR, given STR.

2017 Phaseouts Table by Greg Geisler. Unpublished. Updated annually.

Summary: This table compiles and summarizes the phaseouts of and limitations on deductions, credits, exclusions from income, and allowed contributions for individual U.S. federal income taxpayers in 2017.

"2016 Phaseouts Table" by Greg Geisler. Unpublished. Updated annually.

Summary: This table compiles and summarizes the phaseouts of and limitations on deductions, credits, exclusions from income, and allowed contributions for individual U.S. federal income taxpayers in 2016.

"2015 Phaseouts Table" by Greg Geisler. Unpublished. Updated annually.

Summary: This table compiles and summarizes the phaseouts of and limitations on deductions, credits, exclusions from income, and allowed contributions for individual U.S. federal income taxpayers in 2015.

"Could a Health Savings Account Be Better than an Employer-Matched 401(k)?" by Greg Geisler. Journal of Financial Planning, Jan. 2016: pages 40 - 48.

Summary: • The tax savings on many employees’ contributions to a health savings account (HSA) increases wealth by more than an employer match on the same employees’ 401(k) contributions. • In such cases, surprisingly, the maximum allowable HSA contribution should be made prior to the employees’ contributing any amount to their 401(k). • The higher an employee’s combined tax rate (i.e., federal income, state income, social security, and Medicare), the larger the employer’s 401(k) match must be to beat contributing to an HSA first. • Specifically, an employee with a combined tax rate above 20% maximizes wealth by contributing to an HSA before contributing to a 401(k) with a 25% employer match. It is even possible for a high-income individual that contributing to an HSA before contributing to a 401(k) with a 75% employer match maximizes wealth. • The following is a rank ordering of wealth-maximizing actions for investing and paying down debts: first, contribute the maximum to an HSA and contribute enough to a 401(k) to get the maximum employer match; if money is still available, next, pay down high-interest-rate debts; if money is still available, next, contribute to a 529 account if it produces state income tax savings and if funding future higher education costs of a loved one is important; and, if money is still available, next, contribute the maximum allowed for the year to unmatched retirement accounts.

Investing in Stocks inside Retirement Accounts and Bonds in Taxable Accounts by Greg Geisler. forthcoming in Journal of Financial Service Professionals

Summary: It is widely held that investing in bonds inside retirement accounts and stocks inside taxable accounts is tax efficient. This view leads to the rule of thumb, “Hold ordinary income-producing investments inside retirement accounts.” This rule does not stand up to scrutiny. If the economic environment is one of low expected inflation, low expected bond returns, and expected stock returns about double (or more) than bond returns, this article shows that investing in stocks with contributions to retirement accounts and buying investment-grade bonds in taxable accounts are wealth maximizing.

"Traditional versus Roth 401(k) Contributions: The Effect of Employer Matches," by Greg Geisler and David Hulse. Journal of Financial Planning, October 2014, pages 54-60

Summary: Many employers offer 401(k) plans that allow both traditional and Roth 401(k) contributions and typically match some or all of their employees' contributions. An employee who cannot afford to contribute enough to maximize the employer's match can obtain a larger matching contribution by contributing to a traditional 401(k) because before-tax dollars contributed to it cost less than after-tax dollars contributed to a Roth 401(k). Interestingly, this advantage can make a traditional 401(k) more attractive than a Roth 401(k) in many circumstances where an employee's current tax rate is lower than his or her tax rate will be in retirement. This result is contrary to the usual advice of choosing the Roth-type account when the tax rate is expected to be higher at retirement. The reason is that, while the higher future tax rate disfavors the traditional 401(k), the larger employer match the employee obtains favors the traditional 401(k). Whether these two factors are a net advantage or disadvantage depends on the magnitudes of the current and future tax rates, as well as the employer's matching rate. See Figure 1 (on page 57) and Table 3's examples (on page 59) for specific rates for these three variables.

"Retirement Account Options When Beginning a Career" by Greg Geisler and Jerrold Stern. Published in Journal of Financial Service Professionals, May 2014: 45-50

Summary: When college graduates begin their careers, they face a number of financial choices and obligations. Their choices typically include one or more retirement account options. The options generally include IRAs (Roth and/or traditional), 401(k) plans (Roth and/or traditional) and, possibly, 401(k) contributions matched by the employer. In this article, a decision-making hierarchy is provided. The hierarchy ranks all of the retirement account alternatives in order to facilitate choices that are tax efficient and maximize wealth. A simplified version of the ranking is as follows: (1) Roth 401(k) with matching employer contributions; (2) traditional 401(k) with matching employer contributions; (3) Roth IRA; (4) Roth 401(k) (unmatched); and (5) traditional 401(k) (unmatched).

Taxable Social Security Benefits and High Marginal Tax Rates by Greg Geisler. Journal of Financial Service Professionals, September 2017, pages 56-67

Summary: When social security benefits (SSBs) are collected, the usual federal tax rates of 0%, 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% change to effective marginal tax rates (MTRs) of 0%, 15%, 22.5%, 27.75%, 46.25%, 25%, 28%, 33%, 35%, and 39.6%. The four higher effective MTRs (15%, 22.5%, 27.75%, and 46.25%) are due to SSBs phasing in as taxable until reaching the maximum taxable percentage, 85%. Further, if the taxpayer’s income contains any qualified dividends or long-term capital gains, an effective MTR of 55.5% is sandwiched between the 27.75% and 46.25% MTRs. This article identifies when a client has a higher effective MTR and discusses tax planning strategies.

The Taxation of Social Security Benefits and Planning Implications by Greg Geisler and David Hulse. Journal of Financial Planning, May 2016, pages 52-63

Summary: • Up to 85 percent of Social Security benefits could be taxable, with the percentage increasing as income increases. • Additional income can cause additional Social Security benefits to be taxable, a so-called “tax torpedo.” • The tax effect of this tax torpedo depends on the tax bracket in which the benefits are taxed. This effect can be as high as 21.25 percent of the additional income, but it is less than 10 percent in many circumstances. • This tax effect is an important factor to consider when deciding whether to start Social Security benefits at age 62 or age 70.

"The Best Use of Spare Cash" by Greg Geisler. Published in Journal of Accountancy, September, 2006: pages 41-43

Summary:

1. Do this First: Invest in a 401(k) or 403(b) retirement account up to the full extent of the employer's matching contributions.
2. If you're able to (i.e., if you still have some cash available), do this Second: Pay off high interest rate debts in order—beginning with those that have the highest after-tax interest rate.
3. If you're able to (i.e., if you still have some cash available), do this Third: If higher education costs are an issue, invest in a section 529 college savings plan up to the maximum amount eligible for state tax benefits.
4. If you're able to (i.e., if you still have some cash available), do this Fourth: If your tax rate is lower now than you expect it to be at retirement, then invest, up to the maximum allowed, in a Roth 401(k) and/or Roth IRA. (Note that Roth 401(k)s did not exist when this article was published.) If your tax rate is higher now than you expect it to be at retirement, then invest, up to the maximum allowed, in your 401(k) and/or a traditional IRA (if it is deductible).
5. If you're able to (i.e., if you still have some cash available), do this Fifth: Pay off moderate interest rate debts in order based on the after-tax interest rate.
6. If you're able to (i.e., if you still have some cash available), do this Sixth: Invest in a regular taxable account.
7. If you're able to (i.e., if you still have some cash available), do this Seventh: Pay off low interest rate debts in order based on the after-tax interest rate.

These seven suggestions are in order based on after-tax rates of return. In other words, the article's rank ordering is designed to increase an employee’s wealth by maximizing after-tax rates of return on investing and paying down debts.

"An AMT Trap That Caught Teresa Heinz Kerry in 2003," by Greg Geisler. Published in Tax Notes, July 18, 2005: pages 317–318

Summary: For 2003, it appears that Heinz Kerry paid tax of about $23,333 (Heinz Kerry's marginal AMT rate of 28 percent multiplied by $83,333) because she owned "AMT bonds" (i.e., private activity muni bonds). Heinz Kerry would have been better off if she owned non-AMT muni bonds instead of the AMT bonds. If we assume that she would have received 25 fewer basis points of interest if she owned non-AMT bonds, Heinz Kerry would have been approximately $20,000 richer at the end of 2003. Heinz Kerry was caught by the tax trap of owning AMT bonds when she was subject to the AMT.