Month: September 2025
The Tax Impact of Lower Interest Rates
By Mark Sipos, LFG Tax Director Federal Reserve interest rate drops indirectly impact taxes by influencing the economy, which can affect how and what you're taxed on. Lower rates can lead to higher asset values or increasing potential capital gains taxes, but they also reduce inflation's effect on tax bracket adjustments, potentially pushing more income into higher tax brackets. Additionally, lower rates encourage borrowing and spending, which can be inflationary and impact future tax policies, and can make certain charitable giving strategies more attractive. Impact on Income and Capital Gains Taxes Inflation and Tax Brackets: Lower interest rates are often linked to slowing inflation. Since federal tax brackets and standard deductions are adjusted for inflation, a slowdown in inflation means smaller adjustments, potentially pushing more of your income into higher tax brackets and increasing your tax liability. Asset Values and Capital Gains: Lower borrowing costs from rate cuts can boost asset values. This increased value can lead to higher capital gains when those assets are sold, potentially resulting in higher capital gains taxes. Higher Interest Income Tax: Lower rates mean lower interest earned on savings accounts and investments, but this lower interest income is still taxable at ordinary income tax rates. Tax-free investments or qualified dividends may be more tax-efficient. Impact on Tax Policy Shifting Tax Structures: Sustained low
Key outcomes of the Federal Reserve’s interest rate decision
By Chad Roope, CFA ®, Chief Investment Officer This month, we highlight the key outcomes of the Federal Reserve (Fed) interest rate decision announced on Sept. 17. Overall, the decision was what we expected. Here is a brief summary: Interest rate cut: The Fed cut its federal funds rate by 0.25 percentage point, lowering the target range to 4.00%–4.25%. This is the first rate cut since December 2024. Voting: The decision was mostly unanimous: 11 out of 12 voting members supported the 0.25-point cut. The sole dissenting vote came from Stephen I. Miran, who preferred a larger cut of 0.50 percentage points. Balance of risks & stance: The Fed noted that growth has moderated, job gains have slowed, and unemployment has edged up, though it still remains low. Inflation remains elevated but isn’t accelerating at the same pace; there’s more concern now about economic weakness and risks to employment. The Fed emphasized that it will carefully assess incoming data and adjust policy as appropriate. Projections / Outlook From the Fed’s Summary of Economic Projections released alongside the decision: GDP growth: The median projection for U.S. real GDP growth in 2025 is about 1.6%, rising modestly in subsequent years. Unemployment rate: The unemployment rate is expected to be around 4.5% in 2025, with slight declines in 2026-2027, barring worse-than-anticipated weakening. Inflation (PCE): Inflation (the PCE m
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Case studies are intended to illustrate the types of financial issues faced by actual clients. They should not be construed as a testimonial for or endorsement of Lineweaver Wealth Advisors. They do not represent the experience of any advisory client. Each client’s situation is different, and their goals may not always be achieved. Lineweaver Wealth Advisors, LLC, is not engaged in the practice of law or accounting. Tax information provided is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time.
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