Retirees have long expressed their frustration that a portion of the Social Security benefits they've spent a lifetime earning could be subject to federal income taxes. And for years, those concerns have sparked debate across the political spectrum.

During his 2024 campaign, President Trump proposed exempting Social Security from federal income tax. And in recent months, lawmakers in Congress (both Republicans and Democrats) introduced legislation with that same goal in mind.

So far, however, the tax on benefits — which is based on a person's filing status and income — remains in place.

But thanks to the One Big Beautiful Bill Act (OBBBA), which passed in July, many older Americans can still count on a hefty tax break, at least for the next four years.

The new law temporarily provides a "bonus" deduction of up to $6,000 each year, from 2025 through 2028, for taxpayers 65 and older. (That's $12,000 for married-filing-jointly couples if both spouses are 65-plus.) This is on top of the annual additional standard deduction that these older taxpayers are already allowed.

But unlike the existing additional standard deduction, you can take the new bonus deduction even if you choose to itemize on your tax return.

There are income limits: The value of the bonus deduction begins to phase out at a modified adjusted gross income (MAGI) of $75,000 for single filers and $150,000 for those who are married and filing jointly.

And it phases out entirely if you have a MAGI above $175,000 as a single filer, or above $250,000 for those married and filing jointly. (It is not available at all to those whose tax status is married filing separately.)

Benefits of the new tax break

For many middle-income individuals and couples, this will make a significant difference at tax time. Most will be able to escape, or at least reduce, the taxation of their Social Security benefits.

And because the bonus deduction isn't tied specifically to Social Security, others will get a break, as well. For example, lower-income retirees, who generally don't owe taxes on their Social Security benefits, can also take advantage of the bonus deduction.

So can older adults who have decided to delay filing for their Social Security payments as long as possible in order to keep growing their monthly payment.

The reform recognizes the financial pressures retirees face today, from rising health care costs to housing instability, and aims to provide a buffer against these challenges.

And if supporters of the new law are correct, the tax relief will also have a positive impact on the overall economy — both locally and nationally — as retirees will have more money to spend on goods and services.

Here's how the bonus deduction for older people works

The new deduction is referred to as a "bonus" because it can be layered on top of the standard deduction you take for your filing status, or on top of your itemized deductions, and the additional deduction that older adults already receive.

Here are some basic examples of what that could look like, based on 2025 deduction amounts, for taxpayers who are eligible for the full bonus deduction.

An eligible single filer, age 65-plus, could receive: $15,750 standard deduction + $2,000 annual additional deduction + $6,000 new bonus deduction = $23,750

An eligible married couple filing jointly, both 65-plus, could receive: $31,500 standard deduction + $3,200 annual additional deduction ($1,600 each) + $12,000 new bonus deduction ($6,000 each) = $46,700

Make the most of your bonus with proactive planning

How can you optimize the bonus deduction for the next four years — and into the future if it's made permanent?

If you're hoping to avoid paying taxes on Social Security, the bonus deduction alone may be enough to keep you under IRS thresholds for your filing status. If you're single and your combined income is between $25,000 and $34,000 — or between $32,000 and $44,000 if you're married filing jointly — 50% of benefits may be taxable.

If your combined income is over those limits, 85% of your benefits may be taxable. Though the bonus deduction won't exempt everyone, it's expected to deliver welcome relief for many retirees.

And with proactive planning, there may be other ways to benefit from the bonus deduction. You might find the time is finally right to do that Roth conversion, for example.

Or, if you had high medical bills or made a substantial gift to charity, you may want to look at itemizing this year.

You can also use the deduction to offset the taxes on required minimum distributions (RMDs).

Your financial adviser and/or tax professional can help you evaluate a variety of strategies that might suit your needs. But don't delay: The clock is already ticking on this opportunity to pay less to Uncle Sam and keep more money in your pocket.

For many older Americans, that's more important than ever.

The passage of the OBBBA represents more than a tax cut; it's also the recognition of this generation's contribution to the nation's economy and an assurance that retirement shouldn't come with new financial burdens.

And I expect, as its implementation continues, that the long-term effects of this innovative law could play a crucial role in shaping retirement policy for generations to come.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Related Content

• If You're Retired or Soon-to-Be Retired, You Won't Want to Miss Out on These 3 OBBB Tax Breaks
• I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term Plan
• Is the One Big Beautiful Bill Really All That Great for Your Retirement?
• ​​What the OBBB Means for Social Security Taxes and Your Retirement: A Wealth Adviser's Guide
• Your Golden Years Just Got a Tax Break, But There's a Catch

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

RMDs are like colon cancer screenings: You thought they were only for older folks, and ignoring them now could lead to bigger problems down the road.

When you get to the current RMD age of 73 (updated in the SECURE 2.0 Act) and you're forced to take money from your traditional accounts, you're not just paying taxes on that specific RMD dollar amount.

• Your RMD amount likely makes more of your Social Security taxable
• Your RMD amount could force you to pay extra for Medicare through the income-related monthly adjustment amount (IRMAA)
• Your RMD amount could make you lose out on deductions such as the enhanced deduction for older people and the medical expense deduction
• And you could pay an extra 25% tax penalty on RMDs you don't take out on time

Here are the five biggest mistakes I see retirees make with their RMDs. Learn from these mistakes so that you can plan your RMDs ahead of time and hopefully lower their tax bite.

Mistake No. 1: Waiting until age 73 to create a plan

One of the most consistent concerns I hear from retirees is, "How bad am I going to get killed on taxes when my RMDs start?"

They have projected out their future RMD amount of $10,000, $25,000, even $100,000 in future taxable income, and they're concerned about the tax cost.

But then they stop there. They see the problem, but they figure they can't do anything about it.

Thankfully, you can. Go beyond just projecting your RMD amount, but also project your future tax brackets. Then find the tax years between now and 73 when your taxes are likely to be lowest; this is often before you start Social Security.

Then, during those lower projected tax years, do a Roth conversion at that lower tax rate, so that your future RMD is lower and the Roth money can grow tax-free.

Mistake No. 2: Failing to make use of qualified charitable distributions (QCDs)

A retired pastor came to my office for a new client meeting. He brought in his investment statements, and tax return, and he explained that he had roughly a $12,000 RMD each year and that he gave it all away.

I reviewed his tax return and saw the RMD listed as taxable income, and I saw that he wasn't itemizing his deductions — he was paying more taxes than he should have!

I asked the pastor how he took out his RMD each year to give to charity, and he said, "I want to follow the rules, so I take out my RMD as soon as I can each year and put it in the bank. Then at the end of the year, I write out checks to my church and favorite charities."

I showed him that he could do a qualified charitable distribution (QCD) instead, sending the money from the IRA directly to the charities.

I calculated that using the QCD rules on the $12,000 QCD amount to be $2,263 in income tax savings.

And here's a next-level QCD move: You can start doing QCDs at age 70½, even though RMDs don't start until 73 currently. It just might lower this year's taxes, and it will definitely lower your future RMD amounts.

Mistake No. 3: Doing the wrong tax withholding

I just met a retiree who had his first RMD distribution last year. He and his wife make $36,000 from Social Security and $36,000 from his pension.

They don't need their IRA money, which is why they hadn't taken anything out until their first RMD, which came to $40,000.

His investment company sent him the $40,000 at the end of last year, doing the 10% mandatory federal withholding and no state tax withholding because it wasn't required.

It turned out the taxes on his RMD were $6,400 for federal, not the $4,000 that was withheld, and $2,000 for state — and there was nothing withheld for that.

He had to write out two big checks, and he owed even more because of underpayment penalties.

Before you take out your RMD, do a tax projection to get the withholding right — the standard 10% is almost never the right amount.

Mistake No. 4: Not realizing how your RMD income affects the rest of your tax return

You would think that paying taxes on your RMDs is simple. If you're in the 12% tax bracket, and you take out $10,000, then you just pay $1,200 in extra taxes, right? If only it were that simple.

When you take money from your traditional IRA, especially for the first time with your RMD, you're often surprised at how much it affects the rest of your tax return.

The amount of your Social Security that is taxable is based on how much other income you have. When you have more other income from your IRA, your taxable Social Security amount goes up.

That RMD amount could push you into the next tax bracket. The IRS doesn't hand you a card saying, "You're in the 12% tax bracket forever." When your RMDs start, your income goes up, and often your tax bracket goes higher.

Or perhaps that extra income means that you get less medical deductions or less of the enhanced deduction for older people.

I often see RMDs push retirees over the edge so that they are paying extra for Medicare because of the IRMAA. You can read about those IRMAA tax brackets in the Kiplinger article Medicare Premiums 2025: IRMAA Brackets and Surcharges for Parts B and D. And you can see the 2026 brackets in this Kiplinger article.

When it comes to the U.S. tax code, more RMD income often means more other income and fewer deductions, and then you pay more in taxes than you expected.

Before you take your first RMD, make sure you understand how the new taxable income affects the rest of your income and deductions.

Mistake No. 5: Forgetting that the M in RMD means 'minimum,' not 'maximum'

All these tax mistakes add up to a lot of big surprises when you hit RMD age. Perhaps you've resolved to reduce the tax pain by sticking to just the minimum amount for your RMD. But you don't have to restrict your distribution to the minimum.

Often, the solution to your future RMD tax problems is to bite the bullet this year and do a Roth conversion at a tax rate that you're comfortable with so that your future RMDs are lower.

Also, remember that just because you're required to do RMDs at age 73 doesn't mean you can't take out money earlier. The minimum age to withdraw from your IRA without a penalty is 59½, which means you could have 13-plus years to plan for the likely RMD tax pain.

Lower your retirement taxes by creating your RMD strategy today

RMDs might seem like an annoying part of the tax code, but when it comes to retirement taxes, RMDs affect the rest of your retirement:

• Your tax bracket
• Your Social Security taxation
• Your Medicare premiums
• Your investment strategy
• Your charitable giving

The time to start planning for your RMDs is not the year you turn 73, but even before you retire. In your retirement planning, focus not just on your investment growth, but on how that growth will affect your future tax situation.

That's why I put tax planning as step three in my book, Retire Today: Create Your Retirement Master Plan in 5 Simple Steps, even before your investment planning (step four).

A tax-smart retirement gets you ready for your RMDs well ahead of time and works to minimize their tax impact even when you get to RMD age.

Related Content

• How to Calculate RMDs (Required Minimum Distributions) for IRAs
• I'm a Financial Planner: This Is How You Can Get Started With RMDs
• Required Minimum Distributions (RMDs): Rules, Deadlines, and Important Changes to Know
• Stressing About RMDs? Two Ways to Reduce or Even Eliminate Them
• New Year's Eve RMD Deadline: What to Know and What to Do

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Tax season might feel far off, but the IRS has already set the stage for 2026 — and there are some updates worth paying attention to, especially if you're retired or nearing retirement.

Inflation adjustments are raising income thresholds, standard deductions and the extra deduction for adults age 65 and older.

Thanks to a recently passed tax bill, there's also a new limited-time bonus deduction designed specifically for older taxpayers.

Let's break down what's changing, what's new and how it might affect your bottom line in 2026 and beyond.

A little extra for retirees: A bigger additional standard deduction

If you're 65 or older, you get a little more breathing room in your tax return this year. The IRS bumped up the additional standard deduction for 2026:

• Single filers and heads of household (age 65-plus): $2,050 (up from $2,000 in 2025)
• Married couples (65-plus): $1,650 per qualifying spouse (up from $1,600)

If both partners qualify, that's a $100 total increase. It's not life-changing, but enough to slightly reduce your taxable income — and that's always a win.

For those who are both 65-plus and blind, that amount doubles:

• Singles/heads of household: $4,100
• Married, filing jointly: $3,300 per qualifying spouse

This "double bump" is meant to help taxpayers with additional challenges offset a bit more of their income.

Standard deduction amounts are also on the rise

Most Americans take the standard deduction instead of itemizing, and that number is getting a lift for 2026. The new amounts you'll use when filing in early 2027:

With nearly 90% of taxpayers claiming the standard deduction, these adjustments will put a little more money back into most pockets.

The headliner: A temporary $6,000 'bonus deduction' for older people

The biggest new development for retirees is a fresh, temporary deduction created by the GOP's 2025 tax package — a four-year perk for those age 65 and older.

Here's the highlight reel:

• Worth: Up to $6,000 per taxpayer
• Available: 2025 through 2028
• Income limits: Phases out starting at $75,000 (single) and $150,000 (joint)
• Eligibility: You can take it whether you itemize or claim the standard deduction

Even if you already claim deductions for mortgage interest, medical expenses or charitable giving, you can still tack on this additional benefit. Think of it as a short-term tax break designed to ease the burden on older Americans during a high-inflation period.

How these changes could affect you

Whether these updates have a big impact on you depends on your personal financial picture — but for many retirees, even small adjustments can matter.

Here's how to make the most of them:

Stay strategic about income timing. Adjust when and how you withdraw from IRAs, pensions or brokerage accounts to remain in the most efficient tax bracket.

Double-check your filing strategy. Standard vs itemized deductions can look very different with these new thresholds.

Ask about the bonus deduction early. Because it's temporary, you'll want to plan to make the most of it over the next few years.

The takeaway

Updates for 2026 aren't dramatic, but they're still worth knowing — especially if you're managing income from multiple sources in retirement.

A little planning now can help you take advantage of every available tax break, and that means keeping more of your money where it belongs: in your pocket.

If you're not sure how these changes fit into your broader retirement plan, now's the time to talk with a financial or tax adviser who can run the numbers and help you strategize before the next tax season rolls around.

Smart planning today means fewer surprises — and maybe a few extra dinners at your favorite local spot tomorrow.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Related Content

• New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Age 65-Plus
• Five Ways to Cash In on the $6,000 'Senior Bonus' Deduction
• The Extra Standard Deduction for People Age 65 and Older
• New 2026 Income Tax Brackets Are Set: Will Your Rate Change?
• 2025-2026 Tax Brackets and Federal Income Tax Rates

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Taxes are a worry for most retirees, even as they put their working years behind them and ease into what should be a more relaxing time.

Taxpayers were expecting to face even more worries at the end of this year, when the Tax Cuts and Jobs Act of 2017 was set to expire.

Fortunately, many of the act's provisions became permanent when Congress passed and the president signed the One Big Beautiful Bill (OBBB).

But the new law has done more than that. It also includes tax changes that are especially amenable to many retirees and near retirees.

However, they aren't all going to last, so it may be wise to take advantage sooner rather than later.

The 65-and-older advantage

One of those changes is that many taxpayers age 65 and older can qualify for an extra $6,000 standard deduction. This not only lowers your tax bill but could also reduce your taxable income enough to avoid taxes on your Social Security benefits.

Yes, up to 85% of your Social Security benefits can be taxed, depending on your income.

If couples filing jointly are both at least 65, they can each qualify for the extra deduction, making it a total of $12,000.

But there are income restrictions on who qualifies. The deduction phases out for taxpayers with modified adjusted gross income over $75,000 (or $150,000 for joint filers).

The deduction also won't be around forever; it lasts only through 2028.

Higher deductions for state and local taxes

Some federal income taxpayers may also be able to take advantage of a higher deduction for what they pay in state and local taxes, the so-called SALT deduction, at least until 2029, when this law expires.

The cap on how much you can deduct has been raised from $10,000 to $40,000, but once again, there are income limits.

In this case, the new cap applies to incomes under $500,000 for those filing jointly, or under $250,000 for individuals or married couples filing separately.

For those whose taxable income is over $500,000, the cap is gradually reduced until it reaches the previous level of $10,000.

This new cap could change whether you decide to itemize your deductions rather than take the standard deduction.

Good opportunity for Roth conversions

In addition to taking advantage of the tax changes, there are other steps to consider during this limited period when your tax liability could be lower.

For example, this would be a great time to consider a Roth conversion if you have been saving money for retirement in a traditional IRA, 401(k) or other tax-deferred accounts.

Those accounts are great for saving money, and you do have immediate tax advantages with them since your yearly contributions aren't taxed.

The downside is that when you retire and start spending the money you saved, your withdrawals are taxed.

Plus, once you reach age 73 (age 75 for those born in 1960 or later), required minimum distributions (RMDs) kick in, forcing you to withdraw a certain percentage each year whether you want to or not.

Roth accounts, on the other hand, grow tax-free, aren't taxed when you make withdrawals and don't have RMDs. You do, however, pay taxes when you make a conversion from a traditional account to a Roth.

But that's one reason these next few years may be a good time to move some of your money to a Roth.

You have some wiggle room in your tax bill, thanks to tax provisions such as the extra deduction for those 65 and older, and you can also take advantage of the higher SALT cap.

Pay less, keep more for yourself

One criticism of the OBBB is that lower taxes could increase the federal deficit and add to the country's growing debt. At some point in the future, that debt will need to be addressed — possibly through higher taxes.

In the meantime, consult with a financial professional to make sure you are getting the most out of the tax advantages currently available to you.

An adviser can review your individual situation, analyze your income sources and any available deductions or financial moves, and help you craft a plan that works best for you.

Yes, taxes are a concern even in retirement. But good planning and an awareness of changes that apply to you can allow you to give Uncle Sam less money and keep more for yourself.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Related Content

• I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term Plan
• Is the One Big Beautiful Bill Really All That Great for Your Retirement?
• ​​What the OBBB Means for Social Security Taxes and Your Retirement: A Wealth Adviser's Guide
• Your Golden Years Just Got a Tax Break, But There's a Catch

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

1. Capital gains and the OBBB

Question: Did the “One Big Beautiful Bill” (OBBB) make any changes to the existing federal income tax rates on capital gains?

Joy Taylor: No. Although the OBBB, which was enacted on July 4, 2025, has over 100 tax sections, there are no big changes to the taxation of capital gains. Some Republican lawmakers and free-market groups backed the idea of indexing capital gains to inflation each year, but this didn’t make it into the law. Others wanted a 15% top federal capital gains tax rate. But this proposal was also not included.

2. Tax rates on capital gains

Question: What are the federal income tax rates for capital gains for 2025 and 2026

Joy Taylor: Long-term capital gains, which are profits from the sale or exchange of capital assets held for more than a year, get favorable federal tax rates. They are generally taxed at 0%, 15% or 20%. The rates are based on set income thresholds, which are adjusted annually for inflation. Note that these same favorable rates also apply to qualified dividends. Here are the income thresholds for 2025:

• The 0% rate applies at taxable incomes up to $48,350 for single filers, $64,750 for head-of-household filers and $96,700 for joint filers.
• The 20% rate starts at $533,401 for single filers, $556,701 for head-of-household filers and $600,051 for joint filers.
• The 15% rate is for filers with taxable incomes between the 0% and 20% break points.

Here are the income thresholds for 2026 tax returns that you would file in 2027:

• The 0% rate applies at taxable incomes up to $49,450 for single filers, $66,200 for head-of-household filers and $98,900 for joint filers.
• The 20% rate starts at $545,501 for single filers, $579,601 for head-of-household filers and $613,701 for joint filers.
• The 15% rate is for filers with taxable incomes between the 0% and 20% break points.

Though most long-term capital gains are taxed at the 0%, 15% or 20% rates, there are a couple of exceptions. Long-term capital gains from the sale of art, antiques, coins, historical documents and other collectibles have a 28% top rate. Depreciation recapture from real estate sales is taxed at as much as 25%.

Short-term capital gains, which are profits from the sale or exchange of capital assets held for 12 months or less, are taxed at ordinary income rates up to 37%.

3. Stock mutual funds and capital gains distributions

Question: I invest in stock mutual funds. Every year, I pay a lot of tax on capital gains distributions from these funds at ordinary income tax rates. I’m told by my accountant that this income doesn’t qualify for the lower tax rates on long-term capital gains. Why is this the case?

Joy Taylor: As briefly mentioned in question 2, net short-term capital gains are taxed at ordinary income rates up to 37%. This applies to gains from the sale or exchange of capital assets held for a year or less, which can include capital gains distributions from stock mutual funds. Some of these funds frequently buy or sell holdings that can potentially generate big short-term capital gains distributions.

Before you invest in a stock mutual fund, check its turnover ratio. The higher the ratio, the higher the potential for tax-inefficient short-term capital gains distributions. One way around this hazard is to keep high-turnover stock mutual funds in an IRA or another tax-deferred account instead of in a taxable investment account.

4. Capital gains and state taxes

Question: Do all states tax capital gains in the same manner as the IRS?

Joy Taylor: No. Assuming your state will follow the federal tax treatment of capital gains is a mistake. Some states don’t have favorable capital gains rates, instead taxing investment income at the same rates as wages and ordinary income. A few states have preferential tax rates. And a handful don’t even tax capital gains at all. So be sure to understand your state’s tax treatment of capital gains.

5. Capital gains and the 3.8% NII tax

Question: I sold lots of investments this year for large gains. Will I have to pay the extra 3.8% surtax on top of the regular federal income taxes on my capital gains?

Joy Taylor: Maybe. The additional 3.8% net investment income tax (NII) applies to single filers with modified adjusted gross income (AGI) over $200,000 and to joint filers with modified AGI above $250,000. The modified AGI threshold is $125,000 for married people filing separate tax returns. Trusts and estates can also be hit with the NII tax if their 2025 modified AGI exceeds $15,900 and they have undistributed net income. These modified AGI amounts aren’t inflation-indexed, leading to more filers paying the NII tax each year.

The NII tax, which is added to the regular income tax, is due on the smaller of NII or the excess of modified AGI over the threshold amounts. NII includes dividends, capital gains, taxable interest, annuities, royalties, passive rents and certain income from other passive activities.

Here are a few ways to keep the NII tax at bay: Invest in municipal bonds, which generate tax-free interest income for federal tax purposes. If possible, use an installment sale to spread out a large capital gain over several years. Also, try to keep your modified AGI below the $250,000/$200,000 thresholds so that the 3.8% NII tax won’t even kick in.

6. 0% rate on long-term capital gains

Question: I know there is a 0% rate on long-term capital gains and dividends. But how does one qualify for this rate, and is there anything I should be wary of?

Answer: For 2025, if taxable income other than long-term capital gains and dividends doesn’t exceed $48,350 for single-filed returns, $64,750 on head-of-household returns or $96,700 on joint returns, then qualified dividends and profits on sales of assets owned more than a year are taxed at a 0% federal income tax rate until they push you over the threshold amounts.

These income figures are a bit higher for 2026 tax returns that you would file in 2027, since they are adjusted annually for inflation. For 2026, they are $49,450 for single filers, $66,200 for head-of-household filers and $98,900 for joint filers.

Note that although these 0%-rate capital gains might not be taxed at the federal level, they do increase your adjusted gross income. Also, capital gains may be taxed differently at the state level. For example, some states tax capital gain as ordinary income.

Here are three scenarios to help illustrate the 0%-rate rule. In all three scenarios, you have a married couple with $18,000 of qualified dividends and long-term capital gains in 2025, which are included in the taxable income amounts.

In the first scenario, the couple has $77,000 of taxable income. The full $18,000 of long-term capital gains and dividends is taxed at the 0% rate. In the second scenario, the couple has $104,000 of taxable income. $10,700 of the long-term capital gains and dividends ($96,700 - ($104,000 - $18,000)) gets the favorable 0% tax rate, and $7,300 is taxed at the 15% rate. In the third scenario, the couple has $120,000 of taxable income. The 0% rate doesn’t apply, and the full $18,000 of long-term capital gains and dividends is taxed at 15%.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

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It's not too late to do some clever tax planning for 2025 that will save money on your taxes — but if you wait until January, it will be too late.

When it comes to taxes, the best opportunities come from proactive planning throughout the year, rather than waiting until it's over.

For example, most families who have been saving and investing for some time will generate significant capital gains each year. Long-term capital gains rates can be as high as 20%, while short-term rates can be as high as 37%, depending on your income bracket.

An additional 3.8% tax, the net investment income tax (NIIT), applies to investors above certain income limits. For many, this tax bill can be considerable.

How to employ tax-loss harvesting

These gains can be offset with tax-loss harvesting strategies, which involve strategically selling securities at a loss, creating an offset to that year's capital gains, then replacing them with similar assets.

If the new assets perform similarly to the old ones, your portfolio ends up in a similar place, but through the strategic sale, you now have losses to offset potential gains, resulting in lower taxes. (There is nuance involved, such as complying with wash-sale rules, which should be navigated carefully to maximize the benefit.)

Most tax-loss harvesting is effective when it's opportunistic throughout the year. By January, it's too late to even think about it for the previous year.

If you wait until the end of the year, you might find a few assets in your portfolio that are down, but you'd likely find the most opportunities if you use tax-loss harvesting throughout the year.

Consider the market so far in 2025.

In April, the S&P 500 was briefly down as much as 20%, and a wide range of assets could have been opportunistically sold. But you had to be thinking about it throughout the year to be in a position to take advantage.

If you started thinking about tax losses now, you haven't completely missed opportunities for 2025, but you might have missed the best opportunity of the year.

Maximize your charitable contributions

For investors considering their charitable giving strategies, another opportunity for year-round tax planning is available.

If you have securities that have appreciated in value, you can donate them to a charity at their current fair market value (if they have been held for over a year).

Neither you nor the charity owes capital gains tax on the gift.

A moment of market upswing, which could occur at any point during the year, maximizes both the tax benefit to you and the funds available to your charitable cause.

Now is a good moment for this one.

Consider potential Roth conversions

A third tax-saving strategy to triangulate with your year-round planning would be Roth conversions.

If the deductions from tax-loss harvesting and strategic charitable donations pushed you into a lower tax bracket, you could use this opportunity to convert taxable retirement accounts into after-tax Roth accounts.

The big takeaway here is that there are still opportunities in the final months of 2025 to implement a valuable tax strategy, such as our tax-loss harvesting example above.

There could be even bigger opportunities if you make 2026 the year that you begin year-round tax planning.

Estate planning at the end of the year

In addition to tax strategies within your portfolio, the final months of the year are a valuable window for estate planning.

The annual gift tax limit is $19,000 for an individual and $38,000 for a couple in 2025. No taxes are owed, but the gift opportunity is use-it-or-lose-it.

Some families use the end of the year to take advantage of income-shifting. A family member in a higher tax bracket uses the gift tax limits to donate assets to a family member, perhaps a young adult child, in a much lower tax bracket. Future income from that asset is taxed at the lower rate.

The key takeaway is that if your finances have even a little bit of complexity — capital gains, charitable goals, pretax retirement accounts — there are significant opportunities for tax savings.

As the complexity of your finances grows, so do the opportunities.

For many investors, a key stumbling block is the difficulty of coordinating these strategies among different professionals, a wealth adviser, a tax accountant and an estate planning attorney. That's one reason it often falls by the wayside until it's too late.

Some opportunities fade throughout the year, and most savings opportunities are completely gone by the time the tax-filing deadlines roll around.

Your taxes shouldn't be an exercise in digging up historical documents, but an exercise in active savings. There are still opportunities in 2025 taxes, and even more for 2026.

Related Content

• Year-End Retirement Tax Planning Actions if You Have $1 Million or More
• Trump's 2025 Tax Bill: What's Changing and How It Affects Your Taxes
• Seven Moves for High-Net-Worth People to Make Before End of 2025, From a Financial Planner
• New Tax Rules: Income the IRS Won't Touch in 2025
• Capital Gains Tax Rates 2025 and 2026: What You Need to Know

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

I swore I would never write another column specific to one piece of legislation because of its short shelf life in the ever-changing political landscape. However …

There were enough changes in the planning strategies stemming from the One Big Beautiful Bill (expect a cosmetic name change before the midterms) that I thought it would be a disservice to leave my followers in the dark.

We've done our year-end reviews early because most custodians have to execute transactions before the IRS deadline of December 31. Much of this work requires calculations that take some time.

Here are the strategies our clients with $2 million to $10 million are looking at by the end of the year:

1. Different Roth conversion calculations and considerations

I've equated a Roth conversion calculation to walking across a busy street. Look left for income tax rates, look right for capital gains thresholds. Look both ways for electric scooters. In this analogy, Medicare IRMAA brackets.

Now there's a fourth threat: phaseouts on a few of the tax breaks created by OBBB.

The two that we saw come up multiple times in our reviews were the enhanced senior deduction phaseout and the SALT (state and local taxes) cap expansion phaseout. The enhanced senior deduction adds a $12,000 deduction for a married couple, if both are at least age 65.

However, that additional deduction starts to phase out at $150,000 of income. It disappears at $250,000 of income.

A Roth conversion might cost more than the marginal rate if we accidentally breach this threshold. That doesn't mean it's not worth doing.

You might wonder why I attached an asset level of $2 million to $10 million. Many of our clients fall within this range, and portfolios of this size, depending on where the money is held, can make some of these thresholds easy to hit.

Next one on our list is the temporary SALT cap increase. It increases the cap on the deduction for SALT to $40,000 retroactively to the beginning of 2025 through 2029.

However, a phaseout of that deduction starts at $500,000 of income and reverts to $10,000 at $600,000 of income (joint). A Roth conversion might cost more if we cross the line.

These new rules have made calculations more difficult because of the nuanced rules and sheer number of landmines.

We rely on tax-planning software to load a prior year's return, change the tax year to 2025 and see the impact of the new rules.

2. Charitable bunching

Bunching became popular with the advent of the Tax Cuts and Jobs Act (TCJA) in 2018. Because of the SALT cap of $10,000 and higher standard deductions, a much smaller percentage of wealthy taxpayers itemize deductions.

We would often "bunch" or "stack" deductions in one year to get over the standard deduction hurdle. The taxpayer would make several years of charitable gifts in one year, often using a donor-advised fund (DAF). Our clients would then go back to the standard deduction in subsequent years.

This is not a new strategy, but it has become more important because more people will itemize under the expanded SALT cap and because there is a 0.5% floor on charitable giving starting in 2026.

Think of that floor like the floor on medical expenses. If a client has $100,000 in adjusted gross income (AGI) and wants to give $4,000, only $3,500 of it would be deductible on Schedule A, because of that floor.

This makes the charitable bunching strategy even more important, as the higher you go with the gift, the more inconsequential that hurdle becomes.

If you're close to the standard deduction threshold, this strategy will become even more beneficial if you revert to the standard deduction in 2026. Starting in 2026, there is an additional $2,000 (joint) charitable deduction available for those who take the standard deduction.

We rely on financial planning software to look forward several years and try to figure out if our clients should be itemizing or taking the standard deduction. Unlike the tax software I referenced, we make a free version of this software.

3. Energy projects

We had several clients scrambling to make the electric car credit deadline of September 30. However, there are credits still available for projects completed by December 31.

These credits have fairly low caps, so you should do one of these projects only if you were otherwise already considering it. The energy-efficient home improvement credit is outlined under IRS Section 25C.

This credit allows you to deduct a certain percentage of materials costs for such things as energy-efficient windows, air conditioning units, etc.

As I think of all these caps, phaseouts and rules, I'm picturing a stack of dominos that my 3-year-old lines up on the living room floor. Accidentally knock one over, and the whole line goes down.

Perhaps that's extreme, but it's now even more important to make sure you don't ruin your strategy by inadvertently pushing over one domino.

Related Content

• 3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025
• Three Strategies to Take Advantage of OBBB Changes, From a Financial Planning Pro
• Thanks to the OBBB, Now Could Be the Best Tax-Planning Window We've Had: 12 Things You Should Know
• Four Times You Need a Second Opinion on Your Financial Plan
• Six Financial Actions to Take the Year Before You Retire, From a Financial Planner

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you were to type into a search engine, "Should I talk about politics with my financial adviser?" you would find a long list of articles by advisers, and for advisers, about how best to avoid politics when discussing financial plans with clients.

I vehemently disagree with the notion that political conversations between financial advisers and clients should be sidestepped.

In fact, I would go so far as to say it is impossible for an adviser to fulfill their fiduciary duty — a legal obligation to act in your best interest — without fully knowing you as a whole person, including your political orientation.

A sound financial plan should be shaped by who you are, what you care about and the kind of world you want your money to help build. So, yes, you should get political with your adviser.

Here are three reasons why it's so important for you to do so.

1. Financial planning is deeply personal

Money isn't just about the numbers. And your financial plan isn't a spreadsheet — it's a reflection of your life: your goals, your fears, your family and your sense of purpose.

Everyone deserves the opportunity to show up as their full selves in all aspects of their lives — and that includes meetings with your financial adviser.

If your adviser brushes off this conversation, it is a red flag. You deserve a space where you can speak openly about what matters to you; whether that's climate change, income inequality, reproductive rights or local community investment.

An adviser who invites those conversations will help you create a financial strategy that feels authentic and aligned, instead of one that leaves you second-guessing whether you're compromising your values for returns.

2. Every dollar we spend has a political impact

Whether we like it or not, money is political. Every dollar you earn, invest, donate or spend influences the economy, industries and political policies in ways that either reflect your values or contradict them.

These choices aren't just abstract. They have real-world consequences for the communities we live in and the planet we want to have around for future generations.

A thoughtful financial adviser should help you understand not just where your money is going — specifically, what companies you're investing in — but also what type of direct impact those companies are having on people and the planet.

Here are some prompts you can use to initiate these conversations:

• What specific industries am I invested in, and how do they derive their profits?
• How do the companies I'm invested in stack up in terms of environmental, social, and governance (ESG) metrics, and what sources of data are you using to determine that?
• How do the companies I'm invested in contribute or detract from the United Nations' Sustainable Development Goals (SDGs)?

3. Sacrificing financial returns for ethical alignment is an outdated misconception

Some financial professionals still believe that investing in a way that prioritizes a client's values by excluding certain industries, or using ESG metrics, means sacrificing returns. That is simply not true.

In fact, companies focused on addressing the world's most urgent challenges by prioritizing people, planet and integrity are better positioned to benefit from rising consumer demand as climate change, geopolitical instability, population growth and resource scarcity intensify.

Furthermore, according to a 2025 report by Morgan Stanley, nearly 80% of global investors stated they are likely to choose a financial adviser based on sustainable investment offerings.

This reflects a broader shift toward aligning financial goals with personal values, proving that impact investing is not just a trend, but a lasting shift in how people view wealth.

A skilled, values-aligned adviser can help you invest in companies whose businesses yield both profit and purpose. It's not about choosing between doing well and doing good. It's about doing both.

Finding the right fit

It is completely appropriate to ask your financial adviser if your investments are aligned with specific values that are important to you.

If you get pushback or are sidestepped by phrases like, "You should ignore politics completely when investing," or "I can put you in an ESG mutual fund," with no further discussion about how those funds align specifically with certain issues or themes, you may want to consider whether this adviser is the right fit for you.

Do not be discouraged. There are financial advisers who are not only open to these conversations but who see them as essential to good financial planning.

You can start your search at valuesadviser.org, a directory of professionals who understand that your portfolio reflects your principles and vision for the future.

Money is powerful. When you bring your whole self — your values, your politics and your purpose — to the conversation, you give that power direction. And a good financial adviser should be right there with you, helping to turn that direction into a plan that truly fits who you are.

At the end of the day, sharing your political views with your financial adviser isn't risky. It's responsible.

Related Content

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• What Is ESG Investing and Is It Right for You?
• Scared About Climate Change? Change the Way You Invest
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• I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your Dollars

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When Americans move abroad, their financial lives become significantly more complex. From navigating foreign tax systems to understanding how U.S. retirement accounts are treated overseas, the stakes rise even as the margin for error narrows.

That's why choosing the right cross-border financial planner is so important. High-earning and high-net-worth U.S. taxpayers must find someone who understands the full scope of cross-border financial planning and is committed to a long-term relationship.

A brief review: Types of financial planners

When we talk about different "types" of financial planners, they can be differentiated across three spectrums:

For Americans living in the U.S., these distinctions help guide their choice of professional financial planning service. But for those moving abroad, the meaning of these categories takes on new importance.

Why cross-border planning changes everything

Let's say you're working with a U.S.-based investment manager who doesn't offer planning services. That might work fine while you're stateside; many people feel more comfortable steering their own financial planning ship and personally checking that their compass is pointing due north.

But moving abroad without the support of cross-border expertise to guide the revision and implementation of your financial planning framework can lead to costly mistakes.

Take France, for example. It's often considered one of the "easier" Western European countries for Americans to retire to, thanks to a favorable tax treaty and a relatively straightforward long-stay visitor visa.

But even there, there are common tripwires. One of the most overlooked is the cotisation subsidiaire maladie, more commonly known as the PUMa tax.

The PUMa tax was introduced to help fund France's universal health care system and applies to residents who receive significant passive income, such as dividends, rental income or investment gains, but have little or no earned income.
Here's how it works:

• If your earned income is below 20% of the French social security threshold (PASS), which is €9,273.60 in 2024 (the most recent tax year), and
• Your passive income exceeds 50% of the PASS, or €23,184 in 2024, then
• You may be subject to a 6.5% tax on the portion of your passive income above that threshold.

This tax does not apply if you receive replacement income such as pensions, disability payments or unemployment benefits.

It also doesn't apply if your spouse or civil partnership (PACS) partner earns above the threshold or receives qualifying replacement income.

The formula used to calculate the tax is nuanced, adjusting the rate based on how much earned income you have.

For example, Jean and Marie, both U.S. citizens, move to France and become French tax residents. They draw no earned income in France (well below the €9,273 threshold for 2024) and instead live off €120,000 of U.S. investment dividends.

Because their passive income easily exceeds the €23,184 "50% of PASS" threshold for 2024 and their earned income is minimal, they could face about €6,375 in tax (6.5% of the amount above €23,184) — a surprise many couples who retire abroad don't budget for.

This example illustrates a broader point: Even in jurisdictions considered expat-friendly, the financial landscape requires U.S. financial planners to have a certain familiarity with the local system in order to offer the highest-quality service.

Without a planner who understands both U.S. and local systems, you may be exposed to unexpected liabilities that at best are vaguely annoying, but at worst could derail your retirement plans.

The value of holistic financial planning for expats

When you take a holistic approach to cross-border financial planning, you're able to integrate the following when building a cross-border financial plan:

• Thoughtful relationship-building time in the initial meetings
• Tax planning across jurisdictions, i.e., cross-border tax planning
• Visa and immigration considerations
• Estate planning under foreign laws
• Currency and banking logistics
• Retirement account treatment abroad

A holistic approach ultimately allows the planner to structure the client's portfolio in a way that avoids triggering unexpected taxes or compliance issues.

And, depending on where your cross-border planner is based, they may be equipped to help you navigate the cultural and bureaucratic differences that come with living in another country.

Common pitfalls

1. Continuing with a U.S.-based planner without cross-border experience

Americans understandably want to maintain their existing financial planning relationships when they move abroad.

But, as Arielle Tucker, CFP® and founder of Connected Financial Planning, notes, "Unless your planner has experience with cross-border clients, and ideally specializes in your destination country, they may not be equipped to serve you effectively."

2. Working with EU advisory firms

On the other hand, some expats choose to work with a foreign firm, thinking that working with a local firm in their adopted country is a logical or even savvy financial move. However, this can present challenges.

"Foreign firms typically have higher fees and transaction costs than the U.S., and foreign mutual funds and ETFs are considered PFICs (Passive Foreign Investment Companies for American investors," says Ricardo Jesus, financial adviser at Liberty Atlantic Advisors (also an Adviser Intel contributor).

"This causes additional reporting and tax complications. Plus, client service expectations differ radically between the U.S. and Europe. As an example, execution timelines are often much slower."

Final thoughts

Candidly, moving abroad can feel like you've turned your life upside down and changed the operating language. So, it's completely understandable to seek familiarity among the chaos.

But, speaking as someone who has moved to different countries nearly half a dozen times, I can attest that prioritizing familiarity can come at the expense of long-term stability, particularly when we're talking about financial planning.

Moving abroad is a major life change, and your financial plan needs to reflect that. That said, it doesn't need to be an overwhelmingly frightening change.

Working with a cross-border planner or firm that takes a holistic approach outsources the challenging task of finding the optimal financial through-line in your life abroad, allowing you to be fully present in the new day-to-day of living your life abroad.

Related Content

• I'm a Cross-Border Financial Adviser: 5 Things I Wish Americans Knew About Taxes Before Moving to Portugal
• How to Manage Retirement Savings When Living Abroad
• Where to Retire: Living in the Dominican Republic
• Want to Move to Portugal? What to Consider Financially
• The Pros and Cons of Retiring Abroad

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you're a high-income investor, your brokerage account could be quietly working against you.

Mutual funds, long considered a cornerstone of diversified investing, can trigger surprise tax bills that eat away at returns. The reason lies not in your investment performance, but in the structure of the funds themselves.

The problem: A tax bill you can't control

When you own a mutual fund, your money is pooled with the funds of thousands of other investors. The fund manager actively buys and sells stocks or bonds within that pool. When appreciated securities are sold, those gains must be distributed to shareholders each year under federal law.

That sounds straightforward until you realize two major drawbacks:

No control over timing. The manager's sales decisions are driven by portfolio strategy and redemptions, not your personal tax situation. You can end up realizing gains even when you didn't sell anything.

"Phantom" gains. You can owe taxes even if your fund's value drops. If the manager sells appreciated holdings to meet redemptions, those gains are still passed to remaining investors.

In short, you're paying for someone else's selling decisions and possibly paying taxes on income you never pocketed.

A painful lesson from 2022

This dynamic became painfully clear in 2022, when the S&P 500 fell nearly 20%. Many investors saw their portfolios lose value, yet still received capital-gain distributions.

Actively managed funds had to sell appreciated positions to meet investor withdrawals during the downturn.

Consider the Growth Fund of America (AGTHX). It lost roughly 25% in 2022 but still distributed $3.71 per share in long-term capital gains that December.

Investors were hit twice: a shrinking portfolio and a tax bill on "phantom" gains.

The triple drag: Loads, taxes and fees

Let's break down the hidden costs with a real-world example from The Growth Fund of America®.

• Front-end load. Class A shares charge up to 5.75%. A $100,000 investment could lose $5,750 before the money even hits the market.
• Tax drag. In December 2024, the fund distributed $1.15 per share in dividends and $6.38 in long-term capital gains. For a high-income taxpayer, that could mean roughly $1,900 in federal taxes, according to IRS Publication 550 and Topic No. 559 (net investment income tax).
• Expense ratio. The annual 0.61% fee equals $610 on $100,000.

Combined, the first-year headwind can be staggering. Add the $1,900 tax and $610 fee to the $5,750 sales charge, and your $100,000 investment effectively starts 8.25% behind.

Smarter, tax-efficient alternatives

High-income investors don't have to accept this structural disadvantage. More efficient tools can help reduce taxable drag and improve after-tax returns.

Exchange-traded funds (ETFs). ETFs generally avoid distributing capital gains because of their in-kind redemption mechanism. That structure allows managers to swap appreciated securities out of the fund without triggering taxable events.

Combined with typically lower expense ratios, ETFs are often the better choice for taxable accounts.

Separately managed accounts (SMAs). An SMA gives you direct ownership of the underlying securities. That ownership allows for individualized tax-loss harvesting, which can offset gains elsewhere in your portfolio.

For investors with significant assets and complex tax situations, this added flexibility can be valuable.

Direct indexing. Direct indexing takes tax efficiency a step further. Instead of buying a single fund, you hold the actual stocks of an index. Your adviser or manager can harvest losses from specific positions while keeping overall exposure aligned with the benchmark.

This granular control can meaningfully reduce taxable income over time.

The bigger idea: Asset location matters

Tax efficiency isn't just about what you own, it's about where you own it. Growth-oriented or high-turnover funds belong in tax-advantaged accounts, such as IRAs or 401(k)s.

Your taxable brokerage account should be designed with low-turnover, tax-efficient investments.

This concept, known as asset location, can make a measurable difference. Studies consistently show that thoughtful asset location can boost after-tax returns by 0.5% to 1% per year, a compounding advantage that grows over decades.

The bottom line

If your taxable accounts are filled with actively managed mutual funds, you might be losing money to taxes you can't control. ETFs, SMAs and direct indexing can give you back that control while improving efficiency.

Your portfolio isn't just a collection of investments; it's a financial ecosystem that must work together across account types. By being intentional about structure and location, you can stop the silent erosion and keep more of what you earn working toward your future.

Josh Taffer is a Founding Partner and Wealth Advisor of Journey Wealth Strategies and is an investment adviser representative of Signal Advisors Wealth, LLC ("Signal Wealth"), a Registered Investment Adviser with the U.S. Securities & Exchange Commission.

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• Which Capital Gains Are Taxable and How to Calculate Your Tax
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• The Easiest Asset Allocation Rule
• Five Tax Strategies to Preserve Your Retirement Savings

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Whether it's fatigue due to the ongoing political maelstrom, lifestyle aspirations or a desire to invest in euros, the motivations are understandable. But the financial implications of moving from the U.S. to Portugal are often misunderstood.

As a cross-border financial adviser who's lived and worked in both the U.S. and Portugal, I've seen firsthand how complex this transition can be.

Here are five things I wish every American knew before moving to Portugal.

1. Even if you're living in Portugal, you're still a U.S. taxpayer

Fortunately, this one is becoming an increasingly "obvious" fact to point out thanks to the increase in resources available to Americans researching a move abroad.

That said, it's always worth noting because there are still plenty of Americans who assume that once they leave the U.S., they leave their tax obligations behind, which isn't the case.

Unlike nearly every other country in the world, the U.S. applies a citizenship-based taxation model, meaning that U.S. expats are subject to tax on worldwide income, regardless of where they live.

U.S. expat tax provisions do offer some relief. While the foreign earned income exclusion (FEIE) is often touted as a tax-saving strategy, it's most beneficial in countries with lower tax rates than the U.S.

Since Portugal ended its non-habitual residence (NHR) scheme, Portuguese tax rates easily exceed those in the U.S., often making the Foreign Tax Credit (FTC) a more strategic choice.

Navigating which to use — FEIE or FTC — requires careful planning and often depends on your residency status, income type and long-term goals.

Also, don't confuse the FEIE threshold or standard deduction with exemption from U.S. tax filing. Filing can unlock benefits like credits and deductions, and it's essential for maintaining compliance, especially if you may return to the U.S. or inherit assets.

2. Beware of costly missteps involving foreign funds and PFICs

One of the most common — and costly — mistakes Americans make after moving to Portugal is investing in local mutual funds or ETFs.

These are often classified as Passive Foreign Investment Companies (PFICs) under U.S. tax law, which subjects them to punitive taxation and complex reporting requirements.

It takes practice to reframe the assumption that all ETFs and mutual funds are good for your portfolio. In this case, foreign ones can be financially unhealthy.

The IRS treats PFICs harshly, and the paperwork alone can be overwhelming.

If you're planning to move to Portugal with U.S.-based investments, consulting a cross-border adviser is essential, particularly where significant wealth management is concerned, and ongoing financial planning that takes into account your new cross-border context may be required.

3. Investing in euros isn't necessarily the best money move

Many Americans want to invest in euros to diversify or hedge against the dollar. And this is a perfectly understandable instinct given the economic volatility the U.S. has experienced (and wrought at a global scale) this year.

But it's not as simple as opening a Portuguese brokerage account. You'll need a U.S. address to buy U.S. mutual funds, and European platforms often come with higher fees and limited transparency.

While savings account rates in Portugal hover around 1.6% for standard retail deposits, even Portugal's best term-deposit or niche offers (typically less than 3.0% for one-year terms) still fall well short of top U.S. high-yield accounts, many of which exceed 4.0% APY.

In short, yes, Portugal offers stable and safe options, but there's nothing that truly rivals the highest U.S. yields.

Moreover, client service in Portugal is markedly different compared to what Americans are used to. Bureaucracy and red tape can slow down even basic transactions.

There's also a saturation of services targeting Americans, many of which assume Americans are wealthy enough to absorb financial losses — I know firsthand this is not necessarily the case.

This misunderstanding does a disservice to the growing number of middle-class Americans moving abroad for affordability and quality of life.

4. Portugal's tax landscape is rapidly shifting

Portugal's popular NHR regime has officially ended.

In its place is the Tax Incentive for Scientific Research and Innovation (Incentivo Fiscal à Investigação Científica e Inovação (IFICI), which offers limited benefits and applies only to specific professional categories.

As a result, many Americans are reconsidering Portugal in favor of countries like France and Italy, where long-term planning is more straightforward.

If you're still set on Portugal, proactive planning is more important than ever.

5. U.S. investments can be a stabilizing anchor

Political instability is a common reason Americans cite for leaving the U.S. But while emotions may drive the move, the factors that shape the decisions you make about your portfolio should be grounded in data.

Historically, the U.S. stock market has delivered strong annualized returns, even through periods of volatility. European markets have shown more variability in recent years, especially in southern economies.

Maintaining U.S.-based investments can provide regulatory clarity, familiar structures and a stabilizing anchor in uncertain times.

Conclusion

Moving to Portugal can be a beautiful life change. But financially, it's not a clean break for Americans, as much as they may be moving for the mental relief of living somewhere new and foreign.

As someone who's lived and invested in both countries, I recommend maintaining your money in the U.S. and building a cross-border strategy that can encompass the scope of your financial goals — not just your geography.

Related Content

• How to Manage Retirement Savings When Living Abroad
• Where to Retire: Living in the Dominican Republic
• Want to Move to Portugal? What to Consider Financially
• The Pros and Cons of Retiring Abroad
• Want to Retire Abroad? Five Things to Know About Your Money

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

We work with families who have $1 million or more saved — we call them Midwestern Millionaires. They're the kind of people who pack their lunch, pay off their home and try to do things the right way.

For those who have spent decades saving, serving and doing the right thing, sending painful amounts of money to Uncle Sam to pay taxes can feel downright unfair.

When you have a high income and a high net worth in retirement, then taxes will likely be your greatest expense.

Tax avoidance, not evasion

I get it. One of our clients, Jeannie, looked me straight in the eye during our first meeting and said, "Joe, there's one thing you need to know about me — I hate taxes." That moment inspired my bestselling book I Hate Taxes (request a free copy here).

And, honestly, she's right. You shouldn't feel bad about wanting to keep as much as you can of what you earned through all your years of hard work.

Let's be clear: I'm not talking about breaking the rules. I'm talking about using them to your advantage.

As Judge Learned Hand famously said, "Anyone may arrange his affairs so that his taxes shall be as low as possible ... There is nothing sinister in so arranging affairs as to keep taxes as low as possible."

That is exactly what smart tax planning is about: paying your fair share, but not a penny more — and not tipping Uncle Sam.

The IRS has a plan for you. Do you have a plan for you?

Here is the truth most retirees don't realize: You already have a tax plan — it's set out for you by the IRS.

If you don't take control of how and when you pay taxes, the government will happily make that decision for you by imposing required minimum distributions (RMDs).

Creating your own retirement tax plan now can allow you to decide when and how much to pay in taxes.

Plus, you can structure your retirement income so more goes into your pocket and less goes into Uncle Sam's.

Taxes are on sale — for now

Current tax rates are among the lowest in U.S. history. The top tax rate today is 37%. In the 1980s, it was 70%. And in the 1940s, the highest tax rate was 94%!

When clients ask me, "Joe, when's the best time to plan for taxes?" my answer is simple: right now.

If taxes were going to double over the next 10 years, would you do something today? Of course. And with our national debt now over $38 trillion, that future isn't hard to imagine.

That's why I say taxes are currently on sale, and like most sales, this one may not last forever.

When you shop at the grocery store, you check prices before putting items in your cart. But with tax-deferred accounts, most Americans are shopping blind.

Every time you add money to your 401(k) or traditional IRA, you're agreeing to pay taxes later, but you don't know how much "later" will cost.

Would you invest in something if you didn't know the price? Of course not, and that's why understanding your future tax liability is so crucial.

Now, as I always say, the tax code is written in pencil, which is why we must proactively plan for what we call tax diversification.

Three tax buckets

We teach our clients to think of their savings as being in three buckets:

• Taxable bucket. Checking, savings, brokerage accounts
• Tax-deferred bucket (Uncle Sam is the joint owner of this one). 401(k)s, IRAs, TSPs, 457s, 403(b)s
• Tax-free bucket. Roth IRAs, Roth 401(k)s, HSAs

Here is the goal: to move money from the "tax later" category to "tax never." I always ask, if we had a magic wand, which bucket would we want our money in? The tax-free one, of course.

Unfortunately, most people have the majority of their wealth in tax-deferred investments. So, typically, what they do is contribute to a Roth from their taxable bucket.

Or they look at doing Roth conversions by moving a portion of their tax-deferred bucket to the tax-free bucket and paying taxes now while they are lower.

You can't take it with you

You've worked hard, you've saved, you've done everything right … Now it is time to ask yourself, What is all of this for?

I tell people all the time that there will be no U-Haul hitched to your hearse. You can spend your money, give it to your family, give it to charity … or give it to Uncle Sam.

If your retirement plan is structured properly, you can live comfortably, give generously and still leave a lasting legacy without giving the IRS a tip on your way out.

Smart tax planning

The IRS is very good at making taxes complex, but your strategy doesn't have to be.

With tactical and intentional planning strategies — using Roth conversions, charitable giving, income diversification and more — you can cut your tax bill, strengthen your retirement and put more of your money toward what truly matters.

At Peak Retirement Planning, we believe that every dollar you save in taxes is another dollar that can serve your family, your community and your legacy.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

While this advice is well-intended and generally useful, it turns out that following this advice blindly can sometimes make things worse than if you had done nothing at all.

Let's start with that last point about avoiding probate. Many people have heard horror stories about probate, and consequently they want to do everything they can to enable their estates to avoid it.

There are multiple ways to try to accomplish this, from establishing trusts to setting up payable-on-death (aka transfer-on-death) accounts and more.

Small estates already protected

Before bothering with any of these avoidance maneuvers, however, you should be aware that "small" estates don't need to go through probate in the first place.

Almost every state has laws that allow certain estates to bypass or at least greatly simplify probate … and the definition of "small" can be quite generous.

For example, California estates worth less than $208,850 in 2025 don't have to go through court at all (and assets like vehicles and IRAs with named beneficiaries don't even count against this limit). You can visit EstateExec.com for details by state.

Overdoing automatic transfers

If an estate doesn't qualify as "small," some people attempt to bypass probate by putting everything into assets that transfer automatically on death … but overdoing this process can leave a real mess for the survivors.

For example, if everything automatically transfers, what will be left to pay your final bills (medical, credit cards, funeral expenses and more)?

Automatically transferring everything will effectively make your estate insolvent, enabling your creditors to sue the recipients of your transfers, and leaving a real headache for the person responsible for finalizing your affairs.

One approach to handling this is to leave some of the money in accounts that don't automatically transfer … but if you leave too much, then probate will be triggered anyway.

Be careful here: While California's limit is over $200,000, South Carolina's equivalent limit is only $25,000.

Another thing to consider is that assets change in value over time, so while you may equitably set things up so one child gets a bank account that's payable on death and another gets your stock portfolio, by the time you eventually pass away, those could be at very different values.

This could result in unwanted discrepancies between the amount each person inherits.

If there are only a couple of heirs, you could list them at their desired percentages for every account, but if you have more people you want to inherit, or there are specific bequests involved, it can get a little messy.

Trust mistakes

Rather than using payable-on-death or transfer-on-death accounts, some people try to avoid probate by way of a trust.

One common misunderstanding involves a "testamentary trust," in which the will establishes a trust upon the decedent's death.

While there may be valid reasons to set up such a trust (for example, to provide for the care of a minor), you should be aware that these trusts are officially funded with assets after those assets have gone through probate … and thus don't avoid probate at all.

Another area of misunderstanding that can lead to costly mistakes concerns cost basis. When you sell an asset, you typically owe taxes on any gains you make if the selling price exceeds the original cost of the item.

So if you bought a house for $250,000 and sell it for $600,000, you will owe taxes on the $350,000 gain.

However, the U.S. tax code gives heirs a break on this tax: Many assets enjoy an automatic step-up in cost basis upon death, so if your mother bought the house, and it was worth $600,000 at the time of her death, the house would be assigned a new cost basis of $600,000.

You could turn around and sell the house for $600,000 with no taxes owed!

Unless the house had been placed in an irrevocable trust … in which case there would be no automatic cost basis step-up, and thus taxes would be due on the full $350,000 gain.

You can see how things would likely have been much better for their heirs if nothing at all had been done, and they had simply inherited the house according to normal probate processes.

Revocable trusts do generally benefit from a cost basis step-up at the time of death, and can be quite helpful — but they have their own gotchas, and in any case, you'll want to be sure that some provision has been made to pay your debts at the time of death (even if they're just your latest credit card charges), along with sufficient funds to keep everything maintained while your estate is settled and everything resolved.

The will

Of course, if you put everything (or almost everything) into assets that bypass probate, then your will won't really matter, because the will only affects things that don't automatically transfer (i.e., things subject to probate). Maybe that's OK, but it's something to take into consideration.

If not, everything will bypass probate, then a will can be quite important, especially if you have strong ideas about what you want done with your estate upon your death.

Perhaps you want to make a large charitable donation, perhaps you have certain belongings you wish to go to certain people, or perhaps you simply want to ensure that a friend or distant relative inherits a share of your estate (or that a close relation doesn't!).

However, if you're not careful, you can end up with a flawed will that can be challenged and overturned in court. Without very careful wording, for example, it can be difficult to "cut someone out of your will."

For example, many states have laws that protect a surviving spouse from such situations, and upon request from such a spouse, the court will simply overrule your will. In another example, a child of a Louisiana decedent is usually entitled to a significant portion of the estate, regardless of almost anything the will may say.

For these reasons, if you intend to do anything "unusual" in your will, it makes sense to have an experienced lawyer help you draft it. And then be sure an interested party will have access to the will upon your death … it doesn't do any good to have a will if no one can find it when the time comes.

Intestate estates

On the other hand, if you're not going to do anything unusual in your will, you may wonder why you should even bother in the first place.

After all, every state has laws that require your estate to go to your closest relations (i.e., spouse, children, etc.) if there is no will, and no one should feel slighted if the estate goes to the "normal" distribution percentages.

In fact, settling an estate can be even easier without a will. If there is no will, no one needs to prove that the signature on the will was yours, and that you were in your sound mind and not under duress when you signed it.

If there is no will, distributions can be made directly to the "heirs-at-law" (your closest relations as defined by law), but if there is a will, the heirs-at-law must be officially notified so they have a chance to contest the will. And so on.

Lawyers generally cringe when they hear someone saying that settling an estate can be easier without a will, because it's just accepted wisdom that everyone should have a will.

We're certainly not recommending that you avoid writing a will. If you care about the outcome, it's probably a good thing to do.

We're just pointing out that, like everything in life, there are pros and cons, and you should decide what's best for you … and that for better or worse, the majority of people opt not to bother in the end.

Estate planning vs estate settlement

While all aspects of estate planning are optional, estate settlement (the process of winding up the decedent's affairs) is mandatory.

And no matter what plans have been made, there are still myriad things that must be done after the death, even if everything has been set to transfer "automatically" (for example, various federal and local agencies must be notified, the residence must be cleaned out, debts resolved and more).

If your goal is to make things easy on your surviving family, one other thing to consider is estate settlement preparation, which doesn't involve legal documents or anything formal: just pulling together some basic information like a list of major assets, the location of keys, how to contact the heirs, etc.

Although often overlooked, settlement preparation is probably the easiest aspect of estate planning. Even something as simple as a list of financial accounts can transform the settlement process from a complex investigation into a straightforward task.

You can just list things in a basic spreadsheet, you can use a purpose-built product like The NokBox, or you can even use something like EstateExec, which will also automatically guide your executor through the settlement when the time comes. (Note: I am the founder and CEO of EstateExec.)

Summary

Traditional estate planning can be helpful, especially for larger estates, but it can also backfire, so if you are going to engage in it, it is best to get advice and help from an experienced professional.

And if the estate is on the smaller side, one of the most important things you can do is to ensure your executor will have some basic information about your estate when the time comes.

Related Content

• Simple Ways to Make Your Executor's Job Less of a Pain
• Probate: The Terrible, Horrible, No Good, Very Bad Side of Estate Planning
• Protect Your Family's Future: Avoid These 12 Common Estate Planning Mistakes
• An Expert's Guide to the Estate Planning Documents Everyone Needs
• Estate Planning Checklist: 13 Smart Moves

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

1. Annual limits on Roth IRA contributions

Question: I am thinking of doing a Roth IRA conversion for 2025, but my income is above the limit for making annual Roth IRA contributions. Can I still do a conversion?

Joy Taylor: Yes. Although there are income limitations for making regular, annual contributions to Roth IRAs, those income limitations do not apply to Roth conversions. Even if you cannot make an annual $7,000 ($8,000 for people 50 and older) Roth IRA contribution for 2025 because your income is too high, you can still transfer money from your traditional IRA to your Roth IRA in a Roth conversion. There is no limit on the amount of funds you can convert.

2. Taking the annual RMD and married couples

Question: I am 74 years old. I understand that if I want to transfer some funds from my traditional IRA to my Roth IRA in a Roth conversion, I must first take my total aggregate annual required minimum distribution (RMD) from my traditional IRA before I do the Roth conversion. My husband and I file joint tax returns, and he also has a traditional IRA. Does he have to take his full annual RMD before I can do a Roth conversion for the year?

Joy Taylor: Traditional IRA owners who are 73 and older must take annual RMDs. People of RMD age who are considering a Roth IRA conversion must first take their full annual RMD for the year before doing the conversion.

Since IRAs are individual accounts, only you must take your full required RMD for the year before converting any part of your traditional IRA into a Roth IRA. It’s OK if your husband waits until later in the year to take his annual RMD from his traditional IRA. That won’t have any impact on your Roth conversion for the year.

3. Rollover IRAs and Roth Conversions

Question: I am 63 and retired, and I want to do Roth conversions over the coming years. I have an existing Roth IRA. I also have a rollover IRA to which I had previously rolled over all the funds in my 401(k) account shortly after I retired. Can I do Roth conversions from my rollover IRA to my Roth IRA, or do I have to convert my rollover IRA to a traditional IRA first and then do the conversions?

Joy Taylor: You can do a Roth conversion from a rollover IRA to a Roth IRA. The income tax consequences should be the same as doing a Roth conversion from a traditional IRA.

4. SIMPLE IRA and SEP IRA

Question: Can a Roth IRA conversion be done from a SIMPLE IRA or SEP IRA?

Joy Taylor: Yes, you can transfer funds from a SIMPLE IRA or a SEP IRA to a Roth IRA, and the tax consequences should be the same as if you did the Roth IRA conversion from a traditional IRA.

5. Converting entire traditional IRA vs. a portion

Question: Can I transfer only a portion of my traditional IRA to a Roth IRA in a Roth conversion, or must I transfer all my traditional IRA funds in one swoop?

Joy Taylor: In a Roth conversion, you can convert all or a portion of your traditional IRA to the Roth. And in fact, many personal finance professionals advise to space out the Roth conversions by converting a portion of their traditional IRA each year. That way, you minimize the income tax impact on each conversion, thereby allowing you to manage your adjusted gross income (AGI) or modified AGI in the conversion years. This helps if you are of Medicare age and are trying to avoid Parts B and D Medicare premium surcharges on top of your regular monthly premiums. It also helps if you are trying to qualify for tax deductions or credits that have AGI phaseouts.

There are many factors to consider before doing a Roth conversion. I would suggest you talk with your IRA custodian or other personal finance professional before making any moves.

6. Five-year rules for Roth IRAs

Question: I know there is a five-year rule for withdrawing money tax-free from a Roth IRA. Can you explain the rule? When does the five-year rule start?

Answer: There are actually two five-year rules that apply to Roth IRAs. The first applies to Roth IRA contributions, including rollovers and conversions, and whether distributed earnings are tax-free to you. Under this rule, distributions of earnings after age 59½ aren’t taxed if at least five tax years have passed since the owner first contributed to a Roth IRA.

For this first five-year rule, the five-year clock starts the first time that money is deposited into any Roth IRA that you own, through either a contribution or a conversion from a traditional IRA. The clock doesn’t start for later Roth contributions, conversions or for newly opened Roth IRA accounts.

The second five-year rule applies specifically to Roth IRA conversions, and whether the 10% early distribution penalty hits pre-age-59½ payouts. This rule is an anti-abuse rule to prevent people who are younger than 59½ from circumventing the early IRA withdrawal penalty by first doing a Roth conversion and soon thereafter taking the money out of the Roth IRA. That’s because the 10% early withdrawal penalty doesn’t hit Roth IRA conversions.

This second five-year rule doesn’t apply to new contributions to Roth IRAs, but to conversions of pre-tax income from traditional IRAs to Roths. Under this rule, if someone who is younger than 59½ does a Roth conversion, and later takes a distribution within five years of the conversion and before turning 59½, then the amount of conversion principal that is withdrawn is hit with the 10% penalty. Once you turn 59½, you needn’t worry, even if you take a payout before your conversion meets the five-year period.

Under this second five-year rule, each conversion has its own separate five-year period, which differs from the first five-year rule discussed above. For instance, if you do multiple Roth IRA conversions, there will be multiple five-year time periods, even if each conversion is done into the same Roth IRA account that you have owned for years.

For more information on the two Roth IRA five-year rules, see what to know about the five-year rules for Roth IRAs.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: QCDs and Tax Planning
• Ask the Editor: Questions on Inherited IRAs
• Ask the Editor: Questions on the $6,000 Senior Deduction

High-net-worth donors must contend with stipulations coming into effect on January 1, 2026:

New floor on deductions for itemizers. Philanthropic donations at or below 0.5% of a filer's adjusted gross income will not provide any deductions.

Cap on deductions for top tax bracket. The deduction value of itemized charitable donations will be capped at 35% for filers in the 37% tax bracket (the highest).

New universal charitable deduction for nonitemizers. Tax filers who don't itemize their charitable deductions will be subject to a universal deduction amount — up to $1,000 for single individuals and up to $2,000 for married couples.

This universal deduction does not apply to contributions made to donor-advised funds (DAFs) or private foundations. To receive this new deduction, the gift must be made with cash; donations of appreciated securities will not trigger this new deduction.

Unused deductions are subject to new floors and caps. Charitable deductions that weren't applied to tax returns might still be carried forward to the next year's filing, but any donations carried over into 2026 or later are also subject to the above new floor and caps.

What do these new rules ultimately mean? After the New Year, smaller or routine philanthropic donations might not be able to contribute nearly as much in tax deductions — or will contribute nothing in deductions.

Further, affluent donors who make sizable donations will reap considerably less in tax advantages.

That makes year-end charitable giving and tax planning before 2025 runs out more urgent than ever. For the remainder of the year, taxpayers can consider certain strategic moves that can potentially maximize the tax deductions on charitable gifts made in 2025:

Consolidate multiyear gifts into 2025 filings. Instead of spreading multiyear philanthropic gifts over time, their full amounts should be filed for the 2025 tax year.

That way, the deductions on multiyear gifts won't be affected by the new rules going into effect on January 1.

Prefund multiyear gifts into a donor-advised fund now. Setting up a DAF before 2025 runs out to prefund charitable gifts can also ensure any potential deductions can fall under the 2025 deduction rules.

Keep an eye on adjusted gross income. Since the 0.5% deduction floor is tied to a filer's adjusted gross income, taxpayers need to keep that in mind as they plan charitable gifts going forward.

Business sales and other events which can decrease or increase adjusted gross income will also affect the deduction potential of charitable donations made in years in which that income is either lower or higher.

The window from now through December 31, 2025, grants taxpayers a crucial period for reviewing year-end charitable giving planning ahead of the OBBB's charitable deduction stipulations.

The new rules with regard to deductions will change the potential tax benefit derived from large, ongoing donations to philanthropic causes.

Planning now can help lock in deductions on multiyear gifts under the current calculations, and also potentially optimize deductions on donations made in future tax years.

Related Content

• How Charitable Donations Can Reduce Your Taxes
• 3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025
• Five Ways to Adapt Your Charitable Giving Strategy in a Changing World: An Expert Guide
• How to Choose the Best Charities to Donate To
• Three Factors Sabotaging Your Long-Term Investment Strategy

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

There's about to be a period in which the largest wealth transfer in history takes place, called the Great Wealth Transfer.

By 2048, an estimated $124 trillion, according to Cerulli Associates, is expected to be passed down from Boomers to younger generations.

How do you deal with assets that high when transferring them to heirs and receiving them as an heir?

It's a complex situation in which there's no cookie-cutter approach, but there are things to know about transferring wealth that could help you understand how to best position yourself to receive that money, how it could affect your financial situation and, ultimately, how to weave it into your financial plan.

How to approach the transfer of ownership of assets

The reality is that not everyone wants their children to know about their financial situation or their distribution of assets in the same way.

Many of those fears are for good reason. Studies show that 70% of families lose their wealth by the second generation, and an astonishing 90% lose it by the third generation.

A variety of factors can contribute to this, including taxes, frivolous spending and a lack of understanding of how to handle transferred assets.

For example, if you inherit an IRA, you might think you must pay all taxes on the account now instead of stretching it over 10 years, as the rules currently state.

Instead, you can apply strategies to better utilize or combine that money to allow yourself to retire earlier than you thought possible.

In some cases, an effective wealth transfer can even accelerate a retirement timeline. You might be able to strategically use some rules that enable you to liquidate assets to bridge that gap.

For example, let's say you're in a position to retire early at age 54, but you can't touch your 401(k) without penalty until age 59½, whereas if you worked until age 55, you can, thanks to the so-called Rule of 55. If you inherit assets, it could free you to avoid touching those retirement assets.

Take the funds that you're forced to take from an inheritance to bridge the gap until you get to a point where you can access retirement money.

Otherwise, you'd have had to work five more years just to be able to access what you put into a retirement plan. Here are the three steps that can help to see you and your heirs through a transfer of wealth:

Step 1: Know what you're inheriting and what buckets you receive

The first step is knowing what you're inheriting and what buckets you've received. Sometimes when people inherit money, they think they're going to have a huge tax burden.

But most of the time, if you do it strategically, you won't have a lot of taxes due at one time, based on the current rules on a stepped-up cost basis.

If you inherit a home and sell it immediately, there shouldn't be any taxes. The same is true if you inherit a stock portfolio. The tax basis will update to the date-of-death value.

Depending on the process, you can have a bucket in which assets aren't taxable but available to do such things as help you pay off your mortgage, lowering the amount of money you need monthly. This could put you in a window in which retirement is a possibility.

When it comes to retirement, you must think about your cash flow and how you fill that bucket. What's going to be available for emergencies? What kind of growth vehicle am I going to need for inflation? Depending on what you inherit, that could fill a bucket that you don't currently have today.

If it's a situation in which you feel good about your pension and Social Security income but don't have enough flexibility for emergencies, maybe those assets will bridge that gap. You could have a great situation today, but you are worried about longevity. You could position assets for long-term growth potential.

It's about trying to figure out how to weave that strategy into what you're already doing, because we tell people inherited money is a lot like lottery money.

If you don't know you're going to get it or what you plan to do with it, the money tends to disappear very quickly.

Make sure you're strategic to a point, but don't count money before you have it. I think everybody would like their parents to finish well and have enough money for long-term care and other things that could put a dent in the expected inheritance that you get, especially if you're dividing it between siblings.

Never make tactical decisions before you have money, but it's good to make strategic planning choices or have awareness so you're prepared when you do receive assets.

Step 2: Be as efficient as possible

If you want to transfer wealth as efficiently as possible, there are several actionable steps to make sure your assets are accurate and structured according to your preference.

This will ensure as many of your assets go through beneficiary designations as possible and you aren't waiting on a probate timeline, which helps reduce the risk of someone thinking they're entitled to money they aren't.

Have basic estate planning documents in place so you can end your life well, but also make sure anything that doesn't have a beneficiary's name attached to it is dealt with appropriately.

This time is also about education and having conversations with your children so they're not blindsided. Leave your heirs with a plan, not a puzzle. Determine who needs to have a voice in the conversation and who needs to have a vote in the conversation.

If you want to handle the wealth-transfer process right, communication is key with the next generation.

For example, let's say you have three siblings; two are in good financial shape, but the third has hit hard times. Logically, it would make sense to shift more of the estate in their favor.

But if there's no communication and they see the documents, they might think their parents loved that sibling more than them.

People attach a lot of psychology to money decisions, especially later in life. The more communication you have and get buy-in from the kids, the better it will be for everyone. Don't ruin your legacy through a lack of communication.

Step 3: Be strategic in your gifting

In the same way the recipient must be strategic in how they receive money, parents should be strategic in how they give or leave money.

If they're in a position in which they're financially able, they could gift funds annually while still living, passing money to their heirs that doesn't have the same restrictions or taxation.

Remember to think about the tax buckets. For example, suppose half your money is in a house and the other half is in a retirement account. You want half your money to go to charity and the other half to your kids.

In this case, you'd want to gift the house to the kids, because they would get more and the charity would get more if you gift the entire retirement account.

It might sound simple, but if you switch those, the whole estate is going to be smaller and less impactful simply because you didn't gift from the right bucket to the right places. Strategy matters.

This could make Roth conversions more valuable because inherited Roth funds are the only funds you can receive that have a tax-free life after the person who funded the Roth.

Try to use that as motivation to say, "If I know I'm never going to use that money and I want to try and maximize its impact, then maybe it makes sense for me to start paying taxes on this money for the benefit of kids or grandkids to be able to have a tax-free runway."

Some clients I work with recognize the impact of Roth conversions on their situation, but when I ask about their parents, they tell me they're 89 years old, living on Social Security and are forced to take money out every year.

Because of that, their total income is probably not a lot, especially compared with their heirs.

Could it make sense for the parents to convert so that the money the children receive will then be able to grow tax-free during their lifetime and retirement years?

It's easy to get into your upper 80s and not realize how beneficial a Roth conversion is when you're just pulling whatever the government makes you take out since required minimum distributions (RMDs) started for you almost 20 years ago.

It's about being strategic with what you want to have happen and how you can leverage the decisions that you can make today and maximize the impact.

Related Content

• This Is How You Can Guide Your Heirs Through the Great Wealth Transfer
• You've Built Your Wealth, Now Make Sure Your Family Keeps It
• Great Wealth Transfer: How Families Can Get on the Same Page
• Wealth Transfer Is About More Than Just Money
• Six Ways to Make Talking With Family About Estate Planning Easier

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Rather than focusing on luxury or one-time donations, many are channeling their resources into lasting, purpose-driven movements that can shape communities for generations.

One powerful example is Alice L. Walton, the richest woman in the world, who recently opened her own medical school and is covering tuition for its first five graduating classes, as reported by Time magazine.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Walton's $154 million investment in Bentonville, Arkansas, reimagines medical education by focusing on preventive health, holistic wellness and the principle that doctors must learn to heal themselves before they can heal others.

Her vision exemplifies how today's women of wealth are shifting from traditional philanthropy to creating sustainable systems to fund philanthropic gifts into perpetuity.

A strategic and generous model of giving

This new model of giving is not just generous, it's strategic. It's reshaping how ultra-affluent women think about wealth management and legacy.

To facilitate this movement, many are turning to family offices and multifamily offices to help them transform legacy into meaningful impact.

This CFO-type relationship enables women to focus on enabling significant change rather than managing their daily financial complexities.

Women of wealth today expect far more than traditional portfolio oversight. They seek solutions that align wealth with purpose, impact and legacy.

According to HSBC's 2025 report The Giving Shift, 60% of female respondents said financial giving is extremely or very important, prioritizing causes tied to family, health and community over status or prestige.

This values-based approach underscores how women use wealth to strengthen connections and drive measurable impact.

This evolution extends to how women choose their wealth managers.

A 2024 New York Life survey found that 48% of women feel more understood by a female adviser, up from 29% just five years earlier, and nearly half value collaborative, educational relationships.

They're not seeking transactions; they're seeking strategic partners.

How the family office model delivers

The family office model delivers this by providing detailed and timely financial analysis to address all the complexities of multigenerational wealth — tax, estate and philanthropy.

This clarity provides the time and ability for these women to pursue their passions.

Unlike traditional firms with standardized offerings, family offices are designed to be nimble to the complexity of clients' entire lives.

The timing of this shift is significant, as the Great Wealth Transfer has begun. Bank of America Institute's Women and Wealth report projected that roughly $54 trillion will pass to surviving spouses, 95% of whom are women.

Concurrently, Deloitte's Global Family Office Report provides insight that there are more than 8,000 single-family offices worldwide, up from approximately 6,000 in 2019. That figure is projected to increase by 75% or exceed 10,000 by the end of the decade.

A powerful truth

Together, these trends reveal a powerful truth: The next generation of female-led wealth is redefining stewardship. For women, that stewardship often centers on three main pillars:

• Wealth preservation and growth
• Family mission
• Next-generation education

The first priority is the security and growth of wealth throughout future generations with proper entity structure and risk management. The family's mission channels resources toward philanthropic causes that support family values and beliefs.

Family wealth counseling prepares children and grandchildren not only to inherit wealth, but to continue the stewardship in perpetuity.

Family offices help support these pillars by turning intention into an actionable plan of execution, helping to ensure a successful outcome of the long-term family strategy.

One example includes coordinating a charitable giving strategy with an income tax event in the same year. Within the Great Wealth Transfer, a significant portion of assets will come from qualified retirement plans.

Non-spouse beneficiaries of these plans are required to take mandatory annual distributions and must fully withdraw all assets within 10 years of the original account owner's passing.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Because these distributions are taxed as ordinary income, working with a family office that understands your entire financial situation is essential. This coordination enables proactive tax bracket management and the use of charitable deductions to offset income, supporting both tax efficiency and the family's broader legacy objectives.

Documentation is critical

Another example is the structure and organization a family office provides when navigating complex, multigenerational strategies — particularly those involving estate exemptions and the transfer of assets to the second and third generations.

Many of these plans evolve over decades, making documentation vital. Tools such as our proprietary Family Legacy Book^® serve as a central record of gifting history, ownership structures and entity relationships.

This living road map ensures that if the matriarch or patriarch passes unexpectedly, the family retains a clear and current financial picture, providing continuity, confidence and peace of mind.

These examples reflect a broader movement among affluent women leveraging wealth with intentionality.

Increasingly, they recognize that family offices don't just preserve capital, they simplify complexity, saving them time and allowing them to focus on what truly matters: health, family purpose, personal passions and family legacy.

Beginning with the end in mind

For women of wealth, the takeaway is clear: Building a lasting legacy begins with the end in mind. Rather than chasing returns, they build the management around meeting their targeted objectives, incorporating investments, trusts, philanthropy and education under one coordinated strategy.

A well-run family office makes this possible, serving as the hub that turns intention into successful outcomes.

Start by defining what you want your wealth to accomplish, whether that's long-term stability, meaningful philanthropy or empowering the next generation with financial confidence. Surround yourself with professionals who listen, educate and collaborate.

True stewardship isn't about managing assets; it's about ensuring your wealth continues to advance family values and the future vision across generations.

Related Content

• Ten Ways Family Offices Can Build Resilience in a Volatile World
• Do You Need a Family Office? Four Signs for the Very Wealthy
• How Women Can Handle Their Growing Wealth Like a Pro
• Financial Planning: Sisters Should Be Doin' It for Themselves
• Melinda French Gates Models Three Strong Lessons for Philanthropists

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Charitable giving should feel just as joyful and natural — but for many households, it's also a moment when good intentions collide with inefficient habits.

The biggest habit that needs a rethink? Donating cash when there are far better options.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This year, with markets up and many investors holding appreciated securities, writing a check could be one of the least efficient ways to support your favorite causes.

The good news: With a little planning, you can stretch your generosity and reduce your tax bill.

Why Americans give — and why it matters now

Americans are remarkably generous people.

Whether it's supporting a food pantry, helping a local family in need or giving through a workplace program, most of us want to help — especially during the holidays.

Giving truly feeds our sense of purpose: The latest Bank of America Study of Philanthropy reports that 87% of affluent donors say charitable giving brings them joy.

But with inflation still squeezing households and many nonprofits seeing higher demand this year, the way you give matters. Advisers are urging clients not just to give — but to give smart.

Donating appreciated securities: The most powerful (and overlooked) tool

For many families, the most effective giving tool is also the simplest: donating appreciated stocks, ETFs, mutual funds, even cryptocurrency — instead of cash. Yet, most people overlook it.

When you donate long-term appreciated assets (held more than a year), you get two benefits at once:

• A charitable deduction for the full market value
• Complete elimination of capital gains tax

That combination is hard to beat.

A real-life example

Say you bought $10,000 worth of a stock 15 years ago that's now worth $50,000.If you sold it, you'd owe capital gains taxes on the $40,000 of growth.

If you donate the shares directly:

• You eliminate the entire $40,000 gain from taxation
• You receive a deduction for the full $50,000
• The charity gets the whole $50,000 — not a reduced after-tax amount

Financial adviser Keith Spencer, founder of Spencer Financial Planning in Spokane, Washington, often walks clients through this exact scenario.

"If the client wants to maintain the position," he says, "they can donate the shares and immediately repurchase them. The reset cost basis may significantly reduce long-term tax liability."

This "resetting" of cost basis is a hidden gem: It starts future gains at a higher level, trimming long-term tax drag in your taxable account.

A great fit for real-world portfolios

Many households already own perfect candidates for gifting:

• Old mutual funds with large gains
• Company stock from long careers
• ETFs bought during early-pandemic dips
• Automatic dividend reinvestment shares
• A handful of big winners in an otherwise diversified account

Even donating $1,000 of appreciated securities can be more efficient than donating $1,000 of cash.

Bonus: It helps rebalance your portfolio

If one stock or sector, such as technology, has grown too large, donating appreciated shares is a painless way to trim an overweight position — without triggering capital gains.

It's the charitable equivalent of replacing that one broken string of holiday lights: a small fix that makes everything else work better.

Meet the donor-advised fund (DAF)

For many families, the easiest way to combine tax benefits, flexibility and long-term planning is a donor-advised fund.

A DAF works like a "giving account" for your charitable life — you contribute now (cash or appreciated securities), take the deduction right away, and recommend grants over time.

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The biggest DAFs are Fidelity Charitable, DAFgiving360 (formerly Schwab Charitable) and Vanguard Charitable.

According to Ted Hart, author of The DAF Revolution, here are the reasons people use DAFs:

• Flexible and strategic. Contribute now, give later and time tax deductions to high-income years.
• Simple, One contribution can support many charities; the sponsor handles verification and paperwork.
• Accessible. Many DAFs have low or no minimums, opening the door to mass-affluent donors.
• Family-friendly. A natural tool for teaching kids and grandkids about giving and values.
• Powerful tax benefits. Immediate deduction plus tax-free growth inside the account.

Who uses DAFs?

With roughly 1.5 million to 2 million accounts in the U.S., DAFs are thriving across:

• Middle-income households
• Mass-affluent families
• Workplace-giving participants
• Corporate teams
• Community and faith-based donors

David Johnston, CFP®, partner and wealth management adviser at One Point BFG Wealth Partners, and based in Flemington, New Jersey, has seen DAFs reshape how families engage with philanthropy.

"DAFs are a very powerful tool for those who want the tax deduction today but also want to control the assets over time," he says. "Some of our clients involve their family in deciding where donations go. It's a great way to teach the values of philanthropy."

Five reasons to donate stock instead of cash

1. Bigger impact, same gift. Your charity receives the full market value — not an after-tax amount.

2. Eliminate capital gains tax. Avoid taxes on appreciated assets you donate directly.

3. Increase your tax deduction. Claim the full fair-market value of the stock or fund.

4. Keep your portfolio healthy. Reduce concentrated positions without triggering taxes.

5. Pair with a DAF for maximum flexibility. Fund your DAF with appreciated shares and give over time — on your schedule.

Why this matters now

The holidays are busy. Between decorating the tree, hosting family, shopping and trying to figure out why last year's wreath looks slightly more lopsided this season, charitable giving can feel rushed.

But a little planning — especially around appreciated assets and DAFs — can turn your holiday generosity into a smarter, more meaningful gift.

The bottom line

Giving generously is part of who we are. But giving smarter helps you support more causes, involve your family in meaningful conversations and reduce your long-term tax burden.

As a retirement coach at RetireMentors, I help clients understand the meaning of money in their lives — and for many retirees, that includes finding the right nonprofits to support, volunteer with, and champion.

Just because you're retired doesn't mean you want to stop giving. Many retirees find themselves wanting to give more, to deepen their impact and to make philanthropy part of their legacy.

With a few simple strategies — such as donating appreciated securities and using a DAF — you can do exactly that.

Related Content

• How the One Big Beautiful Bill Will Change Charitable Giving
• Developing a Charitable Giving Strategy: Where to Begin
• Seven Moves for High-Net-Worth People to Make Before End of 2025, From a Financial Planner
• How Baby Boomers and Gen Xers Are Redefining Retirement Living
• I'm a Retirement Coach: Eight Surprising Signs You're Ready to Retire

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you are in the 2% Club, congratulations! You've done the hard work and saved diligently. And because you've done so, you need a tailored strategy to protect and enjoy the wealth you've earned.

If you are looking for more information beyond this article, then you can request a free copy of my book The 2% Club.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Meet the 2% Club: Midwestern values and millionaire discipline

At Peak Retirement Planning, we call our clients Midwestern Millionaires. This title is not just about geography but also about values.

We work with retired public servants and pension holders all across the country, including teachers, police officers, federal employees, nurses, union workers and people who worked at private or public companies that offered pensions.

They have lived a life of service and want to be the best stewards of their wealth and maximize their retirement.

Most of these Midwestern Millionaires share certain traits, including:

• They're loyal. Many of them stuck with one employer or industry for decades.
• They're disciplined. Most are diligent savers, amassing more than $1 million on even modest earnings.
• They're frugal. They are often the best savers (and sometimes the worst spenders).
• They're hardworking. Many come from middle-class, blue-collar or public service backgrounds.

Being in the 2% Club is a big deal

If your pension pays $50,000 per year over 20 years, that's $1 million in income for retirement, not including adjustments for cost of living. That pension is like having an extra $1 million saved, but many retirees don't realize this because it doesn't appear on a net worth statement.

When you combine your pension with $1 million or more saved (possibly in a TSP, 403(b), 401(k), IRA or other accounts), your financial picture is incredibly strong. You have what many term as "financial freedom." This means you can have even more purpose with your money in retirement.

Many times, this means we must encourage those in the 2% Club to spend or give more money. Despite being in this great situation, without the right strategy, many of our clients say they have one major concern: taxes. (In case you're wondering about my thoughts on taxes, you can request a book I wrote called I Hate Taxes.)

Why tax planning is so important for the 2% Club

We often ask clients, "Have you ever been told you will be in a lower tax bracket in retirement?" They usually laugh when they hear that question.

Due to your pension and large amount saved in investments that haven't been taxed yet, you will likely be in the same or higher tax bracket in retirement.

Knowing taxes will likely be the biggest expense in your retirement means proactive tax planning is more important for someone like you than the rest of the population.

The five pillars of pension planning

To help ensure those of you in the 2% Club do not miss anything, here are the five pillars of pension planning we use for our clients:

Tax planning. This could lead to $100,000-plus in tax savings if done the right way for the 2% Club. Consider strategies such as Roth conversions or a donor-advised fund (DAF) and seek ways to reduce future required minimum distributions (RMDs).

Investment planning. It's crucial for the 2% Club to know where to grow vs protect wealth and how to keep investments tax-efficient. If you have a pension, you could take on more risk if you desire, since you have your pension to fall back on.

Or you could take on less risk since you do not need the highest returns to be successful.

Income planning. Look at ways to maximize your pension retirement paycheck with smart withdrawal strategies from your investments. It is important to consider tax-efficient income planning, not just market volatility.

Also, explore if you should take your pension as a lump sum or if you should sign up for the survivorship option.

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Health care planning. Many in the 2% Club are worried about overpaying for Medicare Part B and D premiums, also known as the income-related monthly adjustment amount (IRMAA).

It is important to proactively plan now to ensure your income does not force you to overpay for health insurance throughout retirement. Understand that you do not get better coverage by paying more for Medicare.

Estate planning. Ensure your legacy is protected and that wealth transfers smoothly. Many in the 2% Club might worry about the "widow's penalty," which forces a surviving spouse to pay nearly double the taxes after a partner passes away.

You also most likely want to pass wealth to your loved ones in the most tax-efficient way.

Are you in the 2% Club?

Many people don't realize how well they have done until they run the numbers. We talk to a lot of people who have worked for 30-plus years, saved steadily and lived modestly.

After talking with our team, they realize they are not only going to be OK, but that they're in a position to give more, spend more and leave behind more than they ever imagined.

Our team recently met with a retired firefighter and his wife, a former school administrator, who were unsure if they could retire comfortably. They told me, "We thought we were doing fine, but we had no idea how much better it could be with the right plan."

Cookie-cutter financial advice might work for the average retiree, but not for the 2% Club.

My recommendation? Work with an adviser who recognizes your unique financial planning situation and deploys strategies that fit your life.

Related Content

• Are You a 'Midwestern Millionaire'? Four Retirement Strategies
• Five Opportunities if You're in the 2% Club in Retirement
• Here's Why You Shouldn't Put All Your Money Into Roth IRAs
• Thanks to the OBBB, Now Could Be the Best Tax-Planning Window We've Had: 12 Things You Should Know
• The $1 Million Retirement Question: Are You Being Tax-Smart About Your Pension?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

This article clarifies the nuances of the earnings test, its implications on benefit amounts and how to navigate it effectively.

Earnings test fundamentals

The retirement earnings test (RET or earnings test) applies to Social Security beneficiaries who:

• Have not yet reached their full retirement age, and
• Receive Social Security retirement, spousal or survivor benefits and
• Continue to work and earn income above specific earnings thresholds

Once beneficiaries have reached their month of full retirement age (FRA), the earnings test no longer applies.

It's important to note that the amounts withheld are not lost. Once an individual reaches FRA, all withheld amounts are calculated and converted to the equivalent number of months withheld.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Benefits going forward are then increased as if the beneficiary had started claiming at a later date. This results in permanently higher future payments, which eventually should replace the money that had been previously withheld.

Earnings that count

The earnings test applies only to the income you earn, which includes:

• Wages. Salaries, bonuses and commissions
• Self-employment income. Net earnings from self-employment
• Deferred compensation. Income for services performed in earlier years

Income that is not counted

Only earned income is counted under the earnings test. Other sources of income do not count. SSA has a list from (literally) A through Z that describes those sources of income.

For example, some of the income sources that do not count include:

• Pensions, investment income and payments from certain annuities that are exempt from income tax
• Rental income (unless actively managing property as a business)
• Veterans or military disability benefits
• Gifts or inheritances

Annual earnings test thresholds and deduction rules

There are two retirement earnings test-exempt threshold amounts and deduction rules. The annual limits for these in 2025 (and in 2026) are:

• In the years before you reach your FRA, up through December of the year before hitting this age milestone, $23,400/year (rising to $24,480 in 2026). For every $2 earned above this amount, $1 is withheld from your Social Security checks.
• In the year you reach your FRA, up to but not including the FRA month, $62,160/year (rising to $65,160 in 2026). For every $3 earned above this, $1 is withheld from your Social Security checks until the month you reach your full retirement age.

During the month you reach your full retirement age and after that, there is no longer an earnings limit. Full benefits are paid regardless of how much you earn.

Monthly earnings test thresholds and deduction rules

There is a special earnings limit rule that could be helpful for some. In the first year of receiving benefits, a monthly test applies if you start your benefits midyear. This avoids individuals being penalized if they made more than the annual limit prior to receiving benefits.

Benefits may be paid for months when earnings are below the monthly limit. These monthly limits are:

• In the years before your FRA year. $1,950/month in 2025 (rising to $2,040 per month in 2026). For every $2 earned above this, $1 is withheld from your Social Security checks.
• In your FRA year. $5,180/month in 2025 (rising to $5,430 per month in 2026). For every $3 earned above this, $1 is withheld from your Social Security checks.

If the monthly earnings test applies, benefits are withheld only for months when earnings exceed the monthly limit, regardless of annual income.

The flow chart below demonstrates how the earnings and monthly earnings tests are applied.

The monthly threshold cannot be exceeded by even $1. If it is exceeded, the entire month of benefit isn't paid.

How withholding benefits works

SSA calculates the excess earnings for the year. Benefits are withheld in whole month increments until the required reduction is met. Payments resume once withholding requirements are satisfied.

Annual earnings test example for 2025:

• An individual filed in January 2024 at age 63 and receives a monthly benefit of $1,500. Their annual earnings are $35,000.
• Their excess earnings are $35,000 - $23,400 = $11,600.
• Their withholding will be $11,600 ÷ 2 = $5,800.
• SSA will withhold benefits for the first four months ($1,500 × 4 = $6,000).
• Full benefits resume in May.

Monthly earnings test example for 2025:

• An individual filed in June 2024 at age 64 and received a monthly benefit of $1,800 for June through December.
• The individual earned $2,600/month from January through May and then continued working a reduced schedule as they eased into retirement.
• They earned $2,100/month in June and July, $1,500 in August, September and October and $1,200 in November and December. The MET amount of $1,950/month would have applied to those months.
• This person would receive no monthly benefits for June and July because they exceeded the MET amount those months. However, they would get their full $1,800 Social Security check for the rest of the year, because their monthly earnings for each of those months were below the MET limit.
• The annual earnings limit (with $1 withheld per $2 earned over the threshold) would apply in the following year, based on their age of 65.

Recalculation of benefits after FRA

Once a beneficiary reaches their FRA month, the SSA determines the total amount that was withheld and converts that into the number of months of benefits that is equivalent to.

A recalculation is made by giving credit to the beneficiary for the total months that benefits were withheld. The credit is given as an adjustment to the date that benefits were started and results in a higher monthly benefit for the remainder of the beneficiary's life.

Recalculation example:

Consider the case of an individual who is collecting $2,000 per month and still working. For simplicity, assume that they earn $3,950 per month for two years, 24 months, and then stop working.

Each month the SSA will withhold $1 for every $2 over the lower threshold of $1,950. Since $3,950 minus $1,950 equals $2,000, an amount of $1,000 will be withheld each month.

This is 50% of the individual's monthly Social Security benefit amount. The total withheld then is equivalent to 12 months, or one year of credit to be given.

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After reaching FRA, the individual's benefit will be recalculated as if the individual had delayed filing for 12 months and had started collecting benefits at age 63, increasing the monthly benefit accordingly going forward.

This readjustment happens the month you hit full retirement age, so depending on how long you live, over time, you potentially will regain all the benefits that were withheld due to the earnings test.

Earnings test overpayments

Sometimes the SSA will overpay an individual who is subject to the earnings test and will send an overpayment recovery letter — meaning you got more than you should have, and you have to pay it back.

This overpayment can happen for a variety of reasons, such as a beneficiary starting work again after claiming or receiving a raise at their job that increases their earnings above the threshold.

Overpayment recovery process

The overpayment process begins when a beneficiary receives a notice detailing the overpayment amount. Their options include paying the entire amount as a lump sum repayment or monthly deductions from future benefits.

Beneficiaries can appeal by filing Form SSA-561, Request for Reconsideration. Make sure to file your request within 60 days.

Or you can request a waiver if repayment causes financial hardship (Form SSA-632-BK).

Strategies to minimize the impact of the earnings test

• Time your filing date strategically to align with lower earnings years.
• Track and report earnings accurately to avoid overpayment issues.
• Consider delaying benefits until your full retirement age to avoid the retirement earnings test entirely.

Conclusion

The Social Security earnings test can significantly affect cash flow for beneficiaries who continue to work while claiming benefits early.

By understanding its rules, limits and exceptions, you can better navigate its complexities, optimize benefits, and plan effectively for retirement.

Related Content

• Six Changes Coming to Social Security in 2026
• Want the Maximum Social Security Check in 2026? Here's What You Need to Do Now
• Social Security Asked You For Money Back — Now What?
• I Claimed Social Security Six Months Ago at 62, but My Checks Are Too Small. What Are my Options?
• Social Security Wisdom From a Financial Adviser Receiving Benefits Himself

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

What's new? Making charitable contributions just got a little easier — but also a little harder. It's a mixed bag, and donor education is critical, with some changes already in effect for the 2025 tax year, and others set to begin January 1.

Generally, those who itemize and make charitable contributions might want to accelerate some donations to make them before the end of this year to maximize their effectiveness. There are several reasons.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

It's worth noting that diminished federal grant funding to charities this year has left an unmet need within the budgets of many nonprofits.

Luckily, asset prices are relatively healthy, making conditions ripe for a generous giving season when it's needed the most.

Less reason to itemize and a new deduction

Except for two brief periods (from 1982 through 1986 and again from 2020 through 2021), charitable contributions have been tax-deductible only as an itemized deduction.

Prior to 2018, itemizing was common: The standard deduction was relatively modest, and state income taxes were fully deductible for federal purposes, resulting in almost a third of all taxpayers being itemizers.

In 2018, the standard deduction was greatly increased, and many itemized deductions were reduced or eliminated, with the result that fewer taxpayers were able to benefit from itemizing. By 2022, less than 10% of taxpayers were itemizing.

Starting in 2026, the OBBB adds a new above-the-line deduction for charitable contributions made by non-itemizers, capped at $1,000 per year for individuals and $2,000 for married couples filing jointly.

This means that non-itemizing taxpayers can enjoy a tax deduction for at least part of their charitable contributions.

On the flip side, also beginning in 2026, taxpayers who itemize will find that their charitable contributions are limited by a "floor" consisting of 0.5% of the adjusted gross income (AGI) on the return.

For example, if your AGI is $100,000, you're entitled to a charitable contribution deduction only to the extent your contributions exceed $500 in the aggregate.

In other words, a taxpayer who itemizes and has $100,000 in AGI doesn't get any deduction for their first $500 of charitable contributions.

This limitation is applied in the aggregate, not per charity, so the overall charitable deduction in this example is reduced by $500, not each separate donation.

It's important to note that the above-the-line and floor changes are independent of each other. If you don't itemize, the new above-the-line deduction applies, and the floor is not applicable; if you itemize, it's the opposite.

Beginning in 2027, taxpayers who make donations to certain scholarship-granting organizations that provide scholarships to K-12 students will be entitled to a tax credit rather than a deduction.

A tax credit is more valuable because it directly reduces your tax rather than just the amount of income on which you're taxed.

More limits on itemized deductions

There are other important changes that affect charitable giving. For example, there's an important limitation on itemized deductions for taxpayers in the 37% marginal income tax bracket (single taxpayers with $626,350 and higher and married/joint filers with $751,600 and higher in taxable income in 2026).

Usually, an income tax deduction is "worth" the amount of the deduction multiplied by your marginal rate.

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In other words, if you're in the 24% marginal tax bracket, each $100 deduction reduces your tax by $24.

Starting in 2026, this will remain true for taxpayers in all the marginal brackets except those in the 37% bracket; taxpayers in that bracket will have all or a portion of their itemized deductions reduced by 2%.

As a result, a $100 deduction will be worth only a maximum of $35.

SALT going back up to $40,000 should drive more itemizing

In the other direction, the limitation on the state and local tax (SALT) deduction for itemizers is going up by $30,000 (to a total of $40,000), though it phases out for higher earners. This change is already in effect for the 2025 tax year.

The more meager limit had significantly reduced the number of taxpayers who would benefit from itemizing. Now it might make more sense for those taxpayers to itemize and take advantage of the higher charitable contribution deductions available to those who do.

The bottom line: Bunching

Going forward, we might see more of the bunching strategy to maximize the reach of charitable contributions.

For example, suppose a taxpayer with a yearly AGI of $200,000 normally makes $10,000 in charitable contributions each year. Due to the 0.5% floor, a contribution of $10,000 in 2026 and 2027 will result in a deduction of only $9,000 each year, or a total of $18,000 for the two years.

However, if that taxpayer makes two years' worth of contributions in one of those years and skips the other, the total contribution of $20,000 is only reduced by $1,000, and the total deduction is $19,000.

Depending on the specific situation of the taxpayer, this could be combined with a strategy of not itemizing at all in the "off" years and taking the $2,000/$1,000 above-the-line deduction in those years, further leveraging the amount of tax-favored money going to charity.

All in all, OBBB will transform the landscape of tax-advantaged giving. It has benefits as well as drawbacks to donors, and proper planning will be essential to making sure your gifts go the longest way possible.

Related Content

• One Big Beautiful Bill, One Big Question: Will We Keep Giving?
• Five Ways to Adapt Your Charitable Giving Strategy in a Changing World: An Expert Guide
• 3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025
• How Charitable Donations Can Reduce Your Taxes
• Revocable Living Trusts: The Good, the Bad and the Ugly

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Daniel Goodwin, chief investment strategist at Provident Wealth Advisors, often writes about real estate investing vehicles such as 1031 exchanges and Delaware statutory trusts (DSTs).

Recently, he wrote about how DSTs can shift your wealth into a higher gear.

If you read that article, then we bet you'll ace this quiz. We even threw in some easy questions for you. Let's see how you do!

Related Content From Adviser Intel

Here are some other articles about DSTs by Daniel Goodwin:

• Six Risks of Delaware Statutory Trusts in 1031 Exchanges
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells
• Delaware Statutory Trust: A Viable Alternative to Debt Replacement

That's the power of a private annuity sale — an advanced, yet simple and elegant estate tax-mitigation strategy used by sophisticated families and their advisers.

What is a private annuity sale?

A private annuity sale is a transaction in which you transfer an asset — such as a closely held business interest, investment real estate or a concentrated securities position — to an irrevocable dynasty trust in exchange for the trust's unsecured promise to pay you a fixed annuity for the rest of your life.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

There's no commercial insurer involved; it's a private arrangement, priced using actuarial life expectancy and an appropriate interest rate.

How it works

You sell the asset at its fair market value. In return, the dynasty trust commits to pay you a lifetime stream of payments calculated to be actuarially equivalent to that value, taking into account your age and prevailing rates.

From that point, all future appreciation accrues to the trust for your family. Because you receive only an unsecured promise to pay rather than retaining the asset, the transferred property and its post-sale growth are removed from your taxable estate, if properly structured and respected.

Why it can reduce estate taxes

Estate taxes apply to what you own at death. With a private annuity, you no longer own the transferred asset. You hold an annuity promise that generally has no value at death because payments cease when you do.

The result is that high-growth assets and future appreciation sit outside your estate, while you retain lifetime income. If the asset outperforms the assumptions used to price the annuity, that upside accrues to heirs without additional estate tax.

Here's an illustrative example. Assume you own $10 million of rapidly appreciating company stock. You sell it to a dynasty trust in exchange for a lifetime annuity priced at fair market value.

If you live to your actuarial life expectancy, you receive the economic equivalent of $10 million over time. If the stock grows to $16 million inside the trust, the $6 million of growth is outside your taxable estate, because you no longer own the shares.

Income and income tax features

The annuity provides predictable lifetime cash flow. Depending on basis and structure, each payment might be characterized among gain, return of basis and interest for income tax purposes.

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When the buyer is a grantor trust, income tax treatment can be streamlined in certain circumstances, aligning cash flow with wealth transfer goals. Careful modeling and coordination are essential.

Key considerations and risks

The trust must be financially able to make payments; the promise is unsecured. The annuity must be properly priced and documented to avoid gift or valuation challenges.

Longevity risk is inherent: A longer life means more payments to you; a shorter life shifts more value to heirs. Success depends on rigorous legal, tax, valuation and actuarial execution.

When it's a fit and next steps

A private annuity sale can be compelling if you hold high-growth assets, want lifetime income and aim to minimize estate taxes.

Work with a team of experienced estate planning lawyers, valuation experts and tax experts to structure, document and fund the transaction correctly.

Related Content

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These platforms have attracted hundreds of thousands of investors by simplifying property investment and handling all management responsibilities.

With more than a million registered investors, such platforms demonstrate the appetite for accessible real estate investment opportunities.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

However, for accredited investors with substantial assets, these retail-focused platforms represent a fundamental compromise.

Investment caps, share limits, concentration in residential real estate and a lack of sophisticated tax-planning tools create inherent limitations that prevent serious wealth-building.

While these platforms can serve an important role for smaller investors, they pale in comparison to the institutional-grade opportunities available through Delaware statutory trusts (DSTs).

The Delaware statutory trust advantage

DSTs represent the pinnacle of passive real estate investing for accredited investors, providing access to institutional-quality assets that individual investors could never acquire independently.

These sophisticated investment vehicles allow multiple investors to pool their capital and acquire professionally managed, institutional-grade real estate offerings throughout the United States.

The fundamental structure of DSTs creates compelling advantages that retail platforms simply cannot match. With minimum investments typically starting at $100,000, DSTs immediately distinguish themselves by providing access to assets worthy of substantial capital deployment.

This higher barrier to entry enables participation in institutional-quality properties including large multifamily complexes, medical office buildings, industrial warehouses and Class A commercial properties valued in the hundreds of millions.

Institutional scale and asset quality

The asset quality differential between retail platforms and DSTs is profound and transformative. DSTs provide fractional ownership in institutional-grade assets often exceeding $100 million in value, with some offerings providing access to stabilized properties worth several hundred million dollars.

This scale advantage translates into superior diversification and risk management that smaller residential properties cannot achieve.

A single DST might own a portfolio of 15 Walmart stores across multiple states, a collection of Class A apartment communities in high-growth markets or a diversified portfolio of medical office buildings leased to health care systems.

Such diversification provides stability and risk mitigation that comes from institutional-level asset management.

DST properties also benefit from economies of scale and operational efficiencies that create competitive advantages. Large commercial properties typically feature long-term leases with credit-worthy tenants, professional property management teams with specialized expertise and operational systems that smaller residential properties cannot match.

This institutional approach consistently produces more stable cash flows and superior long-term performance.

Superior tax optimization through 1031 exchanges

Perhaps the most significant advantage DSTs offer accredited investors lies in sophisticated tax optimization, particularly through 1031 exchanges.

Revenue Ruling 2004-86 established DSTs as qualifying "replacement property" for 1031 exchanges, enabling investors to defer capital gains taxes indefinitely while building wealth through real estate.

For accredited investors with appreciated real estate holdings, this capability represents a wealth preservation tool of extraordinary value.

An investor who owns rental properties with substantial appreciation can execute a 1031 exchange into multiple DSTs, achieving superior diversification while deferring potentially hundreds of thousands in capital gains taxes.

This tax deferral preserves capital that continues working within the investment, compounding wealth over time.

DSTs provide the same tax advantages of direct real estate ownership, with depreciation and amortization passed through to investors based on their proportionate share.

The ability to execute subsequent 1031 exchanges from DST to DST creates a powerful wealth-building cycle that can span decades, allowing investors to continually upgrade their real estate holdings while preserving tax efficiency.

This tax optimization capability represents millions in potential wealth preservation for high-net-worth individuals over their investment lifetimes, creating compounding advantages that retail platforms cannot provide.

Efficient capital deployment for substantial investors

DSTs offer rational capital deployment solutions for accredited investors with significant assets to allocate.

Rather than fragmenting large investment amounts across dozens of small properties, investors can efficiently deploy capital across carefully selected institutional-quality assets that provide meaningful diversification and professional oversight.

A $2 million real estate allocation might be strategically divided among three or four DSTs representing different property types, geographic markets and economic drivers.

This approach achieves superior diversification while maintaining focus on institutional-quality assets managed by experienced professionals with proven track records.

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The efficiency extends beyond initial investment to ongoing management and eventual exits. Professional DST sponsors handle all operational aspects while providing regular reporting and strategic guidance, eliminating the complexity that comes with managing multiple smaller investments.

Professional management and sponsor quality

DST investors benefit from sponsor expertise specifically focused on institutional real estate investment and management.

These sponsors often manage billions in assets and possess decades of institutional real estate experience, providing access to off-market deals and institutional-level financing terms unavailable to smaller operators.

The signatory trustee structure empowers professional management to take necessary actions including restructuring financing, renegotiating leases or executing property sales to optimize returns and reduce risks.

This professional oversight provides fiduciary responsibility to investors while maintaining the passive nature of the investment.

Leading DST sponsors maintain dedicated asset management teams, sophisticated financial reporting systems and strategic relationships with institutional lenders and service providers.

This infrastructure creates operational advantages that translate into superior investment performance and risk management.

Risk management through institutional structure

DSTs provide superior risk management through several structural advantages. The institutional quality of underlying assets creates inherent stability, while professional management teams implement sophisticated risk mitigation strategies.

Commercial real estate sectors accessible through DSTs often demonstrate superior resilience during economic cycles compared to residential real estate.

DST investors enjoy limited liability protection through bankruptcy-remote provisions, ensuring that even in adverse scenarios, investor exposure is limited to their investment in the trust.

This protection extends beyond the property level to shield personal assets from potential creditor claims.

The scale and diversification possible within DST structures provide additional risk mitigation. Rather than being exposed to single-property risks, investors participate in professionally managed portfolios that can weather individual tenant departures, market fluctuations or property-specific challenges.

Long-term wealth-building potential

DSTs enable true generational wealth building through real estate by providing access to institutional-quality opportunities previously reserved for pension funds, endowments and large institutional investors.

The combination of superior assets, professional management, tax optimization and efficient structure creates compound advantages that accelerate wealth accumulation.

The ability to continuously execute 1031 exchanges between DSTs allows investors to upgrade their real estate holdings over time while preserving tax efficiency.

This creates a wealth-building cycle that can span decades, allowing investors to participate in increasingly valuable institutional assets while deferring taxes indefinitely.

For estate-planning purposes, DSTs provide excellent vehicles for transferring wealth to future generations while maintaining professional management and institutional-quality assets.

The passive nature and professional oversight make DSTs ideal for family wealth transfer strategies.

The clear choice for sophisticated investors

The choice between retail real estate platforms and DSTs represents a fundamental decision about investment sophistication and wealth-building ambition.

For those who qualify, DSTs offer access to the institutional real estate market with all its attendant advantages: Superior assets, professional management, tax optimization and true wealth-building potential.

Even so, it goes without saying that not all DSTs are created equal. Working with a financial advisory team with extensive experience in this area is essential for your short- and long-term investing success.

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• 1031 Exchanges: A Matter of Life and Death?
• Top 10 Myths About 1031 Exchanges, Debunked

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Most people think of retirement in two stages: accumulation, when you save and invest, and distribution, when you start spending. But there's a crucial middle phase that rarely gets the attention it deserves — the Critical 15.

These five years before you stop working and the first 10 after often determine how confident and comfortable you'll feel for the rest of your life.

It's the transition period in which paychecks end, withdrawals begin, and every decision carries extra weight.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Many retirees enter this phase unprepared, caught off guard by unexpected tax bills, Medicare surcharges or market downturns that hit just as they start drawing income.

How do you turn awareness into action? The first step in navigating the Critical 15 is creating a plan for a steady income so you can have control, flexibility and peace of mind no matter what the markets do.

Income planning during the Critical 15

The first step is learning how to create your own "retirement paycheck". Separate essentials (housing, health care, food) from discretionary expenses (travel, hobbies, gifts).

Your budget should work like a dashboard, giving you a clear view of your spending and helping you make adjustments, not a diet that makes you feel restricted.

Once you understand what you'll need to spend, the next step is deciding where that money should come from and when. The timing and source of your withdrawals can make a major difference in how long your savings last and how much you pay in taxes.

Social Security timing. The right time to claim isn't just about the biggest check, it's about how your benefits interact with taxes and investment withdrawals. In some cases, filing earlier can help preserve investments during a market downturn by reducing the need to sell assets at low prices.

Account sequencing. The order you draw from pretax, Roth or brokerage accounts directly affects how long your savings last. Instead of spending down one type of account first, it can be smart to blend withdrawals to help keep your taxable income consistent over time.

For example, you might pull from Roth accounts in high-income years or during market downturns and use taxable funds when gains can be realized at lower rates. The goal is to smooth your tax bill over the years rather than face costly surprises later.

Spending guardrails. Instead of sticking to a rigid 4% rule, build flexibility into your plan. Set spending thresholds that tell you when to adjust. If markets rise and your portfolio grows, you can safely increase withdrawals.

If markets drop, scale back slightly to give your investments time to recover. This approach keeps your plan sustainable without forcing unnecessary sacrifice when times are good or panic when they're not.

Retirement tax planning during the Critical 15

Income planning doesn't stop once you've figured out where the money will come from — it's just the start.

The real opportunity lies in how you manage taxes on that income, especially during the Critical 15 when small decisions compound over time. For most retirees, this is the last and best window to shape your lifetime tax bill.

Several moving parts make this period especially complex:

Social Security and taxes. Up to 85% of your benefits can be taxable, depending on how much other income you earn. Coordinating withdrawals and benefit timing helps you avoid unnecessary tax on your Social Security.

Medicare premiums. Higher income can trigger IRMAA surcharges, which are based on your tax return from two years earlier. Managing income levels in your early retirement years can prevent these surprise costs.

Account mix. Many retirees have most of their savings in pre-tax accounts, which can backfire when required minimum distributions (RMDs) begin. Building tax diversification early — across taxable, pre-tax and Roth accounts — gives you more control of your tax bracket later.

Heirs' taxes. A surviving spouse often ends up in a higher tax bracket filing as a single taxpayer, and non-spouse heirs must now empty inherited IRAs within 10 years. Thoughtful planning can reduce that future burden.

The most effective moves in this phase often include Roth conversions, in which you gradually shift money from pretax to Roth accounts to create tax-free income later, and tax diversification, blending withdrawals across account types to keep your effective tax rate steady over time.

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These steps might not make a big splash in a single year, but over a 20- or 30-year retirement, they can save hundreds of thousands in taxes and add years of longevity to your portfolio.

Investment planning during the Critical 15

The Critical 15 also brings one of retirement's biggest risks: sequence of returns — poor market performance early on that permanently damages your portfolio. Selling during downturns locks in losses and can derail even strong savers.

To protect yourself:

• Build a "war chest." Hold three to five years of essential expenses in stable assets such as Treasuries or short-term bonds.
• Match risk to timeline. Keep near-term funds conservative, but let long-term money keep growing.
• Stick to your plan. Reacting to headlines often hurts more than it helps. Let your strategy (not emotion) drive decisions.

Key steps to take during the Critical 15

After you've looked at income, taxes and investments, it's time to bring the pieces together. A checklist highlights the most important actions to take and revisit to stay organized and on track through this critical transition.

• Start early. Begin at least three years before your Critical 15 phase is due to begin. This will allow time to align your investments, taxes and income strategy.
• Build a flexible income plan. Design a spending approach that adjusts for markets, health costs or lifestyle shifts — think dashboard, not diet.
• Be proactive with taxes. Use Roth conversions, smart withdrawal sequencing and charitable giving to reduce your lifetime tax bill.
• Create a safety reserve. Keep several years of spending in low-volatility assets to weather market declines without panic selling.
• Plan for health care. Understand how income affects Medicare premiums and explore options such as health savings accounts (HSAs) or supplemental insurance.
• Revisit regularly. Update your withdrawal plan, tax projections and investment mix at least once a year — or sooner if life changes.

The Critical 15 isn't just another planning concept — it's the phase in which everything you've built finally comes together.

By coordinating income, taxes, investments and health care during this window, you gain flexibility and confidence for the years ahead.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

But now, with retirement on the horizon and economic uncertainty on the rise, it's time to hit pause on nostalgia and start building a fresh financial "playlist" for the next 30 years.

This is about more than just investment accounts.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

It's about preparing for living a long life, navigating complex family dynamics and making sure your money works as hard as you have.

Here's a modern framework — track by track — to accompany Gen Xers into retirement.

1. Reality bites soundtrack: Answering the big questions

• Do I have enough saved?
• What will my retirement lifestyle actually cost?
• How long will it all need to last?

These are all the right questions — and they don't have easy, one-size-fits-all answers. According to Northwestern Mutual's Planning & Progress Study, more than half (54%) of Gen Xers believe they will not be financially prepared for retirement when the time comes.

It's no wonder. Many are juggling aging parents who are living longer, adult children challenged by higher costs and their own dreams and goals — all while market volatility chips away at their confidence.

This is where a personalized and comprehensive financial plan is critical — one that factors in a mix of income sources, financial needs and investment risk tolerance while also protecting what you've built to date.

Talking to a financial adviser can help you look at your full financial picture and work out a strategy that is right for you.

2. Unexpected duets: The sandwich generation's balancing act

Gen X is the classic "sandwich generation." You may be helping fund a parent's care while also supporting a child through college. Many of these adult kids have moved back in, and others never moved out in the first place.

That's why your plan should include financial flexibility. For example, keeping a portion of your assets liquid — through savings, whole life insurance cash value, which is guaranteed to grow and can be accessed at any time, or accessible brokerage accounts — can help you respond to family needs without compromising your long-term goals.

Spousal IRAs are another overlooked tool that can help married couples build tax-advantaged savings, especially when one partner has stepped away from the workforce to provide care.

3. Greatest hits: Must-have financial moves

Certain decisions have an outsized impact on retirement success. Chief among them? When to take Social Security, how to handle health care expenses and how to turn savings into a steady income.

Claiming Social Security early — at age 62 — can lock in permanently reduced benefits. Waiting until your full retirement age (likely 67) or even up to age 70, can mean thousands more in annual income.

The key is to integrate Social Security into your overall income strategy, which may also include annuities, Roth IRA withdrawals or tax-efficient drawdowns from brokerage accounts.

And don't overlook health care.

Even with Medicare, retirees can spend hundreds of thousands of dollars out of pocket on premiums and uncovered services, so consider a health savings account part of your retirement toolkit.

As the realities of aging become more immediately relevant, solutions like life insurance and long-term care planning can play a vital role in protecting your retirement assets from unplanned costs.

4. Encores: Working in retirement

For many Gen Xers, "retirement" doesn't mean exiting the workforce entirely — it means redefining work on their own terms. Whether through consulting, part-time roles or entrepreneurial pursuits, staying engaged can supplement income and add purpose.

But working in retirement can also affect your benefits. If you claim Social Security before full retirement age and continue earning income, your benefits may be temporarily reduced based on the retirement earnings test.

Additionally, earned income can push you into higher tax brackets or increase Medicare premiums.

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The good news: Continued income can reduce pressure on your savings. The key is to build a financial plan that coordinates all income sources — earned, invested and guaranteed — to preserve financial efficiency.

5. The outro: Leaving a legacy

Retirement isn't just about spending down assets, it's also a chance to think about what you'll leave behind.

Legacy planning involves more than just having a will. Naming beneficiaries, setting up trusts and considering charitable giving strategies can help ensure your assets transfer smoothly and according to your values.

And if privacy or probate avoidance is a concern, tools like living trusts and whole life insurance offer alternate approaches to intergenerational wealth planning.

6. Bonus tracks: Planning for life's surprises

Life doesn't always stick to the setlist. Whether it's a market downturn, an unexpected illness or family dynamics shifting in retirement, having contingency plans is essential.

Stress-testing your financial plan — such as looking at "what-if" scenarios like long-term care needs or a 20% portfolio dip — can help you prepare for surprises.

Maintaining an emergency fund (even in retirement), diversifying your income sources and including protection elements like life insurance and long-term care coverage can help make your retirement plan more resilient.

Final track: This isn't a rewind – it's a remix

Retirement planning for Gen X isn't about recreating your parents' retirement. It's about building a life that reflects your values, your family responsibilities, and your future reality.

The good news is that you don't have to figure it out alone, or all at once. Retirement planning is an ongoing process — one that benefits from thoughtful reflection, clear priorities and the right resources along the way.

After all, the most successful retirement plans, much like the best playlists, aren't set in stone. They're built to adapt, evolve and carry you confidently into your next chapter.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Most have a good idea of the amount of money they have stashed in savings and investments, and they've estimated how long they can expect those funds to last if they stick to their retirement budget and withdrawal strategy.

This is great. I'm a big believer that getting and keeping your finances on track goes a long way toward helping things go right in retirement.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

But I'd also argue that preparing a course of action, or a "crash plan," for when things go wrong can be just as important, if not more.

Plan for what you can control

You can't control which candidate gets into office, which country goes to war, what the Fed does with interest rates or all the other factors that can impact markets — and your portfolio.

But you can control what you do with your nest egg when the market goes through a correction, a downturn or worse.

A crash plan can be like the list of emergency procedures that's tucked into the seat-back pocket of an airplane, although your financial crash plan should be tailored specifically to you. It doesn't need constant monitoring, but you'll know it's there when you need it most.

Having a clear plan for what to do (or not do) when market turbulence is making you nervous can help keep you from making rushed or emotional decisions, which often lead to mistakes.

It can also highlight potential actions that could put you in a better place once markets recover.

A good crash plan should cover three main areas:

1. Income sources

Income planning is one of the most important parts of preparing for retirement — but without an emergency income strategy, your plan is incomplete.

If portfolio withdrawals are an integral part of your retirement paycheck, your crash plan can show you where to make adjustments when the markets get bumpy. When the market goes down, cash and cash equivalents in your portfolio can be a valuable backup.

If stock dividends are slashed, or if you've been selling stocks to fund your retirement, you can pause that action temporarily and draw from those backups or other guaranteed sources (such as interest from a multiyear guaranteed annuity or MYGA) to make up the difference.

This can be especially valuable when it comes to mitigating sequence of returns risk, which can have a devastating effect on the longevity of a new retiree's nest egg.

2. Rebalancing

During a downturn, your crash plan can also remind you of the benefits of "buying low."

If you have a well-diversified retirement portfolio, you likely have some assets that are uncorrelated to the market or even non-traded.

This presents an opportunity to take any extra funds from those parts of your portfolio and buy quality stocks that you already might own, but at a massive discount.

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Once market pricing recovers, you can skim the cream off the top of those investments and put those dollars back into the assets from which they originally came.

How many times have you wished you'd bought a household-name stock when it was 30% off? This might be your chance. But you have to be ready to move when the time is right.

3. Tax strategies

A down market can also provide an opportunity to do some tax-loss harvesting — selling investments in taxable accounts that have lost value to offset capital gains elsewhere and reduce the taxes you owe.

This can be a complicated process, and there are IRS rules to consider, such as the "wash-sale rule," which prohibits claiming a loss on the sale of an investment if the same or a "substantially identical" investment is purchased 30 days before or after the sale date.

Despite its potential complexity, tax-loss harvesting can be a useful strategy for reducing current-year taxes and/or helping with portfolio rebalancing. Here's an example of how it can work:

Let's say Mary wanted to renovate her kitchen, but being a high earner, she was aware of what accessing the necessary funds from her IRA might mean for her tax bill.

Then, in 2020, when the COVID-19 pandemic hit, the energy sector crashed, resulting in a large paper loss on the ExxonMobil (XOM) stock that she held in her taxable brokerage account.

Mary also owned Amazon (AMZN) stock, which had reached a bloated position in her portfolio and kept growing during the pandemic.

Using the loss-harvesting strategy in her crash plan, Mary sold ExxonMobil at a loss and immediately bought Chevron (CVX) stock, which was also down, with the proceeds (avoiding a wash sale). She then sold an equal amount of her Amazon stock.

The result?

• Mary got the money she needed for her renovation virtually tax-free.
• She was able to trim Amazon from its oversize allocation and stay invested in energy by owning Chevron.
• As the energy sector recovered, her Chevron investment grew to match what she owned in ExxonMobil before the crash.

Another tax strategy that could be included in your crash plan is a Roth conversion.

Owning a Roth account can have many benefits, but the tax hit when you make the conversion can be off-putting. If the markets are down, however, you might be able to get more bang for your buck if you move securities to a Roth.

If those stocks make a comeback inside the Roth, any growth you might realize would be tax-exempt.

Bottom line: A crash plan can help lower anxiety in retirement

I know it might sound funny, but preparing for the worst is the best way to succeed at retirement (unless you don't mind white-knuckling the arms of your favorite chair every time the economic news is grim).

Knowing you have a crash plan in place can allow you to worry less about market uncertainty and focus more on enjoying life's longest vacation.

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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• 12 Steps to Protect Your Retirement Savings From Market Volatility
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• I'm a Financial Planner: Here Are Five Phases of Retirement Planning You Have to Get Right

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Clients often ask whether they should convert funds in tax-deferred retirement accounts into Roth accounts.

Roth conversions are a crucial part of your retirement picture, and there's typically little downside to protecting your wealth from the government in retirement.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

However, there are ripple effects that can impact many aspects of your financial life to consider. They need to be approached strategically before developing a plan.

Evaluate future tax rates

Taxes are the reason why you should consider funding a Roth account, whether it's through conversions or contributions. Any money in a tax-deferred account means only a portion of that money is yours; the rest is due to the IRS.

Future taxation is one of the keys to developing the right Roth strategy for you. We want as much tax-free money as we can to block Uncle Sam and the government from our finances, but it's important to look at it through a strategic lens.

If you're early in retirement and taxes are expected to go down in the future, converting to a Roth at the moment would be a poor choice. But if they're expected to go up, taking advantage of today's low tax rates could be a good choice.

Tax rates are currently low — the top federal income tax rate is 37%, compared with 70% in 1980. The Social Security Trust fund is shrinking, and the federal deficit continues to grow.

Despite the One Big Beautiful Bill Act (OBBB) making 2017's tax cuts "permanent," many experts believe taxes are likely to increase under future administrations. That means it could be a good idea to pay taxes now through Roth conversion and capitalize on growth without the burden of taxes looming over it.

Another factor is how much money you'll make in the future. If you expect to earn more, will it lead to a higher tax rate down the road? That's different for each family, but it needs to be considered.

Pay attention to the ripple effects

Future tax rates are just one piece of how Roth conversions could impact your finances. There could be significant financial consequences if you don't pay close attention.

Accidentally jumping to a higher tax bracket in the present is a common mistake. Each transfer adds to your taxable income and could lead to a higher tax rate, and it can make a substantial difference.

For example, couples with a taxable income from $23,850 to $96,950 have a tax rate of 12%, but that jumps to 22% on any income earned above that range. Avoid this by strategically spacing out your Roth conversions across multiple taxable years.

There are also nuances that can be complicated. If you open a new Roth IRA account, you must wait five years from the beginning of the first taxable year you contributed to withdraw without a 10% penalty.

That means even if you open a new account after you turn 59½ and use a Roth conversion to contribute, you must still wait to withdraw funds penalty-free.

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Other consequences of converting too much to a Roth include incurring a Medicare surcharge, higher taxation on your Social Security and the loss of the marketplace health insurance tax break (if those subsidies are renewed — that's up in the air during the government shutdown).

These are easy mistakes to make, and they can also be easily avoided with proper planning.

Work with a professional

I often hear from people caught in the trap of reading an article with a blanket recommendation about a specific Roth conversion strategy, and they want to follow that advice. Don't do that — it truly depends on your unique circumstances.

Roth conversion decisions shouldn't be made in a matter of months, but years in advance. As a financial professional, it's my job to evaluate your financial picture and understand these nuances.

If you work with accountants and CPAs, they might understand the tax implications, but they don't understand the long-term financial planning aspect of Roth conversions.

Roth conversions are a big deal, and for something as important as your retirement, don't mess around. Consider converting your savings into tax-free wealth and think about working with a financial adviser to help you navigate that strategy.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The irony is that financial plans go stale almost immediately. Goals shift. Assumptions change. Life is constantly moving. Two years ago, I would have told you my family of four was complete. Today, we are a family of five.

Sometimes, financial planning on an ongoing basis is more important than the plan itself. It allows you to iterate, shift resources and stay on track.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

But there are certain transitions and situations that should cause you to stop, seek a second opinion and start over.

To save Millennials and Gen Zers some time, my firm focuses on people who are already taking money out of their portfolios, typically in retirement, so this column focuses on folks in those situations.

Situation No. 1: You've been through a major life event

Certain events in life mean you are a different person today, financially, than you were yesterday. Early in my career, for example, I started working with a couple who were a month from retirement.

Six months later, the husband died of brain cancer. That led to a complete overhaul of his widow's financial plan. Values and priorities shifted. Income changed. Expenses changed. Lifestyle changed.

To ascertain whether you need to get a second opinion on your financial plan and whether it needs a complete overhaul, ask yourself these questions:

• Have my values and priorities shifted?
• Have my income and expenses dramatically changed?
• Do I spend my days doing much different things than I did previously?
• Does my adviser focus on serving who I am today or who I was yesterday?

If you're downsizing, for example, you probably don't need to start over with your financial plan. Most planning software will have a primary home relocation that will adjust expenses based on the new place. You can access a free version of what we use online.

However, if you've sold a business, gotten divorced or if your partner has passed away, you are now a different person financially. This likely requires an overhaul and a new strategy.

Situation No. 2: Your adviser talks only about investments

When I first started in the profession, quarterly investment meetings were the norm. Financial planning was in the process of taking center stage, but most financial advisers still believed their value was mostly based on the investments they put their clients in.

You'd therefore meet quarterly and discuss any changes to the portfolio. The conversations about life and how to align your money with what's truly important? Those stayed at home.

If these sound like the meetings you are still having with your adviser, surprise: You don't actually have a financial plan. Now is a good time to get started.

Situation No. 3: Your adviser never talks about taxes

If your adviser isn't talking about taxes, this could be for myriad reasons, and from a compliance perspective, some of them may be legitimate.

However, when you are pulling money from your nest egg to cover your expenses, every move you make shows up on your tax return and has an impact on the bill you pay.

An adviser who looks only at investments may be eking out a point or two in excess returns without realizing that even more of that is being eaten up in taxes by holding a tax-inefficient vehicle in a taxable account.

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For example, you would typically be better off holding a growth stock in a taxable account than a REIT, because the income from the REIT is taxable as income. The REIT is better placed in a retirement account.

Tax planning is part of financial planning. It is an entire course in the CFP curriculum. Even if your adviser isn't preparing your return, they should be helping you mitigate your lifetime tax bill. This is especially important for those in the income stage of life.

Situation No. 4: You still can't answer the big questions

Can I retire? Do I have enough? Will it last? Can I afford to help my adult children?

Most prospective clients we see have an adviser. You'd be shocked at how few can answer these questions. And to be fair, the software we all use does not give yes-or-no answers.

However, that is one value of a human adviser. They should be able to look at the numbers, interpret the output and give you permission (or not) to turn in those keys, to help with that down payment, to help you sleep at night.

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• Three Things Missing From Almost Every Financial 'Plan'

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For years, financial success has been measured by numbers, such as beating market benchmarks and increasing net worth.

But with tax laws now clarified under the One Big Beautiful Bill Act (OBBB), inflation still weighing down portfolios and family priorities evolving, people are asking a different question: Do our financial plans support the lives we want to live?

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This moment feels like a turning point. The estate tax exemption is set at $15 million for 2026, removing years of what-if uncertainty.

But clarity on the law has not erased other pressures. Rising costs, unclear borrowing rates and political tensions all make it harder to feel secure about the future.

Add to that generational differences, with some families leaning on tech-driven DIY investing and others relying on long-term adviser relationships, and it's clear the definition of financial success is shifting.

When wealth aligns with life

Financial success goes beyond tax efficiency and investment performance. It's about how money supports a meaningful life. I see this most clearly with families who have complex goals that can't be solved by numbers alone.

I've recently worked with a couple in their second marriage, each with children from prior relationships. Their concern was that their estate could spark conflict, with assets unintentionally flowing to the wrong heirs, or family members feeling shortchanged.

Together, we built a plan with trusts that provided for both spouses during their lifetimes, while ensuring assets ultimately passed to the intended children and grandchildren.

The design offered more than tax benefits; it gave both spouses the confidence that their legacy would reflect their wishes and preserve family harmony long after they were gone.

That peace of mind is often what clients are truly seeking. Many accumulate wealth only to discover that bigger account balances don't bring greater fulfillment.

The turning point usually comes when they pause to ask: What is this money really for? For some, it's creating memorable experiences with family. For others, it's supporting charities or investing in future generations.

When wealth is aligned with purpose, the plan becomes more than financial; it becomes personal.

Money can also strain relationships. Spouses might have different money "scripts," shaped by their upbringing. Children might see their parents' assets as an inheritance rather than resources meant to support the parents' own goals.

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Open conversations, whether around the dinner table or in structured family meetings, can shift that dynamic. By explaining why decisions are being made, families reduce uncertainty and build understanding, even if every detail is not disclosed.

These strains don't stop at family dynamics. Financial stress often spills over into physical and emotional health. Those who overwork to accumulate more, overspend to keep up appearances or stress about markets often find their financial choices eroding their physical and emotional well-being.

By aligning spending with values, such as education, travel, philanthropy or simply enjoying time together, you can create financial stability and a richer quality of life.

Practical steps for 2026

Redefining financial success requires both reflection and action. The following steps can bring clarity to your goals, create alignment with your family and allow you to move into 2026 with a plan that feels both purposeful and achievable.

Step No. 1: Clarify your values. Write down the principles that guide your decisions, whether family security, philanthropy, lifestyle goals or something else. This list becomes the filter for every financial choice.

Step No. 2: Prioritize your objectives. Separate "must haves" from "nice to haves." Paying for children's education might be essential, while a vacation home is a bonus. Ranking goals prevents competing priorities from derailing the plan.

Step No. 3: Define your legacy. Look beyond the question of who will inherit your assets and consider how you want to be remembered. Do you want to create traditions, support charities or establish trusts that last beyond your lifetime?

Step No. 4: Engage a holistic adviser. Look for an adviser who goes beyond investment performance to address taxes, estate planning, insurance and family dynamics. Ask how they incorporate well-being and values into the planning process.

Step No. 5: Schedule a family conversation. Bring your spouse or heirs into the discussion. Even a simple conversation about what matters most can ease tensions and set expectations for the future.

Step No. 6: Check alignment annually. At least once a year, revisit your goals and compare them with your financial plan. Life events, tax law changes or shifting priorities may require adjustments.

Step No. 7: Watch for red flags. Warning signs include strained family conversations, stress that undermines health or an inability to answer the question, "What is this money for?"

These steps don't require perfection, but they do require intentionality. The goal is not to build the largest portfolio, but to create a financial life that supports your well-being today and in the years ahead.

Wealth alone doesn't equal success. As 2026 begins, redefine financial success in broader terms: well-being, family harmony, health and legacy.

By aligning financial strategies with priorities, wealth can become a tool for building a more meaningful life.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

News has been circulating for months about the One Big Beautiful Bill Act (OBBB) since it was signed in July, but now is the time when many of its implications are beginning to take shape as we head toward their effective date in 2026.

The OBBB has replaced uncertainty with permanence, locking in lower individual income tax rates, expanding deductions for business owners and solidifying estate exemptions that had once been scheduled to expire.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

On the surface, the new environment feels simpler. In reality, it raises the bar for the financial planning profession. A tax code that stays still doesn't reduce the need for expertise; it amplifies it.

Advisers now face a different kind of challenge: transforming stability into strategy.

The changes introduced by the OBBB include:

Permanent lower tax brackets. The Tax Cuts and Jobs Act of 2017's reduced individual income tax rates are now permanent, preserving historically low brackets and expanded standard deductions.

Estate and gift tax exemption increase. The unified exemption rises to $15 million per person ($30 million per couple), permanently indexed for inflation.

The higher exemptions for wealth transfer provide new flexibility for families, business owners and legacy planning strategies.

Temporary enhanced state and local tax (SALT) deduction (2025-2029). The cap increases to $40,000 for modified adjusted gross income (MAGI) under $500,000, with a steep phase-out and reversion to $10,000 in 2030.

Many taxpayers will enjoy a few years of relief before the cap reverts, making timing and income management more critical than ever.

New itemized deduction limitation (effective in 2026). Top-bracket taxpayers (37%) will see itemized deductions limited to a 35% effective benefit, creating a window of opportunity for charitable and deductible planning before the change takes effect.

New temporary deductions and credits (2025-2028):

• No tax on tips and overtime (up to $25,000 each)
• A new deduction of $6,000 per taxpayer for people age 65-plus
• Auto loan interest deduction for U.S.-assembled vehicles (up to $10,000)

Child and family enhancements. The child tax credit rises to $2,200 per child (permanent), and so-called Trump Accounts introduce a $5,000/year child savings vehicle with federal seed funding.

Business tax provisions. Section 199A (20% qualified business income deduction) and 100% bonus depreciation are made permanent, while R&D expensing and business interest deductions are restored and liberalized.

Permanent relief for business owners. Key provisions for pass-through entities, depreciation and research expensing are no longer set to expire, ensuring continued support for entrepreneurial growth.

Long-term considerations are easier now

The permanence of lower brackets allows for the kind of long-term modeling that's been elusive since 2017.

Roth conversions, charitable giving and capital gains harvesting can all be viewed through a multiyear lens.

The absence of looming sunsets gives advisers a chance to coordinate across disciplines, working alongside accountants, attorneys and insurance specialists to build truly integrated wealth plans.

When the framework is predictable, planning can finally become architectural instead of tactical.

Yet markets remain unpredictable, and that's where the profession's human element matters most. If the last few years have taught us anything, it's that volatility is the one constant.

Advisers who guide clients through uncertainty, not away from it, will be best positioned to lead in this next phase. Helping clients understand the behavioral side of investing — including the fear that can derail discipline — will remain just as critical as tax or investment strategies.

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Periods of market weakness often present the greatest opportunities. When asset values dip, so do conversion costs and gifting valuations. Proactive advisers can help clients take advantage of those temporary conditions to create lasting tax advantages.

Volatility doesn't have to be a setback; it can be a planning tool, provided communication is timely and clear.

Diversification, too, will continue to test both advisers and clients. It rarely stands out in any single year but remains the foundation of long-term wealth preservation.

As the economic landscape becomes more complex, with global elections, shifting interest rates and evolving corporate earnings trends, diversification is what turns unpredictability into endurance.

Advisers who can contextualize that truth will keep clients grounded when the headlines turn noisy.

The importance of tax strategy

But perhaps the most defining difference in 2026 will be the rise of tax strategy as the profession's key differentiator. Investment performance may fluctuate, but the ability to minimize lifetime tax drag and enhance efficiency is measurable, durable and directly tied to advisor value.

The OBBB gives professionals a stable backdrop to design and execute those strategies.

In practice, that means looking at every decision through a tax-integrated lens.

• How do withdrawals affect future brackets and Medicare surcharges?
• When should a client harvest gains or accelerate income?
• How can charitable intent align with tax savings?

These aren't once-a-year conversations — they're the new rhythm of holistic financial planning.

Technology and automation will continue to support this work, but they can't replace the perspective advisers bring. The future of advice lies not just in data, but in dialogue.

Clients want to understand how their financial lives fit together and need reassurance that their plan accounts for what's controllable, even when the world isn't.

The OBBB is more than just another piece of tax legislation. It represents a chance to help clients create stability instead of reacting to uncertainty.

For an adviser, it's an invitation to elevate yourself from problem solver to plan designer, to turn clarity into confidence and to ensure that strategy, not circumstance, drives outcomes.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The rules that govern these mandatory retirement account withdrawals have always been confusing.

And because RMDs don't start until you're in your 70s, it can be tempting to put off worrying about their impact until other, more pressing planning decisions are made.

Most people are far more anxious about getting their Social Security and Medicare benefits squared away than preparing for RMDs.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

But putting RMD planning on the back burner can have significant consequences — especially if, like most Americans, you've stashed all or a large portion of your savings into one or more tax-deferred retirement accounts, such as a 401(k), 403(b) or traditional IRA.

Every saver should know the basics of how RMDs work. Here's a quick Q&A to help you get your planning started.

What is an RMD?

The IRS doesn't allow savers to keep the money in their tax-deferred retirement accounts indefinitely.

Once you reach the age when RMDs start (currently 73), you must begin withdrawing at least a minimum amount annually and pay income taxes on that money.

The amount you're required to withdraw each year will be based on your age and the balance of your account (or accounts) at the end of the previous year.

What accounts require minimum distributions?

The RMD rules apply to all employer-sponsored retirement plans, such as 401(k), 403(b) and 457(b) plans, as well as profit-sharing plans.

Owners of traditional IRAs and IRA-based plans, including Simplified Employee Pension Plans (SEPs), Salary Reduction Simplified Employee Pension Plans (SARSEPs) and Savings Incentive Match Plan for Employees (SIMPLE IRAs), must also take RMDs.

The RMD rules don't apply to Roth IRAs or designated Roth accounts while the owner is alive, because Roth owners have already paid taxes on their contributions. But beneficiaries of these accounts do have to abide by RMD rules.

When is my first RMD due?

For most people, their first RMD is due on April 1 of the year following the calendar year in which they turn 73.

For example, if you're turning 73 in 2026, your first RMD — based on your account balance at the end of 2025 — won't be due until April 1, 2027.

But here's where things can get tricky.

After that first withdrawal, the due date for all future RMDs switches to December 31. That means if you wait until the April 1, 2027, due date to make the first withdrawal and then make your second withdrawal by December 31, 2027, you'll pay taxes on two RMDs in the same year.

If that works for you, great. But you may find that it makes more sense to take those disbursements in two separate tax years. For this example, that would mean taking the first RMD by December 31, 2026, and the second by December 31, 2027.

Your financial adviser or tax professional can help you run the numbers to determine which is the better strategy for you, but do that planning well in advance of your first RMD.

If you don't take your RMDs at the appropriate time, or you withdraw the wrong amount, you may face a hefty penalty.

What if I'm still working?

If you're turning 73 but you're still employed, and you own less than 5% of the company you work for, the IRS will let you delay taking RMDs from your workplace retirement plan — as long as your plan allows it.

However, if you own retirement accounts outside your current workplace (a traditional IRA with your bank, for example, or a 401(k) with a former employer), you'll have to calculate RMDs for those accounts.

How do I calculate my RMDs?

Your retirement account custodian will determine your RMD amount automatically each year and provide you with that information. But it's your responsibility as the account owner to make sure the amount is correct and the distribution is made.

You can calculate your RMDs using this guide or the Required Minimum Distribution Calculator at Investor.gov.

Or you can do the math yourself and divide your previous year-end account balance by the life expectancy distribution factor next to your age on the IRS Uniform Lifetime Table.

As you age, the distribution factor will decrease, which means your RMDs may grow as you get older, depending on the size of your account balance.

Planning for that potential impact now, by converting some funds to a Roth account or employing other strategies, could help you minimize future taxes.

What if I have more than one tax-advantaged account?

As mentioned previously, you may need to calculate multiple RMD amounts each year if you have more than one account. But, depending on the types of accounts, you can be strategic with your withdrawals.

For example, after calculating the RMD separately for each traditional IRA you own, you can add up the amounts and withdraw the total from just one of your IRAs.

However, RMDs for some types of retirement plans, such as 401(k) and 457(b) plans, must be calculated and withdrawn separately from each of those accounts.

What if I don't want or need the money?

Although you're required to take RMDs every year once you turn 73, you aren't obligated to spend the money. You can always choose to reinvest those funds elsewhere.

That might mean opening or adding to a brokerage account, buying an investment property, paying down high-interest credit card debt, or contributing to a 529 plan for a child or grandchild.

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Or you could consider the tax benefits of an RMD-reduction strategy, such as a qualified charitable distribution (QCD) or a qualified longevity annuity contract (QLAC).

Again, your adviser or tax professional can help you understand each strategy's implications for your situation.

RMD rules keep evolving

Even if you think RMDs won't be an issue for you, keep them on your retirement planning radar.

The rules that govern the timing of RMDs — including the age when they begin and how they might affect those who inherit your accounts — have gone through significant changes in recent years.

These and other regulations will likely continue to evolve, so the information you rely on should be well-sourced and up to date.

You don't have to (and shouldn't) wait until you're in your 70s to familiarize yourself with the RMD rules, which can be found on the IRS website.

And if you have questions, don't hesitate to contact a financial professional, preferably a retirement specialist, for guidance.

Insurance and Advisory services are offered through Heckman Financial & Insurance Services, Inc. HFIS, Inc., an SEC Registered Investment Adviser. Heckman Financial & Insurance Services is not affiliated with or endorsed by the Social Security Administration or any government agency. CA Insurance License #OE89971

Kim Franke-Folstad contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The jubilation is limited, though, so take advantage while you can before the opportunity to reduce your tax bill slips away.

Changes to certain income tax rules and deductions were included in what President Donald Trump referred to as the One Big Beautiful Bill (OBBB), which was signed into law July 4, 2025, and amended the Tax Cuts and Jobs Act of 2017.

About that extra deduction

The most notable change directed at older Americans is an extra $6,000 deduction for those who are 65 and older. The $6,000 is added to the standard deduction and applies to each individual, so married couples filing jointly can reduce their taxable income by an extra $12,000 if both spouses meet the age requirement.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The deduction applies to taxpayers whether they itemize deductions or not, but it has limits based on income.

Those with higher incomes don't qualify for the full deduction, which begins phasing out for taxpayers with a modified adjusted gross income of more than $75,000 for individual filers or more than $150,000 for joint filers.

The deduction is not available for individuals with incomes of $175,000 and couples with $250,000 or more.

This extra $6,000 deduction is not going to be around forever, or even all that long. It sunsets after 2028, but for the next few years, it's a golden opportunity for retirees and other older taxpayers to reduce their tax bills.

That's more important for some retirees than they anticipate as they approach retirement.

Taxes don't end with retirement

Taxes follow people throughout life, even into retirement. Although people often expect to be in a lower tax bracket when they retire, that isn't always the case.

Sometimes retirees can get bumped into a higher bracket. For example, many Americans save for retirement through tax-deferred accounts, such as a traditional IRA or 401(k). They weren't taxed on the money they contributed to those accounts.

But after they reach retirement, the money is taxed when they start withdrawing it. The federal government isn't going to wait forever for its money.

Once the people who hold these accounts reach age 73 or age 75, depending on their birth year, required minimum distributions (RMDs) kick in, forcing the account holder to withdraw a certain percentage of their money each year whether they want or need to.

Those RMDs sometimes are enough to bump taxpayers into a higher tax bracket.

A good time for Roth conversions

Clearly, if people aren't careful with their tax planning, they can become trapped as these RMDs come due.

But the good news is there is a way to avoid RMDs, or at least reduce the amount of your savings that's subject to them. The recent tax changes make the next few years an opportune time to take advantage of this strategy.

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The strategy: convert the money you have in a traditional IRA or 401(k) account into a Roth IRA. A Roth grows tax-free, and there are no RMDs. You also don't pay taxes when you withdraw money from them.

You do pay taxes when you make the conversion, but that's why this is a better-than-usual time to move the money into a Roth.

That extra $6,000 tax deduction that will lower your taxable income in the next few years provides a window in which the Roth conversion will have less of an impact than it would without the added deduction.

The key is to make sure you take advantage of this or any other tax change that affects you while you can.

Another bit of good news is that you don't have to figure it out all alone. A financial professional can help you understand how this and other tax changes might apply to your situation and recommend steps you can take to capitalize on them.

So while taxes don't disappear in retirement, there's no need to pay anything above and beyond what you owe.

Investment advisory services offered through Redhawk Wealth Advisors, Inc., an SEC Registered Investment Advisor. SEC Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. Some Investment Advisor Representatives of Redhawk may market their advisory services under the name of Top Rank Advisors, an unaffiliated and separate legal entity. The information presented in this article is the opinion of Top Rank Advisors and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but no liability is accepted for any inaccuracies. This is for informational purposes only and its contents should not be construed as investment, tax, or legal advice. Past performance of investments is no indication of future results.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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• Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on Retirement
• Is the One Big Beautiful Bill Really All That Great for Your Retirement?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

But for the financially minded, there are advantages that go far beyond beautiful sunsets and dolphins frolicking in the water. One of the most significant: Florida is one of only nine states that don't have a state income tax.

For retirees, this means no state tax on your Social Security benefit, pension, withdrawals you make from retirement accounts or any other income you have.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The advantages don't end there. Florida also doesn't have an estate or inheritance tax. Meanwhile, a homestead exemption reduces the amount Floridians pay on property taxes if the home they are living in is their primary residence. The homestead exemption cuts the property's taxable value by as much as $50,000.

Somewhat related, Florida also has Save Our Homes, which limits how much the property appraiser can increase the property's assessed value each year.

Of course, to take advantage of these financial incentives, retirees must establish residency in Florida, not just be a long-term guest.

A snowbird's financial journey

Often, a retiree's first foray into Florida is just to get their feet wet. They still have ties to New York, Michigan, Ohio or wherever they are from originally. That's where their children and grandchildren are, where they still have friends or where they still have a home.

They spend winters in Miami, Tampa, Naples, Fort Myers or other Florida communities, but then return to their northern abodes around the time spring arrives.

In many cases, these "snowbirds" want to get a feel for the place before they take the plunge and become full-fledged and legal Florida residents. In a sense, that's a prudent idea.

Let's look at a hypothetical example involving a 67-year-old New York resident named Amanda. For the last two winters, Amanda has lived the life of a Florida snowbird, traveling south as cold weather sets in up north, then returning to New York as temperatures in the Northeast return to an appealing level.

But Amanda's unwillingness to let go of her New York residency has consequences.

New York has a state income tax with nine brackets, ranging from 4% to 10.9%. Counting Social Security, a pension and withdrawals from her IRA, Amanda has taxable income of $100,000, which places her in New York's 6% bracket.

Based on how the state's progressive tax brackets work, Amanda has a $5,432 tax bill that she would not have had if she had become a Florida resident.

When a friend points this out, Amanda does some math and realizes that in the previous year, she spent more days in Florida than in New York. Doesn't that mean she is now a Florida resident and no longer under the purview of New York's state income tax?

Nope. Residency is determined by more than just how many days you spend in a given state.

Those who work at the New York Department of Taxation and Finance will inform her that she is still officially a New York resident — and she still owes taxes.

The path to residency

As a financial professional working in Florida, situations like Amanda's are something I see routinely. Fortunately, there are steps to take to avoid being blindsided by unexpected and unwanted tax bills.

Of course, you can't simply proclaim yourself a Florida resident for tax purposes and still live most of the time back in your old homestead.

To become a Florida resident, you will need to spend most of the year in Florida (at least 183 days). But as Amanda, our hypothetical example, showed, even that won't be enough.

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There are other actions you should take that will let the state know you now consider yourself a permanent Florida resident, such as getting a Florida driver's license, registering your car in Florida and filing a declaration of domicile in the Florida county where you have taken up residence.

And that's when the tax advantages really start.

Time your taxable events carefully, if you can

So, if you are a retiree with one foot in Florida and one foot elsewhere, you might want to consider holding off on financial moves that could trigger taxes until you have fully and legally become a Sunshine State resident, if that is your goal.

For example, if you want to convert a traditional IRA to a Roth IRA, and you are still officially a resident of your previous state, you will pay both federal income tax and state income tax when you move the money over. But postpone the conversion until you are a Florida resident and you will pay only the federal income tax.

If you are unsure about all the ramifications, consult a financial professional who can help you better understand the advantages or disadvantages of moving from one state to another in retirement and the steps you can take to save money.

After all, retirement in Florida or elsewhere should be as relaxing and as fun as possible — and part of achieving that is keeping more of your money in your pocket rather than in the government's.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Securities offered only by duly registered individuals of Madison Avenue Securities, LLC (MAS), member FINRA/SIPC. Investment advisory services offered only by duly registered individuals of Global Wealth Management Advisory (GWM), a registered investment adviser. GWM and MAS are not affiliated entities. GWM does not offer legal or tax advice. Consult your legal or tax advisor regarding your situation. A Roth IRA conversion is a taxable event. This article is intended for informational purposes only.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Market research company, Talker Research, recently found that, at a certain stage in life, more than a third of taxpayers are “happy to just let professionals handle their taxes for them,” citing that finances may get “too complicated the more you age.”*

Age aside, there are several circumstances when professional tax assistance could be beneficial, like when you’re trying to navigate complex rules surrounding foreign-earned income or cryptocurrency investments. Yet there are situations where you may not benefit from hiring a tax preparer. Here’s more of what to know.

*The Talker Research survey was commissioned by TaxSlayer Pro, conducted online, and surveyed 2,000 U.S. taxpayers.

When to hire a tax professional for filing taxes

The Talker survey found that the “average American” turns to professional tax help by age 29 for a variety of reasons:

• Investments. About 23% turn to professionals before 30 because they’ve begun investing.
• Bandwidth. Almost one-quarter of respondents say they don’t have the time to handle their own taxes.
• Life events. At least 20% of “younger” taxpayers look for a tax professional after getting married, and 15% opt for a tax preparer after buying a home.

“For many Americans, big life milestones like getting married or buying a home can make filing taxes start to feel overwhelming,” said Richard Marshall, Director of Sales at TaxSlayer Pro, in the survey’s press release. Research shows the average marriage age for men is around 30, and for women, 28. “...another motivator for people — especially this year — is when tax laws change.”

True, the big Trump/GOP tax and spending bill, also known as the “big beautiful bill,” made significant changes to tax provisions in 2025. Among other things, eligible taxpayers can now take an interest loan deduction for some cars, potentially claim a higher deduction for state and local taxes, and deduct tips and overtime pay on their federal income returns.

But do concerns about missed opportunities justify hiring a tax professional? Well, that depends on whether you have a complicated tax situation, regardless of age.

Are tax preparers worth the cost?

A tax preparer can be valuable when your financial situation is “complex.” Here are a couple of scenarios where attempting to manage your taxes without professional help could be complicated:

• If you have several sources of income. Over 25% of Americans surveyed by Talker had multiple sources of income (this may include gig work, rental income, etc.). Several revenue streams can complicate the tax filing process, as different tax rules may apply to each additional source.
• If you own a business. Almost half of self-employed taxpayers surveyed said they have consulted with tax preparers about how to manage business taxes. Business tax laws can present significant compliance issues or unique record-keeping challenges compared to individual income tax returns.

Tax compliance is a key issue when your income tax return is complicated. The North Carolina Association of CPAs found that an average IRS “mail” audit led to $6,000 in additional taxes for taxpayers. And in-person IRS audits averaged a whopping $21,000 to $22,000 in unexpected taxes.

Hiring a tax professional may help you avoid the risk of an IRS audit, thereby possibly saving you money. The cost of outsourcing your taxes fluctuates based on the number of hours your tax preparer spends and/or how many tax forms you need filed. The typical fee for a tax preparer, like a CPA, can range from $200 to over $2,500 for one income return.

However, you should steer clear of a “one size fits all” approach. As reported by Kiplinger, less than 1% of all individual tax returns have been audited in recent years, so not everyone is at risk of a costly mistake. You may opt for software to file your taxes instead if your tax situation is simple. For instance, some taxpayers use IRS Free File each year, while millions were eligible for Direct File last year.

Choosing between a CPA and DIY tax software

At least 60% of taxpayers surveyed by Talker said they still file their own taxes — so if you’re one of them, you're not alone. You may be able to skip the professional and do your own tax filing if you fall into at least two of the following categories:

• Claim the standard deduction. IRS data show that about 90% of taxpayers choose the standard deduction over itemizing. This means you wouldn’t use your itemized receipts for medical expenses, charitable contributions, etc., for income tax purposes.
• Only have one or two W-2s. Even if you’ve changed jobs in the last year, you may not need a professional’s help. (But residing in two or more states might make your tax reporting more difficult.)
• You don’t have a business, rental properties, or tricky investment income. Significant or complex investments may warrant a tax professional’s help (e.g., cryptocurrency investing or investments that require you to pay net investment income tax).

If you meet none or only one of these criteria, you may wish to consult a qualified tax preparer, like a CPA. But in reality, your comfort level with taxes and the complexity of your situation dictates whether you need a tax professional.

Also, tax situations change. Reevaluate every year whether you would like a professional’s help. After all, more than half of do-it-yourself taxpayers from the Talker survey admitted they’d use a tax preparer if their situation got more complicated in the future. Although there’s no perfect “age” to hand over your taxes to a professional preparer, there’s certainly a perfect time to start tax planning: Now.

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While financial advisers routinely recommend diversified portfolios of stocks and bonds, groundbreaking research and decades of tax policy innovations have created a compelling case for making real estate the cornerstone of any serious investment strategy.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The data speaks: Real estate's historical dominance

The most comprehensive analysis of investment returns ever conducted, titled The Rate of Return on Everything, 1870-2015, revolutionizes our understanding of asset class performance.

This Federal Reserve Bank of San Francisco study examined over 145 years of investment data across major asset classes, revealing findings that challenge conventional wisdom about portfolio allocation.

The research found that residential real estate delivered superior risk-adjusted returns compared to stocks, while demonstrating significantly lower volatility.

Over the entire study period, real estate achieved returns exceeding 8% annually after inflation, outpacing stocks while maintaining half the volatility of equity markets.

This "having your cake and eating it too" scenario represents the holy grail of investing: higher returns with lower risk.

Even when limiting the data to the modern era, post-World War II, real estate continued to demonstrate its superiority. Housing consistently outperformed bonds and Treasuries by substantial margins, while matching or exceeding stock market returns.

This consistency across different economic periods underscores real estate's fundamental strength as an investment vehicle.

The study's findings become even more compelling when considering real estate markets remain largely uncorrelated globally, unlike increasingly interconnected stock markets.

This insulation provides additional portfolio protection during market downturns, as property values in different geographic regions don't move in lockstep like international equity markets tend to do.

The power of leverage: Amplifying returns through strategic financing

While the San Francisco Fed's study examined unleveraged real estate returns, the true power of real estate investing emerges when incorporating strategic leverage.

Unlike stock market investing, where margin loans carry significant risks and limitations, real estate allows investors to safely amplify returns through mortgage financing.

Consider a property generating 8% annual returns, purchased with 75% financing at 6% interest. The investor's actual return on invested capital reaches about 14% annually, significantly outpacing what's achievable in traditional markets without assuming excessive risk.

This leverage advantage remains sustainable because real estate provides steady cash flow to service debt obligations while appreciating in value over time.

Moreover, real estate leverage is non-recourse in most cases, meaning lenders can claim the property itself only if problems arise, protecting investors' other assets.

This contrasts sharply with margin investing in stocks, where losses can exceed initial investments and trigger devastating margin calls, a phenomenon that can wipe out even the savviest of accredited investors (and the examples of this are many — such as when Long-Term Capital Management collapsed and Credit Suisse's Archegos Capital Management defaulted).

Tax advantages: The real estate investor's secret weapon

While pretax returns favor real estate, the post-tax comparison reveals an even more dramatic advantage.

Real estate enjoys numerous tax benefits unavailable to stock and bond investors, creating superior after-tax returns that compound over time.

Annual depreciation deductions shelter rental income from taxation, effectively providing tax-free cash flow during ownership.

This phantom expense reduces taxable income without requiring actual cash outlays, creating an immediate advantage over dividend-paying stocks that generate fully taxable income.

Capital gains treatment provides favorable tax rates upon sale, but real estate's true tax advantage lies in strategies unavailable to traditional investors.

These preferential treatments transform good pretax returns into exceptional after-tax wealth accumulation.

The 1031 exchange: Deferring taxes to infinity

The most powerful tool in real estate investing remains the Section 1031 like-kind exchange, which allows investors to defer capital gains taxes indefinitely by reinvesting sale proceeds into replacement properties.

This strategy, often called "defer till you die" or "swap till you drop," enables investors to compound their returns without tax drag, potentially over multiple decades.

Consider an investor who purchases a $200,000 property that appreciates to $400,000 over 10 years. Rather than selling and paying $40,000 in capital gains taxes (assuming a 20% rate), a 1031 exchange allows the entire $400,000 to purchase replacement property.

Over multiple exchange cycles, this tax deferral creates exponential wealth accumulation that's impossible through traditional investing.

The mathematics are compelling. An investor executing 1031 exchanges every seven years over a 30-year period can accumulate about 40% more wealth than someone paying taxes on each transaction.

This advantage compounds over time, creating generational wealth that far exceeds what's achievable through traditional buy-and-hold stock investing.

Multiple exchanges magnify this benefit. Sophisticated investors often execute three to five exchanges over their investing careers, each time upgrading to larger, more valuable properties while deferring substantial tax obligations.

The stepped-up basis provision means heirs inherit these properties at fair market value, permanently eliminating the deferred tax liability.

Qualified opportunity zones: Accelerating after-tax returns

The Tax Cuts and Jobs Act (TCJA) in 2017 created qualified opportunity zones (QOZs), offering additional advantages for real estate investors willing to invest in designated economically distressed areas.

These zones provide a pair of distinct tax benefits that further enhance real estate's appeal.

First, investors can defer capital gains taxes from any source by investing proceeds into QOZ properties, providing flexibility beyond traditional 1031 exchanges. (Current law defers these capital gains taxes until December 31, 2026, although proposed legislation may extend that deadline.)

In addition, and even more significantly, any appreciation within the QOZ investment itself becomes permanently tax-free if held for 10 years.

These benefits stack with traditional real estate advantages, creating unprecedented after-tax return potential. An investor might defer $100,000 in stock market gains by purchasing QOZ real estate, then eliminate taxes entirely on any property appreciation through the 10-year provision.

Risk-adjusted performance: The true measure of investment success

Superior returns mean little without considering risk, where real estate demonstrates additional advantages over traditional investments.

Real estate provides multiple income streams — rental income, appreciation, tax benefits and principal paydown through tenant payments — creating diversification within a single asset class.

Market volatility affects real estate less dramatically than stocks. While stock prices can fluctuate 20% to 30% annually, real estate values typically move more gradually, providing stability for long-term wealth building.

This stability proves particularly valuable for investors approaching retirement who cannot afford significant portfolio volatility.

Real estate also provides inflation protection unavailable in bonds or fixed-income investments. As costs rise, rental income and property values typically increase proportionally, maintaining purchasing power over time.

This inflation hedge becomes increasingly valuable when traditional "safe" investments fail to preserve wealth. (There's a longer conversation to be had about whether U.S. Treasuries still constitute a "safe" investment as the national debt spirals over $37 trillion … but that's for another article.)

Implementation strategy: Building a real estate-centric portfolio

Successful real estate investing requires systematic implementation rather than sporadic property purchases. Start with investment-grade rental properties in stable markets with strong rental demand and consistent appreciation patterns.

Focus on properties generating positive cash flow from day one while offering appreciation potential.

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For accredited investors seeking to begin or expand their real estate portfolios, Delaware statutory trusts (DSTs) provide an excellent entry point into institutional-grade properties.

DSTs allow investors to acquire fractional ownership in high-quality commercial real estate assets — such as Class A office buildings, retail centers or multifamily complexes — that would typically require millions of dollars to purchase individually.

These professionally managed investments provide access to premium properties with experienced operators handling day-to-day management responsibilities.

Importantly, DST interests qualify as replacement properties for 1031 exchanges, enabling investors to defer capital gains while transitioning from hands-on property management to passive real estate ownership.

Gradually scale the portfolio through strategic acquisitions, utilizing both cash flow and periodic refinancing to fund expansion. Execute 1031 exchanges when properties reach optimal sale timing, typically every seven to 10 years, to defer taxes and upgrade holdings.

Consider diversification across property types and geographic markets to minimize risk while maximizing return potential.

Single-family rentals, small multifamily properties and commercial real estate each offer unique advantages depending on market conditions and investor expertise, and all can be acquired individually, or as part of a DST investment.

Conclusion: The evidence-based case for real estate superiority

The combination of superior historical returns, favorable leverage opportunities, exceptional tax advantages and lower volatility creates an overwhelming case for real estate-centric investment strategies.

Academic research confirms real estate's historical outperformance while demonstrating lower risk characteristics compared to traditional investments.

Strategic use of 1031 exchanges amplifies these advantages by eliminating tax drag over multiple investment cycles, enabling wealth accumulation impossible through traditional approaches.

DSTs can improve returns even more, by enabling investors to upgrade the quality of their holdings even while throttling back on day-to-day property management.

QOZs provide additional acceleration for investors willing to target specific geographic areas.

While past performance provides no guarantee of future results, the fundamental drivers of real estate's superiority — limited supply, consistent demand, leverage availability and preferential tax treatment — remain intact.

These structural advantages suggest real estate's outperformance will continue benefiting knowledgeable investors who understand how to harness these powerful wealth-building tools.

The data is clear: Real estate investing, enhanced by strategic tax planning through 1031 exchanges, Delaware statutory trusts and opportunity zone investments, offers superior risk-adjusted returns compared to traditional investment alternatives.

Investors seeking optimal long-term wealth accumulation should seriously consider making real estate the foundation of their investment strategy.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

One strategy to consider is tax-loss harvesting, an approach that not only helps optimize tax efficiency, but can also maintain a balanced portfolio to help weather future market fluctuations.

What is tax-loss harvesting?

Tax-loss harvesting is a financial strategy that involves selling investments that have incurred losses and using those losses to offset the capital gains tax owed on other investments.

If your losses exceed your gains, you can also potentially offset up to $3,000 of ordinary income each year, with any remaining losses carried forward to future tax years.

This strategy can be particularly useful in times of high volatility or a rotation in market leadership, where investors may see red among certain portfolio investments — offering a way to help reduce tax liability while also realigning investment portfolios towards their long-term strategy.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Benefits beyond tax season

Investors often think of tax-loss harvesting as a way to reduce their overall tax bill, because realizing losses today can help decrease the amount of capital gains taxes they may owe from investments sold at a gain.

However, this process also provides an excellent opportunity to reassess your overall investment portfolio.

Selling off poorer-performing investments might free up capital that you can reallocate or reinvest in more promising opportunities, potentially leading to a more robust portfolio — all while maintaining similar market exposure.

What's more, the benefits of tax-loss harvesting may also extend beyond immediate tax relief: Over the long term, even a modest improvement in after-tax returns can potentially enhance wealth accumulation.

For instance, in one hypothetical study, we found that a high-net-worth investor aiming to build wealth could see an additional 1.6% return a year by incorporating various tax-efficient strategies in their portfolio, leading to nearly 73% more gains over 20 years.

So, proactively managing your investments and engaging in strategic tax-loss harvesting can play a significant part in building your financial future, even in the face of ongoing market volatility.

How tax-loss harvesting works

There are a few key steps if you're considering getting started with tax-loss harvesting:

Identify underperforming assets. Review your portfolio to identify investments that have lost value throughout the year and consider whether it makes sense to sell them.

Execute trades carefully. When selling assets, be mindful of the IRS's wash-sale rule, which prohibits claiming a tax loss on a security if you repurchase the same or a substantially identical asset within 30 days before or after the sale.

Reinvest wisely. Consider using the proceeds from the sales to buy other investments that fit your asset allocation and investment strategy. This might involve buying similar securities that don't violate the wash-sale rule or choosing different assets that you believe might perform better.

This step is important for staying aligned with your long-term investment goals while still taking advantage of potential tax benefits.

Considerations across different asset classes

While many investors focus on stocks, tax-loss harvesting can also be used with other types of assets, including bonds, mutual funds and certain types of alternative investments — each with varying considerations and complexities.

Remember, it's always important to speak with a tax adviser regarding potential tax implications when considering a strategy such as tax-loss harvesting.

Engaging with financial advisers

A market upswing can be a good time to realign your investment portfolio with your long-term objectives.

Tax-loss harvesting is more than just a tax-season planning strategy; it's a proactive approach to support portfolio management that can provide potential benefits year-round — during market drawdowns, rebounds and periods of higher volatility.

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While the immediate tax benefits of tax-loss harvesting are well known, its long-term impact on wealth accumulation should not be overlooked.

That said, it's important to work with financial professionals, such as a tax adviser and financial adviser, who can offer guidance tailored to your specific financial situation and help you manage the timing and selection of asset sales and purchases.

They can also help you remain compliant with tax laws while enhancing your portfolio for tax efficiency and staying on target for your overall investment objectives.

Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for legal matters.

Investing in securities involves risk, including possible loss of principal. Past performance is not an indication of future results.

If an investor sells the bond prior to maturity, there is a possibility of capital loss.

Tax-loss harvesting. IRS rules stipulate that if a security is sold by an investor at a tax loss, the tax loss will not be currently usable if the investor has acquired (or has entered into a contract or option on) the same or substantially identical securities 30 days before or after the sale that generated the loss. This so-called "wash sale" rule is applied with respect to all of the investor's transactions across all accounts.

This material has been prepared for informational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC ("Morgan Stanley") recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. CRC 4743873 08/2025

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

1. Present and future tax rates

A Roth conversion is a taxable event in the year of the switch. So, if you expect that the income tax rate you will pay in retirement will be equal to or higher than the rate on conversion, then switching to a Roth IRA can pay off taxwise. If your tax rate in retirement will be lower, then tax-free Roth distributions are less advantageous.

2. Roths offer several advantages

You can withdraw contributions at any time tax-free. Distributions of Roth earnings are tax-free, provided you are 59½ or older and at least five years have passed since you first put funds in any Roth IRA. Roth IRAs don’t have required minimum distributions (RMDs), so the money can stay in the account, generating tax-free earnings. Also, conversions by the original IRA owner can ease the pain of the 10-year cleanout rule for inherited IRAs. Many non-spouse beneficiaries of inherited Roth IRAs would still have to empty the accounts within 10 years, but the money would be tax-free to them, unlike beneficiaries of traditional IRAs.

3. Multi-year strategy

It’s best to look at Roth conversions as a multi-year planning tool and not as a one-time-only decision. Doing conversions in increments over time helps you space out the tax hit. Review your income and deductions each year and determine with your financial adviser the optimal amount of traditional IRA money to convert so that the conversion doesn’t move you into a higher tax bracket or cause you to lose out on tax breaks.

4. Your adjusted gross income matters

Adjusted gross income, or more specifically, modified adjusted gross income (MAGI), is often used to determine eligibility for certain tax benefits or tax breaks or to determine if you are subject to surtaxes or surcharges. For example, it’s used to see if you qualify for any of these five new temporary tax breaks in the “One Big Beautiful Bill:” The $6,000 senior deduction for people age 65 and older, the $40,000 cap on deducting state and local taxes (SALT) on Schedule A, the deduction for up to $25,000 of tips, the deduction for up to $12,500 of overtime pay, and the deduction for up to $10,000 of car loan interest.

All five tax breaks or benefits begin to phase out at modified adjusted gross income levels above a certain threshold. Your modified adjusted gross income also determines whether you will be hit with the 3.8% surtax on net investment income and whether your Social Security benefits are taxed. You don’t want the additional income from a Roth conversion to cause you to lose deductions and credits you could otherwise be entitled to. Using a multi-year strategy and doing incremental conversions can help you manage this.

5. Medicare premiums

The additional income from a Roth conversion can trigger higher Medicare premiums, known as IRMAA. Individuals with 2023 modified adjusted gross incomes over $212,000 for joint filers and $106,000 for singles pay a monthly surcharge in 2025 for Parts B and D coverage on top of their regular premiums. These figures will rise a bit for 2025 modified adjusted gross income used for figuring 2027 monthly Medicare premium surcharges. Modified adjusted gross income includes income from a Roth conversion.

6. Paying the tax on converted funds

A Roth conversion is treated as a taxable distribution from your traditional IRA when those IRA funds are contributed to the Roth. By default, the IRA custodian will withhold 10% federal income tax. This withheld amount is treated as a distribution to you on which you must pay tax, in addition to the actual money moved to the Roth. In essence, you lose out on a portion of the IRA money being converted into the Roth. This is why financial experts advise you to pay tax owed on the conversion with non-IRA funds, if possible, and you ask the IRA custodian to withhold 0% from the converted funds.

7. IRA owners of RMD age

If you are of RMD age (73 or older for now, though RMD age will gradually rise over the next few years), you must take your annual RMD from your traditional IRA before doing a Roth conversion for the year. This applies whether you convert the full IRA or just a portion. There is another rule for owners of multiple traditional IRAs. You must withdraw your total aggregate IRA RMD for the year before doing a Roth conversion.

8. You can't undo a Roth conversion

Prior to 2018, if you did a Roth conversion, you could undo it and eliminate the tax bill by transferring the funds back to your traditional IRA. This made sense if the Roth lost money shortly after the conversion. Now if you do a conversion, you are stuck with your tax bill.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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That's when the IRS and Treasury Department issued Notice 2025-50, providing the first concrete guidance on the permanent opportunity zone program signed into law in July as part of the One Big Beautiful Bill Act.

The headlines tell only part of the story. Yes, the opportunity zone program is now permanent. Yes, there's a new emphasis on rural investment.

However, what most investors are missing is this: The guidance identifies exactly which 3,309 census tracts qualify for dramatically enhanced tax benefits starting immediately — and it provides the road map for understanding which zones will likely qualify when the entire map is redrawn in 2027.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

For investors with substantial capital gains who seek to defer taxes and potentially eliminate them entirely on future appreciation, the next 15 months represent a strategic inflection point unlike anything we've seen since the program was launched in 2018.

What changed on September 30

The IRS guidance addresses two critical questions that kept opportunity zone fund managers and investors in suspense since the law passed in July: What exactly constitutes a "rural area" for purposes of the enhanced benefits? And which of the current 8,764 opportunity zones qualify?

The answers are now much clearer. A rural area is defined as any census tract that isn't in a city or town with a population greater than 50,000 and isn't in an urbanized area adjacent to such a city or town.

Using this definition and 2020 Census data, Treasury identified roughly 38% of all current Opportunity Zones — 3,309 specific census tracts — qualify as entirely rural.

Why does this matter? Because investments in these rural zones come with turbocharged incentives that took effect the day the law was signed: July 4, 2025.

The rural advantage: Triple the benefit, half the requirement

For standard opportunity zone investments, investors receive a 10% basis step-up after holding their investment for five years. This reduces the amount of deferred capital gains ultimately subject to tax.

For qualified rural opportunity funds investing in these 3,309 designated rural tracts, the basis step-up jumps to 30% — triple the standard benefit.

If you're deferring a $2 million capital gain, that's the difference between excluding $200,000 from taxation vs $600,000. At current capital gains tax rates, we're talking about an additional $95,200 in tax savings.

But the real game-changer is the substantial improvement requirement. Traditional opportunity zone rules require investors rehabilitating existing buildings to invest at least 100% of the property's adjusted basis in improvements.

That means if you acquire a building valued at $5 million, you need to invest another $5 million in renovations … a $10 million total project just to meet the threshold.

Under the new rural rules, that requirement drops to 50%. The same building now requires only $2.5 million in improvements for a $7.5 million total project.

This dramatically expands the universe of economically viable projects, particularly for adaptive reuse, historic preservation and workforce housing development.

These aren't theoretical benefits coming in 2027. Any investment in qualifying rural opportunity zones since July 4, 2025, is already eligible.

The 2027 redesignation: A preview of coming attractions

While the rural benefits are immediate and actionable, the bigger strategic question facing investors is what happens when the entire opportunity zone map gets redrawn. Beginning July 1, 2026, state governors will begin nominating new census tracts for designation, with the new map taking effect January 1, 2027.

Here's where things get interesting — and where a new OZ mapping tool becomes invaluable.

Novogradac, the accounting and consulting firm that tracked over $42 billion in opportunity zone investments and serves as the industry's de facto data authority, released its Opportunity Zones 2.0 Mapping Tool in August.

This tool shows which census tracts are "likely eligible," "likely eligible and rural" or "likely not eligible" for the 2027 designations based on current data.

The tool is expected to be 90% to 95% accurate once the Treasury certifies the final eligible tracts in 2026, making it the best crystal ball available for strategic positioning.

What the data reveals is sobering for urban investors, but exciting for those focused on rural America: The new rules tighten the eligibility criteria from census tracts with median family income of 80% of the area median down to 70%.

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This single change is projected to disqualify roughly 22% of currently designated zones — about 1,900 census tracts won't make the cut in 2027.

Industry experts project about 6,530 total opportunity zones in the new map, down from today's 8,764.

The winners? Rural areas — they must comprise at least 25% of each state's nominations under the new requirements.

The strategic timing dilemma

This creates what I call the "2026 paradox" for investors with significant capital gains. Do you invest under the current program before December 31, 2026, or wait for the enhanced benefits that take effect January 1, 2027?

There are compelling arguments for both approaches … or better yet, a "both/and" strategy that splits gains across both programs.

The case for investing now:

• You start the 10-year clock immediately for tax-free appreciation
• You have certainty about which census tracts qualify (the current map is known; the 2027 map won't be finalized until late 2026)
• Many of the best-performing zones from the first round won't qualify under the stricter 2027 rules

The case for waiting until 2027:

• Enhanced rural benefits (30% vs 10% basis step-up)
• Rolling five-year deferral period instead of a fixed 2026 recognition date
• Fresh zones that may offer better risk-adjusted returns

For investors with substantial multiyear capital gains events — such as installment sales of businesses or real estate — there's an elegant solution: Structure transactions to generate gains in both 2026 and 2027, then deploy capital into the most appropriate program for each tranche.

What December brings

The next critical date is December 2025, when the Census Bureau will release the 2020-2024 American Community Survey data. This updated information on income, poverty rates and census tract boundaries will allow Treasury to finalize which tracts are eligible for governor nomination.

Once that data drops, investors and developers will have about six months to conduct due diligence on likely qualifying zones before governors begin their formal nominations on July 1, 2026.

For those looking to acquire property in zones likely to be redesignated, this represents a valuable window to secure positions at potentially lower predestination prices.

The bottom line

The permanent extension of opportunity zones, combined with the dramatic enhancements for rural investment, represents a generational shift in place-based investment incentives.

The September 30 IRS guidance didn't just clarify the rules; it provided sophisticated investors with a road map and timeline for strategic positioning.

For high-net-worth families with significant unrealized gains in stock portfolios, business interests or real estate holdings, the next 15 months demand careful planning.

The decision isn't whether to consider opportunity zone investing. With stock markets near all-time highs and a permanent, enhanced program now in place, the question is when and where.

The IRS guidance provides immediate clarity on rural zone benefits. And December's Census data release will sharpen the picture considerably.

As always, opportunity zone investing requires careful coordination with experienced tax and legal advisers to ensure compliance with the complex timing and investment requirements. But for investors willing to do the work, the combination of multiyear tax deferral and potentially tax-free appreciation remains one of the most powerful wealth-building tools in the tax code.

The opportunity is here. The map is (mostly) drawn. And the clock is ticking.

Related Content

• Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
• Striking Oil in Opportunity Zones: Now Might Be the Best Time to Invest
• 1031 Exchanges vs Opportunity Zones: Which Has the Edge?
• Five Strategies to Defer Capital Gains in Real Estate Investing
• How to Invest in Qualified Opportunity Zones: Step-By-Step

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

How? Well, you’ll have to update your federal tax withholding.

Your withholding is the amount your employer takes out of each paycheck to pay taxes on your behalf. It’s typically a form you fill out when you start a new job, but the IRS recommends reviewing your W-4 Form annually to avoid costly mistakes.

For example, if you qualify for a new federal tax deduction, waiting until year-end to claim that tax break could lead to missing out on monthly savings, potentially giving the government an interest-free loan of your money until tax time.

So if you want to keep more of your take-home pay as you receive it in 2026, here are three critical tax changes that could boost your paycheck — if you qualify and update your Form W-4, that is.

Key tax changes to boost pay in 2026

To find the three critical tax changes for 2026 paychecks, Kiplinger considered tax breaks the IRS will soon add to its Tax Withholding Estimator that could affect workers.

• Taxpayers may use the estimator tool to help calculate federal tax withholding.
• This information can then be utilized to help fill out IRS Form W-4, Employee’s Withholding Certificate, with your employer.
• Only tax deductions with annual estimated savings above $1,000 qualified as “critical.” Estimated tax savings were referenced from the Tax Policy Center and The Tax Foundation, the latter of which sourced data originally published by the U.S. Census Bureau.

While Kiplinger notes estimates of how much you could save with these tax breaks, any actual tax savings may depend on several factors, like your filing status, applicable restrictions, and federal income tax bracket in 2026.

That said, here are three critical tax break changes that could boost your paycheck in 2026.

1. Tip income tax deduction in 2026

Tax deduction amount in 2026 (maximum): $25,000

Average estimated tax savings in 2026: $1,400

The new tip income deduction is a temporary tax break for tax years 2025 through 2028.

Although the deduction can be as high as $25,000 per tax return, the Tax Policy Center projects an average benefit of approximately $1,400 for each eligible household in 2026. That’s over $100 per month in tax savings, if you qualify and update your withholding.

Here are a few fast facts about the federal tipped pay tax deduction:

• Only “Qualified” tips are eligible, including voluntary cash and charged tips (like credit card or PayPal).
• Payroll taxes still apply (that is, the deduction doesn’t reduce Social Security or Medicare taxes).
• Your tip deduction starts to be reduced if you’re a single-filer with a modified adjusted gross income (MAGI) of $150,000 or more (married filing joint filers have a MAGI limit of $300,000 or more).

For every $1,000 your MAGI exceeds the above limits, your tip income deduction is diminished by $100. The deduction is completely phased out for single filers with $400,000 in MAGI and joint filers with MAGI of $550,000.

Plus, only certain professions qualify. The list of qualifying professions from the Treasury/IRS currently includes:

• Wait staff and bartenders.
• Food servers, chefs, and cooks.
• Dancers, musicians, singers, and digital content creators.
• Housekeeper cleaners and resort desk clerks.
• Home plumbers, electricians, and landscapers.
• Private event planners, pet caretakers, and tutors.
• Hairstylists, Tailors, makeup artists, and pedicurists.

While the IRS hasn’t released a final 2026 W-4 Form, you can start thinking about your withholdings with the draft version released late last month.

However, you’ll need to know an estimate of your qualified tip income for 2026 to plan how this federal tax break may affect your withholding. You can start by using your reported tips on last year’s tax return as a baseline and then project your qualified tips for 2026.

2. Overtime tax deduction for 2026 paychecks

Tax deduction amount in 2026 (maximum): $25,000

Average estimated tax savings in 2026: $1,400

Similar to the tax deduction for qualified tip income, qualifying non-exempt employees may be eligible to claim an overtime pay deduction from tax years 2025 through 2028.

The overtime deduction is worth up to $12,500 for single filers and $25,000 for joint filers, which the Tax Policy Center estimates could average about $1,400 per qualifying household next year.

Here are a few fast facts about the federal overtime pay tax deduction:

• You must work more than 40 hours per week.
• You must be a non-exempt employee who earns overtime under the federal Fair Labor Standards Act (FLSA).
• Single filers with more than $150,000 in MAGI will see their deduction reduced, while married filing joint couples won’t see a phase-out begin until their MAGI exceeds $300,000.

The overtime deduction is reduced by $100 for every $1,000 MAGI over the thresholds. When single filers have MAGI of $275,000 or more (and married filing jointly couples with $550,000 or more), the overtime deduction is completely phased out.

Like the tip income deduction, you can start thinking about adjusting your tax withholding for how much overtime pay you expect to receive in 2026. Begin with your 2025 overtime pay as a starting point. If you're unsure of this amount, consult your employer or refer to your pay stubs.

But keep in mind the overtime deduction only applies to the “extra” half of your time-and-a-half rate, not total overtime wages. That means your regular hourly rate is subtracted from your overtime rate when determining the deduction.

3. SALT deduction for 2026 withholding

Tax deduction amount in 2026 (maximum): $40,400

Average estimated tax savings in 2026: $4,722 to $14,974

The unlimited state and local tax (SALT) deduction was capped at $10,000 seven years ago by the Tax Cuts and Jobs Act (TCJA).

In 2025, the GOP tax bill temporarily raised the SALT deduction cap for certain taxpayers. This cap is projected to rise by 1% in 2026, increasing from $40,000 to $40,400.

Here are a few fast facts about the SALT tax deduction cap:

• Itemizing taxpayers could save up to $40,400 on federal taxable income in the 2026 tax year (returns normally filed in 2027).
• However, single filers in tax year 2026 will be subject to a phase-out of the SALT deduction when MAGI reaches $505,000 or more ($252,500 if married filing separately).
• For every dollar your income surpasses the above thresholds, your SALT deduction cap will be reduced by 30 cents.
• Your SALT cap will return to the original $10,000 limit once your income no longer qualifies for the deduction.

Claiming the SALT deduction largely depends on whether you itemize deductions on your return and how much state and local taxes you pay. So, individual tax savings may vary widely.

For example, the Tax Foundation estimates the average SALT paid per capita is between $4,722 and $14,974 annually. If you’re on the low end of that spectrum, you likely won’t see any benefit from this raised deduction cap, but if you’re on the high end, a higher SALT cap could make it worth the effort to update your federal withholding.

But beware if you’re in the highest tax bracket. That’s because those in the top 37% federal bracket for 2026 will be subject to a 35% rule on itemized deductions. This rule caps each itemized dollar to 35 cents worth of tax benefits (rather than 37 cents). Thus, if you’re a high-income earner, the 35% rule may limit the amount of estimated SALT deduction you should enter on your W-4 Form for 2026.

New federal tax withholding in 2026

While we covered three major 2025 tax breaks that could boost your monthly paycheck in 2026, the IRS will update its estimator tool with several other key tax breaks that may affect your work withholding to a lesser degree.

• The car loan interest deduction. Worth up to $10,000 on qualifying new vehicles, some suggest the estimated annual tax savings could average around $400 to $500 per taxpayer in 2026.
• The bonus deduction for those aged 65 or older. Worth up to $6,000 for eligible individuals with less than a certain income, the Tax Policy Center estimates that about half of eligible older adults will see some benefit.

The IRS is expected to release a final version of the 2026 W-4 Form by the end of December. So if you’re thinking about claiming these or other federal tax breaks on your withholding, wait until the finalized version is published to submit a new or updated form to your employer.

Also, it’s important to remember that not all tax savings may apply to you, and restrictions or certain limitations may apply to these and other tax deductions.

Double-check that you are fully eligible for the amount you claim on your Form W-4 before entering the deduction amount on your tax withholding. Otherwise, you could be in for a rude awakening at year's end with a hefty tax bill, fees, and even penalties.

The IRS Estimator may also be a helpful tax planning tool for other IRS withholding forms, like the Form W-4P (for retirees) and Form 1040-ES (for quarterly estimated tax payments). The estimator tool does not account for state income tax, so consult your tax professional for guidance on your specific tax circumstances if necessary.

Read More

• W-4 Form: Tax Withholding Tips to Optimize Your Taxes This Year
• New 2026 Income Tax Brackets Are Set: Will Your Rate Change?
• Three Popular Tax Breaks Are Gone for Good in 2026
• Standard Deduction 2026 Amounts Are Here

For investors considering oil and gas, understanding how deductions and depletion allowances work is critical.

These provisions are not only long-standing features of the tax code but now interact with newly expanded incentives designed to boost U.S. energy production.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

What the OBBB means for energy investors

The OBBB was designed to increase domestic oil and gas production and reduce dependence on foreign sources. Among its notable provisions:

Effective January 20, 2025, and made permanent, was 100% expensing for tangible drilling equipment and related assets placed in service during the year (bonus depreciation).

The qualified business income (QBI) deduction was made permanent. Under this provision, taxpayers can deduct up to 20% of qualified business income from pass-through entities, such as partnerships, S corporations and other qualifying pass-through structures, under IRC Section 199A.

This deduction is generally claimed using Form 8995 or Form 8995-A, depending on income level and complexity.

The Section 179 expensing limit and phaseout thresholds were changed. The OBBB increases the maximum deduction from $1 million to $2.5 million and the phaseout threshold from $2.5 million to $4 million of property placed in service during the year for taxable years beginning after 2024; both amounts will be indexed for inflation for taxable years beginning after 2025.

The OBBB also introduces a new provision: Section 168(n) allows for 100% expensing of certain nonresidential real estate property used in a qualified production activity within the U.S.

This provision significantly accelerates depreciation on property that is otherwise depreciable over 39 years. To be a qualified production property (QPP) for the accelerated deduction, the property must meet several types of criteria.

The excess business loss (EBL) limitation under IRC 461(L) has been extended through December 31, 2028. Beginning with the 2025 tax year, non-corporate taxpayers will continue to be subject to this limitation and must report disallowed losses on Form 461.

For 2025, the threshold amounts are $313,000 for single filers and $626,000 for joint filers.

With respect to oil and gas working interest ownership, the OBBB did not change the Section 469(c)(3) exception, which allows for general partners to claim deductions against any form of income rather than being subject in the passive loss rules.

Enhanced carbon-capture credits (Section 45Q) reward projects that integrate emissions mitigation. The residential Clean Energy Credit (IRC Section 25D) ends as of December 31, 2025, and new construction of Clean Electricity Credits (IRC Sections 45Y and 48E) must begin prior to July 4, 2026, and be placed in service by December 31, 2027.

A shift away from renewable tax credits, as the bill halts new incentives for wind and solar in favor of traditional hydrocarbons.

Lower federal royalty rates on onshore wells, dropping from 16.67% to 12.5%, make federal land drilling more attractive.

These measures reinforce what energy investors have long known: The oil and gas sector is uniquely positioned to combine potential cash returns with robust tax offsets.

The foundation: Intangible drilling costs (IDCs)

One of the most significant tax benefits in oil and gas investing is the deduction of intangible drilling costs (IDCs).

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These are the non-recoverable expenses of drilling — labor, site prep, drilling fluids and other costs that don't result in a tangible asset.

What's deductible: IDCs are non-recoverable costs such as labor, site prep, drilling fluids and other "sunk" expenses. These are generally 100% deductible in the year incurred.

Why it matters: For investors with high current income, these immediate write-offs can shield substantial taxable earnings.

The depletion allowance: Recognizing resource decline

Oil and gas investors can claim deductions for the depletion of natural resources, claiming annually, the greater of:

• Cost depletion. Based on how much of the reserve is produced compared with remaining, in the ground, total estimated reserves.
• Percentage depletion. This is usually 15% of gross income from production (subject to limits), available to working interest owners deemed as independent producers and royalty owners.

What's deductible: Revenue from producing wells can be offset by depletion allowances year after year.

Bonus depreciation and tangible drilling costs

What's deductible: Equipment such as casing, wellheads and rigs — normally depreciated over years — are now eligible for 100% bonus depreciation under the OBBB.

What's not deductible: Not every cost is immediately deductible. For example:

• Lease acquisition costs must usually be capitalized, not expensed
• Geological and geophysical studies often follow different amortization rules
• Personal expenses tied to investments (travel, entertainment) are generally not deductible

Balancing risk and reward

Energy investing is not without risk; commodity prices fluctuate, wells might underperform, and regulatory priorities can shift with administrations.

However, the unique tax treatment of oil and gas can soften the downside by allowing investors to:

• Deduct a large portion of their upfront costs
• Claim ongoing depletion allowances against production income
• Leverage new OBBB incentives for U.S.-focused projects

As we enter the fourth quarter of 2025, investors should note that the opportunity to take advantage of these powerful tax benefits ends on December 31, 2025. Acting before year-end ensures access to deductions, depletion allowances, and the expanded incentives under OBBB.

The bottom line

For investors seeking both portfolio diversification and tax efficiency, oil and gas remains one of the few asset classes in which the tax code provides distinct advantages.

With the OBBB reinforcing these benefits in 2025, now may be a prudent time to review whether energy investments fit into your overall financial strategy.

As always, consult with a tax professional who understands oil and gas specifically. Done right, deductions and depletion can be powerful wealth-building tools. Done wrong, they can become audit triggers.

Related Content

• Striking Gold (or Gas): A Financial Pro Unpacks the Nuances of Energy Investing
• Tax Advantages of Oil and Gas Investments: What You Need to Know
• Striking Oil in Opportunity Zones: Now Might Be the Best Time to Invest
• Kiplinger Energy Outlook: Gasoline Prices Holding Steady

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Families are diversifying into unfamiliar sectors, reassessing jurisdictional choices and professionalizing their operations at a faster pace than ever before, according to TMF Group's recent report on private wealth and family offices.

For family offices, building in resilience to rising global risk is no longer just about wealth preservation; it is about ensuring that operations, governance and structures can withstand turbulence while being able to take advantage of new opportunities.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Here are 10 practical steps family offices are considering to strengthen their resilience.

Step No. 1: Diversify beyond the familiar

Traditionally, wealthy families have tended to concentrate on sectors they know well, such as real estate, infrastructure and energy.

Today, they are diversifying into areas like AI, digital assets, renewables and sustainable agriculture. These industries present unfamiliar risks, but also potential for growth and relevance to next-generation priorities.

The challenge is to avoid "blind diversification" driven by headlines rather than due diligence. Families that succeed with diversification have often started by co-investing with partners who have sector expertise, or by hiring managers with direct operational knowledge.

The goal is to reduce concentration risk while also learning how to operate effectively in emerging or unfamiliar sectors.

Step No. 2: Choose jurisdictions for stability, not just tax advantages

Tax planning remains important, of course, but family offices increasingly weigh institutional stability, rule of law, transparent rules and enforceable cross-border agreements when deciding where to invest.

Family offices that prioritize these attributes gain predictability and reduce exposure to sudden regulatory shifts.

For example, for non-U.S. citizens looking to set up in the U.S., potential changes to income and estate tax thresholds create uncertainty on whether the cost of a U.S. residency (in pure tax terms) could rise.

As part of a broader assessment, however, jurisdictions that offer clarity and enforceability often prove more valuable in the long term than those offering only short-term fiscal advantages.

Step No. 3: Build governance frameworks that go beyond tradition

Traditionally, many family offices have historically relied on a patchwork of advisers — lawyers, investment managers and accountants — without integrated oversight.

The move toward an enterprise-level governance framework helps families coordinate decision-making, ensure compliance across borders and safeguard their reputation.

Family offices are building up resilience by establishing independent boards, defining formal reporting lines and conducting regular audits.

Some also create family constitutions or charters to clarify decision-making authority across generations.

Such measures reduce the risk of disputes and ensure continuity even when leadership changes unexpectedly.

Step No. 4: Professionalize talent

A key driver of resilience is the calibre of the professionals managing family office operations. Family offices are increasingly appointing chief executives, financial officers and compliance specialists with international experience.

The challenge, however, is retention: Competition for senior talent is intense, especially in hubs such as Dubai, London and Singapore.

For family offices still building scale, employing a full-time, in-house executive team may be premature. In this case, drawing on external expertise for specific functions can provide institutional-grade professionalism without the cost or commitment of hiring in-house.

Family offices can test new markets or sectors — with proper governance in place — while retaining the flexibility to expand later.

Once the scale of investments justifies it, responsibilities can be transitioned to permanent staff.

In practice, many family offices combine in-house leadership with targeted outsourcing for specialist support to ensure resilience.

Step No. 5: Incorporate next-generation values into long-term strategy

Successors to family wealth are often more focused on ethical and sustainable investment priorities, and their interest in impact investing, green business and philanthropy is not a passing trend.

Integrating these values into the family's long-term investment strategy ensures smoother generational transitions and helps protect against future reputational risk.

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One practical approach that some family offices apply is to create parallel investment portfolios that allocate a defined share of capital to ethical, socially focused and responsibly governed businesses.

This enables younger family members to take a hands-on role, without disrupting the overall wealth strategy, while giving the family office a structured way to evaluate the performance of responsible investments.

Step No. 6: Take philanthropy seriously as an operational activity

Often, family members — especially younger ones — want to be actively involved in philanthropy, rather than simply making passive donations. Establishing charitable trusts, setting clear governance rules and measuring social outcomes can make philanthropic ventures more effective.

The growth of family-run charitable trusts reflects a shift from one-off giving to structured, multigenerational impact.

Offices that treat philanthropy with the same rigor as other investments — by tracking outcomes and appointing skilled managers — find that this strengthens family cohesion while also enhancing public reputation.

Step No. 7: Keep ahead of compliance complexity

Compliance requirements, from anti-money-laundering rules to inheritance tax policies, vary widely and can evolve quickly. Building resilience into family offices means treating compliance not as an administrative burden, but as a core function.

This involves setting up internal compliance capabilities or engaging independent external providers who understand local regulatory environments.

A proactive approach that includes monitoring legislative pipelines and running regular compliance audits can prevent costly remediation later. It also reassures regulators and counterparties that the family office is operating transparently and responsibly.

Step No. 8: Embrace technology for oversight and transparency

As family offices expand across jurisdictions, digital tools that provide centralized oversight of entities, reporting obligations and operational risks are becoming essential. Cloud-based platforms can consolidate data, track compliance deadlines and provide real-time insight into global operations.

Technology also enables families to maintain transparency with multiple generations. Secure portals can enable family members in different regions to access up-to-date financial reports, philanthropic updates and governance documents.

This reduces misunderstandings and keeps all stakeholders aligned, even when they are geographically dispersed.

Step No. 9: Foster collaboration with peers and partners

Family offices are increasingly pursuing joint ventures with other family offices when entering unfamiliar industries or regions. This builds resilience by spreading risk, pooling expertise and accelerating learning.

Collaboration also extends to professional advisers — such as administrators, trustees and compliance specialists — who provide vital infrastructure for offices that cannot build every function in-house.

Step No. 10: Stress-test structures with scenario planning

Political disruption, regulatory changes and new trade policies can happen overnight. Uncertainty around tariffs, for example, has already disrupted private equity funds that depend on international supply chains.

Increasingly, family offices are using scenario planning and risk-weighted models to test the impact of multiple outcomes, such as new tax policies, capital flow restrictions or market shocks.

This kind of what-if analysis not only highlights vulnerabilities, but also enables family offices to build playbooks for rapid response.

For instance, knowing in advance which jurisdictions offer fast-track relocation options, or which structures provide the best protection in the event of sudden regulatory changes, can make all the difference.

Resilience in family offices is no longer just about weathering storms: It is about building operational strength, professional talent and governance models that adapt to shifting compliance needs and changing expectations of next-generation investors.

Family offices that take a structured approach — choosing stable jurisdictions, investing in governance, embracing professionalism and aligning with ethical priorities — will be better placed to thrive in an unpredictable world.

Related Content

• Nine Types of Trusts for High-Net-Worth Estates
• Average Net Worth by Age: How Do You Measure Up?
• What Is a Good Inheritance? Six Great Assets to Inherit
• Estate Planning for Millionaires
• Wealth Transfer Is About More Than Just Money

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

And if they have plenty of working years left, people think, What's the hurry?

Consequently, retirement planning is often a piecemeal process for those folks. Throughout their careers, they focus solely on the savings or investments aspect, leaving the other important parts of a plan for another day.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

But as you get closer to retirement — let's say within 10 years of your planned exit from the workforce — strategizing with a holistic approach and putting all the pieces together is vital to being properly prepared for the day you walk away.

By taking all the retirement elements into account, you can build a comprehensive, interconnected plan that brings you added peace heading into retirement.

Here are the factors to consider when constructing a well-rounded plan that can protect you in retirement.

Design a lifetime money map

How are you going to replace your paycheck when you retire?

People have achieved the pinnacle of their wealth while working, and now they start to spend it. That gets nerve-racking. They've been good with their money, saving and investing, and then they're just spending it.

It's a whole mindset shift. And unfortunately, many financial people never talk about it. People often work with financial professionals who don't do comprehensive planning but typically just handle investments.

To do well in retirement, you need to have a written year-by-year income plan. It's essentially a money map showing:

• How much money you have in different accounts
• How to create income streams — the accounts to pull from and when
• How to manage taxes every year
• Adjusting the plan for inflation

A key to developing your money map is reviewing all your monthly spending. Knowing your expenses while working provides clues to how much you might spend in retirement — when you have far more time to spend and less money coming in.

It also gives you ideas about what types of expenses to cut or reduce and helps you develop a budget mindset, which most people need in retirement.

Unfortunately, many people don't have a clear grasp of their expenses and don't take the time to investigate them. Out of the many people I've met with in the past year, maybe five were close to knowing how much they really spend each month.

To determine how much of your money you are spending, look at the total withdrawals on your bank statements over the last 12 months. I mean, look at everything you spent, from the mortgage to utility bills to entertainment and every miscellaneous item.

Many people make a ballpark estimate without looking at their statements. On average, the people I see are off by as much as 30% to 50% when they do that.

Extend that miscalculation over a 10- to 15-year period, and that's the difference between somebody living a great retirement and somebody having to go back to work or running out of money.

Reduce your market risk

Many people take too much risk. When drawing closer to retirement, it makes sense to start getting their investments aligned with the Rule of 100.

That's a formula for managing risk by gradually reducing exposure to stocks as you age. You subtract your age from 100 to calculate the percentage of your portfolio that should be invested in stocks. The remainder should be protected from market losses.

Following the Rule of 100, someone who is 60 years old would have 60% of their savings protected and the remaining 40% held in stocks. When you've got a paycheck coming in, you can ride through the ups and downs of the markets.

But when you don't have that paycheck anymore and you're starting to withdraw money, you are more vulnerable to market volatility.

In your working years, you're putting money into a 401(k) or other investment accounts when the market is high and when it's low. You might be dollar-cost averaging over time; that's an investment strategy where a fixed dollar amount is invested at regular intervals, regardless of the asset's price.

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This means you buy more shares when prices are low and fewer when prices are high, potentially reducing the average cost per share over time.

Dollar-cost averaging can help reduce the risk of investing a large sum right before a market downturn, which can work out in people's favor.

But the opposite of that starts happening in retirement, when you've got to pull your money out monthly to cover expenses. Even when the market finishes up positive at the end of the year, it's negative at times during the year.

Trying to time the market is pointless. If the market has a downturn of 30%, 40% or 50% when you are in retirement, you don't have time to recover.

Review your tax exposure and manage it

According to an Employee Benefit Research Institute survey, almost half of the retirees sampled said they didn't understand how taxes would impact their retirement, and nearly 40% said the amount they are paying is either higher or lower than what they expected.

People who have 401(k)s or IRAs face potential tax hits when withdrawing money from these tax-deferred accounts in retirement. Required minimum distributions (RMDs) begin at age 73 (or 75 if you were born in 1960 or later).

That taxable income could push them into a higher tax bracket, especially when coupled with how much of their Social Security is taxable, which can trigger higher Medicare premiums.

When you're putting money away in your working years, are you putting it in the right places? Are you maximizing the tax-free accounts, such as the Roth 401(k) option?

People get really focused on rates of return, but in the ramp-up to retirement they need to consider the potential tax rate that they're going to pay when they make withdrawals in retirement.

Choose your best health care option

If you want to retire before 65, what are the health insurance plans to help you bridge the gap until you hit your Medicare age at 65? Some people continue working just for the employer-offered health insurance. But if you found another option, could you retire earlier?

The Affordable Care Act provides income-based subsidies, and every state has an exchange where individual or family health plans can be purchased.

COBRA can be expensive, unless your employer subsidizes your coverage temporarily as part of a severance package. If your spouse is still working, another option might be enrolling in that plan.

Once people hit Medicare age and are no longer covered by their employer's health insurance plan, they need a Medicare supplement plan and a prescription drug plan.

Medicare late-enrollment penalties can increase your monthly premiums if you don't sign up for Part A, Part B or Part D when you're first eligible. But you can delay enrolling in Part B and Part D without penalty if you have creditable coverage through your or your spouse's current employer.

The big costs that can hit people down the road are what Medicare usually doesn't cover, such as extended care in nursing homes, assisted-living facilities and in-home assistance.

Long-term care can be costly. You can use long-term care insurance to protect your assets (an even more important factor for those wanting to leave an inheritance), but premiums can be prohibitive.

On the plus side, long-term care insurance reduces the burden on family members to be caregivers, has potential tax advantages and enables the insured person to protect financial stability for a spouse.

The bottom line: You need a plan

When you see the retirement horizon a decade or less in the distance, it's time to get all the pieces of your plan in place so you can walk off into the sunset in peace. Putting it off for too long risks having a less satisfying retirement than you deserve.

Plan carefully and comprehensively to account for all the aspects of retirement living — and with the goal of living those hard-earned years to the fullest.

Dan Dunkin contributed to this article.

Appearances on Kiplinger.com were obtained through a paid PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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1. Itemizing and doing a QCD

Question: Can I itemize on Schedule A of the Form 1040 and do a qualified charitable distribution (QCD) this year? And does this make sense?

Joy Taylor: People age 70½ and older can transfer up to $108,000 in 2025 from a traditional IRA directly to charity. QCDs can be done only from an IRA, either one that you own or an inherited IRA. You can’t do them from a 401(k) or other workplace retirement plan.

You can itemize on Schedule A and do a QCD, but you can’t deduct the QCD as a charitable contribution on Schedule A. QCDs are nontaxable and aren't included in your adjusted gross income (AGI). And they can count toward your required minimum distribution (RMD), thus reducing the taxable amount of the RMD, provided you do the QCD before withdrawing your full RMD for the year.

Because QCDs aren't included in adjusted gross income, they aren't counted in calculating your 2025 AGI for figuring out whether you would owe monthly surcharges on Medicare premiums for 2027. The fact that QCDs don't increase AGI has even more upside now because of the various new tax breaks in the "One Big Beautiful Bill" (enacted in July 2025) that begin to phase out at modified AGIs above a certain amount. These include the new $6,000 senior deduction for filers age 65 and older, the deductions for up to $25,000 of tips and $12,500 of overtime pay, the deduction for up to $10,000 of interest paid on an auto loan to buy a new vehicle, and the $40,000 cap on deducting state and local taxes on Schedule A. Depending on your circumstances and your income, you might be able to use the QCD strategy to keep your AGI below the various levels.

2. How to do a QCD

Question: I have check-writing privileges on my IRA. If I write a check from my IRA account to a charity and send it to the organization, will this qualify as a QCD?

Joy Taylor: It depends on the IRA custodian. It is true that only transfers from your IRA directly to charity are considered QCDs, but different IRA custodians have their own procedures for complying with this. Some will require that the check goes directly from the custodian to the charity. Others will, at the account owner’s request, have the check written from the IRA account and send the check to the IRA owner to forward to the charity. And others will allow IRA account owners with check-writing privileges to write the check and send it directly to the charity. Check with your IRA custodian to see what it sanctions before doing a QCD.

Note that it’s not acceptable for the custodian to write the check to the IRA owner, who then deposits the money and writes a check from his or her own account to the charity. It’s also not acceptable for an IRA owner with check-writing privileges to write a check from the IRA account to himself or herself and then make a donation to charity.

3. QCDs greater than the annual RMD

Question: I am of RMD age. Does it make sense to donate more money through a QCD over and above my annual RMD amount?

Joy Taylor: The answer depends on several factors. I'll discuss two of them here. First, if you are itemizing on Schedule A, then you would be able to deduct normal charitable contributions (those not made through a QCD). This is tax beneficial because it would reduce your taxable income and the amount of tax you would owe. Note that deducting a charitable contribution on Schedule A would not reduce your adjusted gross income. If you are not itemizing and you want to donate to charity, then doing a QCD over the RMD amount makes lots of sense.

Second, doing a QCD that exceeds your RMD would reduce your IRA balance for figuring RMDs in later years, which is a good thing.

For more information, I would suggest that you discuss with your financial advisor and a tax accountant whether it would be beneficial for you tax-wise to do a QCD in excess of your annual RMD.

4. Deductible IRA contributions and QCD

Question: I have made deductible contributions to my traditional IRA for the past few years. I am now 77. Do all of my post 70½ deductible IRA contributions count against me when attempting a QCD? Also, what about my wife’s post-70½ deductible contributions to her traditional IRA, which I have now inherited because she passed away? Do her deductible IRA contributions count against a QCD?

Joy Taylor: There’s a special rule if you do a QCD and you make tax-deductible contributions to a traditional IRA after 70½. Essentially, these post-70½ contributions reduce your allowable tax-free QCD amount until used up. Post-70½ deductible contributions to a SEP, SIMPLE IRA or a workplace retirement account aren’t affected by this rule.

Let’s take a simple example. A 75-year-old working man is planning to do a QCD for the first time in 2025. For 2021, 2022, 2023 and 2024, he made tax-deductible contributions to his traditional IRA totaling $23,000. In 2025, the man does a QCD and transfers $20,000 from his IRA directly to charity. He would owe income tax on the full $20,000 because it is less than the $23,000 of post-70½ tax-deductible IRA contributions. Let’s say that in 2026, he then transfers another $15,000 to charity directly from his IRA. $12,000 will be a nontaxable QCD, and $3,000 will be treated as a normal distribution.

Any post-2019 deductible contributions made to your IRAs when you were 70½ or older will reduce your allowable tax-free QCD amount until they are used up. Unfortunately, this rule applies to your original IRA and to the IRA you inherited from your wife (so her post-70½ deductible contributions would also reduce the tax-free QCD amount). IRS Publication 590-B, “Distributions from Individual Retirement Arrangements (IRAs)” has a QCD worksheet, titled "Appendix D Qualified Charitable Deduction (QCD) Adjustment Worksheet" that includes a line for reducing your QCD amount by the post-70½ deductible contributions made to the IRA.

Note that if you have already done what you thought was a QCD this year, and it turns out it is not a tax-free QCD because of your post-70½ deductible contributions, then the distribution would be taxable to you. But if you itemize, you can take a charitable deduction on Schedule A of your Form 1040.

5. 401(k) contributions and QCDs

Question: I am 76 and still working. I contribute to my employer-sponsored 401(k) account every year. I have also done QCDs from my traditional IRA since I turned 72 and was required to start taking required minimum distributions from the IRA. Can I get the full advantage of my QCDs even though I also contribute to my 401(k)?

Joy Taylor: As discussed in the answer to question 4 above, there is a special rule if you do a QCD and you make tax-deductible contributions to a traditional IRA after 70½. Essentially, these post-70½ contributions reduce your allowable tax-free QCD amount until used up. Post-70½ deductible contributions to a SEP, SIMPLE IRA or a workplace retirement account aren’t affected by this rule, so you don’t need to worry about it. Your 401(k) contributions won’t impact the QCD.

6. Documentation substantiating a QCD

Question: I’m planning to do a QCD for the first time this year. What documentation do I need from the charity to show that I made the donation from my IRA?

Joy Taylor: When you do a QCD, you will want to receive a letter from the charity acknowledging the gift and stating that you didn't receive anything in exchange for your charitable donation. This is similar to what you would receive from a charity if you made a normal charitable contribution of cash. The letter from the charity doesn’t need to specifically state that the donation was made through a QCD, and likely won’t include that language. Also, be sure to keep a copy of the check or electronic transfer you sent to the charity.

7. Reporting QCDs on your tax return

Question: I have a traditional IRA that I currently take RMDs from. Last year, I did a QCD from that IRA for the first time. The Form 1099-R that I received from my IRA custodian doesn’t separate the QCD amount from the remaining RMD. How do I report the QCD on my Form 1040?

Joy Taylor: It is true that if you do a QCD, the Form 1099-R that you receive won’t reflect the distribution as a QCD. It will show only the total amount of your distributions because IRA custodians lack firsthand knowledge to discern whether a particular distribution from a traditional IRA meets the QCD rules. This is normal procedure.

The IRS is aware of this, and the Form 1040 instructions explain how to report the QCD on your tax return. When filling out the 2024 Form 1040, you would include on line 4a the total amount of distributions reported on Form 1099-R. Then you subtract the amount that was transferred directly to charity (the QCD portion) and report the remainder, even if zero, on line 4b. Write “QCD” next to line 4b so that the IRS knows why the numbers don’t match. If using tax software, the program should do this for you once you report the 1099-R distribution and let the program know about the QCD.

For example, here is an explanation from TurboTax: "To report a qualified charitable distribution on your Form 1040 tax return, you'll use the 1099-R (even though there's no indication that it was a QCD). Enter the info as a 1099-R and you'll be asked in one of the follow-up questions if it was a Qualified Charitable Distribution. TurboTax includes the full amount of the distribution reported on your Form 1099-R on line 4a (IRA Distributions) of your Form 1040 or 1040-SR. The taxable amount reported on Line 4b will be the total distribution less the QCD amount and will have 'QCD' entered next to it."

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes related to the One Big Beautiful Bill and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: Questions on Capital Gains
• Ask the Editor: Questions on Four New Tax Deductions
• Ask the Editor: Questions on Inherited IRAs
• Ask the Editor: Questions on Home Sales and Taxes

With the passage of the One Big Beautiful Bill (OBBB), new tax rules and opportunities are now available to help investors reach their goals.

OBBB's key changes to charitable giving

The OBBB introduced four important changes to tax laws affecting charitable giving:

Standard deduction. Taxpayers who take the standard deduction will be able to claim a deduction for charitable contributions of up to $1,000 for single filers and $2,000 for joint filers.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Itemized deductions. The individual deduction limit for cash contributions made to public charities is 60% of a taxpayer's adjusted gross income (AGI). This limit was previously scheduled to sunset and revert to 50% at the end of 2025, but the OBBB extends the current 60% limit.

0.5% floor. For individual taxpayers who itemize deductions, the OBBB creates a new floor of 0. 5% to be eligible to deduct charitable contributions. This means that individuals will be able to deduct only the value of charitable gifts that exceed 0.5% of their AGI — that's $500 for every $100,000 in AGI.

Deductibility cap. For itemizers, the tax law also caps the benefit of the total itemized deductions at 35 cents per dollar for taxpayers who are in the 37% tax bracket.

These changes for individual taxpayers are effective for taxable years beginning January 1, 2026.

While introducing a charitable deduction for taxpayers who don't itemize might encourage greater participation in giving, high-income taxpayers could see a reduced tax benefit from charitable deductions in the future.

In light of these changes, some donors might consider accelerating their contributions in 2025 using a donor-advised fund (DAF) to maximize the value of their contributions before the new changes go into effect.

Understanding donor-advised funds

DAFs are charitable accounts funded by individual donors but maintained and operated by a charity. Once a donor makes a contribution, the sponsoring charity is responsible for maintaining the account, investing contributions and distributing funds in line with the donor's advice.

Distributions are made whenever and to whomever the donor and the sponsoring charity direct. Unlike private foundations, which require a 5% distribution each year, the law doesn't require DAF funds to be deployed at any time.

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DAFs are treated as public charities for tax-deduction purposes; however, DAFs aren't qualified recipients of a qualified charitable distribution (QCD).

As a result, DAFs can't receive qualified distributions from retirement accounts or from nonitemizers seeking to take advantage of the new $1,000 below-the-line deduction for cash contributions.

Selecting the right DAF can be as important as selecting the eventual charitable recipients, and thanks to innovations in product development, investors have some compelling options.

For example, the recently launched Janus Henderson Charitable Investment Accounts provides a tax-deductible opportunity for investors with no account minimums, low contribution minimums, grants as low as $50, tax-free growth potential and an attractive fee structure.

The time is now

The OBBB has altered some of the rules of philanthropy, and investors should act ahead of the end of the year to secure the tax benefits provided by the new law.

This is especially true for high-income taxpayers who have an opportunity to accelerate contributions in 2025, implement a bunching or bundling strategy via a DAF and make the most of current tax regulations before they change.

To maximize deductibility and avoid application of the 0.5% floor, we believe itemizers should "prefund" charitable contributions into their charitable investment accounts this year.

A charitable gift of $5,000 made in 2025 generates a $5,000 deduction. That same $5,000 charitable gift made in $1,000 increments per year beginning in 2026 would create a total deduction of $2,500.

For a potentially better tax result, investors can "bunch" those charitable gifts into a DAF this year and make gifts to charity from the DAF in the coming five years.

As always when it comes to tax planning, investors should work with a trusted tax professional or financial adviser to create a plan that meets their values and goals.

Matthew Sommer is a Managing Director and Head of Specialist Consulting Group at Janus Henderson Investors. His team consists of various subject matter experts across several disciplines, including retirement planning, wealth advisory, practice management and investment strategies. They provide clients actionable insight and expertise they can implement into their business practice to retain and gain clients. Prior to joining Janus in 2010, Dr. Sommer spent 17 years at Morgan Stanley Wealth Management and its predecessors, Citi Global Wealth Management and Smith Barney, during which time his roles included director of financial planning and director of retirement planning.

Jeffrey R. Brooks is an Executive Director and Wealth Strategist with the Specialist Consulting Group at Janus Henderson Investors. Jeff brings to his role years of experience in both the practice of law as well as the financial services industry, working together with financial advisors and their high-net-worth and ultra-high-net-worth clients. His knowledge and real-world experience are invaluable for advisers and investors facing hurdles in the quest to achieve tax, wealth transfer, family governance, business succession and philanthropic goals.

The information contained herein is for educational purposes only, is not an account type recommendation, and should not be construed as financial, legal or tax advice.

Investing involves risk, including the possible loss of principal and fluctuation of value.

A donor-advised fund is facilitated by a tax-exempt public charity under sections 501(c)(3) and 509(a)(1) of the Internal Revenue Code. Contributions made to a donor-advised fund are considered an irrevocable gift and are not refundable. Once contributed, the charitable organization facilitating the donor-advised fund has exclusive legal control over the contributed assets.

Donors should carefully consider information contained in the prospectus, or if available, the summary prospectus, for the registered underlying mutual funds, including investment objectives, risks, charges and expenses. Donors can request a prospectus by calling Janus Henderson at 800-525-3713. Please read the prospectus carefully before making contributions.

Market fluctuations may cause the value of investment fund shares held in a donor-advised account to be worth more or less than the value of the original contribution to the funds.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

At least, they might have such opportunities if the third-party administrators for their workplace 401(k) plans elect to add these alternatives to the mutual funds and exchange-traded funds (ETFs) that make up most accounts.

It would be advantageous for plan participants if they do.

The alternative investments that fall under the president's order include real estate and cryptocurrencies, as well as private-market assets, such as equity and credit in private firms that aren't publicly traded.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Many participants in 401(k), 403(b) or 457 accounts are intrigued by the idea. For example, according to a survey by Schroders, an asset management firm, 45% of those surveyed say they would invest in private equity and private debt if their plan offered those as options.

Most of the people surveyed don't have high hopes that this will happen, though. Just 30% say they expect their plans to offer these alternatives in the next five years.

That would be disappointing.

Limited options

A 401(k) is one of the most common ways people save for retirement, with about 70% of private-sector employees in the United States having access to such plans.

But one drawback of the plans is the limited investment options many of them give participants. In many cases, those options lean heavily on target-date mutual funds that are tied to the year the employee anticipates retiring.

The idea is that investments within the fund will adjust automatically as the years pass, starting with an aggressive investment mix and becoming more conservative as the target date nears and risk needs to be reduced.

Theoretically, that sounds good. But many people contributing to those accounts could earn greater returns if they had a wider range of investment options — and if they had someone who could offer sound advice on how to get the most out of their accounts.

In too many cases, people with workplace 401(k) accounts act as their own advisers. They're given a list of funds to choose from and make a quick decision without having a good handle on whether it's the best decision.

They shouldn't be faulted. There's no reason to expect that the average person, without any training, will be adept at choosing investments, especially when the goal is to invest for the long term.

Sadly, in too many instances, savers aren't optimizing their portfolios over time and don't realize they could have accumulated much more money than they have.

The rise of cryptocurrency

Now, cryptocurrencies and other investment alternatives could give 401(k) participants the chance to do better — if they're given the opportunity to use them.

In a way, it might not be surprising if some people are hesitant to test the waters with alternatives, preferring to stick with the way things are.

But the way things are hasn't always worked as well as it should have for many people trying to plan a stable and sound retirement.

As fiduciaries, those of us at my firm would not have offered cryptocurrency as an investment option as recently as five years ago. But things change, and the cryptocurrency market has become mainstream. Even so, there are restrictions on how we do it.

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Generally, we prefer to limit cryptocurrency to 5% of a client's portfolio, although clients can request and sign off on increasing the amount up to 10%.

Clients aren't buying actual digital coins. The investment is in crypto ETFs, which allow investors to participate in the cryptocurrency market without directly owning the coins. Instead, they buy and sell ETF shares on the traditional stock exchanges.

Maximizing returns

Many people who feel they're in good shape with their 401(k) contributions and growth aren't in good shape at all, or at least not to the extent they could be. They aren't maximizing their returns. This is one reason so many Americans worry about running out of money in retirement.

If you participate in a 401(k) or similar plan at work, look into whether your plan will offer these alternative investments.

Should the answer be no, there's another option you can consider about which many people aren't aware. Even if you're still working and contributing to a 401(k), you can roll over money from your 401(k) into an IRA and get help managing your investments through a financial professional.

This option is especially advantageous as you near retirement, because you want to make sure you're using the right investment strategies to optimize your portfolio and increase the amount of money you will retire with.

A financial professional can help you understand and implement those strategies.

Your goal is to be able to enjoy the retirement you've always dreamed about, rather than fret about whether your money will last.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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You're doing what you've been told to do: Save as much as possible, ideally in your 401(k) so you can defer tax.

After all, shouldn't you save on taxes today while you're making a bunch of money, and pay it later in retirement while you're in a lower tax bracket? That's what you're told.

And don't forget, you often also get free money in the form of your employer's matching contribution.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Between consistent contributions and wise investing, the compounding growth of a 401(k) can produce a large nest egg for your retirement. It feels great to see that balance.

However, when it's time to start withdrawing money from your 401(k), the tax bills start and your sense of comfort dissipates.

Here's what you need to understand: When you're ready to retire, a 401(k) becomes the highest-taxed asset(s) you own, and the IRS can't wait to get its share. The same goes for other pre-tax accounts, such as a 403(b) or traditional IRA.

What many people don't realize is that when they take money out of their 401(k), they could be taxed multiple times for each distribution. Here are the main reasons why you shouldn't leave your nest egg there, or at least not the majority of it.

Income tax and RMDs

The money you withdraw from a traditional defined contribution plan, such as a 401(k), is taxed as ordinary income at the rate of your tax bracket in the year you take the distribution.

A traditional 401(k) is subject to required minimum distributions (RMDs), which begin at age 73 for most people. If you save a lot of money in your 401(k), your annual RMDs could significantly increase your income, push you into a higher tax bracket and punish you in taxes.

By the time you reach your 80s, RMDs can become so large that they are a real problem, causing a shocking amount of taxation and leading to higher premiums on your Medicare.

Don't assume, as many people do, that you'll be in a lower tax bracket in retirement than the one you were in during your top earnings years. That's a big lie people are told.

If you do a good job saving for your retirement, aren't you going to be able to retire at roughly the same standard of living you enjoyed when you were working?

A similar standard of living equals a similar income, which leads to similar tax rates. Also consider that tax rates are likely to increase by the time you retire.

Social Security

Your 401(k) distributions could also make more of your Social Security benefits taxable. A withdrawal from a pre-tax account raises your combined income, an equation the IRS uses to determine how much of your Social Security may be subject to tax.

Up to 85% of your Social Security benefits may be taxable if you're single and earn more than $34,000 or are married and earn more than $44,000.

Higher Medicare premiums

When 401(k) distributions are added to your taxable income, it increases your modified adjusted gross income (MAGI). If your MAGI exceeds certain income thresholds, you must pay an income-related monthly adjustment amount (IRMAA), which is an additional surcharge on your Medicare Part B and D premiums.

Impact on the surviving spouse

If you're married and taking distributions from your 401(k), the good news is you're getting hit with all these taxes while you're in the most favorable tax bracket of married filing jointly.

But what happens when one of you dies? Then the surviving spouse goes into the higher tax obligation, filing single. The net effect is that the surviving spouse often sees their taxes doubled or more. We like to call this the "spousal tax trap."

The Roth solution

Part of financial fulfillment in retirement often comes down to this decision: Do you want to pay tax on the seed or on the harvest? With a traditional 401(k), you're saving tax on the seed, but you're paying tax on the harvest. That is the exact opposite of what you should be doing.

The 401(k) is a great tax shelter when you are working, but it's the worst place to have your money in retirement.

What can you do about it? The most obvious answer is to speak with a tax planner well in advance of your projected retirement. They can help you put together some type of Roth conversion glide path while using your current tax bracket.

With a Roth conversion, you transfer retirement assets from a 401(k) or other pre-tax accounts into a Roth IRA. You must pay income tax on the money you convert in the year you convert, according to your tax bracket at the time, but the advantages when you retire are well worth it.

Withdrawals are tax-free as long as you are at least 59½ and have had the account for a minimum of five years. And unlike other types of retirement accounts, Roth IRAs are not subject to RMDs.

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Also, if you don't need part or all the money, you can let your Roth IRA keep growing and leave it to your heirs or your spouse. Roth IRAs aren't just tax-free for you; they are also tax-free to your beneficiaries.

There are no IRS limits on the amount of money you can convert from a traditional IRA or other pre-tax retirement account into a Roth IRA, but spreading the conversion over several years can help reduce your tax burden in those conversion years.

Roth misconceptions

Of course, it's far better to start contributing to a Roth IRA, or Roth 401(k), earlier in your work life. But what sometimes happens, if you're a high earner in your 40s and doing a good job saving, is that everyone tells you to make pre-tax contributions to your 401(k).

So here you are, maxing out your 401(k) contributions, putting $25,000 a year into your 401(k) and getting that tax deduction for that amount. It feels like the "smart" move, because that's what everyone tells you to do.

But socking money away in your 401(k) may not actually be the most efficient tax move. You may even want to consider doing the opposite by changing those contributions to Roth. You won't get the tax deduction up front, but you will certainly appreciate tax-free money as you approach retirement.

When it comes to Roth conversions, people often have two misconceptions that make them hesitant to do them.

One is that they mistakenly think they have to pay the tax on the conversion in one lump sum by writing a check to the IRS or withdrawing from their savings or investment account.

However, provided that you are over the age of 59½, you can simply do it by having the tax withheld by whatever financial firm holds your retirement account.

The second misconception: If you do a Roth conversion, you must wait five years before you touch that money. The truth is that you have to wait five years to touch the earnings on that money.

When you're over 59½, just withhold the tax and you can take distributions on the principal from day one.

Take action to avoid 401(k) tax bombs

Beware of building your traditional 401(k) during your working years while ignoring the tax repercussions you'll face in retirement.

Take action now by changing your 401(k) contributions to Roth and strongly consider converting any IRAs you have to a Roth.

Don't wait until you're near retirement. Give yourself a true sense of future financial security and remember: It's far better to pay tax on the seed rather than the harvest.

Dan Dunkin contributed to this article.

Centennial Advisors, LLC is an Investment Adviser registered with the U.S. Securities and Exchange Commission ("SEC"). Registration as an investment adviser does not imply a certain level of skill or training.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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• 5 Ways Your 401(k) Is a Tax Trap (and What to Do About It)

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1. What is capital-loss harvesting?

Question: I keep hearing about capital loss harvesting as a strategy for year-end tax planning. What is capital loss harvesting?

Joy Taylor: Tax-loss harvesting (or capital-loss harvesting) is a way for investors to lower their federal income tax bills. The strategy involves selling stocks or other securities in your taxable investment accounts that have declined in value for the purpose of generating capital losses to offset capital gains from the sale of winners that you have sold during the year. Investors commonly do this closer to the end of the year, when they have a better idea of the amount of capital gains they will have.

2. What is the wash sale rule?

Question: I sold stock earlier this year for a large taxable gain. I have another stock that’s not performing well right now, so I want to sell it at a loss to help offset the capital gain. Can I then immediately buy back the stock I sell at a loss?

Joy Taylor: No. The wash sale rule in the federal tax code prevents this. You can’t deduct a capital loss from a sale of securities if you buy substantially identical securities up to 30 days before or after the sale. The recognized loss isn’t gone forever; it’s only suspended. That’s because the loss is added to the tax basis of your replacement securities.

3. How do wash sales apply between spouses?

Question: I sold stock from my taxable account this year at a loss. My spouse purchased stock in the same company the next day. Will the wash sale rule prevent me from deducting the capital loss from my stock sale?

Joy Taylor: Yes. The wash sale rule is a sneaky rule that can easily catch people by surprise. For example, selling a mutual fund at a loss shortly after the date a dividend is reinvested can lead to a wash sale. Also, buying stock in an IRA after selling the same stock at a loss in your taxable investment account results in a wash sale. You also have a wash sale if you sell securities, and your spouse or a corporation that you control buys substantially identical securities within the 60-day period.

4. What if I sell crypto at a loss?

Question: I own Bitcoin and I sold some at a loss earlier this year. About a week later, I bought some more Bitcoin. Does the wash sale rule prevent me from deducting the capital loss on the sale?

Joy Taylor: No. The wash sale rule doesn’t apply to taxpayers who sell cryptocurrency at a loss. The definition of securities for the purposes of the wash sale rule doesn’t include crypto. So, for example, if you own crypto that sharply falls in value, you can sell it, recognize a capital loss, and buy the same digital currency the same day or soon after.

5. How much capital losses can I deduct?

Question: How much capital loss can I deduct on my federal income tax return?

Joy Taylor: Your capital losses can offset your capital gains (which is why tax-loss harvesting is a popular strategy), plus up to $3,000 of other income ($1,500 if you are married and filing a separate return from your spouse). Excess losses are carried over to the next year and can help reduce future capital gains. For individuals, capital losses can be carried over indefinitely until they are used up.

For example, say you have $25,000 of capital gains and $40,000 of capital losses in 2025. You can use $25,000 of your capital loss to wipe out your capital gain. You can then deduct $3,000 of excess capital loss on your 2025 Form 1040 against your wages or other ordinary income and carry forward $12,000 of losses to the next year. You would use the capital loss carryforward worksheet in the instructions for Schedule D of the 1040 to figure the amount of capital loss that you can carry forward to 2026.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill and more. We will continue to answer these in future Ask the Editor round-ups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

• All Ask the Editor Q&As
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• Ask the Editor: Questions on Capital Gains
• Ask the Editor: Questions on Four New Tax Deductions
• Ask the Editor: Questions on Inherited IRAs
• Ask the Editor: Questions on Home Sales and Taxes

Rather than hand over $400,000-plus to Uncle Sam in capital gains taxes, she's eyeing a completely different strategy — one that could not only defer her taxes but potentially triple her cash flow ... by moving her investment dollars 2,000 miles east to Atlanta.

Welcome to the world of geographic arbitrage through 1031 exchanges, where smart investors are discovering the best replacement property might not be in their backyard — or even their state.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The new rules of real estate geography

The traditional wisdom of "invest where you live" is being challenged by investors who understand a dollar of equity can work very differently depending on where it's deployed.

With remote property management technology and the rise of institutional-quality investment opportunities in secondary markets, the geographic barriers that once constrained real estate investing are rapidly dissolving.

Geographic arbitrage in real estate investing is essentially the practice of selling property in a high-priced market and reinvesting the proceeds in a lower-priced market where the same capital can generate higher yields, better cash flow or superior growth potential.

When combined with a 1031 exchange, this strategy becomes particularly powerful because it allows investors to redeploy their full equity without the drag of immediate tax consequences.

The mathematics of market migration

Let's return to Sarah's situation to see how the numbers work. Her San Francisco duplex was generating $6,500 per month in rental income — a respectable figure in one of the nation's most expensive markets.

After selling for $2.8 million, she's identified a 24-unit apartment complex in Atlanta priced at $2.4 million.

Here's where the magic happens: To properly complete her 1031 exchange, Sarah needs to reinvest her entire $2.8 million in proceeds. She structures her replacement property acquisition as a two-property portfolio: the $2.4 million Atlanta apartment complex plus a $450,000 duplex in nearby Birmingham.

Together, these properties generate about $19,500 per month in rental income — triple her San Francisco cash flow.

Moreover, by investing slightly more than her original proceeds, she ensures zero taxable "boot" — the taxable portion of an exchange that occurs when an investor receives cash or reduces debt — while maximizing her geographic arbitrage benefits.

Sarah's story illustrates more than just geographic arbitrage. She's also sidestepping California's high-tax environment — at least for the moment. California's top marginal tax rate hovers around 13.3%, while Georgia's caps out at 5.75%.

For a high-income real estate investor, this difference compounds significantly over time, especially when considering depreciation recapture on future sales.

However, Sarah needs to understand California's "claw-back" provision, which significantly complicates her exit strategy. Under California law, as of January 1, 2014, any capital gains from the sale of California property remain subject to California state tax even after a 1031 exchange into out-of-state property.

This means when Sarah eventually sells her Atlanta and Birmingham properties, she'll owe California taxes on the $1.6 million gain from her original San Francisco duplex — regardless of whether she's still a California resident.

Just as importantly, California requires Sarah to file Form FTB 3840 (California Like-Kind Exchanges) annually until she either sells the replacement properties in a taxable transaction, passes away or donates the properties to charity.

This annual filing requirement applies even if Sarah moves to Georgia and never owns California property again. Failure to file this form can result in penalties and interest charges that could significantly erode her investment returns.

The state tax chess game

One of the most overlooked aspects of cross-state 1031 exchanges involves understanding how different states treat real estate transactions and ongoing ownership.

This isn't just about income tax rates — it's about understanding the full spectrum of the full spectrum of tax implications that can dramatically impact your investment returns.

Consider Mike, a real estate developer from New York who recently completed a 1031 exchange, selling a commercial property in Manhattan and acquiring a portfolio of industrial properties across Texas and Tennessee.

Beyond the obvious income tax advantages (New York's top rate of 10.9% vs Texas' 0% and Tennessee's 0% on investment income), Mike discovered several additional benefits he hadn't initially considered.

New York imposes a transfer tax on real estate sales that can reach 1.825% in New York City. Texas, by contrast, has no state-level transfer tax. Tennessee's transfer tax maxes out at $1.25 per $500 of value — essentially negligible for large transactions.

Over time, as Mike continues to trade up through additional 1031 exchanges, these savings compound significantly — assuming he can avoid the New York claw-back provisions.

Similar to California, New York has a claw-back provision that requires if a New York property is exchanged for one outside of New York state and then later sold for cash, New York will tax the original gain.

Additionally, New York has mandatory tax withholding regulations that affect sales of real estate by non-residents, though there is an exemption available for properties sold as part of a 1031 exchange.

The claw-back problem extends beyond just California and New York. Currently, states with claw-back provisions for 1031 exchanges also include Massachusetts, Montana and Oregon.

Massachusetts' claw-back provisions require a taxpayer who exchanges Massachusetts real estate for real estate located outside the state to report and pay Massachusetts "source income" when they subsequently have a taxable sale of replacement property.

Oregon requires taxpayers to file Form 24 each year after the disposition of Oregon relinquished property until the gain is ultimately recognized.

The practical realities of remote investing

While the financial benefits of geographic arbitrage are compelling, successful cross-state 1031 exchanges require careful attention to operational realities. The 45-day identification period and 180-day completion timeline don't provide much buffer for learning new markets from scratch.

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Smart investors solve this challenge through several approaches. Many partner with local real estate professionals who understand their target markets intimately.

Others focus on institutional-quality properties with existing professional management in place. Delaware statutory trusts (DSTs) have become particularly popular for this reason, offering investors access to institutional-grade properties across multiple markets without the complexity of direct ownership and management.

Jennifer, a real estate investor from Seattle, exemplifies this approach. After selling her portfolio of single-family rentals in the Pacific Northwest, she used her 1031 exchange proceeds to acquire interests in DSTs with properties spanning Phoenix, Austin and Nashville.

This strategy gave her instant geographic diversification across high-growth markets while maintaining the passive investment approach she preferred.

Importantly, Washington state has no state income tax, but it does have a real estate excise tax (REET) on property sales, though transfers as part of properly structured 1031 exchanges are generally exempt from REET.

Due diligence across distance

Evaluating replacement properties in unfamiliar markets presents unique challenges that can make or break a geographic arbitrage strategy. Successful investors develop systematic approaches to remote due diligence that go far beyond the basic financial metrics.

Market fundamentals become critical when investing across state lines. Population growth trends, employment diversification, infrastructure development and regulatory environments all carry more weight when you can't rely on local market knowledge.

Investors need to understand not just current returns on investment and cash flow, but the underlying economic drivers that will influence long-term property performance.

The regulatory environment deserves particular attention. Rent control laws, landlord-tenant regulations and eviction procedures vary dramatically between states. A property that generates strong cash flow in business-friendly Texas might become a nightmare in a state with more restrictive landlord regulations.

Financing considerations across state lines

Cross-state 1031 exchanges often involve financing complexities that don't exist in local transactions. Lenders may have different appetites for various markets, and loan terms can vary significantly between regions.

Interest rates, loan-to-value ratios and debt service coverage requirements might differ based on both the lender's geographic preferences and local market conditions.

Moreover, investors need to maintain consistent debt levels in their exchanges to avoid boot. When moving between markets with different price points and financing environments, maintaining appropriate debt levels requires careful coordination between the investor, their qualified intermediary and their financing sources.

The timing element

Geographic arbitrage through 1031 exchanges also involves a timing component that adds both opportunity and complexity. Real estate cycles don't move in perfect synchronization across markets. An investor might be selling at the peak of their local market while buying in a market that's just beginning its recovery phase.

This timing differential can create exceptional opportunities for investors who understand how to read multiple market cycles simultaneously.

However, it also means that successful geographic arbitrage requires a more sophisticated understanding of national real estate trends than traditional local investing demands.

Risk management across markets

While geographic arbitrage can significantly enhance returns, it also introduces risks that need careful management. Concentration risk becomes particularly important when moving from a familiar local market to unfamiliar distant markets.

Currency risk doesn't exist within the United States, but economic risk certainly does — different regions can experience dramatically different economic cycles.

Successful investors often phase their geographic diversification over multiple exchanges rather than making dramatic shifts all at once. This approach allows them to build market knowledge gradually while spreading their risk across multiple regions and property types.

The future of geographic real estate investing

Technology continues to reduce the barriers to cross-state real estate investing. Virtual property tours, remote property management platforms and sophisticated market analysis tools make it easier than ever to evaluate and manage properties from a distance.

Simultaneously, the rise of institutional-quality fractional ownership opportunities through vehicles like DSTs provides access to previously unavailable property types and markets.

For investors willing to think beyond their local markets, 1031 exchanges provide a powerful tool for geographic arbitrage that can significantly enhance both current cash flow and long-term wealth building.

The key lies in understanding not just the financial opportunities, but the operational realities and tax implications that determine whether a geographic arbitrage strategy will succeed over the long term.

The next time you're considering a 1031 exchange, don't just look down the street — look across state lines. Your best replacement property might be waiting in a market you've never considered, offering returns your local market simply can't match.

Related Content

• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells
• Five Strategies to Defer Capital Gains in Real Estate Investing
• Top 10 Myths About 1031 Exchanges, Debunked
• 10 Ways Your 1031 Exchange Can Go Horribly Wrong
• Six Risks of Delaware Statutory Trusts in 1031 Exchanges

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Once reserved for top executives and startup insiders, stock-based pay is now a regular feature in compensation packages at many high-growth companies. The challenge? Few employees know how to adeptly navigate the complexity of equity compensation packages.

Between vesting schedules, tax rules and the risk of having too much tied up in a single stock, it's easy to feel overwhelmed or worry you're leaving money on the table.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

However, with a well-timed, tax-aware strategy, your equity can shift from something you ignore until tax season to a powerful tool for building lasting wealth.

Whether you've been granted RSUs, incentive stock options or participate in an employee stock purchase plan, here's how to approach your equity compensation and avoid common missteps.

First, know what you own

It's critical to start by understanding the type of equity you've been granted, because each comes with different tax implications and planning opportunities.

Restricted stock units (RSUs) are taxed as ordinary income when they vest. No action is required on your part, but you'll owe tax immediately upon vesting.

Non-qualified stock options (NQSOs) are taxed as income, on an exercise date of your choosing, based on the difference between the strike price and the current market value.

Incentive stock options (ISOs) may qualify for long-term capital gains treatment if holding requirements are met, but exercising them (on a date of your choosing) can trigger the alternative minimum tax (AMT).

Employee stock purchase plans (ESPPs) allow you to buy company stock at a discount. The tax treatment depends on how long you hold the shares.

Performance stock units (PSUs) do not allow you to choose the exercise date, but they become taxable as income (once specific performance targets are met) and are settled in shares or cash.

Knowing the rules around your specific grants is the first step toward making tax-smart and goal-aligned decisions.

Time transactions for taxes and personal goals, not the market

The timing of when you exercise options or sell shares can significantly affect your tax bill.

For instance, holding stock for more than one year after exercising (and two years from the grant date for ISOs) can qualify you for long-term capital gains rates, which are lower than ordinary income tax rates.

Timing also matters for personal planning. Aligning stock sales with life goals, such as a home purchase or tuition payment, allows you to turn equity into real financial progress, rather than letting it sit idle or adding unnecessary risk to your portfolio.

Diversify where you can

It's common for employees at successful companies to build a large portion of their net worth in employer stock. While this can build wealth quickly, it also creates concentration risk.

If your job, income and investments are all tied to the same company, a downturn could be financially devastating. A diversification plan helps manage that risk.

One popular option is a 10b5-1 plan, which allows you to schedule stock sales in advance, even during blackout periods. Donating appreciated shares to a donor-advised fund (DAF) can also offset capital gains while supporting charitable giving goals.

Integrate equity into a holistic financial plan

Your equity compensation should support your long-term financial goals, not sit off to the side. Whether you're saving for retirement, buying real estate or funding a child's education, think about how your equity fits in with your overall financial plan.

It's easy to treat stock grants as a windfall, but the most successful professionals view them as a tool. Incorporating equity into your planning can improve decision-making across everything from taxes to cash flow to estate planning.

Stay ahead of the tax man

Many people assume their company's withholding will fully cover taxes on RSUs or exercised options. In fact, many companies withhold just 22% for federal taxes, which is well below the actual liability for high earners. This can result in a hefty tax bill at filing time.

A financial adviser or tax professional can help you figure out your tax liability and adjust your withholding or make estimated payments to stay on track. It's especially important to do this in years when large grants vest or you exercise options.

Case study: Avoiding a surprise tax bill and diversifying a portfolio

Maya, 38, had an annual RSU vest that normally produced steady income. But after a strong earnings call, her company's stock price jumped 30% just before 5,000 shares vested, creating $450,000 of W-2 income.

Her employer withheld the standard 22% ($99,000), but the true tax bill for state and federal was closer to 42% ($189,000). That left a $90,000 shortfall.

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Instead of panicking, Maya and her adviser reviewed the safe-harbor rules. They found that her existing withholding from the year covered most of the requirement, but she still needed to make an additional $6,000 estimated payment for the quarter to stay fully compliant and avoid penalties.

Maya sold her shares right away to avoid future capital gain exposure and reallocated the proceeds:

• $6,000 set aside for the upcoming quarterly payment
• $50,000 for near-term cash needs
• $90,000 set aside in a high-yield account for April taxes
• $304,000 invested in a diversified ETF to reduce single-stock risk

Result: She stayed penalty-free, kept cash available for taxes and expenses, earned interest on reserves and meaningfully reduced concentration in her company stock.

Five equity compensation missteps to avoid

Treating equity like a lottery ticket. Hoping for a big payday without a plan can backfire. Structured selling and tax-smart decisions will likely lead to better results.

Forgetting about expiration dates. Many stock options expire 90 days after leaving a company. Miss that window and the value disappears.

Relying on default withholding. Most companies under-withhold on equity income. You may owe much more than expected come tax time.

Overlooking state taxes. If you've moved or worked remotely in multiple states, you could face tax obligations in more than one jurisdiction.

Waiting too long to get help. Equity compensation is complex. The earlier you get guidance, the more strategic choices you'll have.

The bottom line

Equity compensation has the potential to be a powerful contributor to long-term wealth — but only with thoughtful, proactive planning.

Take the time to understand what you've been granted, how it fits into your broader financial picture and the tax implications that come with each decision. Most importantly, don't wait for a triggering event like a vest, an IPO or a surprise tax bill to start planning.

With the right strategy in place, equity compensation can move from a source of uncertainty to a cornerstone of your financial future.

Related Content

• The Snake Bite Effect: How Fear Can Cost Investors Dearly
• 4 Potential Problems with Equity Compensation, and How to Solve Them
• Why Company Stock May Be Riskier Than Employees Realize
• Have Equity Compensation? Strategies to Handle Stock Market Volatility
• Planning for Early Retirement When You Have Equity Compensation

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.