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.

The projected increase is expected to boost the average federal tax refund amount by around $1,000 for taxpayers.

However, that benefit is not universal: The size of your tax refund, if any, will ultimately depend on tax break eligibility requirements and other factors (like your filing status, taxable income, etc.).

Here are the households set to receive a potentially higher tax refund, along with the steps you can take now to prepare.

Largest tax refunds ever?

“Tax filers could expect an extra $1,000 bump to their tax refund next year,” The Ways & Means Committee reported out last month in a press release. “[It] could be a record-breaking tax refund season.”

• The total, accumulated impact of the new law is expected to be $91 billion in additional refunds in 2026 compared to last year, according to the release.
• This potentially translates to an average tax refund of $4,151 during the 2026 filing season, up from the IRS’s average of $3,151 last year.

The House release used an analysis conducted by Piper Sandler, a financial services firm. The results were shared with the public via a financial podcast.

Like some previous studies of its kind, the Sandler analysis reveals that middle and upper-income households, specifically those earning between $60,000 and $400,000, are expected to benefit the most from the new Trump/GOP tax and spending law.

Tax refunds 2026: Bigger checks

Since the Trump tax bill was passed mid-year, new tax benefits were not withheld from paychecks in 2025. Because of this, next year’s tax refunds are expected to be bigger for those who can take advantage of the new provisions.

For instance, you might receive a higher 2026 tax refund if:

• You’re a homeowner in a high-tax state. The new tax law temporarily increased the state and local tax (SALT) deduction from $10,000 to $40,000 annually for households with incomes of $500,000 or less.
• You’re an adult aged 65 or older. The new temporary “senior” bonus deduction may provide tax relief for those with a modified adjusted gross income (MAGI) of $250,000 or less ($175,000 if single filing).
• You’re a tipped employee or overtime worker. The new tip and overtime tax deductions allow eligible working taxpayers to receive up to $25,000 in federal deductions for the 2026 filing season (for married couples filing jointly; eligible single filers may receive up to $12,500).

Yet it’s important to remember that the anticipated $1,000 increase to tax refunds is an average estimate, and not a guarantee. Your individual financial circumstances impact your overall tax refund, if any. But if you’re anticipating a bigger 2026 tax refund, the IRS recommends steps you can take now to prepare (more on that later).

Does everyone get a bigger refund in 2026?

Some individuals might not receive a bigger tax refund in the future, but actually lose out on tax savings — even facing higher tax bills — due to the 2025 Trump/GOP tax and spending law enacted in July.

For example:

• Low-income households may lose out. As reported by Kiplinger, families earning $53,000 or less could lose an average of $65 by 2033 due to certain cuts to Medicaid and other social programs, and taxpayers earning $18,000 or less could lose 1.1% of their income by 2027.
• Most future student loan forgiveness will soon be federally taxable. This reverses the temporary tax exemption provided by the Biden-era American Rescue Plan Act. CNBC reports that a borrower with student debt of approximately $49,321 could see a tax bill increase between $5,800 to over $10,000 in the 2027 filing season.

Note: For more information on these breakouts, read Kiplinger’s report, Biggest Winners and Losers in Trump's New Tax Plan.

IRS tax refund check projection

The IRS is urging taxpayers to prepare early for the 2026 tax filing season.

“It is important for taxpayers to get ready now because the One, Big, Beautiful Bill can significantly affect federal taxes, credits, and deductions,” the federal tax agency announced in a press release late last month.

To help “avoid errors that could delay refunds,” taxpayers are urged by the IRS to gather important tax information, like:

• W-2 Forms, Forms 1099, and other key documents (though delay tax filing until all necessary information is organized).
• Bank account information, including your direct deposit account and routing numbers. Starting this filing season, the IRS is phasing out paper checks (yet limited exceptions may apply).

As Kiplinger reported, the IRS may encounter operational issues in the upcoming filing season. The agency will be operating with a significantly reduced staff this tax season, which could result in longer wait times on the phone and even delay tax refunds. By preparing early, taxpayers position themselves to potentially receive refunds more promptly.

Stay tuned.

Read More

• Are New Trump $2,000 Stimulus Payments Coming Next Year?
• Costco Sues Over Trump Tariffs: Price Impacts in 2026
• IRS Income Tax Refund Schedule: When Will Your Refund Arrive?
• 5 Ways Trump’s Tax Bill Could Boost Your Tax Refund (or Shrink It)

With an FSA, employees can make payroll deposits into their accounts to build a cushion to pay insurance deductibles or pay for qualifying medical expenses, or other items not covered by insurance.

Deposits are made with pre-tax dollars, before any federal or state income taxes, Social Security taxes, or Medicare taxes are withheld from your paycheck. That means your FSA deposits are not included in your taxable income. In other words, it’s essentially “tax-free.”

Want to know more? Read on.

What’s an FSA and what’s so great about it?

FSAs are employer-sponsored savings accounts that allow employees to set aside money from their paychecks, before taxes, to pay for healthcare and health-related dependent care expenses.

This tax-free money establishes a revolving, self-replenishing fund from which an employee can pay insurance deductibles, copays, and other qualified medical expenses.

Qualifying FSA expenses include, but are not limited to:

• Prescription medications and most over-the-counter medications (like cough remedies)
• Medical equipment and supplies, like monitoring devices (e.g., CPAPs), canes, hearing aids, first aid, and emergency care
• Denture and orthodontic care, like adhesives, retainers, and dental treatments like fillings and crowns
• Prescription eyeglasses and contact lenses, including over-the-counter contact lens care and maintenance supplies.

FSA downsides to watch out for

Having access to tax-free money to pay healthcare bills can be great, but it’s a good practice to keep tabs on how much you’re putting into your account.

As mentioned, the IRS has announced higher contribution limits for next year (2026): $3,400, up from $3,300 in 2025.

But if you contribute more than the FSA threshold to your account ($3,400 for 2026), your deposits lose their tax advantage and will be taxed as wages at your applicable income tax rate.

The fact that FSA deposits are made through your employer’s payroll system can act as a brake of sorts on the amounts you’re contributing.

Another reason to monitor your FSA balance is that if you don’t spend all the money in your FSA by your health plan’s year-end, the balance will be forfeited to your employer. That’s pretty harsh.

• Employers may allow employees a grace period after the plan year’s end to spend the funds, or allow the employee to roll over a certain amount (up to $680 for 2026) to the following plan year.
• But an employer isn’t required to provide that relief.
• And if an employee leaves the company, the money in their FSA account stays with the employer. That's because under IRS rules, the account belongs to the employer, not the employee.

In either case, it’s in your best interest to exhaust all your FSA account funds before the plan year ends or before you leave the company.

Is an FSA right for me?

It depends. Employers may elect to offer FSAs to employees in addition to their standard benefits package, but it’s not a requirement. In addition, only employers can sponsor FSAs, so if you’re self-employed, you’re out of luck. (There are alternatives for you, but they’re governed by different rules.)

However, FSAs can be good for people with ongoing routine medical expenses — prescription and non-prescription drugs, glasses, contact lenses, and products for their maintenance, denture and orthodontic care products, and other dental treatments.

Dependent care FSA limit 2026

Employees with child or adult dependents who require care so the employee can work can open a dependent care FSA in addition to a healthcare FSA (these are separate accounts under IRS rules).

And some good news: The dependent care FSA limit is significantly increasing for 2026.

For 2026, the maximum dependent care tax-free contribution is $7,500, up from $5,000 in 2025. Eligible expenses include:

• Childcare (day care, pre- and after-school care)
• Summer camps (not overnight)
• Babysitters or nannies (work-related)
• Adult day care for a dependent parent or spouse

Not FSA-eligible? Consider an HSA

Under IRS rules, FSAs can only be sponsored by employers as part of an employee’s health benefits package, and in fact, the account belongs to the employer. So, individuals who aren’t employed are ineligible for an FSA.

But the self-employed and others aren’t left in the cold when it comes to a tax-advantaged savings account. They can open a health savings account (HSA), with all the tax benefits of an FSA and more, provided they meet a key requirement: they must be enrolled in a qualifying high-deductible health plan (HDHP).

However, HSAs come with their own contribution limits and pros and cons. For more information, see Kiplinger’s report: An HSA Sounds Great for Taxes: Here’s Why It Might Not Be Right for You.

Read More

• What Medical Expenses Are Deductible?
• Hidden Costs and Tax Benefits of Health Savings Accounts
• Child Tax Credit: How Much Is It for 2025 and 2026?

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

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• 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.

More Reader Questions Answered

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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

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• Trump's 2025 Tax Bill: What's Changing and How It Affects Your Taxes
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• 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.

This proposed deduction would be in addition to the standard deduction, which most taxpayers currently claim.

The proposal comes on the heels of a massive 2025 Trump/GOP tax and spending bill that offers taxpayers several new deductions for car loan interest, overtime pay and tip income.

However, Hawley's proposal, which would have to clear significant political hurdles to advance in Congress, wouldn’t replace the Affordable Care Act (ACA) premium tax credits.

Those credits, which help millions of Americans afford health care premiums, have been at the heart of debate on Capitol Hill since the government shutdown.

Will there be significant changes to health care tax breaks in 2026?

No taxes on health care?

In a release about the bill, Hawley points out that “nearly 41 percent of adults in the United States have some form of debt stemming from medical expenses. In the last year alone, a recent Gallup report found that 31 million Americans borrowed money to pay for health care.”

To address that, Hawley’s bill would expand the existing medical expense deduction, which currently is available only to taxpayers who itemize and only for expenses above 7.5% of adjusted gross income.

His plan would move that deduction “above the line,” so that any taxpayer could claim up to $25,000 per person in out‑of‑pocket medical spending, including premiums they pay directly for coverage.​

The proposal, announced in early December, is framed as “no taxes on healthcare,” echoing recent GOP slogans such as “no tax on tips” and “no tax on overtime.”

What about ACA tax credits?

ACA premium tax credits lower marketplace premiums up front based on income and plan cost, and enhanced subsidies created by pandemic‑era legislation are set to expire at the end of 2025 unless Congress acts.

• Hawley’s bill doesn’t extend those ACA subsidies and doesn’t create a new ACA‑style credit.
• Instead, his proposal offers a separate federal tax deduction that would come into play at filing time, not at the time you purchase a health care plan.​

Because deductions reduce taxable income rather than premiums directly, they generally deliver less relief than a dollar‑for‑dollar subsidy, particularly for lower‑income households with little tax liability.

If enhanced ACA credits lapse, many marketplace enrollees could see substantial premium increases in 2026, regardless of Hawley’s idea. Nonitemizers would still likely be left weighing higher monthly bills against a possible year‑end tax break

Who might benefit?

Generally speaking, an above‑the‑line health deduction would skew toward taxpayers with enough income and out‑of‑pocket costs to fully use it. Think middle‑ and upper‑middle‑income households buying their own coverage without employer help.

Lower‑income consumers who currently rely on ACA subsidies, Medicaid, or employer plans with modest worker premiums might see little or no direct gain from a health care tax deduction such as Hawley’s. That's because they often don't pay enough income tax to fully benefit from a large deduction.

And ... a tax deduction wouldn't prevent coverage loss for people who can't afford the higher gross premiums that will come if enhanced ACA credits expire.​

Health care premiums: Bottom line

Key mechanics of the Hawley plan remain vague, including a major fiscal issue: How the government would offset the revenue loss from such a significant, broadly available health care tax deduction.

For now, the long and short of it is that Hawley’s bill is just a proposal.

Senate Democrats, meanwhile, continue to push for an extension of ACA subsidies rather than a deduction‑based alternative.

The health care tax debate rages on.

Read More

• What's in Trump's 2025 Tax Overhaul Bill?
• ACA Tax Credits and the Government Shutdown
• Most Overlooked Tax Deductions and Credits
• Premium Tax Credit: Are You Eligible?

Fortunately, you could have a say over how much the taxman takes if you’re willing to relocate. But you should consider a state’s overall tax landscape before making a move.

For instance, some states make up for low income taxes with higher taxes in other areas, such as sales and property tax rates — making you perhaps no better off than you were before relocating, tax-wise.

Kiplinger found the one U.S. state that might offer the best balance of low income, sales, and property taxes for your family’s wallet.

The most tax-friendly state for the middle class

To determine the “most tax-friendly state for the middle-class,” Kiplinger considered each state's median annual salary to determine which states have the lowest tax burden for households with middle incomes.

Then we calculated the average annual tax spent on three tax categories: state income tax, property taxes, and sales taxes on essential items (groceries, diapers, and gas). (See the end of the article for more information about methodology.)

The state with the lowest tax burden is considered the most "tax-friendly " for these rankings.

Best state for middle-class taxes

Nevada.

Nevada has no state income tax, which is one reason it’s the most tax-friendly state for middle-class families. Among the many types of income that you’ll find tax-exempt in the Silver State are:

• Investment income (Nevada is one of the most tax-friendly states for investing).
• Short-term rental income and capital gains.
• Most retirement income, such as 401(k) withdrawals and Social Security benefits.

Nevada residents save on property tax bills, too. The annual median property tax paid in the Silver State is $2,143, which is about $1,000 less than the national average, according to U.S. Census Bureau data.

• This is partly due to Nevada’s effective property tax rate of .49%, per the Tax Foundation, which is one of the lowest rates in the nation.
• Nevada has a property tax abatement law that caps yearly increases on property taxes for primary residences, protecting homeowners from sudden hikes.

Even better is that the Silver State is one of the few states that don’t tax inheritance or estates, meaning more money for your heirs is also tax-exempt.

But although these tax benefits generally outweigh the tax cons in our ranking, as with all states, there might be a few tax reasons you wouldn’t want to move to Nevada. Let’s go over those next.

Nevada taxes for middle-class families

Nevada has low taxes compared to other states, yet there is one primary tax caveat that might raise an eyebrow for middle-class families.

• The Nevada sales tax rate is 6.85%, which may be higher than where you are living now.
• This is especially true when you factor in local taxes, which average 1.39%, for a combined average local and state tax rate of 8.24%, per the Tax Foundation.

Yet while Nevada might levy higher sales taxes to compensate for lower taxes in other key areas, several essentials are exempt from the Silver State’s high sales tax rate.

• Nevada has one of the lowest state gas tax rates in the U.S., which might help reduce your weekly commuting expenses (though local taxes can raise the rate).
• Groceries, diapers, prescription medicine and feminine products are all tax-exempt in Nevada, which might further reduce your monthly spending.

If most of your annual spending is on essentials, you might save on your state sales taxes even if the Nevada rate is a little higher than where you currently reside.

Is Nevada a good state for middle-class families?

Before you’re ready for a move to Nevada, there are other important factors to consider.

While Kiplinger’s ranking considered state tax burdens, you’ll probably want to research other key considerations, like cost of living, political climate and crime rates.

• For instance, Nevada is famously known for extreme heat, which might increase your monthly utility bill. The state’s desert geography makes the transportation of goods more challenging and limits local agriculture compared to most other states. Because of this, the cost of groceries might be higher than where you live now.
• Yet year-round sunshine supports Nevada’s thriving outdoor recreation scene, with a variety of national parks, and entertainment centers like Las Vegas.
• However, Nevada typically receives a lower score in national rankings that compare pre-K-12 education quality and outcomes.

Ultimately, consider your family’s unique lifestyle and financial needs before deciding to move to a new locale. Just because Nevada is generally the most tax-friendly state for middle-class families, it might not be the most optimal state for you and your family.

Note: No matter where you move, federal income taxes still apply, and local taxes might vary. The definition of “middle-income” can also differ greatly. For purposes of this ranking, “family” means any household with at least one adult still raising at least one child. The amount of taxes paid can vary depending on several factors, including family size and the number of adults in the household who work. Full details about the methodology Kiplinger used to rank state tax burdens for this story are available in Kiplinger’s report, Low-Tax States for 'Middle-Class' Families in 2026.

Read More

• The GOP Wants to Auto-Enroll Your Child in a Trump Account for Savings
• Claiming the Standard Deduction? Here Are 10 Tax Breaks For Middle-Class Families in 2025
• Nevada Tax Guide 2025
• New 2026 Child Tax Credit and other Family Credit Amounts Could Save You More

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.

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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.

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.

What's happening? Costco recently filed a lawsuit to preserve its right to a potential refund of an undisclosed amount of tariffs paid. A sticking point is whether the United States Supreme Court will ultimately rule that Trump lacked the authority to impose the levies in the first place.

But it’s important to note that Costco’s lawsuit is separate from the main Supreme Court tariff case. The company argues that even if the U.S. Supreme Court strikes down Trump’s tariffs, importers like Costco might not automatically get refunds of the money they paid unless they file their own lawsuits.

And Costco isn’t the only retailer taking action. Other companies have reportedly filed lawsuits related to U.S. tariff policy. Some contest Trump tariffs on Chinese-made goods while others seek to preserve eligibility for potential tariff reimbursements.

So, will tariff refunds even happen? And what does all of this mean for you as a shopper? Read on.

Costco tariff refunds?

Costco filed suit in the U.S. Court of International Trade to preserve its ability to recover tariffs paid under the Trump administration's trade policies.

• Earlier in 2025, President Trump used emergency powers under the International Emergency Economic Powers Act (IEEPA) to impose sweeping new tariffs on goods from key trading partners.
• He said the tariffs, which have been as high as 50-145% in some instances, were needed to address problems like drug trafficking and trade deficits.
• Those levies have generated billions of dollars primarily at the expense of importers and U.S. consumers.

Many companies have sued the government, arguing that the IEEPA doesn’t grant the president authority to impose tariffs and that, because tariffs are taxes, that authority instead lies with Congress.

The Court of International Trade and a federal appeals court agreed, ruling that Trump had overstepped his authority. However, the Trump administration appealed, and the Supreme Court is now considering whether most of Trump’s tariffs are illegal.

Adding to the chatter: Some believe that tariff refunds may be warranted if the Supreme Court rules that Trump lacked authority to impose tariffs under the IEEPA.

In its filing, Costco warns that if U.S. Customs and Border Protection (CBP) finalizes tariff payments before a key deadline, the ability to recover some of the tariff funds could be lost or made more difficult for some importers.

So, Costco’s legal challenge focuses on these key points:

• Many of Trump’s tariffs may be unlawful because IEEPA doesn’t explicitly empower the president to impose them.
• Even if SCOUS strikes down the tariffs, importers have to act swiftly through legal action to secure refund eligibility before CBP “liquidation.”

According to the lawsuit, Costco argues: "This separate action is necessary…because even if the IEEPA duties and underlying executive orders are held unlawful by the Supreme Court, importers that have paid IEEPA duties, including Plaintiff, are not guaranteed a refund for those unlawfully collected tariffs in the absence of their own judgment and judicial relief.”

Supreme Court tariff ruling?

As Kiplinger has reported, lower courts have already found Trump’s tariffs imposed under the IEEPA to be unlawful in cases, including those before SCOTUS, brought by beverage company V.O.S. Selections and toymaker Learning Resources, Inc. But the Trump administration appealed those rulings, so the Supreme Court’s upcoming decision looms large.

During oral arguments on November 5, several justices seemed skeptical about the president's “emergency” tariff powers. Justice Amy Coney Barrett pondered how tariff refunds might work, describing such a process as a potential “mess.”

At that time, in an emailed statement, Pacific Legal Foundation senior attorney Oliver Dunford noted, "This is a complicated case involving profound constitutional questions. It's hard to predict exactly how the court will rule, but the President's IEEPA tariffs seem to be in trouble."

Meanwhile, Trump has continually framed tariffs as essential for protecting U.S. jobs, industries, and long-term economic strength. He claims reversing them would "our country would be completely destroyed."

Consumer impact

Some legal experts note that even if SCOTUS strikes down the tariffs, the government could attempt to reimpose similar duties under other statutory authorities. And in the event of a Supreme Court ruling against the Trump administration, refunding the duties wouldn’t necessarily be automatic. (Under current law, importers generally must file a timely protest to challenge liquidation determinations.)

Regardless of the lawsuit's outcome, any changes in tariff policies could impact the pricing and availability of products for millions of shoppers.

For example, if existing tariffs remain in place, consumers will likely continue to face higher prices on various goods. On the other hand, if the Supreme Court invalidates the tariffs and/or allows tariff refunds, businesses could see financial relief (reap substantial sums) that might eventually lead to lower prices for shoppers. Stay tuned.

Costco hot dogs: 40th anniversary

Some less dicey news? Amid this legal challenge over import costs, Costco's popular signature offerings continue.

The $1.50 hot dog-and-soda combo turned 40 this year, marking its 1985 introduction. Sales reportedly hit a record 245 million units in fiscal year 2025, up from 199 million the prior year.

Meanwhile, gold bar sales, launched online to Costco members in June 2023, also sustained strong demand through 2025 as prices topped $4,000 per ounce.

• Initial batches sold out in hours, generating an estimated $100-200 million monthly by 2024, while e-commerce sales reportedly rose 15.6% in FY2025.
• September listings reportedly depleted quickly.

Costco imposed a limit of one transaction per membership per 24-hour period, with a max of two 1-ounce, 24-karat gold bars.

Read More

• How Tariffs Work and What They Mean for Your Money
• Costco Gold Bars Keep Selling Out: Are They a Smart Investment?
• Are Trump Tariffs Even Legal?

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.

Related Content

• Capital Gains Taxes Trap: How to Avoid Mutual Fund Tax Bombs
• Which Capital Gains Are Taxable and How to Calculate Your Tax
• To Reap the Full Benefits of Tax-Loss Harvesting, Consider This Investment Strategist's Steps
• 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.

Many assume that Social Security benefits are tax-free after a certain age or that only wages affect whether your Social Security benefits are taxed by the IRS, but the reality is more nuanced.

This quiz will test your knowledge of the often-misunderstood topic of Social Security taxation, including how provisional income works, how other income types affect your tax burden, and common misconceptions.

Read More About Social Security Taxes

• Social Security and Your Taxes: Five Things to Know
• How to Calculate Taxes on Social Security Benefits
• The New $6,000 Senior Bonus Deduction: What It Means for You

Whether you are a recent investor in I bonds, have owned them for many years, or are pondering adding them to your investment portfolio, you should be aware of the federal income tax rules.

I bonds have important tax advantages for owners. Interest earned on I bonds is exempt from state and local taxation. Also, owners can defer federal income tax on the accrued interest for up to 30 years.

These rules might seem simple at first. But they're not as straightforward as you think, and they can get complicated pretty quickly.

For example, the tax treatment of I bonds varies depending on who owns the bonds, whether you gift the bonds to someone else, and, in some cases, how the bonds are used. Following are descriptions of how and when I bond interest is taxed under federal law in eight common situations.

Note: For people who own EE bonds, the federal income tax consequences are identical to those of I bonds. So this story is also applicable to you.

1. Taxes when you are the bond owner

I bond buyers have a choice when they acquire the bonds. They can pay federal income tax each year on the interest earned or defer the tax bill to the end. Most people choose the latter. They report the interest income on their Form 1040 for the year the bonds mature (generally, 30 years) or when they're cashed in, whichever comes first.

However, deferring tax on the full amount of accrued interest for up to 30 years may sound like a great idea until you get the tax bill for three decades' worth of interest.

Also, taking the tax hit all at once can push you into a higher federal income tax bracket, making the tax bill even more expensive than it needed to be.

2. How to report and pay taxes when you cash in I Bonds or they mature

If you cashed in I bonds this year, you must report the interest on line 2b of your 2025 Form 1040 and pay tax to the extent you didn't otherwise include the interest income in a prior year. If you received $1,500 or more in interest during the year, you would also have to fill out Schedule B and attach it to your tax return.

If you keep the I bonds through the date they mature, generally 30 years, and you didn’t otherwise include the interest income in a prior year, you will be taxed on all the accrued but previously untaxed interest in the year of maturity, whether or not you cash them in. You would report interest income on your Form 1040 in the same manner as if you cashed in the I bonds.

If you are using the bond proceeds to pay for higher education, some of the interest may be exempt (see "Using I Bonds for Education" below).

3. Tax implications of co-owned I Bonds

For I bonds issued in the name of co-owners, such as a parent and child or grandparent and grandchild, the interest is generally taxable to the co-owner whose funds were used to buy the bonds.

However, that co-owner can choose to defer paying tax on the interest or report it annually. This is true even if the other co-owner redeems the bonds and keeps all the proceeds.

4. Gifting I Bonds: Tax rules when buying bonds for others

Savings bonds make great gifts. But if you buy I bonds for someone else, such as your children, grandchildren or any other person, the interest is reportable by that person, provided the bonds are titled in his or her name. Just like any other holder of I bonds, the recipient can choose to defer paying tax on the interest until the earlier of the year the bonds mature or are cashed in, or he or she can report the interest annually.

5. Gifting I Bonds you own

Gifting an I bond before maturity will accelerate taxation of the interest income. Giving away bonds you already own to someone else doesn't get you off the hook with the federal government for owing money on previously untaxed interest. If the bonds are reissued in the gift recipient's name, you're still taxed on all that interest in the year of the gift.

6. Donating I Bonds to charity

Donating an I bond before it matures to charity while you're alive will also accelerate taxation of the interest income. As with gifts to other people, giving away bonds you already own to your alma mater, favorite museum or other charitable organization doesn't let you avoid the tax on previously untaxed interest. You're still taxed on all that interest in the year the donation is made.

7. Inheriting I Bonds

If you inherit I bonds that haven't yet matured, who is taxed on the accrued interest that went untaxed because the original owner deferred the interest? It depends. The executor of the decedent's estate can choose to include all pre-death interest earned on the bonds on the decedent's final income tax return. If this is done, the beneficiary reports only post-death interest on Form 1040 for the year the bonds mature or are redeemed, whichever comes first.

If the executor doesn't include the interest income on the deceased owner's final federal income tax return, the beneficiary will owe taxes on all pre-death and post-death interest once the bond matures or is redeemed, again whichever is earlier.

8. Using I Bonds for education

One way to avoid paying federal income tax on accrued I bond interest is to cash in the bonds before or on the maturity date and use the proceeds to help pay for college or other higher education expenses for you, your spouse or your dependent. But there are lots of rules and hurdles to jump over to be able to take advantage of this tax perk. For instance:

• You must have purchased the bonds after 1989 when you were at least 24 years old.
• The bonds must be in your name only.
• The bonds must be redeemed to pay for undergraduate, graduate or vocational school tuition and fees for you, your spouse, or your dependent. (Grandparents can't use this tax break to help pay for their grandchild's college tuition unless the grandparent can, on their 1040, claim the grandkid as a dependent.)
• Room and board costs aren't eligible for the exclusion.
• The exclusion is subject to strict income limits. For 2025, it begins to phase out at modified adjusted gross income (modified AGI) of more than $149,250 for joint filers and $99,500 for other filers, and is fully phased out at modified AGI of $179,250 for joint filers and $114,500 for other filers. For 2026, it begins to phase out at modified AGI of more than $152,650 for joint filers and $101,800 for others and is completely phased out at modified AGI of $182,650 for joint filers and $116,800 for other filers.

If the proceeds from all savings bonds cashed in during the year exceed the qualified education expenses paid that year, the amount of interest you can exclude is reduced proportionally.

Use IRS Schedule B and Form 8815 to report and calculate any excluded I bond interest used for education.

Related

• Bond Basics: Investing
• How Are Inherited EE or I Savings Bonds Taxed?
• Types of Income the IRS Doesn't Tax

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.

High inflation as of late means this is the fourth year in a row that the adjustments have resulted in a higher 401(k) contribution limit. But what about your IRA?

Here’s how much you can contribute to retirement accounts in 2026.

IRA 2026 contribution limits

The contribution limits for a traditional or Roth IRA increased last year and will increase again for 2026.

• You can contribute a maximum of $7,500 (up from $7,000 last year).
• Catch-up contributions for taxpayers 50 and older are also subject to cost-of-living adjustments, and these limits have also increased for 2026 to $1,100 ($8,600 total).

However, not everyone can make the maximum IRA contribution limits this year. You can only make the maximum contribution to your Roth IRA if your modified adjusted gross income (MAGI) is below the threshold set for the year.

• For 2026, single and head-of-household filers with a MAGI below $153,000 (up from $150,000 last year) can contribute the full $7,500 in 2026.
• The maximum contribution is reduced for these filers if their MAGI is between $153,000 and $168,000, and these taxpayers can't contribute to a Roth IRA at all if their MAGI exceeds $168,000.
• For married couples filing jointly, the income phase-out range for 2026 is from $242,000 to $252,000 (up from from $236,000 to $246,000 last year).
• Joint filers with a MAGI below $242,000 can contribute the full $7,500 for 2026, but these filers cannot contribute anything to an IRA with a MAGI greater than $252,000.

(Note: The above income limits do not apply to traditional IRAs.)

401(k) limit increase for 2026 contributions

Contribution limits for 401(k), 403(b) most 457 plans, and the federal government's Thrift Savings Plan will increase by $1,000 for 2026. Eligible taxpayers can contribute $24,500 to these accounts in 2026 (up from $23,00 last year).

The contribution limit for SIMPLE plans increases to $17,000 this year (up from $16,500 last year). Similarly, participants of an applicable SIMPLE plan might be able to contribute a higher amount of $18,100 (up from $17,600 last year).

401(k) 2026 catch-up limit

There's an increase in catch-up contribution limits for taxpayers 50 and older for 2026. These taxpayers will be able to contribute an additional $8,000 in 2026 ($32,500 total).

However, under SECURE 2.0, a higher catch-up contribution limit applies for those age 60 to 63 beginning this year. (Participants in that age range could contribute an additional $11,250 instead of $8,000.) The total potential contribution amount for these taxpayers is $35,750.

For more information, see Kiplinger's report: 'Super Catch-Up' Contribution for Ages 60-63.

The catch-up contribution limit for employees age 50 and older who participate in SIMPLE plans also has increased for 2026, to $4,000 (certain applicable plans might have a contribution limit of $3,850).

But under a new change under SECURE 2.0, those who are 60 to 63 can contribute more to SIMPLE plans, ($5,250) for 2026.

IRA deduction phase-out thresholds for 2026

If you put money in a traditional IRA, you might be able to take a tax deduction for some or all your contributions. (There is no deduction available for contributions to a Roth IRA.)

However, the deduction is gradually phased out if your income is above a certain amount.

Here are the phase-out ranges for 2026.

• For single taxpayers covered by a workplace retirement plan, the phase-out range is from $81,000 to $91,000 (up from from $79,000 to $89,000 last year).
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is from $129,000 to $149,000 (up from $126,000 to $146,000 last year).
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is from $242,000 to $252,000 (up from from $236,000 to $246,000 last year).

If you are married and filing a separate return (and covered by a workplace retirement plan), the phase-out range remains from $0 to $10,000 because this limit is not subject to a cost-of-living adjustment.

Saver's Credit income limit for 2026

Americans with lower and middle incomes who contribute to a retirement plan can claim the Saver's Credit on their federal tax return, which could lower their tax bills.

However, not everyone qualifies. Here are the new income limits for claiming the Saver’s Credit in 2026.

• $80,500 for married couples filing jointly (up from $79,000 last year).
• $60,375 for heads of household (up from $59,250 last year).
• $40,250 for single and married taxpayers filing separately (up from $39,500 last year).

Read More

• 2026 HSA Contribution Limit: What You Should Know
• Saver's Credit: Who Qualifies for This Retirement Tax Break?
• New 2026 Income Tax Brackets Are Set

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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• 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

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

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• 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.

Unlike income taxes, which often decline in retirement, property taxes are based on the value of your home — and in many parts of the country, assessed values have skyrocketed in recent years. Median property taxes rose by an average of 10.4% between 2021 and 2023, according to an analysis of the latest data available by LendingTree, an online marketplace for consumer loans. The median property tax in 2023 was nearly $3,000 ($2,969), but median property taxes in 50 metropolitan areas ranged from $1,091 to nearly $10,000, according to LendingTree.

Before writing a check for your next property tax bill, make sure you take full advantage of property tax relief programs offered by your state or locality. While more than 9 million Americans likely qualify for property tax relief, only about 8% apply for it, according to the AARP. “Many aren’t aware these programs exist or assume they’re not going to qualify,” says Nicole Heckman, vice president of well-being for the AARP Foundation.

The types of property tax relief available vary, not only by state but by individual counties and jurisdictions. Many states and jurisdictions offer expanded relief to homeowners who are 65 or older; some offer breaks to homeowners who are 61 and older. Veterans and residents with disabilities may also qualify for a reduction in their property taxes. While eligibility is often income-based, the income thresholds “can be pretty expansive,” Heckman says, so don’t assume you earn too much to qualify. In New Jersey, for example, homeowners with incomes of up to $500,000 are eligible for reimbursement of a portion of their property tax bill.

Tax relief isn’t automatic. In most cases, you must fill out an application and file it by a deadline set by your locality or state. Some jurisdictions require you to apply in person. Other states and localities allow you to apply online, but that can be challenging for older adults who don’t have broadband internet, Heckman says.

The AARP Foundation’s Property Tax Aide program, now in its fifth year, allows homeowners to research more than 140 programs in 50 states and Washington, D.C. Users can find details on eligibility, deadlines and where to get help. The average amount of relief provided through the program is $400, but some users have saved up to $1,000, Heckman says. Many states allow eligible homeowners to apply for up to three years of back tax relief, she says. “That can be a significant credit or refund.”

Some types of relief states and localities offer homeowners:

1. Tax credits and refunds

More than a dozen states offer property tax credits or refunds to eligible older adults in amounts ranging from $250 to $2,730. Pennsylvania provides rebates ranging from $380 to $1,000 for eligible older and disabled residents. Tennessee refunds all or a portion of property taxes paid by eligible residents.

Minnesota provides two types of property tax refunds: one based on homeowners’ income and the amount of their property taxes, and another based on how much residents’ property taxes have increased. (Some residents qualify for both, and the program isn’t limited to older adults.) Cindy Rieck, 68, of Pequot Lakes, Minn., whose home has nearly doubled in value since she purchased it in 2007, says she received a refund of $1,200 in 2024.

2. Expanded homestead exemption

Property taxes are based on the assessed value of your home, which may differ from its appraised or market value. A homestead exemption lowers the assessment, thus reducing your property tax bill. Most states offer some kind of homestead exemption for residents, but many states provide an additional homestead exemption for older adults.

Florida, for example, allows residents to exempt up to $50,000 of their home’s assessed value from property taxes (which will increase with the rate of inflation starting in 2025), but jurisdictions in the state have the option of providing an additional $50,000 exemption to eligible homeowners 65 and older.

Texas recently increased its homestead exemption to $140,000 for all residents. The state provides an additional $60,000 exemption for residents age 65 or older, for a total combined homestead exemption of $200,000. Texas now allows individual jurisdictions to add $3,000 to that amount.

3. Assessment freeze

In Arizona, homeowners ages 65 or older who have lived in their primary home for at least two years and meet income limits can have their property’s valuation frozen for three years. New Jersey has a “senior freeze” program that reimburses property tax increases for eligible residents who have owned their homes for at least three years.

4. Tax deferral

Illinois allows eligible homeowners 65 and older to defer up to $7,500 of property taxes on their principal residence. California, Maine, Minnesota, Vermont and Washington also allow eligible older adults to defer property taxes.

If you sign up for deferral, the state or locality will place a lien on your home; the taxes must be paid, usually with interest, after you die or sell the home. That’s important to consider when planning your estate. If your heirs sell the home, the back taxes will reduce the amount they’ll receive from the proceeds, and if they want to keep it, they’ll be on the hook for the taxes you deferred. “If you can afford it, you may decide you’d rather pay the tax now and not have something your heirs will have to worry about when they sell the property,” says Jared Walczak, vice president of state projects at the Tax Foundation in Washington, D.C., a tax-policy research organization.

Other options to cut your tax bill

Applying for property tax relief is just one way to lower your tax bill. Other options that may be available to you:

Claim a deduction
The One Big Beautiful Bill Act, signed into law in July, allows homeowners to deduct up to $40,000 in state and local taxes, up from a cap of $10,000. The provision takes effect in 2025 and expires in 2029. The legislation also expanded the standard deduction for eligible taxpayers 65 and older, so for many older adults, claiming the standard deduction will still provide the lower tax bill. However, if you live in a high-tax state and have other deductible expenses — large charitable contributions, for example — it’s worth running the numbers with your tax preparer or on a tax software program to determine whether you should itemize on your 2025 tax return.

Challenge your property tax bill
If you believe your assessment was inaccurate or outdated, you may be able to lower it by filing an appeal. Review your property’s record card, usually available on your locality’s website or by request. If you find an obvious error — four bedrooms instead of two, for example — your assessor may agree to lower the assessment on the spot.

If the information on your property’s record card is correct but you believe your assessment was higher than those for comparable homes in your neighborhood, you can use that information to file an appeal. Check your local government’s website for deadlines and procedures. Realtor.com offers a tool that will provide you with an estimate of the market value of your home, along with estimated values of other homes in your neighborhood. The tool is free but you must create an account to use it.

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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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.

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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.

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• 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.

1. Will my home sale be taxed?

Question: My husband and I are thinking of selling our home next year that we have owned for many years. Will the gain be taxed?

Joy Taylor: It depends. Generally, if you have owned and lived in your main home for at least two out of the five years before the sale date, up to $250,000 ($500,000 for joint filers) of your gain when you sell the home is tax-free. Any gain above the $250,000/$500,000 exclusion amounts is taxed at long-term capital gains rates of 0%, 15% or 20%, depending on the amount of your taxable income. Losses from sales of primary homes are not deductible.

Here are a couple of examples to illustrate the rule. Say you bought your home in 1995, have a tax basis of $250,000, and are selling the home for $650,000. The entire $400,000 gain is tax-free since you are filing a joint return. Let's now take the same example, but instead of selling the home for $650,000, you sell it for $900,000. Since you are married and, provided you file a joint return, the first $500,000 of the gain is tax-free, and the remaining $150,000 is taxed at long-term capital gains rates.

2. What if I change jobs and sell my home early?

Question: I am married, and I bought my home 14 months ago. My company is relocating, and I must move out of state for work. I plan to sell the home next month. Can I exclude any gain from the home sale?

Joy Taylor: In your case, you don't meet the two-out-of-five-year ownership and use periods to qualify for the full $500,000 gain exclusion for joint filers. However, you are not out of luck. Some people who sell a home early may still be eligible for a portion of the exclusion, depending on the circumstances.

For example, early sales due to job changes, illness or unforeseen circumstances qualify for the partial exclusion. The percentage of the $250,000 or $500,000 gain exclusion that can be taken is equal to the portion of the two-year period that you used the home as a residence. You can use days or months for this calculation.

For example, say you bought your home for $740,000 in September 2024 and you sell it for $790,000 in December 2025 because of your out-of-state job move. The maximum gain exclusion in this instance is $312,500 ($500,000 x (15/24)). So, your $50,000 gain would be fully excluded from income and would be tax-free.

3. What if my unmarried partner and I jointly own a home?

Question: My partner and I own our primary residence together and have lived here for 10 years. We plan to sell it next year. We aren't married and file our taxes separately as single filers.

When we sell the home, can each of us claim a $250,000 gain exclusion? And since there is lots of appreciation in the home since we bought it, are we allowed to split the remaining taxable gain so that we each pay capital gains tax on half of the amount?

Joy Taylor: Since your partner and you would have each owned and used the home as your primary residence for at least two out of the five years before the sale date, then each of you would qualify for the $250,000 home-sale exclusion. Any excess capital gain would be split between you. Each of you on your single-filed tax returns would report your share of the selling price and tax basis in your home to arrive at gain.

Here is a simple example. Say you sell your home for $1.5 million next year, and you have a total tax basis in the home of $200,000. Each of you would calculate your separate gain based on 50% of these figures. On your single-filed tax return, you would calculate gain before the home-sale exclusion of $650,000 ($750,000 sale price - $100,000 tax basis). Your taxable gain is $400,000 ($650,000 total gain - $250,000 home-sale exclusion). You would then report the $400,000 long-term capital gain on your Form 1040. You would use IRS Form 8949 to calculate the taxable gain and transfer the amount to Schedule D of your Form 1040. Your partner would do the same thing on his or her single-filed tax return.

4. Will Congress make all home-sale gains tax-free?

Question: Someone told me there is a congressional proposal in the House to make all gain on home sales tax-free. Is this true, and if so, do you think it will pass?

Joy Taylor: Some Republican lawmakers advocate making the full gain on home sales tax-free. House Representative Marjorie Taylor Greene (R-Ga) has introduced a bill, the "No Tax on Home Sales Act," to end the tax on sales of primary homes, saying her proposal would lead to increased housing supply. And President Trump has chimed in, saying he would be open to ending the tax on home sales.

This idea might sound wonderful, but I don't think it will come to fruition. The proposal would be very expensive and would mainly benefit upper-income individuals.

A more feasible option is a one-time increase in the current $250,000/$500,000 gain-exclusion amounts. Another potential alternative is to annually index the gain-exclusion amounts to inflation. The $250,000 and $500,000 figures have never been adjusted for the appreciation in residential real estate during the 28 years this popular tax break has been in effect. Both alternatives would require congressional action.

5. What is my gain exclusion if I sell my house after my husband dies?

Question: My husband and I jointly owned our home together for many years. He died last year, and I plan to sell my home in 2026. How much of my gain will be nontaxable?

Joy Taylor: If you sell the home in 2026, your home-sale exclusion would be $500,000. A spouse who sells the family home within two years after the death of the other spouse gets the full $500,000 exclusion that is generally available only to joint filers, provided the two-out-of-five-year use and ownership tests were met before death.

There is also a welcome added tax benefit since you owned the home jointly with your spouse. If you don't live in a community property state, half the home will get a step-up in tax basis upon the death of the first-to-die spouse. The rule is more generous if the house is held as community property. The entire tax basis is stepped up to fair market value when the first spouse dies.

Here's an example. Let's say you and your husband bought your home for $150,000 many years ago in a non-community property state, and it was worth $980,000 when your husband died in 2024. Your tax basis in the home jumps to $565,000 (your half of the original $150,000 cost basis plus half of your husband’s $980,000 date-of-death value). Twenty months later, you sell the home for $1,085,000. Of the $520,000 gain from the home sale ($1,085,000 - $565,000), $500,000 is tax-free and $20,000 is taxed at long-term capital gains rates.

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, IRAs 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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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.

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.

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.

The latest American Farm Bureau (AFB) Federation survey puts the average cost of Thanksgiving dinner for 10 people at $55.18. That’s down about 5% from 2024.

But as anyone wandering the grocery aisles can tell you, the dip in prices hasn’t solved the challenges of local taxes, inflation on side dishes, or the hunt for a meal deal that matches last year’s value.​ Here’s more to know as you plan your celebration.

Thanksgiving meal deals

From rising food prices to state grocery taxes and tariffs, many factors are influencing this year’s feast and how retailers are responding.

Walmart’s Thanksgiving meal returns for under $40 (less than $4 per person based on a 10-person gathering). That includes turkey, several sides and dessert.

“We know every dollar and minute counts — which is why we are offering a low-priced, one-click Thanksgiving Meal Basket featuring iconic brands like Butterball and Stove Top alongside trusted Walmart private brand items,” Walmart U.S. President and CEO John Furner stated in a release.

As CNN reports, this year’s kit includes fewer items and more “Great Value” Walmart store brand items than last year's bundle.

Target advertises a $20 Thanksgiving meal deal kit for four, while Aldi touts deals that bring the per-person price even lower to $4 per person, which the chain notes in a press release, is “less than a pumpkin spice latte.”

Note: According to Aldi: The meal deal “includes 21 total products and ingredients to dish out a 14-pound turkey, rolls, cranberry sauce, mac and cheese, stuffing, mashed potatoes with gravy, sweet potato casserole, green bean casserole and pumpkin pie. Items that are part of the meal are purchased individually.”

Some meal deals might come with caveats. This year’s lowest-priced bundles might include fewer fresh vegetables and substitutions for pricier favorites.

On the bright side, the AFB notes that this year, “a 16-pound turkey only accounts for 39% of the cost of a 10-person Thanksgiving dinner.” (That’s Turkey’s lowest share since 2000.)

• Meanwhile, such side dishes as cranberry sauce and some name-brand rolls have reportedly jumped more than 40% in some markets, even as prices on frozen veggies decreased.
• The Farm Bureau says, “price increases for fresh produce and key baking ingredients reflect higher costs throughout the supply chain.”

In its latest report, the AFB explains:

“Items like fresh vegetables and sweet potatoes posted some of the most notable increases. A veggie tray is up more than 61% and sweet potatoes are up 37%. Natural disasters contributed to these higher costs. North Carolina, which produces more than half of the nation’s sweet potatoes, experienced hurricane damage that reduced yields and tightened supplies ahead of the holiday.”

Grocery taxes: Where you shop matters

State sales taxes also play a significant role in the real price of Thanksgiving dinner. As of late 2025, 13 states still impose some form of sales tax on groceries.

In Alabama and Mississippi, for instance, families can face effective sales tax rates as high as 9% on grocery staples, adding up to $5 to a typical dinner basket.

• Kansas stands out for eliminating its grocery food tax as of January 1, 2025. This means a shopper there pays just the shelf price on food and food ingredients.
• In some places, prepared foods can carry an additional local or “meals tax,” as seen in Louisiana and Virginia.

Check your state’s tax policy on food and groceries. Even small taxes can make that store-bought Thanksgiving bundle pricier than advertised, depending on where you live.

What about tariffs?

Adding to these challenges, President Donald Trump’s sweeping tariffs have impacted several food categories, especially those with more extensive packaging. Examples include canned vegetables, which can be more expensive due to steel and aluminum tariffs.

The Trump administration recently announced tariff rollbacks on such goods as coffee, tropical fruits and certain spices. However, many of those items aren’t traditional Thanksgiving staples.

For SNAP recipients and many working families, the checkout experience is still challenging. New federal rules and delayed benefits due to the recent government shutdown have left some with less to spend — even as food costs stabilize a bit.

Why is Thanksgiving so late this year?

Meanwhile, another question on some people’s minds involves this year's late Thanksgiving date.

Thanksgiving 2025 falls on Thursday, November 27, the latest possible date for the holiday this year.

Since Thanksgiving is celebrated on the fourth Thursday of November, a tradition established by Congress in 1941, and November began on a Friday, the 2025 holiday falls near the end of the month.

This late Thanksgiving creates a shorter holiday season, with less than four weeks between Thanksgiving and Christmas.

Thanksgiving 2025: Bottom line

The story for 2025: The cost of Thanksgiving dinner has ticked down a little, but the actual number on your receipt doesn’t just depend on what you buy or where you shop. It can also be impacted by a web of sales taxes and tariffs.

If you’re in a state that has eliminated or lowered its grocery tax or you find a great holiday meal deal, you might see some relief at the checkout. But as always, pay attention to the fine print in your area to savor the smartest savings.

Read More

• States That Still Tax Groceries in 2025
• The Pumpkin Spice Tax and Your Holiday Coffee Budget
• Best States for Tax-Free Chocolate Candy
• States With the Lowest Sales Taxes

Missteps here, from miscalculating a holding period to violating the Wash Sale Rule, can lead to unnecessary taxes or penalties.

Can you confidently navigate the rules governing capital gains taxes, and do you know which capital gains tax rate applies to your investments?

Take our quiz to identify knowledge gaps and ensure you are optimizing your portfolio and keeping more of your profits!

Read More About Capital Gains Taxes

• Capital Gains Tax Rates for 2025 and 2026
• Understanding Capital Gains Taxes: An Essential Guide
• How Collectibles Are Taxed
• Capital Gains Tax Exclusion for Homeowners: What to Know

The immediate tax trade-off from an IRA to a Roth is relatively clear: With a traditional retirement account, you pay taxes when you take a distribution; with a Roth, you pay taxes now on the funds you contribute.

Converting to a Roth means you must pay the income tax on contributions in the year of conversion. Still, the potential tax benefits could be worth the upfront cost, especially if one of the following scenarios applies to you.

Here are six tax reasons you may convert your IRA to a Roth — and when you probably shouldn’t.

Roth IRA tax benefits

1. Get tax-free growth and withdrawals in retirement with a Roth

One major reason to convert your traditional IRA or 401(k) into a Roth is for tax-free growth. Because taxes are paid on your conversion upfront, all future qualified distributions are withdrawn tax-free, leading to significant trickle-down benefits.

• For example, once you reach age 65, you might have to pay Medicare’s income-related monthly adjustment amount (IRMAA). This amount is based on your modified adjusted gross income (MAGI). Because tax-free Roth earnings are excluded from your MAGI, you might avoid higher Medicare premiums on your retirement income.
• Other taxes, such as those on capital gains and the net investment income tax (NIIT), depend on your MAGI in the year of withdrawal. By withdrawing future earnings tax-free with a Roth, you might indirectly minimize or even avoid these taxes altogether.

Timing your Roth conversion is also important for maximizing tax-free growth. For example, you can convert to a Roth when the market is down and your IRA balance is temporarily low. This allows you to pay the tax on a smaller valuation, so when the market inevitably rebounds, your tax-free earnings might more easily recoup your upfront conversion tax bill (more later on conversion timings).

2. Set up flexible retirement income with Roths

Roth conversions from a traditional IRA account might also be ideal for those who want the final say in how they spend their retirement savings account income.

With a traditional IRA, Uncle Sam dictates when and how much you need to withdraw from your retirement account every year.

With a Roth, you’re not forced to take out a certain distribution during specific years, meaning you can freely avoid late-withdrawal penalties and flex your retirement account savings.

However, before your Roth IRA earnings become entirely tax-free and penalty-free, you must meet two requirements for a qualified withdrawal:

1. The 5-year rule. Your Roth IRA must have been open for at least five full years.
2. The age or life event rule. You must be at least 59½ years old, or the withdrawal must be due to disability, a first-time home purchase (up to $10,000), or death.

If you withdraw the earnings before you meet the rules above, that money could be subject to both income tax and a 10% early withdrawal penalty. But by flexing your retirement IRA distributions, you can make strategic withdrawals and help manage your taxable income, even lowering your federal tax bracket altogether.

Roth conversion timing

3. Take advantage of a low tax bracket with Roth accounts

The final months of the year are often the most popular time to execute a Roth conversion. Why? By late fall, most taxpayers have a firm grasp of their projected taxable income and, consequently, their federal tax bracket.

If you expect this bracket to be lower than the one you'll be in future years, converting your IRA to a Roth now could be advantageous. This strategic move allows you to lock in a lower tax rate and significantly reduce your immediate tax bill on the conversion.

If you're fortunate enough to have a lower tax bracket in 2025 than you anticipate in the future, here are the specific times and scenarios when converting your traditional IRA into a Roth might make sense:

• You’re not close to retirement. If retirement age is still 10 or more years away (and you expect to earn more in retirement), now might be a good time to convert your IRA to a Roth, so you can maximize your tax-free growth.
• You expect to live longer. Do you know any relatives who have reached their 90s and are still in good health? Required minimum distributions (RMDs) on traditional IRAs are calculated based on life expectancy tables, which might not fit your family’s expected lifespan. A Roth account offers lifetime tax-free savings, potentially providing a cushion of funds for many years.
• You’re retired and recently transitioned from married filing jointly to a single filer. Single filers generally have a lower income threshold for paying Medicare surcharges, making them susceptible to higher tax bills in the future. By converting to a Roth account, you can potentially avoid those higher tax brackets by preventing the Medicare surcharges on IRA distributions.

The most “ideal” time to convert to a Roth depends on a case-by-case basis, so consult a qualified tax professional before the conversion to see if it’s right for you.

4. Avoid RMD taxes with a Roth IRA

Retirees are likely already familiar with the concept of a RMDs. But if you’re new to the retirement game, here’s the scoop:

• RMDs are money that must be withdrawn from your 401(k), 403(b) or traditional IRA every year after you reach a certain age (right now, that’s likely age 73).*
• Failure to make the withdrawal typically results in a 25% penalty on the amount not distributed.

RMDs can increase your taxable retirement income in a variety of ways. For instance, they can raise the taxable portion of your Social Security benefits by increasing your provisional income or pushing your taxable income into a higher federal tax bracket.

A key advantage of converting to a Roth IRA is the lack of RMDs during the original owner’s lifetime.

Because Roth accounts typically don’t have RMDs, you might be able to avoid taking distributions from your Roth during years of high taxable income, while withdrawing more funds tax-free during low-tax years. This is particularly ideal for high-earners who anticipate higher tax rates in the future.

*Note: If you are 73 or older at the time of the conversion, you must first take your RMD from your traditional IRA in the year of the switch.

Retirement and Estate Planning for Roths

5. Start a Roth IRA after you retire to avoid future high tax rates

If you’re newly retired, now might be the optimal time to convert your 401(k), 403(b) or other traditional IRA into a Roth. Your tax bracket might be lower than it's been while you were working, and you’re not yet taking Social Security or are required to take an RMD (which can push you into a higher tax bracket).

This retirement “sweet spot” is when federal tax rates are at their lowest, which might help create a couple of ideal scenarios for a Roth conversion:

• For instance, if your pension or annuity hasn’t kicked in yet, now might be a great time to convert your traditional IRA or 401(k) while taxable income is low.
• If you plan to receive a large lump sum from an employee stock ownership plan (ESOP) or other retirement investment, converting to a Roth now could save you future taxes when your taxable income is higher.

As reported by Kiplinger, some financial planners also speculate that the changes made in the Trump/GOP 2025 tax and spending bill have placed taxpayers in “one of the lowest-income-tax environments in history.” If that applies to you, consider converting now to a Roth before future tax rates potentially increase.

For more information, check out Kiplinger’s report on Timing Roth Conversions.

6. Give tax-free assets as inheritance to your kids with a Roth

Withdrawals from a traditional IRA or 401(k) are always taxable, no matter who’s taking the funds. Unfortunately, that means your kids could pay the price if you leave them your IRA.

That’s where another tax advantage of converting your IRA into a Roth comes in handy: Your heirs could inherit those funds income tax-free.

Not only that, but inherited Roth earnings continue to grow tax-free, meaning your heirs have more flexibility on when to withdraw.

However, your nonspouse heirs generally have to withdraw all funds from an inherited Roth within 10 years of your death (this also applies to traditional IRAs and is commonly referred to as the 10-year rule). Once more, inherited Roth IRAs have RMDs for some heirs (such as children), though spouses who inherit a Roth might not be subject to RMD rules.

For more information on the 10-year rule and inherited Roth accounts, check out Kiplinger’s report, Inherited an IRA? Key Distribution Rules to Know for 2025.

When you shouldn’t convert to a Roth

Although we covered six tax reasons for converting your IRA to a Roth, there are times when a Roth conversion can be financially detrimental. Here are a few scenarios when you wouldn’t convert a traditional IRA to a Roth.

• You expect your 2026 income tax rate (or later) to be lower (or the same). If you think your future federal tax rate will be lower than your current rate, you might not want to convert a traditional IRA to a Roth, as doing so would mean paying higher tax rates later.
• You have to use IRA funds just to pay the conversion tax bill. Since the Roth conversion tax is due upfront, you must pay it immediately. If you're forced to use the IRA funds themselves to cover the tax bill, that withdrawal becomes taxable and could trigger an early withdrawal penalty (if you're under 59½). This might significantly diminish your retirement savings and undercut the primary benefit of the Roth: Tax-free growth.
• You need to use the converted funds within five years. If you’re under 59½, you can’t use your funds for five years after a traditional IRA to Roth conversion. Otherwise, you could be subject to a 10% early withdrawal penalty. (Yet if you’re older than 59½, you might withdraw the funds penalty-free before the five years are completed, though any earnings on those funds will be subject to income tax.)
• You’re retiring soon. If you’re retiring within the next five years, your Roth account will not have a lot of time to grow tax-free, so you might not want to convert your IRA into a Roth. Otherwise, your upfront conversion tax bill might never be recouped.

Deciding if and when to convert your traditional IRA to a Roth account should be part of a comprehensive tax strategy that considers your various income streams and retirement time horizon.

For example, converting to a Roth might seem like a good idea for generating tax-free growth, but the increase to your taxable income in the year of conversion could have ripple effects. Higher taxable income might preclude you from claiming tax breaks that you’re eligible for, such as the tip tax deduction or $6,000 bonus deduction for older adults.

You don’t have to make an IRA to Roth conversion all at once. You can decide to minimize the impact of your conversion taxes by spreading out a Roth conversion gradually, if at all.

Ultimately, Roth conversions are irreversible: Exercise caution. Once you’ve made one, you’re stuck with the upfront tax bill and the Roth account for a lifetime.

Read More

• Roth IRA Contribution Limits for 2025
• 10 Retirement Tax Plan Moves to Make Before December 31
• The Rubber Duck Rule of Retirement Tax Planning
• 3 Ways High-Earners Can Maximize Their Charitable Donations in 2025

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

Online searches for “stimulus checks” are climbing, and speculation about government payments has intensified after President Donald Trump revived one of his attention-grabbing ideas: sending some U.S. taxpayers $2,000 “tariff dividend” checks.

Trump claims his tariffs on imported goods have generated enough money to fund the plan and to pay down some of the deficit. However, since tariffs are taxes, U.S. consumers are bearing much of the burden of the administration's trade policy, and some fiscal experts say the "dividend" numbers don’t add up.

So, the question is: Will you receive a $2,000 payment soon? Here’s what you need to know.

Related: Costco Sues Trump Administration Over Tariffs: What to Know

Are Trump 'tariff dividend checks' really on the way?

Trump recently revived his proposal to provide a $2,000 payment to some U.S. taxpayers. He’s framing it as a fair share of the revenues generated by sweeping tariffs he’s implemented on imported goods since the start of his second term as president.

In a recent post on his social media platform, Truth Social, Trump wrote the following:

“People that are against Tariffs are FOOLS! We are taking in Trillions of Dollars and will soon begin paying down our ENORMOUS DEBT, $37 Trillion. Record Investment in the USA, plants and factories going up all over the place. A dividend of at least $2000 a person (not including high income people!) will be paid to everyone.”

Trump suggests the new plan for 2026 stimulus payments is a patriotic payback to working families, who are shouldering higher costs. However, you might recall that this message echoes previous flirtations.

For instance, not long ago, the Trump administration talked about “DOGE dividends” — payments tied to Elon Musk’s infamous Department of Government Efficiency cuts. Those “savings” never materialized into payments to taxpayers.

And Trump’s call for tariff dividends raises other questions. Who will be considered “high earners”? When and how will the money be sent?

In response, Treasury Secretary Scott Bessent seemed to temper expectations.

On ABC’s This Week, Bessent said the administration is exploring whether the “dividend” would come in the form of direct payments, temporary tax relief, or another form, like tax cuts in the recently enacted 2025 Trump tax bill.

“The $2,000 dividend could come in lots of forms, in lots of ways. It could be just the tax decreases that we are seeing on the president's agenda — no tax on tips, no tax on overtime, no tax on Social Security, deductibility on auto loans.”

*Note: The 2025 Trump/GOP tax bill does not end taxes on Social Security benefits. For more information, see Social Security Tax Cuts Missing From Trump Tax Bill.

• On Fox News, Bessent noted that Congress must approve any such payout and that no final design has been established yet.
• The Treasury Secretary also floated an income limit — possibly excluding households earning over $100,000 — but stressed those details remain under discussion.
• More recently, Bessent acknowledged a trade-off between using tariff revenue for checks versus paying down the federal debt.

Tariff stimulus: Is there enough tariff revenue to go around?

The fiscal realities and trade-offs are key, as several budgetary experts have raised concerns about the feasibility of Trump’s proposal.

John Ricco, an analyst with the Budget Lab at Yale University, told reporters, “It’s clear that the revenue coming in would not be adequate.”

That’s based on the assumption that Trump’s tariffs may bring in $200 billion to $300 billion annually. (That amount reportedly constitutes less than 4% of total federal revenue.)

The Committee for a Responsible Federal Budget (CRFB) estimates that issuing a one-time $2,000 payment to every American, including children, would cost approximately $600 billion — roughly triple the current annual tariff revenue.

And even if the checks were limited to those making $100,000 or less, Alex Durante, a senior economist at the Tax Foundation, points out that this would mean checks going to an estimated 150 million Americans at a minimum cost of $300 billion.

Takeaway? Tariff revenue has grown, but not nearly enough to fund dividend checks of this scale without dramatically increasing the federal deficit.

• Despite tariff growth, the federal deficit in fiscal 2025 still reached nearly $1.8 trillion, according to data from the Treasury and the Congressional Budget Office (CBO).
• The International Monetary Fund warns that while tariffs can temporarily curb deficits, they often distort trade and raise consumer prices.
• The Tax Foundation notes that as tariffs rise, imports tend to fall. That can potentially undercut the revenue source Trump claims to want to redistribute.

Trump tariffs Supreme Court ruling

Then there’s also the looming question of the legal sustainability of Trump’s tariff policies.

As Kiplinger has reported, the U.S. Supreme Court is currently considering challenges to Trump's tariffs, examining the broad application of the International Emergency Economic Powers Act (IEEPA), which underpins many of the Trump administration’s tariffs.

If the court invalidates many of the tariffs, the ruling could significantly affect the availability of funds for the proposed tariff dividends and possibly necessitate tariff refunds. (During oral arguments in the tariff case, Justice Amy Coney Barrett pondered the potential administrative “mess” involved in ordering massive tariff refunds for affected importers.)

Then, here’s the legislative hurdle surrounding tariff dividends. As Besent acknowledged, Congress would have to pass legislation to authorize the payments.

Earlier this year, Sen. Josh Hawley (R-Mo.) introduced a bill that would mandate annual “tariff rebates” for lower- and middle-income families, funded by duties on Chinese imports.

Hawley’s version, which hasn’t moved in Congress, would stop short of setting a flat $2,000 figure. If approved, the bill would reportedly provide at least $600 per adult and dependent child, meaning a family of four could receive a minimum of $2,400 in rebates.

• The $600 would be a guaranteed minimum per eligible person.
• But if tariff revenues exceed projections, payments could increase proportionally.

Meanwhile, even some Trump allies acknowledge the need for congressional approval for any such payments, meaning that any rollout of Trump dividends will face political and procedural headwinds.

Investor and Shark Tank personality, Kevin O'Leary, recently warned that sending out checks funded by tariffs is just a “quick band‑aid” that risks acting as a “silent tax” by stoking inflation.

On X (formerly Twitter). O’Leary posted: “Everyone loves the idea of a free check, especially in a tough economy. But here’s the truth, and it’s not always popular. Sending out $2000 checks funded by tariffs might feel good in the moment, but it does nothing to fix the core problem.”

He later told reporters that any new tariff revenue should be used to pay down the national debt and shore up long‑term economic stability.

Also, worth noting: After the longest US government shutdown in history, Congress is already battling over ACA tax credit subsidies and government funding levels.

Trump giving $2,000 checks: Bottom line

The idea of a Trump $2,000 “tariff dividend” might understandably resonate with many households. But fiscal realities remain shaky, the legal situation is uncertain, and congressional cooperation is far from guaranteed.

Budget Pressure: The plan could significantly deepen the deficit unless the payouts are sharply limited.

Revenue Volatility: Tariff revenue tends to fluctuate, particularly when imports decline or trade partners retaliate.

Debt Trade-Off: Using tariff proceeds for checks would divert funds from federal debt reduction.

Legislative Hurdles: Congressional approval will be required for direct federal payments.

Legal Risks: Ongoing court challenges could narrow Trump’s tariff authority and erode the revenue base.

So, for now, the “tariff dividend” looks more like another idea than a budget-ready program that taxpayers can look forward to. Focus on practical financial steps for now, including taking advantage of existing tax breaks and legitimate employment and income opportunities.

But, as always, stay tuned. Some states are sending various forms of rebates and relief payments this year.

This story has been updated to include information about Trump allies' views of the proposed dividend checks.

Read More

• Sen. Hawley Proposes $600 Tariff Rebates
• Trump Tariffs and the Supreme Court: Three Things to Know
• Trump Tax Bill 2025: What's In It?
• Stimulus Checks: Is Your State Sending Money This Year?

Earlier this month, President Donald Trump released a graphic on his social media platform Truth Social titled “Great American Presidents.” Inside the graphic were the words “30-Year Mortgage” above a photograph of former President Franklin D. Roosevelt, and “50-Year Mortgage” above a photo of Trump.

The post sparked debate as industry experts and elected officials weighed in on a proposed 50-year loan term to help first-time buyers afford a home.

But would such a proposal actually help or hurt a homebuyer’s financial situation? And how would a 50-year mortgage affect another pain point for homeowners: Taxes?

Read on.

Are 50-year mortgages coming?

When homeowners buy a house, they typically secure a 30-year mortgage. This loan lifecycle follows a process called amortization, where the borrower pays fees and interest first, then slowly pays down the principal balance over time. Ideally, after 30 years, the homeowner owns the house.

By stretching the loan term from 30 to 50 years, the buyer effectively pays less every month for the same principal balance.

Consequently, on the surface, a 50-year mortgage might seem to help a first-time homebuyer afford a home, as shown by Fannie Mae’s mortgage calculator:

• A 30-year mortgage on a $200,000 home with a 5% down payment and 6% interest rate could result in a monthly mortgage payment of $1,512.
• A 50-year mortgage home with the same price and terms as above could lead to a monthly mortgage payment of $1,373.
• Compared to a 30-year term, the proposed 50-year mortgage would result in a monthly payment savings of approximately $139 for the homebuyer.

Director of the Federal Housing Finance Agency, Bill Pulte, who reportedly proposed the idea to Trump, called the proposal “a complete game changer,” while sharing Trump’s post on X. Pulte later added that the Trump administration is developing a “WIDE arsenal of solutions” to the housing affordability crisis.

Home affordability has become a recent issue for the Trump administration, as housing prices have skyrocketed more than 50% over the last five years.

And those who can afford a house spend an average of 39% of their income on housing expenses — well over the 30% recommended amount given by financial experts, according to Redfin. Yet some elected officials and industry experts claim the 50-year mortgage proposal could boomerang, leading to significantly higher home costs over time and even threatening future generational wealth.

50-year mortgage Trump proposal

A 50-year mortgage may yield slightly lower monthly payments than a 30-year term. But the total loan cost would be staggering, according to the latest LendingTree analysis using a $500,000 mortgage and a 6.1% interest rate:

• For a 30-year fixed loan, a homebuyer would pay $590,791 in interest over the life of the loan.
• For a 50-year fixed loan, a homebuyer would pay over $1.1 million in interest alone.
• Effectively, the amount of interest you pay on a 30-year vs. a 50-year loan would be more than double, even though your loan only increased by 20 years.

“This is not a good idea,” remarked Richard Green, a professor at the University of Southern California’s Marshall School of Business, who told CNN, “The monthly payment savings would be really small. At the same time, you’re putting people at risk, because it takes a really long time for them to start paying down their loan.”

Just days after the proposal, Trump told Fox News in an interview, “It’s not even a big deal,” and “All it means is you pay less per month. You pay it over a longer period of time. It’s not like a big factor.”

Meanwhile, the average age of a new homebuyer has increased to a record-breaking 40 years old, according to the National Association of Realtors.

If the first-time buyer purchases a home at that age, there’s a good chance they could be dead before their 50-year mortgage matures. Future generations could be on the hook for paying the loan, which means less wealth would be passed down to younger generations.

"I don’t like 50 year mortgages as the solution to the housing affordability crisis,” wrote Rep. Marjorie Taylor Greene (R-Ga.) on X. “It will ultimately reward the banks, mortgage lenders, and home builders while people pay far more in interest over time and die before they ever pay off their home. In debt forever, in debt for life!"

In the meantime, Opendoor’s CEO, Kaz Nejatian, praised the idea on X. “50 year mortgage is probably the most pro-homeowner government policy of the last two decades.”

50-year mortgage vs. 30-year mortgage: Interest tax deduction

Some may wonder whether the cost of a 50-year mortgage could be offset through tax savings. After all, homeowners may take advantage of the mortgage interest deduction (MID) if they itemize their federal returns.

• MID allows you to deduct up to $750,000 on qualifying loans after 2017 (before that date, the limit is $1 million).*
• Interest paid on a proposed 50-year loan would be higher compared to interest paid on a 30-year loan (even though your monthly mortgage payment would be lower).
• Because of this, your annual MID could be potentially higher on a hypothetical 50-year loan compared to a 30-year mortgage.
• However, because the MID is capped at $750,000 for new loans, you might not be able to recoup all your interest paid over the life of the loan (plus you’d have to itemize your federal taxes every year just to claim it instead of the standard deduction).
• And since the average homeowner typically sells their home after 12 years, you likely wouldn’t see a more advantageous tax benefit from the mortgage tax deduction than on a 30-year loan.

And there’s home equity risk, too. The principal is paid down slowly on a 50-year mortgage, which means the homeowner's equity builds at a significantly slower rate. This exposes the homeowner to a greater risk of potential home price declines, or even “negative” equity if the housing market dips.

*Note: The MID limits for married filing separately couples are lower than other filing statuses.

Is a 50-year mortgage a good idea legally?

Before anything else, the Trump administration would need to overcome a legislative hurdle to enact a 50-year mortgage.

The Dodd-Frank Wall Street Consumer Protection Act, which was designed (in part) to protect homebuyers after the 2008 housing financial crisis, doesn’t currently embrace 50-year mortgages.

So if a 50-year loan were issued, it would likely be “non-qualified,” meaning it wouldn’t be backed federally. The lack of federal assurance increases lender risk, which would likely increase the interest rate for the buyer.

Yet a policy change might not be off the table.

According to ABC News, a White House official said that the administration is "always exploring new ways to improve housing affordability" and will announce any official policy changes directly.

So stay informed and stay tuned.

Read More

• About 40% of Heirs Say They Can’t Afford an Inherited Home
• Ten Tax Breaks for Homeowners and Homebuyers in 2025
• Are Trump Tariffs Legal? The Supreme Court and What’s at Stake

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.

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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.

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.

Related Content

• How to Use DSTs and 1031 Exchanges for Diversification
• A Little-Known Tax Buster for Rich Retirees: Zero-Coupon DST
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells
• 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.

Related Content

• A 10-Year Retirement Planning Checklist
• The 'Rule of 25' for Retirement Planning
• Retirement Income Strategies for the Long Haul
• I'm a Financial Planner: Here Are Five Phases of Retirement Planning You Have to Get Right
• How to Create Retirement Income That's Driven by Cash Flow

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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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. Did the OBBB extend the QBI deduction?

Question: I know the qualified business income (QBI) deduction was going to expire at the end of 2025. Did the “One Big Beautiful Bill” (OBBB) extend this federal income tax break?

Joy Taylor: Yes. The OBBB not only extended this popular tax break that was otherwise set to expire after 2025 but also made it permanent. Self-employed individuals, independent contractors, gig workers who aren’t employees, farmers, some landlords and owners of pass-through entities, such as partnerships, LLCs and S corporations, claim the 20% QBI write-off on line 13 of their Form 1040 and attach IRS Form 8995 or 8995-A.

QBI is one’s allocable share of income less deductions from a business. The rules can get complicated, especially for individuals with 2025 incomes that exceed $394,600 for joint filers and $197,300 for other filers.

This tax deduction was first enacted in the 2017 Tax Cuts and Jobs Act to provide some federal income tax parity between C corporations, which are taxed at a 21% rate, and pass-through entities, in which the individual owners pay income tax on earnings up to a 37% tax rate. Many congressional Republicans wanted to make the 20% QBI permanent, and they got their wish in the OBBB.

Note that making this tax break permanent cost the government lots of money. That’s because it is in the top 10 largest federal individual income tax expenditures, rounded up by the staff of the bipartisan congressional Joint Committee on Taxation.

2. Can freelancers claim the QBI deduction?

Question: I recently left my full-time job, and I am now an independent freelance consultant. Can I claim the 20% QBI deduction on my 2025 Form 1040?

Joy Taylor: Generally, yes. The QBI deduction applies not only to individual owners of pass-through entities, such as partnerships, S corporations and LLCs, but also to self-employed individuals who file Schedule C with their returns.

An important limitation applies to high earners in certain service fields. They include health, law, accounting, consulting, financial and brokerage services, performing arts, athletics, actuarial science, investing or trading in securities, or any business where the principal asset is the reputation or skill of its employees. If you are in one of the affected fields and your income for 2025 exceeds $394,600 for joint filers or $197,300 for single filers and head-of-household filers, the 20% deduction begins to phase out.

3. Do landlords qualify for the QBI write-off?

Question: I own rental property and generate a profit from the activity. Can I claim a 20% qualified business income deduction for my rental income that I report on Schedule E of my Form 1040?

Joy Taylor: It depends. Self-employed individuals and owners of LLCs, partnerships, S corporations and other pass-through entities can deduct 20% of their QBI, subject to limitations for individuals with incomes in 2025 of more than $394,600 for joint filers and $197,300 for single filers and head-of-household filers.

Rental income reported on Schedule E of the Form 1040 may be eligible for the deduction in certain cases. There are two ways to qualify for the 20% QBI write-off for rental income. The first is if the rental activity rises to the level of a trade or business. For this purpose, the IRS’s regulations refer to the standard under tax code Section 162, the statute that generally governs the deductibility of trade or business expenses.

There is no statutory or regulatory definition of a Section 162 trade or business. Instead, this is based on each taxpayer’s specific facts and circumstances. Some relevant factors are the type of property (commercial or residential), lease terms, extent of day-to-day involvement by the lessor or his or her agents, the significance and type of ancillary services provided under the lease, and the number of rentals.

A second way to qualify rental income as QBI is to meet an IRS safe harbor. At least 250 hours in a year must be devoted to the rental activity by the taxpayer, employees or independent contractors. Time spent on repairs, collecting rent, negotiating leases, tenant services, property management, advertising and supervising workers counts. Hours put in for driving to and from the property, arranging financing and constructing long-term capital improvements on the property aren’t included. If you own multiple properties, you can treat each property separately or aggregate similar rental activities into commercial or residential categories.

Taxpayers who use the safe harbor must meet strict recordkeeping requirements and attach an annual statement to their tax returns. Contemporaneous records must detail hours, dates and descriptions of the services and who performed them. If the services are done by contractors or employees, the taxpayer must keep logs of the work done by them, as well as proof of payment.

Note that the safe harbor doesn’t apply to rental income from property leased under a triple net lease or if the owner’s personal use of residential property exceeds the greater of 14 days or 10% of the days rented.

Treating rental income as QBI doesn’t change how you report that income on your Form 1040. Rental estate rental income is usually reported on Schedule E of the 1040. Also, the rental income generally isn’t subject to self-employment tax.

4. Do REIT investors get the 20% QBI write-off?

Question: I am thinking of buying shares in a real estate investment trust (REIT). My financial advisor told me that REIT investors qualify for the 20% QBI deduction. Is this true?

Joy Taylor: Yes. The 20% QBI deduction also applies to holders of publicly traded partnership units and REIT shares. Individuals can deduct 20% of qualified REIT dividends, which are distributions not taxed under the favorable rules for capital gains and dividends, and 20% of their share of a PTP’s QBI.

5. How do LLC members know the amount of the entity’s QBI?

Question: I own membership interests in a multi-member LLC. How do I know if the LLC has QBI, and if it does, my allocable share of the LLC’s QBI?

Joy Taylor: The Schedule K-1 that you receive from the LLC will include your allocable share of the LLC’s QBI, if any, in the “Other Information Box” of the K-1 under a special code. Similar information will be shown on Schedule K-1s given to S corporation shareholders and to partners in partnerships.

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.

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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.

Insurance products are offered through the insurance business Medalist Wealth Management. Medalist Wealth Management is also an Investment Advisory practice that offers products and services through Impact Partnership Wealth, LLC (IPW), a Registered Investment Adviser. IPW does not offer insurance products. The insurance products offered by Medalist Wealth Management are not subject to Investment Advisor requirements. Investing involves risk, including the potential loss of principal. Guarantees and protections provided by insurance products, including annuities, are backed by the financial strength and claims-paying ability of the issuing insurance carrier. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of Matthew Eilers or Medalist Wealth Management is stated or implied. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Medalist Wealth Management is not affiliated with or endorsed by the U.S. Government or any governmental agency. Market Guard ® is a firm that provides investment signals, as well as portfolio allocation recommendations, for a wide variety of model portfolios. Market Guard ® does not offer advice or enter into fiduciary relationships. 4857030-09/25

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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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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 for high-income earners, charitable giving in 2025 is particularly vital. Tax legislation in 2026 will cap the maximum federal tax benefit at 35%, effectively making contributions this year far more valuable. Plus, a new rule next year might further reduce the allowable charitable deductions for donors with complex gifting strategies.

Here’s what you need to know.

Charitable deduction for high-income earners in 2025

Let’s first review why donating this year, in 2025, is more advantageous than in 2026. Basically, the 2025 Trump Tax Bill changed many rules regarding charitable donations. Those changes are summarized in the following table.

As you can see, for 2026, a charitable contribution "floor" will be introduced for itemizers, regardless of income level. Only total contributions above 0.5% of your AGI will be deductible.

For example, if you had $200,000 AGI and donated $2,000, only $1,000 would be deductible.

Charitable contributions for high-income itemizers will also be subject to a cap in 2026. The new law imposes a 35% limit on the value of all itemized deductions for high earners, meaning taxpayers in the top bracket will receive a lower tax break compared to 2025.

The calculation order for charitable asset types will be reversed. Assets with the lowest deduction limits (e.g., 20% of AGI) will now be calculated first.

This technical change directly affects how much of your giving is an allowable deduction in 2026, potentially reducing the overall tax break for high-income donors who make gifts of varying asset types.

While excess contributions can still be carried forward for up to five years, carryforwards used in 2026 and beyond will be subject to the new limitations.

So below are three ways for you to take advantage of the more advantageous donation rules in 2025 — especially if you’re a high earner.

1. Donate stock to charity (or other appreciated non-cash assets)

You may have heard that donating appreciated stock (or other non-cash assets) is a part of a good charitable deduction strategy. Well, that’s because donating these assets provides a “double” tax benefit.

• You can deduct the asset’s full fair market value, pre-tax. If your asset’s fair market value (FMV) is higher than “cost-basis” (what you paid), the gain is not taxable once donated to a qualified, public charity.
• This allows you to avoid capital gains tax. By transferring the asset directly to your chosen charity, you’ll avoid paying capital gains tax (up to 20%) on the increase in the asset’s value. Plus, you may also avoid paying the 3.8% net investment income tax (NIIT).

Of course, there are a couple of caveats when donating appreciated non-cash assets.

• Namely, the donated asset must have been held for more than one year before donation; otherwise, the asset will be donated at cost-basis, which could be significantly lower than the value of an appreciated stock.
• Also, donations of appreciated stock to a public charity are subject to a 30% AGI limit, which is higher than the AGI limit for cash (60%). Despite this difference, avoiding capital gains tax typically makes donating the asset (rather than selling and donating the cash) more tax-advantageous.

If you donate appreciated assets to specific types of accounts, your donations may also yield tax-free growth for future charitable giving. One such account that high-earners typically use is a donor-advised fund (DAF).

2. Use a donor-advised fund (DAF) bunching tax strategy

A donor-advised fund (DAF) allows you to claim an immediate tax deduction for your contributions this year (under the more favorable 2025 rules), while the fund recommends grants to your chosen charities over time.

Given the flexibility in timing, a DAF is often used in conjunction with a tax strategy called “bunching.” This is where you pay two or more years’ worth of itemized expenses in the current tax year to push your total itemized deductions over the standard deduction amount.

• If performed correctly, “bunching” your deductions gives you one year of high itemization followed by one year of the standard deduction, which maximizes your total tax savings for both years.
• Using a DAF-bunching strategy is particularly beneficial for high-income earners who anticipate a higher federal income tax rate in 2026, when charitable giving tax laws will be less favorable.
• Plus, tax-free growth in a DAF means you can pay out more money in the future, amplifying your philanthropic impact.

Also, bunching doesn’t just exist for charitable deductions. You can front-load other popular itemized deductions, like the state and local (SALT) deduction, the medical expense deduction, and even the mortgage interest deduction, to help push your deduction amount higher than the standard. Yet keep in mind that certain AGI limits and other IRS rules may apply to each itemized deduction.

3. Make a charitable IRA distribution (QCD)

A qualified charitable distribution (QCD) is a distribution from your IRA to a qualified charity of your choice. QCDs are particularly beneficial if you’re trying to avoid taking your required minimum distribution (RMD) and still want to meet your charitable giving goals for the year.

Here are the eligibility requirements for 2025:

• You must be age 70 ½ or older.
• You can donate up to $108,000 (or $216,000 if married spouses) in a single tax year.
• The distribution must be made from a traditional IRA, an inherited IRA, or an inactive SEP/SIMPLE IRA.

Although QCDs require that you “give up” a portion of your annual IRA distribution to a charity, that amount is excluded from your AGI.

This lower AGI may reduce your taxable income, thereby lowering your tax on Social Security benefits for the current year. Even better, reducing your AGI helps lower your income for the Medicare premium calculation two years later, potentially allowing you to avoid higher premiums.

But a QCD doesn’t qualify as an itemized “charitable deduction” on your income taxes, which may hamper your bunching strategy. You also can’t use a DAF to make a QCD, so be sure to review your complete charitable giving strategy before making one.

Changes to charitable donations in 2026

While we covered several notable ways to maximize your gifting strategy in 2025 if you’re a high-income earner, here are a couple of other gift tax changes going into effect in 2026:

• Increased estate tax exclusion. While the basic exclusion amount for individuals was $13.99 in 2025, the exclusion was increased to $15 million in 2026. This may affect your gifting strategy as a higher exclusion amount allows individuals to transfer more wealth to heirs estate tax-free.
• New non-itemizer charitable deduction. A federal deduction for non-itemizers up to $1,000 for single filers (or $2,000 for joint filers) will be available in 2026. However, you can’t use this deduction in conjunction with DAF or private foundations.

Of course, these changes may not affect everyone, depending on your gifting strategy. Also, state tax rules may differ. Consult with a qualified tax professional to discuss which tax strategies are best for your financial circumstances.

Read More

• 10 Retirement Tax Plan Moves to Make Before Year-End
• What is the Gift Tax Exclusion for 2025 and 2026?
• 2025 Roth Conversion Strategy: 6 Reasons to Convert (& When Not to)
• How Charitable Donations Can Reduce Your Taxes

However, Texas voters made a move of their own, approving Proposition 2. That amendment to their state constitution will solidify a ban on Texas capital gains taxes, including those on unrealized gains.

But wait: isn’t Texas already a state with no income tax? Why would voters need to prevent a tax on capital gains that has never been imposed? As you might expect, answers to these questions involve economic and political considerations.

So, here’s more of what you need to know, including what the Texas move could mean for other states.

Texas capital gains tax ban

The passage of Proposition 2 aligns with the Lone Star State's longstanding policy of not imposing a personal income tax (including capital gains taxes). However, once certified, the amendment will reinforce that by constitutionally prohibiting future taxes on capital gains, whether realized or unrealized.

Key Points:

• At first glance, the idea of banning capital gains taxes in Texas may seem unnecessary. (The state has never implemented taxes on capital gains, primarily because it does not have a personal income tax.)
• However, given the changing policies in other states without income taxes, along with proposals for a "wealth tax" discussed during the Biden administration, there are some floating concerns about potential future taxation of unrealized capital gains.
• Since no U.S. state or the federal government has yet introduced an unrealized gains tax, some view the actions being taken in Texas as symbolic and preemptive.

According to reports of unofficial numbers, approximately 65% (just under 2 million Texans) voted in favor of the ban, while 35% voted “no.”

Future plans to tax unrealized gains?

An unrealized gain occurs when the value of an asset you own increases, but you haven't sold the asset yet. So, the gains are what some refer to as “paper gains” since they haven’t been realized tangibly.

• Generally, only realized gains are taxed in the U.S. Some argue that this allows the already ultra-wealthy to accumulate more wealth while avoiding paying their “fair share” of taxes.
• (For instance, billionaires can typically avoid income taxes by living off loans secured by appreciated assets rather than selling those assets, which would trigger capital gains taxes.)

The Biden administration had proposed a 25% tax on unrealized gains for ultra-wealthy individuals holding $100 million or more in assets. Biden also floated taxing unrealized gains at death for gains exceeding $5 million for single filers and $10 million per married couple.

At the time, those ideas ignited political and policy debate about everything from practicality and fairness to economic impact. However, the most important thing to know now is that under current U.S. tax law, investors are generally taxed only on realized gains.

Still, the idea (or fear of the concept) has lingered in some state tax policy debates.

Washington capital gains tax controversy

Interestingly, Washington state also has no personal income tax, but it has had a controversial capital gains tax for the last few years.

• Washington’s capital gains tax initially imposed a 7% tax on long-term capital gains above an annual exemption ($270,000 for 2024, with inflation adjustments).
• The tax applies to profits from the sale of stocks, bonds, and other non-retirement assets, while exempting real estate, retirement accounts, and many small business sales.
• Now, under recent state legislation, a new 2.9% surcharge applies to net long-term capital gains exceeding $1 million above the exemption, effective retroactively from January 1, 2025.

Washington’s approach contrasts with the Texas constitutional ban, highlighting the different strategies states are adopting to fund public services and manage tax policy.

For example, during the 2024 election, Initiative 2109, a measure to repeal the capital gains tax, appeared on the Washington state ballot. But as Kiplinger reported, voters there rejected the repeal effort, with over 63% voting “no.”

The state uses the capital gains tax revenue to fund education (K-12 and early learning) and child care programs. According to Washington’s Department of Revenue, the levy has raised over $1 billion for education and school construction in its first three years

Missouri capital gains tax eliminated

On the other side, Missouri recently became the first state with an individual income tax to ban capital gains taxes.

As Kiplinger reported, on July 10, 2025, Missouri Gov. Mike Kehoe signed House Bill 594 into law. That legislation eliminates the state tax on capital gains for individuals, effective January 1, 2025.

In a statement regarding the bill’s passage, the governor described the tax changes as pro-growth — “keeping more money in the hands of Missouri families and less in government coffers.”

The measure is projected to cost Missouri around $350 million a year.

And speaking of revenue, while Texas voters favored locking in tax protections, some critics argued that bans like Proposition 2 could ultimately limit revenue streams essential for public services, including schools, infrastructure, and health care. There were also concerns that the measure could limit legislative flexibility in the future.

Supporters contend that low and predictable taxes foster economic growth, attract businesses, and encourage investment.

Worth noting: The Washington state capital gains tax sparked warnings of “wealth flight.” Some critics worried that high-income individuals and entrepreneurs would leave in favor of states with lower or no capital gains taxes.

However, data so far seems to tell a different story.

• In its first year, the Washington cap gains tax reportedly generated approximately $840 million — well above projections.
• A subsequent drop the next year, to about $418 million, was attributed to market volatility, rather than a mass exodus of wealthy residents, according to the state’s Department of Revenue.

Federal capital gains tax rates

For now, the fact is that at the federal level, the capital gains tax framework hasn’t changed since President Donald Trump’s second term began. His administration has essentially maintained lower rates from previous administrations without pursuing unrealized gains taxes.

• For 2025 (returns you’ll file early next year) and 2026 (returns typically filed in early 2027), the long-term capital gains tax rates remain at 0%, 15%, and 20%, but the income thresholds have shifted.
• Note: Remember that short-term capital gains (assets held for one year or less) are taxed at ordinary income tax rates, different from those for long-term capital gains.

For taxpayers and investors, the Texas amendment may reinforce the state’s reputation as a low-tax state. Although even low-tax states have their pros and cons.

For other states, moves like those in Texas and Missouri (or even Washington) could serve as reference points as they decide whether to consider new taxes or strengthen protections against them. Stay tuned.

Read More

• IRS Updates Capital Gains Tax Thresholds for 2026
• Texas Property Tax Relief: What to Know Now
• States With Low and No Capital Gains Tax in 2025

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.

Related Content

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• Why More Americans Are Redefining Retirement, Just Like I Did
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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.

Why? Because of the HSAs’ so-called “triple tax advantage.” That includes pre-tax contributions, tax-free investment growth, and tax-free withdrawals for qualified medical expenses.

With such potentially significant tax advantages, opting in to an HSA might seem like an easy choice.

However, some situations may make an HSA less than ideal for you or your family, despite its tax benefits.​ Curious? Here’s more of what you need to know.

How do Health Savings Accounts work?

An HSA is a special savings account that allows you to pay for qualified medical expenses with pre-tax dollars. You can only open a health savings account if you’re enrolled in a high-deductible health plan (HDHP) — meaning you’ll pay more out of pocket before insurance kicks in.

You (and sometimes your employer) can deposit money into the account, and that money can be used tax-free for expenses like doctor visits, prescriptions, or even dental and vision care.

The balance rolls over from year to year, and you keep the account even if you change jobs or retire.

As mentioned, a main appeal is the triple tax advantage:

• HSA contributions are tax-deductible
• Growth is tax-free, and
• Withdrawals for eligible expenses are also not taxed.

However, while HSAs can be a powerful way to save on healthcare costs, they may not be the best fit for every health plan or budget. Here are some key reasons why.

‘Hidden costs’ of High-Deductible Health Plans

To qualify for an HSA, you have to have a high-deductible health plan (HDHP). That means trading lower monthly premiums for higher out-of-pocket costs. (Because HSAs pair with HDHPs, you’ll pay more out of pocket before insurance starts covering expenses.)

• If you don’t have enough saved yet, those upfront costs can be tough to manage.
• The high-deductible, higher-risk paradigm means you’ll need to cover more upfront costs before insurance kicks in, which can strain your cash flow if medical needs arise.
• You might not see enough savings to offset the higher deductible.

That structure can be challenging for people with chronic conditions, ongoing prescriptions, or families with ongoing medical needs, or those who expect high medical costs early in the year.

Studies from the National Bureau of Economic Research (NBER) note that while HSAs incentivize consumer-driven health spending, they also disproportionately affect chronically ill patients and lower-income individuals.

The Kaiser Family Foundation reports that "premiums for HSA-qualified health plans may be lower than for traditional insurance, but these plans shift more of the financial risk to individuals and families through higher deductibles."

Conversely, if you rarely have medical expenses, the potential deductions may not outweigh the higher deductible or plan limits.

And from a tax perspective, if you find yourself pulling from your HSA for regular health bills, you miss out on tax-free investment growth. As mentioned, for many, the compounding aspect is a large part of the HSA’s appeal.​

Frequent HSA withdrawals undercut long-term growth

Some people understandably end up using their HSA dollars every year just to cover doctor visits or medications. But each withdrawal means less money stays invested, which not only reduces future tax-free growth but can also undermine the “retirement account” aspect HSAs aspire to offer.

If you’re in that boat, the account can sometimes feel like more of a glorified checking account than a tax-optimized investment vehicle.​

Limited HSA contributions mean limited tax benefits

Much of the power of an HSA is realized when you can contribute a meaningful amount each year and, ideally, leave those funds invested for a significant period.

Note: The IRS sets annual contribution limits for these accounts.

Here are the 2025 and 2026 contribution limits for individuals and families, including the catch-up amount for those aged 55 and older:

HSA Contribution Limits

These limits apply to the total contributions from both individuals and employers combined. The catch-up contribution allows individuals 55 or older (not yet enrolled in Medicare) to contribute an additional $1,000 each year.

Still, if you can’t afford to contribute much because of, for example, tight household finances, other priorities, like debt repayment or just the higher out-of-pocket costs that come with a high-deductible health plan, can also effectively shrink the tax benefits of an HSA.

• That is because HSAs essentially reward those who can maximize contributions.
• The tax deduction for putting money in is only substantial if you’re actually making full or near-full contributions.

Higher earners, or those with substantial disposable income, can often reap significant tax benefits, while others may see less substantial tax breaks.

Other factors can undermine the “triple tax” HSA promise

Account fees and investment limits: Some providers require keeping a minimum cash balance or charge fees that can erode some of your gains, particularly if your HSA balance is low.​

As Kiplinger has reported, former Consumer Financial Protection Bureau (CFPB) director Rohit Chopra has said, "HSAs may appear beneficial due to tax advantages, but many consumers underestimate the hidden costs, including account fees, complexity, and the challenge of high deductibles that can hinder access to care."

Medicare eligibility and job changes: Even though the HSA remains yours even if you switch jobs, turning 65 or switching to a non-HDHP (including many employer plans) means you can’t make new HSA contributions to that account. That could hinder your future potential for tax-advantaged savings.​

Recordkeeping demands and early withdrawal penalties: Managing an HSA requires careful recordkeeping to document eligible medical expenses. Additionally, if funds are withdrawn for non-qualified purposes before age 65, the amount is taxed as ordinary income and subject to a 20% penalty. For those who may need easier access to their savings, this lack of flexibility can limit the practicality of the account’s “triple tax” advantage.

Preference for predictable costs. Some people would rather pay higher premiums each month in exchange for lower, more predictable costs when they need care. An HSA plan can feel risky if you want that stability.

Employer coverage advantages with other plan options. If your job offers another plan with low copays and strong employer coverage, that option might save you more overall than an HSA-linked plan.

Downsides of an HSA: Bottom line

An HSA can be a powerful tool, especially for those who can consistently contribute and let their savings compound over many years while covering high upfront medical costs out of pocket.

If that doesn’t fit your financial life or if frequent withdrawals, high expenses, or modest contributions are part of your reality, the tax perks of an HSA might seem minimal.

As open enrollment continues, it’s worth running the numbers on whether you’ll reap the tax benefits of an HSA will or if you’re better off (even if only temporarily) focusing on another health plan option.

Read More

• HSA Contribution Limits Are Set for 2026
• What's the Standard Deduction for 2025 and 2026?
• Three Hidden Costs of Health Savings Accounts

The D.C. City Council decoupled from the new 2025 Trump tax law, thereby removing local income tax savings tied to the new "no tax on tips" deduction and the $6,000 "senior bonus" deduction. This means District of Columbia residents who qualify for these federal tax breaks won't be able to claim them on their local tax returns.

While difficult, the choice certainly wasn’t surprising. The District of Columbia is expected to lose up to $1 billion in revenue over the next four years, due to the projected loss of 40,000 federal government-related jobs, according to the D.C. Fiscal Policy Institute (DCFPI). Although the federal shutdown may be coming to an end, its effects could be felt long-term in the nation’s capital.

City Chief Financial Officer Glen Lee wrote in a letter to the mayor and council chairman late September, citing that a prolonged government shutdown could “place significant strain on the economy” in D.C., as previous shutdowns had “a range of impacts on revenue.”

The Council’s temporary decision to separate its income tax laws from federal tax provisions also underscores a broader, continuing state-level debate: Should states adopt all of the “Trump tax law,” and if not, which provisions will get bumped? Read on.

D.C. ends tax-free overtime and bonus deduction for older adults

Although the BBB is federal law, it doesn’t have to be part of state tax laws. That’s because states have three options when it comes to adopting current federal tax policy (or any combination thereof):

• Rolling conformity. States can automatically follow the latest federal rules for the current tax year.
• Static conformity. States can update their conformity date every year through legislation.
• Selective conformity. States can “pick and choose” which parts of the federal tax law to follow, rather than adopting the tax code in its entirety.

In the past, the District of Columbia has typically accepted federal tax law on a rolling basis. However, just this month, the City Council approved “emergency legislation” to decouple from federal tax code changes enacted in July, including:

• The $6,000 bonus deduction for older adults.
• The “no tax on tips” provision and the overtime pay deduction.
• Immediate expensing of research and development (R&D) costs.
• Special depreciation allowances for businesses.

By excluding these provisions from D.C. income taxes, the Council is hoping to save $95 million in fiscal year 2025 and $567 million through fiscal year 2029.

Retained revenue will be used to create a new local Child Tax Credit of $1,000 per child and expand the city’s Earned Income Tax Credit from 85% to 100% of the federal level.

Supporters of the measure, like the DCFPI and DC Guaranteed Income Coalition pointed out the growing child poverty rates in the District of Columbia. The city faces a significant challenge with child hunger, affecting approximately one in seven children. Furthermore, D.C.'s child poverty rate for those aged 6 to 17 is the fifth-highest when compared to other states, according to the DCFPI.

Federal vs. state: The complex rules of tax conformity

The “emergency amendment” that the City Council passed did not require voter approval. The effect will only last 90 days, at which point a “temporary amendment” clause will also kick in, extending the law for 225 days. After that, the law must be approved through the normal, permanent state legislative process.

Yet while D.C. is unique in how it temporarily decoupled from federal law, other former rolling conformity states are decoupling from individual tax law via more “traditional” methods:

• New York has rejected the federal "no tax on tips" and overtime deductions. The state achieved this by adhering to its tax code's static date (an enactment date before the new bill was signed), effectively ensuring these federal tax breaks do not apply to state income taxes.
• Even before the BBB was signed, Colorado passed a law requiring all overtime pay to remain subject to overtime tax. This means the overtime provision in the BBB will not benefit Colorado overtime workers on their state returns.

With COVID-era federal aid depleted and Trump tariffs raising economic uncertainty, many states are looking for ways to protect state budgets by decoupling from federal corporate tax law, too.

For instance, Michigan, Rhode Island, and Illinois decoupled from specific business tax cuts, like the 100% bonus depreciation and R&D provisions. If all states conformed with these provisions, the total projected cost would be $38.2 billion in 2026, according to the Tax Foundation.

However, in an already slowing national economy, further reduction in economic growth could be a red flag. The Tax Foundation has advocated for “judicious decoupling” of federal tax cuts that could promote economic prosperity, particularly in the nation’s capital.

The Institute of Taxation and Economic Policy also reports that greater conformity to federal rules makes state tax returns more “practical” for taxpayers, with “fewer calculations to make.”

How state tax conformity will alter your 2025 income tax bill

As the debate continues, several states have decided to either decouple from federal provisions or simply continue with existing state tax laws. Here’s a breakdown of where various states stand in adopting BBB tax provisions, according to Reuters:

• At least four states will accept most BBB individual return provisions in 2025, including Iowa, Montana, North Dakota, and Oregon.
• Several states will not conform to BBB provisions, including California, Connecticut, Hawaii, and Massachusetts.
• Waiting in the wings are states like Georgia, Maryland, and South Carolina, which plan to address changes to their state tax codes in the 2026 legislative session.

So when you file your 2025 taxes in the 2026 filing season, you should pay extra attention to your state return. The tax breaks you thought you were getting may only apply to your federal taxes, and your state tax liability may be unaffected by the new Trump tax law provisions.

Read More

• Ten Tax Breaks for Middle-Class Families in 2025
• Trump’s 2025 Tax Bill: What’s Changing and How It Affects Your Taxes
• Three Popular Tax Breaks Are Gone for Good in 2026
• New Tax Rules: Income the IRS Won’t Touch in 2025