Category Archives: Financial Planning

Impact of One Big Beautiful Bill

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The One Big Beautiful Bill is now law

After considerable wrangling, Congress passed the One Big Beautiful Bill and President Trump signed it into law.  As we noted before, the new tax law meets President Trump’s campaign promise to make provisions of the 2017 Tax Cut and Jobs Act or “TCJA” permanent; it also adds some new provisions.  We updated our abbreviated summary of the new bill at the bottom of this post. 

What is the Impact of New Tax Law?

This example on how the new tax law did not result in simplification is worth repeating:

Assessing the impact and planning – The increase in the deduction allowed for state and local tax or “SALT” to $40,000 could reduce taxes for many, allowing them to include more state and local taxes when they itemize.  But, the impact is blunted because the standard deduction also increased (you take the larger of the two).  Then the benefit of itemized deductions is reduced when you hit the 37% bracket.  The above-the-line charitable deduction also reduces the impact of itemizing.  And increasing the SALT deduction could mean you owe the Alternative Minimum Tax or “AMT.”  In other words, you have to run tax projections to determine the best action. 

Bunching – In previous posts, we have advised bunching of deductions into a single year so you can optimize itemizing.  That planning may be both more important and tougher to do as you now have to watch state and local taxes as well as charitable contributions.  

New or enhanced provisions – There are many new provisions that you need to review to see if they could affect you and determine if you qualify and need to act.  The new Trump account provides an alternative to 529 plans for young families saving for children.  And access to health savings accounts (HSAs) for seniors could provide a new resource for planning. 

Expiring credits – The expiration of electric vehicle credits and energy-efficient home credits means that you need to act this year if you were considering those purchases.  

Conclusion

You may see benefits from the final tax law, but extracting the full amount will require careful planning.  

In the meantime, please contact us if you have any questions and good luck!

Steven  

A Quick Summary:

The new law will keep the same tax rates and AMT exemption. 

It increases the state and local tax or SALT limit to $40,000, but then cuts it back for income over $500,000. 

It extends the standard deduction from TCJA with a temporary increase to $32,000 for married filing joint taxpayers or “MFJ” for 2025 through 2028 and adds a $6,000 bonus standard deduction for taxpayers over 65, but this phases out for income of $150,000 to $250,000 for MFJ. 

There is now a above-the-line deduction for up to $25,000 of qualified tip income and $12,500 for qualified overtime, if your income is below the related caps. 

The new law restores the “above the line” deduction for up to $2,000 to a charity for married couples or $1,000 for all others. 

The new and used electric vehicle or EV credits end September 30, 2025; the credits for energy efficient homes end December 31, 2025.  

The dependent care credit is increased to $7,500 in 2026.

It temporarily increases the child credit from $2,000 to $2,200 through 2028, subject to the same phaseouts as the current law. 

You can deduct up to $10,000 of car loan interest for new cars with final assembly in the US, but with a phaseout for income over $200,000. 

You can contribute up to $5,000 per year into a new Trump account for a child until through age 18 which can then be used for education, business or a new home.  Employers can contribute up to $2,500 which is excluded from the employee’s taxable income.  Qualified distributions are subject to capital gains tax while all other distributions are subject to ordinary rates plus 10%. 

Adoption credits are expanded as are allowed contributions to ABLE accounts.  Roll overs from tuition plans to ABLE accounts are allowed.  Qualifications for tax-free distributions from 529 plans are expanded.

Seniors receiving Medicare can contribute to health savings accounts or HSAs if they have a high-deductible health insurance plans.  This is a great way for tax sheltered growth to cover future bills.  The new law allows taxpayers and spouses to make catchup contributions. 

The bill adds 1% tax on remittances by non-US Citizens for transfers out of the USA.   

The rule for 1099-K reporting finally goes from $600 to $20,000 and 200 transactions while 1099NEC reporting goes from in excess of $600 to $2,000. 

A new credit up to $1,700 is allowed for qualifying contributions to 501(c)(3) organizations that grant scholarship.  

A new tiered structure was added for tax on qualified small business stock gains.

Losses on gambling are limited to 90% of winnings. 

The QBID stays at 20%.        

And estate planning:

The estate and gift tax credit rises to $15 million in 2026.  As we pointed out in a post a while back, fewer people will owe estate taxes so more may want to work on the income taxes due after their deaths, utilizing the step up in basis to shelter gains.

Beyond basic estate planning – helping your heirs sort it all out

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When we talk about estate planning, most people think of signing a will (some may even mention a revocable trust as well).  But having signed documents is only the beginning; not following through can still leave a mess for your heirs.  You need to go beyond the basic plan. 

The Basic Plan – means you executed a will and probably a revocable trust, updated beneficiary designations and changed ownership to match your documents to minimize estate taxes and control flow of your inheritance.  For this post, we assume you have a good plan (check out the post to be sure) and if you have not acted, please see estate planning checkup: why you don’t, why you should. 

Beyond Basic – is the focus of this post so you prepare the people who survive you so they can assemble the pieces you leave behind and make decisions.  We review this roughly in the order in which they will have to address everything and respond so nothing is left unresolved. 

Write notes or better provide a memorandum now

How do you address “beyond basic estate planning”?  One way is to have a detailed conversation or better yet to  provide a memorandum for your personal representative, trustee, children or close friend that can help them navigate all the steps required after your death.  Start by with telling them where to look for everything.  But a good “beyond basic estate planning” plan encompasses more than listing where to locate the documents you signed, it tells survivors who to notify (attorney, tax preparer, insurance agent), how to access your accounts on line or in person, and who gets what and when.  

Note:  make sure they know where your original will is located, as well as whom to contact.  Not having the original can cause problems.  Same for other originals like stock certificates and car titles. 

Notifications

When you die, the first step for your survivors will be to notify family and friends and to arrange for services.  Make sure your survivors know everyone you want them to contact or even who you don’t want attending your services.  Also, make sure they know if you want to be buried or cremated.  If you have a plot, let them know where.  If you envision a particular service, tell them. 

Beyond telling friends and family of your services, there will be more notifications:

Professionals – make sure they know your attorney and tax prep person so they can notify and they can be ready for their roles – more on this below.

Medical professionals – depending on your death, your family will want to make sure your family doctor and others are notified. 

Social Media – do you want them to post about your demise on social media? – more on this below.

Social Security – your heirs will need to inform the administration so that they stop your benefit.  Your spouse will need to sign up for the spousal benefit.  

Banks and investments – your heirs will need to let banks and brokers know so no one other than your personal representative tries to gain access. 

Board of directors or other office positions – if you are on a board or hold office, be sure survivors know whom to contact. 

Death certificate 

Soon after your death, a medical examiner will produce a death certificate.  That will be required for filing in probate, if necessary, and for access to benefits and accounts or making certain transfers.  Your personal representative will want to provide copies to your attorney but hold some copies for transferring accounts and titles.  

Internet age – social media and online accounts  

What do you want your heirs to do with your social media?  You want to avoid anyone gaining access and attempting identity theft.  Do you want them to leave your profile active for a period? 

Do you have shared accounts where you are the manager, such as a photo stream on your smartphone?  Be sure survivors know how to access and copy.  For instance, anything in an Apple photo stream disappears once the source photo is deleted so deleting your iPhone account could cause all photos taken by you to be lost and pictures you contributed to various photostreams will disappear.  Check with your provider to be sure how to archive what you want archived.

The same may apply to other items stored on your smartphone.  You may need to maintain your account until others access and save everything.  You can also setup cloud storage and make sure they know how to access. 

How do they access your online accounts?  How do they terminate all those subscriptions you never canceled?  Your memorandum should include information for key people that are likely to survive you.  They will need IDs and passwords for all your online accounts.  You may also want to provide access to your smartphone so they can use the apps that may have reward balances. 

With access to your online accounts, they can stop recurring payments, end subscriptions, and pay bills until they have access to your assets.  If your assets are already in trust, the trustee may be able to pay bills as required.  If your assets are not in trust, the personal representative will need to transfer them to estate accounts after being appointed. 

Make sure your list of all IDs and passwords identifies key accounts and is provided to somebody you trust so they can manage access until accounts are transferred. 

Assets and accounts

When listing your online accounts, provide a detailed list of all your assets so nothing is overlooked and ends up unclaimed.  Your survivors may be able to see the accounts on line and provide statements to your attorney. 

If you are holding assets for others or promised to make a gift (see below), be sure to state this in your memorandum. 

As noted above, they will need certain originals, like your will and titles to cars.  If you hold certificates for stocks or bonds, they will need to know where to look – a safe deposit box?  If you have cryptocurrency or other digital assets, they will need to know where your wallet is and how to access your accounts. 

Specific gifts of personal items

If you have items for which you have certain people in mind, make sure your personal representative knows.  As noted above, if you are holding items for others or have promised to make gifts, be sure your personal representative knows your intent.  You may also want certain personal items to go to specific people, such as heirlooms, jewelry, memorabilia, etc.  You may have signed a tangibles memorandum with your will; if not, be sure to list items and recipients.

Life insurance and benefits

If you have life insurance, make sure they know where the policy is and who handles it.  The personal representative will need to contact them to arrange payment to the policy beneficiaries. 

The same for any pension for survivors and other benefits. 

Retirement plans

If you have qualified plans, make sure beneficiaries know they will be receiving your account.  They may need a death certificate and have forms completed by the personal representative to have the account transferred to them as an inherited IRA. 

Tax returns

Notify your tax preparer so they know to advise on what needs to be filed.  They will file a tax return for the part of the year when you were living and then an estate return for the remainder. 

Conclusion

Think through all you do now and imagine what others would require in order to be able to do those things then write it down!  Save your survivors from having to be detectives. 

In the end, your memory will survive and you will be known for your deeds and how you treated others. 

Steven

Will it be a Big Beautiful Tax Law?

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The bill passed by the House is now before the Senate.  It meets President Trump’s campaign promise to make provisions of the 2017 Tax Cut and Jobs Act or “TCJA” permanent.  That law made substantial changes to tax rates, deductions and credits for individuals, corporations and other entities as well as including the qualified business income deduction or QBID.  We provide an abbreviated summary of the new bill at the bottom. 

However, the impact on the national debt from the reduced revenue due to the cuts has raised concerns with investors and led to downgrading the rating for Treasury bonds.  One estimate has a ten-year cost of $3 trillion, which could explain why the bill raises the debt ceiling by $4 trillion. 

Will this bill suffer the same fate as the Trump bill in 2017 to overturn the Affordable Care Act?  That bill had passed the House only to be thrashed to death in the Senate.  We will post updates when the Senate finishes with its version. 

What is the Impact of New Tax Law?

We have been reviewing the impact of the new law and this is not simplification! 

Here is one example: the increase in the deduction allowed for state and local tax or “SALT” to $40,000 could reduce taxes for many, if they can include more state and local taxes when they itemize.  But, the impact is blunted because the standard deduction also increased (you take the larger of the two).  Then the benefit of itemized deductions is reduced above a certain income level.  The above-the-line charitable deduction also reduces the impact of itemizing.   And increasing the SALT deduction could mean you owe the Alternative Minimum Tax or “AMT.”  In other words, you have to run tax projections to determine the best action. 

In previous posts, we have advised bunching of deductions into a single year so you can optimize itemizing.  That planning may be both more important and tougher to do.

Many new provisions that initially sound good involve complex qualifications that could mean few taxpayers use them.  For example, there are so many savings accounts to which this bill adds the Trump account and expands other provisions.  On the other hand, access to health savings accounts or HSAs for seniors could provide a new resource for planning. 

The expiration of electric vehicle credits and energy-efficient home credits may mean acting sooner on some purchases.  

Conclusion

We have to see what the final law looks like to know how best to respond. If you want us to review the impact on your taxes, please let me know.

In the meantime, please contact us if you have any questions and good luck!

Steven  

A Quick Summary:

The new law will keep tax rates and the AMT exemption the same. 

It increases the state and local tax or SALT limit to $40,000, but then cuts it back for income over $500,000. 

It extends the standard deduction from TCJA with a temporary increase to $32,000 for married filing joint taxpayers or “MFJ” for 2025-2028 and adds a $4,000 bonus standard deduction for taxpayers over 65, but this phases out over $150,000 for MFJ. 

There is no tax on qualified tip income or overtime if your income is below the cap. 

The electric vehicle or EV credit ends for some in 2025 and all the rest at the end of 2026 as does the credits for energy efficient homes by 12-31-2025.

The estate and gift tax credit rises to $15 million in 2026. 

You can deduct up to $10,000 of car loan interest, but with a phaseout for income over $200,000. 

You can contribute up to $5,000 per year into a new Trump account for a child until through age 18 which can then be used for education, business or a new home.  Qualified distributions are subject to capital gains tax while all others pay ordinary rates plus 10%. 

The new law restores the “above the line” deduction for up to $300 to a charity for married couples or $150 for all others. 

It temporarily increases the child credit from $2,000 to $2,500 through 2028, subject to the same phaseouts as the current law. 

There is a new credit not to exceed 10% of gross or $5,000 for contribution to scholarship granting institutions.

Adoption credits are expanded as are ABLE accounts.  Roll overs from tuition plans to ABLE accounts are allowed. 

Qualifications for tax-free distributions from 529 plans are expanded.

The QBID goes from 20 to 23%.      

Seniors receiving Medicare can contribute to health savings accounts or HSAs if they have a high-deductible health insurance plans.  This is a great way for tax sheltered growth to cover future bills.  The new law allows taxpayers and spouses to make catch-up contributions. 

Pass through entity tax deductions or “PTET” are only allowed for entities that are qualified businesses under Section 199A – the QBID provision.

There is an increase on tax on private foundations and college endowments.

Emergency planning – key documents, disaster relief and document recovery

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If you have not experienced a disaster, you probably know someone who has.  We have seen numerous posts that suggest steps to take to protect important information as well as ways to rescue or restore information.  The key is planning ahead so you are prepared.   

Therefore, I urge you to review your situation and consider whether you are prepared or need to do more.

You can start by identifying possible hazards and your vulnerability.  If you determine that you are at risk in any way, plan how to respond and recover.  Know your emergency communication options and consider training drills for your family.  The Red Cross has a site with steps for an emergency plan for you and your family.  And there are detailed plans listed by FEMA under planning guides which include risk management.  FEMA even has a preparedness app! 

If you are hit, you may be entitled to disaster relief – check the IRS Disaster Relief page..  The IRS also offers disaster loss workbooks in Publication 584, Casualty, Disaster and Theft Loss Workbook (Personal-Use Property), and Publication 584-B, Business Casualty, Disaster and Theft Loss Workbook. 

Amy Poulton suggests the five key documents to have readily available.  Here is a summary of her post:

1.  Identification Documents – keep these documents in a fireproof, waterproof container (that is her link to Amazon for ideas) or digital copies in a secure cloud storage to ensure they’re safe and easy to access during an emergency. 

2.  Insurance Policies and Emergency Contacts – have access to insurance cards and policies for home, car, health, and life insurance along with emergency contacts.

3.  Medical and Health Information – have current prescriptions, medical history, immunization records and medical directives and powers of attorney. 

4.  Financial Documents – have on hand your bank and credit cards, with access to your tax returns and retirement accounts.  You will also want a current list of key websites with log-in IDs and passwords – you may want to store this “in the cloud.”  

5.  Legal Documents – have copies of  your wills and trusts, deeds and rental agreements, marriage certificates and powers of attorney.  

Organizing and Storing Documents – create a digital folder, back up your documents and share with trusted people.  You can also place digital items on a flash drive to share. 

What if you are hit before preserving your records?  The IRS has a site to visit: Reconstructing Records. 

If you want to make sure you have food and water for a physical disaster, here is one guide to check out to build a kit.  The list includes emergency supplies. 

We all hope to be spared, but it is wise to organize your documents and have a plan in place in case you are not!

Let me know if you have more ideas and good luck!

Steven

Roths and Market Volatility – a chance to convert on dips

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We have written before on the advantages of a Roth IRA over the standard IRA and discussed strategies for converting IRAs to Roth IRAs.

One possible good side to market volatility is that with the swings in the value of stocks and mutual funds, you can try to convert an IRA to a Roth IRA at a low point, with the cash invested in a similar way so when the market returns, your portfolio swings back up while the taxable income at the time of conversion is lower. 

If it works, the tax cost of converting will be less. 

When reinvesting, you need to be aware of the wash sale rule, which is designed to prevent creating artificial losses for tax purposes without actually changing your investment position.  That is, it prevents realizing losses if you buy back the same or similar securities within 30 days. 

Why would that apply to IRAs?  If you only sell inside the IRA, it doesn’t. 

However, if you sell in a taxable account, and then buy the same or similar securities within 30 days inside an IRA, the IRS disallows the loss permanently (if it were in a taxable account, the loss would just be delayed). 

Let me know if you have any success with Roth conversions!

Steven