As more people in the U.S. remain in their homes as they grow older ("age in place"), the cost of making a home safer and more accessible can be a significant hurdle.

A new proposal in Congress would ease that burden by creating a federal tax credit for older homeowners who invest in accessibility upgrades.

The Senior Accessible Housing Tax Credit Act of 2026 would provide a credit of up to $10,000 for taxpayers age 60 and older who make qualifying improvements to help them remain safely and independently in their homes.

The legislation addresses a gap for older adults because Medicare generally doesn't cover structural home modifications, like installing wheelchair ramps, widening doorways, or remodeling bathrooms for accessibility. As a result, many homeowners must pay those often substantial costs out of pocket.

Here's more to know.

New $10,000 home tax credit for older adults?

The Senior Accessible Housing Tax Credit Act of 2026, recently introduced by Sens. Angela Alsobrooks (D-Md.) and Kirsten Gillibrand (D-N.Y.), would create a federal tax credit of up to $10,000 for taxpayers age 60 and older who make qualifying accessibility improvements to their homes.

"This critical legislation allows for seniors to stay in their homes — for many that means homes they love and have been in for decades —and install essential, aging-related modifications," Sen. Alsobrooks stated in a release announcing the proposal.

Sen. Gillibrand, top Democrat on the U.S. Senate Committee on Aging, added that "a safe, accessible place for seniors to live should be a right, not a privilege."

The measure, which has received support from the National Association of Realtors, also has companion legislation in the House, introduced by Democratic Rep. George Latimer of New York. According to the bill's sponsors:

• If enacted, the bill would create a nonrefundable tax credit for eligible taxpayers age 60 or older for expenses related to certain home modifications on their principal residence or a qualifying second home
• The credit would be equal to the cost of eligible expenditures, with an annual limit of $10,000
• Qualifying expenditures would also include certain labor costs related to the preparation, assembly, or installation of an eligible modification

What kind of projects are lawmakers talking about? Installing wheelchair ramps, grab bars, non-slip flooring, bathtub cuts or shower seats, furniture risers or chair lifts, or widening doorways would generally qualify under the proposal.

Replacement of toilets and bathroom vanities and kitchen or bathroom faucets are also mentioned in the bill. However, a general remodeling project, like a kitchen renovation designed primarily for appearance, likely wouldn't qualify.

Aging in place home modifications

The proposal comes as more older adults in the United States look for ways to remain in their homes. According to AARP's 2024 Home and Community Preferences Survey, 75% of adults age 50 and older want to remain in their current homes as they age.

But so-called "aging in place" often requires more than simply remaining in a longtime home. As some people get older, features like stairs, narrow doorways, high thresholds, and traditional bathrooms can make everyday tasks more difficult or increase the risk of falls.

As a result, some homeowners may need to install grab bars or step-free entrances, widen doorways or make other accessibility upgrades to continue living safely and independently.

Those improvements can vary widely in cost. According to data compiled by NerdWallet on aging-in-place home renovations:

• Installing grab bars can cost about $100 to $400
• Widening doorways can cost roughly $600 to $2,000 per doorway
• A stair lift can cost about $7,000 on average

For homeowners who need multiple changes, the expense can be significant.

As mentioned, another challenge is that Medicare generally doesn't pay for these types of home modifications.

Medicare Part B may cover certain medically necessary durable medical equipment (DME) prescribed by a doctor for use in your home (e.g., walkers, wheelchairs, hospital beds), provided deductible and supplier rules are met. But Medicare doesn't cover structural modifications to a home or, for example, bathroom "convenience" items like grab bars or raised toilet seats.

That leaves many paying these expenses out of pocket or looking for other sources of assistance.

Home accessibility tax deductions under current law

Keep in mind that the proposed $10,000 tax credit isn't currently available. Congress would need to pass the legislation and have it signed into law by President Trump before eligible taxpayers could claim it. It's unclear if there's sufficient bipartisan support for the measure to gain traction.

But…all is not lost. As Kiplinger has reported, under current IRS rules, certain home modifications may qualify as deductible medical expenses.

Under existing law, a taxpayer generally must itemize deductions to claim medical expenses, and only eligible medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted.

Reimbursed medical expenses are not deductible, and the modification(s) must be made primarily to provide medical care for the taxpayer, a spouse, or a qualifying dependent.

Additionally:

• The improvement generally must be tied to a specific medical need. A homeowner who installs a ramp because of a diagnosed medical condition may be able to deduct some of the cost, but someone who adds accessibility features simply as a precaution generally would not receive a tax benefit.
• If a home improvement increases the value of the property, only the portion of the cost that exceeds the increase in the home's value generally qualifies as a medical expense deduction.

For example, if an accessibility improvement costs $20,000 but increases the home's value by $8,000, generally only the remaining $12,000 may qualify as a medical expense deduction, assuming the other IRS requirements are met.

For more information and specific rules, see IRS Publication 502. Consider speaking with a trusted tax professional if you're unsure whether a specific upgrade might be deductible on your return, as this information is provided for educational purposes.

If you're concerned about the costs of making a home upgrade, you may also want to check for programs or organizations in your state or community that may provide assistance for eligible aging-in-place improvements.

What to Read Next

• Tax-Deductible Home Improvement in Retirement
• New Bill Proposes $1 Million Capital Gains Home Exclusion
• 5 Little-Known Senior Tax Deductions
• Property Tax Changes Homeowners Over Age 65 Should Watch in 2026

One of the first questions many people ask after learning they’ll receive an inheritance is: "Will I owe taxes?"

It’s an understandable worry. Taxes can be confusing, especially during an already emotional time when someone has passed away. But there is some good news — receiving an inheritance doesn’t automatically mean you’ll owe taxes to the IRS.

That's because for most people, the inheritance itself isn’t a taxable event. Whether you owe anything depends on what you inherit, where you live, and whether those assets later produce income or are sold.

Still, before you decide what to do next, it helps to understand which tax rules might apply to your situation and when. Here's more to know.

Do you owe taxes on an inheritance?

When you first inherit money or property, your instinct might be to prepare for a heavy tax bill on your next federal income tax return. It's a natural concern, but the IRS actually treats inheritances with a surprising amount of grace.

As a general rule, the federal government doesn't handle inherited assets as taxable income.

Simply receiving cash, a house, a stock portfolio, or other property won't trigger an automatic tax event or change your baseline tax situation for the year. In most cases, you aren't required to report the initial inheritance on your federal return.

Where tax responsibilities tend to enter the picture is not from the gift itself. The inheritance itself is generally a "clean slate," so to speak; what you choose to do with those assets is what determines which tax rules may apply.

Different inherited assets come with different tax rules

If you inherit cash: For most people, inheriting cash doesn’t create a federal income tax bill. That's because, as mentioned, the inheritance itself isn’t taxable. But any income it earns afterward might be.

For example, if you deposit inherited money into a high-yield savings account, any interest you earn is generally taxable. The same applies if you invest the money and later receive dividends or realize capital gains.

If you inherit a house: Inheriting a home generally isn’t a taxable event. If you later sell the property, however, capital gains tax rules may apply.

That’s where the tax picture can start to change.

• Most inherited homes receive a stepped-up basis, which adjusts the property’s value to its fair market value at the time of the owner’s death.
• That can reduce the amount of taxable gain if you later sell the home.

For example, if you inherit a home worth $400,000 and later sell it for about that amount, you may owe little or no capital gains tax. If the home’s value increases after you inherit it, you may owe tax only on the appreciation that occurs after the inheritance.*

*This is a simplified example solely for educational purposes. Consult a trusted financial professional to help determine possible capital gains tax liability if you plan to sell an inherited home.

If you inherit stocks or investments: Stocks, mutual funds, and other investments generally aren’t taxable when you inherit them.

Much like inherited real estate, inherited stocks, mutual funds and other investments generally receive a stepped-up cost basis. If you sell them later, you may owe capital gains tax only on the appreciation that occurs after you inherited the assets.

If you inherit an IRA or retirement account: Inherited retirement accounts follow different tax rules than most other inherited assets.

While inheriting the account itself usually isn’t taxable, withdrawals often are. The rules depend on your relationship to the original account owner, the type of retirement account, and other factors.

• For example, distributions from an inherited traditional IRA are generally taxable, while qualified withdrawals from an inherited Roth IRA are typically tax-free.
• However, even though inherited Roth IRA distributions aren't taxed, most non-spouse beneficiaries are required under the SECURE 2.0 Act to withdraw all funds from the account within 10 years.

Because inherited retirement account rules can be complex, it’s important to understand these distribution timelines before taking money out and to consult a trusted tax advisor who knows your individual circumstances.

Common inherited assets and when taxes may apply

State inheritance taxes

Although there is no federal inheritance tax, a handful of states impose an inheritance tax paid directly by the beneficiary.

(Note: This is separate from a state estate tax, which is paid from the deceased person’s estate before assets are distributed.)

Whether you’ll owe state inheritance tax depends on where the deceased lived or owned property and your relationship to them — spouses and close relatives are often exempt.

If you’re unsure whether your state imposes an inheritance tax, our guide might help, but also consult a trusted tax professional or financial planner since every beneficiary's situation is different.

Keep in mind: Whether you’ll owe an inheritance tax largely depends on the state involved and your relationship to the deceased.

Frequently asked questions about inheritance taxes

Even though most inheritances aren’t subject to federal income tax, there are a few situations that can confuse beneficiaries.

Can you owe taxes years after receiving an inheritance?

Yes. While the inheritance itself usually isn’t taxable, you may owe taxes later if inherited assets earn interest or dividends, appreciate before you sell them, or require taxable withdrawals from a retirement account.

Does every state tax inheritances?

No. Only a handful of states impose an inheritance tax, and many exempt spouses and other close relatives. In most states, beneficiaries don’t owe a state inheritance tax.

Should you talk to a tax professional?

If you inherit a retirement account, real estate, a business, or other high-value assets, a qualified tax professional can help you understand how federal and state tax rules apply to your situation.

You can also find additional guidance in IRS Publication 559, Survivors, Executors, and Administrators, which explains the tax responsibilities of beneficiaries, executors, and estates.

Related

• Inherited an IRA? Key Distribution Rules to Know
• States That Won’t Tax Your Death
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?
• Filing a Deceased Person's Final Income Tax Return

New York City’s new tax on high-value second homes is moving from the policy stage to enforcement. But the first challenge involves determining which property owners actually owe it.

The pied-à-terre tax was approved as part of the state budget signed into law in May 2026 and applies to certain non-primary residences in NYC beginning the 2026-2027 property tax year.

But as the city begins implementing the new levy, some homeowners are questioning why they received notices indicating their properties might be subject to the tax.

In response to the confusion, the Department of Finance extended the deadline to apply for a pied-a-terre tax exemption until Sept. 18, 2026. The move is designed to give property owners more time to review their notices and provide documentation showing why the tax shouldn't apply.

"We are announcing the extension of the exemption application deadline to ensure that New Yorkers who received the ‘You may be subject to...’ letters have the time and information they need," New York City Mayor Zohran Mamdani said in a statement.

The administration has said the goal is to ensure that residents who shouldn't owe the tax have an opportunity to establish their exemption eligibility.

So, how does New York City’s pied-à-terre tax work and who's actually affected?

NYC Pied-à-Terre Tax exemption deadline extended

NYC’s pied-à-terre tax is a surcharge on certain residential properties that are not used as an owner’s primary residence.

The measure is designed to raise revenue from high-value homes and apartments maintained as second residences, particularly those owned by people who live elsewhere.

Mamdani has described the tax, which is expected to generate about $500 million annually, as "an important new tool to help our city collect the revenue we need for safer streets, cleaner parks, and other critical investments across the five boroughs."

Some key points:

• The new law, which took effect July 1, 2026, applies during the 2026–27 (phase-one) and 2027–28 property tax years.
• The levy applies to certain non-primary residences. That includes one-, two- and three-family homes, condominiums and cooperative units, based on property type and market value.

• One-, two- and three-family homes are subject to the surcharge if the property has a market value of $5 million or more. Condominium and cooperative units are subject to the surcharge if the unit has a market value of $1 million or more.
• Properties used as a primary residence by the owner or an immediate family member are exempt. Properties leased for at least one year as a primary residence may also qualify for an exemption.

It's important to note that the surcharge is not part of a homeowner’s regular property tax bill. Instead, it creates an additional tax obligation for qualifying non-primary residences that meet the applicable value threshold and don't qualify for an exemption.

How much is the tax? The amount a homeowner could owe will depend on the property’s standardized fair market or assessed value and the applicable surcharge rules.

Class 1 (one-, two-, and three-family homes)

• $5 million to $15 million: 0.8%
• More than $15 million to $25 million: 1.05%
• More than $25 million: 1.3%

Condominiums and co-ops (FY 2026-27 and FY 2027-28)

• $1 million to $3 million (Phase One Market Value): 4.0%
• More than $3 million to $5 million (Phase One Market Value): 5.25%
• More than $5 million (Phase One Market Value): 6.5%

Which homeowners actually owe the tax

As the city began implementing the new levy, confusion has emerged over which properties might be subject to it.

• On July 24, the Department of Finance published a list of more than 900,000 properties, prompting some homeowners to question why their homes appeared on the list.
• The city later added a disclaimer clarifying that inclusion on that larger list didn't necessarily mean a property was subject to the pied-à-terre tax.

The city's Department of Finance has since reportedly sent notices to about 17,000 property owners who may be affected by the new surcharge. (That number was larger than the state’s earlier estimate of roughly 10,000 to 13,000 affected non-primary residences, which has raised questions about how many properties will ultimately qualify once exemptions are reviewed.)

Some homeowners are reportedly concerned about the notices they received.

For example, a Brooklyn homeowner told The Wall Street Journal that he received a notice indicating a potential $44,048 surcharge, despite stating that the property was his primary residence. The Gothamist reported on another New York resident who said she would owe close to $43,000 in tax without an exemption for a property she says has always been her primary address.

Those types of disputes highlight why implementation could prove difficult. The city is not only identifying valuable properties — it's trying to determine how those properties are actually used.

Under NYC law, the surcharge generally applies to qualifying properties that are not used as a primary residence. The Department of Finance determines primary residency based on legal factors, including whether the property is occupied for a majority of days during the calendar year by a covered owner.

But…in some cases, that determination may require more than a review of ownership records.

• A property deed may show who owns a home, but it doesn't necessarily establish how the property is used
• Properties held through trusts, limited liability companies, or other ownership structures may require additional review
• The city may request documentation related to residency, occupancy, ownership details, or other information relevant to an exemption

For homeowners who received notices, a key challenge could be showing their property doesn't meet the criteria for the surcharge.

What NYC homeowners need to know

Keep in mind: Receiving a notice does not automatically mean a homeowner owes NYC’s second-home tax. Instead, it means the property has been identified as potentially subject to the new rules and the owner may need to submit information showing why an exemption applies.

City officials have said that homeowners who believe their properties shouldn't be taxed under the measure should complete the exemption application by Sept. 18, 2026.

The documentation required will depend on each homeowner’s circumstances. The Department of Finance has a webpage that includes frequently asked questions, an eligibility tool, and instructions for submitting documentation.

And since every homeowner's situation is different, you may want to consult a trusted tax professional who can help you determine whether your property qualifies for an exemption.

Related

• New York POWER Utility Rebates Are Coming: What to Know
• Mamdani's Millionaire Tax: Will a New York Exodus Begin?
• New York STAR Tax Relief Checks Being Sent This Year

Historically, summer is a quieter period for trading as market volumes slow down. But 2026 is breaking the rules. With recent tech-sector rotations and unexpected volatility shaking portfolios, putting your investments on autopilot right now could be a costly mistake.

In fact, research shows that 86% of financial advisors ramp up tax management strategies during volatile periods, rather than waiting for a particular season, like year-end.

And one of those employed strategies is tax-loss harvesting — selling underperforming investments to offset capital gains, or even ordinary income. Not only does this practice lock in paper losses early, but it positions your portfolio for tax advantages before filing season arrives.

Here's how to target the right assets to turn your tax losses into a potentially lower federal income tax bill.

This article does not cover state income tax and is for educational purposes only. The content does not constitute financial, legal, or tax advice. Consult a certified financial advisor before making trading decisions based on your individual tax situation.

Why market dips are the strategic time to harvest

Tax-loss harvesting means selling losing investments in taxable accounts to lower the capital gains tax you owe on your winning ones. By taking advantage of this strategy during market dips, you gain three strategic advantages:

• Capturing market dips before they disappear. Selling during dips locks in tax offsets before potential year-end rallies erase your paper losses.
• Avoiding the year-end rush. Executing trades in late November or December (or other times of the year where tax planning is "trending") comes with liquidity pinches, trade execution delays, and wider bid-ask spreads as everyone rushes to rebalance at once. Selling losses as they occur can help avoid all that.
• Proactive portfolio rebalancing. Reviewing your holdings periodically throughout the year gives you breathing room to realign your asset allocation and see trends like asset class drift, sector overconcentration, or performance divergence before they expose you to unintended market risks.

Identifying your tax harvesting targets

But, of course, you don't want just to sell an investment because it's underperforming. Otherwise, you could lose out on savings that would bring more benefit than tax-loss harvesting might (more on that below).

Review your portfolio for these key indicators that an investment might be a good candidate for tax-loss harvesting:

• Focus only on taxable brokerage accounts. Tax-loss harvesting only applies to taxable brokerage accounts where you buy stocks, bonds, mutual funds, or ETFs. Tax-advantaged accounts like IRAs, Roth IRAs, and 401(k)s are ineligible.
• Target assets below cost basis. Focus on positions trading noticeably below what you originally paid for them to generate the most usable realized losses. When placing your sell orders, ensure your brokerage uses "specific identification" or "highest-in, first-out" (HIFO) lot selection so you can sell your specific underwater shares instead of triggering default "first-in, first-out" (FIFO) rules on older, more profitable shares.
• Look for temporary displacements. Identify high-quality assets that have decoupled from their long-term fundamentals during volatility swings.

For instance, in the summer of 2026, the tech sector saw a global sell-off as investors grew increasingly anxious that AI investments were outstripping immediate revenue returns. This anxiety impacted Nvidia (NVDA), Advanced Micro Devices (AMD), and Alphabet (GOOGL) stocks.

For more information on up-to-date stock news, check out Kiplinger's reporting on Stocks: News, Features and Analysis.

How tax savings actually add up: Tax-loss benefits

Selling an asset at a loss in a taxable account gives you a potentially powerful tool to lower your overall tax burden at year-end. This happens across three tiers:

• Offset capital gains dollar-for-dollar. Your losses directly cancel out capital gains realized from winning stock sales or real estate. So, if you made $10,000 in profits earlier this year, $10,000 in harvested losses brings your federal taxable capital gain to $0.
• Deduct up to $3,000 against ordinary income. If your total capital losses exceed your capital gains for the year, you can deduct up to $3,000 ($1,500 if married filing separately) of the excess against ordinary income, like wages or retirement distributions.
• Carry forward the excess indefinitely. Do you have more than $3,000 in net losses with no other gains to net them against? No worries. Unused capital losses don't expire. So you can carry them forward into 2027, 2028, and beyond to offset future gains.

Examples: when tax-loss harvesting can lower your tax bill

How does tax-loss harvesting benefit other items on your tax bill? Here are a couple of examples:

• If you’re subject to the highest tax rate on capital gains (20%), you can potentially avoid that tax through tax-loss harvesting, resulting in valuable savings. Those savings can be reinvested in securities or used to help rebalance your portfolio. (Note: If your income falls into the 0% long-term capital gains tax rate, harvesting long-term losses might not offer immediate savings, as your gains are already tax-free.)
• By deducting up to $3,000 of capital losses against ordinary income, you can save on taxes typically levied on retirement plan distributions, pensions, and other ordinary income sources. An unlimited amount of capital loss might be carried forward to offset gains you anticipate from real estate sales, mutual funds, ETFs, etc.

But don't forget: While the top federal capital gains rate is 20%, there's a net investment income tax (NIIT) that may apply an extra 3.8% on top of that, bringing the total federal rate to 23.8% for some high-income earners.

Navigating the IRS wash sale rule

Before executing trades for tax-loss harvesting, you must navigate the IRS "wash sale" rule.

The rule: If you sell a security at a loss and buy a "substantially identical" security within a 61-day window (30 days before, the day of, or 30 days after the sale), you cannot claim the loss on your current-year tax return. Instead, the loss is deferred — the disallowed amount is added to the cost basis of the new shares, which adjusts your future tax obligation when you eventually sell them.*

This means that, if you want to preserve your target market exposure (without breaking IRS rules), you might:

• Switch to a non-identical replacement. Reinvest sale proceeds into a similar (but not substantially identical) asset. For example, swapping a tech ETF tracking the S&P 500 Information Technology Index for one tracking the MSCI USA IMI Technology Index.
• Try the "double-up" strategy. Buy a matching block of the same security today using available cash. Hold both positions for at least 31 calendar days (so the original purchase falls outside the 30-day pre-sale window), and then sell the original, underwater lot to harvest the loss. (Keep in mind this temporarily doubles your exposure to that investment for 31 days and carries additional market downside risk.)

You should also watch out for other, "hidden" wash sale tax traps, like:

• Automatic Dividend Reinvestment (DRIP). Some portfolios are set up so that dividends are automatically reinvested in the harvested stock or fund during the 61-day window. If a dividend automatically reinvests, that could trigger the wash sale rule.
• The IRA wash sale trigger. While IRAs and Roth IRAs are disallowed from claiming a tax-loss harvest, they can accidentally trigger the wash sale rule if one of them buys back a harvested asset inside the 61-day window. Because retirement accounts don't track cost-basis adjustments, this can permanently eliminate your potential tax deduction rather than just deferring it.

Your financial advisor may have other strategies. But whichever you choose, ensure you account for trading fees or bid-ask spreads (the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to sell). You don't want these costs to outweigh the savings you generate through tax-loss harvesting.

*Note: The rule applies across all accounts you or your spouse own.

What you can do now

If you're ready to turn current or future market volatility into tax savings, follow this summary checklist:

1. Audit year-to-date gains. Tally up any capital gains you've already realized in 2026.
2. Scan taxable accounts. Locate positions affected by recent rotations that are trading below cost basis.
3. Analyze the impact of a sale. If you were to sell the chosen investment, how would you utilize the cash proceeds? How much would brokerage fees eat into your profit margin? Be sure you know the answer to these (and other) applicable questions before making any trades.
4. Execute and swap. Sell chosen losing positions and immediately deploy your capital into suitable, non-identical replacement assets or another strategy. Remember to pause any automatic DRIP reinvestment plans on that security.
5. Document everything. Maintain clean trade receipts and cost-basis logs to help streamline your income tax preparation come spring.

Market volatility is inevitable, but paying unnecessary taxes isn't. By taking a proactive, year-long approach rather than reacting in December, you can transform short-term paper losses into immediate tax savings — freeing up capital to stay invested and compound over time.

So use an hour this week to review your portfolio, consult your tax advisor, and make the next market dip work for you.

Read More

• Here Are The Capital Gains Tax Rates for 2026
• Taxable Income: What It Is and How to Calculate It
• 2026 Tax Brackets and Federal Income Tax Rates: What to Know
• How Long Should You Keep Tax Records?

Even after paying off a mortgage, rising property taxes can be a significant financial challenge, especially for retirees living on fixed incomes.

Recent data show that property tax bills nationwide average $4,427 annually per single-family home, a more than 3% jump from the previous year.

But…several states are currently considering changes to their property tax systems. As a result, this November, many voters will decide whether to freeze taxable home values, expand homestead exemptions, or cap annual assessment spikes — changes that could provide relief to many homeowners struggling with affordability.

So, if you're an older adult homeowner, or someone helping an aging loved one manage housing costs, here are some key property tax changes to watch this year.

Louisiana property tax exemption for seniors

Voters in Louisiana will decide in November whether to expand property tax relief for some older homeowners through a proposed constitutional amendment created by House Bill 514 (Act 274).

• The measure would allow parishes and municipalities to provide an additional property tax exemption for qualifying homeowners age 65 or older.
• Eligible taxpayers must own and occupy a homestead and qualify for Louisiana’s existing special assessment level program.

How it could affect older homeowners: The proposal wouldn’t eliminate property taxes for older adults statewide. Instead, the measure would give local governments the option to offer this additional benefit.

• If a parish or municipality adopts the exemption, qualifying homeowners age 65 and older could receive an additional reduction in their taxable home value.
• That could, in turn, potentially lower their property tax bills.

Supporters say the tax measure would help older adults stay in their homes as property values rise. It could also provide relief to retirees whose incomes may not keep pace with housing costs.

Note: Louisiana already provides a special assessment level program that protects certain qualifying seniors from increases in the assessed value of their homes. But advocates see the proposed exemption as an additional layer of protection.

Opponents’ concerns focus primarily on the effect on revenue. Property taxes help fund schools and local services, and expanding exemptions could mean less money for local government priorities.

If approved by voters on the November 3, 2026 Louisiana ballot and adopted by local governments, the exemption would apply to tax years beginning January 1, 2028.

Oklahoma property tax cap & senior protection tiering

Oklahoma voters will decide this fall whether to approve State Question 847, a constitutional amendment to slow property valuation growth statewide while restructuring tax protections for older adult homeowners.

For homeowners overall, the measure would reduce the annual cap on homestead property valuation growth from 3% to 1.75% and non-homestead real property from 5% to 4%.

How it could affect older adult homeowners: Unlike general property tax caps, State Question 847 would modify Oklahoma's existing Senior Valuation Limitation (senior freeze) program for homeowners age 65 and older:

• Seniors with low-to-moderate income: Retirees earning at or below their county's HUD median income would retain a 0% freeze on taxable property value increases.
• Seniors with higher income: Currently, seniors earning over the median income receive no valuation protection. Under the proposed measure, senior property valuation increases would be capped between 0.35% and 1.75%, scaled according to household income brackets.

Supporters argue that replacing the "all-or-nothing" income threshold with a sliding scale ensures that older adults with middle incomes on fixed pensions aren't suddenly exposed to full market-value spikes, while keeping baseline caps predictable for all Oklahomans.

Opponents argue that altering senior freeze structures creates uncertainty for local school districts and municipal services that rely heavily on property tax revenues to fund local infrastructure and career centers.

State Question 847 will appear on the November 3, 2026 ballot. If approved, the new valuation caps and senior income tiers would take effect for tax year 2027.

Florida homestead exemption: Amendment 3

Florida voters will decide in November whether to approve a constitutional amendment that would significantly increase the state’s homestead exemption.

The measure, known as Amendment 3, would raise the exemption from $50,000 to $150,000 in 2027 and then to $250,000 in 2028 for qualifying homesteaded properties. The increased exemption wouldn’t apply to school district taxes.

Those who qualify for the homestead exemption would have a larger portion of their home’s value excluded from tax, potentially lowering their property tax bills.

How it could impact older adult homeowners: Unlike the Louisiana proposal, Florida’s measure isn’t limited to those 65 and older. It would apply broadly to homeowners who qualify for Florida’s homestead exemption.

However, the measure could have a significant impact on older homeowners in part because of the state’s large retiree population. The savings could be particularly helpful for Florida retirees with fixed incomes, who are increasingly facing rising insurance, housing, and living expenses.

• Supporters argue that Florida homeowners need relief after years of rising property values and higher housing costs. They say expanding the homestead exemption would allow residents to keep more of their income and make it easier for some of them to remain in their communities.
• Critics argue that the proposal could reduce funding for vital public services or force local governments to find other revenue sources.
• Legal Challenge to Watch: The measure is currently facing legal challenges in state court over its ballot language. Opponents contend the title and summary written by lawmakers are overly promotional rather than objective. While the court challenges don't contest the proposed tax cuts, a new ruling could potentially force revisions to how the measure appears on the November ballot.

Update: On August 5, 2026, a Leon County Circuit Court judge ruled that the ballot wording for the proposed Florida property tax amendment is misleading. The court found it uses promotional language, e.g., describing the measure as "constitutional protections for Florida homeowners," instead of neutrally describing what the measure would do.

As a result, the Florida Attorney General's Office has until August 14 to rewrite the ballot title and summary in more objective terms.

It's important to note that this ruling doesn't remove the amendment from the November ballot. Instead, it requires voters to receive more neutral ballot language before casting their votes.

Amendment 3 would need at least 60% voter approval to pass. If approved, it would represent one of the largest expansions of Florida’s homestead exemption.

Ways to lower a property tax bill

While voters in these and some other states decide on tax changes this November, homeowners across the country don't necessarily have to wait for election day to potentially lower their property tax bills.

Check whether your state, county or local government offers property tax exemptions, freezes or deferral programs for older homeowners.

Keep in mind that eligibility rules vary, and some programs require homeowners to apply each year.

It also could be worth reviewing your property assessment.

If your home’s assessed value appears too high compared with similar properties in your area, you may be able to appeal the assessment and potentially lower your taxable value.

For more information, see our report: How to Lower Your Property Tax.

This article has been updated to include a new ruling on the Florida property tax amendment.

Related

• Florida Voters to Decide on Major Property Tax Changes
• States With the Lowest Property Tax Rates
• New Bill Proposes $1 Million Capital Gains Tax Exclusion for Those 65 and Older
• College Towns Are Becoming Retirement Destinations: How Does the Tax Math Add Up for Retirees?

When planning for retirement, state taxes on your 401(k), pension, and Social Security benefits should be part of your strategy.

Yet while some states offer no retirement taxes on any of these sources, a zero-percent tax rate can lose its shine if you can't get a doctor's appointment when you need one.

After all, an average 65-year-old retiring in 2026 can reportedly expect to spend $185,500 on healthcare and medical expenses throughout retirement. And living comfortably on a fixed income requires balancing healthcare costs with other top retiree concerns, like housing and daily living expenses.

To help you navigate this balancing act, we cross-referenced states that don't tax retirement income against property tax data, cost-of-living metrics, and senior healthcare rankings. The final list highlights the five most tax-friendly states for retirees, ranked by the quality and accessibility of their older-adult healthcare.

How we ranked these retirement states

Our list draws from Kiplinger's analysis of states that do not tax retirement income. Among the 13 states meeting that baseline, we filtered for the ten with the lowest median property taxes paid on mortgage homes (using PropertyShark data referenced from the latest U.S. Census Bureau data points).

Cost-of-living data was drawn from the Missouri Economic Research and Information Center (MERIC) index, where a score of 100 represents the national average.

Then, states were ranked using the United Health Foundation's "America's Health Rankings Senior Report," specifically focusing on "Clinical Care for Seniors." This metric evaluates:

• Healthcare access: Including availability of dedicated primary care providers, home health aides, and care affordability.
• Clinical services: Including rates of routine cancer screenings, avoided care rates due to high costs, and flu and pneumonia vaccinations.
• Quality of care: Including hospice care usage, nursing home quality ratings, and preventable hospitalization stays (per Medicare beneficiaries aged 65 to 74).

Scores range around a national benchmark of 0.00. Positive scores indicate above-average healthcare performance, while negative scores reflect below-average metrics. However, it's important to note that these scores are statewide averages and are not indicative of any one area within a specific state.

This list evaluates state income tax only. Federal income taxes still apply. Consult with a qualified tax professional when necessary.

1. Washington: Outstanding healthcare, higher cost of living

Senior healthcare ranking: +0.528 (Top 10 nationwide)

Median property taxes paid: $4,556

Cost-of-living score: 114.6 (14.6% above national average)

Washington takes the top spot on our list. The Evergreen State exempts all retirement income from state tax, meaning your Social Security, pensions, 401(k)s, and IRAs remain untouched by local authorities.

Another retiree benefit is its healthcare system. With a score of +0.528, per the Clinical Care report, Washington's medical care for older adults is above average, placing it in the top 20% of all states nationwide, just behind Colorado.

Yet everyday affordability remains an issue.

• Washington's median annual property tax bill exceeds $4,500, and overall living expenses — like groceries and housing costs — run roughly 14.6% higher than the national average.
• Plus, Washington recently approved an increased capital gains tax structure ranging from 7% to 9.9% on certain high-value investments, which can make the state more expensive for higher-wealth individuals.

But if you're retired and can comfortably afford the often higher price tag of Pacific Northwest living, Washington delivers an ideal combination of state retirement tax income exemptions and top-tier healthcare.

Related: 10 Cheapest Places to Live in Washington

2. Pennsylvania: Strong healthcare and moderate living costs

Senior healthcare ranking: +0.320 (#16 nationwide)

Median property taxes paid: $3,311

Cost-of-living score: 96.2 (3.8% below national average)

Pennsylvania slides into second on our list. The Keystone State exempts retirement income from state tax, including Social Security, pension payouts, and 401(k) or IRA distributions.

Senior healthcare access also remains strong here. With a score of +0.320, older adults may expect high-quality medical care, placing the state in the top 32% nationwide, according to data from the United Health Foundation. Plus, the average cost of living sits nearly 4% below the national average.

• But while retirement income is exempt from state taxes, all other income sources (like interest and dividends) are subject to a flat 3.07% state income tax.
• Additionally, the median property tax bill, while lower than Washington, remains 11% above the national average according to data from PropertyShark.

For retirees, Pennsylvania may offer a more balanced financial profile than higher-tax northeastern neighbors, like New York. However, elevated property tax bills can be difficult on a fixed income.

3. Iowa: Affordable living with above-average care

Senior healthcare ranking: +0.185 (#21 nationwide)

Median property taxes paid: $2,897

Cost-of-living score: 88.6 (11.4% below national average)

Iowa may be a true hidden gem for budget-conscious retirees. The state exempts retirement income from state taxes for residents aged 55 and older, meaning you don't have to wait long before you get state income tax relief.

On top of that tax exemption, Iowa boasts the lowest property tax bill among our top three states on this list, at just under $2,900. This is right below the national average, according to the U.S. Census Bureau, and the savings don't stop there. The Hawkeye State's cost of living is more than 11% below the national average, according to MERIC.

And perhaps more importantly, low cost doesn't automatically mean low healthcare quality, either. Iowa's senior healthcare ranking sits in the top 42% of the nation (ranking 21st overall in the Clinical Care United Health report), supported by lower rates of preventable hospitalizations.

• While Iowa ranks high nationally for average senior clinical care, its rural geography can create more care disparities for some areas than in, say, Washington or Pennsylvania.
• Plus, if you're used to a top #20 state for prime medical care, Iowa falls just short of that in the Clinical Care report.

Yet for fixed-income retirees seeking a balance of affordability and dependable healthcare (at least in more urban areas), Iowa may be considered a standout choice among tax-friendly states.

4. Florida: Low taxes, but rising costs and healthcare strain

Senior healthcare ranking: -0.103 (#31 nationwide)

Median property taxes paid: $2,730

Cost-of-living score: 100.7 (0.7% above national average)

Florida remains a classic choice for retirement because it levies no state income tax at all, protecting not just retirement distributions but also interest and dividends (and who doesn't love the weather?).

However, the Sunshine State's significant influx of retirees in recent years has created new friction points.

• Rapid population growth stretches the doctor-to-patient ratio, lowering Florida's senior healthcare access score to slightly below the national benchmark, according to the United Health Foundation.
• Additionally, rising housing expenses and skyrocketing home insurance rates have pushed Florida's overall cost of living slightly above the national average, according to MERIC.

So while Florida remains viable, a 2026 retirement plan in the Sunshine State might mean preparing for higher everyday expenses and longer waits for medical specialists than in previous decades.

Related: 10 Cheapest Places to Live in Florida

5. South Dakota: Maximum tax relief, lower healthcare access

Senior healthcare ranking: -0.263 (#35 nationwide)

Median property taxes paid: $2,724

Cost-of-living score: 94.1 (5.9% below national average)

Like Florida, South Dakota levies no state income tax on personal income (though its cold weather stands in sharp contrast to the Sunshine State).

South Dakota also has the lowest median property tax bill on this list, per U.S. Census Bureau data, and a cost of living roughly 6% below the national average.

One drawback for seniors requiring medical care in the Mount Rushmore State is medical availability, per the Clinical Care report.

• South Dakota ranks 35th in older adult clinical care, with a score below the national average.
• Rural geography and fewer medical centers mean accessing specialized care can require travel.

But if your primary goal in retirement is stretching your dollars as far as possible and you are comfortable with traveling for specialty care, South Dakota may offer your retirement nest egg significant financial benefits.

Read More

• How All 50 States Tax Retirement
• States That Won't Tax Your Death
• 5 Retirement Tax Traps to Watch in 2026
• How to Prepare Your Retirement Taxes for a Longer Life

Investors with large, highly appreciated stock positions can face a challenge: how to diversify those holdings without triggering a large capital gains tax bill.

Enter Section 351 exchanges.

Instead of selling an already diversified basket of appreciated securities, qualifying investors can contribute those holdings to seed a newly created ETF and receive ETF shares in return, deferring capital gains taxes.

Not surprisingly, the strategy has attracted interest from some wealth managers, ETF sponsors, and investors. But as the transactions become more popular, they are also attracting federal government attention.

U.S. Treasury Department officials have recently identified Section 351 transactions as one of several tax-focused investment strategies under review.

So how does this exchange work, and why has it become a closely watched approach?

What is an IRS Section 351 exchange?

This ETF exchange strategy gets its name from Section 351 of the Internal Revenue Code, which generally allows investors to transfer property to a corporation without immediately recognizing gain if certain strict requirements are met.

In a Section 351 ETF transaction, investors contribute appreciated securities during the initial launch phase of a new exchange-traded fund.

Note: Because IRS rules require the initial contributor (or group of contributors) to own at least 80% of the new ETF's total shares immediately after the exchange, this strategy cannot be used with existing, established ETFs. It is an opportunity that only occurs during the launch/seeding phase of a new fund.

• Instead of selling their holdings and receiving cash, which could trigger capital gains taxes in the year of the sale, investors receive shares of the ETF.
• If the transaction qualifies under Section 351, investors generally don't recognize the involved capital gains at the time of the exchange.

It's important to note that the tax benefit is a deferral, not a permanent elimination of tax. Investors' built-in gain generally carries over to the ETF shares and may become taxable when those shares are sold.

For example: Consider an investor who holds a broad, diversified portfolio of 30 different stocks worth $1 million, with an original purchase price of $200,000 — meaning there is an $800,000 unrealized capital gain.

No single stock makes up more than 25% of the portfolio.

Selling all 30 stocks to buy a traditional ETF would trigger an immediate tax bill on the $800,000 gain. So, the investor contributes their entire diversified stock portfolio as part of the launch of a new ETF, following all applicable IRS rules.

In exchange, they receive shares of the ETF. Because the contributed portfolio was already diversified before the transfer, the investor generally defers the $800,000 gain via the qualifying Section 351 exchange.

Note: The above is a highly simplified example. Every investor's situation is different, and you should consult a trusted tax advisor for guidance tailored to your financial circumstances.

Why some investors are turning to 351 ETFs

For some, the appeal of a 351 exchange is fairly straightforward: diversification without an immediate capital gains tax bill.

• Large stock positions can develop for many reasons, including years of investing, executive compensation, business ownership, or inherited assets.
• As mentioned, for investors with substantial unrealized gains, selling a position that has appreciated significantly can create a major tax liability.

Some supporters of the strategy argue that Section 351 exchanges represent legitimate tax planning within existing rules. They emphasize that investors aren't eliminating tax liability for the gains; they are merely changing the timing of when those gains are recognized.

The table below highlights some key differences between selling appreciated assets, in this case, stock, and a qualifying 351 ETF transaction.

Selling Stock vs. Using a Qualifying 351 ETF Exchange

Why Treasury is taking a closer look

Meanwhile, Treasury Department officials’ recent comments highlight growing attention toward investment strategies designed around tax deferral.

Officials at a Wall Street Tax Association seminar reportedly said the agency is reviewing several tax-focused transactions, including Section 351 ETF structures, to determine whether certain arrangements could lead to abusive tax outcomes.

According to Bloomberg News, Kevin Salinger, Treasury's deputy assistant secretary for tax policy, said: "We’re not here to be over-broad or disruptive, but we are also not prepared to turn the blind eye to aggressive planning."

The concern is not necessarily that every Section 351 ETF transaction is improper. Rather, Treasury seems to be considering whether some structures achieve results that Congress didn't intend when it created the underlying tax legislation.

351 exchange ETFs: What happens next?

Keep in mind: Treasury has not announced that Section 351 ETF transactions are prohibited, nor has it issued guidance, new restrictions, or enforcement actions regarding the tax treatment of qualifying exchanges.

So, for now, the strategy remains available for investors who meet the IRS requirements.

Still, the debate over 351 ETFs reflects a broader question in tax policy: How far can investors go in using existing rules to reduce or postpone tax bills before regulators decide the strategy has gone too far? Stay tuned.

Related

• What's the Capital Gains Tax Rate in Your State?
• New Bill Proposes $1 Million Capital Gains Tax Exclusion
• Another State Eliminates Capital Gains Taxes
• Capital Gains Tax Rates for 2026: What to Know Now

If you’ve ever wondered whether your family could face a tax bill after inheriting money or property, you’re not alone.

While estate tax and inheritance tax both involve assets passed on after death, they differ in who pays them, when they’re paid, and when they apply. Understanding the distinction can help you better navigate estate planning and inheritance decisions.

The good news? According to the Center on Budget and Policy Priorities, fewer than 1 in 1,000 estates owe federal estate tax.

Inheritance taxes are even more limited.

So, what does this mean for you? Here’s more of what you need to know.

How an estate tax works

An estate tax is a tax on the transfer of a person’s assets after death.

Rather than taxing each beneficiary individually, the tax is calculated based on the total value of the deceased person’s estate before assets are distributed.

The estate’s executor or personal representative generally pays any estate tax owed before beneficiaries receive their inheritances.

According to the IRS, an estate may include:

• Cash and investment accounts
• Real estate
• Business interests
• Life insurance proceeds (in certain situations)
• Trust interests
• Retirement accounts
• Personal property and other assets

Because the federal estate tax exemption is $15 million per person in 2026 (indexed for inflation in future years), only a relatively small percentage of estates owe federal estate tax.

Some states impose their own estate taxes, often with exemption amounts much lower than the federal threshold. For example, Massachusetts has a $2 million estate tax exemption, so an estate could owe state estate tax even if it doesn’t owe federal estate tax.

How an inheritance tax impacts heirs

Unlike an estate tax, an inheritance tax is assessed after assets are distributed. If inheritance tax applies, the beneficiary, not the estate, is responsible for paying it.

Even then, many surviving spouses are exempt, and children and other close relatives may qualify for reduced tax rates or exemptions depending on state law.

Whether you owe inheritance tax largely depends on state law, your relationship to the deceased, and any available exemptions.

Who actually pays estate tax vs. inheritance tax?

The biggest differences are who pays the tax, when it’s paid, and when it applies.

Whether estate tax or inheritance tax applies depends on three primary factors:

• The size of the estate
• Where the deceased was domiciled at the time of death (and, in some cases, where certain property is located)
• The beneficiary’s relationship to the deceased (for inheritance tax purposes)

Estate vs Inheritance Tax

How it works

Note: This is a simplifed example. Keep in mind that everyone's financial situation is different and you should consult a trusted tax or estate planning advisor for guidance on your individual circumstances.

Imagine finding out you’ve inherited part of a loved one’s $5 million estate. Before mentally earmarking those assets to pay off debt, boost your retirement savings, or help fund a child’s college education, one question is likely to come to mind: "Will I owe taxes?"

For most families, the answer is no.

Federal estate tax applies only to very large estates, and only a handful of states impose an inheritance tax. If taxes do apply, who pays depends on whether it is an estate tax or an inheritance tax.

Why the difference matters

Estate tax and inheritance tax often get conflated, but the distinction matters. Understanding who pays each tax and when it applies can help you avoid costly misconceptions.

Although most families won’t owe either tax, understanding the rules can help you navigate an inheritance or plan your own estate with greater confidence.

If your estate could approach federal or state exemption thresholds, advanced planning strategies, like lifetime gifting, charitable giving, or trust planning, may help reduce future tax exposure.

Frequently asked questions

Can you owe both estate tax and inheritance tax?

Yes, although it’s relatively uncommon.

A large estate could owe estate tax, while a beneficiary in a state that imposes an inheritance tax could also owe inheritance tax on the same transfer.

Because different laws govern estate and inheritance taxes, both taxes can apply in certain situations.

Which states impose an inheritance tax?

As of 2026, only five states impose an inheritance tax:

• Kentucky
• Maryland
• Nebraska
• New Jersey
• Pennsylvania

Whether you owe inheritance tax largely depends on state law, your relationship to the deceased, and any available exemptions.

In many cases, surviving spouses are exempt, while children and other close relatives may qualify for reduced tax rates or exemptions.

Who pays estate tax?

Estate tax is generally paid by the estate before assets are distributed to beneficiaries.

The estate’s executor or personal representative is responsible for filing any required estate tax returns and paying any tax due from estate assets.

Who pays inheritance tax?

The beneficiary, not the estate, is responsible for paying any inheritance tax that applies.

How long do you have to pay estate or inheritance tax?

Estate tax: Federal estate tax is generally due nine months after the date of death. The IRS may grant an extension to file, although any tax owed may still need to be paid by the original due date to avoid interest and penalties.

Inheritance tax: Payment deadlines vary by state because inheritance taxes are imposed at the state level. Beneficiaries should check their state’s requirements, as filing and payment deadlines differ.

Do most people have to pay estate tax or inheritance tax?

No. Most Americans won’t owe either tax.

The federal estate tax applies only to estates that exceed the applicable federal estate tax exemption amount, and only a handful of states impose an inheritance tax.

Whether taxes are owed depends on the size of the estate, applicable state law, and, for inheritance tax purposes, the beneficiary’s relationship to the deceased.

Estate tax planning: Bottom line

Whether you’re planning your own estate or navigating an inheritance after the loss of a loved one, a qualified estate planning attorney or tax professional can help you understand how federal and state tax laws apply to your situation.

Though every individual's financial situation is different, if you're engaging in estate planning, you may want to assess whether your total net worth puts you close to any state-level tax thresholds. And if you think you're receiving an inheritance, you may want to consider how your relationship to the deceased impacts your state tax exemptions, or if the estate covers the bill.

Overall, remember this simple rule: If the estate writes the check, it’s an estate tax. If the beneficiary writes the check, it’s an inheritance tax.

Related

• Gift Tax Exclusion: How Much You Can Give Tax‑Free This Year
• The Estate Tax Exemption Amount for 2026
• States That Won't Tax Your Death

You probably know how much you pay in taxes each year when you file your annual return and either (1) aren't happy about how much you owe the IRS or (2) find yourself looking forward to a tax refund. But have you ever wondered about how all of those yearly payments add up over time?

A new analysis takes that long view, estimating that the average U.S. taxpayer will pay hundreds of thousands of dollars in federal, state, and local taxes over the course of their lives. The high six-figure total includes income taxes, property taxes, sales taxes, and vehicle-related taxes.

And depending on where you live, your lifetime tax bill could be hundreds of thousands of dollars higher, according to the study from fintech company Self Financial.

These tax burden findings arrive amid rising frustration in the U.S. over high prices and lack of affordability, and as lawmakers in several states and Congress debate eliminating or reducing income taxes and, in some cases, property taxes.

Here's more to know.

How much tax people pay in the U.S.

According to a recent analysis by Self Financial, the average American will pay an estimated $762,272 in total taxes over their lifetime. (Notably, that represents a roughly 45% increase from the 2024 estimate of $524,625 in lifetime taxes.)

The study adds up various taxes Americans pay throughout life across several major categories:

• Federal and state income taxes
• Property taxes
• Sales taxes
• Vehicle-related taxes

As you might expect, income taxes make up the largest share of the lifetime tax burden. (The analysis estimates that the average U.S. taxpayer pays about $532,910 in federal and state income taxes over a lifetime.)

Property taxes add roughly more than $145,000 over a lifetime, according to the study.

• Then there are the taxes we often pay without thinking much about them: Sales taxes at the register and taxes tied to car ownership.
• For example, the study data show that "owning the most popular car (i.e., a Ford F-Series) will cost an additional $31,817 in tax payments."

While these taxes might seem relatively small in any given transaction, over a lifetime, the average U.S. taxpayer will pay an estimated 33.6% of their earnings in taxes, according to the study.

Which states have the highest taxes

Where someone lives can impact their tax payments. However, when it comes to lifetime tax burden, the latest analysis reveals significant differences due to income levels, housing costs, tax structures, and spending patterns.

For example, residents of New Jersey face the highest estimated lifetime tax burden. The study projects Garden State residents will pay roughly $1.35 million in taxes over their lifetimes.

Other states with high lifetime tax burdens:

At the other end of the ranking, Florida residents have the lowest estimated lifetime tax burden, at about $508,000, according to the study. The difference between the highest- and lowest-tax states exceeds $800,000 over a lifetime.

Note: The analysis estimated lifetime taxes by combining federal, state, local, property, sales, and vehicle-related taxes using median earnings, consumer spending, housing, and vehicle ownership data. Researchers assumed a typical working life from ages 22 to 67 and applied current tax rates and spending patterns over an average lifespan of 79.6 years.

Proposals to eliminate state income tax and property tax

This tax burden analysis comes as lawmakers nationwide advance tax cut proposals.

Several states have recently lowered income tax rates or adopted flat-tax systems, while others are debating further cuts to attract residents and businesses.

For example, in Missouri, voters will decide in August on Amendment 5, a measure that would phase out the state's individual income tax.

• Supporters of eliminating the state's income tax argue it would let residents keep more of their earnings.
• Some opponents warn that Missouri might need to rely more on other taxes, e.g., sales taxes, to make up for lost revenue and fund public services.

Property taxes have also become a major target in recent years, particularly in states where rising home values have pushed up tax bills.

As Kiplinger has reported, in Florida, lawmakers are considering a constitutional amendment that would increase the state's homestead exemption for non-school property taxes to $250,000 in 2028 and beyond.

• Supporters of the proposal for November's vote say it would help homeowners and gradually eliminate property taxes on homesteaded properties.
• Critics, however, are concerned about how local governments would replace lost revenue for essential services like public safety and infrastructure.

Several members of Congress have introduced plans to exempt certain income levels from federal income tax.

The Working Americans' Tax Cut Act, proposed by Sen. Chris Van Hollen (D-Md.), would eliminate federal income taxes on the first $46,000 for individuals and $92,000 for couples while imposing a surtax on higher-income households.

Sen.Cory Booker's (D-N.J.) "Keep Your Pay Act" would increase the standard deduction to effectively eliminate federal income taxes on the first $75,000 of earnings. However, neither has gained traction in Congress

For his part, President Donald Trump has floated eliminating income taxes (initially to be replaced with tariffs, many of which have since been struck down by the U.S. Supreme Court).

Also worth noting: Some users across social media platforms like Reddit, X, and TikTok have shared posts expressing support for tax resistance or a "tax strike" to stop paying taxes.

How to lower your taxes

To reduce your tax liability, it can help to plan for taxes that you can influence to some degree. However, each financial situation is unique, so consult a trusted tax advisor or financial planner for guidance.

Review your property tax bill.

Property taxes can be a major expense for homeowners. Review your assessments and apply for any eligible exemptions, homestead exemptions, and property tax breaks.

Pay attention to other state and local taxes.

No-income tax states aren't always the ones with the lowest overall tax burden. Sales taxes, gas taxes, vehicle fees, and other costs can sometimes offset income tax savings. So take all of these factors into consideration when deciding where to live.

Use available federal tax breaks.

You can lower taxable income by taking advantage of tax deductions and credits you're eligible for, along with leveraging tax-advantaged accounts like HSAs and retirement savings accounts.

Plan for retirement taxes

Taxes don't necessarily end in retirement due to income from required minimum distributions (RMDs), pensions, Social Security benefits, etc. Planning the timing of withdrawals and other income sources can help retirees manage tax burden.

Consider the tax impact of major financial decisions.

Remember that major life changes and financial decisions, from getting married or divorced to buying a home, changing jobs, having a child, or making certain investment moves, can affect tax liability.

Also, keep an eye on tax law changes.

With the November 2026 midterm elections approaching and special elections taking place across the country, voters in several states could have their say on major tax policy changes. Stay tuned.

Related

• Polls Show Most People Think Their Taxes Are Too High
• More States Have Changed to Flat Tax Rates
• How to Pay the IRS if You Owe Taxes
• Another State Could End Income Tax in 2026

Fear of an IRS audit is incredibly common, even if the actual odds of one are much lower than you think. After all, the federal tax agency audits only about one in 250 individual files (roughly .4%) each year.

However, getting selected isn't entirely random. Common red flags like disproportionate deductions, omitted income, or simple reporting mismatches can increase your chances of a manual review.

Think you can spot the warning signs? Take our quick five-question quiz to test your knowledge of IRS audit red flags.

Explore More

• What Are Your Chances of an IRS Audit? 15 Audit Red Flags
• 6 Tax Mistakes That Could Be Raising Your Bill
• These Popular Tax Breaks Are Gone for Good in 2026

Managing healthcare costs is one of the biggest financial hurdles in retirement. According to AARP, the average Medicare beneficiary spends roughly $7,295 annually on out-of-pocket medical care. But there may be ways to save.

One way is through your federal tax return. By utilizing the medical expense deduction, you can deduct qualifying, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). While this strategy requires electing to itemize rather than claiming the standard deduction, heavy medical bills might justify the extra paperwork.

Plus, more than just standard doctor visits or hospital stays may qualify for the deduction. For instance, you might be able to deduct the cost of your weight-loss program or service animal on your federal return.

But because the IRS heavily scrutinizes unconventional claims, navigating these deductions requires ample preparation. So carefully consider whether or not you are eligible for these five unusual write-offs before claiming them on your 2026 federal return.

This list focuses exclusively on federal tax deductions. You may qualify for other tax breaks on your state income taxes. Also, the article does not constitute legal or financial advice. Always consult a qualified tax professional before filing.

The medical expense deduction: Ground rules

To be eligible to claim any of the medical tax deductions listed below, you must first meet the specific criteria for the medical expense deduction. This includes:

1. Itemizing your deductions on Schedule A (Form 1040) instead of claiming the standard deduction.
2. Filing your itemized deductions under the medical expense deduction (which is technically available to taxpayers of any age, but is heavily utilized by older adults).
3. Exceeding the adjusted gross income (AGI) threshold. You can only deduct the portion of your total qualifying medical expenses that exceeds 7.5% of your AGI. (For example, if your AGI is $100,000, the first $7,500 of your medical expenses won't count; only the amounts above that are deductible.)

Also, you can't deduct an expense on your federal return if it was already covered by your insurance, health savings account (HSA), or flexible spending account (FSA).

Additionally, the IRS recommends that you maintain all applicable tax records for qualifying medical expenses for at least three years (though most tax experts advise six or more years). This covers the IRS's tax audit period.

1. Home modifications for medical care

If you have a home improvement project planned to accommodate a medical condition or physical disability, the net cost may qualify for a medical expense deduction. These are the requirements:

• What qualifies. The modification must directly treat or accommodate a diagnosed condition. A formal letter of medical necessity from a doctor is typically necessary.
• Documentation needed. Keep your doctor's letter, a home appraisal from before and after the project (to document changes in property value), all itemized contractor receipts, and any other applicable tax records.
• Value calculation. You can only deduct the amount by which the cost of the improvement exceeds the increase in your home's market value.

The last bullet point might sound confusing. But here's an example:

• Say you install a home elevator for $35,000 to accommodate a mobility issue.
• A licensed appraiser determines that it increases your home's total property value by $25,000.
• Thus, your potentially deductible medical expense is the difference between the two: $10,000.

(Note: If an upgrade increases your home's value by more than it costs to build, the potential deduction drops to $0).

The IRS also explicitly states in its Medical and Dental Expenses Guide that certain standard accessibility modifications are presumed not to increase a home's market value, and are thus 100% potentially deductible. These include adding ramps, widening doorways, modifying stairways, etc.

For more information, check out Kiplinger's report, Tax-Deductible Home Improvements for Retirement.

2. Guide dogs and service animals

Service animals trained to assist with physical disabilities (like visual impairments or mobility limitations) or medical alerts may qualify for the medical expense deduction. Typical qualifying expenses include the total cost of purchasing, training, and maintaining the animal.

• What qualifies. The animal must be individually trained to perform tasks for a person with a disability. Emotional support animals (ESAs) or general family pets are not tax-deductible and do not qualify.
• Documentation needed. You must retain training invoices, veterinary bills, grocery/supply receipts, and other applicable tax records.
• Value calculation. You may write off the vet care, grooming, food, and specialized training supplies associated with your service animal.

3. Prescribed swimming pools

This is a highly scrutinized deduction by the IRS, but it may be medically necessary under special circumstances.

If a doctor explicitly prescribes hydrotherapy to treat a severe, specific medical condition (like advanced arthritis), the cost of installing and operating a home pool might be eligible for a medical expense deduction.

• What qualifies. You can deduct not only the qualifying home pool installation fees but also the ongoing operational costs — like heating, chemicals, and electricity — only for the portion of the year the pool is used strictly for medical treatment.
• Documentation needed. You will need a letter of medical necessity, appraisal documents, and utility bills to prove your operation costs.
• Value calculation. Like home modifications, the installation cost is deductible only to the extent it exceeds the value the pool adds to your real estate. So, if a pool costs $50,000 to build but adds $20,000 to your home's equity, you can potentially claim only $30,000 as a medical expense.

Special note: Because the IRS looks closely at pool deductions, it is very rare to claim this home improvement as a tax deduction. However, if a pool is medically necessary, you can consult with a tax professional to see if it would qualify for a potential write-off.

4. Prescription weight-loss programs

If you're enrolled in a weight-loss program to manage or mitigate a specific diagnosed health condition — like type 2 diabetes, heart disease, or severe hypertension — the enrollment and attendance fees may be tax-deductible as a medical expense deduction.

• What qualifies. Only fees related to your prescribed diagnosis. The IRS strictly prohibits deductions for programs designed for general health, well-being, or cosmetic appearance.
• Documentation needed. A written diagnosis from your physician stating the specific disease being treated, along with itemized monthly statement receipts from the program.
• Value calculation. You generally cannot deduct the cost of specialty diet foods, nutritional supplements, or standard gym memberships. All qualifying healthcare expenses related to your program are potentially deductible under the medical expense deduction.

5. Oral and facial physical therapy

In a landmark IRS ruling, a parent successfully argued that clarinet lessons for their child were deductible because an orthodontist formally prescribed them to correct a severe overbite.

For older adults, the equivalent is specialized physical therapy for the mouth and jaw muscles, like treatment for Temporomandibular Joint (TMJ) disorders or myofunctional therapy.

• What qualifies. As with other qualifying expenses on this list, you can only claim out-of-pocket expenses that were not otherwise covered or reimbursed by your insurance, HSA, or FSA.
• Documentation needed. A formal referral and script from a dentist, orthodontist, or primary physician, alongside detailed treatment logs specifying the dates of service and itemized payment receipts.
• Value calculation. Any qualifying medical expenses above the 7.5% AGI limit may be potentially deductible under this federal tax deduction.

For more information on what qualifies as AGI, check out Kiplinger's report, How to Calculate Your Adjusted Gross Income — and What It Means.

Explore More

• Most-Overlooked Tax Breaks for People Over 65
• New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers
• The Extra Standard Deduction for People Age 65 and Older
• States With No Retirement Tax Ranked by Medical Care

Many investors know to expect to pay federal capital gains tax when they sell appreciated stocks, mutual funds, cryptocurrency, investment property, or other assets. But state taxes are often an afterthought, even though those levies can significantly impact your total tax bill.

Most states tax capital gains as ordinary income, while others have special rules, exemptions, or separate capital gains taxes. So, depending on where you live and how much you earn, your gains may escape state tax altogether or be taxed at rates as high as 10% or more.

Here's more to know about state capital gains tax rates and how they could impact your total tax burden for 2026

How capital gains tax works

A capital gain occurs when you sell a capital asset for more than you paid for it. (Common examples include stocks, bonds, mutual funds, exchange-traded funds (ETFs), investment real estate, and certain business interests.)

The amount subject to tax is generally the difference between your purchase price (your cost basis) and the sale price.

Whether you owe tax, and how much, depends in part on how long you owned the asset.

• Short-term capital gains apply to assets held for one year or less and are generally taxed as ordinary income.
• Long-term capital gains apply to assets held for more than one year and typically qualify for lower federal tax rates.

While the federal government provides preferential tax rates for most long-term capital gains, many states don't.

Instead, they generally include capital gains in taxable income and apply the state's regular income tax rates. But…other states have their own rules or exemptions that are important to know.

State capital gains taxes

Bottom line first? Where you live can make a meaningful difference in your overall tax bill.

For example, investors in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Wyoming, and New Hampshire generally pay no state tax on capital gains because those states don't impose a broad individual income tax.

Missouri also now provides a 100% deduction for qualifying capital gains, effectively eliminating the state tax on those gains.

At the other end of the spectrum, taxpayers in states like California, Hawaii, New York, Oregon, Minnesota, and the District of Columbia may face some of the nation's highest state tax rates on investment gains.

Washington also imposes a separate capital gains tax on certain high-dollar long-term gains rather than a traditional income tax.

Still, as mentioned, in most states, capital gains are taxed as ordinary income. As a result, the rates below generally represent the highest state income tax rate that could apply to capital gains for individuals in 2026.

Also, keep in mind:

• This table is based on the most recent 2026 state tax data from the Tax Foundation and state revenue department publications available as of mid‑2026.
• State tax rates and rules can change with new legislation or inflation adjustments that are filed late or implemented mid‑year.
• Some states have special capital gains deductions, tiered rates, or local taxes that are not captured by a single number or have unique rules or exemptions that may apply.

Capital Gains Tax Rates by State

States with special capital gains rules

Note: Not every state with a special capital gains tax rule is listed here.

Under Arkansas state tax law, 50% of long-term capital gains are tax-exempt. Because Arkansas taxes the remaining half at ordinary income rates, the state's maximum effective capital gains tax rate is 1.85%. Arkansas also has a unique "super-exclusion" where any net capital gains exceeding $10 million in a single tax year are 100% tax-free.

Massachusetts taxes capital gains at a 5% base rate, but high-income investors may pay more. A 4% “millionaire’s surtax” applies to income above $1,107,750 in 2026 and can affect certain gains, pushing the effective rate above 5% for some taxpayers.

Montana’s top ordinary income tax rate is 5.65%, but long-term capital gains are taxed at lower rates ranging from 3.0% to 4.1%.

New Mexico’s capital gains deductions can reduce the effective rate below its 5.9% top ordinary income tax rate.

South Carolina allows a 44% deduction on qualifying long-term capital gains.

As Kiplinger has reported, Washington imposes a separate capital gains tax, with taxable gains taxed at 7% up to $1 million and 9.9% above that threshold after applicable deductions.

Wisconsin offers a 30% exclusion for net long-term capital gains (60% for qualifying farm assets), and up to a 100% exclusion for long-term investments in qualified Wisconsin businesses.

In some states, local taxes can raise the overall burden. Maryland counties impose additional income taxes, while many Ohio residents pay municipal income taxes that can increase the total tax bill. Other jurisdictions, including the District of Columbia, may also impose local taxes.

What about states with no capital gains tax? Nine states do not impose a state capital gains tax: Alaska, Florida, Missouri, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.

Missouri is a newer exception when it comes to capital gains taxes. As of last year, individuals can subtract 100% of federally reported capital gains from Missouri taxable income, effectively eliminating the state tax on qualifying capital gains.

Federal Capital Gains Tax Rates for 2026

As mentioned, state taxes are only part of the picture when it comes to navigating capital gains taxes. For federal taxes, most long-term capital gains qualify for one of three tax rates:

• 0%
• 15%
• 20%

The rate you pay depends on your taxable income and filing status.

Taxpayers with higher incomes may also owe the 3.8% Net Investment Income Tax (NIIT) on top of their regular capital gains tax.

Short-term capital gains, meanwhile, are generally taxed at ordinary federal income tax rates rather than the preferential long-term rates.

Ways to reduce capital gains tax

While paying some tax on investment profits is often unavoidable, there are strategies you might consider to help reduce or potentially defer capital gains taxes.

Remember that every investor's situation is different, so you may want to consult with a trusted financial planner or tax professional for strategies tailored to your circumstances.

Holding investments for more than one year. Long-term capital gains generally qualify for lower federal tax rates than short-term gains. Depending on your income, that difference can significantly reduce the tax owed on a sale.

Leveraging tax-advantaged accounts. Investments held in traditional IRAs, Roth IRAs, and many employer-sponsored retirement plans generally are not subject to annual capital gains taxes while the money remains in the account. Qualified Roth withdrawals can be taken tax-free.

Offsetting gains with investment losses. If you sell investments at a loss, those losses can be used to offset capital gains. "Tax loss harvesting" can reduce the amount of gain subject to tax and, in some cases, allow taxpayers to deduct up to $3,000 of excess losses against ordinary income each year. But don't forget about the wash sale rule.

Considering the timing of a sale. Selling an asset in December instead of January — or vice versa — can affect which tax year the gain falls into. Taxpayers expecting a significant change in income might benefit from carefully planning when gains are realized.

Related

• Which Capital Gains Are Taxable?
• Federal Capital Gains Tax Rates for 2026
• New Bill Proposes $1M Capital Gains Tax Exclusion
• No-Capital-Gains-Tax States Ranked by Cost of Living

Millions of taxpayers who make certain tax filing or payment mistakes could get a break from IRS penalties without having to ask.

Starting this summer, the IRS will automatically review taxpayers for First-Time Abatement relief, a program that can waive certain failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with a clean compliance history.

The agency estimates the change could eventually help more than 1.5 million taxpayers each year. That’s compared with roughly 220,000 taxpayers who reportedly obtained similar relief under the previous process, which required taxpayers to request a penalty waiver after the IRS assessed a penalty.

The new system will roll out for eligible 2025 individual federal income tax returns and 2026 quarterly returns, with a full transition expected in 2027.

But…While the IRS is changing how taxpayers receive penalty relief, the rules for who qualifies for so-called first-time relief haven't changed. Here’s what you need to know.

New IRS automatic penalty relief

Under the previous first-time penalty abatement program, taxpayers generally had to wait until an IRS penalty was assessed and then request relief from the agency by phone, in writing, or using Form 843

That meant taxpayers had to know that penalty relief existed and then take action to request it.

The problem? Some eligible taxpayers never received relief simply because they were unaware of the program or didn't know they qualified. Others found it challenging to obtain IRS assistance by telephone or to complete the required forms and processes without professional support.

The new Automatic Exemption from Penalty (AEP) process essentially moves the review earlier in the process and automates it.

• Now, during return processing, the IRS will check a taxpayer’s compliance history to determine whether the taxpayer qualifies.
• If the requirements are met, the IRS will automatically suppress the penalty before it is ever officially assessed.
• The taxpayer will receive a written notice explaining the relief.

“By automatically applying penalty relief, the IRS recognizes that taxpayers who historically pay on time should not have to make a formal request for relief that is routinely granted," IRS CEO Frank J. Bisignano stated in a release.

Although the process is just beginning, the new automated system is intended to replace the First-Time Abatement process for eligible returns due on or after Jan. 1, 2027.

To qualify, taxpayers generally must have:

• Filed required returns or requested a valid extension
• Paid any tax due or established an approved payment arrangement with the IRS
• No significant penalties during the previous three years (or 12 consecutive quarters for quarterly filers) on the same type of tax return

Keep in mind that the new automated process doesn't mean all IRS penalties will disappear.

The relief generally applies only to eligible failure-to-file, failure-to-pay, and failure-to-deposit penalties. Additionally, certain returns, including information returns and some estate and gift tax returns, are not included.

Also worth noting: This new AEP process doesn't eliminate the underlying tax owed or the interest that accrues on that tax.

Why the IRS changed the first-time penalty process

The change addresses a long-standing problem with First Time Abatement: Eligible taxpayers often missed out on relief because they did not know the program existed or that they needed to request it. That can be notable for some taxpayers, since a failure-to-file penalty, for example, is 5% of your unpaid taxes for each month the return is late, up to a maximum of 25%.

The Taxpayer Advocate Service (TAS) has argued that penalty relief should not depend on whether taxpayers understand the process, can reach the IRS, or have access to professional tax assistance.

National Taxpayer Advocate Erin Collins highlighted that concern when discussing the new system, writing the following in a blog post:

"For years, too many eligible taxpayers missed out on first-time penalty relief simply because they did not know it was available, did not understand how to request it, could not get through to the IRS, or did not have a tax professional advising them. That is especially true for low-income taxpayers and taxpayers who cannot afford representation. A penalty that may seem modest to some taxpayers can be financially significant for a taxpayer struggling to pay rent, utilities, groceries, transportation, or medical expenses."

Take, for example, a taxpayer who filed and paid their federal income taxes on time for years but accidentally files a return late. Under the previous system, that taxpayer could incur a failure-to-file penalty, wait for the penalty notice to arrive, contact the IRS, and request First-Time Abatement relief.

Under the new process, the IRS can review the taxpayer’s compliance history while processing the return and automatically remove the penalty if the taxpayer qualifies.

The three-year clean history

When the IRS talks about a "clean compliance history," that generally means the taxpayer hasn't had a significant penalty assessed during the three years before the penalty year. For taxpayers who file quarterly returns, the IRS will generally look at the previous 12 consecutive quarters.

• A clean history also doesn't mean a taxpayer has never made a mistake on their income tax return.
• The IRS will look at whether the taxpayer has generally met their tax obligations.
• As mentioned, that generally includes timely filing required returns and paying taxes owed/establishing an approved payment arrangement when needed.

Additionally, the three-year lookback applies to the specific (same) return type being filed. So a penalty on a business partnership return won't disqualify your individual filing from automatic relief.

According to the IRS, the three-year rule also doesn't mean a taxpayer can receive relief only once. If a taxpayer receives automatic relief and then maintains a clean compliance history for the required period, that taxpayer could potentially qualify for relief again in the future.

However, if a taxpayer fails the automated "clean history" check and doesn't receive AEP relief, they aren’t necessarily out of luck. Taxpayers can still manually request a penalty waiver under the traditional IRS "reasonable cause" framework, which evaluates various sound reasons for non-compliance.

What happens if you receive an IRS penalty relief notice?

Under AEP relief, the IRS will issue a notice explaining that the penalty wasn't assessed because the taxpayer met the relief requirements. Taxpayers who receive that notice generally don't need to contact the tax agency or take additional action, according to the agency.

However, during the transition period, the IRS says some qualifying taxpayers may still receive penalty notices for eligible 2025 tax-year returns or 2026 quarterly returns.

• If you receive a penalty notice, it's important to review it carefully.
• If you believe you qualify for first-time penalty relief and the penalty wasn't automatically removed, you may still need to request relief under the existing process during the transition period.
• There should be a 1-800 number on the penalty notice for contacting the IRS.

If you want to track whether a penalty was removed, you can also review your official IRS Online Account.

Records there should show whether a penalty was assessed, whether relief was applied, and when the three-year compliance period begins for potential future eligibility.

As always, however, consult a qualified and trusted tax professional if you have questions or concerns about IRS penalties.

Related

• Does the IRS Really Never Text You? Here's What We Discovered
• IRS Names Its First CEO, But He's Also Running Social Security
• How to Pay the IRS if You Owe Taxes
• IRS Says You Made a Tax Return Mistake? A New Law Could Help

If you get a text message claiming to be from the IRS this week, your first instinct is probably to delete it and block the number.

And that's usually smart. After all, the IRS famously warns that it "will not contact [you] by text message or social media."

But dropping the hammer too quickly might cause you to miss a legitimate government notification — or, worse, an alert that a scammer is trying to compromise your tax data. (According to the U.S. Congress Joint Economic Committee, almost 25% of Americans have reported being victimized by tax scams, including spoofed text messages and QR codes.)

Adding to the confusion is the fact that the IRS can now text you. In recent years, the federal tax agency has introduced three very specific reasons it will text your mobile phone, and one glaringly obvious reason it still won’t.

Here's how to know who's on the other side of that "message received" prompt.

The IRS rolls out text messaging

The IRS only began rolling out SMS text messaging in the last eight years or so. Things like opt-in account updates, initiated system reminders, and requested callback confirmations that may have required paper letters or wait times in the past may now land in your digital inbox.

However, there are two important caveats to receiving an IRS text message.

First, the IRS will only text you if you opt in. Second, the federal tax agency uses strict, dedicated short codes to send texts to your phone.

So if you receive a text claiming to be from the IRS via a standard 10-digit phone number, it's likely a fake. Legitimate short codes are below:

• Short code 91040: Used for official IRS news bulletins (like changes in the tax code), appointment reminders, account notifications, and one-time security codes.
• Short code 34381: Reserved for IRS customer service callback reminders.

(Note: While these are the primary codes deployed by the agency, the list may expand as digital services evolve.)

Furthermore, receiving an unexpected short-code text — like a sudden two-factor authentication code you never requested — doesn't necessarily mean the message itself is inherently fake. Instead, it might be a sign that a hacker is attempting to breach your online IRS portal account.

Never give that security code to any individual, even if they claim to be an IRS agent. If you suspect fraudulent activity, log directly into your IRS portal to check your account status.

To help keep your identity and wallet safe, here are three key reasons you might receive a text claiming to be from the IRS, and one reason you won't.

1. You subscribed to IRS news bulletins

Not many people realize you can subscribe to direct IRS communications and receive a text message.

Everything from new tax law regulations (like those governing the recently launched Trump Accounts) to IRS criminal investigation tax case highlights can be delivered right to your inbox.

Taxpayers initially subscribe to these notifications via email (usually coming from irs@service.govdelivery.com). However, the IRS system allows you to opt in to text alerts as well, as demonstrated by this snapshot of a Tax Stats Dispatch Mailing List email sent from the IRS:

If you decide to receive IRS bulletins via text, the updates will always originate from the secure short code 91040. A different number delivering the tax law updates is likely a phishing attempt designed to steal your credentials.

2. You have an upcoming IRS appointment

When you schedule an in-person meeting at an IRS Taxpayer Assistance Center (TAC), you can opt in to receive text confirmations and scheduling updates about that appointment.

The IRS will also text you a notification once you're checked in at the building or when it is your turn to be seen (a screenshot of what an appointment reminder may look like can be found on Reddit).

Just like news bulletins, these automated operational texts will come from short code 91040.

However, scammers can use fake IRS appointment reminders to trick you into "confirming your appointment" by clicking a link or handing over personal or financial information.

To play it safe, never click a text link. Instead, log directly into your secure IRS online account to verify your appointment status. If you're still unsure, call the IRS customer service line directly at 1-800-829-1040 to double-check your appointment time.

3. You requested an IRS callback

Holding on the line for an IRS agent can feel grueling. According to the Taxpayer Advocate Service, taxpayers this past filing season had more difficulty reaching the federal tax agency than last year, with an average reported wait time of 14 minutes (up from 8 minutes). Only about 21% of calls were answered by an agent.

To alleviate the gridlock, the IRS offers a digital callback service for select high-volume phone topics, like refund inquiries and how to pay the IRS if you owe taxes. So instead of waiting on hold, you can opt in to receive a text when an agent is ready to call you back.

These text alerts generally only come from short code 34381.

But as you might've guessed, scammers can take advantage of this method as well.

Potential fraudsters can impersonate the IRS callback service to gain your trust before trying to extort personal information or demand immediate payment.

You can typically verify the text by its timing: the message should arrive within a predictable window after you personally initiated a call to the IRS. If you get a random "callback" text out of the blue, it's probably a red flag.

The one thing the IRS will never text you

Although the IRS will text you for administrative and scheduling updates you opt into, the federal tax agency will never initiate a text message demanding payment.

The hallmark of a text tax scam is typically a claim that you owe back taxes, have an "unclaimed refund" waiting to be deposited, or must urgently click a link to "fix" a suspended account, per the IRS' latest Dirty Dozen report (an annual list of the current tax scams).

And if an unsolicited message lands on your phone offering "free tax advice," demanding your Social Security number, or asking you to scan a QR code, do not engage. Instead, take a screenshot (or copy the text) and forward it to phishing@irs.gov with the following information.

• Subject line: "Text."
• Sender's phone number and your phone number
• Date, time, and time zone received.

Then forward the text to 7726 (SPAM) to alert your mobile carrier and delete the message.

Stay alert.

Read More

• What Are Your Chances of an IRS Audit? 15 Audit Red Flags
• Gifting Cash for a Wedding or Graduation? Here's a Quiz on IRS Gift Tax Rules
• How Benjamin Franklin's Simple Money Rules Could Help Lower Your 2026 Taxes

A major tax question surrounding new Trump Accounts has now been answered by the IRS.

The federal tax agency recently issued guidance clarifying how contributions to the children’s savings accounts will be treated for federal gift tax purposes. This clarification comes as the accounts officially launched on July 4 with a full-court press on July 6.

Here's more of what you need to know.

Trump Accounts $1,000 seed money

"Trump Accounts" were created under the 2025 Trump-GOP tax overhaul as a new tax-advantaged savings vehicle for kids.

• Eligible children born between Jan. 1, 2025, and Dec. 31, 2028, may receive a $1,000 federal contribution if an account is opened on their behalf and program requirements are met.
• In addition to the federal seed deposit, parents, grandparents, employers, charitable organizations, and others can contribute cash or eligible assets, subject to annual limits and program rules.
• The money is invested and grows on a tax-advantaged basis, with withdrawals restricted to specific permitted uses under the law.

Trump Accounts are designed as long-term investment vehicles to help young people build assets early. Account assets are generally invested in a diversified stock index fund, allowing children to benefit from potential market growth over time. Withdrawals are generally limited until adulthood and subject to rules governing how the money can be used.

Notably, the program has also attracted support from some major employers and philanthropists.

One commitment that gained a lot of attention is a $6.25 billion pledge from Michael and Susan Dell to help fund accounts for millions of children. According to the Trump administration, several large employers also plan to contribute to the accounts as an employee benefit.

Supporters of the program say the accounts could help encourage early saving and broaden access to long-term investing for children, particularly by giving families a structured way to build assets over time.

During a July 6 Oval Office launch event, President Donald Trump touted, "Trump Accounts are absolutely incredible for children. They come into the world with no money and by a certain age end up rich."

Critics, however, have questioned whether the benefits will be widely accessible. They cite contribution limits, withdrawal restrictions, and concerns that higher-income families may be better positioned to take full advantage of the program than households with lower incomes.

Some also question whether other savings vehicles make more sense, as they see Trump Accounts functioning as traditional IRAs minus the up-front tax deduction.

On TikTok, personal finance guru Dave Ramsey said of Trump Accounts: "They're not as revolutionary as a Roth IRA. They're not on the level of a 529. This feels more like a political stunt than a wealth-building breakthrough."

More recently, as Kiplinger has reported, comments by Sen. Ted Cruz (R-Texas) suggesting the accounts could serve as a backdoor to privatizing Social Security have added to the debate.

IRS gift tax exclusion rules for Trump Accounts

Then, there are the practical tax-law questions surrounding how Trump Account contributions would be treated under federal gift tax rules.

Under federal law, individuals can give up to $19,000 per recipient in 2026 without triggering gift tax reporting requirements, provided the gift qualifies for the annual exclusion.

Amounts above that limit generally require filing IRS Form 709, even when no tax is owed due to the lifetime exemption.

So, a key question was whether contributions to a Trump Account would qualify for the annual exclusion. The issue attracted attention because gift-tax reporting requirements can apply even when no gift tax is ultimately due.

• Some tax professionals had raised concerns that the structure of the accounts could cause contributions to be treated as gifts of a future interest.
• Future-interest gifts don't qualify for the annual gift tax exclusion, which can trigger tax reporting requirements even for relatively small amounts.
• If that view had applied, contributors to a child's account could have been required to file a gift tax return.

The IRS guidance resolves that issue by establishing a safe harbor that treats qualifying contributions as present-interest gifts, allowing them to qualify for the annual gift tax exclusion.

As a result, contributions within the annual limit can generally be made without triggering a federal gift tax filing requirement, provided they meet the conditions in the guidance.

Note: The issue here is largely about tax reporting rather than tax liability. Most U.S. taxpayers don't pay federal gift tax because gifts above the annual exclusion generally count against the donor's lifetime gift and estate tax exemption. At $15 million, that exemption is high enough that relatively few households ever owe gift tax.

Trump Account eligibility: Bottom line

Trump Accounts are now in the active launch phase, including an app. That means families interested in participating can begin setting up accounts, depending on which banks and brokerage platforms are offering access.

Administration officials have said millions of accounts have already been registered and that 500,000 children have received their $1,000 deposits. Treasury and IRS officials have also recently outlined how contributions of publicly traded stock may be made to the accounts.

Still, before making contributions, interested families may want to compare and understand each provider's account-opening process and work with a trusted financial planner to consider the pros and cons of contributing to these or other savings accounts.

Related

• Gift Tax Exclusion for 2026: How Much Can You Give Tax-Free?
• How to Claim a $1,000 Trump Account for Your Kid
• The Estate Tax Exemption Amount for 2026
• What's in the 2025 Trump Tax Bill?

Traditional retirement planning has long assumed a household of at least two people and often the involvement of adult children in managing financial decisions later in life.

But more and more, that assumption no longer applies to a growing share of retirees. Surveys and data show that many people living in the U.S. are charting a different course, with roughly 1 in 5 over the age of 50 living alone. (That number rises to 27% for those age 60 and older.) And about 23% never had children.

The reasons why are varied. Some are widows or divorced. Others never married or had kids. Whatever the personal situation or choice, aging alone can change how retirement taxes work in practice, particularly when it comes to income, required minimum distributions, and estate-planning tax strategies.

Curious? Here's more of what you need to know.

Avoiding solo aging tax traps in retirement

Despite how it might feel sometimes, the federal tax code is not explicitly designed to penalize single taxpayers. However, the structural rules create practical headwinds for those aging and living alone.

Because a single filer cannot pool income or coordinate the timing of financial events with a spouse, a solo ager faces a much shorter runway before reaching higher income tax rates, Medicare premium surcharges, and other phase-out thresholds for tax deductions and credits.

Consider the following examples.

Filing status changes the way income is taxed

One key difference between single and married filing status is how quickly taxable income can move into higher federal income tax brackets.

Married couples filing jointly do generally benefit from wider income thresholds before higher marginal tax rates apply. And in retirement, that difference often shows up when income is drawn from multiple sources at once.

For example, a single retiree with $80,000 in annual income, e.g., from IRA withdrawals, Social Security, and part-time work, is more likely to push part of that income into higher marginal tax brackets than a married couple filing on a joint return.

The system is the same, but there’s less room to spread income across lower tax brackets for the single filer.

One of the clearest differences is how quickly income reaches higher tax brackets.

For example, for the 2026 tax year (returns you'll file in early 2027), the 22% federal income tax bracket begins at very different income levels depending on filing status.

Ultimately, a single taxpayer transitions into the 22% marginal tax bracket with half the taxable income allowance of a married couple filing a joint federal income tax return.

Deductions and credits introduce lower phase-out cliffs

A similar structural gap appears across various tax deductions and credits.

While tax credits reduce a filer's final tax bill dollar-for-dollar and deductions reduce overall taxable income, many of these provisions feature phase-out rules that, in practice, can restrict single filers.

Consider the temporary new senior bonus deduction available through 2028. This provision allows taxpayers aged 65 and older to claim an additional $6,000 deduction on top of the standard deduction and the existing extra standard deduction for older adults, allowing an eligible single retiree to shield up to $24,150 of income from federal taxes in 2026.

However, for those aging alone, the planning challenge lies in how quickly this benefit disappears.

The full $6,000 deduction begins to phase out once a single filer’s modified adjusted gross income (MAGI) exceeds $75,000 and is eliminated at $175,000. For married couples filing jointly, the phase-out doesn't begin until MAGI reaches $150,000.

Because a solo retiree's resources are measured against the individual filer threshold, a routine financial decision — like an RMD or a capital gain — can easily push them past the $75,000 threshold.

In contrast, a married couple filing jointly has twice the income runway to absorb potentially similar lifestyle expenses before their deductions begin to phase out.

Taxes on Social Security benefits can increase despite modest income changes

Social Security becomes taxable based on what the IRS calls "provisional income," which includes adjusted gross income (AGI), nontaxable interest, and half of Social Security benefits. Once certain thresholds are exceeded, up to 85% of benefits may be subject to tax.

What often surprises retirees is how quickly changes in routine income can move them closer to those thresholds.

A retiree living alone with a mix of Social Security and IRA withdrawals may find that even modest additional income — like portfolio rebalancing or capital gains from selling appreciated assets — increases the taxable portion of benefits.

What makes this a particularly tight rope for single retirees is that the thresholds for taxing Social Security benefits, unlike standard tax brackets, are not indexed for inflation.

• For a single filer, provisional income above just $25,000 triggers taxation on up to 50% of benefits, and it jumps to 85% at just $34,000.
• Because these thresholds have remained the same since they were enacted decades ago, even modest retirement incomes quickly expose a retiree's benefits to tax.

So with Social Security impacts, it’s not a single trigger, but the stacking of income in a single year that often drives the tax outcome.

Required minimum distributions can create concentrated tax years

Required minimum distributions (RMDs) force withdrawals from tax-deferred accounts regardless of retiree spending needs. Under current SECURE 2.0 rules, the required age to begin taking RMDs is 73 (and will rise to 75 for individuals who turn 74 after 2032).

Take a retiree with a $900,000 traditional IRA. The first RMD may fall in the $35,000–$40,000 range. When combined with Social Security and other income sources, total taxable income can rise into a range where multiple effects begin stacking:

• More of your Social Security benefits become subject to tax.
• Marginal income moves into higher federal income tax brackets.
• Future Medicare premiums may increase due to IRMAA.

What matters a lot here is timing. A single RMD can push income just high enough to trigger multiple tax thresholds at the same time.

Medicare premiums can reflect one-time income decisions

Medicare IRMAA surcharges are based on prior-year MAGI, which means today’s decisions affect premiums two years later.

A single retiree can cross into a higher IRMAA tier through what looks like a normal planning decision — like a Roth conversion, a large capital gain, or a high-RMD year — even if income is lower the following year.

Because the thresholds are fixed, timing becomes critical. A single spike can have a longer financial tail than expected.

Income and estate planning start to overlap earlier

For single retirees, estate planning tends to become less of a separate step and more closely tied to income decisions throughout retirement.

Without a spouse as a built-in transfer point for retirement assets, the timing of withdrawals and the structure of accounts often influence both current tax outcomes and future inheritance outcomes at the same time.

Partial Roth conversions are an example.

• They are often discussed as an estate strategy, but they also function as an income management tool — filling lower tax brackets before RMDs begin and potentially reducing future taxable withdrawals.
• Similarly, deciding whether to draw from taxable or tax-deferred accounts first can affect not only current-year taxes but also the size and timing of taxable income passed to heirs.

Beneficiary designations also take on added importance earlier in retirement.

For a solo ager, non-spouse heirs usually must withdraw inherited retirement accounts within 10 years. That can create higher taxable income in shorter bursts for heirs. It also places greater weight on account-type and withdrawal-timing decisions during life, since there is no spouse to help smooth those tax impacts over time.

The overall shift is toward integration: fewer separate “phases” of planning, and more overlap between income management and legacy decisions.

Solo aging bottom line: What single retirees can do

Aging alone doesn’t change the tax code, but it does make timing decisions important. Because every financial situation is different, it’s worth working with a trusted tax professional or certified financial planner to tailor strategies to your circumstances.

Still, when dealing with a single-filer tax return, there’s a tradeoff. Fewer built-in buffers can make income feel more exposed in certain years. But it can also give you a complete, unified view of your financial picture. That can make it easier for some to see how each decision affects taxes and adjust accordingly.

In practice, that often comes down to some core considerations:

• Spreading withdrawals and gains across years rather than clustering them
• Using lower-income years for targeted Roth conversions
• Coordinating account draws to manage tax brackets
• Staying mindful of Medicare thresholds that respond to prior-year income

State taxes also matter. Where you live — and how your state taxes retirement income — can change the outcome of these decisions.

Related

• 6 Things to Know About Taxes on Social Security Benefits
• How the New $6,000 Senior Bonus Deduction Works
• Retirement Taxes: How All 50 States Tax Retirees
• Avoiding the Widow's Penalty Tax Trap When a Spouse Passes

Social Security benefits have always been designed to protect individuals from a loss of income due to retirement, disability or the death of a primary income earner, but how much you receive might be changing soon.

Current Social Security Administration (SSA) projections predict the program will face a funding shortfall by late 2032, triggered by a wave of retiring baby boomers outnumbering the younger workers paying into the system.

While the program survived a similar insolvency scare via a bipartisan overhaul in 1983, critics argue the current administration's approach makes the upcoming crisis feel different. The SSA has faced shrinking staff, shuttered regional offices and budgetary constraints — downsizing that advocates label as "efficiency," but critics view as an attempt to "gut" the program.

Enter: Trump Accounts. Launching July 4, 2026, the federally seeded vehicles were originally designed, supporters say, to help children build generational wealth.

However, the narrative about the accounts shifted when Sen. Ted Cruz (R-Texas), a key advocate, admitted the program's "dirty little secret" is that these child savings vehicles are actually personal accounts intended to eventually privatize Social Security.

Here's what you need to know.

Trump Accounts: The new face of Social Security?

Trump Accounts, which officially debut this month and are a key component of the 2025 Trump tax bill, were initially pitched as standard child savings accounts meant to help families save for a child's future housing, higher education, or other qualifying expenses.

That definition was broadened last month during a panel on economic mobility at the Milken Institute Global Conference.

Cruz, who originally proposed the Trump Account initiative, elaborated on how these child savings vehicles could be utilized.

Cruz told the audience, according to a transcript of the event.

For decades, various free-market think tanks and lawmakers have tried to overhaul Social Security by shifting it to private investment accounts. These efforts — most famously backed by then-president George W. Bush in 2005 — have historically failed due to prohibitive transitional costs and the risks of exposing retirees to market volatility (more on that later).

But Cruz outlined a strategy to bypass some potential roadblocks: Start at the cradle.

"Babies grow up." Cruz reasoned. "And that little girl who is born this year, she is going to be 70. And the math is, if you contribute regularly to [a Trump Account], by the time she is 18, she will have $170,000 in that account. By the time she is 35, she'll have $700,000 in that account. And … very quickly after that, you get into the millions."

• This strategy aligns with comments made nearly a year ago by U.S. Treasury Secretary Scott Bessent.
• Speaking at a Breitbart News event, Bessent similarly remarked, "In a way, it is a backdoor for privatizing Social Security."

Facing subsequent criticism from Democratic lawmakers, Bessent later clarified on X that the proposed accounts were intended to supplement, rather than replace, existing Social Security benefits.

The push toward privatizing Social Security

Historically, the biggest roadblock to privatizing Social Security has been the "pay-as-you-go" transition problem.

Current workers' payroll taxes fund current retirees' benefits. If younger workers suddenly diverted their payroll taxes into private accounts, the government would be left with a $1 trillion to $3 trillion deficit, according to data from the Center on Budget and Policy Priorities (CBPP) and the Center for American Progress (CAP).

Trump Accounts, supporters claim, could circumvent this problem by building a parallel, privately funded program before Social Security benefits are ever disrupted.

"We're going to be able to go to parents and say, 'Hey, you know that Trump account your kid has….and you're seeing this compound growth? Wouldn't you like to be able to keep a portion of your tax payments…wouldn't you like to have a Trump account just like your kid does?' " Cruz suggested.

Yet, critics argue that the seeming magic of compound interest on a Trump account would look a lot less magical during a market crash.

• Unlike private investment accounts, Social Security benefits have very low administrative overhead and provide a guaranteed, lifelong inflation-adjusted benefit.
• Meanwhile, Wall Street management fees can silently erode a retirement nest egg, disproportionately threatening low-income beneficiaries who lack financial literacy or access to alternative wealth management tools.

According to data from the U.S. Congress Joint Economic Committee (PDF), Social Security accounts for roughly 79% of income for the poorest 20% of "elderly" Americans. Half of women age 65 and older would drop below the poverty line without guaranteed monthly checks. Under a privatized model, these citizens could be more susceptible to market risk and run out of funds early.

Social Security vs Trump account taxes

The Social Security privatization debate isn't just about how you accumulate wealth, but how that wealth is eventually taxed. Traditional Social Security benefits and private retirement accounts (like Trump Accounts) are taxed very differently.

Although the definitive tax rules for Trump Accounts are still being finalized, their structural similarity with traditional IRAs reveals stark contrasts to the tax treatment of Social Security benefits:

For example, a single retiree with provisional income above $34,000 can have up to 85% of their Social Security benefits included in their taxable income.

Meanwhile, proposed IRS rules dictate that the tax bill for a $34,000 distribution from a Trump Account depends entirely on who funded the account.

• If the beneficiary made $5,000 in after-tax contributions, that portion might be withdrawn tax-free.
• However, if the remaining $29,000 consisted of government-contributed amounts, market earnings, and compound interest, it would be 100% taxable at ordinary federal income tax rates.
• Each withdrawal would be roughly 14.7% income tax-free ($5,000/$34,000), and 85.3% taxable income ($29,000/$34,000).

Distributions from Trump Accounts must follow traditional IRA rules, including required minimum distributions (RMDs) once the beneficiary reaches the RMD age threshold.

The bottom line on Social Security benefits

If the U.S. Congress fails to act by the early 2030s, Social Security won't vanish into bankruptcy. Instead, the system will trigger automatic benefit cuts, reducing payouts to roughly 78 cents on the dollar, according to the latest Social Security Board of Trustees Report.

For the average recipient, that translates to losing several hundred dollars a month, which can be a significant blow to the roughly one in five Americans who rely on the program.

The outlook is even more uncertain for late-career Gen Xers (currently ages 46 to 61), who are closing in on retirement. According to AARP polling, 41% of Gen Xers plan to rely on Social Security as their primary source of retiree income — meaning a sudden 22% benefit cut could derail their retirement.

History suggests that panic might be an effective motivator. The last major legislative rescue in 1983 passed just months before the trust funds ran dry. Proposals for the current crisis are rolling in.

• For instance, Sens. Elizabeth Warren (D-Mass.) and Bernie Moreno (R-Ohio) published a joint plan in the New York Times to eliminate the $184,500 payroll tax cap on high earners to fund the shortfall.
• Supporters say this could inject $3 trillion into the program over a decade.
• But some fiscal models, such as those from the Tax Foundation, warn that raising the tax cap alone won't be sufficient to guarantee long-term solvency, returning the system to annual deficits in only a few years.

At the same time, alongside child savings account vehicles, the Trump administration recently signed an executive order establishing TrumpIRA.gov to help adult workers without workplace plans to invest privately for retirement.

The IRS also recently issued guidance establishing a "safe harbor" for Trump Account gift tax reporting, meaning grandparents and relatives can contribute up to $5,000 without needing to file federal gift tax returns.

While the total elimination of Social Security might be unlikely, the launch of parallel private programs could mark a distinctive shift. The next iteration of American retirement security could rely less on traditional federal guarantees and more on private, market-driven accounts. Stay tuned for updates.

Read More

• Taxes on Social Security Benefits: 6 Things to Know for 2026
• Social Security Tax Limit: What the Higher Cap Means for Your Paycheck
• How to Calculate Taxes on Social Security Benefits

The United States Supreme Court has concluded its current term with the usual flurry of rulings. This year, SCOTUS heard arguments in disputes ranging from gun rights to birthright citizenship, and, as usual, there's been no shortage of controversy.

However, the Court also issued decisions that can ultimately affect the financial bottom lines of everyday people across the country. These rulings, which involve property rights, the independence of monetary policy, and tariff authority, alter key rules for investors, consumers, and homeowners.

Additionally, a separate tax case that the High Court declined to review leaves heightened IRS audit risk in place for some taxpayers…

Curious? Here’s more of what you need to know about what some of the latest SCOTUS cases mean for your finances.

U.S. Supreme Court opinions 2026

Not every Supreme Court ruling necessarily affects your wallet. But the following decisions could have significant consequences for taxes and personal finances at a time when many people are facing financial uncertainty due to inflation and rising costs of housing, food, and gas.

Note: These are not the only decisions from the Court this term that could affect your finances.

#1. Supreme Court property tax ruling

Local governments don’t have to pay fair market value for foreclosed homes

In Pung v. Isabella County, the U.S. Supreme Court held that when a municipality forecloses on a property for unpaid taxes, “just compensation” under the Fifth Amendment to the U.S. Constitution is measured by the actual auction price — not fair market value.

What happened in the case?

A homeowner, Michael Pung, fell behind on roughly $2,200 in property taxes on his home in Isabella County, Michigan. The county foreclosed and sold the home at public auction for $76,008, despite an assessed market value of approximately $194,400.

Pung argued that keeping the difference between the tax debt and the home's fair market value amounted to an unconstitutional taking of equity. So the dispute centered on how to measure any surplus equity owed to a property owner after a tax foreclosure.

Pung said that compensation should be based on the home's market value, while the county maintained that any surplus should be measured using the amount actually realized at auction.

In a 9-0 ruling issued on June 23, 2026, the Supreme Court agreed with the county, holding that surplus equity from a tax foreclosure is measured by the amount realized at a lawful public auction, not by an estimate of the property's market value.

How this may affect your home

Tax foreclosure risk isn't just about losing a home. It can also mean losing equity.

What this means in practice:

• Property tax debt can put your home and your home equity at risk, even if the amount owed is relatively small.
• If a home is sold at tax foreclosure, you might not get back the difference between what it’s worth and what it sells for.
• Setting up a payment plan or resolving delinquent taxes before foreclosure may help.

Note: This case follows a 2023 ruling in Tyler v. Hennepin County, where a unanimous Supreme Court ruled that it’s unconstitutional for a state to take your home to cover your property tax bill while pocketing the profit from your surplus home equity.

Now more than a dozen states allow what some call “home equity theft.”

#2. Supreme Court tariff decision

Presidential authority is limited when it comes to imposing broad tariffs

In Learning Resources, Inc. v. Trump, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the executive branch to impose broad tariffs.

What happened in the case?

As Kiplinger has reported, in 2025, President Donald Trump imposed sweeping tariffs on imports from a wide range of countries, with some duties reaching 25%–60% on certain goods. The administration invoked emergency declarations under the International Emergency Economic Powers Act (IEEPA) to justify the measures, arguing that the statute authorized broad action to address national economic and security concerns.

Importers challenged the tariffs, arguing that the executive branch exceeded its statutory authority. Lower courts, including the U.S. Court of International Trade and the Federal Circuit, ruled that IEEPA does not grant tariff-setting power.

The Supreme Court affirmed those courts in a 6-3 decision on February 20, 2026, holding that tariff authority remains a core congressional power tied to taxation and revenue.

How this could impact your finances

Tariffs function as embedded costs within everyday goods and supply chains.

What this could mean in terms of potential benefits:

• Fewer surprise tariffs or sudden consumer cost spikes due to emergency executive tariff declarations
• More predictable pricing for import-heavy goods
• Tariff refunds for some importers

#3. Supreme Court Federal Reserve ruling

There may be limits on removal power when it comes to the Federal Reserve

In Trump v. Cook, the U.S. Supreme Court held that statutory “for-cause” protections limit the executive branch’s ability to remove Federal Reserve governors.

What happened in the case?

The Trump administration attempted to remove Federal Reserve Governor Lisa Cook over alleged discrepancies in financial disclosures, a move seen as part of an effort to assert greater control over the Fed.

Lower courts blocked the removal, and the Supreme Court affirmed in a 5-4 ruling on June 29, 2026, holding that Congress may limit removal authority to protect the Federal Reserve’s independence.

How this could affect your finances

Federal Reserve independence is central to how interest rates and credit conditions are set.

• An independent Fed can fight inflation even when it’s politically unpopular to do so.
• That helps keep inflation expectations more stable over time, which supports steadier borrowing costs and economic planning.

Note: This case was part of a broader decision (consolidated with a case involving the FTC) in which the 6-3 conservative majority expanded presidential power. The Court overturned decades of precedent (known as Humphrey’s Executor) to rule that a President can fire the heads of most other independent regulatory agencies at will. The Fed was essentially treated as the exception in the Cook case.

IRS audit Supreme Court case: Honorable mention

IRS audit risk can be indefinite for fraudulent returns

In Murrin v. Commissioner, the U.S. Supreme Court declined to review an interesting Third Circuit federal court ruling. That leaves in place a decision allowing the IRS to assess taxes beyond the standard statute of limitations when a tax return contains fraud, even if the taxpayer was unaware of the fraud.

What happened in the case?

A taxpayer, Stephanie Murrin, received a notice of deficiency nearly 20 years after filing her federal income tax returns. (The IRS determined that her tax preparer had inserted fraudulent items that significantly understated her tax liability.)

The court found that she acted in good faith and had no knowledge of the preparer’s misconduct. Still, a $65,318 tax deficiency ultimately grew to more than $328,000 once the IRS applied interest and penalties.

The central dispute was whether the normal three-year statute of limitations barred the IRS from assessing additional tax when fraud was present, even if the taxpayer wasn't personally aware of it.

The Third Circuit Court of Appeals held that Internal Revenue Code Section 6501(c)(1) applies to the return itself — meaning fraud on the return removes the standard three-year limitation period regardless of the taxpayer’s intent or knowledge.

Note: This ruling applies in jurisdictions under the Third Circuit, including Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands.

How this might impact your taxes

In Third Circuit states and territories, fraud on a tax return can potentially eliminate the normal IRS audit deadline.

What this means for some taxpayers:

• In Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands, fraud-related returns may remain open indefinitely.
• Taxpayers remain responsible for accuracy even when using paid preparers.
• Long-delayed IRS assessments could accumulate significant interest and penalties.
• Strong tax recordkeeping and preparer oversight become more important.

SCOTUS decisions: Bottom line for taxpayers

Supreme Court decisions about money and property often don’t drastically change financial conditions right away, but they set the rules for how taxes are enforced, how agencies are regulated, and where power sits in the financial system.

Over time, those rulings shape how predictable things feel for "regular people" and the balance of authority between Congress and the executive branch.

So, as always, stay tuned as the effects of these and other rulings ripple through everyday life in the months and years ahead.

Related

• What a New Fed Chair Can Mean for Your Taxes
• Who Benefits From the Supreme Court's Home Equity Theft Ruling?
• How Long Should You Keep Tax Records?
• U.S. Supreme Court Strikes Down Most of Trump's Tariffs

The United States Supreme Court has concluded its current term with the usual flurry of rulings. This year, SCOTUS heard arguments in disputes ranging from gun rights to birthright citizenship, and, as usual, there's been no shortage of controversy.

However, the Court also issued decisions that can ultimately affect the financial bottom lines of everyday people across the country. These rulings, which involve property rights, the independence of monetary policy, and tariff authority, alter key rules for investors, consumers, and homeowners.

Additionally, a separate tax case that the High Court declined to review leaves heightened IRS audit risk in place for some taxpayers…

Curious? Here’s more of what you need to know about what some of the latest SCOTUS cases mean for your finances.

U.S. Supreme Court opinions for 2026

Not every Supreme Court ruling necessarily affects your wallet. But the following decisions could have significant consequences for taxes and personal finances at a time when many people are facing financial uncertainty due to inflation and rising costs of housing, food, and gas.

Note: These are not the only decisions from the Court this term that could affect your finances.

#1. Supreme Court property tax ruling

Local governments don’t have to pay fair market value for foreclosed homes

In Pung v. Isabella County, the U.S. Supreme Court held that when a municipality forecloses on a property for unpaid taxes, “just compensation” under the Fifth Amendment to the U.S. Constitution is measured by the actual auction price — not fair market value.

What happened in the case?

A homeowner, Michael Pung, fell behind on roughly $2,200 in property taxes on his home in Isabella County, Michigan. The county foreclosed and sold the home at public auction for $76,008, despite an assessed market value of approximately $194,400.

Pung argued that keeping the difference between the tax debt and the home's fair market value amounted to an unconstitutional taking of equity. So the dispute centered on how to measure any surplus equity owed to a property owner after a tax foreclosure.

Pung said that compensation should be based on the home's market value, while the county maintained that any surplus should be measured using the amount actually realized at auction.

In a 9-0 ruling issued on June 23, 2026, the Supreme Court agreed with the county, holding that surplus equity from a tax foreclosure is measured by the amount realized at a lawful public auction, not by an estimate of the property's market value.

How this may affect your home

Tax foreclosure risk isn't just about losing a home. It can also mean losing equity.

What this means in practice:

In Pung v. Isabella County, the U.S. Supreme Court held that when a municipality forecloses on a property for unpaid taxes, “just compensation” under the Fifth Amendment to the U.S. Constitution is measured by the actual auction price — not fair market value.

What happened in the case?

A homeowner, Michael Pung, fell behind on roughly $2,200 in property taxes on his home in Isabella County, Michigan. The county foreclosed and sold the home at public auction for $76,008, despite an assessed market value of approximately $194,400.

Pung argued that keeping the difference between the tax debt and the home's fair market value amounted to an unconstitutional taking of equity. So the dispute centered on how to measure any surplus equity owed to a property owner after a tax foreclosure.

Pung said that compensation should be based on the home's market value, while the county maintained that any surplus should be measured using the amount actually realized at auction.

In a 9-0 ruling issued on June 23, 2026, the Supreme Court agreed with the county, holding that surplus equity from a tax foreclosure is measured by the amount realized at a lawful public auction, not by an estimate of the property's market value.

How this may affect your home

Tax foreclosure risk isn't just about losing a home. It can also mean losing equity.

What this means in practice:

• Property tax debt can put your home and your home equity at risk, even if the amount owed is relatively small.
• If a home is sold at tax foreclosure, you might not get back the difference between what it’s worth and what it sells for.
• Setting up a payment plan or resolving delinquent taxes before foreclosure may help.

#2. Supreme Court tariff decision

Presidential authority is limited when it comes to imposing broad tariffs

In Learning Resources, Inc. v. Trump, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the executive branch to impose broad tariffs.

What happened in the case?

As Kiplinger has reported, in 2025, President Donald Trump imposed sweeping tariffs on imports from a wide range of countries, with some duties reaching 25%–60% on certain goods. The administration invoked emergency declarations under the International Emergency Economic Powers Act (IEEPA) to justify the measures, arguing that the statute authorized broad action to address national economic and security concerns.

Importers challenged the tariffs, arguing that the executive branch exceeded its statutory authority. Lower courts, including the U.S. Court of International Trade and the Federal Circuit, ruled that IEEPA does not grant tariff-setting power.

The Supreme Court affirmed those courts in a 6-3 decision on February 20, 2026, holding that tariff authority remains a core congressional power tied to taxation and revenue.

How this could impact your finances

Tariffs function as embedded costs within everyday goods and supply chains.

What this could mean in terms of potential benefits:

• Fewer surprise tariffs or sudden consumer cost spikes due to emergency executive tariff declarations
• More predictable pricing for import-heavy goods
• Tariff refunds for some importers

#3. Supreme Court Federal Reserve ruling

There may be limits on removal power when it comes to the Federal Reserve

In Trump v. Cook, the U.S. Supreme Court held that statutory “for-cause” protections limit the executive branch’s ability to remove Federal Reserve governors.

What happened in the case?

The Trump administration attempted to remove Federal Reserve Governor Lisa Cook over alleged discrepancies in financial disclosures, a move seen as part of an effort to assert greater control over the Fed.

Lower courts blocked the removal, and the Supreme Court affirmed in a 5-4 ruling on June 29, 2026, holding that Congress may limit removal authority to protect the Federal Reserve’s independence.

How this could affect your finances

Federal Reserve independence is central to how interest rates and credit conditions are set.

• An independent Fed can fight inflation even when it’s politically unpopular to do so.
• That helps keep inflation expectations more stable over time, which supports steadier borrowing costs and economic planning.

Note: This case was part of a broader, sweeping decision (consolidated with a case involving the FTC) where the 6-3 conservative court majority expanded presidential power. The Court overturned decades of precedent (known as Humphrey’s Executor) to rule that a President can fire the heads of most other independent regulatory agencies at will. The Fed was essentially treated in the Cook case as the exception.

IRS audit Supreme Court case: Honorable mention

IRS audit risk can be indefinite for fraudulent returns

In Murrin v. Commissioner, the U.S. Supreme Court declined to review an interesting Third Circuit federal court ruling. That leaves in place a decision allowing the IRS to assess taxes beyond the standard statute of limitations when a tax return contains fraud, even if the taxpayer was unaware of the fraud.

What happened in the case?

A taxpayer, Stephanie Murrin, received a notice of deficiency nearly 20 years after filing her federal income tax returns. (The IRS determined that her tax preparer had inserted fraudulent items that significantly understated her tax liability.)

The court found that she acted in good faith and had no knowledge of the preparer’s misconduct. Still, a $65,318 tax deficiency ultimately grew to more than $328,000 once the IRS applied interest and penalties.

The central dispute was whether the normal three-year statute of limitations barred the IRS from assessing additional tax when fraud was present, even if the taxpayer wasn't personally aware of it.

The Third Circuit Court of Appeals held that Internal Revenue Code Section 6501(c)(1) applies to the return itself — meaning fraud on the return removes the standard three-year limitation period regardless of the taxpayer’s intent or knowledge.

Note: This ruling applies in jurisdictions under the Third Circuit, including Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands.

How this might impact your taxes

In Third Circuit states and territories, fraud on a tax return can potentially eliminate the normal IRS audit deadline.

What this means for some taxpayers:

• In Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands, fraud-related returns may remain open indefinitely.
• Taxpayers remain responsible for accuracy even when using paid preparers.
• Long-delayed IRS assessments could accumulate significant interest and penalties.
• Strong tax recordkeeping and preparer oversight become more important.

SCOTUS decisions: Bottom line for taxpayers

Supreme Court decisions about money and property often don’t drastically change financial conditions right away, but they set the rules for how taxes are enforced, how agencies are regulated, and where power sits in the financial system.

Over time, those rulings shape how predictable things feel for "regular people" and the balance of authority between Congress and the executive branch.

So, as always, stay tuned as the effects of these and other rulings ripple through everyday life in the months and years ahead.

Related

• What a New Fed Chair Can Mean for Your Taxes
• Who Benefits From the Supreme Court's Home Equity Theft Ruling?
• How Long Should You Keep Tax Records?
• U.S. Supreme Court Strikes Down Most of Trump's Tariffs

It's no secret that retirement tax rules can be tricky to master, especially since they often change significantly from how our income was taxed during our working years. And if older adults find retirement taxes confusing, younger workers — who are decades away from retiring — likely feel less prepared.

A study by the Teachers Insurance and Annuity Association of America (TIAA) Institute, a financial research organization, and the Global Financial Literacy Excellence Center (GFLEC) recently highlighted this knowledge gap.

The study revealed that Generation Z (those born between 1997 and 2007) scored an average of just 29% on a "retirement fluency" test. By comparison, Baby Boomers (those born between 1946 and 1964) answered only 44% of the questions correctly.

Inspired by this finding, we decided to look at a specific, crucial piece of the retiree puzzle: retirement taxes. Can retirement-aged individuals prove their experience, or will a younger worker surprise us?

To find out, we tested a Gen Z working professional (28 years old) outside the financial sector with five retirement tax questions.

That person scored a 40%. Now, it's your turn. Good luck!

Hint: This quiz covers federal retirement tax rules and doesn't include how states tax retirees.

Explore More

• Learn about how to save on taxes with education tax breaks.
• Here's how the IRS actually taxes retirement income.
• Passing on or inheriting a home? 40% of heirs say they can't afford it.
• Gen X, Boomers, Millennials, or Gen Z: which generation pays the most taxes?

For millions across the country, the 2026 midyear mark is as much a time for financial planning as it is for celebration. This summer marks America's 250th birthday — a historic milestone for our country's independence.

But while the nation was founded on a rebellion against unfair taxes, tossing your computer into the nearest harbor probably wouldn't work when it comes time to pay the IRS; December 31st is the final deadline for most 2026 tax year money moves.

Instead, you might just want to look to the wisdom of founding father and financial thinker, Benjamin Franklin, this planning season.

Franklin famously noted that, "nothing can be said to be certain except death and taxes." And though you can't escape either, you can control how much you overpay the government.

By applying Ben Franklin's wisdom to midyear tax planning today, you could help secure your retirement nest egg, fund intergenerational wealth, and potentially lower your tax bill in 2026. Here's how.

1. "The Doors of Wisdom are never shut."

Popularized in the 1755 edition of the Almanac, Franklin quoted this proverb to challenge the status quo in how we do things; it's easy to fall into a routine of wash, rinse, and repeat.

But routinely doing your taxes the same way every year can cost you. Gain a little midyear tax wisdom through the following ways:

• Learn midyear strategy. You don't have to wait until April to learn a new tax strategy. Platforms like the IRS Video Learning Portal and tax software academy portals offer free, year-round webinars to help you spot planning opportunities before the year-end deadline strikes.
• Revitalize your filing plan. Your revenue streams may change, and so should your taxes. For instance, if your financial situation has simplified, you might no longer need an expensive tax professional anymore. Alternatively, if you've bought property or started a business, doing taxes yourself might cause you to overlook certain tax deductions and credits.
• Save with free tax tools. There are several ways to file your taxes for free each year. For example, the IRS reports that millions of taxpayers have saved over a billion dollars collectively using IRS Free File alone. Evaluate free filing tools available to you now, while you're outside of the chaotic tax season stress.

2. "Beware of little expenses; a small Leak will sink a great Ship."

In the Almanac, Poor Richard warns that "a little punch" or extra tea now and then might seem like "no great Matter," but accumulated tiny expenses can sink your long-term financial ship.

In terms of midyear tax planning, the lesson is simple: Don't miss the small stuff. Now is the perfect time to audit your tax records before the end-of-year holiday chaos.

• Audit your health accounts. Check your Flexible Spending Account (FSA) or Health Savings Account (HSA) balances. Ensure your medical procedures, prescriptions, and qualifying purchases are properly documented with clean receipts (no matter how small), and budget out your remaining FSA funds if your plan has a strict year-end deadline.
• Track new tax provisions. If you plan on claiming provisions from the 2025 Trump tax bill, tracking documentation is key. For example, the car loan interest deduction allows you to deduct up to $10,000 in interest, but only if the vehicle was bought new, is used primarily for personal use, and had its final assembly in the U.S. Make sure you qualify for all the tax deductions and credits you plan on claiming.
• Organize the paper trail. Start digging through your kitchen junk drawer or email folders. You'll want to make sure you have your tax mileage log on file if you're, say, a ride-share driver, or have your gambling tax documentation if you've placed a bet this year. Start the family's designated "tax folder" now to avoid unnecessary stress later.

3. "Early to Bed and early to rise, makes a Man healthy, wealthy, and wise."

Printed in the 1735 edition of the Almanac, this phrase originally praised the discipline of an industrious lifestyle. Let's modernize that approach and polish it into a midyear tax mantra:

"Early to check and early to optimize makes you more planned, less stressed, and energized."

Corny, sure.

But a midyear checkup ensures you aren't accidentally giving Uncle Sam an interest-free loan — or worse, setting yourself up for an IRS underpayment fee or penalty. Here's the phrase broken down:

For more information on how to plan your tax payments and optimize your withholdings, check out Kiplinger's reports on Estimated Tax Payments and 13 Things Every Worker Needs to Know About Withholding.

4. "Having been poor is no Shame, but being ashamed of it is."

Printed in 1749, this quote reminds us that financial struggle is often a consequence of shifting circumstances, not a lack of virtue. In tax planning, knowing how to handle these financial pivots — and leveraging the IRS code to protect your downside — can be a key tool in your tax toolbelt.

Here's how we can relate that to our midyear tax planning strategy:

• Harvest your investment losses. Know when a position isn't working out. Through tax-loss harvesting, you can sell underperforming equities to counteract your capital gains. If your losses exceed your gains, you can use them to offset up to $3,000 of ordinary income, carrying the rest over to future years.
• Strategize charitable giving. If you want to support a cause close to your heart, plan those donations now rather than scrambling in December. Strategizing early helps you maximize itemized charitable deductions and navigate the new 2026 rules on charitable giving.
• Utilize a QCD. If you're age 70½ or older, you can make a qualified charitable distribution (QCD) directly from your IRA to an eligible charity. This counts toward your required minimum distribution (RMD), the minimum annual amount you must withdraw after reaching a certain age, and also helps keep that money out of your AGI, potentially lowering your tax bill.

5. "Money can beget Money, and its Offspring can beget more."

Moving away from the Almanac, this quote comes from Franklin's 1748 essay, "Advice to a Young Tradesman." Franklin was explaining compound interest, noting that money is of a "prolific generating nature."

Retirement accounts and legacy planning are perfect examples of compounding wealth while avoiding high taxes. And midyear is a great time to double-check that your savings vehicles are on track.

• Maximize pre-tax contributions. If you're currently working and in a higher tax bracket than you expect to be in retirement, maximize your traditional 401(k) or other traditional IRA contributions now. It lowers your taxable income today and gives you more immediate cash flow to save or invest. Later, when your federal tax bracket is (hopefully) a little lower, you'll be taxed on the contributions when you withdraw them.
• Plan the "perfect" Roth conversion window. If you anticipate an upcoming low-income year — maybe you're freshly retired but haven't started drawing Social Security or reaching your RMD age yet — plan a potential Roth IRA conversion ahead of time. Converting traditional retirement funds into a Roth during a low-income year allows you to pay a low tax rate on the conversion, but while there are six reasons to convert to a Roth, there are reasons not to.
• Evaluate your estate tax plan. Check in with your financial advisor about your new estate tax exemption amount. Are you optimizing for the stepped-up basis of inherited assets, leaving appreciated equity without capital gains after death? Also, review whether you should use the annual gift tax exclusion to pass tax-free assets to children or grandchildren in 2026.

From shifting brackets to new legislative bills, tax planning is typically a moving target that requires at least a bi-annual checkup.

While a great financial professional can help you tailor these moves to your specific roadmap, keeping these five pieces of financial wisdom in mind may help you avoid being caught off guard and keep you focused on what matters most this summer — celebrating.

Happy planning!

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws (including state taxes) are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

Explore More

• Here's the age at which most Americans hire a pro to do their taxes.
• Ever heard of the rubber duck rule of retirement tax planning?
• Vacationers: Pack these 11 travel items that are totally HSA-eligible.

The death of a partner often forces a surviving spouse to face two challenging and conflicting timelines at once: The open-ended process of grief and the immediate reality of financial and tax deadlines and consequences.

Chief among these is the so-called "widow’s penalty."

Despite the name, we're not talking about an official IRS penalty or surcharge. Rather, the widow's penalty is a series of tax and financial shifts that occur when a surviving spouse's tax filing status changes from married filing jointly to single.

The amount of tax-friendly space available to the surviving spouse changes as the standard deduction shrinks, federal income tax brackets compress, and Medicare income thresholds become less favorable.

Meanwhile, tax returns still have to be filed. Retirement accounts continue generating required distributions, and Medicare premiums are recalculated according to established rules and deadlines.

To visualize this, imagine traffic flowing on a four-lane highway suddenly merging into one. The number of cars remains the same, but there is far less room to move.

Understanding these changes and how they interact can help surviving spouses anticipate surprises before they appear on a tax return, Medicare notice, or unexpected bill. Here's more of what you need to know.

The reality of single filing status after a loss

At the center of the widow’s penalty is a deceptively simple shift: moving from married filing jointly to filing as a single taxpayer.

In the year a spouse dies, the surviving spouse can generally still file a joint tax return. By the following tax year, however, many widows and widowers begin facing a very different tax landscape.

Wider federal income tax brackets, a larger standard deduction, and other advantages available to married couples may no longer apply, potentially increasing the taxes owed on the same retirement income.

You can see the differences in the following table.

2026 Tax Thresholds: Single vs Married Filing Jointly

For 2026, the 12% federal tax bracket extends to $100,800 for married couples filing jointly. For single filers, that same bracket tops out at $50,400.

Federal income tax brackets compressed. A widow whose retirement income once fit comfortably within the 12% bracket while married may suddenly find any income over $50,400 pushed into the 22% bracket the very next year.

The standard deduction is cut in half. Even if the surviving spouses' total household income drops slightly, a much larger portion of it is exposed to higher tax rates. This is because the surviving spouse is now claiming a smaller standard deduction; they often end up paying taxes on a much larger share of their remaining income than they expected.

In short, the widow's penalty shift isn’t necessarily driven by more income. Instead, it often reflects the reality that the tax code provides fewer advantages once a surviving spouse begins filing as a single taxpayer.

Your income may fall, but taxable income often doesn’t

One of the most common misconceptions surrounding the widow’s penalty is the assumption that household income is automatically cut in half after the death of a spouse.

Retirement finances, however, are rarely that simple, and a lower income does not automatically result in a lower tax bill.

A surviving spouse may lose one Social Security benefit and potentially a portion of pension income. Other sources of retirement income may continue unchanged, including:

• Investment income continues, survivor benefits may kick in, and retirement accounts must still generate Required Minimum Distributions (RMDs).
• These mandatory withdrawals increase adjusted gross income (AGI), which can further complicate the picture by triggering higher Medicare premiums and increasing the taxable portion of Social Security benefits.

Ultimately, household income may decline, but the tax advantages that once helped shelter that income decline as well.

For instance, if both you and your spouse qualified for the new "senior bonus" deduction, your total tax break might have been $12,000. Now, that tax deduction is capped at $6,000.

Other overlooked tax deductions and credits might be lower with just one individual in the household rather than two.

Why more of your Social Security benefits may become taxable

Many retirees assume that if they’re receiving fewer Social Security benefits after the death of a spouse, they’ll owe less tax on those benefits. In reality, the opposite can sometimes occur.

• Although a surviving spouse may lose one Social Security check, they often continue receiving the larger of the two benefits.
• At the same time, they may be filing as a single taxpayer under a different set of income thresholds.
• As a result, a larger percentage of Social Security benefits may become subject to federal income tax.

For single filers, the thresholds used to calculate taxable Security benefits are significantly lower than those available to married couples filing jointly.

But the rule of taxability remains the same. Up to 85% of their Social Security benefits may be taxable, depending on a survivor’s income, including from retirement accounts, pensions, and other sources.

That is another example of how the widow’s penalty can emerge through changes elsewhere in a surviving spouse’s financial picture.

Medicare premiums can rise even if income falls

For many retirees, Medicare premiums are one of the last places they expect to encounter the widow’s penalty. Yet for some surviving spouses, healthcare costs can become part of the equation.

In many cases, the answer lies in a Medicare surcharge known as the Income-Related Monthly Adjustment Amount, or IRMAA. Higher-income beneficiaries pay additional Medicare Part B and Part D premiums, and those surcharges are based on income reported on a tax return from two years earlier.

• Because IRMAA uses a two-year income lookback and lower income thresholds for single taxpayers, some surviving spouses may find themselves paying higher Medicare premiums even if household income has declined.
• In some cases, surviving spouses may be able to request an IRMAA adjustment based on a qualifying life-changing event, including the death of a spouse, by filing Form SSA-44 with the Social Security Administration (SSA).

Still, IRMAA is another example of how several separate rules can quietly stack on top of one another, exacerbating the widow's penalty.

What surviving spouses can do now

Even though every situation is different, there are some planning opportunities worth discussing with a qualified tax professional or financial advisor who can advise you on your specific situation. Here are a few to get you started.

Taking advantage of the final joint-filing year. The year a spouse passes away provides a final opportunity to leverage the wider "married filing jointly" tax brackets and a larger standard deduction before your filing status changes.

Exploring strategic Roth conversions. Converting portions of a traditional IRA into a Roth IRA during the final joint-filing year — or during lower-income transition years — can help shrink future mandatory distributions and reduce long-term taxable income.

For example, converting $25,000 from a traditional IRA to a Roth IRA during a lower-income year may allow a surviving spouse to lock in a lower tax rate and create a source of tax-free income later in retirement.

Monitoring Medicare income thresholds. Because Medicare relies on a two-year lookback to determine IRMAA surcharges, spikes in taxable income today can dramatically increase your future Part B and Part D premiums.

Working with a tax professional to spread large withdrawals or Roth conversions over multiple years may help avoid crossing into a higher IRMAA bracket.

If your income falls due to a qualifying life-changing event, you may be able to request a new IRMAA determination using Form SSA-44.

Coordinating Social Security survivor benefits. Deciding when to switch from your own retirement benefit to a survivor benefit (or vice versa) requires careful timing to maximize lifelong guaranteed income while managing the sudden shift to single tax brackets.

Reviewing your Social Security claiming strategy may help optimize survivor benefits while minimizing potential tax consequences.

And keep in mind, this piece discusses federal income tax rules and changes, but state income tax consequences may differ. So always consult a trusted advisor who can help with your individual circumstances.

Related

• Taxes on Social Security Benefits: 6 Things You Need to Know
• 2026 Federal Tax Brackets and Income Tax Rates
• Filing a Deceased Person's Final Income Tax Return

Virginia has approved what appears to be the nation’s first tax on data center electricity use.

A legislative deal, which ends months of budget negotiations, imposes a new charge on the power used by data centers in the Commonwealth as of July 1.

But…the compromise stops short of rolling back the long-standing and controversial sales tax exemption on equipment that has helped fuel Virginia's massive data center industry.

Here's more of what you need to know.

Virginia data center tax compromise

The new data center tax emerged from negotiations during this year’s General Assembly session, as Virginia lawmakers struggled to reconcile competing views on how to tax one of the Old Dominion state's fastest-growing industries.

For months, some state senate lawmakers pushed to scale back or eliminate Virginia’s sales tax exemption for data center equipment.

Supporters of repealing the billion-dollar tax exemption argued that the incentive — first enacted in 2008 — has become increasingly costly as data center construction has accelerated across Northern Virginia. State estimates show the exemption now reduces revenue by more than $1.5 billion annually and is expected to rise further as new facilities come online.

Still, some House of Delegates lawmakers and Gov. Spanberger opposed eliminating the incentive outright. A concern was reportedly that eliminating or changing the exemption before its slated end in 2035 could undermine Virginia’s reputation as a destination for stable technology investment.

The disagreement had stalled broader budget negotiations until lawmakers reached a compromise earlier this week: keep the exemption in place, but add a new tax tied directly to electricity consumption.

Under the FY 2027–FY 2028 biennial budget agreement:

• Data centers will pay 1.1 cents per kilowatt-hour of electricity consumed, billed monthly.
• The tax will begin on July 1, 2026.
• Revenue is capped at $600 million annually, with excess collections refunded to the data centers at the end of the fiscal year.

Virginia's Data Center Alley: Why this matters

As Kiplinger has reported, Virginia is home to the largest concentration of data centers in the world, with Northern Virginia’s “Data Center Alley” anchoring a global hub of cloud computing and digital infrastructure.

Around 200 facilities are currently operating in Loudoun County alone, with more planned. These facilities handle over one-third of the world’s daily internet traffic.

But the scale of the data center industry has sparked debate over everything from electricity and water usage to noise concerns.

• Utilities and grid planners have warned that data center electricity demand is growing rapidly, driven in part by artificial intelligence (AI) workloads that require more computing power than traditional cloud services.
• In some forecasts, data centers could account for roughly 20% to 30% of electricity demand in parts of Virginia over the next decade if current growth trends continue.
• For some Virginia residents living near data centers, the constant hum from cooling systems, back-up generators, and other equipment has become a quality of life issue.

Data centers also typically rely on large diesel-powered backup generators to ensure uninterrupted operations during power outages, which raises concerns about local air quality in some communities.

And, depending on the design and cooling technology, large facilities can consume hundreds of thousands of gallons of water per day to cool server racks. Some large campuses reportedly use volumes comparable to those of a small town, raising sustainability questions in some communities.

Adding to the debate, the existing data center sales tax exemption in Virginia cost an estimated $1.6 billion last fiscal year, according to the Commonwealth’s tax disclosures.

That massive exemption and the growing backlash over the more than 600 data centers already in the Commonwealth have made data centers a politically sensitive issue.

But Virginia isn't alone. Similar data center debates have erupted across the United States.

A recent Gallup poll finds that 71% of Americans now oppose the construction of AI data centers in their local communities (with 48% strongly opposed). The pollsters note that local data center construction is more unpopular in the U.S. than building a nuclear power plant.

As of June 2026, according to various online trackers, more than 25 states are either advancing data-center-related legislation or have enacted measures that address grid cots, reporting requirements, utility regulation, tax incentives, or local authority over data centers.

Virginia data center tax exemption: What's next?

For most residents, the immediate impact of the new tax will likely be indirect, since the data center tax revenue will flow into the Commonwealth's general fund.

Notably, under the budget compromise, the Virginia Department of Environmental Quality (DEQ) would play a larger role in regulating data centers. The agency, currently responsible for protecting Virginia's air, water, and land resources, would study data center impacts, create rules, and oversee limits on issues including noise and water use.

Gov. Spanberger's signature on June 30 ended this year’s fiscal standoff, but not the broader debate over how and whether the data center industry should be taxed or constrained. So stay tuned.

Related

• The Hidden Toll of Data Centers on Local Communities
• New Poll Shows People Hate Data Centers: Tax Breaks Are One Reason Why
• The Burger Tax? 13 States Where Your Summer Cookout Costs More

Many retirees rely on their homes for financial security. According to the Federal Reserve’s Survey of Consumer Finances, home equity accounts for a substantial share of net worth among households aged 65–74.

But when it comes time to tap that value, often through a sale, converting housing wealth into cash doesn’t always go as planned for older adults.

A recent study finds that even when home prices are relatively strong, the proceeds older sellers receive can differ meaningfully from those of younger homeowners. Though timing and how the sale is managed play a role.

And while the research doesn’t point to a single cause for the disparity, it raises broader questions about how home-sale outcomes can affect retirement income and, yes, taxes. Here’s more to know.

Why older homeowners get less money for their homes

A study from the Center for Retirement Research at Boston College finds significant variation in sale outcomes for older homeowners. It analyzed roughly 10 million repeat home sales using CoreLogic deed records linked to demographic data to estimate sellers’ ages.

Researchers compared outcomes across age groups while controlling for home type, location, and broader market conditions and found a consistent gap.

A key takeaway? Older homeowners tend to realize lower proceeds when they sell compared with younger sellers with similar observable characteristics.

According to the study's findings:

• "Older sellers get less starting at age 70," with the gap "increasing with each additional year."
• There is an estimated 5% gap in realized sale proceeds over the average 11-year holding period for some cohorts.
• For a typical home, the differences can amount to tens of thousands of dollars, depending on market conditions. Per the study, for a median $400,000 home, that is roughly a $20,000 reduction in proceeds.

There appear to be several explanations for the gap. But the study points to two primary factors.

• First, older homeowners are more likely to sell homes with fewer recent updates, which can affect pricing even in strong markets.
• Second, the researchers report that in some cases, older adults are more likely to use off-market or less competitive listing channels than the Multiple Listing Service (MLS), which can result in fewer bidders.

Also worth noting: Some home sales at older ages are driven by life transitions like downsizing, health changes, or moves into assisted living, where speed and certainty matter more than maximizing the price. In some cases, that can mean accepting an early offer rather than waiting through a longer listing process.

How a lower home sale price affects retirement income

The impact of lower home proceeds can show up in how retirees adjust their broader financial picture after the sale.

A retiree may expect a home sale to generate a certain amount of cash, enough, for example, to fund a year or two of spending without significantly tapping retirement accounts. But if the actual sale comes in lower than expected, that shortfall might be covered elsewhere, e.g., through additional withdrawals from traditional IRAs, 401(k)s, or taxable investment accounts.

• Those withdrawals are generally taxed as ordinary income. As a result, a larger-than-planned draw in a single year can push a retiree into a higher marginal tax bracket, even if only part of their income crosses the threshold.
• The same increase in reported income can also eventually affect Medicare premiums (IRMMA surcharges), since those costs are tied to income levels from two years prior.

As a result, a lower-than-expected home sale price can have retirement planning implications beyond the transaction itself.

Capital gains tax on home sales over age 65

Even though the tax impact here is primarily about how income replacement flows through the rest of the retirement portfolio, capital gains are an important consideration in retirement.

The tax treatment of a primary residence remains unchanged, including the capital gains home sale exclusion of up to $250,000 for single filers and $500,000 for married couples. That tax break can shield many homeowners entirely from tax on the sale.

Note: A 2026 analysis by the Tax Policy Center and Brookings Institution finds that about 90% of households age 65 and older will likely remain within the current home-sale capital gains exclusion, while roughly 10% would have gains large enough to exceed it.

Still, other recent data indicate that approximately 8% of home sales resulted in gains that exceeded the home exclusion threshold. That's more than double the percentage over the last five years or so, according to a report from the consumer information and analytics company CoreLogic.

That rising share of taxable gains has prompted several proposals on Capitol Hill, including bills that would eliminate capital gains taxes on home sales and a recent legislative proposal to increase the capital gains exclusion to $1 million for homeowners age 65 and older.

Why is this happening? One issue is that the exclusion limit hasn't been adjusted for inflation, so the value of the tax relief provided by the home sale exclusion has eroded over time.

As a result, homeowners across the U.S., but more often in states with high property values, like California, New York, New Jersey, Massachusetts, Florida, and Colorado, are likely to see gains exceed the exemption limit.

Selling a home in retirement: Bottom line

If you're considering a home sale, it may help to speak with a financial planner or tax professional first to understand how the proceeds could affect your retirement finances.

Every individual's financial situation is different, and a trusted professional can help with a tailored strategy.

However, a few considerations:

• How the sale fits into your broader retirement income strategy
• Whether the proceeds could affect taxable income or Medicare premiums
• How the proceeds will be used, saved, or reinvested

It may also be worth considering whether the timing of the sale allows enough time to attract multiple buyers. As the study suggests, urgency can limit a seller's options and make it harder to maximize the sale price.

Related

• New Bill Proposes $1 Million Capital Gains Tax Exclusion for Those Over Age 65
• The Capital Gains Tax Exclusion for Homeowners Explained
• Capital Gains Tax Rates for 2026: What to Know Now
• Retirees Face a Growing Capital Gains Tax Trap

Weeks away from the official launch of "Trump Accounts," the child savings vehicles from the 2025 tax bill, a targeted spinoff is set to roll out.

Dubbed "Fostering the Future Accounts," this new initiative is designed to help children in foster care save for future housing, educational, and career development costs as they transition to adulthood.

First lady Melania Trump and U.S. Department of the Treasury Secretary Scott Bessent announced in a press release that these new accounts will open on July 4, 2026.

“Fostering the Future Accounts give foster children the same chance for asset ownership and long-term wealth building as every other American child," Mrs. Trump remarked. "By investing in our foster youth now, we help strengthen America’s workforce, communities, and economic future."

But because these accounts will be opened and managed by state infrastructure, states must opt in. Not everyone is on board. Read on for who qualifies and what's holding back the remaining 27 states.

New: Low-Tax States For Middle-Class Families Ranked by Childcare Affordability

Fostering the Future Accounts for kids

The Trump "Fostering the Future Accounts" are an offshoot of standard Trump Accounts structured to help children in foster care save for long-term financial goals, like a down payment on a home or higher education expenses.

To qualify, a child must be:

• Under age 18
• A U.S. citizen with a Social Security number

These accounts might be opened by a state, territorial, or tribal child welfare agency. They can also be opened by designated foster parents or other legal guardians in the foster care system.

Which states are participating?

Because Fostering the Future Accounts are managed at the state level, access depends on local legislative approval. So far, governors in the following 23 states have pledged to offer the program, according to White House officials:

Participating state child welfare agencies must submit IRS Form 4547 (Trump Account Election) to formally open an account for each eligible child in their custody.

Fostering the Future Accounts vs standard Trump Accounts

Although Fostering the Future accounts function the same as a standard Trump Account — investing in stock market index funds to grow tax-deferred savings — there are some nuances in how each is opened and funded.

For instance, when a parent or guardian opens a standard Trump Account, they can claim a $1,000 federal seed deposit directly into the newborn's account, provided their child is born from 2025 to 2028.

However, "a child welfare agency cannot elect to receive the $1,000 pilot program contribution to the child's [Fostering the Future] Account," as the IRS reported in a recent update. Instead, only a foster parent or other qualifying individual who anticipates caring for the child might claim this federal seed money for the child's account.

Here's a table highlighting several other key differences between the two types of accounts:

The Fostering the Future Accounts also have unique funding methods that the federal government doesn't offer for standard Trump Accounts.

For example, state officials can redirect existing state resources — such as unused Temporary Assistance for Needy Families (TANF) block grants — into a foster child's savings, according to the Administration for Children and Families (ACF).

Why isn't my state on the list?

Notably, all 23 states opting into Fostering the Future Accounts are GOP-led, reflecting the partisan divide surrounding Trump Accounts, which were a key component of the 2025 Trump tax bill.

But beyond partisan lines, several other reasons exist for why states might heavily debate signing on:

• Strained budgets. State child welfare departments often depend on federal funding streams such as TANF and the Social Services Block Grant (SSBG) to operate. Because most states have already finalized their budgets for the upcoming fiscal year, adding new, unplanned programs midcycle might be too financially constrained.
• Administrative hurdles. Fostering the Future Account documentation, including individual investment portfolios and private donations for every child, must be monitored. As such, participating state agencies are required to establish new protocols to continuously update this information, which might prove difficult given that children frequently shift between foster homes.
• Legal challenges. Legally, a state, territorial or tribal child welfare agency might open a Fostering the Future account, but the timeline of who holds account management authority can be constantly in flux. If a child is in temporary emergency care, for instance, then switches to kinship care or transitions between different county jurisdictions, it might be unclear who is legally authorized to update the account. (Note: the Treasury and ACF released joint guidance related to this issue.)

Ultimately, the Trump administration has set a target for all 50 states to sign on to Fostering the Future Accounts by December 2027.

However, some child welfare advocates worry that a prolonged state-by-state rollout will deepen economic disparities for children aging out of foster care — especially for children who move across state lines due to interstate adoptions or structural changes in their care.

Ruth Anne White, executive director of the National Center for Housing and Child Welfare, told independent news outlet, The Imprint. "But it's right there in the Child Welfare Policy Manual [released guidance] — as clear as day."

According to data from the National Council for Adoption, there are roughly 330,000 children in the U.S. foster care system. Statistics from the National Foster Youth Institute show that one in five foster youth face homelessness after aging out of the system, and only half secure gainful employment by age 24.

Supporters of the new initiative hope these accounts will disrupt those outcomes.

Yet while supporters have framed Fostering the Future Accounts as a solution to the financial hardships facing youth aging out of care, states will need to overcome complex questions surrounding budget allocations, administrative hurdles and bipartisan support.

Until then, foster parents and child welfare agencies will find that state lines dictate whether children in their care are eligible for these accounts.

Read More

• How to Claim Your Kid’s Trump Account in 3 Steps
• Adoption Tax Credit: What You Need to Know for 2026
• Child Tax Credit 2026: How Much Is It and What's Changed?

It's a tale as old as time: If you live in a high-cost area like Long Island, San Francisco, or Seattle, your paycheck doesn't stretch nearly as far as it would in, say, Pittsburgh. Yet, the IRS taxes your income exactly the same.

A new bill from lawmakers on Capitol Hill would flip that script by linking your federal tax obligations to your home address.

The Cost of Living Tax Cut Act, introduced by House Reps. Laura Gillen (D-NY-04) and Mike Lawler (R-NY-17) would adjust federal income tax brackets based entirely on where a taxpayer lives.

"This bipartisan bill would help lower taxes for families in high-cost areas [like Long Island] by accounting for regional differences in the cost of living and ensuring taxpayers can keep more of what they earn," Gillen said in a recent release.

Lawler echoed the sentiment for his constituents in Hudson Valley, New York, arguing that the tax code should reflect the economic reality of high-cost regions.

Yet while the prospect of localized tax relief sounds promising to families in expensive ZIP codes, the proposal is likely to face heavy scrutiny over who will ultimately foot the bill for the corresponding drop in federal revenue.

Here is a breakdown of how this plan could change your take-home pay, which areas stand to benefit, and what this means for the upcoming mid-term election season this fall.

How the bill adjusts the tax brackets

The Cost of Living Tax Cut Act is designed to prevent households in more expensive regions from being pushed into higher tax brackets when their real purchasing power is relatively low compared with the rest of the U.S. If passed, the bill would take effect after December 31, 2026.

The bill's framework relies on localized data to determine your federal tax liability:

• The index: The bill directs the Secretary of Commerce to use regional price parities (RPPs) to calculate an annual cost-of-living index for metropolitan and rural areas.
• The adjustment: Instead of applying uniform national tax thresholds as it does now, the IRS would expand tax brackets in regions with an above-average cost of living.
• The savings: By widening the lower tax brackets, more of a household's income would be shielded from higher tax rates.

Who wins the affordability contest?

If passed, the Cost of Living Tax Cut Act would provide the most significant relief to major metropolitan statistical areas (MSAs) where the local purchasing power of a dollar is typically lower than the national average.

Per the most recent regional economic metrics from the Tax Foundation, the primary beneficiaries of this new bill would live in regions where a typical $100 has the real purchasing power of only $84 to $90. For example:

• California metros: The San Francisco Bay Area (Oakland, Berkeley, San Jose, Santa Clara), Los Angeles, Orange County, San Diego, and Santa Barbara.
• The Pacific Northwest: The greater Seattle-Tacoma-Bellevue metro area in Washington.
• Northwest corridor: The broader New York-Newark-Jersey City metro area (spanning NY, NJ, and PA), Boston-Cambridge-Newton (MA/NH), and high-cost zones in Connecticut.
• Hawaii and South Florida: Urban Honolulu and the Miami-Fort Lauderdale-Pompano Beach metroplex.

Under the proposed framework, families in the affected ZIP codes would see their tax brackets widened proportionally. Conversely, regions where the cost of living is at or below the national average — like parts of Arkansas, Louisiana, or Ohio — would see no changes to their baseline brackets.

However, federal policy historically requires an offset for targeted tax cuts. Since the legislation bars lawmakers from adjusting tax brackets downward in lower-cost regions, the federal government would have to absorb the resulting deficit, which could eventually lead to spending cuts or the search for alternative federal revenue sources.

The hidden cost of geographic tax cuts

Data published by the Rockefeller Institute of Government reveals that high-wage coastal states subsidize spending in the rest of the nation. For instance, in a single fiscal year, New York residents paid $19.4 billion more to the federal government than the state received, while California taxpayers contributed an extra $72 billion.

So if the federal tax code were to cut taxes for some areas and not others, that might lead to several potential long-term risks:

• A structural drop in federal revenue. Think tanks like the Center on Budget and Policy Priorities often note that targeted tax cuts substantially reduce federal funding for key national obligations like infrastructure, Social Security, and defense.
• Ripple effects in the tax code. Drops in federal revenue could lead to raising baseline tax rates nationwide, implementing broad surtaxes, or risking an increase in the national deficit. This fiscal pressure isn't unique to the federal government; for example, a state-level structural deficit was one reason Washington enacted a millionaire's tax on its wealthier residents.
• Porous boundaries and "tax cliffs." Relying on regional price indexes could create tax spikes right at city borders. For example, a taxpayer living just outside a high-cost metropolitan boundary line who works inside it could face a higher federal tax burden than a neighbor living just one mile away. A similar dynamic already plays out with commuters who live in one state and work in another.
• Increased regulatory burdens. Shifting to an address-based tax system forces the IRS to track, audit, and dynamically update tax brackets across hundreds of MSAs. In an era of $1 billion IRS funding cuts, managing localized federal brackets would heavily strain resources. Furthermore, tax preparation software would need to become more complex, potentially driving up filing costs for everyday taxpayers and increasing the risk of location-reporting errors or geographic fraud.

Bottom line: Will the legislation pass?

Even though the Cost of Living Tax Cut Act addresses a very real financial pressure point for millions of voters, it will most likely face a steep climb to become law.

The proposal must compete against much broader fiscal blueprints, like the 2025 Trump Tax Bill, which focused on making previously enacted individual tax cuts permanent and revamping the federal standard deduction. Adding a localized layer to the IRS tax code could complicate revenue projections and require extensive bipartisan negotiation and spending offsets.

With several congressional seats on the ballot this November and a recent 3.8% inflation surge reported by the U.S. Bureau of Labor Statistics, targeted affordability proposals may take center stage. Even if this specific bill stalls, it highlights a growing legislative focus on how your ZIP code impacts your wallet.

So, before making any sudden moving plans for a cheaper area, wait to see how these fall tax proposals shake out. Your bracket might not change, but your vote could shape future local tax policy.

Read More

• People Are Leaving High-Tax States: Here's Where They're Moving Instead
• New Bill Proposes $1 Million Capital Gains Tax Exclusion for Those Over Age 65
• Are No-Income Tax States Better to Live In?

After lawmakers approved HJR 1-F during a special session on June 2, a proposed constitutional amendment aimed at expanding property tax relief for homeowners is headed to the November ballot, setting up one of the most closely watched tax debates in recent Florida history.

For homeowners, the proposal could mean significant savings. Under the measure, Florida’s existing $50,000 homestead exemption would increase to $150,000 in 2027 and $250,000 in 2028, reducing the portion of a home’s value subject to tax.

A homeowner with a $400,000 primary residence could save thousands of dollars annually, depending on local tax rates. And for supporters, that potential savings is exactly the point.

Critics, however, have raised questions about how local governments would replace the revenue currently generated by property taxes, which a legislative analysis projects could drain local municipalities of up to $8.4 billion annually by 2028.

And…a nonprofit group, naming two former South Florida mayors as plaintiffs, has filed a lawsuit against the measure, arguing that the ballot summary is "unconstitutionally biased, misleading, and inaccurate."

These tensions have emerged as central questions surrounding the proposal as it heads toward a statewide vote. Here's more of what you need to know.

The HJR 1-F property tax exemption for Florida homeowners

The passage of HJR 1-F moves the long-debated property tax relief conversation in Florida from Tallahassee to the ballot box.

• If approved by at least 60% of Florida voters this November, the amendment would significantly expand the state’s homestead exemption for qualifying homeowners.
• The proposal applies to owner-occupied primary residences that qualify for Florida’s homestead exemption and would not extend to second homes or investment properties.
• The measure also introduces a tiered structure based on residency duration.

Current Floridians and those who establish permanent residency by December 31, 2026, would be eligible for the full tax break immediately, while anyone moving to the state after that date would have to wait five years before becoming eligible for the full $250,000 exemption.

Gov. Ron DeSantis has framed the measure as a way to provide relief for homeowners facing rising housing costs, insurance premiums, and other housing-related expenses.

“I think a lot of people need relief,” DeSantis told reporters in a recent presser, adding, "I think a lot of people have been wondering, where can we get it? We’re showing a pathway to be able to get that done that I think is going to be transformational for people."

To justify that relief, the administration points to an aggressive surge in local property tax collections.

According to data released by the governor’s office, property tax revenue collected by Florida local governments has nearly doubled over the past seven years, climbing from $32 billion to $60 billion. It is currently projected to reach $83 billion by 2032.

Why property taxes matter

Property taxes have become an increasingly visible part of the cost of homeownership, particularly in fast-growing areas where home values have climbed sharply over the past decade.

For retirees, fixed-income residents, and longtime homeowners, the appeal of lower property tax bills is easy to understand. Many are already balancing rising insurance premiums, HOA fees, utility costs, and other housing-related expenses.

Supporters argue homeowners should not continue paying higher taxes simply because their property values have increased. They view the amendment as long-overdue relief that would allow residents to keep more of their own money while strengthening Florida’s reputation as a low-tax state.

For many households, even modest savings could have a meaningful impact on annual budgets.

Tradeoffs for Florida voters

The debate surrounding the amendment extends beyond annual tax bills and potential savings.

Former State Sen. Jeff Brandes has described the proposal as "a tax shift, not a tax cut," arguing that while homeowners may pay less directly, the costs associated with funding local government services do not simply disappear.

Property taxes currently help support many of the services and infrastructure residents rely on every day, including public safety, road maintenance, infrastructure improvements, and emergency preparedness.

Notably, HJR 1-F legally requires local governments to prioritize remaining property tax revenues strictly on designated "core services," such as law enforcement, fire protection, and flood control.

However, the lawsuit filed by Save Our Voters From Misleading Ballot Language argues that the ballot summary's promise of "ensuring funding for core services" is misleading when the policy itself cuts the revenue available to pay for them.

In a state that regularly faces hurricanes and severe weather events, how local governments would replace billions of dollars in projected revenue reductions remains one of the proposal’s biggest unanswered questions.

Cragin Mosteller, spokesperson for the Florida Association of Counties, told the Miami Herald that "one of the things that is easy to overlook sometimes is that we move to a community not only because it’s safe but because it’s wonderful, because it has a great quality of life."

For opponents, the question isn’t whether homeowners deserve lower taxes. It’s whether communities can continue delivering that quality of life if one of their largest sources of funding is significantly reduced.

Ultimately, the decision comes down to how homeowners view property taxes: as a recurring cost of homeownership or an investment in the neighborhood surrounding that home.

Infrastructure and public safety are easy to take for granted when they work seamlessly, but their true value becomes clear the moment those services are stretched thin.

What happens next

The amendment must receive at least 60% voter approval to become part of the Florida Constitution — assuming the text first survives its current legal challenge. So between now and Election Day in November, debate over the measure will continue as those on both sides try to win over voters.

Floridians will ultimately have to weigh historic tax savings for their household budgets against long-term funding concerns and the certainty of local services they rely on every day.

Related

• Property Tax 101: What Every Homeowner Needs to Know in 2026
• Florida Wants to Eliminate Property Tax: Who Pays Instead?
• 10 Cheapest Places to Live in Florida
• No-Inocme-Tax States Ranked by 2026 Cost of Living: Where You'll Save the Most

In 2024, Bob DeSmidt, 78, of Sioux City, Iowa, wanted to help his adult son buy a home in an area that was closer to his new job. DeSmidt, a retired chief financial officer for a construction company, could afford to help his son with the purchase, but the contribution he and his wife wanted to make exceeded the annual gift tax exclusion — the amount of assets that individuals can transfer to each recipient without filing a gift tax return or reducing their lifetime exemption for federal gift and estate tax.

The gift tax exclusion in 2024 was $36,000 for a married couple, or $18,000 per individual. The DeSmidts ended up giving their son more than $36,000 and filing a gift tax return with the IRS. But that doesn't mean they had to pay tax on the gift, or that their assets will be subject to federal estate tax after they die.

In fact, it's highly unlikely that will happen. The One Big Beautiful Bill Act, signed into law in 2025, permanently increased the federal exemption for gift and estate tax. For 2026, it's $15 million per person, or $30 million for a married couple, and the exemption is indexed annually to inflation. DeSmidt says that while he and his wife are financially comfortable, their estate's value is well below that threshold. Iowa has no estate tax, so state taxes aren't a concern.

Given such a large federal lifetime exemption, only the very wealthy — and extremely generous — gain a tax benefit by keeping their gifts within the annual exclusion. Using this strategy, they can reduce the size of their estate, limiting the amount of it that is subject to tax and preserving the full lifetime exemption amount. Any gifts that exceed the annual exclusion count against the lifetime exemption.

But even if you're not among the ultra-wealthy and want to give away more than the annual exclusion, you'll still have to file a gift tax return on Form 709 unless you meet certain exceptions, which we'll discuss below. For 2026, the gift tax exclusion is $19,000 per person, or $38,000 for married couples.

Financial planners say De-Smidt's situation isn't unusual. Many of their clients want to help their children and grandchildren while they're still alive, instead of making their heirs wait 30 or 40 years to inherit family wealth. “We don't want to see our kids struggle when we can help them,” says Rose Price, a certified financial planner in Vienna, Va. In many cases, particularly when it comes to buying a house, they'd like to give away more than the annual exclusion.

Filing the gift tax form

If you're convinced that your estate will never be worth $15 million (or $30 million if you're married), you may be tempted to skip the hassle of filing Form 709 for gifts that exceed the annual exclusion. Financial planners say that's a bad idea. There's no guarantee that lawmakers won't lower the federal estate and gift tax exemption in the future, exposing more families to estate taxes of up to 40%.

In addition, several states have much lower exemptions. Oregon, for example, has an estate tax exemption of $1 million, making planned gifting even more critical. Annual gifts within the federal exclusion are tax-free under Oregon law, and those gifts will reduce the size of your taxable estate while preserving your $1 million exemption.

Filing a gift tax return can also protect you from future audits, says Lawrence Pon, a CFP and certified public accountant in Redwood City, Calif. Once you file a gift tax return, the IRS has three years to audit it; if you don't file, there is no statute of limitations on audits, he says. In addition, if you help a family member make a down payment on a home, the lender may request a gift tax return to confirm that money was a gift instead of a loan, Pon says.

Finally, by filing gift tax returns, you can track your lifetime giving, says Easton Price, a CFP in Irvine, Calif. That's a useful estate-planning tool, particularly if you want to equalize the amount you give to children or beneficiaries, he says.

Bypassing the annual exclusion

If you'd like to avoid filing a gift tax return — or you're worried about possible future changes to the lifetime estate and gift tax exemption — there are strategies you can employ to avoid the annual exclusion:

Make educational gifts. You can contribute an unlimited amount to a child, grandchild or other beneficiary's tuition as long as the funds go directly to the educational institution.

Contribute to a 529 plan. Contributions to a 529 college-savings plan are considered gifts for federal tax purposes, which means they're subject to gift tax requirements. However, you can front-load up to five years' worth of annual contributions. For example, in 2026 you can contribute up to $95,000 to a child or grandchild's 529 plan ($190,000 if you're married and file jointly).

If you take advantage of this strategy, you can't make additional contributions for the next five years without filing a gift tax return. In the meantime, however, you're giving the money invested in the plan more time to grow and compound, while reducing the size of your estate — a smart strategy if you live in a state with an estate tax.

Offer medical assistance. Want to help a family member with catastrophic medical bills? Payments made directly to the medical provider or insurer are exempt from gift taxes.

You could even give the recipient a debit card that's designated to be used for medical expenses, says Jon Robertson, a CFP in Columbia, S.C. The expenses must qualify as deductible expenses under IRS rules, which include hospital bills, dental procedures and long-term care. As is the case with tuition payments, the money must go directly to the medical provider or insurer, not the family member.

Stagger your gifts. The gift tax exclusion restarts every year. With that in mind, you and your spouse could give an adult child $38,000 in December and the maximum for 2027 (which has not been announced) in January without triggering the requirement to file a gift tax return, says Catherine Valega, a CFP in Burlington, Mass.

Double up. Under federal rules, you can give up to the annual exclusion to as many people as you want without filing a gift tax return. So if you'd like to help an adult child make a down payment on a house, you and your spouse could give $38,000 to your child and another $38,000 to your child's spouse this year, for a total of $76,000. That may not cover the entire down payment, especially in parts of the country with a high cost of living, but it's a good start.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• Gift Tax Exclusion 2026: How Much You Can Give Tax‑Free This Year
• A Financial Planner Answers 10 Common Questions About the Gift Tax
• How to Give Your Kids Cash Gifts Without Having to File IRS Paperwork
• 5 Types of Gifts the IRS Won't Tax: Even If They're Big

Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at five tax questions on inherited property, including the tax basis upon death. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Inheriting gold and silver

Question: I own highly appreciated gold and silver bars and coins. When I die, will my children get a stepped-up basis in this property?

Joy Taylor: Under the tax law, a decedent’s unrealized gains aren’t hit with federal income tax at death, and heirs step up or step down their basis in the assets they receive, equal to fair market value on death. So yes, your children would take a stepped-up tax basis to fair market value in the gold and silver bars and coins that they inherit from you.

2. Inheriting property with a built-in loss

Question: I own stock that currently has a built-in loss, meaning I paid more for the shares then what they are now currently worth. If I die tomorrow, what tax basis will my heirs take in the stock?

Joy Taylor: Under the tax law, a decedent’s unrealized gains aren’t hit with federal income tax at death, and heirs step up or step down their basis in the assets they receive, equal to fair market value on death. Not many people are aware that when they inherit loss property, they take the lower fair market value at the time of death as their tax basis in the property. That's because most estate planners and tax advisers focus on stepped-up basis for appreciated inherited assets.

If you die tomorrow, your heirs' basis in the stock would be the fair market value of those shares upon your death, which would be a lower tax basis then what you actually paid for the stock. This means that the built-in capital loss in your shares is gone forever. You may want to think about selling the loss property before you die, so that you can take advantage of the capital loss, especially if you have other capital gains that the loss could offset.

3. Tax rules for a jointly-owned home

Question: My spouse and I jointly own our home, which has substantially appreciated. How do the tax basis rules work if one of us dies?

Joy Taylor: With regards to your house, which has appreciated, if you don’t live in a community property state, half of the home will get a step-up in basis upon the death of the first-to-die spouse. The rules are more generous if the house is held as community property. The entire basis is stepped up to fair market value when the first spouse dies.

4. Inheriting rental property

Question: I own rental property that has appreciated since I first bought it. When I die, I plan to leave it to my child. Does he get a step up in basis in the property upon my death? Also, what happens to the depreciation that I had previously deducted on the property?

Joy Taylor: The answer to your first question is yes, your beneficiary would take a stepped-up tax basis in the rental property when you die. That means your child's basis in the inherited property would be its fair market value on the date of your death.

I haven't looked at the depreciation issue before, but it is my impression that your depreciation essentially disappears when you die. Again, your beneficiary takes a stepped-up tax basis in the property. If he decides to keep renting the property, he would depreciate it over 27.5 years, beginning in the year he inherited it and using the stepped-up tax basis.

5. Tax rules for co-owned stock

Question: My mother bought shares in a company in 1987 for $2300. The stock is now worth over $400,000. At some point between 1987 and 1997, she added my name to the shares as joint tenancy. She died last month, and now I own all the shares. What is my cost basis in the shares?

Joy Taylor: I don't know for certain, but I will give you my thoughts. I think when your mom added your name to the shares as joint tenancy, it is treated for tax purposes as if your mom made a gift of half of the stock to you. If it is considered a gift, then I would think your tax basis in the shares equals half of your mom's original cost basis plus half the value of the shares on your mom's date of death.

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 roundups. 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: Will I be Audited by the IRS?
• Ask the Editor: Deductions for Self-Employed Retirees
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Reader Questions on QCDs

A Republican lawmaker is proposing a major tax break for some homeowners, arguing that outdated tax rules are preventing many older adults from selling homes they've owned for decades.

The "Nest Egg Protection Act" would temporarily increase the federal capital gains tax exclusion to $1 million for qualifying homeowners age 65 and older who sell their primary residence.

Under current law, homeowners can exclude up to $250,000 in gains from the sale of a primary residence, while married couples filing jointly can exclude up to $500,000.

But… those thresholds were established in 1997 and haven't been indexed for inflation, despite increases in home values over the past three decades.

The bill's sponsor, Rep. Nicole Malliotakis of New York, says many older Americans are effectively trapped in homes that no longer meet their needs because selling could trigger a significant tax bill.

"By removing this tax barrier that discourages seniors from selling when they want to, we can protect their nest egg while making the American Dream of homeownership more attainable for younger families and first-time homebuyers," Malliotakis said in a release announcing the legislation.

Curious? Here's more of what you need to know.

New $1 million home sale tax break for seniors?

According to Malliotakis, the proposal is intended to help seniors preserve the equity they have accumulated over decades while also encouraging downsizing that could free up housing inventory for younger buyers.

• To qualify under the proposal, those over age 65 would need to have owned their home for at least 25 years.
• If approved and enacted, the enhanced exclusion would apply from tax years 2027 to 2030.

The bill comes as lawmakers from both parties have increasingly focused on capital gains taxes as a factor contributing to housing market gridlock. (You may recall proposals last year to eliminate capital gains taxes on home sales.)

Housing advocates and economists often refer to the issue as a "lock-in effect," where homeowners delay selling, in part because of the tax consequences associated with large gains.

• Older adults and long-term homeowners often choose not to sell their homes because they represent a source of financial stability.
• Particularly for those who have paid off their mortgages, selling often means facing higher costs elsewhere due to today's elevated mortgage rates.
• Additionally, in many cases, their homes hold substantial equity, which they may want to preserve as an emergency resource, through reverse mortgages, or to pass on to loved ones.

The result can be fewer homes available for sale, particularly in high-cost markets.

Who benefits from a higher capital gains exclusion?

As Kiplinger has reported, data show that in recent years, approximately 8% of home sales resulted in gains that exceeded the home exclusion threshold. That's more than double the percentage five years ago, according to a report from CoreLogic, a company that provides consumer information and analytics.

Supporters say that increasing the exclusion amounts would make it easier for retirees to relocate closer to family members, move into smaller homes, or transition into assisted-living communities without sacrificing a portion of their nest egg to taxes.

Another argument is that additional housing supply could help ease affordability pressures in some markets.

Critics, however, question whether such a measure would disproportionately benefit homeowners in higher-value markets who have generally seen the largest appreciation gains.

• According to research from the Yale Budget Lab, only about 10 to 15 percent of homeowners have capital gains on their primary residences that exceed the current federal tax exclusion limits.
• These are typically wealthier and older folks, with homes averaging $1.4 million and capital gains above the exemption at around $430,000.

Some tax policy analysts have also warned that expanding (or eliminating) capital gains exclusions could reduce federal revenue.

Capital gains exclusion on primary residences: Bottom line

The legislation has been referred to the House Ways and Means Committee and will likely face a lengthy path through Congress. But if eventually approved, it would represent one of the most significant targeted tax benefits for homeowners in recent years.

For now? The capital gains tax break for homeowners remains at $250K for singles and $500K for those married filing jointly.

To be eligible for the exclusion, you must have owned and used the home as your primary residence for at least two of the five years leading up to the date of the sale.

The IRS allows you to have only one "primary residence" at a time, and uses various factors to determine whether a home qualifies.

If you're thinking about selling your home, it may be a good idea to consult with a certified financial planner or tax professional who can consider your situation and help evaluate any capital gains tax implications.

Related

• Capital Gains Tax Exclusion for Homeowners: Who Qualifies and How It Works
• Tax Breaks for Homeowners and Homebuyers
• Retirees Face a Growing Capital Gains Tax Trap
• Capital Gains Tax Rates for 2026

The graduation caps have been tossed, summer heat has arrived, and graduate celebrations are winding down. But as reality sets in, you might notice a surprising line on your financial dashboard: unspent money in your child’s or grandchild’s 529 plan college savings account.

Roughly 10% of families may end up with surplus 529 funds, according to data from Consumer Reports, often thanks to unexpected scholarships or grants, or by choosing a more affordable school. Fortunately, thanks to the SECURE 2.0 Act, you may be allowed to roll those leftover education funds directly into a Roth IRA without paying federal income tax or a penalty.

Yet it isn't always as simple as moving money from point A to point B. The IRS has strict, fine-print rules regarding timelines, lifetime limits, and account history.

Take our 6-question quiz to find out if you can seamlessly pivot your beneficiary's college savings into a retirement head start — or whether a different tax strategy might make more sense for your family.

Explore More

• This is how much you can contribute to an IRA and 401(k) in 2026.
• Passing on a home? Here's why 40% of heirs say they can't afford the inheritance.
• Help your child get their paycheck right with these tax withholding basics.
• If you're hiring your kids, these are the tax benefits and IRS rules to follow.

Drive through eastern Loudoun County, Virginia, and you will quickly understand why some parts of the area are often referred to as "Data Center Alley."

Massive, windowless gray cement structures rise up behind fences and security gates, while cranes loom over roads once lined with trees, now covered in mud from construction traffic, working to make way for yet another data center.

This mixed suburban/rural area is now home to the world’s largest concentration of data centers. Around 200 facilities are currently operating in Loudoun alone, with more planned, and they handle over one-third of the world’s daily internet traffic.

While supporters argue these centers are vital to the digital economy, many residents — not only in Virginia but across the United States — are concerned about their rapid expansion, energy and water use, and broader environmental impact.

Critics also highlight that these facilities often create fewer permanent jobs compared to the tax incentives they receive. As tensions grow, the question becomes: where do residents and lawmakers go from here?

The great data center debate

Data centers are specialized facilities that house a variety of computing components, including servers, networking equipment, and extensive drives.

Their prevalence has increased in recent years, as every time someone streams a movie, stores photos, shops online, uses social media, or interacts with AI chatbots, information is processed through these centers worldwide.

There are now reportedly around 4,000 data centers in the U.S., which some see as a good thing, helping create jobs and generate revenue.

But…data centers place significant demands on local infrastructure.

• Modern data center campuses can span dozens or even hundreds of acres and often require new power lines, substations, roads, and other infrastructure.
• Many consume significant amounts of electricity. (Just a few years ago, data centers accounted for an estimated 4% of total electricity use in the United States. By 2028, that figure is expected to climb to as high as 12%.)
• Data centers also typically rely on large diesel-powered backup generators to ensure uninterrupted operations during power outages, which raises concerns about local air quality in some communities. (According to the U.S. Environmental Protection Agency, diesel exhaust from backup generators contains fine particulate matter and nitrogen oxides that are associated with respiratory issues like asthma.)

Notably, data centers and water have emerged as another point of contention.

Depending on the design and cooling technology, large facilities can consume hundreds of thousands of gallons of water per day to cool server racks. Some large campuses reportedly use volumes comparable to those of a small town, raising sustainability questions in some communities.

Still, states and local governments across the country have spent years competing to attract data center development, often by offering generous tax incentives.

Data center tax exemptions

In recent years, 38 states have offered generous incentives, including sales tax exemptions on servers and equipment and property tax reductions, to win a larger share of the industry's explosive growth.

Increasingly, however, several of those states are facing backlash not just from residents but also from some lawmakers.

As a result, some are moving toward requiring greater transparency, shifting infrastructure costs onto developers, reexamining tax incentives, or studying the industry's impact on electricity and water supplies and local communities.

Some examples:

Illinois: Late last week, Gov. JB Pritzker directed the state's Department of Commerce to completely halt the processing of all new data center tax exemptions starting July 1.

"Illinois has an opportunity to continue leading in technological innovation and economic growth, but we also have a responsibility to protect working families and local communities as the data center industry rapidly expands," Pritzker stated in a release.

Ohio: In May, Ohio Gov. Mike DeWine ordered the state’s Tax Credit Authority to freeze all pending and new data center sales tax exemption requests. The halt came after a state report revealed that the exemption cost Ohio $1.5 billion in 2025 alone.

In a release regarding the issue, DeWine wrote, “I fully support the Ohio General Assembly's work to study the issue and bring forward facts about data centers, including the local benefits to communities when tax exemptions are granted.”

Georgia: Lawmakers in the Peach State are moving to phase out data center tax suspensions after a state audit revealed the exemptions will cost a projected $2.5 billion this year.

Data centers in Virginia: What’s happening

In Virginia, lawmakers in the Senate want to let a multibillion-dollar annual data center tax exemption expire, while the Virginia House is reportedly trying to tie any remaining tax breaks to strict environmental and clean-energy compliance rules.

According to the Commonwealth’s tax disclosures, the existing data-center sales-tax exemption in the Old Dominion state cost an estimated $1.6 billion last fiscal year.

That massive exemption and the growing backlash over the more than 600 data centers already in the Commonwealth are sticking points in a budget process that must be completed by the end of June.

At the same time, in some other states, resistance to data centers has led to new legislation. (This is not an all-inclusive list.)

• In Oklahoma, Gov. Kevin Stitt signed the Data Center Consumer Ratepayer Protection Act of 2026 into law, effective July 1. The law is designed to prevent utility cost hikes for residents.
• New York lawmakers just passed the Responsible Data Center Development Act (A11560), which, once enacted, will impose a one-year moratorium on permits for new data centers of 20 megawatts or more.
• Monterey Park, California, became the first U.S. city to enact a ban on data center developments after roughly 88% of local voters approved a June 2 ballot measure.

As of June 2026, according to various online trackers, more than 25 states are either advancing data-center-related legislation or have enacted measures that address grid cots, reporting requirements, utility regulation, tax incentives, or local authority over data centers.

What about Congress? In March 2026, Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y) introduced the Artificial Intelligence Data Center Moratorium Act. The measure, which would temporarily pause new data center construction nationwide while Congress develops federal rules for AI infrastructure, hasn’t gained traction on Capitol Hill.

Are data centers bad? Bottom line

The debate over the good and not-so-good aspects of data centers shows no signs of going away.

A recent Gallup poll finds that 71% of Americans now oppose the construction of AI data centers in their local communities (with 48% strongly opposed). The pollsters note that local data center construction is more unpopular in the U.S. than building a nuclear power plant.

This “not in my backyard” sentiment is split between environmental concerns (expressed by 50% of respondents) and economic fears, e.g., higher utility bills (about 20% of respondents), according to Gallup. Pollution, negative views of AI, and quality-of-life concerns were also factors for some.

While polling data help explain national sentiment, grassroots opposition efforts highlight local concerns.

• In Hood and Hill Counties, Texas, residents hoped to block eight proposed data centers by attending town halls in large numbers, though developers are fighting back in court. A similar effort occurred in Champaign County, Illinois, leading to a moratorium to protect a crucial aquifer.
• In Sand Springs, Oklahoma, residents mobilized in response to reports that local officials had allegedly signed non-disclosure agreements to annex 827 acres of agricultural land for a tech campus.
• Residents in Box Elder County, Utah, along with Alliance for a Better Utah, have filed a lawsuit against state development agencies over a 40,000-acre AI project backed by celebrity investors. They argue it undermines local voter oversight and grants big tech unchecked control over their water, roads, and tax structure.

Meanwhile, among those polled by Gallup who favor having a data center in their communities, the most cited reason why was potential job growth.

To that end, a Brookings Institution analysis finds that while data centers do create local jobs, it is likely “fewer than advocates claim.”

Some independent estimates put the total at a few dozen to a few hundred long-term on-site positions once a given center is constructed.

Read More

• How Data Centers are Impacting Retirees in Some States
• 10 Cheapest Places to Live in Virginia
• From the Pink Tax to Surveillance Pricing: Are You Paying More without Knowing?

You won't find them at grocery checkouts, but the U.S. penny is back. To celebrate America's 250th birthday in 2026, the U.S. Mint has introduced one-year-only design overhauls to almost all circulating coins, which are out now.

The rollout includes quarters, nickels, dimes, half-dollars…and yes, the penny.

Though President Donald Trump ordered the end of circulating penny production late last year to save taxpayers an estimated $56 million annually, a special "dual-date" penny has returned exclusively for the semiquincentennial. Think of its comeback like Pluto's status as a "dwarf planet": Not quite a "regular" planet, yet it makes us feel good.

The federal government didn't strike these 2026 pennies for general circulation, so you won't find them in everyday cash transactions. You'll have to embark on what the Mint Director calls a "treasure hunt," and you could actually be taxed on that treasure if the collection is eventually sold for a profit.

Happy Birthday, America — let's talk about what's in your pocket.

New pennies in 2026?

The Mint is celebrating the nation's 250th anniversary with one-year-only design upgrades.

The only other time the U.S. has done this on such a widespread scale was during the 1976 bicentennial. After the celebration concludes, however, the coins are scheduled to revert to their standard looks, like Cinderella's dress at midnight.

The Mint's new redesigns feature a 1776 to 2026 "dual date," and many of the coins are already in circulation, including:

Who's missing from the cash register? The penny. Since the penny's retirement last year, it is the only coin in the lineup that won't be distributed to local banks. Instead, the 2026 dual-date penny is being issued strictly as a collector's item available through official Mint sets.

(Though the Mint is keeping the penny's classic Union Shield look for the 250 celebration, perhaps because the Feds were feeling just as nostalgic about the copper-colored coin as we are.)

*Note: The remaining quarters for the U.S. Constitution and Gettysburg Address will roll out later in the year, alongside various commemorative sets that have already come out or are scheduled to debut through late 2026.

A nationwide 'treasure hunt'

While you have to buy the new pennies directly from the government, the rest of the 2026 circulation coins are headed straight to your wallet.

The Mint, alongside the American Numismatic Association (ANA), has launched the #CoinHunt250 campaign to encourage Americans to look for the new designs in their daily change.

U.S. Mint Director Paul Hollis noted in a recent interview with CBS News, "Certain banks are giving them out, but I would encourage people to request them from your bank."

That's because it can take four to six weeks for new coins to begin to appear in circulation, according to the Mint. Banks typically get them first, and finding them in your everyday change can take longer, depending on your area.

However, serious collectors looking for flawless, scratch-free versions of the coins — or the elusive dual-date penny — might still want to buy pristine uncirculated or proof sets directly from the Mint website rather than relying on treasure hunts.

Are these coins actually worth anything?

With hundreds of millions being minted, the new 250th-anniversary coins probably won't ever exceed their face value. A 2026 quarter found in your car's cupholder will likely only be worth 25 cents for decades to come — regardless of the image stamped on it (unless it's a rare exception).

Even so, value may be built if your coins have flawless preservation, mint errors, or extreme scarcity.

• For instance, if you submit a coin to a professional grading service and it scores a "Perfect Proof 70" (PR70), collectors might pay more for it.
• This is because finding a coin completely free of microscopic scrapes, bumps, and bruises is nearly impossible (just think about the coins rattling around your glove compartment).

Even more lucrative are mint errors, which are flawed pieces that accidentally slip past the Mint's quality control.

Discoveries like a genuine "doubled die" (where the design looks doubled with a rounded, distinct separation) can turn ordinary pocket change into an asset worth hundreds or thousands of dollars. Yet finding true error coins is rare nowadays due to modern minting technology combined with sheer production volume.

Trump's hunt for gold

The collectible coin market is often flooded with standard modern base-metal commemorative sets, uncirculated coin rolls, and third-party legal tender. Although sometimes appreciable, many of these sets fall flat on the resale side.

However, if a set is struck in certified precious metals, it could retain its melt value, and in some cases, retail as well.

• For instance, the Mint is currently navigating a legal battle for an ultra-exclusive, 24-karat gold coin featuring President Trump's profile to mark the semiquincentennial.
• According to Mint and legal filings, only 47 of these coins would be released, each containing 19.7 troy ounces, retailing at $90,000 (pending approval). But legal issues and production delays mean these specific gold pieces wouldn't drop until after July 4, 2026 (more on that below).
• The built-in scarcity and historical track record of precious metals could make these gold coins a popular alternative asset, though gold investment returns can fluctuate significantly depending on inflation and the broader economy.

How the IRS taxes coin collections

If you do decide to jump into the hobby of coin collecting with the hope of selling for a profit later, keep in mind that the IRS treats collectibles very differently from stocks or cash (even for America's Birthday party).

• The holding period is capital. If you buy a collectible coin and sell it in under a year, any profit is taxed as ordinary income (up to 37% federal marginal rate). If you hold it longer than a year, the profit is subject to a specific collectibles capital gains tax rate, capped at 28%.
• Watch the net investment income tax (NIIT). Depending on your income, high earners may face an additional 3.8% NIIT surcharge. How much tax applies is equal to the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) exceeds the following thresholds: single filers with MAGI over $200k, or married couples filing jointly over $250k.
• Don't forget your cost basis. The good news is that everything you pay to get the coin — including shipping fees, sales tax, and any "buyer's premiums" above face value — counts toward your cost basis. You can subtract these expenses from your final sale price to lower your taxable gains.

Note: State income taxes on collectibles may also be applicable depending on where you live.

Ultimately, whether you're trying to build an alternative investment or just want to sort through your change with your kids or grandkids, the 2026 coin rollout is a historic milestone. Keep your eyes on your pocket change — you just might find a piece of history staring back at you.

Read More

• How Benjamin Franklin's Simple Money Rules Could Help Lower Your Taxes
• Is the Nickel Next? The New Math Behind Your Checkout Total
• Hobby Taxes: What They Are and How They Affect You
• How Collectibles Are Taxed: A Closer Look at Capital Gains Rules

Summer is often a popular season for major life milestones. Across the country, proud parents, grandparents, relatives, and friends are celebrating graduations and weddings, and some are sending hefty financial gifts.

But every year, questions loom about how much gifting results in IRS scrutiny.

The good news? The annual gift tax exclusion currently sits at $19,000 per person. But what actually happens if you exceed that threshold? And does the federal government even track these things?

Take this quick quiz to see if you can outsmart common gift tax misunderstandings and earn a perfect score.

Please note that this quiz has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or financial advice.

Navigating the complexities of the lifetime estate exemption and annul gift exclusion often requires a personalized approach. That's why it's important to consult your own tax and financial advisors with questions or concerns about any transactions.

Read More

• Gift Tax Exclusion 2026: What You Need to Know
• 5 Types of Gifts the IRS Won't Tax Even if They're Big
• June Tax Deadlines and IRS Refund Status

For some, June means summer vacations, backyard barbecues, weddings, graduations, and the NBA Finals.

For many, taxes are probably among the last things they want to think about right now.

Unfortunately, the IRS doesn't take the summer off.

While the April 15 tax filing deadline has come and gone, there are important IRS deadlines to keep on your radar this month. If you're still waiting for a tax refund, there are a few developments worth noting.

Here's more about key IRS deadlines for June, refund processing, and some common summer activities that could affect next year's tax bill

June 15 estimated taxes

The second estimated tax payment for the 2026 tax year is due June 15, 2026.

The U.S. tax system operates on a pay-as-you-go basis, meaning taxpayers are generally expected to pay taxes throughout the year as income is earned. While traditional employees typically have taxes withheld from each paycheck, that isn't always the case for other types of income.

Estimated tax payments are commonly required for:

• Self-employed workers
• Freelancers and independent contractors
• Gig workers
• Small business owners
• Investors with significant dividend, interest, or capital gains income
• Landlords receiving rental income
• Some retirees who don't have enough tax withheld from their retirement income

Failing to pay enough tax during the year can result in IRS underpayment penalties, even if you ultimately pay your full tax bill when you file your return.

Taxpayers can use Form 1040-ES to estimate how much they should pay. After the June payment, the remaining estimated tax deadlines for 2026 are September 15, 2026, and January 15, 2027.

For more information, see our report: When Are Estimated Tax Payments Due?

June 15 filing deadline for Americans living abroad

June 15 is also an important date for U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico.

These taxpayers receive an automatic two-month extension beyond the standard April filing deadline. As a result, many expats have until June 15, 2026, to file their 2025 federal income tax returns.

It's important to remember that an extension applies to filing your return, not to paying your taxes. (That payment was due in April.) Interest generally begins accruing on unpaid balances after the regular April tax deadline.

Keep in mind:

• Many Americans living overseas might qualify for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, but they generally must file a U.S. tax return to claim them.
• Taxpayers who need additional time can typically request an extension until October by filing IRS Form 4868.

IRS refund status: Why some taxpayers might receive refunds in June

The IRS continues to issue refunds throughout the summer, and many taxpayers who filed later in the season might still be receiving their refunds in June.

• For most taxpayers who file electronically and choose direct deposit, refunds are generally issued within about 21 days.
• However, not every return moves through the system that quickly, particularly if additional review or corrections are required.

One issue affecting some taxpayers this year involves IRS Notice CP53E.

As Kiplinger has reported, this notice is generally issued when a direct deposit is rejected, most often due to incorrect or mismatched bank account information or a financial institution declining the deposit. When that happens, the IRS typically eventually issues the refund as a paper check.

While taxpayers still receive their money, the switch from electronic payments to mailed checks can add processing time and create delays that many weren't expecting. The CP53E letters, which have reportedly been sent to millions of taxpayers this year following the tax agency's move to phase out paper refund checks, have caused confusion.

If you're still waiting on a refund, the IRS recommends checking the "Where's My Refund?" tool on IRS.gov or logging directly into your official IRS online account.

For more information, see our IRS tax refund calendar for 2026.

Summer activities that could affect your next tax bill

Even if you've already filed your taxes this year, several common summer activities can affect the return you'll file next year, in early 2027.

Some common summer events that can affect taxes include:

Starting a summer job

Students and seasonal workers often take on summer employment. Keep in mind that even part-time work can affect tax withholding and potentially create a tax filing requirement.

Taking on gig work or a side hustle

Driving for a rideshare company, freelancing, selling products online or earning income through an app (a few examples) can create taxable income that isn't subject to tax withholding. That might mean estimated tax payments are necessary for some to avoid penalties later.

Getting married

Summer remains one of the most popular wedding seasons in the U.S. Marriage can affect filing status, tax brackets, deductions, credits and withholding. Newlyweds might want to review their Form W-4s to ensure enough tax is being withheld from their paychecks.

Welcoming a child

Having a baby or adopting a child might make taxpayers eligible for valuable tax benefits, including the Child Tax Credit and other family-related tax breaks.

Buying or selling a home

A home purchase can affect deductions and tax planning, while a home sale could potentially trigger capital gains considerations depending on the circumstances.

Changes in retirement income

Some retirees begin taking required minimum distributions (RMDs) during the year or adjust withholding on Social Security and retirement plans. Those changes can affect overall tax liability.

June tax concerns: Bottom line

The IRS is reminding taxpayers to review their withholding and tax situation whenever major life or income changes occur.

But keep in mind that midyear is a good time not only to review your potential tax liability and make adjustments that might lower your next tax bill, but also to take a holistic look at your finances.

Overall? Everyone's tax and financial situation is different. If you have any concerns about whether the June tax deadlines affect you, it's best to consult with a tax professional or certified financial planner who can provide tailored advice and guidance.

Read More

• Federal Income Tax Brackets and Rates for 2026
• NBA Finals Put the Jock Tax in the Spotlight
• IRS CP53E Letters Could Change Due to Taxpayer Backlash

After weeks of intense budget negotiations, New Yorkers are in for a payout in 2026.

More than 8 million residents will receive hundreds of dollars in relief this fall, due to the Protecting Our Wallets Energy Rebate (POWER) program, a new initiative designed to combat surging gas and electric bills in the state.

Checks will be sent automatically to qualifying New York residents.

"We know New Yorkers need some relief," Gov. Kathy Hochul said in a press briefing regarding the program. "...The bills are just getting higher and higher, and it is so discouraging for our families."

But the POWER rebate is only one piece of a larger $268.1 billion puzzle. The finalized 2026-2027 New York budget introduces several targeted and localized changes to the state's tax landscape.

From a tipped income exemption for workers to a controversial new "pied-à-terre" tax on luxury New York City real estate, these provisions are intended to reshape New York's affordability — even as the state faces a staggering $34.3 billion cumulative structural budget gap through 2029.

Here's the breakdown of how the new budget might impact your wallet.

Who qualifies for a New York State rebate check?

Roughly $1 billion in rebates will be sent starting in September 2026. To be eligible, a taxpayer must be a full-time resident and not claimed as a dependent. No application is necessary.

The POWER rebates are also based on 2024 state tax filings. How much you receive depends on your state adjusted gross income (AGI) and filing status for that tax year.

Below is a table outlining the 2026 New York POWER check amounts:

Targeted relief for NY families, workers, and older adults

Beyond one-time checks, the budget also introduced a few long-term adjustments offering more potential savings for New Yorkers.

• Expanded childcare: The state is investing $1.5 billion to expand its Child Care Assistance Program (CCAP) by raising income eligibility limits to include more families and capping weekly copayments. Through instituting the $15 weekly caps, an eligible family currently paying $300 per week could see their annual expenses drop by over $14,000.
• Tax-free tips: Starting in 2026, New York will eliminate income taxes on the first $25,000 of tipped wages for those earning under $150k (similar to the federal "no tax on tips" deduction). This could save service workers — from servers to stylists — roughly $189 per person in annual state income taxes, according to state data and Kiplinger's analysis.*
• Older adult property tax relief: The state authorized an expansion of the Senior Citizen Homeowners' Exemption (SCHE) to $75,000 (up from $50,000). So, for example, if you're newly qualified for the homestead exemption and have a 2.5% property tax rate, you could save about $500 on your next property tax bill. (Yet, not all tax jurisdictions may adopt the exemption, and the percentage of your property tax bill that qualifies could differ depending on income.)

However, despite the state having the funds to support these initiatives, the New York State Comptroller forecasts a cumulative structural deficit of about $34.3 billion through 2029 due to federal cuts from the Trump administration, coupled with state Medicaid and education spending.

Additionally, New York City's structural deficit is projected to be $10.4 billion in 2027. New York City Mayor Zohran Mamdani has previously advocated for higher taxes on high earners to address the city's deficit. The new real estate surcharges included in the state's budget might just deliver.

The 'millionaire's' second-home tax in New York City

As part of the 2027 New York budget, Hochul and Mamdani have introduced an annual surcharge targeting New York City's high-end secondary market, specifically homes valued at $5 million or higher. This new "pied-à-terre" tax on non-primary residences will be in addition to annual property tax bills.

Here's how it'll work. Starting July 1, 2026, co-ops and condos will be taxed using the city’s current "assessed values" framework, starting with properties valued at $1 million or more. Single-family homes will use a lower annual tax rate for properties valued at $5 million. After two years, co-ops and condos will then switch to the lower single-family home framework.

Here's the math in action:

Here's how it could affect you. According to state officials, a single-family home assessed at $11.5 million would pay about $92,300 annually under the new tax law. In total, this second home tax is expected to cost some luxury homeowners about $500 million annually until the provision expires in 2031 (unless renewed by state lawmakers).

'Pied-à-terre' tax critics and budgetary concerns

New York is home to "the highest concentration of extreme wealth in the nation," according to the Institute on Taxation and Economic Policy (ITEP). At the same time, New York City has a 25% overall poverty rate, according to Robin Hood, which is higher than it has ever been.

Some state and city officials see the new second-home tax as a means to bridge New York City's wealth gap and the state's structural deficit in one go.

However, critics of the plan argue that the tax will weaken the city's economy rather than improve affordability.

"It will not raise the amount of revenue expected." James Whelan, President of the Real Estate Board of New York, reportedly wrote to Business Insider. "[It will] eliminate thousands of construction jobs, lower property values, and raise costs for New Yorkers."

• Recent reports from the U.S. Census Bureau mark New York property tax bills as among the highest in the nation, with a median bill of $6,542.
• The U.S. Bureau of Economic Analysis (BEA) also reports that the average prices for essential goods and services in the state, like food, transportation, and healthcare, are about 8% above the national average (ranking New York as the fifth most expensive state to live in overall by these metrics).

Fiscal watchdogs caution that $268 billion in spending could outpace inflation for New Yorkers.

"The budget increases State Operating Funds spending by at least 8 percent," the Citizens Budget Commission of New York (CBCNY) reported after the budget's release. "[This pushes] decade-long spending growth over $30 billion above inflation."

Yet even with budgetary concerns, New York State currently boasts a $2.5 trillion economy, ranking as the third-largest state economy in the U.S., according to the BEA.

This means the state generates about 7.9% of the nation's Gross Domestic Product (GDP), and recent projections for New York City's economic growth track around 1.7% annually, roughly in line with national U.S. GDP projections.

Bottom line for your wallet

For the average New Yorker, the 2027 budget might present a mixed bag of immediate relief and long-term questions.

If you are a working parent or a service industry professional, the combination of the POWER rebate, the childcare cap, and the tax-free tips could represent a significant relief in your monthly household costs for the coming year.

However, for the real estate industry and high-net-worth individuals, the pied-à-terre tax might signal a shift toward more aggressive wealth redistribution to patch a looming multi-billion-dollar deficit.

Ultimately, the $100 to $200 hitting your mailbox this fall could be a helpful bridge, but not quite a cure for the state's high cost of living. Whether New York's economic output can continue to outpace inflation — and whether the new NYC luxury taxes will drive away wealthier individuals — remains to be seen. Stay tuned.

Read More

• 10 Cheapest Places to Live in New York
• Will You Still Owe Taxes After Moving Out of a State With a Wealth Tax?
• New York Tax Guide

Touted by the Trump administration as "eliminating taxes on Social Security," the new, temporary "senior bonus deduction" is adding to concerns about Social Security's solvency, even as a COLA increase is expected for the coming year.

When President Donald Trump and Republicans in Congress passed the so-called "big beautiful bill" last year, one of the most talked-about provisions was a new, but temporary, bonus deduction for older adults.

The $6,000 tax break, available to eligible taxpayers age 65 or older from 2025 through 2028, can be stacked on top of the standard deduction and the extra standard deduction for those over 65 and is available to those who itemize deductions. Yes, there are income phaseouts.

Still, the Trump administration has pointed to the deduction as a windfall for seniors, effectively eliminating taxes on Social Security. (No, the 2025 Trump tax bill doesn't change Social Security tax law and doesn't necessarily eliminate SS taxes. However, in many cases, the deduction can reduce taxable income enough for some to effectively exempt Social Security income from tax.)

But…what if that benefit could weaken Social Security's finances?

That's an emerging concern: a policy marketed as eliminating taxes on Social Security could worsen the system's long-term funding gap and perhaps affect the timing of future benefit reductions.

Curious? Here's more of what you need to know.

How the $6K senior deduction interacts with Social Security taxes

Let's start with some facts.

• The $6,000 senior deduction doesn’t affect the payroll tax (12.4% levy split between workers and their employers) that funds Social Security.
• Neither the 2025 tax bill nor the new over-65 bonus deduction changes the rule that allows the IRS to tax up to 85% of Social Security benefits depending on income.

However, the senior bonus deduction can lower taxable income for millions of older adults. That can, in turn, push some retirees below the thresholds at which their Social Security benefits become taxable, reducing the amount of tax paid by those who remain above them.

So, what's the big deal? Well, federal income taxes on Social Security benefits are credited to the Social Security trust funds. That revenue stream is small compared with the amount that comes from payroll taxes, but it is part of the program’s long-term financing picture.

Why Social Security solvency concerns are resurfacing now

Concern about the potential impacts of the senior bonus deduction on Social Security is surfacing against a backdrop of projections from the Social Security Administration’s Office of the Chief Actuary.

• Current estimates are that the Old-Age and Survivors Insurance (OASI) trust fund will be depleted around 2033.
• At that point, incoming payroll taxes would cover roughly 77% to 80% of scheduled benefits, depending on assumptions.
• So, even before any new tax policy impacts are considered, that implies a potential across-the-board benefit reduction of about 20% to 23% unless Congress intervenes.

From a tax perspective, the Joint Committee on Taxation (JCT) has estimated that the $6,000 senior tax break could initially (through 2029) reduce federal revenues by roughly $91 billion. The 10-year costs could fall in the $125 to $220 billion range by 2034, depending on whether the provision is extended.

That figure includes several moving parts, but part of the revenue loss stems from reducing the tax treatment of retirement income, including Social Security benefits.

Because federal taxes paid on Social Security benefits are credited to the program’s trust funds, lower taxable income can also mean less money flowing into the system over time.

Important to note: Social Security’s financial challenges are driven primarily by demographics, not this new deduction. The system’s long-term funding gap already existed well before the Trump/GOP reconciliation tax package became law.

But that’s also why some analysts are paying attention to even relatively modest revenue changes around the edges. In a program already facing long-term fiscal pressure, policies that reduce money flowing into the trust fund — even indirectly — can affect projections at the margins.

And that’s where some irony comes in: a policy promoted as delivering tax relief tied to Social Security could potentially slightly weaken one of the revenue streams tied to the program’s long-term finances.

How much could the $6,000 deduction shift the Social Security depletion timeline?

In situations where revenue tied to benefit taxation is reduced, some long-range projections suggest the depletion date could move sooner by a matter of months to roughly a year. How much earlier depends on various assumptions about economic growth, payroll tax receipts, and behavioral responses.

That doesn't necessarily change the trajectory of Social Security’s finances. And it doesn't create insolvency on its own or replace the structural drivers of the system’s funding imbalance.

But it highlights how even seemingly small changes in related revenue sources (like reduced tax collections resulting from a new $6,000 tax break for millions of older adults) can affect the timing of trust fund exhaustion in models that already show a narrow runway.

What this means for retirees now

For many older adults, the senior bonus deduction is a relatively straightforward tax cut:

Taxpayers age 65 or older can stack the $6,000 deduction on top of the standard deduction and the existing extra standard deduction for those 65-plus. Eligible taxpayers who itemize can also claim the bonus deduction.

• You must be 65 or older by the end of the given tax year.
• The bonus amount tops out at $6,000 for individuals and $12,000 for married couples, when both spouses are 65 or older.
• This deduction phases out above a certain income level: Modified Adjusted Gross Income (MAGI) of $75,000 for singles and $150,000 for those married, filing jointly. It phases out completely for MAGI above $175,000 and $250,000, respectively.
• The IRS says you must "include the Social Security Number of the qualifying individual(s) on the return, and file jointly if married, to claim the deduction."

For some middle- and upper-middle-income retirees, the new deduction can reduce or even eliminate taxes on Social Security benefits by lowering taxable income. For lower-income retirees who already pay little or no federal income tax, the impact is often much smaller.

• Middle- and upper-middle-income seniors will likely account for roughly three-quarters of the total tax relief under the measure, according to the Tax Policy Center.
• In 2026, average savings are projected at about $220 for middle-income households and around $300 for those in the upper-middle income tier.

Keep in mind: Despite how the Trump administration has framed the policy, the deduction does not change Social Security tax law or permanently eliminate taxes on benefits. Instead, it works indirectly by reducing the amount of income exposed to taxation in the first place. So keeping an eye on your taxable income and existing SS tax thresholds remains important.

What's next? Funding conversations for Congressional lawmakers.

Potential ways to address the Social Security funding issues floated by policymakers in recent years include raising payroll taxes, lifting or eliminating the income cap, gradually increasing the retirement age, reducing cost-of-living adjustments, and means-testing benefits for higher-income retirees.

But...no specific bipartisan proposal seems to be on deck yet, so as always, stay tuned.

Learn More

• How the $6,000 Senior Bonus Deduction Works
• What You Need to Know About Taxes on Social Security Benefits
• College Towns Are Becoming Retirement Destinations in 2026: Does the Tax Math Add Up for Retirees?
• The Extra Standard Deduction for Those Age 65 and Older

Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at four questions on whether Congress will enact more tax changes before November's mid-term elections and related topics.(Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Congress and tax changes

Question: Do you think Congress will enact more tax changes before this November's midterm elections?

Joy Taylor: No, we really don't expect any big federal tax changes to pass before November's midterm elections. That's not to say that many in Congress wouldn't like to see more tax changes. Republican taxwriters are pushing for tax legislation to supplement last year's "One Big Beautiful Bill." Meanwhile, some Democrats are offering sweeping tax plans, while others are introducing narrower proposals to curb what they see as tax schemes for the wealthy.

Some Republicans in Congress want to use budget reconciliation to shove their tax priorities through Congress. This process has lots of technical and arcane rules, but it lets lawmakers circumvent the 60-vote filibuster rule in the Senate. Budget reconciliation requires only a simple-majority vote. Congressional Republicans used it to pass the OBBB and the 2017 Tax Cuts and Jobs Act, among other laws. Democrats have also used it when they controlled Congress and the White House.

Republicans are currently working on a new budget reconciliation measure, but President Trump and congressional GOP leadership want to limit its parameters to funding Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP). There is talk on Capitol Hill about trying to push through a third reconciliation bill, but the odds of this happening before the midterm elections are middling at best.

2. Capital gains indexing

Question: I heard that Republicans are pushing to index capital gains to account for inflation each year. Can you explain what this would do and whether Congress would enact such a law?

Joy Taylor: Republican lawmakers and conservative free-market groups are pushing the White House to index capital gains to inflation each year. Essentially, this would let taxpayers increase their tax basis in appreciated assets, such as stocks and real estate, by the rate of inflation between the asset’s purchase date and the time of sale. Having a higher asset basis would result in a lower capital gain when the person sells the property, and thus a lower tax.

This idea has been bandied about for decades but is gaining steam again during President Trump’s second term in office. Over 25 organizations asked that Trump use his executive authority to annually index capital gains to inflation. And Senator Ted Cruz (R-TX) has introduced a bill in Congress to index capital gains to inflation.

We don't think Congress will enact a law this year to index capital gains to inflation. But the concept might make Trump's regulatory agenda. If Trump does this through the Department of the Treasury, and not with legislation, it would be controversial and would almost certainly face legal backlash. We don’t know where Trump stands on the idea. During his first term in office, he first supported capital gains indexing, and later he opposed it.

3. Gain on home sales

Question: I heard there were bills in Congress to fully eliminate the taxation of gain when homeowners sell their primary residence. What are the odds that Congress would pass such a proposal?

Joy Taylor: Under current law, if you have owned and lived in your principal residence for at least two out of the five years before you sell the home, up to $250,000 of the gain is tax-free. The tax-free home sale gain exclusion is $500,000 for married couples filing a joint return. Any gain in excess of these amounts is taxed at long-term capital gains rates of 0%, 15% or 20%, with possibly an extra 3.8% tax.

Many sellers won't crack the gain exclusion limits. But homeowners living in pricey areas or who have owned their home for a long time may. One reason for this is that the home-sale exclusion, unlike many other breaks in the tax code, isn't indexed to inflation each year. The gain-exclusion amounts of $250,000 and $500,000 have stayed the same since 1997, when they were first enacted into law. They have never been adjusted for the skyrocketing appreciation in value of residential real estate during the nearly 30 years this tax break has been in effect.

It is true that some Republican lawmakers want to make all gain on home sales tax-free and have introduced proposals in Congress to this effect. President Trump has even dangled this idea. But we don't see this coming to fruition any time soon. These types of proposals would put a huge dent in federal revenue and would mainly benefit upper-income individuals.

A more feasible legislative option might be to raise the current $250,000 and $500,000 gain-exclusion amounts. Two bills would increase the exclusion to $500,000 ($1 million for joint filers). The identical bipartisan proposals, which were introduced by House Representative Jimmy Panetta (D-CA) and Senator John Cornyn (R-TX), would also index the amounts to inflation each year. The odds of enactment are better than they have been in past years, but it is still a steep climb. Neither of these bills will be enacted as a stand-alone law, so it must be attached to a bigger piece of must-pass legislation.

4. Health premium tax credit

Question: Do you think Congress will bring back the pre-2026 expansions to the health premium tax credit?

Joy Taylor: We think the odds of Congress reaching a deal on health premium tax credits ("PTC") are quite slim. The PTC is for eligible people who buy insurance through the marketplace. Temporary easings, which were enacted during the height of the COVID-19 pandemic and later renewed, ended after 2025. Prior to 2021, the PTC was available to people with modified adjusted gross incomes ranging from 100% to 400% of the poverty level. For 2021-25, some people with higher modified AGIs also qualified, and the credit was bigger for many individuals. Beginning January 1, 2026, the PTC rules reverted to those in place for pre-2021 years.

Democrats want the pre-2026 PTC expansions cleanly extended. Republicans want changes made to narrow the scope of the PTC. The parties appeared close to an agreement earlier this year, but talks have stalled as Congress’s attention is diverted elsewhere.

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 roundups. 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: Will I be Audited by the IRS?
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: More Questions on IRAs

The IRS may revise its CP53E notices after months of taxpayer backlash and practitioner complaints.

During a recent meeting with tax practitioners, the IRS Chief of Taxpayer Services said the agency may consider changes to the notices in light of widespread confusion, according to nonprofit publication Tax Notes (paywall).

As Kiplinger has reported, hundreds of thousands of CP53E notices tied to direct deposit verification have reportedly been sent, and by some estimates, several million. In either case, those numbers represent a significant share of taxpayers hearing from the IRS during filing season.

The notices are part of the tax agency's broader effort to shift more refunds to electronic direct deposit and phase out paper checks — a modernization push designed to improve efficiency and lower fraud risk.

But the rollout has become somewhat controversial, as many recipients believed the letters were scams or sent with nefarious intent.

The stakes aren't trivial. Average federal tax refunds for the 2026 filing season hovered just above the mid-$3,000s, and surveys show that most taxpayers planned to use their refunds to cover essentials and pay down debt. So delays can tie up household cash flow.

What IRS notice CP53E means

The CP53E notice is generally issued when the IRS cannot process a refund via direct deposit because:

• Bank account information is missing or incorrect
• Financial institution details were rejected
• Post-filing adjustments result in a refund being issued after changes to a return

Taxpayers are typically instructed to log in to their IRS online account within 30 days to update their banking information. If they don't respond, the IRS says it will issue a paper check. Though that can add roughly 6 weeks to the processing time, depending on timing and agency workload.

Does the IRS use QR codes?

Some tax professionals and taxpayers reported receiving CP53E letters in situations where:

• Refunds had already been received
• No refund was expected
• Taxpayers actually owed money to the IRS

On practitioner forums and social media platforms, some described situations in which CP53E notices reportedly appeared before other notices related to IRS tax return adjustments that would have explained an unexpected refund.

The format of the notices added to the confusion, as some taxpayers reported being unsure about the validity of QR codes and instructions directing them to log in to their IRS online accounts.

Those CP53E scam fears stood out, since IRS impersonation scams have become increasingly common.

Adding to the confusion? The toll-free phone number listed in the notice contains recorded explanations regarding the notice and doesn't connect taxpayers to a live customer service agent at the IRS.

ID.me access concerns

The CP53E notice seems to have also revived criticism of the IRS’s online account system and its reliance on ID.me identity verification.

On social media, some taxpayers said they felt pressured to create online IRS accounts or complete third-party identity verification to resolve refund issues within tight response windows.

One Reddit user described waiting for ID.me verification while the 30-day response deadline ticked down, writing that “having a 3rd party stand between me and my refund feels silly.”

Another practitioner told Kiplinger that she and several of her clients received the CP53E notices, and that some of those clients owed taxes, leading her to believe the IRS might be trying to prompt taxpayers to sign up for IRS online accounts.

The IRS hasn't said the notices were intended to increase adoption of online accounts or ID.me, but updated FAQ materials direct users experiencing access issues toward identity verification support resources.

IRS updates CP53E FAQs due to confusion

Worth noting: the IRS updated its FAQ guidance on CP53E notices.

The agency clarified that the letters are legitimate IRS correspondence and that QR codes included in the notices are intended to direct taxpayers to official IRS online account services, not third-party websites.

The guidance also walks taxpayers through how to confirm a notice’s authenticity by logging directly into IRS.gov rather than using embedded links or scanning codes. The tax agency reiterates that taxpayers will never be asked to provide sensitive information through QR codes or unsolicited text links.

The Taxpayer Advocate Service (TAS) issued separate guidance reinforcing that CP53E notices should be verified on IRS.gov or through official IRS accounts, and that taxpayers who believe they received a notice in error can cross-check their refund status directly using IRS tools before taking action.

TAS also emphasized basic scam-avoidance, including not clicking unfamiliar QR codes or links from unconfirmed notices.

Getting an IRS letter: What happens next

No formal redesign of the notice has been announced yet, so for now, the IRS says the safest approach is to verify your IRS status directly through your official IRS online account.

And remember: Every taxpayer's situation is different, so if you need professional advice on how to respond to a CP53E or other IRS notice, it's a good idea to consult a tax professional.

Overall, the situation highlights a significant challenge for the IRS: modernizing a system that processes hundreds of millions of tax returns and billions of dollars in refunds each year while maintaining trust in its communications with millions of taxpayers.

Related

• Received an IRS Letter? CP53E Notices Spark Confusion and Scam Fears
• IRS Tax Refund Calendar 2026: When Will Your Payment Arrive
• The Government is Phasing Out Paper Checks: What to Know
• Trump No-Audit Deal: Will You Still Get Audited by the IRS?

Nearly 40% of self-employed workers are baby boomers, according to a 2024 survey by Guidant Financial, and the number of older entrepreneurs has increased significantly in the past 25 years. Working for yourself in retirement, either full or part-time, makes a lot of sense: You can supplement your savings, stay engaged in your profession or try something new.

But if you're new to self-employment, you may not be prepared for the tax consequences of going solo.

In addition to income taxes, you'll also be responsible for paying the employee and employer portions of your Social Security and Medicare tax, which totals 15.3% of 92.35% of your net earnings. This often comes as a surprise to individuals who have spent their careers working for someone else, because employees who receive a W-2 only pay half of the payroll tax. Their employer picks up the rest. And since the employees' portion is usually withheld from paychecks, it may go unnoticed.

Fortunately, you can deduct half of your self-employment tax. You may also be eligible to deduct your Medicare premiums — a tax break many self-employed retirees overlook, financial planners say.

If you have self-employment income and are enrolled in Medicare, you can deduct premiums for Medicare Part B, Part D, Medicare Advantage, or a Medigap supplemental policy.

You can also deduct your spouse's Medicare premiums, even if your spouse doesn't work for you.

A portion of premiums for long-term care insurance is also deductible, as long as the policy is deemed tax-qualified by the IRS.

The amount you can deduct will vary depending on your age; in 2026, individuals between 61 and 70 can deduct up to $4,960 in long-term care insurance premiums. If you're 71 or older, you can deduct up to $6,200.

David Haas, a certified financial planner with Cereus Financial Advisors in Franklin Lakes, N.J., says he recently met with a self-employed client whose accountant failed to deduct thousands of dollars in premiums for Part B, D, Medigap and long-term care insurance. Fortunately, he caught the mistake before the client filed his tax return.

One possible reason for the confusion is that taxpayers who don't work for themselves are limited in the amount of medical expenses they can deduct. If you claim the standard deduction — which is the case for most retirees — you can't deduct any of your unreimbursed medical expenses. And even if you have enough deductions to itemize, you can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. That usually limits the deduction to taxpayers who have very high medical expenses and low income, Haas says.

But if you work for yourself, you can deduct your health insurance expenses — including Medicare — from your self-employment income even if you claim the standard deduction. For self-employed taxpayers who file a Schedule C, health insurance is an “above-the-line” deduction, which will lower adjusted gross income.

This could make you eligible for other tax credits or benefits that are tied to your AGI, says Catherine Valega, a financial planner and enrolled agent with Green Bee Advisory in Burlington, Mass. It could help you avoid a high-income surtax on your Part B Medicare premiums, which is tied to your modified adjusted gross income (that's your AGI with a few adjustments).

There are some limits to this deduction. It can't exceed your self-employment income.

• For example, if your net self-employment income for the year was $5,000, your deduction can't exceed that amount.
• In addition, you can't deduct your Medicare expenses for any months you were eligible to enroll in an employer-subsidized health care plan.
• And, if you or your spouse are working for an employer that offers health insurance, you can't deduct your Medicare premiums, even if you opt not to enroll in the plan.

Nor can you double dip: If you itemize and deduct unreimbursed medical expenses, you can't deduct them from your self-employment income.

To get the most from this deduction, keep good records of Medicare and long-term care insurance premiums and any other expenses, such as traveling to clients, part of your internet service, and office supplies.

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.

Related Content

• 7 Overlooked Tax Deductions for the Self-Employed
• 12 Tax Strategies Every Self-Employed Worker Needs in 2026
• Ask the Tax Editor, May 15: Deductions for Self-Employed Retirees

You may have heard about a settlement between President Donald Trump and the IRS to resolve a $10 billion lawsuit over his tax returns. The deal has sparked backlash, including over a provision that bars the federal tax agency from continuing existing audits involving Trump, his company, and his family members.

The agreement also reportedly creates a multibillion-dollar “Anti-Weaponization Fund” (more on that later).

Meanwhile...the administration has cut IRS staffing and budget — most recently by roughly $1.1 billion in FY26 — since Trump began his second term.

These developments raise several thorny political, legal, and practical concerns. But one key question is whether IRS enforcement priorities will shift in ways that affect more taxpayers: Who else will still get audited, and why?

Trump IRS settlement: How we got here

Before looking at who the IRS might audit, it helps to understand how the Trump IRS settlement came about in the first place.

As Kiplinger has reported, Donald Trump, the Trump Organization, and family members sued the IRS and Treasury Department in federal court in early 2026.

• They alleged that the agencies failed to safeguard Trump’s confidential tax information after an unauthorized disclosure by a former IRS contractor.
• The suit sought $10 billion in damages and drew scrutiny because a sitting president was suing over the very agency that enforces tax law.

By mid-May 2026, Trump said the dispute was resolved through a settlement with the Department of Justice (DOJ). As mentioned, a provision in that settlement appears to limit IRS action surrounding existing audits involving Trump, his family, and affiliated entities.

The settlement also reportedly creates a roughly $1.776 billion “Anti-Weaponization Fund” tied to claims of government misconduct. The fund would be taxpayer-funded and controlled by an administration-appointed group, not the IRS, raising concerns about its broad scope, lack of congressional oversight, and lack of precedent in tax disputes.

A lawsuit has already been filed challenging the fund’s structure, and the combination of a large compensation fund and limits on IRS scrutiny of Trump, his company, and his family is fueling concern.

In a May 21 letter to Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano, several Senate lawmakers wrote the following.

“Through this settlement, you and the President have created a nearly $1.8 billion taxpayer-funded slush fund for the President's political allies, including potentially the January 6th insurrectionists . . . essentially making it official United States government policy that President Trump, his family, and many other allies are above the law.”

Update: A federal judge in Virginia temporarily blocked the Trump administration from creating or distributing money from its "Anti-Weaponization Fund" while the court reviews legal challenges alleging the fund may be unconstitutional and improperly benefit Trump allies.

IRS audit red flags for everyone else?

Even as Trump appears to have reduced exposure to IRS scrutiny for certain existing matters involving him or his family, audits remain unlikely to disappear for other taxpayers.

And one thing to note first: Historically, IRS audit activity has not been evenly distributed, and data show that a meaningful share of audits involving lower-income taxpayers has centered on refundable credits such as the Earned Income Tax Credit (EITC).

The reason seems to be that those are easier for the agency to flag and resolve through automated review and correspondence audit.

What about audit rates? The overall audit tax rate for the IRS is reportedly less than 1%.

• IRS audit rates fell sharply from about 0.9% of returns in 2011 to roughly 0.3% in 2018 (about 9 in 1,000 returns versus 3 in 1,000), according to IRS Data Book figures.
• Audit activity then ticked up modestly through 2024, following new IRS funding under the Biden administration's Inflation Reduction Act.
• Early reporting from President Donald Trump’s second term suggests that audits have softened again due to staffing and budget cuts, which affect enforcement capacity.

With fewer experienced revenue agents available, enforcement leans more heavily on automated systems that can operate at scale — flagging discrepancies between reported income and third-party forms like W-2s and 1099s, or generating notices based on data mismatches.

That tends to push compliance toward high-volume, low-complexity cases where algorithms identify errors. Some so-called “red flags” include:

• Income reporting mismatches detected through IRS computer systems
• Refundable tax credit claims requiring documentation checks
• Self-employment and gig-economy income reporting
• Automated compliance alerts triggered by third-party reporting gaps

More complex audits, like those involving large partnerships, layered business structures, and high-net-worth returns, require more staff time and specialized expertise. As a result, they tend to be more sensitive to staffing levels when the agency loses experienced examiners or shifts resources toward automation.

That doesn't necessarily mean fewer audits overall, but there could be a shift in which kinds of errors the agency catches most often. That tension lies at the center of the broader question raised by Trump’s settlement: not just who is exempt from audit scrutiny, but who remains most exposed and why.

Who get audited by the IRS: Bottom line

For most taxpayers, IRS audits in 2026 are still likely to occur — but probably at relatively low rates overall — and they don’t usually look like the intensive, in-person examinations some people experienced in the past or tend to imagine.

Note: Keep in mind that whether the IRS audits you will depend on your specific tax situation. As Kiplinger has reported, the agency may consider several factors, including income, tax breaks claimed, whether you own a business, etc. Consult a tax professional if you're concerned about your audit exposure.

• More often, modern IRS audits are "correspondence audits."
• These are automated notices often triggered by mismatched income records, missing paperwork, or questions tied to tax credits and deductions.
• They tend to be relatively narrow, system-driven, and generally designed to be resolved through documents rather than agent interviews.

But since enforcement tends to fall most heavily on returns that are easiest to flag automatically, everyday taxpayers can end up more visible than higher-income taxpayers with more complex cases, which many people would assume would or should draw the most scrutiny.

Meanwhile, the Trump IRS settlement is fueling a fiery debate.

Senate Finance Democrats, including the top Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-Ore.), as well as Sen. Patty Murray (D-Wash.), have questioned whether the agreement oversteps congressional authority and effectively restricts IRS enforcement in ways never approved by statute.

At the same time, some Republicans, including Rep. Brian Fitzpatrick of Pennsylvania, have also raised concerns about precedent and process, arguing that any deal involving limits on IRS audits or large compensation structures requires clearer congressional oversight and guardrails.

Fitzpatrick and Rep. Tom Suozzi (D-NY) introduced the No Taxpayer-Funded Settlement Slush Funds Act to prevent federal dollars from being used for the fund.

Notably, Republican Senate Majority Leader John Thune of South Dakota reportedly has said he didn't see a purpose for the fund.

The Justice Department also recently faced questioning in a hearing on Capitol Hill over how the agreement was structured and how a nearly $1.8 billion compensation fund was justified in the context of a tax enforcement dispute. Lawmakers pressed acting Attorney General Todd Blanche for more details on how the terms were negotiated and approved.

Overall? Stay tuned. What becomes of the Trump IRS deal could spark continued debate over tax enforcement and fairness.

More on the IRS

• Common IRS Audit Red Flags to Avoid
• Ask the Editor: Will You Get Audited by the IRS This Year?
• Who Does the IRS Audit the Most?
• Received an IRS Letter? Taxpayer Confusion Grows Over CP53E Notices

Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at four questions on Roth IRAs and the five-year rule, including contributions and conversions. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. What is the Roth IRA five-year rule?

Question: I understand that to withdraw money from a Roth IRA without paying tax or a penalty on the earnings, the account owner must have had the money in the Roth IRA for at least five years and be age 59½ or older. My question relates to when the five-year clock starts when contributions are made over several years. Also, do the rules differ for Roth IRA conversions?

Joy Taylor: The five-year rule your question refers to applies to Roth IRA contributions, 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 year the owner first put money into a Roth IRA. For this first five-year rule, the five-year clock starts on January 1 of the year you first deposited money into any Roth IRA that you own, through either a contribution or a conversion from a traditional IRA. The clock doesn’t restart for later Roth contributions, conversions, or newly opened Roth IRA accounts.

Note there is another five-year rule that 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. This second five-year rule doesn’t apply to new contributions to Roth IRAs, but to conversions of pretax income from traditional IRAs to a Roth. 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 more on both of the five-year rules applicable to Roth IRAs, see our article, "What to know about the five-year rules for Roth IRAs."

2. When does the five-year rule start?

Question: I am 68 and have been doing Roth IRA conversions for the past three years. My first Roth conversion was in 2023. When does the clock start for the five-year rule? And are there separate five-year clocks for each Roth IRA conversion that I do?

Joy Taylor: In your situation, the five-year clock for withdrawing Roth IRA earnings tax-free begins on January 1 of the year that you first put money into any Roth IRA that you own, whether through contributions, rollovers or conversions. So if you first started funding a Roth IRA in 2023, and you don't have other pre-existing Roth IRAs, the five-year period begins on January 1, 2023. It doesn't restart after each conversion.

3. Another question on when the five-year rule starts

Question: I am 70 years old, and I have been doing Roth conversions over the past 10 years. My initial conversion was in 2017, and each year thereafter I converted more money. Does each conversion date have its own separate five-year period or does the five-year period start when I made my first conversion in 2017? I have no other Roth IRAs other than the one I opened in 2017.

Joy Taylor: In your situation, the applicable five-year rule begins on January 1 of the year you first put money into any Roth IRA, via contribution or conversion. And it doesn’t restart. Since your first Roth conversion was in 2017, you are in the clear, and your Roth distributions should be fully tax-free.

4. How does the five-year rule apply to transfers from a Roth 401(k) to a Roth IRA?

Question: I am 64, and I recently retired from my full-time job. While working, I contributed for many years to a Roth 401(k) account. A few months ago, I transferred the funds in that designated Roth 401(k) account to a Roth IRA. Can I start withdrawing money from my Roth IRA tax-free?

Joy Taylor: The general rule for Roth IRAs is that distributions of earnings are nontaxable, provided you are 59½ or older. There is an exception, what experts refer to as the five-year rule. Distributions of earnings taken out within five years of January 1 of the year you first contributed to a Roth IRA are taxed.

You may have had the Roth 401(k) for five or more years, but unfortunately, that time period doesn't transfer to the Roth IRA. So, if this is your first Roth IRA, and you don't have any other Roth IRAs that you had contributed to in the past, the five-year rule would apply. The five-year period begins on January 1 of the year you first put money into any Roth IRA, either through contributions, rollovers or conversions. The ordering rules that apply to distributions from Roth IRAs may mitigate some of the negative tax consequences in your situation. I would suggest speaking with a CPA or your financial planner for more information.

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 roundups. 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: Will I be Audited by the IRS?
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: More Questions on IRAs

Ever arrive at a beach town only to realize you forgot your prescription sunglasses or high-SPF sunblock? It can be frustrating and expensive.

According to packing data from Radical Storage, the average traveler forgets two essential items per trip, resulting in about $53 in immediate replacement costs.*

Some replacements are a total loss, but did you know that you can turn others into a tax advantage?

By leveraging your health savings account (HSA), you can repurchase forgotten essentials using pre-tax dollars — effectively giving yourself a 25-30% "tax discount" on vacation necessities (when combined with FICA savings).

Here are the most commonly forgotten travel items that are HSA-eligible and the strict IRS rules you need to know to possibly claim them.

*Radical Storage is a global luggage storage service that surveyed 1,511 Americans regarding their packing habits and the items they most commonly forget.

IRS Rules for HSA purchases in 2026

Before we dive into our list, let's cover the 2026 IRS rules for a purchase to be considered "HSA-qualified."

The expense must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of a specific health condition for you, your spouse, or your tax dependents. Otherwise, you may owe penalties and taxes on non-qualified purchases.

Here's a handy guide to help you figure out if your purchase could be HSA-eligible:

• Check the "HSA store." Before you head to the register, use your HSA provider's mobile app. Many now let you scan a product's barcode to confirm eligibility. You can also browse pre-vetted items at the HSA Store or Amazon's HSA/FSA shop.
• Identify items requiring an LMN. Some travel aids, like high-grade compression socks or specialized orthopedic pillows, may require a letter of medical necessity (LMN) from your doctor to qualify. This letter details why the purchase is medically necessary for your or your spouse's/dependent's condition.
• Keep digital backups. Although your HSA debit card may be accepted at major pharmacies, the IRS requires proof of the item purchased, not just the total spent. Snap a photo of your receipt immediately and save it in your digital files.

Travel Essentials

1. Broad-spectrum sunscreen (SPF 15+)

Sun protection is one of the most frequent casualties of rushed packing, with 18.3% of travelers leaving it behind. But if you have to buy a replacement bottle at a pricey resort gift shop, your HSA has you covered.

• The IRS rule: The sunscreen must offer broad-spectrum protection and have an SPF rating of 15 or higher.

What about bug spray? Standard insect repellent is a "general health" item and is not HSA-eligible. However, if you buy a sunscreen that includes built-in bug spray, the entire purchase may become eligible, provided the primary purpose is qualified sun protection.

2. Prescription shades

According to the Radical Storage data, 17.6% of travelers forget their sunglasses when packing for a trip. And when you're planning outdoor fun, your eyes may need more than a $5 pair of gas station shades. Fortunately, replacing your prescription sunglasses might qualify for HSA eligibility.

• The IRS rule: Fashion shades and traditional, "beach shop" sunglasses don't qualify. You need prescription sunglasses designed to correct vision and protect against UV rays.

Beyond the frames, contact lens supplies and lubricating eye drops typically qualify for HSA eligibility. This includes travel-sized solutions, replacement cases, extra lenses, and over-the-counter (OTC) drops for dry "airplane eyes."

3. OTC medications

It may not come as a surprise that people often forget painkillers while traveling, with 13.7% of travelers reporting leaving home without their trusted bottle of OTC meds; many more medicinal remedies qualify for HSA spending, though.

• The IRS rule: No prescription is needed. You can purchase Advil, acetaminophen, and other pre-packaged OTC remedies to treat pain relief. Cold/flu medications are also generally included, as are motion sickness pills and antacids.

Not explicitly listed in the survey are personal care products, like tampons, pads, and acne treatments, which are HSA-eligible. This is thanks to the CARES Act, which permanently expanded the list of "qualified medical expenses" to include menstrual care and OTC medications without a doctor's prescription.

4. First aid kits

Unfortunately, 12.8% of travelers report leaving behind a first aid kit, which can be a crucial travel essential in case of emergency. Fortunately, these kits are often eligible for HSA spending.

• The IRS rule: Everything from premade first-aid kits and individual components (like bandages, gauze, and antibiotic creams) is eligible. Still, special non-medical carrying cases for the kit may not be covered.

5. Medicated moisturizers and aloe vera

The data shows that 10.9% of travelers forget to pack their daily moisturizer. If your skin takes a beating from the sun, wind, or airplane air, your replacement lotion might qualify for tax-free HSA funds, provided it meets IRS regulations.

• The IRS rule: Standard cosmetics and regular beauty lotions do not qualify. To use your HSA, the moisturizer must contain a specific medicated ingredient designed to treat a medical condition, such as severe sunburn, eczema, or dermatitis.

6. SPF Cosmetics and lip balms

Vanity kits are easily left behind, with 10.3% of travelers forgetting their makeup. Even though standard foundation or lip gloss is considered a personal care expense, your sun protective makeup may be HSA-eligible.

• The IRS rule: Lip balms, foundations, and skin tints qualify for HSA reimbursement only if they are explicitly labeled SPF 15 or higher, offer broad-spectrum protection, and primarily serve to prevent sunburn.

The survey did not mention allergy medications, yet the local environment on vacation can trigger new reactions. Thus, if you find yourself sniffling and suffering, know that most OTC antihistamines and nasal sprays are generally fully eligible.

7. Prescription meds

About 9.8% of travelers have been there: they got to their destination only to realize they forgot their meds. When you need to make a surprise run to a foreign pharmacy, here are the HSA eligibility rules governing prescription meds.

• The IRS rule: Always eligible, including "rush" refills. However, nutritional supplements, vitamins, and toiletries are merely for maintaining general health and are not considered qualified.

8. Underwear (that's medically necessary)

Only 9.6% of travelers forget their underwear while traveling, according to data from Radical Storage. Certain repurchases might be eligible for your HSA funds. (So no, your standard boxers don't count!).

• The IRS rule: Specialized "adaptive clothing" can be HSA-approved if it serves a medically necessary purpose, like a pumping bra, certain postpartum care products, etc. But general hygiene items are not eligible.

9. Specialized swimwear

Swimwear is often left in the dresser drawer, with 9.3% of travelers reporting forgetting bathing suits or similar wear at home. Though swim trunks might not qualify for HSA eligibility, you may be able to use tax-free funds on prescription swimwear.

• The IRS rule: Items for specialized wear, like prescription goggles or masks with corrective lenses, may qualify if they are used to treat a condition. Otherwise, an LMN may be necessary for other types of bathing suits.

11. Sneakers and sandals to treat a condition

Footwear like flip-flops and tennis shoes is often forgotten at home, with travelers reporting forgetting to pack these essentials 7.4% to 8% of the time. Though if you meet specific requirements, you might be able to repurchase them with HSA funds.

• The IRS rule: Shoes must directly help manage or improve a medical issue. Common examples include orthotic inserts, gel pads, and orthopedic footwear, though they may require an LMN.

What about accessories? Long flights can take a toll on the body, leading many travelers to invest in biometric trackers. In 2026, popular medical devices like the Oura Ring and certain smart watches may be HSA-eligible if they have an LMN from your doctor stating the specific condition the device monitors and/or treats.

Yet if you're using your HSA for a high-end medical device, many experts recommend paying out of pocket, then obtaining your LMN and submitting the receipt for reimbursement. This may help ensure your purchase meets IRS rules before linking the item to your HSA account.

Don't forget your passport

Approximately 6.3% of travelers report forgetting their passport, which is a major headache — but no, the replacement fees are not HSA-eligible (despite the blow to your mental health). However, your medical care in a foreign country is often covered by your HSA funds.

• The IRS rule: Passports aren't eligible for HSA spending. Instead, hospital and urgent care for legal, non-elective procedures and standard dental work abroad are often qualified tax-free expenses.

Prescription drugs may also qualify if they are consumed abroad (importing them back to the U.S. generally makes them ineligible). The drug must also be legal in both the country you bought it and back home in the U.S.

Also, many U.S.-based HSA debit cards won't work at international locations. Thus, you might want to pay with a travel credit card, keep the itemized receipt, and then reimburse yourself through your HSA portal once you're back on American soil.

Bottom line: Pack ahead

Although no one likes to realize they left their travel essentials behind, a forgotten bag doesn't have to mean a total financial drain.

By utilizing your HSA for these 2026 often-forgotten items, you can potentially get a discount on repurchased items. So pack carefully, keep a record, and enjoy the peace of mind that comes with a tax-advantaged suitcase, no matter what you forget.

Happy trails!

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

Read More

• Are You 'Broke Planning'? 10 Frugal Habits People Are Using to Save in 2026
• States With the Highest & Lowest Tax Rates — Where Your Money Goes the Farthest
• College Towns Are Becoming Destinations in 2026: How Does the Tax Math Add Up?
• 3 Tax Benefits Make Retirement in Greece Possible

It's a common headline: A billionaire public petitions for higher taxes on the ultra-rich. Yet, you rarely see those same individuals cutting voluntary checks to the U.S. Treasury.

The American tax system isn't built for donations, but rather for taxable income, deductions and incentives. Even if a high-net-worth person sent money to the federal government, that extra cash would simply go toward the nation's $39 trillion national debt — without changing the donor's tax liability.

This disconnect is key, since it helps explain a broader frustration with the IRS tax code.

A recent Pew Research Center study finds that 60% of Americans believe wealthy individuals and corporations don't pay their "fair share" in taxes.

In response, some point out that high earners technically fund a large portion of federal income taxes, but they do so based on income rather than wealth. That difference means more of what makes the ultra-rich wealthy isn't taxed at ordinary rates. This gives wealthier individuals more flexibility to control which assets are taxed and for how much.

Here's how high-net-worth individuals leverage the tax code, who pay the most federal income taxes and what it means for your own income tax bill in 2026.

Why billionaires don't use the 'donation box'

You can't donate to the IRS since your tax bill is a legal obligation, not a charitable choice. You also can't pay another person's income taxes.

However, the U.S. Treasury Department maintains a program called Gifts to Reduce the Public Debt that receives donations to reduce the national debt.

• Since 1996, this program has received roughly $67 million in total donations.
• As of May 2026, the national debt stands at approximately $39 trillion.
• At current federal spending rates (PDF), that 30-year total of donations would fund the U.S. government for about 20 minutes.

As the high-net-worth advocacy group Patriotic Millionaires notes, individual gifts can't replace structural policy.

"A few wealthy people giving our money to the government wouldn't fund a massive investment in our country's infrastructure," the group stated in a release. "Our individual funds simply aren’t enough to make a difference."

Federal income taxes are the bedrock for multibillion-dollar programs such as the Supplemental Nutritional Assistance Program (SNAP), Medicaid and national defense. Since these obligations are generally permanent, they require dependable funds for which the government can budget.

Consistency is key. While the federal government isn't a charity, the importance of consistent revenue is shared with nonprofits.

"Recurring donations are vital to organizational growth and long-term sustainability," NextAfter (PDF), a fundraising research lab, reported in a recent benchmark study. "Not only do they bring consistency ... they also create longer-lasting and more valuable donors."

Who pays the most tax?

According to data from the National Taxpayers Union Foundation (NTUF), the current U.S. tax system is progressive. This means that, as taxable income increases, so does the percentage of federal income tax you pay.

In the most recent reporting cycle (updated April 2026):

What does this table mean? The top 1% earns about 20% of the nation's income, but pay nearly 40% of the taxes. The top 10% earn about 48% of U.S. income but pay about 70.5% of the annual federal income tax bill. Both groups' tax shares exceed their income shares.

It's important to note that the data only covers federal income tax. The table doesn't include payroll taxes (Social Security and Medicare) or state and local taxes, both of which disproportionately affect lower and middle-income earners more than high-income earners, as reported by the Institute on Taxation and Economic Policy (ITEP).

Meanwhile, the U.S. tax gap — the amount of federal taxes owed but not paid — remains a sticking point for your tax dollars. The IRS estimates this gap at roughly $600 billion, with a large share of unreported income coming from the top 1% of earners.

Closing the gap through enforcement on the top 1% alone could theoretically recover $163 billion, per recent Treasury estimates, far more than any donation program could achieve through voluntary checks to the government.

However, the funding levels for IRS enforcement have been a point of significant legislative debate in 2026, impacting how the agency addresses the tax gap and similar initiatives.

How the wealthy employ tax strategies

According to the Pew study, many Americans think some corporations and wealthy people don't pay their "fair share" in taxes. But if the top 10% of earners pay 70.5% of all federal income tax, why the disparity in perception?

Part of the answer lies in the source of income. Most Americans live on "earned income" (W-2 wages, 1099s, etc.), taxed at ordinary federal rates up to 37%, plus subject to payroll taxes such as Social Security and FICA.

But high-net-worth individuals often live on wealth that bypasses these taxes, utilizing a so-called "Buy, Borrow, Die" strategy:

1. Buy. They acquire appreciating assets (stocks, real estate, etc.).
2. Borrow. Instead of selling (which triggers capital gains tax rates), they take low-interest loans against those assets. Loans are not taxable income.
3. Die. Heirs receive the assets at a "stepped-up basis," meaning the capital gains built up over a lifetime are essentially erased for tax purposes.

High-wealth individuals might also make large donations to private foundations to allow for immediate deductions, employ business expense deductions and receive compensation through stock options or distributions (rather than salaries or wages) to further lower their income tax liability.

While these methods are theoretically available to all, unless you have significant capital to begin with, it's difficult to "break in" to the wealth-preservation strategies used by high-net-worth individuals.

Note: These strategies involve significant legal and liquidity risks and are not one-size-fits-all solutions.

The bottom line: Ways to lower your tax bill

Although the average taxpayer might not be able to live off loans against a billion-dollar stock portfolio, you can still move the needle on your own "tax gap" by using the IRS code's intended incentives.

Here are a few ideas for lowering your income taxes (if you're eligible):

• Audit your "voluntary" overpayment. If you're getting a massive refund every year, you're essentially giving the IRS an interest-free loan. Adjusting your tax withholding ensures your money stays in your pocket for investment throughout the year.
• Create your own "tax-free" bucket. You might not have a private foundation, but traditional 401(k)s or individual retirement accounts (IRAs) allow you to shield income from the IRS today. By using pre-tax dollars, you're effectively lowering your taxable income and withdrawing those funds at perhaps a lower rate during retirement.
• Prune your portfolio. Use tax-loss harvesting to offset capital gains with losses (just be mindful of the "wash-sale" rule, which disallows the loss if you buy the same or a "substantially identical" asset within 30 days). Keep an eye on the calendar: Assets held for more than one year qualify for long-term capital gains rates, which, at 0%, 15%, or 20%, are significantly lower than the ordinary income rates applied to short-term gains.

If you're feeling generous …

Starting this year, new charitable deduction rules take effect. Up to $1,000 ($2,000 for married filing jointly couples) in qualified cash donations can be deductible on your federal return, even if you claim the standard deduction.

But whether you send that check to the Treasury to fund a millisecond of federal overhead — or provide thousands of meals at a qualified food bank — the choice is yours. We can't all be billionaires.

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

Read More

• Residents Driven Out of High-Tax States in 2026: But Will You Still Owe Taxes After Moving?
• Taxpayer Confusion Grows Over Whether IRS Notices Are Real
• First the Penny, Now the Nickel? The New Math Behind Your Sales Tax and Total
• 10 Frugal Habits People Are Using to Save in 2026 With 'Broke Planning'

With gas prices climbing amid tensions in the Middle East (averaging $4.50 a gallon according to AAA, up more than 50% since the start of the war with Iran), President Donald Trump says he wants to suspend the federal gas tax “for a period of time” to help drivers.

But some economists say the policy would likely have only a limited effect, since gasoline prices are driven mainly by global oil markets rather than federal taxes.

What's a driver to do as we head toward the Memorial Day holiday? Read on.

Why a gas tax holiday might not lower prices much

The federal gas tax is 18.4 cents per gallon of regular, layered on top of state taxes (more on those below), but it represents only a small share of what drivers ultimately pay at the pump.

Gas prices are driven far more by global oil markets, which continue to fluctuate. That means even if the federal tax were temporarily suspended, prices would still largely reflect international supply and demand.

Even when costs fall, those savings don’t always quickly reach consumers.

Fuel prices adjust gradually, and companies across the supply chain — from refiners to gas stations — can retain part of the short-term margin depending on competition and local market conditions.

What about state gas tax?

Even if the federal gas tax were paused, drivers in most places in the U.S. would still pay state gas taxes, which are often significantly higher than the federal 18.4-cent tax.

As a result, the impact of a federal gas tax holiday would vary widely depending on where someone lives.

One state has already taken action to address this.

• As Kiplinger reported, Georgia temporarily suspended its state gasoline tax for 60 days in March as fuel prices surged following escalating tensions with Iran.
• The move cut roughly 33 cents per gallon from gasoline prices and about 37 cents per gallon of diesel.

Because Georgia’s state gas tax is higher than the federal tax, the immediate savings there were more noticeable than what a federal suspension alone would provide.

Still, economists note that even state-level tax holidays don't address the core driver of fuel prices: global oil markets. As mentioned, if crude prices remain elevated, pump prices can stay high even with tax relief in place.

On the flip side, out in California, Gov. Gavin Newsom has so far rejected calls for a state gas tax holiday. (Average fuel prices in the Golden State recently soared above $6 per gallon.)

Newsom has argued that suspending the state's gas tax could jeopardize infrastructure funding.

Hidden costs?

Worth noting: The federal gas tax also plays a key role in funding roads, bridges, and transportation infrastructure through the Highway Trust Fund.

Suspending it, even temporarily, could remove billions of dollars in dedicated transportation funding unless Congress replaces the revenue elsewhere, according to the Peterson Foundation.

• The Bipartisan Policy Center has estimated that a five-month federal gas tax holiday, for example, could reduce Highway Trust Fund revenue by roughly $17 billion.
• That matters because the fund is already under long-term strain and has required transfers from general federal revenues to stay solvent.

There is also a political hurdle…

Trump can't suspend the federal gas tax on his own. Congress would need to pass legislation approving the move, and lawmakers would also need to determine how to offset the lost transportation revenue.

Sen. Josh Hawley (R-Mo.) and Sens. Mark Kelly (D-Ariz.) and Richard Blumenthal (D-Conn.) have each introduced proposals to temporarily suspend the federal gas tax — currently 18.4 cents per gallon for gasoline and 24.4 cents for diesel — as a way to provide short-term relief from higher fuel costs.

In a release about his proposed Gas Tax Suspension Act, Hawley stated, "President Trump has proposed to suspend the federal gas tax, and he’s exactly right. American workers and families deserve immediate relief and this legislation will do just that."

Meanwhile, Kelly stated that "suspending the federal gas tax [via the Gas Tax Relief Act] would help bring prices down and give families some much-needed relief."

So, even though Congress has never voted to suspend the federal gas tax, the measure might resonate now on Capitol Hill because gas prices are highly visible and directly affect household budgets. Stay tuned.

What you can do about high gas prices

For consumers facing higher gas prices, most of the real relief comes from factors outside domestic policy. But some practical steps might help.

• Small changes in driving habits, like combining errands, accelerating and braking gently, and keeping tires properly inflated, might help improve fuel efficiency, according to the U.S. Environmental Protection Agency and the Department of Energy.
• Price comparison apps can also help drivers find lower-cost stations nearby, since prices can vary significantly even within the same area.
• Also, keep an eye on states with the highest gas tax and lowest gas tax rates.

And while gas prices tend to move with global oil cycles, they can shift quickly in both directions depending on supply conditions and geopolitical events.

Hopefully, some real price relief will arrive as unexpectedly as the price spikes did.

Related

• States With the Highest Gas Tax in 2026
• Low Gas Tax States to Know Now
• Georgia Temporarily Suspends Its State Gas Tax

Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at four questions on your chances of an IRS tax audit and audit red flags you should know. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. What are my chances that I will be audited by the IRS?

Question: I am getting ready to file my 2025 tax return (I applied for a filing extension). Friends have told me that I don't have to worry about IRS audits anymore. Is that true

Joy Taylor: No. That information is incorrect. It is true that major cuts to the IRS's funding and its workforce will reduce the number of tax audits the agency can do each year. In recent years, the IRS audit rate for individuals was significantly below 1%, and we expect this figure to continue to decline, at least over the next few years. But that doesn't mean it's a tax cheat free-for-all. According to IRS leaders, there will be fewer overall audits, but the exams that are done will be more targeted.

The IRS is relying more on data analytics and artificial intelligence to more precisely identify high-risk noncompliance and to improve efficiency. Data-mining software can sift through taxpayer data, expose suspicious activity and identify audit cases.

Additionally, your chances of an IRS audit could go up, depending on various factors or red flags, including the amount of income you report, the complexity of your return, the types and amounts of deductions or other tax breaks you claim, whether you're engaged in a business, or whether you own foreign assets.

2. Tax audits and refundable tax credits

Question: I am a tax preparer, and many of my clients claim refundable tax credits on their federal returns, such as the earned income credit, the refundable portion of the child credit, the Obamacare premium credit and the American Opportunity credit. I heard that the IRS will be eyeing these credits more than ever before. Do you think this is true?

Joy Taylor: Yes. The IRS's enforcement arm is feeling the brunt of the government funding cuts and recent employee resignations and layoffs. Many of the workers who retired or left the IRS were experienced agents and managers with deep knowledge of the tax law and the processes for conducting complex tax audits of individuals and businesses.

We expect that the IRS will go after low-hanging fruit, such as questionable refundable tax credits claimed on tax returns. Most of these audits are done through correspondence, meaning the taxpayer never meets with an IRS employee. They're a bit more cost-effective, since the audit is generally limited to only one or two issues. The IRS also knows that there is lots of money lost each year to erroneous claims of refundable tax credits. The IRS estimated it improperly paid $21.4 billion in refundable credits in fiscal year 2024 alone.

3. S corporation and partnership audits

Question: I am a partner in a closely held limited partnership. I heard that the IRS is using some of its $80 billion windfall from the Inflation Reduction Act to beef up audits of partnerships. Can you provide details on this?

Joy Taylor: It is true that the 2022 Inflation Reduction Act gave the IRS $80 billion to be withdrawn over 10 years for improved taxpayer service, increased enforcement efforts and modernization. In 2023 and 2024, the IRS went on a hiring spree and began to beef up enforcement areas that were neglected over the past decade or so. This included audits of pass-through entities, such as partnerships, LLCs and S corporations, and exams of higher-income individuals.

Much of the IRS's efforts to bolster its enforcement arm were for naught. The vast majority of the IRS's $80 billion windfall has been rescinded by Congress. And since President Trump began his second term in office in January 2025, the IRS has lost over 20% of its total workforce, and its annual funding has declined. And things promise to only get worse for the agency. The Trump administration's fiscal year 2027 budget request for the IRS includes an 18% additional cut in enforcement money and projects fewer than 25,000 total enforcement employees.

The IRS's scarcer audit resources are leading to decreased numbers of audits, including audits of high-income individuals and partnerships. The number of IRS audits of individuals with $10 million or more of income and partnerships has fallen from 6,786 and 3,174, respectively, in fiscal year 2025 to 2,264 and 2,932 in fiscal year 2026. The IRS forecasts even further drops in these audits in fiscal year 2027.

4. Audit red flags

Question: What does the IRS take into account in deciding whether to audit a taxpayer's Form 1040?

Joy Taylor: We don't know exactly the IRS's formula for choosing returns to audit. That's a closely held secret. But we are aware of various factors or red flags that could escalate one's chance in the unenviable audit lottery.

I wrote a story setting forth 15 IRS audit red flags. They are:

• Failing to report all taxable income
• Making a lot of money
• Failing to file your income tax return
• Taking higher-than-average deductions, losses or credits
• Claiming refundable tax credits
• Taking large charitable contribution deductions
• Running a business
• Writing off a hobby loss
• Failing to report self-employment income and pay self-employment taxes
• Claiming rental losses
• Taking a distribution from an IRA or 401(k) before age 59½
• Failing to report gambling winnings or claiming big gambling losses
• Claiming the foreign earned income exclusion when working overseas
• Engaging in virtual currency or other digital asset transactions
• Failing to report a foreign bank account

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 roundups. 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: Question on Tax Refunds and Penalties
• Ask the Editor: How Can I Resolve My IRS Tax Debt?
• Ask the Editor: Senior Deduction and Tax Filing
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Reader Questions on QCDs
• Ask the Editor: What Medical Expenses are Deductible?

As part of a broader push to modernize payments, the IRS has been phasing out paper refund checks. This tax season, that shift has triggered a surge in notices asking taxpayers to confirm or update their banking information.

These letters, known as CP53E notices, are landing in more than 1 million mailboxes, according to some congressional estimates.

Unfortunately, as you might expect, the spike in IRS correspondence could increase the chances of receiving a letter in error, per some social media reports, or create confusion over whether the notices are from fraudsters.

So, how do you know if your IRS refund letter is real? And what should you do if you get one? Here's more to know and some red flags to watch.

Related: IRS May Change Controversial CP53E Letters

Why CP53E IRS letters seem to be everywhere

Let's start with why what's happening is happening.

A CP53E notice from the IRS typically means the tax agency couldn’t deposit your tax refund as requested. That's often due to missing or mismatched bank account details.

But this year, volume is part of the story.

As Kiplinger has reported, the federal government, including the IRS, is phasing out paper checks and steering more payments toward direct deposit. As a result, hundreds of thousands of taxpayers are being prompted to review or fix their banking information.

So, in recent months, there has been a significant surge in the number of legitimate CP53E letters issued by the IRS.

• Congressional data indicate that 1.4 million CP53E notices have been issued as of March 2026, amid the direct deposit push.
• As mentioned, this volume stems from IRS efforts to reduce paper checks, which take longer to process (typically 6-8 weeks, compared with a few days for electronic payments).
• The Taxpayer Advocate Service reports that direct deposit issues affect roughly 5% of filers each year, but the shift to paper checks has affected the number of notices sent this year.

That increase comes amid reports that some people have received notices sent in error or have received the CP53E notice even though they owed the IRS taxes this year.

The whole situation is raising concerns among taxpayers. Some question the tax agency's motives for sending letters to those who shouldn't receive them, while others are unsure about the authenticity of communications they receive purporting to be from the IRS.

What is an IRS CP53E notice?

As mentioned, the IRS typically sends a CP53E notice when the agency can't deposit your tax refund due to missing, outdated, or mismatched bank details on file.

If your letter is legitimate, it usually indicates a processing issue with your refund — not a penalty or IRS audit.

In most cases:

• Your refund is temporarily on hold (usually approximately 21 days until you provide corrected information via your official IRS account).
• The IRS needs corrected or confirmed deposit details.
• You’ll have time to respond.

If you don't take action, the IRS may still eventually send a paper check. It just may take some time, likely about 6 weeks, according to the agency.

How to spot a fake IRS letter: Red flags to consider

Here are some things to look at closely if you receive a letter that you're not sure is real.

Be wary if the letter you receive asks for sensitive personal or banking information.

This might include your full Social Security number, bank login credentials, or detailed account information, or direct you to click a third-party link or scan an unfamiliar QR code. (Avoid scanning those codes in an unverified letter.)

You'll also want to be cautious if the letter's tone is urgent or threatening.

While legitimate IRS letters can be daunting, they usually should not rely on overly panic-driven language. And in the case of refund direct deposit notices, since you typically have roughly 30 days to respond, you will still likely receive a paper refund check if you don't. So, panic language could be a red flag.

Keep in mind: The IRS generally doesn't ask for sensitive data in unsolicited correspondence. Instead, a legitimate notice will typically direct you to log into your official IRS account via the official IRS website, not through a third-party or otherwise unfamiliar link.

Another thing to consider is whether the letter's details match your tax situation.

Some taxpayers have reported receiving notices about refunds they weren’t expecting or about returns for which they are not due a refund.

That kind of mismatch doesn’t always mean fraud is involved, but it’s a signal to pause and verify before acting.

How to verify your CP53E notice and respond

If you receive a CP53E notice, the safest course is to go directly to the IRS website by entering the official IRS URL in your browser. From there:

• Log in to your official IRS online account
• Check whether the notice appears
• You can also call the IRS using an official number

IRS refund status: Bottom line

According to IRS reporting, refunds run about 11% higher on average than last year. The average refund amount has hovered around $3,400, most likely due to changes in the Trump/GOP tax and spending bill enacted last year.

Recent polls suggest that many plan to use that money to pay down debt or cover essentials.

Overall? If a letter that looks like it's from the IRS asks you to share sensitive information, click on unfamiliar or third-party links, or act immediately, take a step back and verify it first.

And if your notice is legitimate and you need to track your tax refund after completing the direct deposit process, the IRS says to allow 2-5 days for your refund information to update online. From there, you can use the Where’s My Refund tool to check your refund status.

This article has been updated to mention taxpayers receiving letters even when they owe the IRS.

More on Tax Refunds

• IRS Refund Schedule 2026: When Will Your Money Arrive?
• 5 States Where Tax Refunds Could Be Later Than Usual
• Why Your IRS Refund Could Be Delayed or Frozen

Millions of people are leaving high-tax states like California and New York, according to recent IRS migration data, and billions of dollars in income are shifting out of both states each year.

In California alone, IRS-based analysis shows roughly $10 billion to $12 billion in adjusted gross income (AGI) has left the Golden State in a recent year, much of it tied to higher-income households.

New York has also seen multibillion-dollar net outflows (about $9.9 billion), particularly from upper-income taxpayers relocating to lower-tax states like Florida and Texas.

At the same time, two new policy developments are reshaping the conversation around what it actually means to “leave” a high-tax state: a proposed wealth tax in California and a second-home tax proposal in New York.

Together, these measures raise a practical question for taxpayers: Does moving from a high-tax state to a low-tax state actually end your tax exposure or actually change how closely it's reviewed by auditors?

California wealth tax coming in 2026?

As Kiplinger has reported, a proposed wealth tax in California is heading to the November 2026 ballot, where voters will decide whether to impose a one-time 5% tax on some ultra-wealthy households.

The measure would apply to a very small number of taxpayers (roughly 250 according to some estimates) at the top of the wealth distribution, based on net worth, including assets like stocks, real estate, and business ownership interests.

Supporters argue in part that the "wealth tax" would raise significant revenue, about $20 billion a year, per the Institute on Taxation and Economic Policy (ITEP) estimates. Critics say it could increase incentives for high-net-worth households to relocate, especially given existing migration trends already showing sustained outflows from the state.

Gov. Gavin Newsom, who opposes the measure, reportedly told the New York Times, “This will be defeated — there’s no question in my mind," referring to the ballot measure.

Also worth noting: Because wealth taxes depend on residency status at the time of assessment, the proposal has also renewed attention on how states determine whether someone is still considered a resident after a move.

New York 'Second-Home Tax' targets luxury property owners

Meanwhile, in New York, Gov. Kathy Hochul and NYC Mayor Zohran Mamdani are working to advance a proposed tax on high-value second homes, often referred to as a "pied-à-terre" tax.

The proposal focuses on luxury properties valued at over $5 million, particularly in high-value urban markets like New York City, that are not primary residences.

Supporters say the annual surcharge would capture revenue from high-end real estate that benefits from city infrastructure and help fund vital public services. In a Tax Day launch video, Mamdani said, “When I ran for mayor, I said I was going to tax the rich — well, today, we’re taxing the rich.”

Opponents argue the measure could discourage investment and further accelerate out-migration from New York among wealthy homeowners.

Interestingly, while structurally different from a wealth tax, the "second home tax" raises a similar issue: how property use and residency status are defined when taxpayers own assets across multiple states.

Residency rules for tax purposes when you move: Why they matter

So what does all of this have to do with relocating?

Moving to a lower-tax state may seem straightforward: change your address, buy a new home, and start fresh. But for tax purposes, due to residency rules, leaving a state like California or New York isn't always that simple.

That's because residency rules determine your status based on where you have established your permanent home (domicile) and how much time you spend in your home state.

It's important to note that residency rules aren’t unique to NY and CA. Every state with an income tax has some version of them, and many rely on similar “facts and circumstances” tests to determine where you reside for tax purposes.

What’s different right now is the spotlight. As more high-income households consider relocating, those rules are getting renewed attention — particularly in states where the financial stakes are rising.

So, how can you potentially still owe taxes to your former state, at least for a period of time? Here are some common situations.

Your "domicile" doesn’t change overnight.

States look beyond a new address to determine where your permanent home really is. If your life remains centered in your old state, it may continue to treat you as a resident.

You're spending too much time in your former state.

Even after a move, crossing the common 183-day threshold in your former state can trigger residency for tax purposes.

Ongoing ties signal you haven’t fully left.

Maintaining a home or holding on to key financial and business connections can work against your claim.

Your daily activity leaves a trail.

In some cases, auditors might review travel logs, credit card records, and even phone location data to determine where you actually spend your time.

The transition year raises questions.

The year you move — when ties overlap, and timing matters most — is often where residency disputes arise.

Here's a simplified example:

A taxpayer moves from California to Florida, buys a new home, and files as a nonresident. But they keep a property in California, spend significant time there, and maintain business ties. If the state determines they didn’t fully break residency — or spent too many days there in California — they could still be taxed as a resident by California on their full income.

To reduce the risk of your former stale's tax bills following you after you think you've left:

• Make the move decisive, not partial.
• Track your days carefully throughout the year.
• Update legal and financial records to match your new state.
• Keep documentation showing when and how you moved.
• Take extra care in the year of the relocation.

Moving to lower tax states: Bottom line

Moving to a lower-tax state can reduce your tax bill, but only if the move holds up under scrutiny. Remember, your residency for tax purposes is generally determined by what you do, not just what you file, and without a clear break, your former state may still have a claim on your income.

Also, keep in mind that no-income-tax states often have to make up for lost revenue elsewhere, so sales and property taxes can sometimes be higher. Consider the tax-tradeoffs of various states before you start packing boxes.

As for what comes next: In California, November could be a key inflection point if voters weigh in. In New York, the path runs through the state’s legislative and budget cycles, where proposals can evolve — or stall — over the coming months. Stay tuned.

Related

• 9 No-Capital-Gains-Tax States Ranked by Cost of Living
• California Wealth Tax Proposal Heads to the Ballot: What It Means for You
• Millions of People Are Moving From High-Tax States Like California and New York: Here's Where They're Going Instead
• States With the Highest and Lowest Income Taxes

Although the April 15 IRS tax deadline has passed, taxpayers in Delaware, Iowa, Virginia, Louisiana, and South Carolina are still on the hook for their state returns — or have just received extra time.

It has been a tumultuous tax season. The 2025 Trump tax bill not only overhauled federal rules but also prompted state lawmakers to wrestle with whether to adopt federal tax code changes.

While these updates may have yielded new tax savings for some taxpayers who live in states that adopted them, the new rules also led to state refund delays, even leading one state tax agency to move its filing deadline as far as October.

So, when is your state tax return due? If you live in one of these states, here's who needs to file by April 30, which taxpayers have more time, and state tax policy to watch as we move further into 2026.

April 30 deadlines: Delaware and Iowa state taxes are due

The two states with income taxes due by April 30, 2026, are Delaware and Iowa. Even though the federal deadline passed on April 15, residents in these states have until the end of the month to finalize their state returns.

"The Iowa Department of Revenue is once again reminding Iowans of the many resources available that can assist taxpayers with filing their tax return," noted Iowa's DOR in a press release, "[State] income tax returns are due on April 30."

What is due by April 30, 2026?

• Individual state tax returns. Both final filings and any tax payments owed.
• Estimated state tax payments. The first quarter installment for the 2026 tax year (in Iowa only; Delaware's estimated payments were due April 15).

Federal estimated tax payments were due April 15, 2026.

Virginia and Louisiana state income tax returns are due May 2026

Taxpayers in Virginia and Louisiana have even more breathing room, with state tax deadlines stretching into May 2026.

• Virginia residents have until May 1, 2026, to file state income tax returns.
• Louisiana taxpayers have until May 15, 2026, to submit their state returns.

What is due in May 2026?

• Individual state income tax returns. Final filings and payments for both Virginia and Louisiana.
• State business tangible property tax returns. This includes returns for specific jurisdictions in Virginia, like Arlington County.

South Carolina taxpayers have a special extended tax deadline for the 2026 tax season that extends beyond May (more on that later).

2026 mail rules for filing state tax returns

You may file by mail or electronically, but most state tax agencies recommend the latter. Not only does e-filing typically yield quicker processing than for paper returns, but it also bypasses the risks associated with the new USPS postmark rule.

Under this new policy, physically mailed returns are often not postmarked until they reach a regional processing center. If you mail your return on the deadline date, your state income filing might not be stamped until the following day, potentially leading to late-filing penalties.

Note on state tax extensions: If you can't file on time, you should file for a state tax extension (which usually pushes your tax filing due date until October 15 or later). This differs from the federal extension, which should have been requested by April 15.

But remember, an extension to a file is not an extension to pay. Be sure to estimate and pay your tax liability by the state deadline to avoid any late-payment interest and penalties.

New tax law changes for states in 2026

As mentioned, several states adopted federal changes from the 2025 Trump tax bill, which are now impacting the 2026 state tax season.

Of the states with April 30 deadlines (or later), conformity varies:

• Delaware: partially conformed, decoupling from business expense provisions and some individual deductions like "no tax on tips."
• Iowa: rolling conformity, adopting most major federal tax changes automatically.
• Louisiana: partially conformed, decoupling from certain business expense deductions.
• Virginia: partially conformed, including the temporary adoption of an increased standard deduction.

What does this mean for you? In many cases, the Trump tax law changes might lend higher tax savings on some state returns (e.g., if you were a worker who qualified for the federal overtime tax deduction).

However, in states that did not conform to these individual tax breaks — like South Carolina — you may be required to "add back" those deductions on your state return, even if you claimed them on your federal filing.

South Carolina 2026 tax extension deadline: October 15

South Carolina state lawmakers debated whether to conform or decouple from the Trump tax law changes for most of the 2026 tax season. As a result, the processing of state income returns for early filers was delayed, and the state return deadline was eventually extended.

"We are automatically extending the tax filing due date for all 2025 South Carolina Individual Income Tax returns to October 15, 2026," the South Carolina Department of Revenue acknowledged in a recent release. "This extension applies only to the deadline to file your return, not to pay what you owe."

The new Trump tax law changes were enacted federally after many states had already concluded their summer legislative sessions. As such, more states may decouple or conform to federal tax policy when legislatures meet for their regular sessions in the next few months. What comes out of those sessions may ultimately impact how much you owe in 2026 state income taxes.

Stay tuned for updates.

Read More

• 5 Reasons Your Tax Refund Might Be Delayed and How to Fix It
• Does Your State Have an IRS Disaster Extension?
• 2026 State Tax Changes to Know Now
• IRS Tax Refund Schedule 2026: When Will Your Refund Arrive?

Missouri is moving toward a major tax decision that could be decided by voters: whether to essentially eliminate the state income tax and replace much of that revenue with higher sales taxes.

The stakes are significant. Missouri’s individual income tax raises roughly $8.5 billion to $9 billion each year — about 60% to 65% of state general revenue — and is the largest source of funding for schools, public safety, and core state services. If the income tax is phased out, most of that revenue would likely be replaced through expanded reliance on sales taxes.

Missouri’s move comes as several other states, including Kentucky, Mississippi, and Oklahoma, have also cut or plan to phase out their income taxes, making the Show-Me State part of a growing national debate over how much states should rely on income taxes.

A central question for voters is this: with no state income tax, who really ends up paying more, and how much will it cost households at the register?

Missouri income tax elimination could follow capital gains tax change

Missouri’s willingness to make sweeping tax changes was already on display last year when it eliminated state taxes on capital gains.

• As Kiplinger reported, that policy, effective as of the 2025 tax year, removed taxes on profits from stock, bond, and other investment sales.
• The measure reportedly cost the state roughly $300 million to $500 million in annual revenue, depending on market conditions.

Now, the question is whether Missouri will go further and end the broad‑based income tax altogether.

As mentioned, Missouri’s individual income tax accounts for roughly 8 billion dollars a year and helps fund schools, public safety, and many core state services. If the income tax is phased out, most of that revenue would need to be replaced by a greater reliance on sales taxes and other changes to the state budget.

Meanwhile, Missouri’s current state sales tax rate is 4.225%, according to the Department of Revenue, though many residents pay more once local taxes are added.

Under the leading proposals, the state would gradually reduce the income tax over several years, with reductions tied to revenue triggers intended to avoid sudden budget chaos.

Missouri Income tax rate 2026: What a change would mean for residents

Right now, Missouri's 2026 individual income tax tops out at 4.7% on taxable income over $9,436 (Single filers; brackets start at 0% up to $1,348, then climb in approx. 0.5% steps).

If the no-income tax plan advances, the practical impact for most Missouri households would be:

• Lower withheld income tax and higher take‑home pay, especially for wage earners
• Higher prices on many goods and services if sales tax rates rise or the taxable base expands
• A shift from being taxed primarily on earnings to being taxed more on spending

Because sales taxes are collected at the register, many residents would feel the tax burden on a daily basis, and many say the ultimate effect would also be uneven.

That's because studies show that households with lower and middle incomes, which often spend a larger share of their income on taxable goods and services, would likely feel the change more heavily than wealthier households whose income is typically more tied to savings or investments.

Proponents and critics: Who wins and who pays

Supporters of the income‑tax‑to‑sales‑tax shift argue that the measure would make Missouri more competitive with no‑income‑tax states like Texas and Florida, reduce reliance on taxing wages, and simplify the tax code over time.

They point to the recent elimination of capital gains taxes as proof that the state is comfortable shifting away from taxing certain forms of income and moving toward a more investment‑friendly system.

Gov. Mike Kehoe has become a leading supporter of phasing out Missouri’s income tax.

In his 2026 State of the State address and subsequent public comments, Kehoe called for the plan to be placed before voters through a constitutional amendment.

He has argued that Missouri’s tax structure "should modernize for the times we’re in and not be burdened by a tax code written in another era," framing the income‑tax elimination as a central part of his economic agenda.

However, some opponents of the measure, including the nonprofit Missouri Budget Project (MBP), warn that replacing roughly $8.5-$9 billion in annual income-tax revenue with higher sales taxes will sharply increase tax rates and potentially force cuts to essential public services.

In a piece on its website regarding the impact of such a proposal on the state's rural communities, MBP writes the following.

"Missouri’s income tax supports nearly 2/3 of Missouri’s state general revenue budget – a critical state funding source for K-12 schools, mental health services, children’s services like childcare and foster care, and services for older adults like Meals on Wheels and respite care. There’s simply no realistic way to make up the revenue lost from eliminating the income tax – meaning harmful cuts to services for Missourians."

• A key argument is that sales‑based taxes tend to fall more heavily on lower‑income households
• That could deepen inequality and make the state's tax system less progressive.

Also worth noting: Missouri’s experiment could also influence how other states frame their own debates over reliance on income taxes, especially as more states look to cut or phase out their personal income tax.

Missouri income tax elimination bill: What happens next

The measure, HJR 173/174, has passed both legislative chambers and awaits Gov. Kehoe's decision by May 22 on whether to place it on the November ballot.

• If it goes to voters, a "yes" vote would begin a multi‑year phaseout of the income tax and a gradual pivot toward relying more on sales taxes.
• That could mean modestly lower income‑tax bills for many households, but also higher everyday costs at the register, especially for those who spend the largest share of their income on taxable goods and services.

For residents, the core takeaway is this: Missouri gave itself a trial run on big tax changes by eliminating capital gains taxes last year. If approved, this next step could be even bigger.

Missouri’s experiment could also influence how other states frame their own debates on income taxes, especially as more look to cut or phase out personal income tax. So, stay tuned.

More on State Taxes

• States With the Highest and Lowest Tax Rates in 2026
• Missouri Eliminates Capital Gains Tax: What It Means for You
• 9 States With No Income Tax Ranked by Cost of Living