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

The following decisions have potential economic implications and arise during a time when many people are experiencing financial uncertainty due to inflation and the rising costs of housing, food, and gas.

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

#1. 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.

#2. 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. 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.

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: Bottom line

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.

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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.

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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

The aphorism "If you fail to plan, you're planning to fail" is commonly attributed to Benjamin Franklin.

Even if the words are his, he wouldn't have been thinking about income taxes when he wrote them. Those were introduced in 1862 to temporarily fund the Civil War. The 16^th Amendment made them permanent in 1913.

Today's income taxes are quite complex compared to the type of taxation people would have known in the days of the Founding Fathers. And you'll need to take an active, strategic approach to managing them if you want to optimize your financial position.

In general, for income of $150,000 or under, there are specific concerns and ways to approach the planning. For those with $500,000 and more in income, there are different concerns and approaches.

There is no doubt that proper tax planning helps at any level, but in the "messy middle," between $150,000 and $500,000, there is more complexity than necessary.

The challenges of active tax management

One of the biggest challenges in active tax management is synthesizing all the information to uncover what can reduce your tax burden as much as possible in the future, and not just in the current year.

You might be unaware of various deductions, state-specific rules and thresholds that can kick you into a higher bracket, eliminate or phase out a deduction, or cause other unforeseen expenses now or later.

It is a balancing act that is based on and informed by income sources, assets, ways assets are owned, taxation attributes of types of assets, financial goals, expectations about the future of taxes and sometimes even legacy intentions.

For many, the complexity requires a professional to dig into the details, ask the right questions and help devise the best strategy or mixture of strategies. An expert can provide objective analysis that identifies missed deductions and potential opportunities, ensures regulatory compliance, mitigates risks and increases net after-tax long-term wealth.

Whether you do your own tax planning or hire a tax professional, the important point is being intentional — making tax planning a priority in your financial plan (at the very least giving it equal importance to investment, income, legacy and protection planning) and making choices to ensure you are protecting as much of your savings and assets as possible for the long term for the best possible taxation.

Learning the tax implications of your income range

The starting point in active tax management is figuring out your likely income range and optimal tax strategies for now and for retirement. Tax rates can change in the future, but the important approach now is to identify an income range where you think you could settle tax liability at reasonable rates, avoid paying unnecessary taxes and set up a future where you have some flexibility to manage brackets later.

Let's focus on the tricky messy middle — those with between $150,000 and $500,000 in income. For the 2026 tax year, that range of income spans three tax brackets (22%, 24%, 32%) for married couples filing jointly and three for single/married filing single (24%, 32%, 35%).

That range points out the importance of active tax management not only because of the various tax rates, but also because there are numerous deduction phase-outs and additional tax triggers.

Here are just some of those (based on the 2026 tax year).

Net investment income tax (NIIT). This is an additional 3.8% federal tax on certain types of investment income. It applies to individuals with modified adjusted gross income (MAGI) exceeding $200,000 (for single filer/head of household) and $250,000 (married filing jointly/surviving spouse).

Once you cross into these ranges, every dollar of investment income becomes less efficient, making proactive tax planning significantly more valuable. The NIIT applies to income such as interest and dividends, capital gains (stocks, real estate, funds), rental and passive income and certain annuity income.

Long-term capital gains rates. Another negative impact of the NIIT: It effectively raises long-term capital gains rates to 18.8% (15% + 3.8%) or 23.8% (20% + 3.8%), depending on your filing status and income level.

Qualified business income (QBI) deduction. The QBI deduction is a tax break allowing eligible self-employed individuals and pass-through business owners (partnerships, LLCs, S corps) to deduct up to 20% of their qualified business income from their personal taxes.

In 2026, the phase-out range (for some in specified trades or businesses) is $403,500 to $553,500 for married joint filers, $201,775 to $276,775 for single filers.

Child tax credit. The phase-out starts at $200,000 for single/head-of-household filers and $400,000 for married couples filing jointly. The credit amount is reduced by $50 for every $1,000 of income above these thresholds.

Deduction for those who are 65-plus. A new $6,000 deduction for individuals aged 65-plus phases out between a MAGI of $75,000 to $175,000 for singles and $150,000 to $250,000 for married joint filers. The deduction reduces by six cents for every dollar over the limits.

State and local tax deduction (SALT). With MAGI just over $505,000, you begin to lose the increased SALT deduction, but for now, for many with income under $500,000, a higher deduction may mean itemizing for the first time in a while.

Charitable contributions. Donations are only deductible to the extent they exceed 0.5% of your adjusted gross income (AGI). For example, with an AGI of $300,000, only donations over $1,500 are deductible as an itemized deduction, and then only if you itemize. There is now a small "above the line" deduction for those not itemizing. (A note for those in the top tax bracket: A limitation on itemized deductions comes into play for you.)

Increased Medicare premium surcharges. The income-related monthly adjustment amount (IRMAA) is a surcharge added to Medicare Part B and Part D. It is based on your MAGI from two years prior. Single filers with income ranges from $109,000 to $500,000+ pay progressively higher surcharges, as do those filing married jointly from $218,000 to $750,000+.

For example, a married couple filing jointly with a MAGI of $280,000 would pay approximately double for Medicare premiums relative to those who make $215,000.

This is an especially tricky one to navigate and is not felt until two calendar years later, based on how Medicare premiums are determined. You go over a threshold by just a dollar, and it could cost you hundreds, if not thousands.

The widow's tax penalty. This is a surge in federal income tax liability and Medicare premiums that occurs when a surviving spouse shifts from married filing jointly to single status, typically one year after their spouse passes away.

For higher-income individuals, the penalty can be severe because they often have income sources (pensions, IRAs, investments) that do not decrease when a spouse dies.

Most often, the surviving spouse spends about the same money and needs the same amount of funds to accomplish that, which means the same amount of income while the brackets have been cut in half. The IRMAA charges are higher at lower income levels, too, for the surviving spouse.

Take control and reap the rewards

Active tax management is no longer beneficial for just the ultra-wealthy; it is a necessity for anyone and beneficial for those navigating the increasingly complex $150,000 to $500,000 income range.

This bracket is filled with hidden triggers, phase-outs and surtaxes that can quietly erode wealth if left unaddressed. The difference between reactive and proactive planning can mean thousands of dollars kept or lost each year and over a lifetime.

Understand what you have, what you can do now and what you can do later, so you can either defer income or settle tax liability when it makes sense. That approach allows you to optimize your current and future tax situation.

By understanding how the various ingredients and thresholds interact — and by making intentional, forward-looking decisions around income, investments and timing — you can take greater control of your financial outcomes and your net after-tax dollars.

Remember, you do not get to spend pre-tax dollars — it is only the after-tax dollars you get to spend. As the great Yogi Berra once said, "If you don't know where you are going, you'll end up someplace else."

Dan Dunkin contributed to this article.

Appearances on Kiplinger.com were obtained through a paid public relations program. The author received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

The information contained herein is for educational purposes only. It is not intended to provide, and should not be relied on for, any tax, legal or investment advice. You are advised to seek the advice of a qualified professional prior to making any decision based on any specific information contained herein. The specific tax consequences of any investment or strategy will depend on your specific tax situation.

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

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 tax questions on amended returns and penalties for filing your tax return late. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Refund on amended return

Question: I filed Form 1040-X in early May to amend my 2024 federal tax return. I am expecting a refund, and I haven't received it yet. What is the delay?

Joy Taylor: I generally advise taxpayers to have lots of patience when filing an amended federal tax return with the IRS. The agency says you should allow at least 8 to 12 weeks for your Form 1040-X to be processed. However, in some cases, processing could take up to 16 weeks. Note that the IRS website also says that the Service is beginning to process paper-filed Forms 1040-X that were filed in April.

Maybe the processing speed will pick up later this year. The IRS's CEO, Frank Bisignano, testified before Congress that the IRS is using artificial intelligence to reduce processing times of amended returns to as little as three days. We'll see how this plays out over time.

You can use the IRS's "Where's My Amended Return" online tool to check the status of your amended return filing.

2. Amended return filing deadline

Question: I am thinking of amending my 2023 Form 1040, which I filed in February 2024. When is the due date for filing Form 1040-X to amend that return?

Joy Taylor: You generally have (1) three years from the due date of your original Form 1040 or (2) two years from the date you paid any tax due, if later, to amend it by filing an amended return on Form 1040-X. If you filed your original Form 1040 before its due date, it is considered filed on April 15. So, in your case, you would have to file an amended return no later than April 15, 2027.

3. Filing a late refund return

Question: I haven't yet filed my 2024 Form 1040. I plan to do so soon. I know I will get a refund when I do file. But will I have to pay any penalties for my late filing?

Joy Taylor: No, you will not have to pay any delinquency penalties for filing your 2024 Form 1040 late. That’s because taxpayers owe late-filing or late-payment penalties only if they owe tax, and you say you will receive a tax refund. Note that you must file your 2024 return by April 15, 2028, to get your refund. Otherwise, you have essentially ceded the money to the government.

4. Penalty abatement

Question: I haven't yet filed my 2025 Form 1040. I know I will owe tax, and I didn't request a filing extension nor did I pay the tax by the April 15 due date. I hope to file my return next month. This is the first time I have ever filed a late return with the IRS. How much will the agency penalize me for my late filing?

Joy Taylor: You may be in luck. The IRS has a little-known first-time penalty abatement policy. It will approve a waiver of the late-filing and late-payment penalties for filers who pay or arrange to pay the tax due and have been tax-compliant for the past three years. The penalties for late payroll-tax deposits and delinquent returns of S corporations or partnerships are also eligible for the waiver if the conditions are satisfied. But the estimated-tax penalty (also called the underpayment penalty) doesn't qualify for this penalty abatement program.

You may have to request the waiver. If you get a notice from the IRS showing a late-payment or late-filing penalty due but not abated, follow the instructions in the letter or call the phone number on the notice. The IRS has said that it will begin to automatically provide first-time penalty abatement to taxpayers who qualify for relief, starting with 2025 tax returns filed this year. But I am not sure whether the IRS has yet implemented this automatic procedure, which the agency will refer to as automatic exemption of penalties. If the IRS has implemented this program, then you should receive a letter after you file your late 2025 tax return, noting that the IRS didn't assess a penalty.

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

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• Ask the Editor: Tax Questions on Roth IRA Conversions
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As 2026 rolls on and families prepare for the upcoming school year, household budgets may face a tight squeeze.

Inflation continues to drive up everyday expenses like groceries, gas, and utilities. But for parents of young children, the most significant financial burden often comes from early childhood care.

The years from birth to age five are typically the most expensive. This is largely driven by center-based infant and preschool care, which contributes to an average annual cost of $29,325, according to a recent LendingTree study.

However, local tax structures and regional economics may influence how much you pay.

In some tax-friendly states, the average annual price of full-time care drops closer to $18,000 — roughly 38% below the LendingTree average. Yet a lower childcare price tag doesn't necessarily help if high sales taxes or the cost of living drag your budget back down.

To see how different regions balance these trade-offs, we analyzed ten low-tax states for middle-class families and ranked them by early childcare costs and cost-of-living indices.

Tax-friendly states ranked by childcare affordability

To determine the baseline for "affordability," we looked at how much families spend on state taxes as a percentage of their income (basing "middle-class" on the latest U.S. Census Bureau median household income data).

Next, center-based data from Child Care Aware® of America (CCAoA) was used to measure average annual early childcare costs for one child (ages 0 to 4) as a percentage of the median household income for a married couple.

The childcare cost calculations account for five key factors:

• Infant care pricing
• Toddler care pricing
• 4-year-old preschool pricing
• Before- and after-school care
• Summer programs

Kiplinger factored in the U.S. Bureau of Economic Analysis (BEA) cost-of-living index, which uses regional price parities (RFPs) to measure local prices for essentials like housing, food, transportation, and healthcare. On this scale, 100 represents the national average; a score of 88 means a state is 12% cheaper than average, while 102 indicates it is 2% more expensive.

Property tax figures were sourced from PropertyShark.

Yet it's important to note that family size, educational opportunities, and other factors can influence how "affordable" a state is, and "middle-class" may be subjective. Consult with a tax professional for your specific financial situation.

Note: Where before-and-after-care or summer program pricing data were unavailable, Kiplinger used a national average as a baseline.

1. South Dakota: Best overall value and lowest cost-of-living

Average annual childcare costs: $17,030

Childcare costs as a % of income: 14.2%

Cost-of-living index: 88.6

If you're a parent and you hate paying taxes, South Dakota is the most affordable state on our list for middle-class families. Everyday expenses track about 11.4% below the national average, potentially saving new parents on must-haves like formula and baby clothes.

Total annual childcare costs average around $17,030 (well below the national average, according to LendingTree), helping keep the overall income-to-cost ratio manageable at 14.2%.

Middle-class family taxes to consider:

• There is no personal income tax in South Dakota, allowing families to take home more of their earnings.
• To compensate for this, the state relies heavily on property taxes, which hover right around or above the national average, per PropertyShark data.
• Additionally, the 4.2% state sales tax applies to both groceries and diapers — everyday essentials that many other states exempt.

The bottom line? South Dakota's no-income-tax policy and low property taxes could help with your long-term family tax planning, but a large volume of goods for young children could offset some of your state tax savings.

2. Louisiana: Low cost of living and childcare costs

Average annual childcare costs: $18,252

Childcare costs as a % of income: 15.6%

Cost-of-living index: 88.2

Louisiana claims the second spot on this list thanks to its low cost of living. Average annual childcare costs total just over $18,200, consuming a modest 15.6% of median household income for married couples. Plus, the everyday living expenses — like food and gas — are 11.8% cheaper than the national average, according to the BEA.

Middle-class family taxes to consider:

• While considered a "tax-friendly" state for the middle-class family, Louisiana barely made our list, since its average combined sales tax is the highest in the nation at a whopping 10.11%.
• On the other hand, property taxes are among the lowest in the country, with a median bill of just $1,180 — significantly below the national average of $3,119.
• And the Bayou State has a low flat income tax of just 3% in 2026, among the lowest in the nation, according to the Tax Foundation.

The bottom line? If you don't mind higher sales taxes for lower property tax bills, a potentially cheaper cost of living, and reduced childcare costs compared to other states, Louisiana could be the second "most affordable" state to live in.

3. North Dakota: Average taxes, but cheaper childcare affordability

Average annual childcare costs: $21,292

Childcare costs as a % of income: 16.2%

Cost-of-living index: 89

North Dakota secures third by offering low costs and high savings. Families spend roughly 16.2% of their income on early childhood care in the Peace Garden State, a rate lower than most on this list. Plus, below-average costs for healthcare and groceries are common in the state, per the BEA.

Middle-class family taxes to consider:

• Unlike its southern neighbor, North Dakota levies a state income tax, though it's quite low, ranging from 1.95% to 2.5%.
• The state sales tax is a moderate 5%, and, importantly, groceries are state-tax exempt.
• Property taxes are also pretty average compared to the national median, according to PropertyShark data.

The bottom line? North Dakota's financial landscape may represent a stable, "middle-of-the-road" path for middle-class families, with few tax "surprises" and potentially low early childcare costs.

4. Wyoming: Low cost of living balances the national average

Average annual childcare costs: $21,080

Childcare costs as a % of income: 17.5%

Cost-of-living index: 92.7

Early childhood care costs can be low for Wyoming families. Center-based infant care averages just $13,120 annually, and summer care programs typically run below $2,400, according to the CCAoA. Plus, the overall cost-of-living index sits 7.3% below the national average.

Middle-class family taxes to consider:

• Wyoming has no state income tax, which can provide relief for middle-class paychecks.
• Also, the state features very low property taxes, with a median property tax bill of just $1,767 (significantly below the national average of $3,411), according to PropertyShark.
• On the other hand, Wyoming still taxes diapers at its moderate 4% state sales tax rate.

The bottom line? Wyoming can provide significant tax relief, especially if you hate paying high state income taxes or property taxes; daily essential costs can also remain low, unless you venture into more rural areas.

5. Alaska: High local costs drag down cost-to-salary ratio

Average annual childcare costs: $20,178

Childcare costs as a % of income: 14.7%

Cost-of-living index: 102.4

Alaska features the second-lowest childcare cost-to-income ratio on the list, requiring just 14.7% of a typical married couple's salary, per the latest data from CCAoA.

But it ranks fifth overall because its remote geography significantly inflates the cost of daily necessities like food and heating utilities, pushing its overall cost of living above the national average.

Middle-class family taxes to consider:

• Alaska is another no-income-tax state, which means capital gains, salaries, and bonuses are exempt from state tax.
• The Last Frontier also levies no statewide sales tax, according to the Tax Foundation.
• However, because Alaska doesn't collect income or sales tax, local and property taxes can vary widely by region.

The bottom line? For families who can navigate long winters and high retail prices, Alaska's early childhood programs can be affordable depending on the area and household income level.

6. Florida: Moderate costs with a higher cost-of-living

Average annual childcare costs: $19,520

Childcare costs as a % of income: 16.9%

Cost-of-living index: 103.4

It might come as a surprise that Florida lands in the bottom half of the rankings on our list.

But the Sunshine State's cost of living sits nearly 4% above the national average according to the BEA, driven up by rising costs in healthcare, food, and utilities. According to the CCAoA, childcare accounts for 16.9% of the median family income, providing some relief for middle-class budgets.

Middle-class family taxes to consider:

• All forms of personal income are state tax-free, which is one of the reasons people move to Florida.
• State officials are also looking to greatly reduce or even eliminate property taxes, though for now, the median bill is just below the national average, per PropertyShark.
• The statewide sales tax rate is relatively high, at 6%, yet diapers and groceries aren't subject to state sales taxes.

The bottom line? While the cost of living on items like groceries, home insurance premiums, and healthcare is higher in Florida than in other places on our list, middle-class families may still find early childhood care affordable in less expensive areas.

7. Arizona: Higher cost of living, but low taxes on everything else

Average annual childcare costs: $21,909

Childcare costs as a % of income: 18%

Cost-of-living index: 100.7

Arizona's placement reflects a combination of an above-average cost-of-living index and steep upfront childcare fees.

Per the CCAoA, middle-class families can expect to dedicate 18% of their annual income to early childhood care, which is only 2% below the national average. Center-based programs for infants and toddlers are more costly than other states so far, averaging $16,384 and $13,742 per year, respectively.

Middle-class family taxes to consider:

• Arizona has a flat income tax rate of 2.5%, making personal individual returns perhaps a little simpler for families.
• Plus, the Grand Canyon State has some of the lowest property taxes in the nation, with a median bill of only $1,879 — 55% below the national average, according to PropertyShark.
• At the same time, the state's 5.6% sales tax is relatively average; Arizona still taxes diapers.

The bottom line? Despite a higher cost of living, Arizona could be an affordable option for parents with slightly higher incomes who want lower property tax bills. But the overall financial and tax environment requires careful cash-flow management for growing families.

8. Tennessee: Low childcare costs except in the summer

Average annual childcare costs: $23,371

Childcare costs as a % of income: 20.8%

Cost-of-living index: 91.9

Despite boasting a relatively low cost-of-living index that is 8.1% below the national average, Tennessee ranks low on our list due to the state's shortage of licensed childcare facilities. Because of this, summer childcare costs alone can reach over $8,000, pushing total annual care to nearly 21% of a family's household income, per CCAoA data.

Middle-class family taxes to consider:

• Tennessee has no state income tax, meaning your wages, salaries, and tips are state tax-free.
• Property taxes are also among the lowest in the U.S., with a median bill of around $1,442, according to 2026 PropertyShark data.
• High sales taxes are the norm in the Volunteer State. At 7%, Tennessee's base rate is the second-highest in the nation and applies to diapers. Groceries are also taxed, although at a lower rate of 4%.

The bottom line? Tennessee's lower cost of living offers potential savings on most everyday expenses. However, middle-class families with young children should factor in the higher sales tax rates and elevated summertime care costs into their annual budgets.

9. Nevada: Middle ground cost of living, with higher childcare costs

Average annual childcare costs: $24,102

Childcare costs as a % of income: 21.1%

Cost-of-living index: 100

Nevada represents a somewhat flat baseline for everyday living, with housing, food, and medical costs landing right around the national average, according to the BEA. Yet early childcare eats up more than one-fifth (21%) of the median middle-class household income, making these costs a heavier burden than in other areas on our list.

Middle-class family taxes to consider:

• Like many other states on this list, Nevada has no state income tax, helping middle-class families keep their entire paycheck (at least from a state tax perspective).
• Per PropertyShark data, property taxes are also low, with a median bill of about $2,027.
• Sales taxes are a bit higher, around 6.85%, though Nevada doesn't tax groceries or diapers at the state level.

The bottom line? Nevada families enjoy zero state income tax and highly reasonable property taxes, which offer some relief, but the high cost of childcare means that while families keep their full paychecks, a substantial portion is immediately redirected to local care facilities.

10. Washington: Least affordable, high cost of living

Average annual childcare costs: $28,436

Childcare costs as a % of income: 19%

Cost-of-living index: 107

Washington closes out the list as the most expensive tax-friendly state for middle-class families with young children. A cost-of-living index of 107 means families pay a 7% premium on necessities like housing and utilities.

While high median incomes keep the childcare-to-salary ratio at 19%, the annual average childcare cost of $28,436 makes it the most expensive baseline care price on the list, according to the CCAoA.

Middle-class family taxes to consider:

• Though there is no personal state income tax, Washington imposes a 7% to 9.9% tax on long-term capital gains over $262,000.
• The Evergreen State also has a high sales tax, ranking among the highest in the nation.
• Property taxes, too, are expensive, with a median bill above the national average at $4,556, according to PropertyShark data.

The bottom line? Although childcare costs are comparable to a couple of other states on this list, property taxes, an elevated cost of living, and high sales taxes create significant financial hurdles for middle-class families.

Read More

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

The budget deal, which ends months of budget negotiations, will impose a new charge on the power used by data centers in the Commonwealth beginning 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.

The legislation now heads to Gov. Abigail Spanberger, who is expected to sign it before the start of the new fiscal year. 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.
• If Spanberger signs the budget, 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.

Will Spanberger sign? Gov. Spanberger, who has signaled support for the compromise, is expected to sign the budget.

Her signature will end 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

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 federal estimated tax payments and federal income tax withholding. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Underpayment penalty

Question: How much federal income tax must be withheld to avoid paying a tax penalty to the IRS when I file my Form 1040 each year?

Joy Taylor: You are off the hook from the underpayment penalty if you prepay, through estimated tax payments or withholding, at least 90% of your current year's tax bill or 100% of the tax that you owed for the immediately preceding year (110% if your adjusted gross income for the immediately preceding year exceeded $150,000).

2. Due dates for estimated tax payments

Question: I have to start making estimated tax payments to the IRS this year. What are the due dates for the payments, and how can I make them?

Joy Taylor: Estimated tax payments are for people with income that is not subject to withholding. Taxpayers usually make estimated tax payments to the IRS in four equal installments. The first remittance for 2026 was due April 15. The other dates are June 15, September 15 and January 15, 2027. Victims of federally declared disasters may have more time to pay their estimated taxes.

There are several ways to make estimated tax payments.

• If you have an online individual account set up with the IRS, you can log in and pay through the account.
• You can pay online with the IRS's Direct Pay or, if you currently have an account, with the Treasury Department's Electronic Federal Tax Payment System.
• You can use your phone to pay with the IRS's app.
• You can pay by debit or credit card, but know that you will be charged a fee.
• Payment by paper check is also accepted for now, but this option will soon disappear.

3. IRS withholding calculator

Question: Do you know whether the IRS has a federal income tax withholding calculator on its website, and is the calculator updated for changes in tax laws?

Joy Taylor: The IRS does have a withholding estimator on its website. It helps you figure out whether you are having the right amount of federal income tax withheld from wages and pensions. The tool asks about various sources of income, provides tips on credits and deductions, and estimates how much withholding to request. And it is usually updated to account for tax law changes.

4. IRS forms to request withholding

Question: Can you tell me the various IRS forms I would use to request more or less income tax withholding from Social Security, wages, IRA distributions, etc.?

Joy Taylor: Employees who want more or less income tax withheld from their wages can submit a new Form W-4 to their employers. People receiving pension or annuity payments can submit Form W-4P. IRA owners use Form W-4R. Social Security recipients have two options. They can fill out Form W-4V and mail it in. Or, if they have an online Social Security account, they can request through their account that more or less tax be withheld from their monthly Social Security payments.

5. Withholding tax from a late-year IRA distribution

Question: I am retired, and most of my income is from IRA required minimum distributions (RMDs), Social Security, and dividends and capital gains from taxable investments. Someone told me that I don't have to make quarterly estimated tax payments. I can instead wait until year-end and request that my IRA custodian withhold a lump sum amount of income tax from my year-end IRA distribution to satisfy my federal income tax liability for the year. Is that true?

Joy Taylor: Pretty much, yes. For federal income tax purposes, tax withheld at any point in the year is treated as if evenly paid throughout the year. Some retirees rely on this rule to have federal income taxes that they expect to owe for a year withheld from a December RMD instead of making quarterly estimated tax payments. Kiplinger regularly advises retirees who are falling short on their tax withholding to have more tax withheld from a year-end IRA payout. Read more in our article on RMD withholding strategies.

State tax rules may differ, and some sponsors don't withhold state income taxes, so be sure to check your specific state law.

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.

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If your weekend barbecue shopping trip feels more expensive this year, you’re not alone.

The biggest culprit? High beef prices, which are up about 14% year over year, according to the Bureau of Labor Statistics. This cost is sometimes referred to as the "burger tax."

This burger sticker shock comes as shoppers across the U.S. have been dealing with higher grocery bills for years, especially when buying staples like meat, eggs, and dairy products.

And if you live in a state that still taxes groceries, the number on your receipt is even higher. Here's more of what you need to know.

Why is the price of beef so high?

While overall grocery prices are up 3.1% over last year due to inflation, the long-term impact is significant. Food prices at home have jumped 27% over the last five years.

And…the United States Department of Agriculture (USDA) expects food-at-home prices to continue rising in 2026, with beef among the categories projected to see some of the strongest price growth.

As a result, feeding 10 guests at a backyard barbecue could now cost roughly $15 (or more) per person. Ground beef, up 70% since 2021 and now reportedly averaging about $6.90 a pound, is responsible for much of that increase.

Declining cattle numbers, high feed costs, drought, and consistent beef consumption in the U.S. all contribute to soaring prices.

Grocery tax by state

If rising food prices weren't enough, residents in 13 states face an additional expense because some states continue to tax groceries.

In some cases, that means full statewide tax; in others, reduced rates or hybrid systems that still add a charge at checkout.

For example, Mississippi, Idaho, South Dakota, and Hawaii apply full or near-full state tax rates to grocery purchases. But over the last few years, several states (Oklahoma and Kansas are just two) have eliminated their state-level grocery taxes (though local municipal taxes still apply at checkout in many areas).

Below is what that looks like in dollar terms for a typical cookout basket.

Note: Prior estimates from the Wells Fargo Agri-Food Institute put the cost of a typical 10-person backyard barbecue at about $130. With ground beef prices up roughly 14% over the past year, a comparable cookout basket today would likely be closer to $150, or more, depending on menu choices and substitutions.

States with Statewide Grocery Tax This Year (Assumes a $150 grocery basket for a 10-person cookout)

*Note: Additional city, county, or transit district taxes may apply on top of these base numbers.

** Hawaii imposes a general excise tax rather than a traditional sales tax.

Here's where things stand in the remaining states that still technically tax groceries but have eliminated or reduced state-level tax.

Oklahoma: The Sooner State repealed its 4.5% state grocery tax in 2024, though local sales taxes may still apply.

Kansas: Kansas fully phased out its state grocery tax last year after gradually reducing the rate over several years. Local taxes may still be charged on food purchases.

Virginia: Virginia taxes groceries at a reduced rate of 1%, split between state and local governments.

Illinois: Illinois ended its statewide 1% grocery tax as of 2026, but local governments can impose their own grocery taxes, meaning some shoppers still pay tax at checkout.

Arkansas: Arkansas eliminated its state grocery tax in 2025, although some cities and counties continue to levy local taxes on food purchases.

Bottom line: Why some states still tax groceries in 2026

Most states exempt groceries from sales taxes because food is considered a necessity. However, a handful continue to tax groceries at either the full state sales tax rate or a reduced rate.

• Supporters argue that grocery taxes provide a stable source of revenue that helps fund schools, roads and other public services. They also contend that broad-based sales taxes allow states to keep other taxes lower.
• Critics counter that grocery taxes disproportionately affect lower-income households because food purchases consume a larger share of their budgets.

The debate has intensified in recent years as inflation pushed food prices higher, and as a result, several states have reduced or eliminated grocery taxes.

In Alabama, lawmakers have temporarily suspended the 2% state sales tax on most groceries until June 30, to alleviate high food prices, though local sales taxes remain in place. Similarly, as Kiplinger has reported, Illinois and Arkansas have recently eliminated their state-level grocery taxes, while local taxes still apply in some areas.

Notably, some cities are exploring targeted approaches to making food more affordable and accessible. For example, San Francisco's “Affordable Groceries Act” has recently been proposed by District 5 supervisor Bilal Mahmood.

Modeled after Mayor Zohran Mamdani's city-owned grocery store initiative in New York City, the San Francisco bill is designed to support new grocery stores in underserved neighborhoods through an affordable grocery fund and a vacancy tax imposed on large chains that close stores in the city.

Read More

• Food Tax: Which States Still Tax Groceries in 2026?
• 9 No-Income-Tax States Ranked by Cost of Living
• States With the Lowest Sales Taxes

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?

The financial professionals who contribute to Kiplinger's Adviser Intel are always here to make sure you have the information you need to make critical decisions about your retirement planning, estate planning and tax planning.

They've recently written about the growing number of Americans working past retirement age — and why the consequences can be more complicated than you might think in terms of Social Security, healthcare and tax.

This quiz is designed to test what you've learned. Let's see what you know! (And don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

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.

Read More

• Social Security, Healthcare and Tax: The Potential Complications of Working Past Retirement Age
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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

If you have retirement savings in an IRA or 401(k), Uncle Sam is your partner on that money because every dollar you pull out of it is taxed.

Consider this common scenario: One spouse in a retired household passes away and the surviving spouse becomes a single taxpayer, which affects their overall tax liability, even though their income goes down.

Let's say the couple's total income was $200,000 a year. While they were married, this meant they had an effective tax bracket of about 15%.

When the husband passes away, the wife's income goes down to $180,000 because she loses the smaller of their two Social Security checks. But going forward, she will file as a single taxpayer, so she is now in the 20% tax bracket.

Additionally, if her RMDs and her income grow each year, her tax rate could keep climbing. And that doesn't even factor in future tax increases. (It's unlikely taxes will stay as low as they are now, considering our nation's debt of $39 trillion.)

Proactive tax planning could have helped protect her from the impact of higher taxes after losing her partner.

For retirees in higher tax brackets looking to help their spouse (or adult children) avoid this kind of tax trap in the future, partial Roth conversions now can help.

1. Protecting the surviving spouse

If you're a married couple, you're in a joint taxpayer bracket. And once both spouses reach age 65, you become eligible for specific additional tax benefits.

For example, with a taxable income of $148,300, you fall within the 12% tax bracket for married couples filing jointly after the deductions.

The $148,300 figure includes a $32,200 standard deduction based on your filing status. You would also receive the $3,300 additional standard deduction for both being over age 65 – this consists of $1,650 for each spouse, as determined by the One Big Beautiful Bill for taxpayers over 65. On top of this, there is an additional $12,000 bonus deduction for those over age 65 (up to a certain income limit).

However, when one spouse dies, the surviving spouse (usually the wife) jumps up to the 24% tax bracket.

If your income is higher, it's an even larger jump in taxes for the surviving spouse.

For example, if your taxable income as a married couple is $250,000 a year, you can see on the chart below that you're in the 24% tax bracket because you're "married filing jointly."

However, if the husband dies first, the surviving spouse is now a "single filer" with taxable income of $250,000. You can see she has now jumped up into the 32% tax bracket.

A Roth IRA may help protect the surviving spouse from higher taxes as a single taxpayer because you already paid the taxes while you were both alive as joint taxpayers.

2. Protecting non-spouses

When you die and leave your IRA to your children, they only have 10 years to empty your IRA completely.

Let's assume the IRA you leave to your children will earn 4% annual returns over the 10-year period after you leave it to them. This means that your children will have to take out approximately 14% of the IRA balance every year.

This would allow them to take out the 4% annual earnings along with 10% of the principal, so the entire IRA is drained over that 10-year period without a potential big tax hit in year 10.

However, this 14% annual IRA withdrawal could put your heirs in a higher tax bracket.

While a Roth conversion would mean paying income tax now, that could be a bargain compared to the potentially higher income tax brackets your heirs might have to deal with after you're gone — and any state income taxes they may also have to pay.

Additionally, if your children live in a state that has a state income tax (such as New York, which has a 10.9% top state tax bracket), they may be subject to federal income taxes and up to an additional 10.9% in state income taxes as well.

We use software called Holistiplan that helps identify the maximum amount to withdraw year by year to take advantage of today's tax brackets, and will work alongside an accountant or a tax professional.

When appropriate, we recommend our Strategic Roth Integration (SRI) plan to clients so that they can take advantage of today's income tax rates and never pay taxes on their Roth IRA again.

If you'd like to learn more, check out my new book, IRA Owners: Help Defuse Your Ticking Time-Bomb, co-authored with Steven Kao.

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

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

I've worked with enough successful business owners to know that almost every one has the same gap in their plans.

Take a scenario I see all the time: Dave built a widget company from nothing into a $30 million business. He's sharp, disciplined and completely focused on growth.

But when I ask him what his plan looks like after the company's sale, he stares at me like I've asked him to solve a riddle in an unknown language.

Dave isn't unusual. Most successful entrepreneurs pour every ounce of energy into building a business and almost none into planning for what happens when it turns into liquid wealth.

It's not carelessness. Building the company is the priority. If it doesn't succeed, there's nothing for which to plan.

The problem is that by the time the exit is real and there's a signed contract and a closing date, the biggest wealth-building opportunities have already passed. The cost of that timing gap can run well into the millions.

Three things business owners aren't considering

The same three blind spots come up again and again:

• The first is business structure. How the company and the owner's personal stake are organized for tax purposes. Whether you're a C corp, S corp, LLC or LLP affects not just annual income taxes but the tax treatment of any future sale. Get this wrong at formation, and you could be locked in for decades.
• The second is succession planning. For a business to command a strong valuation, it needs to be transferable. This means there is management in place, client relationships are institutional rather than personal, and operations can run without the founder. Buyers pay a premium for businesses they can take over immediately.
• The third is exit and estate planning. This one costs families the most money. A successful sale creates a massive tax event. Without years of advance planning, your options to reduce that burden shrink dramatically.

Why the math gets worse as the business grows

Valuation multiples expand as revenues grow. A company with $200,000 in EBITDA might sell for five times, or $1 million. Scale to $3 million in EBITDA and a 10-times multiple puts the value at $30 million. At $35 million in EBITDA, a 20-times multiple can push it to $700 million.

Industry and revenue quality directly impact these numbers, but the pattern holds: The bigger the exit, the bigger the tax event.

The federal estate tax rate above the exemption is 40%. The current lifetime exemption is $15 million per person ($30 million per couple), which is the most generous in U.S. history.

But Congress can change that number. A sale that pushes your estate above the exemption can trigger an enormous tax bill for your heirs if you haven't planned ahead.

What early planning looks like

If a business owner shows up with a signed purchase agreement and asks what can be done to reduce the tax hit, the honest answer is: Not much. The valuation is set. The structure is locked. The die has been cast, as we say.

The difference between the business owner who plans five years out and the one who plans five months out can easily be eight figures.

Let's revisit Dave's scenario. Five years before his planned exit, we started working on a strategy. Dave created an irrevocable trust for the benefit of his wife and children and transferred 50% of his company, valued at $15 million at the time, into that trust.

When the company sold for $60 million, the trust's half was worth $30 million, and that $30 million was outside Dave's taxable estate.

He paid long-term capital gains of 20% on the sale rather than ordinary income rates of 37%, and by moving assets out of his estate at a much lower valuation years earlier, he avoided what could have been $12 million in estate taxes on the growth alone. All told, early planning saved Dave's family north of $20 million.

Two types of trusts come up most often in these conversations:

• A spousal lifetime access trust (SLAT) is an irrevocable trust that names the spouse as beneficiary during their lifetime, then passes to children and grandchildren. It works well when the business owner might still need access to income or assets from the trust.
• An intentionally defective grantor trust (IDGT) skips the spousal access and goes directly to children and grandchildren.

Both of these options share the same critical advantage: The assets are valued when they go into the trust. For a growing business, that means transferring at a relatively low valuation years before the exit and letting all that appreciation happen outside the taxable estate.

Charitable strategies can strengthen the plan further. Donating appreciated stock to a donor-advised fund — or, for private company shares, to an organization that accepts them — delivers meaningful tax benefits over donating cash. These tools work best when built into the strategy early.

Four things to do now

If you own a business and think you might sell it someday (even if "someday" feels like a decade away) here's where to start.

1. Find the right wealth manager. Look for someone who works specifically with business owners and can help you build a long-term plan that connects your business goals to your personal financial picture. This isn't a one-meeting exercise, it's an ongoing relationship.

2. Assemble your full team and get them on the same page. Alongside your wealth adviser, you also need an attorney and an accountant, all working from the same playbook. These professionals shouldn't be operating in silos. The value comes from coordination. To ensure this, I encourage you to ask your team four questions:

• What is the plan?
• How are we going to get there?
• Who else needs to be involved?
• What are we not thinking about? This is the one most people forget.

3. Start three to five years before any potential sale. This is the window when the most powerful strategies, including trust planning, ownership restructuring, estate tax reduction, are still available to you. If you wait until a deal is on the table, most of those doors close.

4. Execute aggressively. An unexecuted plan is worthless. Once the strategy is in place, move on it. Every year of delay is a year that asset values grow inside your taxable estate instead of outside it.

The future will arrive faster than you think. Time is your single greatest ally in wealth planning but only if you use it.

The entrepreneurs who start early, build the right team and execute with urgency are the ones who keep the wealth they spent a career creating.

The ones who wait? They pay for it.

Related Content

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• When Starting a Business, the End Is a Very Good Place to Start
• The Entrepreneur's Exit: How to Sell (or Pass on) Your Business Without Losing the Family
• Planning to Leave Your Business? How to Find the Right Buyer
• To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around You
• The Most Important Number for a Business Owner Considering a Sale

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

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

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Spending the summer months in Arizona might sound intense — and it often is.

Between a stretch of 100-degree days, spiking utility bills, and the sudden storms of monsoon season, the desert climate can certainly feel daunting. But these few months only tell part of the story.

From fall through spring, Arizona shifts into a sun-soaked haven. During this period, the Grand Canyon State boasts the mild weather of coastal California at a comparatively lower cost.

That affordability extends to state income and property taxes. Residents enjoy a low flat income tax of just 2.5%, and property tax rates typically fall below the national average. There is no state inheritance tax to worry about, and Arizona waives its state sales tax on groceries.

Interested in finding your piece of the desert? Buckle up for a road trip. Here are the ten cheapest places to live in Arizona.

Cheapest places to live in Arizona

After Kiplinger ranked property tax bills from highest to lowest per county in Arizona, one trend jumped out: Rural areas are the cheapest. You’ll typically find a more affordable lifestyle in the country than in metropolitan areas like Phoenix.

But if you’re ready to see vast desert landscapes and quaint small towns and are willing to travel to a city for other amusements, look into these places in Arizona.

Note: Kiplinger used 2026 data presented by the Tax Foundation (sourced from the U.S. Census Bureau) to find the cheapest counties in Arizona to live.

Santa Cruz County

Median property tax bill: $1,415

Median home price: $233,000

At a median of $1,415, Santa Cruz County features the highest property tax bill on our list. Yet, home prices are relatively modest, at roughly $233,000, according to the Tax Foundation.

Located along the sunny Mexican border, Santa Cruz is Arizona's smallest county by land area, but don't let that fool you — there's plenty to do. Whether you're looking for a deeply cultural journey, historic exploration, or a scenic outdoor escape, Santa Cruz offers a distinct, authentic vibe in every region.

Nature lovers can experience world-class birding in the Patagonia Mountains and Patagonia Lake State Park, explore the scenic Arizona Trail, or hike through the lush Sonoita Creek State Natural Area. Just up the road, you can taste award-winning local varietals in the high-desert wineries of Sonoita and Elgin.

For history and art enthusiasts, the area boasts the historic 18th-century Spanish mission at Tumacácori National Historical Park and the oldest Spanish military presidio in Arizona at Tubac, which has evolved into a thriving, world-renowned artist colony.

In the heart of the county sits Nogales, the vibrant county seat and one of the nation's most crucial international ports, anchoring a rich Mexican-American border culture and a bustling produce economy.

So come to Santa Cruz for whatever your vibe is, but stay for the relatively affordable property tax bill.

Gila County

Median property tax bill: $1,386

Median home price: $269,400

Gila has the second-highest median home price on our list, at $269,400, though its median property tax bill is just under $1,400, per the latest U.S. Census Bureau Data. This anomaly exists because while property tax rates are low, highly desirable mountain communities like Payson and Pine drive up home values.

Outdoor enthusiasts might absolutely love Gila County for its local topography. The landscape shifts from the blooming cactus of the Sonoran Desert to the towering ponderosa pines of the Mogollon Rim, meaning a scenic hike is never far away, no matter where you roam.

Residents also enjoy easy access to Tonto Natural Bridge State Park, which contains the world's largest natural travertine bridge. Meanwhile, water lovers can explore Roosevelt Lake — the largest lake entirely in central Arizona — via boating, fishing, and camping along the shoreline.

Families might also love exploring the ancient, restored Salado pueblo ruins at Besh-Ba-Gowah Archaeological Park, or visiting the Tonto Fish Hatchery to learn all about the trout life cycle.

If you have an active, outdoorsy household, Gila County, Arizona, might make for an incredible next stop, and your wallet could thank you.

Yuma County

Median property tax bill: $1,333

Median home price: $217,800

With a median property tax bill hovering around $1,333, Yuma County stands out as a highly affordable corner of the Grand Canyon State. Home prices can also be lower, with a median home price just under $218,000, per the Tax Foundation's data.

Known as the "Winter Lettuce Capital of the World," the region famously produces roughly 90% of all the leafy greens consumed across North America during the winter months. Beyond its agricultural importance, Yuma is also recognized as the "Sunniest Place on Earth," holding a Guinness World Record for enjoying sunshine about 91% of the year — so be sure to pack your parasol!

Residents take advantage of this endless sunshine by kayaking, canoeing, and tubing along the Colorado River, exploring the scenic walking trails and butterfly gardens at West Wetlands Park, or conquering the rolling hills of the Imperial Sand Dunes.

But if outdoor adrenaline isn't your thing, no biggie; historical sites like the Yuma Art Center & Historic Theatre and a vibrant downtown shopping scene mean you can easily trade the desert heat for central AC without missing out on the local vibe.

Whether you're looking for booming seasonal energy or desert relaxation, Yuma County awaits, complete with a relatively low property tax bill.

Cochise County

Median property tax bill: $1,310

Median home price: $218,300

Homes in Cochise are priced slightly higher than in Yuma County, with a median price of around $218,300. However, the median property tax bill is comparatively lower, at just $1,310, according to the U.S. Census Bureau.

Keen on a unique, bohemian atmosphere? Cochise has you covered. Nestled in the region is Bisbee, an artsy mountain enclave beautifully carved into the steep hillsides of Mule Mountain Canyon. The town is filled to the brim with historic brick buildings, local boutique shops, and distinct craft breweries. And when you want to switch gears, you can easily head into other parts of the county for a totally different lifestyle.

The region is famous for the iconic Old West town of Tombstone, home to a community proudly preserving its rugged cowboy heritage through authentic stagecoach rides and daily reenactments of the historic gunfight at the O.K. Corral.

For the outdoorsman, the area surrounding the city of Sierra Vista provides exploration of underground rock formations at Kartchner Caverns State Park, hikes through the scenic San Pedro River Valley, and rock climbing at the Cochise Stronghold.

Offering a vibrant mix of exciting, unconventional, and rich all-American culture, Cochise County delivers a perhaps unforgettable southwestern lifestyle — with surprisingly low property taxes.

Mohave County

Median property tax bill: $1,238

Median home price: $281,000

Located a little over two hours from Las Vegas, Mohave County has a relatively low median property tax bill of just under $1,240.

However, the median home price is the highest on our list at $281,000, according to the latest Tax Foundation data. This is largely due to a localized housing shortage coupled with out-of-state migration from higher-cost states, like California. But don't let Mohave's slightly higher prices drive you away from this piece of American history.

The area has the longest remaining drivable stretch of the historic Route 66, giving residents access to vast, open desert landscapes. You can also take a walk into the Grand Canyon West, where stepping out onto the Skywalk — a famous horseshoe-shaped glass bridge suspended 4,000 feet above the canyon floor — isn't just a daring fantasy, but a reality.

The county's unique geography also features the iconic London Bridge, which was meticulously relocated from England to Lake Havasu City in the 1900s. Alongside local lakes and the Colorado River, the region offers plenty of water recreation paired with a deeply rooted historic mining culture.

Looking for a slice of wide-open outdoor living mixed with a lack of restrictive HOAs and plenty of lifestyle freedom? Mohave County, Arizona, might just be your next move.

Navajo County

Median property tax bill: $1,195

Median home price: $201,500

Navajo County home prices are relatively low compared with other places on our list, at just around $201,500. Median property tax bills are also considered cheap at under $1,200 per year, according to the Tax Foundation.

The area is known for the dramatic contrast of red sandstone buttes in the north and cool pine forests, alpine streams, and deep lakes in the south. Named after the Navajo Nation, which spans across its northern territory, the county is also home to the Hopi and White Mountain Apache tribes, creating a rich cultural tapestry.

Up north, residents can explore the iconic monoliths of Monument Valley alongside local Navajo guides, or visit Petrified Forest National Park to hike past ancient fossilized logs and vibrant strata in the Painted Desert.

Down south, the vibe transforms into a mountain resort centered on active communities like Show Low and Pinetop-Lakeside. Here, locals enjoy endless summer fishing, boating, and hiking at the Fool Hollow Recreation Area, as well as skiing and snowboarding at Sunrise Park Resort during the winter.

Navajo County might just be the ultimate all-season escape from the desert heat and winter snow, delivering a diverse mountain lifestyle paired with a surprisingly affordable property tax bill.

Graham County

Median property tax bill: $1,013

Median home price: $212,000

The median property tax bill in Graham is cheap, at slightly more than $1,000 per year. Home prices can also be relatively inexpensive compared to the rest of the state, with a median of about $212,000 according to the U.S. Census Bureau.

Those who want a classic, laid-back small-town American vibe might stop their travels right here. The county is named for the lofty Mount Graham, which serves as a picturesque backdrop for the entire county. Locals can hike or off-road up the mountain, or soak in nearby mineral hot springs.

Graham also has a tight-knit, small-town atmosphere, where local traditions, such as high school football games, holiday light parades, and seasonal harvest events, are center stage. The region even draws travelers from all over for its annual Salsa Fest.

Yet, despite the hometown charm, Graham is quite the scientific hub. Residents can book guided astronomy tours to see the enormous telescopes at the Mount Graham International Observatory, delve into the Space Shuttle simulators at Eastern Arizona College's Discovery Park, or head outdoors to learn about desert conservation at the striking Gila Box Riparian National Conservation Area.

Come to a place steeped in tradition, research, and strong community, and stay because those property taxes are just so cheap.

La Paz County

Median property tax bill: $873

Median home price: $135,800

A little over two hours from Phoenix is La Paz County, with a median property tax bill of just $873, which is lower than that of all neighboring counties. According to Tax Foundation data, the median home price is also relatively cheap, at $135,800.

La Paz is a snowbird's paradise. Winter residents and visitors flock to the region to enjoy sunny boating on the Colorado River, relaxed camping at Buckskin Mountain State Park, and the sprawling gem and mineral shows in Quartzsite.

For adrenaline seekers, the county delivers in spades, whether you're jet-skiing on the Parker Strip or tearing through the open desert along the rugged Arizona Peace Trail.

Conversely, when summer hits its stride, a beautiful hush falls over the region. Much like the rest of rural Arizona, the crowds thin out, treating residents to private solitude, wide-open roads, and peaceful river access all to themselves.

So if you want exceptionally low property taxes, you could reside in La Paz County for its vibrant winter fun and unmatched seasonal relaxation.

Apache County

Median property tax bill: $572

Median home price: $63,700

Apache County, Arizona, has the lowest median home price on the list, sitting under $64,000 according to U.S. Census Bureau data. Median property tax bills are also exceptionally cheap, hovering just below $575.

Because Apache County is a remote region where the Navajo Nation holds a significant portion of the territory, private acreage is limited, leading to more off-grid living and cheaper home prices. So if homesteading is your goal, the county has your back.

In particular, the sprawling high-desert flatlands near towns like Concho and St. Johns are famous for having highly affordable land, paired with a quietly independent attitude. You must be prepared to haul your own resources, though, which may include drilling a well or setting up solar power — traditional municipal utilities are scarce, which can rack up costs.

Yet when you want to transition from homesteading to recreation, the county offers unforgettable southwestern experiences. Residents can take incredible guided tours through the sheer cliffs of Canyon de Chelly National Monument, hike the brilliant badlands of the Painted Desert, or step back in time by exploring the Hubbell Trading Post National Historic Site.

For the modern frontiersman in all of us, Apache County's unbeatable wide-open freedom could be your calling.

Greenlee County

Median property tax bill: $518

Median home price: $158,600

Greenlee County is the cheapest place to live in Arizona. The median property tax bill is only $518, and home prices are around $158,600, per the most recent Tax Foundation data.

As Arizona's least populous county, Greenlee is peaceful, off the beaten path, and defined by mining, ranching, and warm small-town hospitality. In fact, it hosts the Morenci Mine, the largest open-pit copper mine in North America.

Running right through the county is the historic Coronado Trail (U.S. 191), featuring more than 400 twists and turns that provide prime motorcycling, cycling, and sightseeing opportunities.

Following this winding route upward leads to a dramatic change in scenery at Hannagan Meadow. In stark contrast to the desert canyons below, the meadow sits at over 9,000 feet, offering a mountainous setting for horseback riding, hiking, and both summer and winter eco-tours.

Rockhounds can also strike out into the desert to search for brilliant agate, blood-red jasper, and rare fire agate at public sites like the Round Mountain Rockhound Area and Limestone Gulch. Meanwhile, outdoor sportsmen may fish for native Arizona trout in the mountain streams or spend a quiet afternoon casting along the scenic banks of the Gila River.

So if you want to bypass bustling urbanization in favor of quiet, simple living, making the most affordable county in Arizona your next destination might just be the perfect choice.

More Cheap Places

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For retirees and those closing in on retirement, understanding how to manage required minimum distributions (RMDs) is essential.

These government-mandated withdrawals must be taken from tax-deferred retirement accounts, such as traditional IRAs and 401(k)s, starting at age 73. Yet, as a longtime financial adviser, I've learned that many investors nearing that age aren't familiar with how RMDs work or prepared to deal with the extra taxes they can trigger.

Even those who know something about RMDs aren't always aware of recent rule changes or useful strategies that might help reduce their RMD tax burden. That means they could easily make costly missteps that impact their retirement savings.

What are RMDs?

The IRS doesn't allow retirement savers to keep money stashed in their tax-deferred accounts indefinitely. Once you turn 73, you must begin withdrawing a minimum amount annually (based on an IRS formula) and pay ordinary income taxes on that amount.

These mandated withdrawals are called required minimum distributions. And failing to take the appropriate distribution at the correct time can result in a hefty penalty.

The RMD rules apply to all tax-advantaged plans except Roth IRAs because those account owners have already paid taxes on their contributions.

Common mistakes with RMDs

1. Taking RMDs without advance tax planning

RMDs start at age 73 for most people born between 1951 and 1959. And those born in 1960 or later will start at age 75. But I recommend planning for these complicated withdrawals long before you're required to take them.

When you hear retirees complain about paying much more in taxes than they expected in any given year, it's often because they weren't ready for how RMDs would affect their taxable income.

For example, your RMD could push your income past the IRS threshold that determines whether your Social Security benefit will become taxable and at what percentage it could be taxed.

Your withdrawal could also trigger the income-related monthly adjustment amount (IRMAA), a surcharge on your Medicare premiums. Planning ahead could help you avoid these and other RMD-related tax traps.

2. Waiting until the last minute to take your first RMD

RMDs generally must be completed by December 31 of the current calendar year. In the year you turn 73, however, you'll have the option to delay taking your RMD until April 1 of the following year. (For example, if you're turning 73 in 2027, you'll have until April 1, 2028, to take your first RMD.)

But there can be consequences for postponing. If you decide to make two withdrawals in one year, your taxable income will likely be higher for that year, which could mean facing a steeper tax bill. Before you decide to double up, you may want to run the numbers to be sure it makes sense.

In fact, waiting until the last minute in any year could cause problems if you suddenly get busy, can't afford or simply forget to take your RMD.

If you haven't withdrawn the full RMD amount by the deadline, you could face a 25% penalty on the amount you haven't withdrawn. (That drops to 10% if the RMD is corrected within two years.)

If you decide to wait until the RMD deadline, you also may have to sell investments in a down market. Spreading out your withdrawals could help reduce market risk.

3. Forgetting inherited IRA rules

Planning to leave what's left in your accounts to your beneficiaries? They, too, will have to take distributions based on IRS rules. And they, too, could face a penalty if they don't correctly calculate and take their required withdrawals at the proper time.

The rules for when account beneficiaries must take RMDs vary based on the inheritor's relationship to the original account holder. A spouse who inherits a retirement account usually has more flexibility, for instance, when it comes to determining how soon RMDs will begin and how they'll be calculated.

But most non-spouse beneficiaries are required to empty their inherited account and pay taxes on this income within 10 years of the original account holder's death. Which means adult children often end up having to take RMDs from an inherited account during their highest-earning years.

If you expect to leave money in a 401(k) or similar account to your loved ones, it's important that they have a chance to do their own tax planning. Your financial adviser should be able to suggest strategies to help them maximize your generous gift.

4. Missing out on qualified charitable distribution opportunities

It may be difficult to predict exactly how much your RMDs will be from year to year — or how much they might impact your taxes. But just knowing they're coming will give you an opportunity to prepare.

If charitable giving is part of your financial plan, a qualified charitable distribution (QCD) can help you further your philanthropic goals and reduce the tax hit from your RMDs.

QCDs allow individuals age 70½ and older to make tax-free donations directly from an IRA to a qualified charity, potentially satisfying all or part of the annual RMD amount due from their eligible accounts.

A QCD doesn't offer a tax deduction, but the amount of your QCD won't be included in your taxable income. And you can make a QCD from several different types of tax-deferred retirement accounts — although there are rules regarding using a SIMPLE or SEP IRA, and you can't make a charitable contribution from a workplace retirement plan, such as a 401(k).

5. Ignoring Roth conversion strategies before RMD age

Converting a traditional IRA to a Roth IRA can help you avoid RMDs altogether — or at least lower the amount you'll have to withdraw each year.

Unlike traditional IRAs, Roth IRAs don't require that you take RMDs during your lifetime. This means you can keep your money invested for as long as you want, allowing it to grow tax-free. And if you pass on a Roth IRA to your heirs, they can take their RMDs tax-free.

Of course, you'll have to pay taxes on the amount you convert, so timing — and planning well in advance of your RMD age — is important. Minimizing your income sources in the year you plan to do the conversion can help keep your tax liability as low as possible.

Many retirees find the "sweet spot" for completing a conversion is after they've stopped working but before they begin receiving Social Security benefits or pension payments.

Your adviser can help you determine if and when a Roth conversion makes sense for your needs.

Don't put off RMD planning

If you expect to withdraw the IRS's required amount — or more — each year to cover your living expenses in retirement, RMDs may not be a concern for you. But if RMDs will impact your income, tax and estate planning, you may want to seek guidance.

The rules are complex, and making a mistake can be expensive.

The IRS website offers basic information regarding the overall RMD regulations. But if you want more specific advice and ongoing support, consider talking to a financial adviser ASAP.

Kim Franke-Folstad contributed to this article.

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

Related Content

• How to Calculate RMDs (Required Minimum Distributions) for IRAs
• New RMD Rules: Starting Age, Penalties, Roth 401(k)s, and More
• You're Stuck Taking RMDs: Now What?
• Inherited an IRA? Key Distribution Rules to Know
• 8 Factors to Consider When Considering a Roth Conversion

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

Meet Mike, a 67-year-old who has owned the same set of small Texas rental properties for 31 years. He's ready to step back.

The tenant calls, the late-night plumbing emergencies, the property taxes that climb every year? He's done. So he sells one of his appreciated properties (the highest-maintenance one!), and starts the 1031 exchange clock.

Forty-five days to identify a replacement property. One hundred eighty days to close.

In the past three years, that has sometimes been a challenging window. Replacement properties have been thin on the ground. Sellers and buyers couldn't agree on the price. Lenders have been cautious. Mike, three years ago, might have spent his 45 days in a panic and pulled out, paying the tax he was trying to defer.

Today, Mike has a different problem. Not too few options — too many.

Last week, Mountain Dell Consulting reported that the Delaware statutory trust market is now sitting on the largest inventory of investable equity it has ever had. About $3.9 billion of available equity across roughly 100 DST offerings, according to Mountain Dell associate Seth Anderson, who shared the figures with Bisnow on May 29.

The previous high-water mark was $3.2 billion, recorded in May 2023. And that's just what's open for new capital. Through May 2026, sponsors had already raised an additional $3.75 billion, up nearly 24% from the same period in 2025 ... with Mountain Dell projecting $10 billion to $11 billion in total DST sales by year-end.

That is a meaningful shift. And if you're sitting on a property sale, considering a 1031 exchange, or wondering whether passive real estate makes sense in your retirement plan, you must understand what just happened.

What is a Delaware statutory trust (DST)?

If you're new to the conversation, a DST is a legal structure that holds title to commercial real estate on behalf of multiple investors. You buy a fractional interest. A professional sponsor (typically a real estate firm) handles the work: Acquisition, financing, property management and eventual sale.

The IRS confirmed in Revenue Ruling 2004-86 that a DST interest qualifies as "like-kind" replacement property under Section 1031. So an investor selling a rental house, an apartment building, an office park or raw land can roll the proceeds into a DST and defer the capital gains tax — the same as if they had bought another property directly.

The minimum investment for most DSTs is about $100,000. Some go lower, some significantly higher.

For a 1031 exchanger facing the 45-day clock, a DST is often a safety net. Increasingly, though, it's the main event.

Why DST inventory hit a record high in 2026

Two forces are pushing equity into the DST space.

The first is the supply side. Major institutional names like Ares, Hines and Blue Owl currently lead the DST market by volume, while recent entrants, including Apollo, Nuveen, Fortress and Invesco, have launched their own DST funds in the past two years.

Fortress launched its DST fund in March, targeting housing for older people, student housing and multifamily.

Nuveen rolled out a DST last year that converts property sellers into investors in its $2.1 billion nontraded real estate investment trust (REIT).

Through May 2026, Ares alone accounted for nearly 22% of all DST equity raised — more than twice the next-largest sponsor.

The second is the demand side. Replacement property inventory in the broader market is tight; financing terms have stayed expensive. The bid-ask gap between sellers and buyers has been wide enough to kill plenty of deals.

First American Exchange Company, a national qualified intermediary, reported that its DST transaction volume rose 55% from 2025 to 2026. President Julie Baird told Bisnow the 1031 market is "fundamentally different than it was even five years ago."

Investors are choosing the certainty of a fully structured, professionally managed property over the uncertainty of chasing a direct deal in a difficult market.

What the record DST market means for 1031 exchange investors

Three things change when there is $3.9 billion in inventory, rather than $2 billion, waiting for capital.

First, you have selection power. You can be picky. You can compare a multifamily DST in Phoenix against a net-lease retail DST in Charlotte, against an industrial DST outside Atlanta.

Five years ago, 1031 exchangers were grateful for any DST they could close on inside the 45-day window.

Today, you can build a small portfolio across asset classes and geographies inside a single exchange.

Second, sponsor quality matters more than ever. When inventory was tight, you took what was available. With this much equity competing for investor attention, sponsors have to put their best deals forward to differentiate.

That said, not every offering on the market is a good one. The 1031 timeline pressures investors into decisions, and sponsors know it. Some offerings still arrive with thin reserves, optimistic distribution projections or debt that will be in trouble at the next refinance. It's critical to differentiate.

Third, and this is the one Mike cares about, DSTs are increasingly being used as a starting point for a longer wealth strategy, not just a one-time tax move. Some DST sponsors are affiliated with REITs and offer a future exit through a 721 UPREIT, in which DST holders contribute their interests into a REIT's operating partnership in exchange for partnership units. Tax-deferred.

That is a separate and complex topic — one I wrote about in my article Can You 1031 Exchange into a REIT? — in which the exit options are wider than they used to be.

DST investment risks every 1031 exchanger should know

A record inventory is good news for buyers … but it's not a free pass.

A handful of DST sponsors have had financial trouble in recent years. Properties carrying debt placed in 2020 or 2021 (when borrowing was cheaper) are facing refinancing realities that the original projections never modeled.

Some vintage 2019 and 2020 DSTs have struggled to deliver the distributions investors were originally shown.

Baird at First American said it plainly to Bisnow: "There have been some DST sponsors that have had some financial challenges, and so it really is incumbent upon those interested in those types of investments to understand the mechanics of the transaction and who's backing it."

That is the right framing.

5 questions to ask before investing in a DST

If you're evaluating a DST inside a 1031 exchange, or evaluating whether to consider one at all, here are five questions I would put on the table before signing anything.

1. Who is the sponsor, and how have they performed on prior DSTs over the past 10 years? Not their pitch deck. Their record.

2. What is the debt structure on the underlying property, and when does the loan mature? If the loan matures during a tough rate environment, the projected returns may not survive the refinance.

3. What does the lease tail look like? If a major tenant's lease expires in three years and the DST's expected hold is seven years, somebody is going to have to re-lease the space.

4. What is the income yield investors should reasonably expect, net of all fees? Not the gross number on the cover page. The net.

5. What happens if the property doesn't perform? Reserves, contingencies, sponsor obligations. Read those sections of the offering documents twice.

These are not "gotcha" questions — these are the basics. A sponsor who answers them clearly is a sponsor worth considering.

A sponsor who deflects is telling you something.

How to evaluate today's DST market in a 1031 exchange

Anderson at Mountain Dell told Bisnow he expects the DST market to remain in a "heightened level of sensitivity for the next three or four years." For investors, that sensitivity is an opportunity dressed in caution.

Mike, our 67-year-old hypothetical seller, will close his 1031 exchange this summer with three DST positions across two states. He will trade his late-night plumbing calls for monthly distributions. He will keep his deferred tax intact.

And because of the basis step-up at death, he will be in a stronger position to pass real estate equity to his children than he was with the rental properties he had 10 years ago.

That outcome is available to more investors than ever before in the history of the DST market.

The bigger questions are whether it fits your specific situation and which of the 100-plus current offerings are worth your money.

That is the conversation worth having before inventory tightens up again. (Which, historically, it always eventually does.)

Related Content

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• Do Self-Storage REITs Deserve Space in Your Portfolio? It's a Yes From This Investment Adviser
• How Well Do You Know Delaware Statutory Trusts? Test Your Knowledge
• I'm a Real Estate Investing Pro: This Is How to Use 1031 Exchanges to Scale Up Your Real Estate Empire
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells

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

More and more retirees are "retiring" from retirement.

Data from the National Institute for Occupational Safety and Health shows the number of retirement-age Americans in the workforce is growing.

And in a survey by Asset Preservation Wealth & Tax, 51% of respondents who'd reached retirement age said they plan to work indefinitely.

The reasons for retirees planning to work into their later years vary. Some simply have to from a financial perspective, while others want to live an active, purposeful life.

However, working during retirement brings challenges and trade-offs, especially when it comes to Social Security benefits, taxes and healthcare. The decisions you make about when to start claiming Social Security and whether you plan to keep working can have lasting consequences.

The pitfalls of claiming Social Security too early

A common phrase we hear is, "I'll just take my Social Security benefits at age 62." While it's true this is the first age you can start claiming benefits, doing so can backfire, particularly if you keep working.

If you claim and continue working before reaching your full retirement age, which is between 66 and 67 depending on your birth year, a portion of your benefits may be temporarily withheld owing to Social Security earnings limits.

For 2026, you can earn up to $24,480 before benefits will be withheld. In the year you reach full retirement age, the earnings limit increases to $65,160. After you reach your full retirement age, there are no earnings limits.

Upon reaching full retirement age, your benefit amount will be recalculated to give you credit for any benefits reduced and withheld.

Additionally, once you've started collecting Social Security, stopping and starting benefits is complicated and can permanently reduce your lifetime payments. It's not a switch you can easily flip on and off.

Bridging the healthcare gap: Age 62-65

Another major issue for people who claim Social Security benefits early is healthcare. Medicare eligibility doesn't begin until age 65, so if you leave your employer's health plan and retire at 62, you'll need to find coverage on the open market, which can get expensive.

Working part-time may provide access to employer healthcare, but that could put you at risk of exceeding the Social Security income limits. You could turn to private insurance, but the premiums can easily use up a large portion, or even all, of your Social Security check.

The three-year gap between age 62 and 65 is one of the most overlooked in retirement planning. I recommend sitting down with a financial adviser to go through all of your options before claiming early and potentially setting yourself up for financial failure, watching sky-high out-of-pocket premiums drain your savings faster than expected.

Income, taxes and the cost of working in retirement

Even after reaching full retirement age, when the Social Security earnings limit no longer applies, income from work can still impact your finances. That's because it depends on your total income.

If you're single and your combined income, the sum of your adjusted gross income (AGI), non-taxable interest and half of your Social Security, exceeds $25,000, or $32,000 for married couples, up to 85% of your Social Security benefits may be taxable.

In other words, the more you earn from working, the more you may have to give back in taxes. It's not necessarily a reason to stop working, but it does highlight the importance of strategically coordinating your income sources.

Knowing when to claim

Many people think waiting to claim Social Security until age 70 is always the best option, since benefits grow by about 8% each year after full retirement age until age 70. While that may maximize the amount you receive every month, it's not right for everyone.

For some retirees, the time value of money may matter more. For example, some may start taking benefits at 67 or 68 and use that income strategically by reinvesting it, reducing portfolio withdrawals or using it to strengthen their overall retirement cash flow.

There's also a break-even point, where the total amount collected by claiming early can surpass what you'd get by delaying. For married couples, it often makes sense to strategically stagger claims, with one spouse claiming earlier and the other delaying for a higher survivor benefit.

At the end of the day, there's no one-size-fits-all when it comes to claiming Social Security. It all comes down to finding the right balance of longevity, income needs and your overall financial plan.

Social Security should supplement, not replace, your income

Social Security was never designed to be the sole source of retirement income. It was meant to supplement, not replace, your paycheck.

You will likely need around 70% of your pre-retirement income to maintain your current lifestyle, and Social Security was only meant to cover about 40% of that.

That isn't to say Social Security doesn't matter. After all, those benefits come from decades of contributing payroll contributions. It's money you've earned. While the benefit may not be life-changing, it can still help cover major expenses, such as housing, travel or healthcare.

The importance of having a plan for claiming Social Security

Working in retirement can be incredibly rewarding, personally and financially. But it also requires strategic planning, especially if you plan to claim Social Security early.

Deciding when and how to claim Social Security is one of the most important financial choices retirees make because reversing your initial decision can be complicated and costly.

Before you claim, make sure you understand how your job, income and healthcare could affect your benefits. Working with a financial professional who can help you strategize Social Security with your overall financial plan can make a big difference. The right timing and strategy can help you keep more of what you've earned and lead to a more confident retirement.

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• We've All Heard the Buzz About Roth Conversions, But Not Everyone Will Like the Reality
• 4 Pro Tips for Successfully Scaling the Medicare Mountain

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

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.

It's not unusual to feel a flood of relief as soon as tax season subsides, especially if you're a business owner.

After weeks spent pulling documents, reviewing expenses, answering CPA questions and finding cash for a final payment, you'll probably feel like closing the folder immediately and not thinking about taxes for another year.

But that pause can be expensive.

Q2 is one of the few points in the year when the return is recent enough to teach you something, and the calendar still gives you time to align. The IRS expects taxes to be paid as income is earned, not just when a return is filed.

For many business owners, that means staying current through withholding or estimated payments.

For individuals, sole proprietors, partners and S corporation shareholders, it's when you generally need to make estimated payments if you expect to owe at least $1,000 at filing.

What often gets called tax planning is, in practice, more like tax reporting in advance. Now is the time to make sure you don't fall into that trap.

Model the tax impact before major decisions

Most large tax outcomes begin when a business owner hires, buys, sells, restructures, takes on a partner or changes how income flows through the company.

A decision can look profitable in the operating model and still create a tax position that weakens the economics.

For instance, a new senior hire may bring growth, but the full cost includes payroll taxes and mandated government benefits, which will definitely bring changes to cash flow.

Similarly, a major equipment purchase may qualify for depreciation benefits, so timing and income level matter.

Q2 gives owners time to run those numbers before the decision is locked. As a CPA, I'd recommend leveraging that time because fixing tax problems later can be slow and costly.

For context, during fiscal 2025, the IRS processed about 1.6 million business amended returns and took an average of more than 13 months to process them.

It's always best to involve a tax adviser before making any move. Ask your CPA to show the after-tax effect of the decision, or the estimated cash needed to support it, or anything that would affect the result, such as deadlines.

The goal is not to nitpick every small purchase or watch every action round the clock. It is to identify which decisions can materially change taxable income, deductions, credits, entity treatment or estimated payments before you commit.

Use last year's bill as a diagnostic for this year

A higher tax bill can feel like you're finally growing your business. And in some cases, it is. When revenue rises, the owner's income often rises with it, and so do taxes.

But that bigger payment is not always just a sign of success. It can point to a structure that no longer fits, or planning that may have started too late.

Q2 is the right time to review what drove those numbers while the return is still fresh.

• Look at the categories that changed most from the prior year
• Review whether revenue growth reduced deductions or moved income into a higher tax bracket
• Confirm whether personal and business expenses were clearly separated

Small-business tax surprises often stem from one or more of these.

The purpose of this review is to spot the opportunities you missed so you can course correct quickly and get ahead of any patterns that are likely to repeat this year.

• If revenue grew, is it likely to grow again, and what bracket will that put you in?
• If a deduction was missed, what needs to change in the books before December?
• Does your entity structure still serve you?

These are the questions you should be asking now.

For high-earning business owners, key opportunities may involve retirement plan design, cost segregation for real estate, R&D credits, Qualified Small Business Stock (QSBS) treatment, entity optimization or charitable giving with appreciated assets.

At Gelt, we can never emphasize enough that these strategies require proactive planning rather than a return-preparation mindset.

In a nutshell, check whether the bill increased because the business performed better, or because the tax plan failed to keep up with the business. Those are two very different problems.

Decide whether your CPA relationship has kept pace

Early-stage business owners often just need a CPA to file for them with accuracy and keep them compliant. But as income grows, that level of support may no longer be enough.

Compliance looks backward at what has already happened. Strategy looks forward at the decisions that can still be changed. If the only conversations with your CPA are happening in March or April, the relationship may be limited to just reporting the year instead of shaping it.

Sadly, that gap is common. In fact, reports say 90% of business clients are interested in advisory or consulting services from their accountant, but more than half say they are not fully using their adviser's full range of services.

This is another reason why Q2 is a practical time to assess the relationship, because both sides have more room to think. Ask whether your CPA specializes in clients with your income type, entity structure, industry and long-term goals.

Think about whether they meet with you quarterly, explain your effective tax rate, flag deadlines in advance and help model major financial events before they happen.

Ensure their scope of work is clear, so you know what is included and what is not.

Make Q2 the start of next tax season

The tax return you filed in April should become the first milestone for the rest of the year. If the bill was higher than expected, Q2 is the time to understand what happened and what the rest of your year might look like.

Look at the income that changed, the deductions that were missed, the estimated payments that fell short, and the business decisions that created tax consequences no one modeled in advance. That review gives you a wider view for the next eight months.

From there, update your income projection, adjust estimated payments before the next deadline, review whether your entity structure still fits your revenue and bring your CPA into decisions such as hiring, equipment purchases, real estate transactions, partner changes or compensation planning before they are finalized.

Waiting until Q4 leaves less room to act. Q2 gives business owners the time to correct what caused last year's bill and make tax planning part of the decisions that shape this year's growth.

Related Content

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• The Tax Trap Snares Many Business Owners: A Financial Pro's Guide to 11 Strategies You May Be Missing

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

Dividend investing is one of the most reliable ways to generate passive income from your portfolio. But how much of that income you actually keep depends heavily on one factor — taxes — and specifically whether your dividends qualify for the preferential tax treatment the IRS calls "qualified" status.

Depending on your income level, you may owe nothing on your qualified dividends. But even at high-income levels, the taxes will almost always be lower than what you pay on most other investments.

Dividend tax rules here are quirky and can make a major difference in how much of your dividend income you actually get to keep.

So, let's get to it. We're covering the basics you need to know and go over a few tips on how to use the tax code to maximize your income and minimize your tax bill.

Ordinary dividends vs qualified dividends: what you need to know

Before you start considering how to manage your investment income, it's important to know the difference between ordinary dividends vs qualified dividends.

Ordinary (non-qualified) dividends are taxed as regular income, no different than interest or short-term capital gains. If you're in the 35% tax bracket, then that's what you're paying on your ordinary dividends, plain and simple.

Dividends from money market or bond funds (which are essentially repackaged bond interest), dividends paid by most real estate investment trusts (REITs), dividends paid by most foreign companies or dividends on shares that you held for too short of a period to qualify will all generally be taxed as ordinary dividends.

Qualified dividends benefit from preferential tax rates: 0%, 15% or 20%, depending on your income. The brackets change from year to year, but as of 2026, single taxpayers with taxable income of up to $49,450 and married taxpayers with taxable income up to $98,900 pay nothing on their qualified dividends.

Single taxpayers with taxable income between $49,451 and $545,500 and married taxpayers with taxable income between $98,901 and $613,700 pay 15%. And taxpayers with incomes above those levels pay 20%.

To be categorized as "qualified," a dividend must meet two core conditions. It must be paid by a U.S. corporation or a qualifying foreign corporation whose stock trades on a U.S. exchange and whose home country has an income tax treaty with the United States. And you must have held the stock for more than 60 days during the 121-day window surrounding the ex-dividend date.

That second condition is a little confusing, so it's probably best explained by example. Let's say your stock's ex-dividend date is June 15. Your 121-day window would extend from April 16 to August 14. You would need to have held the stock for more than 60 days within that window. (Don't worry, you don't need to keep track of this yourself. Your broker will handle the accounting.)

If you're a long-term, buy-and-hold dividend investor, you can assume you're meeting the holding period requirements for qualified dividend status.

Minimizing your dividend tax bill

With that as background, let's go over a few strategies to squeeze the most value out of the tax code.

We'll start with the most obvious: Don't engage in short-term trading with your dividend stocks.

There's nothing wrong with short-term trading, of course. In fact, if done with discipline, it can actually reduce the risk of your overall portfolio. Just be sure that you're not actively trading the stocks you intend to hold for dividend income.

If you're still working and don't yet need the income for your living expenses, consider automatically reinvesting the dividends in new shares. This turns your income stocks into compounding machines, and when the day comes to start taking distributions, you'll be doing so on a larger base of shares.

Here's where the real planning starts. Where you hold your dividend-paying stocks is ultimately the biggest factor in the taxes you pay.

Let's say your investment accounts are a mix of tax-advantaged retirement accounts and regular taxable brokerage accounts.

Remember that all investment earnings in an IRA are tax-free. You only pay taxes on the distributions you take out of your traditional IRA in retirement, and those distributions are taxed at ordinary income tax rates.

So, to the extent you can move things around, it makes sense to hold your lowest-taxed investments, such as index funds and stocks paying qualified dividends, in your taxable accounts, and save your higher-taxed investments including non-qualified dividend stocks, REITs, foreign stocks or active trading strategies that generate short-term gains for your IRAS.

Let's use a hypothetical example. Say you have $10,000 in an IRA and $10,000 in a taxable brokerage account and that you want to buy $10,000 of Altria (MO) – a high-yielding stock that generally pays qualified dividends – and $10,000 in Realty Income (O) – a REIT that typically pays non-qualified, or ordinary, dividends.

The smart move would be to hold Altria in the taxable account and Realty Income in the IRA. You'd owe no capital gains taxes on the Altria position until you sold it, and the dividends would be taxed at a low rate (or not taxed at all, depending on your income).

The higher taxes you'll pay on Realty Income dividends, meanwhile, will get deferred until you take distributions from the IRA, at which point you're paying the same amount. Non-qualified dividends are taxed at the same rate as IRA distributions.

Timing matters too

Most taxpayers will never pay the 20% dividend rate, given the high income threshold. But the $98,900 level separating 0% and 15% is roughly at the 60th income percentile for a married couple. That's the definition of a regular, middle-class American.

If you earn significantly more than that, there's really not much you can do. But if you're right at the threshold, there are a few things you should watch out for.

Let's say you're considering a Roth conversion — moving funds from a pre-tax retirement account, such as a 401(k) or traditional IRA, into a Roth IRA. This could be a great idea for any number of reasons, but it could also very easily push you into the higher income bracket. Those dividends you were expecting to get for free are now coming with a 15% haircut.

The same could be true with appreciated stock. Let's say you have some stocks in your portfolio that you've owned for years and are now sitting on substantial capital gains. If you're considering selling, you might want to wait to sell until next year or sell over multiple tax years to keep your income from landing in a higher tax bracket.

In the end, you're never going to escape taxes completely. And you can comfort yourself knowing that paying taxes means that you made money. But strategically using qualified dividend tax rates to your advantage can help you keep your tax bill tolerably low.

Related content

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• How Selling a Losing Stock Position Can Lower Your Tax Bill
• States With Low and No Capital Gains Tax in 2026

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?

The financial professionals who contribute to Kiplinger's Adviser Intel are always here to make sure you have the information you need to make critical decisions about your retirement planning, estate planning and tax planning.

Annuities are a regular topic. Because of their complexity, they're often misunderstood.

This quiz is designed to test what you've learned about annuities. Let's see what you know! (And don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

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.

READ MORE

• The Truth About Annuities: The Question Isn't 'Are They Good or Bad?' It's 'Are They Appropriate for You?'
• What are Annuities? The Different Types and How They Work
• Annuities: Do You Need Guaranteed Income In Retirement?
• The Key to Choosing the Right Annuity: Do Your Homework
• Why So Many Experts Consider Annuities a Win for Retirees

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

Most people spend decades following the same advice: Save consistently, invest wisely, defer taxes. It works — until you retire.

Retirement doesn't eliminate taxes. It changes how and when they show up. Most people aren't ready for that shift.

After working with hundreds of pre-retirees, I've found the same pattern again and again: It's not the markets that derail retirement plans. It's the tax surprises people never saw coming.

The good news? Most of them are predictable and avoidable with the right strategy. Here are nine of the most common.

1. Not all income is created equal

In your working years, income is straightforward: a paycheck, some withholding, done. In retirement, you're pulling income from a mix of source accounts, and each source is taxed differently.

• IRA and 401(k) withdrawals. Fully taxable
• Social Security. Partially taxable
• Investment income. Varies
• Roth withdrawals. Tax-free (if structured properly)

What matters isn't just how much you make but what shows up on your tax return. Many retirees rely heavily on tax-deferred accounts, which means nearly every dollar they spend increases their taxable income. That lack of flexibility can quietly drive up taxes across the board.

The solution: Well-planned Roth conversions before and in the early years of retirement.

2. Taxes on Social Security

A lot of people are surprised to learn that up to 85% of their Social Security benefits can be taxed. These taxes are triggered by something called provisional income. How much tax you pay on Social Security is determined by your other taxable income.

The more you withdraw from tax-deferred accounts, the more likely your Social Security becomes taxable. It's not a smooth, predictable curve. Changes in your provisional income can create what's often called a "tax torpedo," when small increases in income lead to disproportionately higher taxes.

The solution: Coordination matters. Claiming and withdrawal strategies shouldn't be separate decisions. They need to work together to optimize your overall tax picture.

3. Medicare IRMAA

Most retirees don't expect their Medicare premiums to be tied to their income. Through what's known as income-related monthly adjustment amount (IRMAA), higher reported income can increase your Medicare premiums significantly.

Here's the catch: It's based on income from two years prior, so your planning window can get complex.

A large IRA withdrawal, Roth conversion or asset sale today can increase your premiums down the road …. often by thousands per year.

The solution: The planning window matters. If you're still a few years from Medicare, that's your best window for larger conversions. If you're already on Medicare, it's about keeping annual income below the IRMAA thresholds, and coordinating every withdrawal, conversion and asset sale.

4. Forced withdrawals (RMDs)

For decades, you were told to defer taxes. Eventually, the IRS always collects. required minimum distributions (RMDs) force you to withdraw money from tax-deferred accounts starting in your early to mid-70s, whether you need the income or not.

Those withdrawals are fully taxable — and they can push you into higher brackets, increase Medicare premiums and trigger taxes on Social Security all at once. I've seen clients reporting twice the income they need to live.

The solution: The years between retirement and your early 70s are your best window to shrink future RMDs. Converting strategically during that gap, while staying within your current bracket, can reduce the forced withdrawals that cause downstream problems.

5. The surviving spouse tax increase

When one spouse passes away, the surviving spouse moves from married filing jointly to single tax brackets.

• Same assets
• Similar income
• Dramatically higher taxes

That shift alone can push the surviving spouse into a significantly higher bracket, especially when combined with RMDs and Social Security.

It's not just an emotional loss. It's often a financial one, too.

The solution: Convert early. A surviving spouse with a meaningful Roth balance has a source of income that won't push them into a higher bracket at the worst possible time.

6. No tax diversification plus bad timing

Many retirees have done a great job diversifying investments. But no one told them they needed to do the same for their taxes.

If most of your money sits in tax-deferred accounts, you've effectively created a single "tax funnel." That becomes a problem when markets are down. If you need income and your only option is to withdraw from a declining account, you're forced to sell more shares at lower prices and still pay taxes on the withdrawal.

Tax diversification means having assets in pre-tax, Roth and after-tax buckets, to give you options when timing matters most. You don't get to choose what the market does.

The solution: Build flexibility now. Spreading assets across pretax, Roth and taxable accounts means you can choose which bucket to draw from based on what the market and your tax situation look like.

7. Future tax law

Today's tax rates are historically low compared with long-term averages. But they're not permanent.

The challenge with tax-deferred savings is simple: You're betting on future tax policy — and you don't get to set the rate.

The solution: You can't control future tax rates, but you can control how much of your money is exposed to them. The more you've moved into tax-free accounts before rates change, the less it matters what Congress does next.

8. The burden your family inherits

Many retirees assume their accounts will pass cleanly to their children. But recent legislation such as the SECURE Act, changed that.

Most nonspouse beneficiaries have just 10 years to fully withdraw inherited retirement accounts. Every dollar is taxed as ordinary income. For children in their peak earning years, that can mean a substantial tax hit that could reduce the value of the inheritance by 40% or more.

What was intended as a legacy can quickly become a tax liability.

The solution: Estate planning that moves your money into a trust upon your death could provide your family with some tax relief.

9. The 1990s underspending strategy

A lot of retirement advice still reflects outdated thinking:

• Don't touch principal
• Follow the 4% rule
• Spend conservatively

On the surface, that sounds responsible. But for many retirees with large tax-deferred balances, it leads to unintended consequences:

• Larger account balances later
• Bigger RMDs
• Higher lifetime taxes

In other words, underspending early can increase taxes later. I know that's counterintuitive after a lifetime of saving. But early in retirement, you're healthy enough to enjoy it — and saving too aggressively just means handing more to Uncle Sam later.

The solution: A realistic retirement income and spending plan that accounts for the typical spending patterns across a long retirement.

The bottom line

None of these tax surprises are random. They're built into the system.

Today's retirees need to focus just as much on distribution — how and when money comes out, and how it's taxed along the way.

Retirement isn't just about how much you've saved. It's about how much you get to keep.

The difference between the two often comes down to one thing: having a plan for taxes before they show up, not after.

Related Content

• Feeling Too Guilty to Spend in Retirement? You Really Need to Get Over That
• 3 Ways to Potentially Avoid Falling Into a Tax Trap in Retirement, From a Financial Adviser
• 3 Options for Setting Up Your Retirement Paycheck: Choose the One That Suits You
• Social Security Break-Even Math Is Helpful, But Don't Let It Dictate When You'll File
• Turning 59½: 5 Planning Moves Most Pre-Retirees Overlook

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

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 for landlords who own residential rental property. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Taxes if you sell rental property

Question: I own a condo that I have been renting out to tenants for over 20 years. I plan to sell the condo this year. Will I qualify for the home sale exclusion?

Joy Taylor: Unfortunately, it doesn't sound like you will qualify for this break. Homeowners who own and use their home as their principal residence for at least two out of the five years before selling it get to exclude $250,000 of the gain when they sell. The gain exclusion is $500,000 for married couples who file a joint return.

Since you have owned the condo as rental property and not your primary residence, you would not qualify for the home sale gain exclusion. The gain or loss when you sell would generally be characterized as capital gain or loss. And, since you owned the condo for more than one year, it's considered a long-term capital gain or loss.

The capital gain will generally be taxed at 0%, 15%, or 20% — plus the 3.8% net investment income tax (NIIT) for people with higher incomes. However, a special rule applies to gain on the sale of rental property for which you took depreciation deductions.

When depreciable real property held for more than one year is sold at a gain, the federal tax law requires that previously deducted depreciation be recaptured into income and taxed at a top rate of 25%. This is known as unrecaptured Section 1250 gain, the number of its federal tax code section.

2. Inheriting rental property and taxes

Question: I own rental property. 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.

3. The net investment income tax for landlords

Question: I own a triplex, and I rent out all three apartments in the building. I am thinking of selling the property in the next year or so. I know I will pay capital gains tax on the sale. Will I also have to pay the 3.8% net investment income tax?

Joy Taylor: Maybe. The additional 3.8% net investment income (NII) tax applies to single filers with modified adjusted gross income (AGI) over $200,000 and to joint filers with modified AGI above $250,000. The modified AGI threshold is $125,000 for married people filing separate tax returns. These modified AGI amounts aren’t inflation-indexed, leading to more filers paying the NII tax each year.

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

4. Selling a rental that you previously lived in

Question: I own a home that I lived in from 2014 to 2017. I then married and moved into my wife's new home. I rented out my old home from 2017 until now. I plan to sell it this year. How do I establish my tax basis for purposes of determining gain or loss when I sell?

Joy Taylor: Your tax basis in the rental home is as follows: (1) the lesser of your original cost or fair market value of the home at the time you started renting it, plus (2) the cost of improvements to the home, less (3) depreciation taken on the home. IRS Publication 544, Sales and Other Dispositions of Assets, has more information.

5. Selling a duplex

Question: My wife and I own a duplex. We live in the upstairs unit, and a tenant lives in the downstairs unit. The upstairs and downstairs units each have separate addresses. We are now considering selling the full duplex. Can we take the full $500,000 home-sale exclusion when we sell?

Joy Taylor: The up-to-$500,000 gain exclusion applies only to the portion of your duplex that you used for residential purposes (not rental or business purposes). Below is relevant language from IRS Publication 523, Selling Your Home:

"You generally can’t exclude gain on the separate portion of your property used for business or to produce rental income. Examples are: (1) a working farm on which your house was located, (2) a duplex in which you lived in one unit and rented the other, or (3) a store building with an upstairs apartment in which you lived."

"[A]n allocation of the gain is required. For this purpose, you must allocate the basis of the property and the amount realized between the residential and nonresidential portions of the property using the same method of allocation that you used to determine depreciation adjustments. Report the sale of the business or rental part on [IRS] Form 4797."

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: Questions on Residential Rental Property
• 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

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

In the wake of large IRS budget cuts and the significant loss of its workforce, is the agency turning into a paper tiger?

Since President Trump began his second term in office, IRS funding has declined precipitously, and there has been a sharp drop in personnel. Congress set the IRS's fiscal year 2026 budget at $11.2 billion, 9% less than the IRS's 2025 fiscal year funding, and House appropriators want to slash it further, to $10.2 billion for 2027. Additionally, the IRS has lost over 20% of its workers since January 2025 through voluntary deferred resignations and layoffs, with even more departures expected this year.

And there's been lots of chaos at the top leadership at the IRS over the past 17 months. The IRS is on its seventh commissioner since January 1, 2025. Scott Bessent, the Treasury Secretary, is also the nominal head of the IRS. But Frank Bisignano oversees all day-to-day operations at the agency. As chief executive officer of the IRS, he essentially acts as the de facto commissioner. Bisignano is doing double duty. He is also the commissioner of the Social Security Administration. Many other high-level officials have also left the IRS.

The IRS's enforcement arm is feeling the brunt of the personnel and funding cuts. Congress has rescinded most of the IRS's $80 billion windfall from 2022's Inflation Reduction Act. And some of the biggest drops in the agency's employee headcount are from its examination and collection groups. The IRS has lost one-in-four of its enforcement workers through voluntary deferred resignations, retirement and layoffs. Many of them were experienced agents and managers with deep knowledge. This lost know-how will be hard to replenish with those employees who remain. And it will only get worse for the IRS. For instance, the Trump administration's fiscal year 2027 budget request for the IRS includes an additional 18% cut in enforcement activities and projects fewer than 25,000 total enforcement employees.

How is the IRS's budget and personnel cuts impacting IRS audits? The overall number of audits is declining. In recent years, the IRS audit rate for individuals was significantly below 1% (for example, the audit rate for 2018 individual returns was 0.3%), and we expect this figure to continue to go down, at least over the next few years.

Many filers are now escaping the audit anvil because of scarcer audit resources. Two prime examples are high-income individuals and partnerships. The number of IRS audits of individuals with $10 million or more of income has fallen from 6,786 in fiscal year 2025 to 2,264 in fiscal year 2026. The number of IRS audits of partnerships has also declined from 3,174 in fiscal year 2025 to 2,932 in fiscal year 2026. The IRS forecasts even further declines in these audits in fiscal year 2027.

AI will help the IRS filter its audit targets

But this does not mean it is a free-for-all for tax cheats. According to leaders at the IRS, there will be fewer overall audits, but the exams that are done will be more targeted.

Data analytics and artificial intelligence use are increasingly the norm in the IRS's enforcement arsenal. Data-mining software can sift through taxpayer data, expose suspicious activity and identify cases for audit. The IRS is relying more than ever on this technology to more precisely identify high-risk noncompliance and to improve efficiency.

We also expect that the IRS will go after low-hanging fruit. One example is refundable credits, such as the earned income credit, American Opportunity credit, the Affordable Care Act's premium tax credit, and the refundable portion of the child tax credit. 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.

Taxpayers with income-matching discrepancies will also be a prime target of the IRS. The IRS's automated underreporting program matches data on information returns, such as Forms W-2 and 1099, with income amounts reported on individual tax returns. If there is a significant mismatch, the IRS will alert the taxpayer to the issue by sending out a computer-generated CP2000 notice.

High-income nonfilers have been on the list of the IRS's enforcement priorities in recent years, and we expect this trend to continue. The primary emphasis is on individuals who received income in excess of $100,000 but didn't file a tax return.

The IRS will continue to go after abusive tax schemes that it includes on its annual Dirty Dozen tax scams. For 2026, these include:

• Bogus self-employment tax credit promotions
• Overstated withholding
• Abusive noncash charitable contribution schemes, many of them involving the donations of conservation easements
• Refundable tax credits for abusive undistributed long-term capital gains on Form 2439 by investors in real estate investment trusts and mutual funds
• Misleading tax breaks touted on social media: (1) one scheme encourages employees to take the sick and family leave credit, (2) another uses Schedule H, Household Employment Taxes, to seek false refunds, and (3) a third urges filers to claim the fuel tax credit.

There are also audit red flags that could increase the chance of the IRS pulling your return for examination. We'll briefly describe a few of these red flags.

• Taking higher than average deductions. If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return.
• Claiming large charitable deductions. If your charitable deductions are disproportionately large compared with your income, it raises a red flag. Also targeted are conservation easement donations and taxpayers who fail to comply with the substantiation requirements. You can find information on the substantiation rules for charitable donations in IRS Publication 526.  
• Claiming substantial business losses or large deductions on Schedule C.
• Deducting a hobby loss on Schedule C, especially if you have multiple years of losses from the activity and have lots of income from other sources.
• Deducting large rental losses on Schedule C. The IRS is pulling returns of individuals who claim they are real estate professionals and whose W-2 forms or other non-real-estate Schedule C businesses show lots of income.

This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.

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"When the robots take over, I hope they think of me fondly."

That tongue-in-cheek internet joke has turned sour with the increasing usage of artificial intelligence (AI).

Today, it's nearly impossible to click through a few pages without encountering an AI overview — a constant reminder of how much our relationship with information has shifted.

But while you might trust an automatic notetaker or suggested recipe, AI's latest trend, "vibe coding," could raise new concerns in the financial world as AI shifts from merely summarizing information to building the very tools we use to manage that data.

Vibe-coded programs are created entirely by talking to an AI assistant in natural language, like English. This approach lets anyone create an application without coding experience, which can be dangerous when unvetted apps are deployed with coding errors, security flaws, or compliance risks.

Confidential information, like tax data or account balances, could be exposed during security breaches or compliance issues, especially when those tools handle sensitive financial workflows. These risks might be even greater among retirement-aged adults, who are particularly targeted by AI tax scams, according to recent McAfee research.

So how do you know what's safely vetted by a financial professional versus produced by robots for you to consume?

From one human to another, here's how to tell the difference.

The problem with vibe coding in financial tools

Vibe coding is a way of building software in which you tell AI the high-level idea or "vibes" of what you want built, and the machine creates the program for you.

The AI does this by feeding your input into a large language model (LLM) like ChatGPT, Claude, or Gemini to translate your instructions into functional source code.

Not only is coding like this a fast and easy way to create a financial app, but it can also quickly generate retirement tax tools like IRA withdrawal optimizers and Social Security benefit calculators.

So what's the problem? Well, whereas "vibing" prioritizes speed, it often sacrifices quality and security.

• AI-generated code notoriously produces 1.7 times more coding issues, like logic errors and security vulnerabilities, than human-written code.
• This is because AI can use up to 10 times the lines of code as a trained programmer to build the same program (paywall).

But you might be thinking:

...Well, that's often easier said than done.

Maybe if you've used Adobe's attempt at "vibe coding" with Dreamweaver, you might know how easy it is to drag and drop a simple rectangle on the screen, only to discover later how much harder it is to sort through the machine-generated code when you want to change the rectangle's color.

(Pardon the tangent; I'm a CPA with computer science experience and so burdened with strange facts.)

In short, these programs need human oversight to be effective tools, which is a trend that financial and tax professionals are already experiencing as they work with vibe-coded tools in their offices. Otherwise, client information could be leaked to the whole internet to see.

Security risks for your retirement tax portfolio

Financial advisors are increasingly using AI to streamline retirement and tax planning. The CFP® Board of Standards has published its own handbook for CFPs to use to "Harnessing AI in the Financial Planning Profession."

Meanwhile, multinational investment firms like BlackRock have built AI into their advisor suites to automate tax-loss harvesting and model retirement outcomes.

AI efficiencies in retirement tax planning can also scan tax returns for overlooked deductions, forecast the top federal tax bracket you'll be in retirement, or even optimize your stock portfolio while you sleep.

Used the wrong way, vibe-coded applications (and AI tools in general) can pose a risk to your retirement savings data:

• Retaining your financial data. If you or your financial advisor uploads your Social Security number, income details, or past tax returns into an LLM, your confidential financial history could become part of the public domain or surface in other users' chats with the AI.
• Compromised retirement accounts. Employees at a financial or advisory firm may use unsecured AI tools on personal laptops rather than vetted, company-approved platforms. This "Shadow AI" lacks proper cybersecurity protocols, potentially leaving sensitive 401(k) and IRA data vulnerable to interception during tax-planning calculations.
• Multi-firm data breaches. AI systems aggregate large data sets on third-party cloud servers to function. If one financial or tax-advisory firm is cyberattacked, the tax data from connected users across all associated firms can be compromised, jeopardizing your data even if the breach didn't occur in your financial advisor's office.
• IRS penalties from AI "hallucinations." AI tools notoriously hallucinate information that sounds legit but is entirely wrong. If blindly followed, this made-up "advice" can lead to noncompliance with federal and state tax agencies, causing you to pay fees, fines, and penalties for faultily reported information (more on that later).

Altogether, unvetted "vibe-coded" apps can lead to significant financial losses for app users, whether you use a financial advisor or not.

Does it get worse? This month, cybersecurity startup RedAccess, which specializes in threat protection against generative AI leaks, reported that 40% of "vibe-coded" web applications identified in their research were actively releasing sensitive information, including financial data, to the World Wide Web.

Platforms like Lovable, Base44, Replit, and Netlify leverage AI to generate functional web applications from simple text prompts — many of these apps are "public-by-default," meaning they were indexed and searchable for the RedAccess team unless a user manually secures them.

RedAccess co-founder and CEO Dor Zvi emphasized the scale of the risk to tech author Andy Greenberg at Wired magazine. "The end result is that organizations are actually leaking private data through vibe-coding applications. This is one of the biggest events ever where people are exposing corporate or other sensitive information to anyone in the world."

Axios reached out to the studied platforms for comment. Lovable spokesperson Samyutha Reddy told Axios that RedAccess did not disclose a list of compromised URLs. Meanwhile, Replit CEO Amjad Masad claimed on X that RedAccess did not share which users were impacted.

How to spot AI-coded apps holding your financial savings

So how do you determine whether your financial savings information is sitting in an unvetted app by your financial planner vs. a "real" application safely vetted by a warm-blooded human being?

Although "vibe coded" isn't a legal term required in your registered financial advisor's paperwork for you to sign, transparency is still mandatory.

Regulators like the Securities and Exchange Commission (SEC) now actively pursue investment advisors for "AI-washing" — or, said another way, overhyping or misrepresenting the use of AI in their financial products.

Yet, depending on how your financial advisor uses AI, a disclosure might not be necessary (though the advisor remains legally liable for AI-washing). If that's the case, here are some "easy tells" to spot a vibe-coded app.

• Hyper-customized. The app does very specific things that generic software can't do (like having niche property management tracking tools).
• The "AI aesthetic." Despite the hyper-specific functionalities, the interface might look as generic as they come (flat layouts, default fonts, gradients, etc.).
• Fast delivery. If you suggest a change and your planner can deliver it the next day, the app may have been vibe coded.

If you have concerns about how AI is used in your relationship with your financial advisor (whether vibe-coded or not), consider asking the following general list of questions:*

1. How is security handled, and where is my data held?
2. Is my data training the AI?
3. How was the app tested?
4. Who owns and maintains the app?
5. Who is responsible for covering losses caused by the AI?
6. How does the AI verify its calculations?
7. What is the human review process?

You should also confirm your advisor's legitimacy by reviewing their Form ADV via the SEC’s website. Additionally, verify specialized certifications — like a CFP® or CFA® — via their respective certifying boards to ensure your advisor meets the highest ethical and educational standards.

If your financial advisor's application (even if vibe-coded) meets regulatory requirements and all other concerns you have, then — great! But if not, you may want to look for a different professional.

*Note: This list is not exhaustive and is compiled from several different sources of industry expert guidance.

Defend against AI-related compliance issues and tax scams

As mentioned, LLMs and AI are known to hallucinate or "make up" information. From a compliance perspective, the IRS doesn't accept "the AI made a mistake" as a legal defense.

So, for example, if the AI you used to prepare your income return "hallucinates" tax write-offs, incorrectly classifies taxable income, or generalizes federal tax laws and ignores your state-specific laws, you will be held liable. This can look like unpaid taxes plus interest and penalties — even if you were simply given "bad tax advice" by the AI.

The Taxpayer Advocate highlighted this when citing a Washington Post review of Intuit TurboTax and H&R Block's AI usage. The review noted that the two companies' chatbots "provided inaccurate or irrelevant responses up to 50 percent of the time when initially asked 16 complex tax questions."

The release went on to state, "Taxpayers are ultimately responsible for the information reported on their tax returns. Therefore, it is essential to review all information carefully, verify calculations, and seek assistance from qualified professionals."

Unfortunately, care with tax preparation doesn't stop during tax season.

AI has also given rise to year-round tax scams, particularly among adults 65 and older, according to the latest McAfee research. This age group reported just a 15% confidence level (out of 100%) in spotting these scams.

• Scammers use AI to clone the voices of family members or trusted tax professionals to demand payment for "clearing up" account issues.
• AI also allows criminals to generate perfectly worded emails that look and sound like the real deal, including IRS correspondence.
• Scammers can also use "vibe coding" to copy an existing, real website to trick you into uploading your information to what appears to be a legitimate website.

Former U.S. Secretary of Defense Robert McNamara once observed that conflict is often a mirror in his 1995 memoir, referring to the Cold War arms race and proxy wars:

This "security dilemma" now defines our AI-led age. As this technology accelerates our financial capabilities, it simultaneously equips bad actors with more sophisticated tools and security vulnerabilities. The result is a perpetual feedback loop where every defensive innovation triggers a more agile criminal counter-strategy.

Yet, focusing solely on the "AI arms race" risks obscuring the genuine utility of vibe-coded tools.

Beyond the scams and security loopholes, vibe coding is already helping several industries perform essential tasks. Some doctors are using platforms like Google AI Studio to "vibe code" personalized applications for patients, while vibe-coded applications can give students customized, interactive study tools.

In the financial realm, vibe coding can also aid your finance pro in tax planning and retirement strategy — if used safely.

The case for AI (and why it isn't all bad)

AI can be incorrect, insecure, and costly. But once you get past those faults, it can be a useful and unique tool. You just need to know what you're signing up for if your financial advisor uses AI.

A human-led, AI-assisted finance expert can utilize this technology to update their retirement tax plan with data-driven insights, like...

• Analyze vast amounts of financial data that would otherwise be unrealistic for a human to pore over.
• Stress-test different market scenarios, helping you to maximize your portfolio's growth.

But finding a reputable financial advisor is a must. Credible professionals translate the AI "legwork" into a tailored plan that aligns with your specific nest egg and lifestyle goals — they don't just do whatever the AI tells them to.

In today's day and age, more than half of Americans may be getting their financial advice from AI, which, for better or for worse, might say something about our society at large.

Regardless of which side of the aisle you stand on — pro-robot, pro-humanity, or a bit of both — stay vigilant and ask questions.

Your retirement tax portfolio may thank you.

....Maybe even literally. I don't know if they send "thank you" cards yet, but it wouldn't surprise me if they did.

Read More

• Don't let a 'mood' trigger a retirement tax trap.
• Here are the ways AI tax scams targeted middle and older adults last year.
• 'Vibes' aren't tax-exempt, but some states won't tax your retirement income.

For years, the message has been simple: Max out your 401(k), take the tax deduction, and let it grow.

To be fair, that advice has helped a lot of people build meaningful retirement savings.

But for many higher-income, consistent savers — especially those now sitting on large IRA or 401(k) balances — that same strategy is starting to show a different side, not during the working years, but later, when they use money … or they're forced to withdraw it.

What looked like smart tax planning along the way can quietly turn into a tax problem on the back end.

When big balances become a different kind of asset

By the time many people reach their 60s or early 70s, their largest pool of money isn't in a brokerage account or even real estate — it's in pretax retirement accounts.

On paper, that feels like a win.

But unlike a taxable account, where gains might be taxed at favorable capital gains rates, every dollar in a traditional IRA or 401(k) is eventually taxed as ordinary income. There's no step-up in basis, no preferential treatment.

While the balance might read $1 million, $2 million or $5 million, that's not really the amount you "own" in the same way you would in a taxable account. A portion of it — sometimes a significant portion — belongs to the IRS.

If you don't need the money for spending, the situation can get more complicated, not less.

The RMD issue — even if you don't need the income

One of the biggest surprises for many retirees is how required minimum distributions (RMDs) actually play out.

Starting in your early 70s, the government requires you to begin pulling money out of those accounts. It doesn't matter whether you need the income or not.

For someone with a modest balance, this might not be a big deal.

But for someone with a large IRA — those required withdrawals can be substantial — and every dollar is taxable.

We've seen situations in which retirees are forced to take income they don't need, only to find themselves:

• Bumped into a higher tax bracket
• Paying more tax on Social Security
• Crossing thresholds that increase Medicare premiums

It's an odd outcome: After years of careful saving, they're now managing around a tax problem they didn't expect.

The part most people miss: What happens to the kids

For a long time, there was at least a partial workaround. If you didn't use all your IRA, your children could inherit it and stretch the distributions over their lifetimes.

That changed with the SECURE Act.

Today, in most cases, non-spouse beneficiaries have to empty an inherited IRA within 10 years.

That sounds simple enough, but the tax impact can be significant — especially depending on when those withdrawals happen.

Picture a scenario in which a couple leaves a $2 million IRA to two adult children. Each inherits $1 million. Those children are likely in their peak earning years, already in relatively high tax brackets.

Now they must layer in distributions from that inherited IRA over a 10-year window. However they time it, those withdrawals are taxed as ordinary income.

Not capital gains, not at a reduced rate — it's just straight income, on top of everything else they're earning.

In many cases, a meaningful portion of that inheritance goes to taxes in a relatively short period of time.

The irony: You might not even need the account

What makes this more frustrating is that the issue tends to show up most clearly for people who saved well and lived within their means.

A lot of higher-net-worth retirees don't rely heavily on their IRAs for their lifestyles. They might have other assets, or don't spend at a level that requires tapping those accounts aggressively.

But the structure of pretax accounts doesn't really allow you to ignore them. Between RMDs during your lifetime and the 10-year rule after death, those dollars are going to be taxed one way or another.

What many people thought of as a long-term asset often behaves more like a delayed tax liability.

A better way to think about it

This isn't about saying 401(k)s were a mistake. They've been incredibly effective accumulation tools.

The issue is concentration.

Just as you wouldn't want all your investments in one stock, having the majority of your wealth tied up in one tax category can create limitations later on.

More planning today is focused on building a mix across different "tax buckets":

• Pretax (traditional IRAs and 401(k)s)
• After-tax / tax-free (Roth accounts)
• Taxable accounts

That mix gives you options. In retirement, options matter.

Being able to choose where income comes from — rather than being forced into one source — can make a noticeable difference in how much you pay over time.

The window to fix it

The good news is this is something that can be managed, particularly in the years leading up to RMDs.

That might involve gradually shifting some assets into Roth accounts, being more intentional about withdrawals earlier in retirement, simply coordinating income more carefully year to year or insuring the tax liability to an extent.

"Max out your 401(k)" is still good advice. It's just not complete advice — at least not for everyone.

For those with larger balances, especially those who might not need the funds, the conversation needs to shift from just saving to how those savings will eventually be taxed.

At the end of the day, it's not just about how much you've built.

It's about how much of it stays in your family or flows in accordance with your wishes.

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

If you filed your taxes last month, you know the pain of capital gains is real and often a surprise come April.

I recently wrote two surprisingly long and complicated columns on strategies to minimize the tax hit that comes when you press the "sell" button on an appreciated stock.

In one of those columns, I talked about the "gift up" strategy, which is incredibly effective if executed properly. Short version: You give assets, typically to your parents, and when they pass, they (as long as all goes according to plan and you follow the rules) pass them back to you with a step-up in basis.

This is a similar idea, but the gift is down, i.e., to your kids.

We work with folks in or near retirement, which is typically the sweet spot for such a strategy. We also work with people who tend to be comfortable financially, when they can say with a level of confidence that they'll be OK. That allows the flexibility to think about how they can help their kids.

Make sure you're financially secure first

When you give stock to a child, it's considered a completed gift, which means you're not getting that money back.

You should double-check your financial plan to make sure you're going to be financially secure before considering this.

If you don't have a plan or want to double-check the one you have, you can access a free version of the software we use.

The idea here is simple. Want to give your kids money for a down payment? Want to help cover daycare expenses? Instead of writing a check, transfer stock into their account.

When you transfer stock, there is a carryover in basis. That means if you bought XYZ stock for $50 and now it's worth $250, there is still a $200 unrealized gain that will be realized when they sell.

Why do it? This works in a situation of tax arbitrage. In English, this works if their capital gains rate is lower than yours.

What to know about tax rates

There are several income tax brackets, and most people have a general sense of their progressive nature. People might not realize that the same sort of thing exists on the capital gains side.

While many people fall into the 15% capital gains bracket, you can end up paying 0%, 15%, 18.8% (net investment income tax) or 23.8%, depending on what your taxable income is.

Many states also apply their income tax rate to capital gains. In an ideal scenario, you're giving to kids who are in school or at the beginning of their careers and have capital gains rates of zero.

However, it's still a win if their rate sits anywhere below yours.

Here are the capital gains brackets without the net investment income tax, which is what adds that 3.8% for the top two brackets:

It's important to point out that these thresholds are based on taxable income, which is gross income less deductions. If your unmarried daughter is making $75,000, there still might be an opportunity here.

If you're nodding, raising your hand or both, press pause.

What's the gift's purpose?

I often caution clients that giving money can be a rope, or it can be quicksand. Most of this depends on the child, and you probably know which it is.

However, it also depends on the gift's purpose. I am a fan of helping with one-time expenses or expenses on a finite timetable. That's why I mentioned down payments and daycare.

I am not a fan of gifts without an intended goal. Those tend to disappear or reappear in the form of something that gets parked in a garage.

Related Content

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• Three Ways to Give to Your Kids Tax-Free While You're Still Alive
• I'm a Financial Planner: If You're a Wealthy Retiree Who Ignores These 3 Retirement To-Dos, You're Courting Significant Financial Risk
• I'm Retired and Hate Being a Landlord. Should I Sell My Rental Property?
• 5 Options for That Stock You Have Too Much Of (Plus, the Risks to Know)

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

Health savings accounts (HSAs) offer a rare triple tax advantage: Contributions are tax-deductible, investments grow tax-free and withdrawals for qualified medical expenses are tax-free.

Those tax benefits come with an important responsibility, though. If you take tax-free withdrawals from your HSA, you should be able to document that the money was used for qualified medical expenses.

While IRS audits involving HSAs are relatively uncommon, they do happen. And when they do, many account holders struggle to locate receipts or remember which expenses they reimbursed themselves for earlier. Creating a simple system to save and organize HSA receipts can help protect your tax benefits and make it much easier to respond if questions ever arise.

What records HSA account holders should keep

Many people don't realize that the IRS requires you to keep records supporting HSA withdrawals. The following documents can help substantiate qualified medical expenses and reimbursements.

• Itemized receipts: Receipts for qualifying medical expenses need to include details specifying the type of item or service purchased, the date, the cost and any taxes or discounts.
• Proof of payment: Keep proof of payment for each purchase, such as a credit card statement or a canceled check. To stay organized, pair the proof of payment with the corresponding itemized receipt.
• Explanation of benefits (EOB): Your insurance provider’s EOB details the services provided and the amount that insurance covers. It also outlines what you may owe and helps prove that a service qualifies for HSA reimbursement.
• Detailed notes: Take notes on who each expense was for and whether your health insurance reimbursed you for the expense.

The easiest ways to organize HSA receipts

Keeping your HSA receipts organized can make tax time easier and help you respond quickly if you're ever audited. Whether you prefer digital storage, spreadsheets or dedicated tracking tools, several methods can help you keep your records in order.

Cloud folders: Storing receipts digitally in the cloud can reduce clutter and make records easier to retrieve if you need them later. Scan receipts and organize them in folders by year, using clear file names so specific expenses are easy to find. Popular cloud storage services, including Google Drive, Microsoft OneDrive and Dropbox, can make it easy to access records from multiple devices and create backups.

Budgeting apps: Many budgeting apps can also serve as receipt-storage tools. Apps like Monarch, YNAB and Quicken allow users to attach receipts, notes and other documents to transactions. Storing receipts alongside the corresponding expense can make HSA recordkeeping easier and help ensure supporting documentation is readily available if you choose to reimburse yourself years later.

Spreadsheet tracking systems: A spreadsheet can help you track key details such as the expense type, date and amount paid. You can create your own tracker or start with a template from platforms like Canva. Tools such as Google Sheets work well if you don't have Microsoft Excel, and you can access them from multiple devices. Just remember that you'll still need a separate system for storing copies of receipts.

Apps designed for HSA management: Apps designed for HSA management can help you store receipts, track expenses and identify HSA-eligible purchases. Popular options include Reimbursable, which is available for Apple devices, and TrackHSA.

Save PDFs from providers: Many healthcare providers make receipts and statements available online. Downloading and saving PDFs directly from provider portals can help you maintain a paperless recordkeeping system.

Use HSA provider tools: Some HSA administrators offer receipt storage, expense tracking or mobile apps as part of their accounts. These built-in tools can be a convenient way to keep your records organized in one place. If you change jobs, transfer your HSA or switch providers, make sure you know how to download and retain your records so you don't lose access to important documentation.

Keep security in mind when using digital tools to store and track receipts. Look for tools that allow you to create backups, and be sure that you create a secure password and keep it safe to protect your data and privacy.

Why some people delay HSA reimbursements for years

HSAs allow you to delay reimbursement for qualified medical expenses for years, provided you keep accurate records. Some account holders intentionally pay medical expenses out of pocket and leave their HSA funds invested, giving the account more time to grow tax-free.

While this strategy can be appealing, it can also backfire. If you lose receipts or other documentation, you may not be able to prove those expenses were eligible for reimbursement years later. If you're considering delayed reimbursement, it's important to create a reliable system for storing and tracking receipts and other supporting documents.

Common HSA paperwork mistakes that can create tax problems

HSA holders sometimes make paperwork mistakes that can create tax issues, especially during an audit. If you lose receipts, you may not be able to prove or claim HSA reimbursement for that expense.

When you use your HSA, be careful about double-dipping with insurance or tax deductions. If an expense is covered by or reimbursed by insurance, you can’t claim it as an HSA reimbursement. And if an expense is reimbursed by your HSA, you can’t claim it as a medical tax deduction.

Reimbursing nonqualified expenses with your HSA is another potential issue. The IRS provides specific guidance about what qualifies as a qualified medical expense, which includes expenses medically necessary for the "diagnosis, cure, mitigation, treatment or prevention of disease." Cosmetic procedures, spa treatments, unprescribed massages and more are nonqualified expenses.

Don’t forget to document over-the-counter purchases or medical necessity letters, too. This documentation is key to proving that your expenses qualified for HSA reimbursement, so gather these documents at the time of the expense and keep them organized and safe.

A simple annual HSA cleanup checklist

At the end of each year and before tax season, take some time and clean up your HSA documentation. Doing so will help keep you organized and will make filing taxes and navigating a potential audit much easier.

The following steps can help ensure you have your HSA receipts and documents organized:

• Download annual statements
• Reconcile reimbursements
• Back up receipts digitally
• Review qualified expense lists
• Store records with tax documents

Your HSA is only as good as your records

Keeping good records can help protect your HSA tax benefits and give you peace of mind. By creating a simple system now, you'll make it easier to track expenses, document reimbursements and stay prepared if the IRS ever asks questions.

The best recordkeeping system is one you'll use consistently. Whether you prefer cloud storage, spreadsheets or an expense-tracking app, a little organization today can help safeguard your tax savings for years to come.

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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

For families with a child or grandchild who has special needs, a properly drafted special needs trust (SNT) can be one of the most powerful planning tools available.

It can preserve eligibility for government benefits, provide supplemental support and create long-term financial stability.

But there's a mistake I see far too often — one that can quietly undermine everything a family is trying to accomplish: Naming a special needs trust as the beneficiary of tax-deferred retirement accounts.

At first glance, it seems logical. You want to protect your loved one, so you direct your IRA or 401(k) to their trust. Done, right?

Not quite.

In many cases, this creates a significant — and often unnecessary — tax burden that reduces what ultimately benefits your loved one.

Let's walk through why.

The problem: Tax-deferred accounts come with a bill

Accounts such as IRAs, 401(k)s, 403(b)s, SEP IRAs and deferred-compensation plans all share one thing in common: They've never been taxed.

Every dollar in those accounts is subject to ordinary income tax when distributed. When you're alive, you control when and how those taxes are paid. But after your death, that control shifts to your beneficiaries — and the rules change.

Under current law, most non-spouse beneficiaries must withdraw the full balance of an inherited retirement account within 10 years. That means the IRS is effectively saying: "We've waited long enough. Pay up."

Now imagine that the beneficiary is not an individual, but a trust.

When a trust becomes the beneficiary

When a special needs trust is named as the beneficiary of a retirement account, things get more complicated.

Trusts reach the highest federal income tax bracket — 37% — at extremely low levels of income (slightly more than $16,000 in many cases). That means that if retirement distributions are retained inside the trust, they can be taxed at very high rates very quickly.

Even if distributions are passed through to the beneficiary, the timing and structure of those distributions might still create inefficiencies.

The purpose of a special needs trust is not just to hold money; it's intended to stretch and protect it over time.

Large, accelerated taxable distributions can work directly against that goal.

The real risk: Losing a chunk of the legacy

Let's look at a hypothetical example.

A parent passes away with a $1 million IRA and names their child's special needs trust as the beneficiary.

Over the required 10-year period, that money must be distributed — and taxed.

Depending on how those distributions are handled, it's entirely possible that:

• Hundreds of thousands of dollars go to taxes
• The trust is forced into high tax brackets early
• The long-term growth potential is significantly reduced

In other words, a portion of what you intended for your loved one ends up going somewhere else.

Why this happens so often

This mistake is rarely intentional.

It usually happens because two separate planning tracks aren't coordinated:

• Estate planning (attorney). Create a special needs trust to protect the beneficiary
• Retirement planning (adviser or custodian). Assign beneficiaries to accounts

Both are done correctly — individually.

But without coordination, the result can be suboptimal.

A better way to think about it

Not all assets are created equal.

When you're planning for a special needs beneficiary, it's critical to understand that:

• Tax-deferred accounts (IRAs, 401(k)s) carry a future tax liability
• After-tax assets (brokerage accounts) might receive a step-up in basis
• Roth accounts are potentially tax-free to beneficiaries

From a planning standpoint, you want to be intentional about which assets go where.

Smarter strategies to consider

Every situation is different, but here are several strategies worth exploring:

1. Use tax-efficient assets to fund the trust.

Instead of naming the SNT as the beneficiary of a traditional IRA, consider funding the trust with:

• After-tax investment accounts
• Life insurance proceeds
• Roth IRA assets (in some cases)

These assets can often pass to the trust with less tax friction.

2. Leave tax-deferred accounts to other beneficiaries.

If you have multiple heirs, you might choose to:

• Leave IRAs or 401(k)s to individuals in lower tax brackets
• Use other assets to equalize inheritances

This can help improve overall tax efficiency across the family.

3. Consider Roth conversions during your lifetime.

Strategic Roth conversions can:

• Help reduce the future tax burden on inherited accounts
• Create more flexibility for beneficiaries
• Potentially allow tax-free distributions to the trust

You'll pay taxes now — but you might be doing so at lower rates than your beneficiaries would face later.

4. Coordinate your estate plan and beneficiary designations.

This is where many plans fall apart. Your attorney, financial adviser and tax professional should all be working from the same playbook.

If your special needs trust is central to your plan, your retirement account strategy should reflect that.

The goal: Protection without unintended consequences

A special needs trust is designed to provide stability, protection and dignity for someone you care deeply about.

But if it's funded inefficiently, it can also introduce:

• Higher taxes
• Faster asset depletion
• Less long-term flexibility

That doesn't mean you shouldn't use a trust. It means you should use one intentionally.

A simple question to ask: If you already have a special needs trust — or are planning to create one — ask, "Which assets are best suited to fund this trust, and which assets are not?"

That single question can help you avoid a costly mistake.

Final thoughts

Planning for a loved one with special needs is one of the most important — and emotional — financial decisions you'll ever make.

You're not just managing money.

You're building a system of care that could last decades.

By aligning your tax strategy with your estate plan, you can help ensure that more of what you've built serves the person it was meant for.

That's the outcome that matters most.

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

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

The 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.

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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.

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For years, retirees have been told the same thing: Protect your Roth IRA at all costs. Let it grow. Don't touch it. Save it for last. And in many cases, that advice holds up.

But if you're among a small group of Americans with both a pension and $1 million or more saved, the rules change. What works for the average retiree doesn't always apply to what we often call the "2% Club." (I wrote a book about this group, which you can request here.)

In fact, there are specific moments when tapping your Roth IRA earlier can be strategic and save money on taxes. Here are eight situations where it may make sense to take withdrawals from your Roth, even if you've spent years trying to build it.

1. When tax rates are higher than expected

Roth assets shine brightest when tax rates rise. If future tax policy shifts, or increases in your personal income push you into higher tax brackets, pulling from your Roth allows you to avoid those elevated rates.

While today's tax environment is historically low, retirees with pensions often find themselves in equal or higher brackets later in life. That's when tax-free income becomes especially valuable.

2. When you're near the top of a tax bracket

Small decisions can have outsized tax consequences. If an additional $10,000 withdrawal from a traditional IRA would push you into the next tax bracket, it may be smarter to take that amount from your Roth instead.

This strategy helps you "cap" your taxable income and avoid paying a higher marginal rate on dollars that could have been tax-free.

Think of your Roth as a pressure valve, used strategically to keep your tax situation under control.

3. During unusually high-income years

Not all retirement years look the same. You may sell a property, receive a large bonus before retiring, cash out unused vacation time or experience another one-time income spike.

In those years, adding more taxable income from traditional accounts can be costly. Roth withdrawals, on the other hand, won't increase your taxable income, making them a useful tool to maintain flexibility when your income temporarily surges.

4. If you're using the Affordable Care Act before age 65

Early retirees face a unique challenge: bridging the gap to Medicare. Health insurance through the Affordable Care Act is income-based. The lower your reported income is, the lower your premiums may be.

By withdrawing from your Roth instead of tax-deferred accounts, you can generate the income you need without increasing your reported income. This could translate into meaningful savings on health insurance during early retirement.

5. To avoid higher Medicare premiums

Once you reach age 63, another income-based threshold comes into play: Medicare premiums. Known as the income-related monthly adjustment amount (IRMAA), these surcharges can significantly increase your Medicare costs if your income crosses certain limits, even by a small amount.

Higher premiums do not change your coverage. You receive the same Medicare benefits regardless of cost.

Strategic Roth withdrawals can help you stay below those thresholds. In some cases, avoiding a relatively small income increase can save thousands in premiums.

6. To navigate the Social Security 'tax torpedo'

Few retirees anticipate how aggressively Social Security can be taxed. As your income rises, more of your Social Security benefits become taxable — up to 85%.

This creates what's often called the "tax torpedo," where each additional dollar withdrawn can trigger disproportionately high taxes.

Roth withdrawals don't count toward this calculation, making them a powerful way to access income without increasing the taxability of your benefits.

7. After the loss of a spouse

The "widow's penalty" is one of the most overlooked risks in retirement planning. After a spouse passes, the surviving partner typically moves from married filing jointly to single tax brackets, meaning higher taxes on the same (or even reduced) income.

In these years, Roth withdrawals can help manage tax exposure because they are not taxable. This provides flexibility when traditional income sources become less efficient.

Also, consider Roths when planning for your heirs

Roth strategies don't end with your lifetime — they extend to your legacy. Under current rules, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years. If those assets are in traditional IRAs, every dollar withdrawn is taxable.

But Roth accounts? Those distributions are generally tax-free. If your children are in higher tax brackets, or you expect them to be, preserving Roth assets for inheritance while spending from other accounts can create a more efficient wealth transfer.

The bigger picture: Flexibility over rules

For retirees with pensions and significant savings, the biggest risk isn't running out of money — it's losing control over how and when that money is taxed. That's why tax diversification matters. Having assets across taxable, tax-deferred and tax-free accounts gives you options.

In retirement, options are what allow you to adapt to tax law changes, income fluctuations and life events. In the end, the goal isn't just to build wealth, but to use it wisely. So while Roth IRAs don't always have to be spent early, they should always be used strategically.

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

For first-time buyers and budget-conscious households, the 2026 housing market presents a significant challenge.

Last month, the U.S. Bureau of Labor Statistics reported an annual inflation rate of 3.8%, a surge that has trickled down to every facet of daily life, including groceries, healthcare, utilities, and — yes — even the housing market.

Currently, median home prices for new single-family homes are hovering around $412,000, according to Property Shark, with annual property tax bills hovering around $3,119 (though property taxes vary by locality).

But a handful of states tell a different story. In these locations, cost-of-living indices mostly remain below the national average, and median property tax bills are often under $1,500.

Are these lower costs enough to outpace inflation? To find out, we’ve ranked the top ten states with the lowest property tax bills in the U.S. by their affordability to see if 2026 is your year for a move.

States with the lowest property tax bills

Kiplinger used the latest data from Property Shark, sourced from the U.S. Census Bureau, to determine the ten lowest median property tax bills in the nation.

Then, median home values and household incomes were utilized to calculate the home price-to-income ratio for each state. This data point shows the average annual salary required to purchase a home in each state. For example, a ratio of 2.73 means that the average home price is roughly 2.7 times the state's average annual salary.

For our cost-of-living (COL) index, we utilized regional price parities (RFPs) from the U.S. Bureau of Economic Analysis (BEA). These figures represent a weighted average of prices for essential goods and services, including food, transportation, and healthcare.

On the BEA scale, 100 represents the national average. A score of 88, for instance, means the state is 12% cheaper than the national average, while a score of 102 indicates it is 2% more expensive.

Cost of living in states with low property taxes

The ranking below shows typical home values vs. average salaries in the states listed (as reflected in the home price-to-income ratio), along with daily living expenses such as grocery bills and local tax burdens.

While Kiplinger considered some qualitative factors, like job opportunities and weather, it's important to note that healthcare accessibility, education outcomes, political climate, and other considerations can influence reasons to live or move in a specific state and affect the amount needed for "affordable" living in that state.

Each individual's needs differ, so consult a tax professional or financial planner when necessary.

1. West Virginia: Low entry barrier for homeownership

Home price-to-income ratio: 2.73

Median property tax bill: $865

Cost-of-living (COL) index: 89.5

With a home price-to-income ratio of 2.73 according to Property Shark, West Virginia is the most affordable state on our list for homebuyers. Plus, a median property tax bill of $865 and a COL index 10.5 points below the national average secure the Mountain State's top spot.

• The trade-off: Job variety can be limited; West Virginia also has a relatively high state and local sales tax (which can reach 7% in some areas) and taxes most kinds of retirement benefits, but not Social Security benefits.
• Should you move? Remote workers and first-time buyers looking for maximum square footage for their dollar could win out. But if you need more amenities in less populated areas, you might reconsider West Virginia.

2. Mississippi: Cheap median home prices and cost of living

Home price-to-income ratio: 3.01

Median property tax bill: $1,215

Cost-of-living (COL) index: 87

Mississippi boasts a 3.01 home price-to-income ratio, which earns the state a high ranking, despite a significantly higher median property tax bill of $1,215 (compared to West Virginia). The overall cost of living (87) is among the lowest in the country, according to the BEA.

• The trade-off: The job market in Mississippi has been historically slower-paced, though metropolitan areas may sing a different tune. Still, Mississippi has one of the nation's highest grocery taxes at a whopping 5%. Home insurance premiums can also be high compared to the national rate, according to the latest data from Bankrate.
• Should you move? Professionals in agriculture or manufacturing who value a low-cost, warmer climate might consider moving to Mississippi. Also, those who want to live on the cheaper side of things may consider the Magnolia State home.

See also: 10 Tax-Friendly States for Retirees in 2026

3. Arkansas: Very low property taxes and costs on daily essentials

Home price-to-income ratio: 3.09

Median property tax bill: $1,040

Cost-of-living (COL) index: 86.9

Arkansas may be a haven for frugal living, holding the lowest overall COL index on this list at just 86.9. Daily essentials like gas and food are significantly cheaper here than in, say, Alaska or South Carolina. Property tax bills, too, can be quite low, at just over $1,000 per the latest U.S. Census Bureau data.

• The trade-off: Arkansas has some extreme weather. Capital gains are taxed as ordinary income (with a 50% exemption on net long-term investments), and high state and local sales taxes are used to offset the low property taxes.
• Should you move? You might relocate to Arkansas if you're an outdoor enthusiast looking to take advantage of the state's many mountains, lakes, and rivers (weather permitting). On the other hand, corporate professionals might settle near growing hubs like Bentonville or Fayetteville.

4. Oklahoma: Lower median household income and home prices

Home price-to-income ratio: 3.07

Median property tax bill: $1,599

Cost-of-living (COL) index: 87.8

Oklahoma has a relatively low home price-to-income ratio of 3.07, according to data sourced from Property Shark. Daily essentials like gas and electricity are also affordable with an index score of 87.8, about 12.2% lower than the national average.

• The trade-off: Property taxes are the highest in the states on this list, with a median bill of $1,599. Residents must also contend with "Tornado Alley" weather and a regressive tax system that relies heavily on sales tax.
• Should you move? Oklahoma typically offers a highly favorable business tax environment, which makes it a more attractive place to live for entrepreneurs and business owners. But once you're retired, some of your income may still be taxed, like distributions from your pension, 401(k), and IRA.

5. Alabama: The 'middle ground' of low taxes and cost of living

Home price-to-income ratio: 3.28

Median property tax bill: $788

Cost-of-living (COL) index: 88.8

Alabama has the second-lowest property tax bill on our list, with a median of just $788. The Heart of Dixie's COL index of 88.8 and home price-to-income ratio of 3.28 also make the state very affordable, though slightly less so than the top five, according to 2026 Property Shark data.

• The trade-off: Alabama summers are hot and humid. Combined state and local sales tax can reach 9.46%, according to the Tax Foundation; Alabama is one of the few states to still tax groceries, too.
• Should you move? Recent college grads, particularly in the growing tech and aerospace industries, might call the Cotton State "home." Although retirement income is state-taxed, certain exemptions and no state taxes on Social Security could make retirement more affordable.

6. Kentucky: Solid middle ground for overall affordability

Home price-to-income ratio: 3.23

Median property tax bill: $1,544

Cost-of-living (COL) index: 90.2

Kentucky isn't a standout performer for any one metric, but rather an overall affordable choice across the board. With a home price-to-income ratio of 3.23, you'll only need to offer about 3.2 times the average annual salary to buy a home, plus the cost of living is almost a full 10 points below the national average (per BEA data).

• The trade-off: Even though the median property tax bill of $1,544 is higher than that of many states listed here, it isn't the overall highest. However, if you plan on retiring in Kentucky, the Bluegrass State still taxes some retirement income (though it offers significant exemptions) and is one of the few states with a death tax.
• Should you move? Those seeking a blend of cultural hubs (like Louisville or Lexington) and affordable rural living could choose to live in Kentucky. But if you love the fast-paced energy of a city with bustling nightlife, you might look elsewhere.

7. Louisiana: Affordable living and home prices

Home price-to-income ratio: 3.56

Median property tax bill: $1,180

Cost-of-living (COL) index: 88.2

A 3.56 home price-to-income ratio puts Louisiana in the bottom half of the list. Yet while home prices are higher relative to income, the $1,180 median property tax bill remains a major draw for new residents. Plus, the COL index is still 11.8% lower than the national average, per the BEA.

• The trade-off: Louisiana has the highest sales tax in the U.S. (exceeding 11% in some areas). Home insurance premiums are also rising due to the state's location on the Gulf Coast, and summers are humid.
• Should you move? Budget-savvy buyers who prioritize lifestyle, arts, and food culture might make the move to the Pelican State. Once you retire, you could also find enjoyment in escaping the harsh winters of the north.

8. South Carolina: Popular destination with some affordability

Home price-to-income ratio: 3.74

Median property tax bill: $1,251

Cost-of-living (COL) index: 93.7

South Carolina is among the top ten states people are moving to in 2026, and current home prices reflect that. The median property tax bill is $1,251, which isn't bad, but the COL index of 93.7 is the highest on our list so far (yet still below the national average), according to 2026 BEA datasets.

• The trade-off: Rapid growth in recent years has put strain on the state's infrastructure and caused traffic congestion in popular areas like Charleston. While primary residences are taxed at a relatively low rate, vacation homes are taxed at a higher rate.
• Should you move? South Carolina remains a top destination for families and retirees who want coastal access without Florida's higher costs (which are above the national average). The state also frequently ranks as one of the best for military retirees due to veteran benefits.

See also: 10 Cheapest Places to Live in South Carolina

9. Tennessee: Can be affordable despite high growth

Home price-to-income ratio: 4.12

Median property tax bill: $1,442

Cost-of-living (COL) index: 91.9

Tennessee ranks 9th on our list due to its highest home price-to-income ratio of 4.12. The Volunteer State also has the third-highest COL index on our list, at roughly 8% below the national average, per the BEA. Like South Carolina, Tennessee is a top ten destination for new residents, and the median property tax bill of $1,442 reflects that.

• The trade-off: High sales taxes and vehicle registration fees can offset Tennessee's "no state income tax" status, and a competitive housing market is pricing some folks out of popular places like Nashville.
• Should you move? Professionals and families who can bring an out-of-state salary to a high-growth market might benefit from a move. And once you have a home, retirees could prosper with no state taxes on retirement income.

See also: 10 Cheapest Places to Live in Tennessee

10. Alaska: High cost of living and less affordable

Home price-to-income ratio: 3.80

Median property tax bill: $738

Cost-of-living (COL) index: 102.4

Alaska ranks last in affordability among states with low property tax bills, even with an abnormally low median property tax bill of $738. The Last Frontier has the highest COL index on our list (2.4 points above the national average), and the state has the second-highest home price-to-income ratio of 3.80, according to Property Shark.

• The trade-off: While Alaska famously boasts no income tax, fluctuating local taxes require careful planning (for instance, some areas have no property tax, while the median bill is closer to $4,113 in areas that do). The costs of daily essentials are high.
• Should you move? Self-reliant individuals and high-earners in energy or maritime might relocate to Alaska to maximize their space. But if you like city conveniences, the move may not be for you.

Should you move to a state with low property taxes?

A low property tax bill is a significant perk, but it's only one piece of the affordability puzzle. So while the home price-to-income ratio tells you if your salary can support a mortgage in a new state, lower property taxes often make up for that revenue through a higher state sales tax or lower investment in public infrastructure.

You should also weigh other quantitative factors — like COL indices — against qualitative ones, like proximity to family or career opportunities.

Ultimately, the most "affordable" move is one where your income stays comfortably ahead of both the tax collector and grocery bill. Choose wisely.

Read More

• 9 No-Income-Tax States in 2026: Where You’ll Actually Save the Most
• How to Lower Your Property Tax Bill This Year
• Are You 'Broke Planning'? 10 Frugal Habits People Are Using in 2026

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

Most people with about $1 million or more in pretax 401(k)s and IRAs see a rough market year and do exactly nothing. When the market is falling, paralysis feels like safety.

But a midterm election year pullback can be one of the most powerful tax planning windows available in personal finance.

Earlier this year, a client came to us with about $2 million in a traditional IRA. The market had pulled back roughly 8% — and she was nervous.

Instead of sitting tight, we converted about $200,000 to her Roth IRA at the discounted value. That single decision is on track to potentially save her tens of thousands in lifetime taxes.

Here's why that opportunity tends to show up in midterm years — and how to recognize it in your own retirement plan.

What history actually shows us about midterm years

Since 1950, nearly every midterm election year has produced a meaningful intrayear pullback in the S&P 500. The average intrayear drop across midterm years has been about 16.7%. Uncertainty around election outcomes, potential policy shifts and investor sentiment have tended to compress returns in that pre-midterm window.

That compression may create an opportunity.

Because, historically, once the midterm passes, returns have tended to recover meaningfully.

The average 12-month return following midterm year lows has historically come in at about 36.5%. It is important to note that past performance is not indicative of future results, and these historical patterns may not repeat.

Think about what that could mean for a Roth conversion strategy. Converting during a dip may allow the potential recovery to happen inside the Roth account — where that growth could be completely tax-free for the rest of your life, assuming qualified distributions.

Why a portfolio drop may equal a discount on your tax bill

When you do a Roth conversion, the IRS taxes you on the dollar amount you convert — not on how many shares you move.

So if your IRA holds shares of a broadly diversified index fund, and those shares are down about 15% from their peak, you may be able to convert the same number of shares at a roughly 15% lower taxable value.

Same shares. Potentially lower tax bill.

Consider a hypothetical scenario (for illustration purposes only). Say you have about $2 million in an IRA and the market pulls back about 15%. Your account might be worth roughly $1.7 million. You convert about $150,000 worth of shares.

If the market then recovers — and there is no guarantee it will — that recovery would happen entirely inside your Roth account. So, no income tax on the gains. No required minimum distributions (RMDs) later. No additional tax when you eventually withdraw, assuming qualified distributions.

A down market is not necessarily a threat to a Roth conversion strategy. It may actually be an opportunity.

Who should be paying attention right now

The ideal candidate is generally between ages 50 and 65, with roughly $1 million to $5 million in pretax accounts and most of their retirement savings in those pretax buckets.

This is what I call the income valley: The window between when you stop working and when Social Security, pensions or RMDs begin. Taxable income may be temporarily lower during this period, creating space in your income tax bracket that many people never take advantage of.

In 2026, the 22% bracket for married couples went up to about $191,450, and the 24% bracket stretches to about $364,200. Converting in a year when Social Security and RMDs haven't started may allow you to stay inside those brackets.

That same conversion at about age 75, stacked on top of RMDs and Social Security, could potentially push you into the 32% bracket or higher.

One more consideration: IRMAA. A Roth conversion raises your modified adjusted gross income (MAGI) in the year you convert, which gets reported to Medicare about two years later.

A poorly sized conversion could potentially increase your Medicare premiums. Tax brackets and IRMAA thresholds are subject to change and should be verified with a tax professional.

Three steps to consider before this window closes

Step 1: Know about where you stand in your tax bracket. Review your most recent tax return and estimate how much room you have before hitting the next bracket threshold. Know your number before converting a single dollar.

Step 2: Consider your IRMAA thresholds before acting. Model the impact of your conversion on your MAGI and the potential Medicare premium effect two years out. Size conversions thoughtfully to avoid unnecessary surcharges.

Step 3: Work with a tax-first adviser before executing. The interaction between your conversion amount, tax bracket, IRMAA exposure, Social Security timing and RMD projections requires a detailed multiyear model specific to your situation. Done thoughtfully, a Roth conversion strategy over a seven- to 10-year window may potentially save significant amounts in lifetime taxes.

The window may be open — but not forever

Markets recover. Bracket space fills up. RMDs begin. The combination of a market pullback, lower income and time still available is historically one of the more favorable environments for Roth conversion planning.

For anyone with about $1 million or more in pretax accounts who has not yet run a detailed Roth conversion analysis, 2026 may be worth a closer look.

The investors who look back on this period may not remember it as the year the market made them nervous. They may remember it as the year they made a thoughtful, well-timed move.

The bottom line

Midterm election years have historically brought more volatility and deeper drawdowns than average. While that can be unsettling, it also creates a retirement income planning window that doesn't show up every year.

Roth conversions are fundamentally about paying taxes at the most efficient time. And when market values are temporarily lower, that efficiency can improve significantly.

The key isn't predicting the bottom. It's having a conversion plan in place before the next dip arrives and knowing your tax bracket, your conversion ceiling and which accounts to move first.

If you're within five years of retirement or already there, ask yourself this: If the market dropped 15% tomorrow, would I know exactly how much to convert and into which account?

If the answer is no, that's the planning gap to close now. Because sometimes, the best tax opportunities come from uncertain markets, not calm ones.

Related Content

• What's in Store for the Stock Market in 2026?
• 8 Facts You Need to Know About Stock Market Corrections
• Four Historical Patterns in the Markets for Investors to Know
• I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement Income
• Social Security Break-Even Math Is Helpful, But Don't Let It Dictate When You'll File

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

Have you ever noticed that many people only talk about working on their taxes in late winter or early spring during what's traditionally referred to as "tax season"?

I feel that's when everybody seems to be looking for tips on how to lower their annual tax bill or even get a refund (or they head to their local tax preparer with a pile of paperwork and hope for the best).

But I believe taxes aren't a once-a-year problem — not when you're working and definitely not in retirement.

To help minimize your tax burden, I think you need a plan, one that looks well beyond the year that's just gone by and lays the groundwork for many years ahead.

The difference between tax preparation and tax planning

A tax preparation service or software may provide you with strategies that can help you lower your future taxes. But its main job is to complete your return with the information you provide.

The focus of those strategies is on reporting what already happened and getting you to the best place they can with that current return.

Tax planning, on the other hand, is about looking for ways to lower taxes over your lifetime, so there aren't any surprises, especially when you reach retirement.

Many retirees expect lower taxes once they stop working, but that may be a risky assumption. Your income plan — likely a combination of Social Security and pension payments, investment earnings and portfolio withdrawals — could trigger bigger tax bills in retirement.

Knowing where taxes can hide and carefully managing your tax bracket can help protect what you've worked so hard to save and help make your nest egg last longer.

Here are some moves to consider toward accomplishing that.

Using an income lull to do a Roth conversion

If you've been putting most of your savings into a traditional IRA, 401(k) or similar tax-deferred retirement account, converting a portion of those funds to a Roth IRA could go a long way toward helping minimize future tax bills.

I think this is especially important for when required minimum distributions (RMDs) kick in at age 73 (or 75 if you were born in 1960 or later).

But you'll want to be careful about how the timing of that conversion could affect your tax bracket.

One way to help minimize the impact is to consider converting in years when you expect your income to be lower.

For many savers, I find that sweet spot is in the year or years after they first retire, before they claim their Social Security benefits, or have to take RMDs.

You may find other opportunities that also could work well — for example, during a year in which you have high health care costs or other tax-deductible expenses that could offset the cost of the conversion.

Creating a tax allocation plan

Many people have an asset allocation plan that lays out the percentage of stocks, bonds, cash and other investments in their portfolio mix.

In my experience, far fewer have a "tax allocation plan" to help guide them as they withdraw money from their taxable, tax-deferred and tax-exempt accounts in retirement.

I believe that knowing where you'll take your money from, and when you'll take it, is critical to a successful retirement plan. You may have to make some adjustments from year to year, but I think winging it is not the way to go if you want to avoid exposing your income to higher tax rates.

You might not see a single year in which you get a giant refund check — but that's not the goal. The goal is to smooth out your income so you're minimizing taxes over your lifetime.

Avoiding hidden tax traps

I think one of the most important parts of tax planning is education. It's difficult to prepare for a problem you don't see coming. Some common tax traps that can catch retirees off guard include:

Taxes on Social Security. Taxpayers receiving Social Security benefits are often unaware that they may have to pay federal income taxes on a portion of those benefits — up to 85%, based on their income and filing status.

Though the One Big Beautiful Bill Act, passed in 2025, provides a new $6,000 bonus tax deduction for those age 65 and older, it does not eliminate the tax on Social Security benefits.

That bonus deduction is temporary; it will be available only through 2028. Also, it phases out at certain income levels.

The Medicare surcharge. Medicare's income-related monthly adjustment amount (IRMAA) can more than triple Part B premiums for high-income retirees. And the IRMAA is based on a sliding scale that looks at your income from two years earlier, which can be a shock for new retirees.

Capital gains tax. Selling your business or some other highly appreciated asset (your home, a valuable collection, artwork, etc.) could result in your having to pay taxes on the realized gain.

There are multiple strategies that may help minimize this tax burden (including tax-loss harvesting and charitable giving strategies), but these moves require advance planning.

Making a major purchase. Retirees often overlook how a large purchase might affect their annual income tax bill. Withdrawing a significant amount from tax-deferred savings to pay for a new car, a family vacation or other major expense could push you into a higher tax bracket and bring about a higher tax bill.

Passing along the problem. Without planning, a generous gift can become a tax burden for loved ones. Using trusts, exemptions and other tax-efficient strategies can help preserve your assets for heirs.

The bottom line

I believe the sooner you can put together a long-term tax plan — one that will help minimize taxes over your lifetime and eliminate surprises down the road — the better.

If your financial professional isn't willing or able to talk with you about shifting from reactive tax reporting to proactive planning, it may be time to consider seeking a second opinion.

A retirement specialist with tax-planning expertise can help you evaluate the benefits of various tax strategies, run projections based on your individual needs, coordinate your tax plan with your overall financial plan and help make adjustments when necessary.

This is complex stuff, but it can help preserve your nest egg, so don't hesitate to ask for help.

Kim Franke-Folstad contributed to this article.

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

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• Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very Likely
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.