Imagine strolling down charming cobblestone streets as the scent of hot-baked pretzels hangs in the air. Children zip past in crisp lederhosen, laughter echoes over the clink of heavy glass steins, and you duck inside a Bavarian-style shop expecting to hear a German greeting.

Instead, a local welcomes you in an American accent.

Each year, millions of Oktoberfest revelers skip the expensive transatlantic flights and long hours of air travel, opting for the authentic spirit of Gemütlichkeit (that cozy, welcoming cheer) right here in the United States.

If that's you, we're taking a look at how state tax policies compare across the country's top festival spots. Rounding up the ten most famous American Oktoberfest destinations, we've ranked them by their state's beer excise tax rate (the festival's official drink, and, hey — we're not complaining).

So pack your dirndls and warm up your polka: Here's where Alpine charm meets beer taxes on a budget.

Top Oktoberfests ranked by beer tax in 2026

To compare state beer taxes across top Oktoberfest spots, we used the 10 American destinations featured in Time Out magazine.

We then ranked them by their mandatory state beer excise tax rates per gallon, using the latest data from the Tax Foundation. The list utilizes a standard 12-ounce pour of a baseline imported 4.7% ABV lager.

Keep in mind that state excise taxes are built into the wholesale price upstream, providing a foundational baseline for beverage costs across each state. Thus, festival prices on the ground are also shaped by factors like local sales taxes, brewery selections, and souvenir packages.

However, this ranking offers a unique look at how state tax policy frames the nation's premier German celebrations — one stein at a time.

10. Helen, Georgia

State beer tax: $0.48

Dates: Sept. 10 - Nov. 1, 2026

As the longest-running Oktoberfest in the U.S., the festival in Helen, Georgia, has the most expensive state beer tax on our list, according to Tax Foundation data. Additionally, admission generally costs $5 to $25 per person per day (though entry to the Festhalle is completely free on Sundays).

But Helen is famously known for its Bavarian charm. Redesigned in the late 1960s to mirror alpine architecture, the festival is backdropped against the Blue Ridge Mountains, delivering picturesque fall foliage views along the Chattahoochee River.

Visitors can watch the festive Oktoberfest Parade on opening weekend, try holding their beer the longest at the annual Stein Holding Competition in October, or sip warm spiced apple ciders and rich wheat beers. Helen also offers a costume party on Halloween night and 12 to 16 rotating traditional bands inside the Festhalle over the nearly two-month-long celebration.

Thus, if you want to feel like you're in Germany this autumn without ever actually leaving the States, you might consider a surprisingly authentic Oktoberfest in America's South.

Want to be a little closer to the action year-round? Check out the 10 Cheapest Places to Live in Georgia.

9. Stowe, Vermont

State beer tax: $0.27

Dates: Sept. 19, 2026

The von Trapp Family Lodge & Resort Oktoberfest ranks ninth on our list, with a state beer tax of $0.27, per the latest Tax Foundation data. Ticket prices for the one-day affair are typically $80 per person and include an official souvenir mug, one beer pour, and a festive appetizer, entree, and dessert.

Musical fans and history buffs will especially appreciate the setting. Hosted by the real-life family that inspired the film "The Sound of Music", the resort brings an Austrian twist to the traditional festival. The event packs a full schedule of vibrant folk music, cask tapping, Steinholding contests, traditional outfit competitions, and — yes — plenty of singing.

Perched high above the town of Stowe, the lodge also has some of the prettiest scenery on our list, with panoramic views of Vermont's fall foliage. And while the festival itself is a single-day event, booking a weekend stay allows you to enjoy on-site brewery tours, crisp Austrian-style lagers, and cozy fireside retreats.

So you might want to check out von Trapp Family Lodge & Resort in Vermont for one of America's most unique Oktoberfests.

8. Leavenworth, Washington

State beer tax: $0.26

Dates: Oct. 2-3, 9-10, and 16-17, 2026

Taking place over three weekends in October, the traditional Oktoberfest of Leavenworth, Washington, ranks eighth on our list, according to the latest data from the Tax Foundation. Single-day tickets range from $20 to $40, with weekend passes costing about $55 per person (and kids 12 and under enter for free).

Framed by the jagged peaks of the Cascade Range, entering Leavenworth might just feel like you're stepping straight into a Bavarian postcard. Music is at the heart of the festival, with three stages featuring live performances from 6 p.m. to close each day.

The annual Festzug grand parade also marches through town every weekend, while stein hoists and costume contests run throughout the day. Plus, whoever rocks the best or funniest mustache wins a prize on Saturdays (so get your hair gel ready).

Those traveling with children will also love the dedicated "kinderplatz" play area chock full of classic carnival games and a 62-foot Ferris wheel.

Ergo, whether you like browsing street fair merchandise or jumping onto the dance floor with European headliners, enjoy Leavenworth this fall.

See also: 10 Cheapest Places to Live in Washington.

7. Frankenmuth, Michigan

State beer tax: $0.20

Dates: Sept. 17-20, 2026

Frankenmuth's Oktoberfest charges a state beer excise tax rate of $0.20, according to the Tax Foundation, and ticket prices are only $10 per person per day, though kids 15 and under are free (and Sunday admission is free as well).

Known as "Michigan's Little Bavaria," Frankenmuth was settled in 1845 and holds the distinction of hosting the very first Oktoberfest officially sanctioned by the City of Munich outside of Germany. For this reason, Germany’s world-renowned Hofbräuhaus München exported its beer to the U.S. and Frankenmuth for the first time in history.

The festival features live music, authentic cuisine, and beloved events like the Wiener Dog Races — where up to 100 dachshunds compete for glory. (And ribbons, trophies, cash, and a free hotel stay…maybe it's time to adopt a pet?)

Dog lovers will also appreciate that the festival is exceptionally pet-friendly, welcoming leashed pups throughout the outdoor grounds. Frankenmuth offers several walkable (and pet-friendly!) hotels downtown, meaning you and your pooch can enjoy Oktoberfest together.

Thus, if you're a fan of Germanic history and want to take your pup along for the ride, stay for select hotel access in Frankenmuth, Michigan.

6. Fredericksburg, Texas

State beer tax: $0.19

Dates: Oct. 2-4, 2026

Walk under a big tent and experience Fredericksburg, Texas Oktoberfest with remarkably low beer taxes — at just $0.19, according to the Tax Foundation. Ticket prices usually range from $1 to $20 (depending on your age and the day you go), and you can add an extra $10 for daily shuttle passes that run between Marktplatz, local parking, downtown shopping, and nearby county fairgrounds.

Rooted in 19th-century German immigrant heritage, Fredericksburg serves up genuine schnitzel and cold Hofbräu on tap alongside Texas Hill Country classics like spiced wines and warm mulled cider.

You might start your festival with the Saturday morning chicken dance, which is perfect for little ones who want to meet costumed feathered friends on the dance floor. Or, if you're feeling particularly energetic for the autumn air, sign up to walk or run the annual Oktoberfest Kraut Run (benefiting local youth and literacy programs).

With easy shuttles, endless steins, and plenty of Texas hospitality, Fredericksburg may be well worth the trip.

Looking to live nearby? Check out the 10 Cheapest Places to Live in Texas.

5. Cincinnati, Ohio

State beer tax: $0.18

Dates: Sept. 17-20, 2026

Celebrating its 50th anniversary this year is Oktoberfest "Zinzinnati" in Cincinnati, Ohio. With state beer taxes as low as $0.18, per the Tax Foundation, you might not break the bank celebrating here — after all, admission is free.

As America's largest Oktoberfest, this riverfront celebration welcomes nearly one million guests with colorful spectacles like the "World's Largest Chicken Dance" and the Running of the Wieners dachshund race. The festival also features over 30 live musical performances along with circus acts, competitions, and games.

Plus, guests can opt for paid extras with all the free festival admission they save, like a local glassblowing workshop or a VIP pass for dedicated bars and shaded seating. Starting this year, the plaza also has a new Glockenspiel, a two-story clock tower with hourly chimes and choreographed performances.

For America's biggest Oktoberfest blowout with (relatively) cheap beer taxes, head right to the heart of the Midwest.

Related: Check out the 10 Cheapest Places in Ohio to Live.

4. Tempe, Arizona

State beer tax: $0.16

Dates: Oct. 9-11, 2026

Located along Tempe Town Lake at Beach Park, the Four Peaks Brewing Oktoberfest is a must-see for West Coasters and desert travelers alike. Arizona state beer taxes are a cool $0.16, according to 2026 Tax Foundation reports. And with free admission for everyone aged 20 and under, it might offer one of the best values on our list.

Sponsored by the local Four Peaks Brewing Company, this festival proves you don't need alpine pine trees to throw an incredible fall party. Enjoy classic Oktoberfest traditions like live music, brat-eating contests, and the annual "Runnin' for the Brats" 5K, together with a full carnival with rides and games.

Additionally, event hosts put on Dachshund races and a "Low Center of Gravity" dog race specifically for short-legged, non-weiner breeds.

But to upgrade your experience, check out the VIP backstage pass for prime lakefront viewing of mainstage performances, private shaded lounges, and included drink coupons.

So for lederhosen and dirndls in the Southwest, stop by Tempe, Arizona.

Related: 10 Cheapest Places to Live in Arizona.

3. Mt. Angel, Oregon

State beer tax: $0.08

Dates: Sept. 17-20, 2026

Surrounded by Bavarian-style architecture, scenic Willamette Valley farmlands, and hop fields, Mt. Angel hosts the Pacific Northwest's largest Oktoberfest. The Beaver State's beer tax is a startling $0.08, according to the Tax Foundation. Festival passes are only $15 to $20 per day (or $50 for a full season pass), while attendees under 21 enter free.

Explore a host of specialized "gartens" throughout town. This includes a bustling Biergarten, a Weingarten serving regional Oregon pinots and warm spiced wines, an Alpinegarten for live shows, and dedicated play areas for families.

Mt. Angel also features an authentic four-story Glockenspiel clock that chimes and spins hand-carved figures four times daily. Or for a more peaceful moment to get away from it all, step inside historic St. Mary Church to savor uplifting pipe organ music beneath stained glass windows.

Just south of Portland, deep cultural tradition and autumnal charm come together at the Mt. Angel Oktoberfest.

Want to make the commute a bit shorter next year? Check out the 10 Cheapest Places to Live in Oregon.

2. Denver, Colorado

State beer tax: $0.08

Dates: Sept. 18-20 and 25-27, 2026

The heart of downtown Denver beats to a German-style celebration spanning two autumnal weekends. Denver's Oktoberfest offers free general admission and holds the second-lowest beer tax on this list, per Tax Foundation data (tied with Oregon when rounded to the nearest penny).

The schedule is packed with interactive competitions, like the famous Keg Bowling tournament, where participants can pair strength with expert aim. The festival also boasts the annual Stein Hoisting Championship, the Long Dog Derby, a silent disco (whew, what a great way to take a break from it all), and of course, daily costume contests.

Have a dietary restriction? Not a problem. Denver also stands out for its dietary inclusivity, serving up plenty of vegetarian bratwurst, gluten-free bites, local ciders, and non-alcoholic brews alongside traditional taps.

For a high-altitude block party with free general admission, check out the Denver, Colorado Oktoberfest in 2026.

See also: 10 Cheapest Places to Live in Colorado.

1. La Crosse, Wisconsin

State beer tax: $0.06

Dates: Sept. 24-27, 2026

The most famous Oktoberfest with the cheapest state beer tax in America is located in La Crosse, Wisconsin, where the rate is barely above $0.05, according to the Tax Foundation. General admission wristbands are about $25 (with free ground entry on Sunday), giving you access to lederhosen games, food vendors, live polka, and craft beer gardens.

Holding its celebration along the Mississippi River bluffs since 1961, La Crosse has unmatched community traditions. Thursday night launches the famous Torchlight Parade — a tradition added to the festival in 1965 — which glows through the Northside and kicks off the Afterglow Bash.

Meanwhile, daytime brings carnival rides, vendor shopping, and festive community events, culminating in Saturday morning's Maple Leaf Parade and a grand fireworks show that evening. The celebration then wraps up on Sunday with the traditional Parade Marshal Pancake Breakfast and family-friendly activities.

In favor of an action-packed weekend full of Midwestern Gemütlichkeit, culture, and cheap beer taxes? Check out the Wisconsin USA Oktoberfest festival, and you'll be glad you did.

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As natural disasters, such as hurricanes, wildfires, earthquakes, tornadoes, floods and blizzards, become more intense, losses from these disasters are soaring. If you suffer property damage from such a disaster, knowledge of the tax law can help.

Deducting Losses

Individuals can deduct personal casualty losses that are not reimbursed by insurance to the extent those uninsured losses are attributable to federally declared disasters that affect a wide area.

Your loss is equal to the smaller of the damaged property's adjusted basis or decline in value, less any insurance proceeds you receive or expect to receive.

New legislation passed by Congress has tax easings identical to prior relief for victims of federally declared disasters that occurred in 2020 through July 4, 2025. The law, named the "Doug LaMalfa Federal Disaster Tax Relief Certainty Act," applies to federally declared disasters beginning before 2026, which includes disasters that occurred in the last six months of 2025.

The new legislation lets taxpayers deduct their uninsured personal losses, such as damage to a house, car, or personal belongings, from federally declared disasters in excess of a $500 threshold, without regard to the 10%-of-adjusted-gross-income offset that generally applies to disaster loss deductions.

This expanded tax break is available for taxpayers who claim the standard deduction and for those who itemize on Schedule A of Form 1040. The IRS refers to these losses as “qualified disaster losses.”

Computing the amount of loss to your home, car, or belongings can be difficult. Luckily, the IRS has multiple safe harbors that may help with this calculation.

• For example, one method lets a homeowner with casualty losses of $20,000 or less take the lesser of two repair estimates to determine the decrease in the home's value.
• Homeowners can also use the estimated loss in reports prepared by an insurer or a licensed contractor's invoice.
• And there is a safe harbor to help you compute the replacement cost of your personal belongings destroyed in the federally declared disaster.

You can find out more about these safe harbors in IRS Publication 547 and IRS Revenue Procedure 2018-08.

If you suffered a disaster loss last year after July 4, 2025, and you used the old tax rules when preparing your 2025 tax return, you have three years from the filing due date to amend your return by filing Form 1040X to take advantage of the new law.

If you suffer a disaster loss in 2026, you can claim the loss on your 2026 or 2025 federal tax return. That's because individuals can opt to take the loss for the disaster year or the year immediately preceding the disaster.

For example, if a tornado damaged your home or personal belongings this year, you can claim the loss on your 2026 return or your 2025 return, giving you the flexibility to claim it in the year that provides the greatest benefit. If you decide to claim it for 2025 and you have already filed your 2025 return, you can amend it by filing Form 1040-X.

Note that for this purpose, the filing due date for a 2025 amended return is six months after the normal due date for filing your return (without extensions) for the year in which the loss took place. So for 2026 disaster losses, you would need to file an amended 2025 return by October 15, 2027.

IRS Resources

The IRS can be your friend after a disaster. If you lost prior-year tax returns in a hurricane, fire or other disaster, there are multiple ways to get a tax transcript, which is a summary of your key tax information. You can get a paper copy of your full return, but that would take longer.

The IRS also has a dedicated phone line for disaster-related questions: 866-562-5227. This is in addition to the tax filing and tax payment extensions that the IRS regularly provides after a disaster.

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 many people looking for a tax-friendly retirement, no-income-tax states like Florida usually top the list. But recent data indicate an interesting trend: More and more older adults are choosing a small Mid-Atlantic state where the retirement math is more interesting than some might expect.

We’re talking about Delaware.

According to U.S. Census Bureau data, Delaware’s population of residents age 65 and older has increased by 23% since 2020. That’s the fastest growth rate in the nation for the 65-and-older population, according to Census estimates.

Part of the draw might be that newcomers to beach communities like Lewes, Rehoboth Beach and Milton can enjoy a coastal lifestyle without moving far from family and friends elsewhere in the Northeast and Mid-Atlantic.

Interestingly, though Delaware isn't a zero-income-tax state like retirement powerhouses Florida or Texas, taxes factor into the equation for some retirees running the numbers. Here’s more to know.

Why Delaware is becoming a retirement destination

Delaware is becoming increasingly popular with older adults.

• Seniors now make up nearly 22% of the state’s population, according to USAFacts, compared with roughly 18% nationwide.
• In Sussex County, older adults make up nearly a third of residents, pushing the median age to just over 53 years, according to U.S. Census estimates.

New residents are also arriving with financial resources. The latest available IRS migration data show that households moving into southern Delaware from higher-cost states have average annual incomes over $136,000.

So what makes Delaware appealing as a retirement destination? The answer lines up in several ways with what many retirees say they want in a place to live.

• A 2025 survey from the Transamerica Center for Retirement Studies found that an affordable cost of living was the top consideration, cited by 65% of retirees, followed closely by proximity to family and friends at 61%.
• Access to excellent health care and hospitals ranked third, cited by 49%, while 28% pointed to leisure and recreational activities.

Delaware's healthcare infrastructure is geared toward an aging population. For example, in Sussex County, Beebe Healthcare operates a 210-bed medical center in Lewes, while ChristianaCare has reportedly expanded primary care and senior-focused services in Rehoboth Beach and Milford.

Additionally, retirees from neighboring Mid-Atlantic states may choose Delaware for its proximity to children, grandchildren, and longtime friends without giving up a coastal lifestyle.

There’s also plenty to do beyond the beaches.

Southern Delaware offers miles of hiking and biking trails, including those at Cape Henlopen State Park and the Junction & Breakwater Trail linking Rehoboth Beach and Lewes, along with boating, fishing, and golf. Other areas are bustling with restaurants, boutiques, and galleries, plus live music, festivals, and other events throughout the year.

Those amenties help explain the First State’s appeal. But for some retirees from higher-cost states, the retirement math also includes taxes.

How Delaware taxes retirement income

Delaware levies a progressive state income tax with rates ranging from 2.2% to 6.6%. However, retirees rarely pay Delaware income tax on their full income. That’s because:

Delaware exempts Social Security benefits from state tax. (The state also doesn’t tax Railroad Retirement benefits.)

Delaware offers retirement income exclusions. Residents age 60 and older can exclude up to $12,500 of eligible pension and retirement income from state taxable income. Qualifying sources include distributions from IRAs and 401(k)s, as well as dividends, capital gains, interest, and net rental income.

For a married couple where both spouses are at least 60, each spouse can generally claim up to a $12,500 exclusion for eligible retirement income, for a combined potential exclusion of $25,000.

For some retirees, those exclusions could result in a lower state tax bill than they would face on the same retirement income in other states.

Note: We're talking about state tax liability. You still may have federal taxes on retirement income to consider.

Sales and property tax tradeoffs

However, income taxes are only part of the tax equation. Delaware offers zero sales tax and relatively low property taxes.

• No sales tax: Delaware has no state or local sales tax, which can reduce the cost of everyday purchases and larger expenses. (Florida, by comparison, has a 6% statewide sales tax, plus local surtaxes in many counties.)
• Low property taxes: Delaware’s effective property tax rate is about 0.54%, compared with 0.78% in Florida, according to 2026 Tax Foundation data. The actual difference depends on the home’s value, location, and applicable exemptions.

But…that doesn't necessarily make Delaware the cheaper place to own a home.

Sussex County's growth (nearly 40,000 residents in the past six years) has reportedly increased housing demand and pushed prices higher. That can be good news for people who already own homes there, but it can be a different story for retirees just arriving.

Someone moving to Delaware for retirement from a high property-tax state might see lower property taxes while paying more for the house itself.

Delaware vs Florida cost of living

While Florida draws attention for having no state income tax, the full financial picture can change once other costs enter the calculation.

The following table shows how various costs might add up.

Average Annual Costs in Florida and Delaware

Note: This comparison, for educational purposes only, assumes a $500,000 primary residence, $500,000 in homeowners insurance dwelling coverage, and $20,000 in annual taxable purchases. Property-tax estimates use 2026 statewide effective rates; insurance estimates use 2026 published rates; and Florida sales tax uses the 2026 average combined state and local rate.

State income taxes are excluded because they vary by income, deductions, and exemptions. Actual costs vary by location, coverage, exemptions, and spending.

Is retiring in Delaware a good idea? Bottom line

For some retirees, the appeal of a retirement state isn't always about finding the lowest income-tax rate. It's about what happens when you add up all the smaller pieces of the budget.

Before choosing a retirement destination, consider the sometimes seemingly "hidden" costs that follow you into retirement — including how retirement income is taxed, what you'll pay to own a home, and how much you plan to spend each year.

The state you might assume to be cheapest due to having no income tax might not necessarily be the one that leaves you with the most money to spend.

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Retirement often requires adopting a new mindset.

When you were saving for retirement, you were in the accumulation phase as you built wealth. Once you reach retirement, you move into the distribution phase where you begin spending those savings. This warrants a different approach to your financial decisions — and possibly a different adviser.

Just as doctors have specialties, so do many financial professionals. Those who concentrate on the accumulation phase are adept at helping you grow your money during your working years and finding ways to make the market work for you. Their view is long term — as it should be — because they are looking at your retirement from a distance.

Other financial professionals specialize in the distribution phase of retirement. They understand the strategies that can help you maximize your retirement income, improve tax efficiency and make your savings last. Their primary objective is to help you avoid the costly mistakes that can derail an otherwise well-planned retirement.

1. How much income will you really need?

As someone who works in the distribution phase, one of the first things I discuss with clients is what type of lifestyle they want in retirement.

Do they expect to be on the go, traveling to bucket-list locales or buying that boat they fantasized about for years? Or do they envision being a homebody, reading books, chatting with friends and babysitting the grandchildren?

Their answer helps determine how much income they will need, and income is the heartbeat of retirement. Without a sustainable income strategy, retirement plans can go awry.

That's why it's important to make sure your income aligns with your spending goals. Your sources of income may include Social Security, a pension, IRA withdrawals, dividends and interest, cash and rental property.

For example, if someone expects to spend $10,000 monthly in retirement, their withdrawal strategy should be tailored to that need. I always plan for the worst-case scenario and recommend budgeting for more than you will actually spend.

2. When will you claim Social Security?

One significant decision that affects retirement income is when you claim Social Security benefits. The federal government offers plenty of options but not a lot of guidance on this, so Social Security is another area where a conversation with an adviser who specializes in the distribution phase is helpful.

You can begin drawing Social Security as early as age 62 but at a reduced amount that remains reduced for life. There are also income limits if you plan to keep working.

If you wait until your full retirement age (67 for most people these days), you receive more money and there are no income limits. Finally, you can postpone Social Security up until age 70 and receive a larger monthly benefit.

Each claiming strategy has its own advantages and trade-offs, which is why there is no one-size-fits-all answer. The right decision depends on factors such as your health, life expectancy, income needs, tax situation and whether maximizing survivor benefits for a spouse is an important consideration.

3. Can you lower your tax burden?

Taxes may not have been a concern during your accumulation phase, but they could become one during the distribution phase. There are ways to reduce your tax burden in retirement, but if you're not careful, you could unintentionally increase it.

Roth conversions, for example, allow you to move money from taxable retirement accounts, such as traditional IRAs and 401(k)s, to a Roth account that isn't taxed.

It's better to start using them when you are still a few years away from your required minimum distribution age. You pay taxes when you make the conversion, but then your money grows tax-free and isn't taxed when you withdraw it in retirement.

Be careful about transferring too much money into a Roth in the same year, though. You could bump yourself into a higher tax bracket or even cause an increase in your Medicare premiums if your taxable income grows too high.

With the right planning, you can reduce your taxes, keeping more of your money to pay for your retirement needs and wants.

4. Have you thought about sequence of returns risk?

Sequence of returns risk is a potential shadow looming over many retirements — and it may be one of the most significant differences between the accumulation and distribution phases.

It's also another reason retirees need a financial professional who has distribution-phase experience.

Sequence of returns risk can be summed up this way: Before you enter retirement, the order in which your investment returns happen generally makes no difference.

For example, in a 20-year stretch, you can have weak years followed by strong years, or strong years followed by weak years, and at the end the total in your portfolio will be substantially the same.

This is not the case when you retire and are making withdrawals. If the market performs poorly in the first five to 10 years, that combination of market losses with withdrawals can severely drain your portfolio. By the time a recovery happens, you may not have enough in your accounts to capitalize on it.

On the other hand, if the market is strong in your first years of retirement and you are seeing growth even as you make withdrawals, you will be better poised to withstand a down market later on.

Sequence of returns risk is one reason people might want to revisit their investments as they approach retirement. One strategy is to reduce the level of volatility your portfolio faces.

5. And finally: Will you let yourself have some fun?

Many people are hesitant to spend money in retirement, watching pennies carefully and avoiding luxuries or anything even vaguely ostentatious. Remember what I said about retirement requiring a new mindset? That applies here as well.

People who lived frugally as they saved for retirement sometimes struggle to turn off that economical mental attitude when they reach the distribution phase.

They worry so much about running out of money that they risk missing out on the enjoyment these years they saved for can bring. I encourage them to spend that money, to reap the benefits of those years of frugality and to remember the adage they have heard their entire lives, "You can't take it with you."

Of course, they need clarity, structure and some level of comfort to make such a mindset adjustment. That's where the right financial professional comes into play, helping them achieve that comfort by discussing income plans, expenses and any legacy they want to leave behind for children, grandchildren or favorite causes.

The distribution phase can and should be the fun phase — if you let it.

Ronnie Blair contributed to this article.

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

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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.

"Should we move to Florida to save on taxes?"

As a CFP® and wealth adviser with more than 20 years of investment experience, I hear some version of that question from nearly every client approaching retirement in a high-tax state, and it's a fair one.

If you've spent decades building your savings, of course you want to keep more of it. States like Florida, Texas, Tennessee and Nevada have long attracted retirees because they skip state income tax entirely. Next to a high-tax state like Connecticut, New Jersey or California, the choice can look obvious.

After helping hundreds of families work through this decision, I've learned it rarely is. The tax savings are usually smaller than people expect, and the true cost of relocating is almost always bigger.

Recent changes in federal tax law have shifted the math even further. Before you list your house, it's worth running the numbers.

Here's what I walk clients through before they make the call.

The tax gap has narrowed

New federal legislation has changed how I evaluate a move for clients. A higher cap on the state and local tax (SALT) deduction, a new bonus deduction for eligible older taxpayers and a permanent federal estate tax exemption of roughly $15 million per individual all reduce the federal tax burden for many retired households.

None of that eliminates state income tax. But it does mean the gap between staying in a high-tax state and relocating to a no-tax one is often smaller than it looked just a few years ago, especially for clients who assumed the old rules still applied.

I've started running this comparison earlier in the planning process for exactly that reason: The answer clients got two or three years ago may not hold up today.

Consider a hypothetical couple pulling $90,000 from IRAs, $45,000 in Social Security and $20,000 in investment income. Depending on their deductions and how that income is structured, moving to a no-tax state might save them several thousand dollars a year, which is real money but rarely the whole story.

The moving costs add up fast

Clients focus on the annual savings and forget the one-time bill: Real estate commissions, closing costs, movers, repairs before listing, furnishing a new home, temporary housing and the cost of rebuilding a healthcare and professional network from scratch.

I've seen these add up to tens of thousands of dollars before anyone accounts for the stress of starting over.

If a move saves $6,000 a year but costs $60,000 to pull off, that's a decade just to break even. I want clients to see that number before they call a Realtor, not after.

You're not just leaving a state

The cost that's hardest to put on a spreadsheet, and the one I push clients hardest on, is distance from family. I've watched clients move south for the weather, then start flying back for birthdays, grandchildren's games and Sunday dinners they didn't expect to miss. The airfare and hotel bills climb, and some eventually move back entirely.

There's also the team you leave behind: Your financial adviser, tax preparer, estate attorney, insurance agent, doctors. You can rebuild that team, but it takes time, and a physician who knows your history or an adviser who's worked with your family for years provides continuity you can't buy on day one in a new state.

I've had clients spend the better part of a year finding a new cardiologist or estate attorney they trusted as much as the one they left, and that search has a cost even if it never shows up on a spreadsheet.

Moving isn't the only lever

Relocating is one way to lower your lifetime tax bill. It's far from the only one.

I regularly help clients cut their tax burden through Roth conversions timed to lower-income years, coordinating retirement account withdrawals, managing required minimum distributions (RMDs), tax-efficient investing, charitable giving and smarter timing of Social Security.

Done well, these strategies can produce meaningful savings while letting clients stay exactly where they are.

When a move actually makes sense

None of this means relocating is a mistake. I have plenty of clients for whom it was the right call: Their family had already scattered, healthcare needs were easy to meet elsewhere, housing costs fit their goals better, or the long-term tax savings genuinely outweighed the cost of getting there.

The difference is that those clients ran the numbers first. Before you decide, ask yourself what you'd actually save after every tax year, what the total moving cost would be, how long it would take to break even, how often you'd travel back for family and whether better tax planning could get you a similar result without packing a single box.

Sometimes those questions confirm that moving is the right move. Just as often, they reveal that staying put is the smarter financial decision — you just hadn't run the full comparison yet.

Retirement isn't about finding the state with the lowest taxes. It's about building a life you won't spend the next decade second-guessing.

When I walk clients through taxes, income, healthcare, housing, estate planning and family togetherness, the answer usually gets a lot clearer, and it isn't always the one they expected when they first asked about moving to Florida.

Related Content

• Millions of People Are Leaving High-Tax States: Here's Where They're Moving and How Much They're Saving in 2026
• Bye-Bye, Snowbirds: Wealthy Americans Are Relocating Permanently for Retirement
• Should You Relocate to a New State for Retirement? The Ultimate Checklist for Those With a Pension and $1 Million-Plus
• Should You Rent or Sell Your Home When You Relocate? How to Decide
• Why Moving Near the Grandchildren Might Be Your Biggest Retirement Mistake

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.

Sudden wealth doesn't change who you are. It does reveal how prepared you are.

I recently read a news story in which a lottery winner who received a jackpot worth more than $167 million had reportedly been arrested four times within 14 months of receiving the money.

Such stories often generate headlines because they reinforce the belief that sudden wealth changes people.

After more than 25 years as a financial planner, I don't believe that's entirely true.

I believe sudden wealth reveals whether someone has developed the habits and discipline necessary to manage it.

While lottery winners capture the headlines, they're among the least common examples of becoming suddenly wealthy.

Sudden wealth typically arrives in four main ways:

• Inheritance
• The sale of a closely held business (liquidity event)
• A significant legal settlement
• On rare occasions, a lottery or other unexpected windfall

Although each situation is unique, they all have one thing in common. Money that was once unavailable suddenly becomes accessible. That transition is both psychological and financial.

People who accumulate wealth over time (commonly decades) become accustomed to seeing money in their accounts and formulating successful financial and emotional discipline.

• They watch retirement accounts fluctuate with the markets without panic
• They realize that consistent contributions, compounding returns and time is what it took to get to a particular level

The goal is to make work optional through having a balance sheet that yields enough to replace your income.

For some, their balance sheets aren't there yet, or maybe they were never working toward financial independence, then one day the inheritance arrives or the settlement comes in. Whatever the source, the money is available, and it is now a spendable currency.

Real-life examples

I've watched families respond to this moment very differently.

Years ago, I worked with a blue-collar worker and father who spent his entire working life doing everything right. He lived modestly, saved consistently and built a meaningful estate because he wanted to leave something for his three children.

After his passing, two of the children requested checks rather than seeking guidance or developing a long-term plan. Within a couple short weeks, their inheritance was spent on a trip to Las Vegas. The third sibling made some responsible decisions, but within a relatively short period, those funds had also been depleted.

It would be easy to conclude they simply made poor choices. I see it differently. They inherited the money. They never had the opportunity to develop the habits that created it.

I've also witnessed the opposite. A client's mother accumulated substantial wealth during her lifetime and explained not only what she hoped her daughter and son-in-law would receive, but what she hoped the wealth would accomplish.

Today, they continue to manage those assets thoughtfully, taking disciplined annual distributions while preserving the portfolio for future generations.

The difference between these two families wasn't as much about the size of the inheritance. It was the mindset, and the steps below can help anyone with mental framing and decision-making related to sudden wealth.

4 steps to staying wealthy after experiencing 'sudden wealth'

1. Do nothing.

When a significant amount of money suddenly appears on your balance sheet, resist the urge to act.

In most situations, I recommend making no major financial decisions for four to six months. Don't purchase a vacation home, quit your job or make large investments simply because the money is available. The assets aren't going anywhere.

What often changes during that time is your perspective.

2. Understand what you have.

Before making any financial commitments, determine the tax consequences and legal obligations associated with your newfound wealth.

Depending on how the assets were received, there might be income taxes, capital gains taxes, inheritance taxes, trust provisions, estate planning implications or other considerations that affect what's truly available.

3. Decide what this wealth is meant to accomplish.

Start with your own household. Does this wealth provide financial independence or greater flexibility?

Once your household is secure, consider whether you want to help family members, support charitable causes or strengthen your community.

Finally, revisit your estate plan so your own legacy reflects your new financial circumstances.

4. Create a sustainable spending plan.

What lump sum amounts are immediately required? Evaluate what impact spending today has on future income.

Risk tolerance and time horizon will influence what amount of annual distribution is sustainable.

Look for articles on strategies and options on calculating a safe withdrawal rate and methodologies of creating a paycheck from your portfolio.

The real measure of success

After more than two decades helping families navigate life's biggest financial transitions, I've come to believe that sudden wealth isn't really about money. It's about stewardship.

Money can be transferred in a single day. The judgment required to preserve it often takes time to develop.

Whether your wealth arrives through an inheritance, the sale of a business, a settlement or an unexpected windfall, the greatest responsibility isn't deciding what to buy. It's properly preparing before starting to deploy your newfound resources.

Related Content

• Suddenly Inherited Money? The Critical Steps You Need to Take First
• Treating Your Inheritance as 'Extra Money' Is a Sure Way to Blow It: Instead, Use This Simple Technique for Financial Windfalls
• What Not to Do After Inheriting Wealth: 4 Mistakes That Could Cost You Everything
• Your First 5 Potential Moves When Inherited Wealth Makes You Rich Overnight
• Why Would I Hire You? A Financial Adviser Answers a Friend's Pointed Question

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 from readers on various tax proposals in Congress that taxpayers and preparers should keep an eye on this year and next. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Higher home-sale exclusions

Question: My wife and I have lived in our home for many years, and it has greatly appreciated in value since we bought it. If I sell now, my gain will be way above the current $500,000 gain exclusion for selling a home. I have heard that Congress is thinking of raising the gain exclusion cap for home sales. Do you think that will happen this year?

Joy Taylor: Since 1997, individuals who own and use a home as their primary residence for at least two of the five years before the sale can exclude from taxable income up to $250,000 of the gain. The exclusion is $500,000 for joint filers. These figures have never been adjusted for the appreciation in residential real estate during this tax break's 30-year history.

Some congressional lawmakers want to increase the home-sale gain-exclusion amounts. Identical House and Senate proposals introduced by Representative Jimmy Panetta (D-CA) and Senator John Cornyn (R-TX) would hike the exclusion to $1 million for joint filers and $500,000 for others. The bills would also index these amounts to inflation each year.

The odds of enactment into law of these higher home-sale gain-exclusion amounts are a bit better than they have been in past years. But it's still a steep climb. Neither bill will be enacted as stand-alone legislation, so it must be attached to a bigger tax package or to a must-pass legislative priority. We certainly don't see anything happening before the November midterm elections.

2. Age-in-place home modifications

Question: My husband and I want to stay in our home during our golden years. So we are starting to add some age-in-place modifications to it. Will Congress ever give us a tax break for these changes?

Joy Taylor: A Senate proposal by Senators Angela Alsobrooks (D-MD) and Kirsten Gillibrand (D-NY) would do just that. The "Senior Accessible Housing Tax Credit Act of 2026" would give individuals age 60 and older a nonrefundable tax credit of up to $10,000 per year for the cost of specific home improvements. They include:

• Widening doorways
• Replacing toilets and faucets
• Installing non-slip flooring
• Putting in chair lifts and wheelchair ramps
• Installing handrails and shower seats
• Putting in furniture risers

The credit would begin to phase out at modified adjusted gross incomes (MAGI) of over $200,000 for joint filers and $100,000 for single filers.

The odds of passage this year are pretty slim, but we are definitely keeping a close eye on this idea because we expect it will come back again as the U.S. population continues to age.

3. IRS regulation of unenrolled preparers

Question: I am a tax return preparer. I am not a CPA, enrolled agent or lawyer. I heard that Congress wants to make it harder for me to get a preparer tax identification number (PTIN) each year. Can you explain exactly what Congress is proposing for tax return preparers?

Joy Taylor: Last month, the Senate Finance Committee approved a bipartisan bill called "The Taxpayer Assistance and Service Act" that has over 60 proposals covering 10 broad topics:

• Tax administration and customer service
• U.S. citizens who live abroad
• Streamlining judicial review for filers who challenge IRS in court
• Tax return preparers
• IRS's Taxpayer Advocate's office
• IRS's appeals office
• Whistle-blowers
• U.S. citizens held hostage overseas
• Small businesses
• Miscellaneous provisions

One of the secitons in this bill would let the IRS regulate unenrolled paid tax return preparers. An unenrolled preparer is someone who prepares tax returns for money, but is not a CPA, lawyer, enrolled agent or a comparable state-license holder.

Under the bill, unenrolled preparers would have to meet various requirements in order to apply for or renew a PTIN each year. These preparers must provide information about their competence and character, pass criminal background and tax compliance checks, and take up to 18 hours of continuing education courses. Importantly, the proposal does not require unenrolled preparers to pass a competency exam. Under the proposal, the IRS would be able to deny, revoke or suspend PTINs for unenrolled preparers who don't comply with the rules.

Giving the IRS power to regulate unenrolled preparers has been tried before. Since 2014, after an appeals court struck down the IRS's administrative oversight rules for unenrolled preparers, the IRS's National Taxpayer Advocate, Treasury inspectors, government auditors and tax practitioner groups have pleaded with Congress to let the IRS regulate unenrolled preparers. But this has always faced a wall of naysayers in the House and Senate, mainly Republicans, with added pressure from key free-market groups that oppose giving the IRS more statutory authority to regulate preparers.

But some tax professionals say this time could be different. The current language in the bipartisan Senate bill is more modest when compared with prior proposals. Democrats have made preparer oversight a top priority. And it is well documented that unenrolled preparers make more errors with their clients' refundable credits and certain other tax breaks, when compared with filers who do their own returns, CPAs, enrolled agents, attorneys, and volunteers with tax-filing assistance programs.

Maybe we will see Congress act on the Taxpayer Assistance and Service Act in the short time period after the mid-term elections and before lawmakers head home again for the Christmas holidays. There are many factors that will determine this, including which party comes out ahead in the mid-terms, other items on Congress's plate, and the determination of legislators to focus on taxes.

4. Losses from natural disasters

Question: My car was destroyed last fall in a flood that ended up being a federally declared disaster. I didn't have the car insured. I already filed my 2025 Form 1040 and didn't claim a disaster loss because I took the standard deduction. I heard that a new law retroactively allows disaster loss deductions for all of 2025 without having to itemize on Schedule A. What should I do to claim the loss?

Joy Taylor: Before the Senate left Washington, D.C., for its August recess, it approved a House-passed bill. We expect President Trump to sign this bill soon. The legislation provides easings for personal disaster loss write-offs identical to those given to victims of disasters in 2018 through July 4, 2025. The relief applies to losses incurred in federally declared disasters that begin before January 1, 2027. The IRS refers to these as "qualified disaster losses."

Individuals can deduct these disaster losses in excess of a $500 threshold without regard to the 10%-of-adjusted-gross-income offset that generally applies. The relief is available for filers who claim standard deductions and for individuals who itemize on Schedule A of Form 1040.

Since your disaster loss occurred last year after July 4, 2025, and you relied on the old tax rules when preparing your 2025 Form 1040, you can amend your return by filing Form 1040-X to take advantage of the new 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.

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: Will I be Audited by the IRS?
• Ask the Editor: Estimated Tax Payments and Withholding
• Ask the Editor: Questions on Selling a Home
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Tax Rules for Landlords

While Roth conversions are often talked about in retirement planning, they aren't the right strategy for everyone.

For retirees with modest savings and no pension, leaving traditional accounts untouched until it's time to start RMDs can work well. But retirees with pensions face an entirely different tax reality.

In a recent article, Joe F. Schmitz, a CFP® and CEO of Peak Retirement Planning, explains why Roth conversions are so important for retirees with pensions. Schmitz is a regular contributor to Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation.

Check out these five questions to test your knowledge about Roth conversions, pensions and taxes.

Good luck! (Don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Related Content From Adviser Intel

• Why a Roth Conversion Is Wrong for Most People But Often Right for Pension Holders
• When Is a Roth Conversion a Bad Idea? 6 Situations Retirees Should Consider Carefully
• If You're Converting to a Roth IRA, Don't Do It Like This
• 5 Reasons Roth Conversions and Pensions Work Well Together
• 7 Times to Dip Into Your Roth IRA if You Have a Pension (and When to Leave It Alone)

Living cheaply is the dream, but in 2026, high housing costs are often the reality.

Even after securing a home, many homeowners face recurring ownership expenses — like property taxes, utility bills, and sudden home insurance spikes — that come as a costly surprise.

Some relocate to a state without an income tax in search of financial relief. However, to offset the lack of a personal income tax, several states have steep sales taxes or heavy property tax bills. Others rely on natural resources, energy production, or tourism taxes to keep the burden off resident homeowners.

Below, we rank all nine states with no personal income tax by their homeowner cost score, ordered from most costly to least costly. Here's the result.

States that don't tax income ranked by home costs

To rank each state, Kiplinger combined three key homeownership expenses into a single weighted homeowner cost score:

• Property taxes (50% of the score): Using PropertyShark data (citing 5-year U.S. Census Bureau estimates), Kiplinger examined the median property tax bill. Because property taxes can be a homeowner's largest recurring bill (besides a mortgage), this metric makes up half of the state's total score.
• Utility bills (30% of the score): Using Move.org data, Kiplinger aggregated average annual costs for electricity, natural gas, water/sewer, and internet/TV. This accounts for nearly a third of the score.
• Home insurance costs (20% of the score): Using LendingTree data (sourced from Quadrant Information Services), Kiplinger analyzed average annual premiums for a standard policy with a $1,000 deductible.

To account for recent market conditions, scores also reflect present-day market adjustments, including coastal insurance spikes, heavy summer cooling demand, and remote freight/heating overhead.

9. New Hampshire: Low home insurance, high property taxes

Homeowner cost score: 155

Ranking as the most costly state on our list, New Hampshire incurs a weighted score of 155, driven primarily by exceptionally high property taxes. This is largely due to the Granite State's high effective property tax rate of 1.5% — well above the national average of around .90%, according to the Tax Foundation.

High costs: Lacking a state sales tax and state income tax, New Hampshire relies heavily on local property taxes to fund public services. Utility bills are also elevated (around 21% above the national average).

On the bright side: New Hampshire homeowners enjoy relatively low insurance costs due to minimal coastline exposure and stable climate risks. Plus, the state levies no state estate or inheritance tax, meaning family real estate can be passed down to heirs without a state "death tax."

8. Texas: High insurance costs for a no-income tax state

Homeowner cost score: 150

Texas ranks near the bottom for homeowner affordability due to high property tax rates and surging homeowners insurance. Texas homeowners pay high monthly housing costs that rank among the highest in the nation relative to local incomes, according to 2026 reports by Rice University's Kinder Institute for Urban Research.

High costs: Like New Hampshire, Texas relies on high effective property tax rates to fund local government (since there is no personal income tax). Simultaneously, severe weather risks drive up average annual homeowners insurance premiums substantially, along with high summer air-conditioning electric bills.

On the bright side: Residents age 65 and older can ease their tax burden through homestead exemptions that decrease assessed property values for school districts. Texas also charges no estate tax, preserving wealth for heirs and keeping select areas relatively affordable.

Related: 10 Cheapest Places to Live in Texas

7. Florida: Insurance crisis drives homeowner costs

Homeowner cost score: 103 to 155

Florida's score spans a wide range because homeowners insurance premiums vary widely by location. In inland counties, costs remain closer to national averages; in coastal zones, persistently high insurance rates push Florida toward the top of the overall unaffordability rankings, according to data from the Insurance Information Institute and LendingTree.

Related: 10 Cheapest Places to Live in Florida

High costs: While Florida's median property tax bill is moderate, homeowners insurance premiums have surged in recent years — often reaching $5,000 to $10,000 annually — due to increased hurricane risks and reinsurance spikes. Year-round air conditioning demands also drive up utility bills.

On the bright side: Florida offers a standard $50,000 homestead property tax exemption for primary residences (with expansions being considered on upcoming ballots). Florida also levies no state estate tax, which can potentially save heirs money.

See also: Florida Voters to Decide on $250,000 Property Tax Exemption

6. Alaska: High utility bills and low property tax burden

Homeowner cost score: 84 to 151

Alaska presents a unique financial landscape: while its vast rural boroughs are entirely free of property taxes, this benefit is confined to remote areas. For most residents, living in the state means balancing significant urban property taxes against extreme geography that triggers high utility and shipping costs, as highlighted in Move.org's annual utility report.

High costs: Alaska's annual utility bills are among the highest in the nation — with electric and heating bills running roughly 50% above the U.S. average due to harsh winters and remote fuel delivery.

On the bright side: Alaska homeowners enjoy low base insurance rates thanks to zero hurricane risk, and substantial state oil revenues eliminate state income and state-level sales taxes. Plus, Alaska pays eligible residents an annual Permanent Fund Dividend (PFD) check, offers a $150,000 homestead exemption for homeowners 65 and older, and charges no state estate tax.

5. Washington: Moderate utility bills, higher property tax

Homeowner cost score: 133

Washington lands in the middle tier of non-income-tax states. Although the Evergreen State levies no personal income tax on standard wages, high home prices drive up annual property tax bills, according to U.S. Census Bureau estimates.

High costs: Property tax bills exceed the national average because local municipalities rely considerably on property assessments for funding. Total utility costs are higher than average, and Washington levies a state tax on certain high-value capital gains in addition to a state estate tax capped at 20% (as well as a 9.9% Washington income tax starting 2028 for earners with more than $1 million).

On the bright side: Washington state homeowners insurance premiums remain 35% below the national average, per LendingTree data, even though some local premiums have climbed in recent years. Also, homeowners continue to benefit from lower electricity rates than most of the country, thanks to relatively cheap hydroelectric power.

Related: 10 Cheapest Places to Live in Washington

4. South Dakota: Near national averages for homeowner costs

Homeowner cost score: 102

South Dakota aligns closely with the weighted national baseline for recurring home bills, scoring about 2% above the U.S. average according to data from LendingTree and PropertyShark.

High costs: Severe Midwest weather, including frequent hail and tornado risks, drives home insurance premiums higher than the national average. However, despite the state's rural nature, everyday costs like groceries generally remain at or below the U.S. average due to a strong local agricultural economy.

On the bright side: Local property tax bills hover near or slightly below national midpoints, partially offset by state sales tax revenues. Renewable wind power and hydroelectric generation help keep utility costs manageable. South Dakota also offers a senior property tax assessment freeze for qualifying households and levies no state death tax.

3. Nevada: Relatively low taxes with seasonal utility shocks

Homeowner cost score: 100

Nevada can be tax-friendly for homeowners, but its final cost score depends greatly on the season.

High costs: Nevada summer heatwaves trigger utility bill surges that push utilities above average, while mild winters may help keep costs low. For this reason, peak summer bills can surpass the national average, even though recent statewide averages have dropped significantly below it, per Move.org and LendingTree.

On the bright side: Nevada limits annual tax growth through state-mandated property tax caps and a low assessment ratio. Additionally, weighty tourism tax revenue from millions of out-of-state visitors helps fund public infrastructure, keeping residential property taxes and insurance rates down. Nevada also has no state estate or inheritance tax, making it attractive for passing assets to heirs.

2. Wyoming: Below-average homeownership costs

Homeowner cost score: 96

Wyoming is the second-most affordable state without an income tax for homeowners, boasting property tax burdens up to 40% below the national average according to Tax Foundation property tax maps.

High costs: Rising energy prices have increased utility bills in Wyoming. Groceries and other essential goods can be more expensive in remote towns.

On the bright side: Like Alaska, Wyoming funds much of its state budget through natural resource extraction (coal, oil, and gas) rather than residential property taxes. Low base property taxes and reasonable insurance keep total carrying costs well below national midpoints. Wyoming charges no estate or inheritance taxes, which can preserve real estate value for future generations.

1. Tennessee: Lowest overall homeownership costs

Homeowner cost score: 95

Tennessee claims the #1 spot as the most affordable state for homeowners among those with no income tax. A combination of low property tax assessments and stable carrying costs gives the Volunteer State the lowest overall score, according to PropertyShark and Census data.

High costs: Home insurance rates have risen sharply in recent years, making Tennessee the 7th most expensive state for homeowners insurance, according to LendingTree. Tennessee also has one of the highest sales tax rates in the U.S..

On the bright side: Tennessee boasts some of the lowest average property tax rates in the nation. Plus, the overall cost of fixed housing overhead keeps recurring homeowner bills highly competitive compared to most other non-income-tax states. The state also has no estate tax and offers property tax relief programs for low-income seniors aged 65 and older — making some places in Tennessee cheap to live.

Read More

• 10 Can't-Miss Tax Breaks for Homeowners and Homebuyers
• States With the Lowest Property Tax Bills Ranked by Affordability
• Most Expensive States for Homeowners in 2026

Americans who are over the age of 55, mainly baby boomers, own more than half of the country's wealth. Over the next two decades, it will be passed down to the generations that follow, marking the greatest wealth transfer in our country's history.

While many of us look at inheritance as something purely for the wealthy, 66% of Americans either expect to or have already received an inheritance from their parents, according to a survey from Choice Mutual.

Receiving any kind of inheritance can be overwhelming, and being unprepared can lead to losing much of that money to poor financial decisions or taxes. If you think you may be a part of the Great Wealth Transfer, either as a provider or a beneficiary, here's how to avoid those pitfalls.

1. Start conversations now

One of the biggest issues with the trillions of dollars expected to be passed down during the Great Wealth Transfer isn't the money itself, but beneficiaries being unprepared to manage the assets they receive.

Although it may be uncomfortable, discussing the plan for these ahead of time helps family members know exactly how much they will receive and what taxes they might expect.

If beneficiaries don't have a chance to discuss the inheritance before their loved one passes away, they may end up making important decisions while they're grieving.

Bringing the topic up well beforehand will give them time to plan before their emotions take over, helping reduce the likelihood of poor decisions or impulsive spending.

Some of the most successful inheritances I have seen are among families who prioritize these conversations.

2. Avoid spending sprees

If you suddenly receive a windfall, it can be tempting to spend money on the things you've always dreamed of. You may want to buy a bigger house, a more expensive car or finally take that extravagant vacation. But going on a shopping spree can lead to disaster.

Your dream items will come with additional costs, such as taxes, insurance and maintenance, and those will stick around long after the initial purchase.

You should look at your inheritance as a long-term investment, not an excuse for a one-time splurge. If you have a good plan for the assets, they should help provide financial security for years.

Using the money to pay down any debts you have or starting an emergency fund is much more valuable than spending it on an asset that will eventually lose its value.

3. Consider tax implications

While the tax implications that come with an inheritance will depend on what you inherit and where you live, receiving an inheritance can trigger estate, capital gains, inheritance or income taxes.

For example, while many people may believe they will owe federal income taxes on any inherited money they receive, that may not be the case. Cash that is passed down from a person who has passed away is not considered taxable income for the beneficiary.

If you are gifted a property as an inheritance, receiving it is not taxed in most cases. However, depending on how you plan to use it, you need to consider a few things:

• Ongoing property taxes, insurance and maintenance costs
• Capital gains tax if the property value increases significantly before it is sold
• How you will use the property (personal, investment, rental) determines which tax deductions you can take

Most people don't have a full understanding of which processes will be triggered when estates are handed down. It's important to work with a financial professional before signing anything.

4. Build a strong team

Being part of the Great Wealth Transfer may be life-changing, but it could also be overwhelming. You may be faced with financial decisions you've never had to navigate before.

Having a strong team of professionals, such as a trusted financial adviser, tax professional or estate attorney, can help everyone involved avoid costly mistakes and create strategies that align with their goals.

A large inheritance is a life-changing event, and surrounding yourself with the right people can be the difference between enjoying it and watching it disappear.

Related Content

• Manage an Inheritance Like a Pro in Just Seven Steps
• Preparing for an Inheritance: Don't Let Your Blessing Become a Curse
• What Not to Do After Inheriting Wealth: 4 Mistakes That Could Cost You Everything
• Four Things to Know About Managing a Loved One's Finances
• I'm a Financial Planner: Here's How to Make the Most of Your Charitable Giving on a Budget

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.

Roth conversions have become one of the hottest topics in retirement planning. Browse financial headlines long enough, and you'll likely encounter conflicting advice.

Some experts argue that everyone should convert their traditional IRA to a Roth. Others insist it's a costly mistake. The truth is far more nuanced.

As a CERTIFIED FINANCIAL PLANNER® and CEO of Peak Retirement Planning, I can tell you that for most Americans, a Roth conversion probably isn't necessary. However, retirees with pensions often live by a different set of tax rules (I wrote a book for those with pensions, The 2% Club, that you can request for free here.)

Their guaranteed income can create tax challenges that don't apply to the average retiree, making Roth conversions worth a much closer look.

Before deciding whether a Roth conversion belongs in your retirement strategy, it's important to understand the factors that actually determine whether the math makes sense. You can learn more about this in my YouTube video:

The only question that really matters

Many investors focus on whether they can afford to pay the taxes on a Roth conversion today. While that's certainly part of the equation, it isn't the deciding factor. The more important question is this: Will your total tax rate be lower today than it will be later?

That "total tax rate" extends beyond your federal income tax bracket. A Roth conversion can also influence:

• State income taxes
• Medicare IRMAA surcharges
• Social Security taxation
• Capital gains taxes
• Estate planning outcomes

When viewed together, your true tax cost could look very different than your federal bracket alone suggests.

Why most people don't need a Roth conversion

For many retirees, taxable income will naturally decline when they stop working. Someone who retires with modest retirement savings, no pension and Social Security as their primary income source usually remains in relatively low tax brackets throughout retirement.

In those situations, paying taxes today through a Roth conversion could result in paying more tax than necessary.

Roth conversions are frequently overpromoted, as they can be powerful, but they aren't universally beneficial.

Pension holders face a different tax reality

Rather than seeing their income in retirement decline, retirees with pensions often have multiple sources of guaranteed retirement income arriving simultaneously:

• Pension payments
• Social Security benefits
• Required minimum distributions (RMDs) from traditional retirement accounts

Each source adds taxable income, and together they can keep retirees in higher tax brackets for decades.

For households that have accumulated substantial balances in tax-deferred accounts, such as 401(k)s, IRAs, TSPs or 403(b)s, RMDs can make the situation even more challenging as they grow over time.

That's why many pension recipients find themselves paying as much, if not more, in taxes during retirement than they did while working.

Today's tax environment creates planning opportunities

Another consideration is today's tax landscape: Current tax laws provide relatively favorable tax rates and expanded standard deductions compared with historical norms.

While no one can predict future legislation, many economists expect government revenue needs to increase over time because of rising national debt and the long-term funding challenges facing programs such as Medicare and Social Security.

If future tax rates eventually rise, converting portions of traditional retirement accounts while rates remain relatively low could produce meaningful lifetime tax savings. The objective isn't simply to pay taxes sooner, but to pay them when they're expected to be lower than they otherwise would be.

Don't look only at your tax bracket

One of the biggest mistakes retirees make is evaluating Roth conversions using only the federal tax tables. Your retirement tax picture is much more interconnected.

Increasing taxable income through a Roth conversion could:

• Cause more of your Social Security benefits to become taxable
• Push you into a higher Medicare IRMAA bracket, increasing Medicare Part B and Part D premiums
• Raise your capital gains tax rate
• Increase state income taxes

This is why comprehensive tax planning frequently produces better results than simply converting up to the top of a particular tax bracket.

The widow's penalty can create future tax problems

Married couples regularly overlook one significant future risk: When one spouse dies, the surviving spouse generally transitions from married filing jointly to single tax status. At that time:

• Tax brackets and IRMAA thresholds shrink
• The standard deduction lowers
• One Social Security benefit typically disappears
• The surviving spouse often continues receiving pension income and RMDs

The result can be substantially higher taxes for the surviving spouse. Completing Roth conversions while both spouses are alive allows couples to take advantage of the wider married tax brackets before this transition occurs.

Your children's tax situations matter, too

If leaving money to your children is one of your goals, their future tax bracket deserves consideration as well.

Under current law, most non-spouse beneficiaries must empty inherited retirement accounts within 10 years. A child inheriting a large traditional IRA might be required to recognize hundreds of thousands of dollars of taxable income during that period, potentially pushing them into significantly higher tax brackets.

On the other hand, if your children are likely to remain in relatively low tax brackets, leaving them traditional retirement assets instead of paying higher taxes through Roth conversions today could prove more efficient.

Estate planning isn't one-size-fits-all, and understanding your heirs' financial circumstances is an important part of the analysis.

Tax diversification provides flexibility

Many retirees have accumulated the vast majority of their wealth inside tax-deferred retirement accounts, and that creates a challenge. Every dollar withdrawn becomes taxable income, leaving retirees with limited flexibility when tax laws or personal circumstances change.

Building assets across multiple account types — including traditional retirement accounts, Roth accounts and taxable brokerage accounts — creates what many planners call tax diversification.

Having multiple "tax buckets" allows retirees to decide where retirement income comes from each year, making it easier to adapt to changing tax laws, Medicare thresholds or unexpected expenses.

Where you live can affect the timing

State taxes can also influence whether a Roth conversion makes sense. Someone planning to relocate from a high-income-tax state to one with no state income tax could benefit from delaying Roth conversions until after the move.

Conversely, someone expecting to move into a higher-tax state might decide to accelerate conversions before relocating.

State taxes generally receive less attention in planning than federal taxes, but they can meaningfully affect lifetime tax costs.

A common Roth conversion myth

One objection frequently raised against Roth conversions is that paying taxes today means losing years of investment growth. That argument overlooks an important concept: Taxes on a traditional IRA already represent a future liability.

Paying that liability earlier doesn't necessarily reduce long-term wealth if tax rates remain unchanged — it simply satisfies the government's share sooner.

Where Roth conversions can create additional value is by reducing future RMDs, potentially lowering Medicare premiums, limiting Social Security taxation, providing greater withdrawal flexibility and protecting against higher future tax rates.

The comparison isn't simply about investment growth — it's about maximizing what you keep after taxes over the course of retirement.

The bottom line

Roth conversions aren't appropriate for everyone. In fact, many retirees with modest savings and no pensions might be better off leaving their traditional retirement accounts untouched.

Pension holders, however, ordinarily face a different reality. Guaranteed income, RMDs and long retirement horizons can create tax burdens that make proactive planning far more valuable.

Rather than asking whether Roth conversions are "good" or "bad," ask a better question: Will paying taxes today likely cost less than paying them later?

For retirees with pensions and substantial retirement savings, the answer is often worth exploring through a comprehensive, long-term tax strategy that considers not only income taxes but also Medicare premiums, Social Security taxation, estate planning and future tax flexibility.

Because when it comes to retirement, it's not just about how much you've saved — it's about how much you'll ultimately keep.

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• 13 Things to Know About How Your Pension Affects Your Taxes in Retirement
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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.

In April, the IRS and the Department of the Treasury released Revenue Procedure 2026-12. Here's what it means in plain English: The federal government handed state governors the official playbook, and the official map, for nominating the next generation of Opportunity Zones.

When the One Big Beautiful Bill Act (OBBBA) made Opportunity Zones permanent in July 2025, the industry had to wait nine months for the guidelines to be released.

Here are five things I think every investor with significant capital gains needs to understand.

1. We know exactly which communities are eligible

Revenue Procedure 2026-12 doesn't just describe the nomination process. It identifies, by name and by census tract, every community in America that qualifies for Opportunity Zone designation in 2027.

The number? 25,332 population census tracts across the United States, the District of Columbia and U.S. territories. Every single one of them meets the definition of a low-income community under the updated rules of the OBBBA.

The IRS formally adopted the 2020-2024 American Community Survey five-year dataset as the controlling data source for determining eligibility — locking in the methodology and removing any ambiguity about which tracts qualify and which don't.

Not all 25,332 tracts will become Opportunity Zones. Governors can nominate up to only 25% of their state's eligible tracts. But investors and developers are no longer guessing which tracts are eligible to be nominated.

2. Rural America is a bigger part of the story than ever

Of those 25,332 eligible tracts, 8,334 are classified as fully rural. That's roughly one out of every three eligible communities.

This matters for two reasons. First, the OBBBA created powerful new incentives specifically for rural Opportunity Zone investments. Investors in Qualified Rural Opportunity Funds receive a 30% basis step-up after five years, triple the standard 10%, and rural properties benefit from a reduced substantial improvement threshold of just 50% instead of 100%.

These aren't minor tweaks — they fundamentally change the math on deals that wouldn't have penciled out under the original program.

Second, the law requires that states give rural communities meaningful representation in their nominations. With a third of all eligible tracts classified as rural, governors will have both the incentive and the inventory to direct capital into parts of the country that have historically been overlooked by institutional investors.

For those of us who believe Opportunity Zones should be about real economic development in communities that genuinely need it, this is encouraging news.

3. The clock is ticking

Here's the timeline every investor should have on their calendar.

The nomination window opened on July 1, 2026. State governors — along with the mayor of Washington, D.C., and territorial executives — have less than 45 days to submit their nominated census tracts to the Treasury Department.

That puts the initial deadline at September 28, 2026, with a provision for a single 30-day extension that could push final submissions to October 28.

One important detail from the new guidance: States can submit and revise their nominations multiple times during the window, and nominations filed early in the window aren't processed until the window closes. In other words, this isn't a race to gain first-mover advantage — it's a thoughtful, deliberative process designed to arrive at the best possible outcome.

If you're a developer or community leader trying to make the case for a particular tract, you have a genuine window to advocate right up until the deadline.

After the nomination window closes, Treasury will review and certify the selections. The IRS has indicated it expects to publish the final designated Opportunity Zones before January 1, 2027, the date the new OZ 2.0 map officially takes effect.

Treasury has also announced that it will roll out online tools and resources to help state officials with the nomination process, which should make this round smoother than the sometimes chaotic 2018 experience.

But here's what I want you to take away: If you're an investor or a fund manager, you don't have the luxury of waiting until the final map drops in December.

The smart money is positioning now, identifying likely zones, building relationships with developers and local officials and structuring deals to be ready to deploy capital the moment the new designations go live.

4. Fewer zones, fixed boundaries and more competition for the best deals

One thing that sometimes gets lost in the excitement is this: OZ 2.0 will almost certainly have fewer designated Opportunity Zones than OZ 1.0.

Under the original program, there were 8,764 designated zones. Industry estimates suggest the new round will produce roughly 6,300 to 6,500, a reduction of about 25%.

That's because the eligibility rules are tighter:

• The median family income threshold dropped from 80% to 70%
• The contiguous tract loophole (which allowed some higher-income areas to qualify under OZ 1.0) has been eliminated
• Tracts that qualify based on high poverty rates are now disqualified if their median family income exceeds 125% of the area median

Here's something else the new guidance confirms that should matter to anyone doing long-horizon underwriting: The OZ 2.0 tract boundaries are drawn from the 2020 decennial census map and are set in stone for the entire decade the designation is active, which is January 1, 2027, through December 31, 2036.

No redrawing of lines. No splitting of tracts. No adjustments of any kind. Whatever map gets certified in late 2026 is the map for the next 10 years. That's the kind of certainty that serious investors and fund sponsors can build a strategy around.

Fewer zones do not mean fewer opportunities. It means the zones that do get designated are more likely to be genuinely distressed communities where investment capital can make a real difference. But it also means that the best deals in the best locations are going to attract more competition. Early movers will have a meaningful advantage.

5. Puerto Rico investors: Your timeline is different

If you have Opportunity Zone money in Puerto Rico, this one's for you, and it may come as a surprise.

Most investors know that the original OZ 1.0 designations across the 50 states run through December 31, 2028. What many don't realize is that Puerto Rico has always operated on its own schedule.

Back in 2018, the Bipartisan Budget Act gave the island a unique deal: Every eligible tract was automatically designated as an Opportunity Zone, and that designation was backdated to the passage of the Tax Cuts and Jobs Act (TCJA) on December 22, 2017. That was a full year before most states received their designations.

Both parts of that unique deal are now history.

A 10-year clock that started in December 2017 doesn't end in December 2028. It ends in December 2027. The new guidance makes this point clearly, and that gives Puerto Rico investors one less year than they may have been counting on.

In addition, Puerto Rico will play by the same rules as everyone else going forward: No more automatic island-wide coverage. The governor will nominate up to 25% of eligible tracts, just like every other state.

That's a dramatic reduction in scope for a territory where nearly all census tracts were previously designated.

If you have exposure to Puerto Rico in your OZ portfolio, now is the time to review and make sure your timeline assumptions still hold up.

What all of this means for you

If you have unrealized capital gains — whether from real estate, a business sale, stock or any other appreciated asset — and you've been thinking about Opportunity Zone investing, the new guidelines should sharpen your focus.

The OZ 2.0 framework is no longer theoretical. The eligible tracts are published. The timeline is set. The boundaries are locked. And the enhanced benefits, especially for rural investments, are some of the most generous tax incentives the federal government has ever offered.

This is the starting gun. The investors who do their due diligence now, not in January 2027, will be the ones best positioned to capture the full power of what OZ 2.0 has to offer.

Related Content

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• 2026's Tax Trifecta: The Rural OZ Bonus and Your Month-by-Month Execution Calendar
• DST Inventory Just Hit a Record $3.9 Billion: What 1031 Exchange Investors Should Do Next
• 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.

Most of my clients hate paying taxes. That part is universal. But what I've noticed over years of helping high-net-worth families with tax planning is that the instinct to avoid taxes today often leads to paying significantly more of them tomorrow.

The pattern shows up consistently: A client prefers to draw first from Roth accounts or taxable brokerage accounts, which are taxed at favorable capital gains rates, to avoid touching their IRA or 401(k) for as long as possible. It feels like a win. They've deferred taxes.

But when you model it out over 20 or 30 years of retirement, that approach often increases the cumulative tax burden, because they haven't spread withdrawals across tax brackets in a way that keeps their taxable income in check year after year.

That's what happens when you optimize for April instead of the next two decades.

Why deadlines are the enemy of good tax planning

When tax planning happens only in the fourth quarter, or in the final days of December, it may limit available strategies.

First, there's a logistical problem: Custodians can't guarantee that transactions such as qualified charitable distributions (QCDs), donor-advised fund (DAF) contributions or Roth conversions will settle before year-end if you wait until the last minute. A missed deadline isn't a tax strategy, it's a penalty.

Second, and more importantly, you lose flexibility. Many tax-saving moves depend on timing relative to market conditions, income fluctuations and life circumstances. Gifting appreciated shares to charity, for instance, is far more impactful when a stock has just jumped on an earnings report than when you're scrambling in December.

The difference between gifting 10 shares at $80 vs $88 per share, a 10% move that translates directly into a larger charitable deduction and greater tax savings, is an opportunity you can only capture if you're watching for it throughout the year.

Four strategies that require time to be effective

Some of the most effective tax moves cannot be executed well in a single tax season. Four stand out, and each one requires years, not months, to deliver.

1. Roth conversions in the low-income window.

For clients who retire before claiming Social Security, there's often a window, of about five to 10 years, when taxable income drops considerably.

Converting IRA or 401(k) funds to a Roth account during this window, at the 12% or 22% bracket rather than the 32% or higher rate that may apply once Social Security and required minimum distributions (RMDs) kick in, may produce meaningful lifetime tax savings, depending on individual income levels, bracket projections and future tax law changes.

This is cash flow modeling at its most useful: Mapping out conversion amounts year by year rather than deciding in isolation.

2. Coordinated charitable giving.

Bunching charitable deductions into a high-income year, such as one marked by a significant portfolio rebalance or a large Roth conversion, can be far more effective than spreading gifts evenly.

When income spikes irregularly, charitable giving becomes a natural offset. Planning this in advance, rather than reacting after the income event has already occurred, is what separates intentional strategy from coincidence.

3. Inherited IRA management under the SECURE Act.

For clients who inherit an IRA, the old "stretch" provision that allowed distributions over a lifetime is largely gone. Most beneficiaries now have a 10-year window to deplete the account. The planning question is when, within that window, to take distributions.

Consider a client who inherits an IRA two years before retirement and is still earning a full income. Depending on their income trajectory and tax bracket, delaying those withdrawals until after they stop working, while still within the 10-year depletion period, could shift distributions into meaningfully lower tax years.

4. Portfolio transitions for clients with embedded gains.

When a client comes in holding a portfolio of highly appreciated securities, triggering all of those gains in year one is rarely the right answer. A better approach recognizes those gains gradually over two, three or more tax years, spreading the burden while moving toward a better-diversified portfolio.

This requires a long-range view of the tax cost, not a reflex to get everything repositioned quickly.

Where investment decisions and tax strategy meet

Paying capital gains taxes is not inherently bad. It means your investments have grown. The risk of staying in a concentrated position that may no longer outperform can be far greater than the tax cost of diversifying.

We see clients hold individual company stock well past the point where it makes portfolio sense, purely to avoid a capital gains bill. That's a case where the tax tail is wagging the investment dog.

The better goal is minimizing taxes without compromising portfolio quality and diversification. Strategies such as tax-loss harvesting, asset location and direct indexing are genuine tools, but they work best as optimizations on top of a sound plan, not as substitutes for one.

Three steps to explore before your next tax season

If you've been taking a reactive approach, here are three places to start looking for opportunities:

1. Pull out your 2025 tax return and look for surprises.

Were there large distributions you didn't anticipate? Did you end up in a higher bracket than expected? Are there tax-advantaged accounts you could be contributing more to?

2. Identify any irregular income on the horizon.

Equity compensation, a business sale, a liquidity event, a large one-time expense: Each of these is a planning opportunity, and the earlier you can model the tax implications, the more options you have.

Once the income has already hit your return, many of the best strategies are off the table.

3. Get organized before you need to be.

One of the biggest sources of tax-season friction is simply not knowing where things are: Prior returns, IRS PINs, cost basis records, charitable contribution receipts.

Building a simple reference document for your annual tax prep reduces stress and makes it far easier to execute time-sensitive strategies without scrambling.

Taxes are unavoidable. But the total taxes paid over a lifetime of retirement are not fixed. They're shaped by decisions made years in advance, at the right income levels, in the right accounts, in the right sequence. That's a long game worth playing.

Related Content

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• The September 15 Tax Conversation You Should Be Having Right Now
• After Decades of Investing, Your Biggest Winner May Now Be Your Biggest Risk
• A 2026 Tax Playbook for High Earners: Stealth Taxes and Strategic Wins
• A Confident Retirement Starts With These Four Strategies

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’ve inherited a house, you’re not alone. Data show that 38% of people in the U.S. report real estate as part of their past or expected inheritance.

But once the deed is in your hands, you’re probably wondering what comes next. Beyond deciding whether to keep it, sell it, or rent it, there’s one almost universal question: What are the tax implications?

There's good news: Inheriting a house doesn’t automatically mean you’ll owe taxes to the IRS or your state. But what happens next depends on several factors, including whether you decide to sell the property and how the step-up in basis affects your tax bill.

Here’s more of what you need to know.

What happens with taxes if you inherit a house

Inheriting a house doesn’t automatically trigger federal taxes. Instead, you’ll need to decide what to do with the property. Whether you sell it, keep it, or turn it into a rental, each option can have different tax implications.

One of the most important tax rules for inherited property is the step-up in basis. A home’s basis is the amount the IRS uses as the starting point for calculating capital gains tax.

Think of the home’s basis like a car’s trip odometer. Resetting the trip odometer doesn’t erase the miles already driven. Instead, it creates a new starting point, tracking only the miles driven from that point forward.

• When you inherit a home, the IRS generally measures your gain from the home’s fair market value on the date of death instead of what the previous owner originally paid.
• The step-up in basis doesn’t change what the house is worth. It changes where the IRS starts measuring your gain.

For example, your parents bought a home decades ago for $150,000. By the time you inherit it, it’s worth $700,000. If you later sell the home for $750,000, your taxable gain would be $50,000, not $600,000.

That’s because your taxable gain is based on the appreciation that occurred after you inherited the home, not when your parents owned it.

Selling, keeping, or renting inherited property

Selling an inherited home is often one of the biggest financial decisions you’ll make after inheriting property. A Real Estate Inheritance Report from Trust & Will finds that 56% of heirs choose to sell an inherited home, making it the most common path forward.

• Fortunately, you won’t pay capital gains tax on the difference between what the original owner paid for the home and its fair market value when you inherited it. Instead, the IRS uses the home’s stepped-up basis as the starting point for calculating your taxable gain.
• That means when you sell, you’ll owe capital gains tax only on any appreciation that occurs after you inherit the home.
• If you sell the home soon after inheriting it for about its fair market value, your taxable gain may be minimal.

What if you decide to keep the house? Keeping an inherited home doesn’t create an immediate federal tax bill. You’ll still be responsible for ongoing costs like property taxes, homeowners insurance, and maintenance. If you eventually decide to sell the home, the stepped-up basis will determine how your capital gains are calculated.

Some beneficiaries—roughly 17%—decide to turn an inherited home into a rental property. If you do, rental income is typically taxable. You may also be able to deduct certain expenses related to the property.

Depending on your situation, you might qualify to claim depreciation, which can affect both your annual taxes and your capital gains calculation if you eventually sell.

Estate and inheritance tax considerations

If you’ve inherited a house, you may also be wondering whether you’ll owe inheritance tax or estate tax.

For most families, the answer is no.

The federal government doesn’t impose an inheritance tax, and only a handful of states do. Furthermore, the federal lifetime estate and gift tax threshold sits at $15 million per individual ($30 million for married couples), meaning it generally applies only to exceptionally large estates.

Whether either tax applies depends on factors like the overall size of the estate, where the deceased lived, and state law.

Where you live matters with inheritance

While federal tax rules dominate the conversation, state-level rules can create unexpected financial surprises. But the baseline rule is the same: Nearly all state tax codes conform to the federal step-up in basis, resetting the property's starting value to its fair market value on the date of death for state capital gains purposes.

However, state rules diverge from IRS rules in several key areas:

State Capital Gains Rates: If you hold the home and sell it after it appreciates further, any post-inheritance gain is subject to state income tax alongside federal capital gains tax.

In high-tax states like California, New York, or Minnesota, state capital gains tax rates can add 8% to 13%+ to your tax bill.

State Inheritance and Estate Taxes: Five states—Pennsylvania, New Jersey, Maryland, Kentucky, and Nebraska—levy a state inheritance tax on certain heirs.

Additionally, twelve states and Washington, D.C. enforce state estate taxes with exemptions far lower than the federal threshold—in places like Oregon or Rhode Island, kicking in on estates valued as low as $1 million or $1.8 million.

Local Property Tax Reassessments: In some jurisdictions, transferring title triggers a local property tax reassessment. The capped property tax rate the previous owner enjoyed could reset to current fair market value, significantly increasing annual holding costs.

Key questions to consider before making a decision

Before deciding whether to sell, keep, or rent an inherited home, take time to evaluate a few financial factors:

• What is the home’s official stepped-up valuation? Securing a professional, independent appraisal as of the date of death establishes your baseline basis and protects you if you sell later.
• Can you afford the ongoing carrying costs? If you plan to keep the home, calculate the true cost of holding it — including updated local property taxes, insurance premiums, utilities, and deferred maintenance.
• Are there co-heirs or sibling dynamics to navigate? If you inherit with siblings, clarify whether everyone agrees on selling or keeping the property, or if one party needs to buy out the others.
• What are the local property tax reassessment rules? Check with the local tax assessor to see if transferring title triggers an immediate tax reassessment that could increase annual property taxes.

Inheriting a home: Frequently asked questions

Tax laws are complex, and every beneficiary's tax situation is unique. The information provided here is for general educational and informational purposes only and does not constitute formal tax, financial, or legal advice. Be sure to consult a qualified tax professional, CPA, or estate planner to evaluate your specific circumstances before making any financial decisions.

Do you automatically pay taxes when you inherit a house?

No. Inheriting a house by itself won’t trigger federal taxes. Taxes may arise later depending on what you do with the property.

Can you sell an inherited house immediately?

Generally, yes. Many beneficiaries sell an inherited home shortly after probate or once they have the legal authority to do so. However, the timing depends on the estate administration process and state law, so consult a trusted professional to understand any timing restrictions that may apply to your situation.

How is capital gains tax calculated on an inherited house?

In many cases, capital gains are calculated using the stepped-up basis, meaning the home’s fair market value on the date of death becomes the starting point for measuring future gain.

What if I inherit a house with my siblings?

If you inherit a house with your siblings, you may become co-owners of the property. Together, you’ll need to decide whether to keep the home, sell it, or rent it out. If you sell the home, each beneficiary’s share of any capital gain is based on their ownership interest and the home’s stepped-up basis.

Can I live in an inherited house without paying taxes?

Usually, yes. Moving into an inherited home doesn’t automatically create a federal tax bill. However, you’ll likely become responsible for ongoing expenses like property taxes, homeowners insurance, and maintenance.

If you later sell the home, your taxes will depend on the selling price and your stepped-up basis.

What if the house was held in a trust?

It depends on the type of trust. Many homes held in a revocable living trust receive the same step-up in basis as homes passed through a will.

Some trusts, however, have different tax rules that can affect your tax situation. If you’re unsure how the trust is structured, consider consulting a tax professional before selling the property.

Do I have to pay property taxes on an inherited house?

Yes. Once you inherit a home, you’ll typically become responsible for ongoing property taxes, just as any other homeowner would be. Depending on where the property is located, you may also need to update or reapply for property tax exemptions after ownership changes.

Related Content

• Ask the Tax Editor: Tax Basis in Inherited Property
• Capital Gains Tax Rates 2026: What You Need to Know
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?

Whether you're currently retired, just starting your post-career transition, or still years away, how your state taxes retirement income is important.

State taxation impacts how much of your nest egg is truly yours. It shapes your monthly budget during your golden years and can give you a clearer sense of your long-term financial security.

And depending on where you live, your state may not tax retiree income at all. This can save you thousands on Social Security benefits taxes, pension payouts, and 401(k) withdrawals in retirement.

So check out these five quick questions to test your knowledge and see if your state makes the cut.

Good luck!

Remember that no matter where you live, federal income tax still applies. You may want to consult a tax professional for advice tailored to your specific financial situation.

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December has become the default season for financial planning. It's when many investors review taxes, increase retirement contributions, make charitable gifts and rush to complete other planning before the calendar turns.

But it can also be one of the least effective times to make important financial decisions. Schedules are crowded as deadlines are closing in, while advisers, accountants and attorneys may have limited capacity to support.

Instead of rushing through year-end checklists, summer can give you the space and time to think more strategically. By this time of year, you can see how income, spending and investments are tracking, with several months left to make changes while they can still have an impact.

In my experience as a CFP®, that head start often leads to better decisions because families have time to consider trade-offs and adjust gradually.

1. Rebalance your portfolio and review asset location

Even if you haven't made any trades, market performance over time can change your portfolio's risk profile. Strong returns in equities, a particular sector or one concentrated holding can gradually increase risk, leaving the portfolio more aggressive than it was at the beginning of the year.

An end-of-summer review can identify where allocations have drifted and whether new contributions should be directed toward underweight areas. The goal is to ensure that the portfolio still reflects your goals, time horizon and tolerance for risk.

The review can also include asset location, or which investments are held in taxable, tax-deferred and Roth accounts. As markets move and contributions are added, assets may no longer be held tax-efficiently.

Income-producing investments may be better suited to a retirement account, while investments that receive favorable long-term capital gains treatment may fit better in a taxable account.

Liquidity needs, charitable plans, required minimum distributions and estate considerations also matter. Reviewing where assets are held can improve after-tax efficiency without changing the overall strategy.

2. Check your retirement contribution pace

Many employees choose their retirement plan contribution rate at the beginning of the year and rarely revisit it. By summer, however, a raise, bonus or promotion may have changed both cash flow and the contribution needed from each remaining paycheck to reach a retirement savings goal.

Reviewing your retirement strategy in late summer allows time to make smaller adjustments over several months. Waiting until November may require a much larger increase over only a few pay periods.

This is an overlooked aspect of financial planning that has come up often in my client conversations: People assume they are on pace because their contribution percentage has not changed, but soon discover that compensation or payroll changes have left them short.

A summer financial review can also consider a mix of traditional and Roth contributions. Retirees should confirm how much remains to be withdrawn from required minimum distributions and whether qualified charitable distributions fit into their giving plans.

3. Run a tax projection

By the end of the summer, your financial picture is typically much clearer and more comprehensive than it was at the start of the year. Wages, bonuses, business income, investment gains and equity compensation are easier to estimate, making summer an ideal time to determine whether tax withholding or estimated payments need to be adjusted.

A summer tax projection may also reveal valuable planning opportunities, including Roth conversion, gifts of appreciated securities, the timing of stock-option exercises or the use of investment losses to offset realized gains.

Some of these strategies may be better executed later in the year, once the full tax picture is clearer. But reviewing them now allows you to identify your options before year-end deadlines begin to dictate your decisions.

The goal isn't simply to lower this year's tax bill — it's to ensure every tax decision supports your broader long-term objectives without creating avoidable cash-flow constraints.

4. Put cash and debt to work more deliberately

Over time, cash can accumulate without a clear purpose. Conversely, some households may have too little set aside, forcing them to rely on credit or investment sales to cover predictable expenses.

An end-of-summer review can separate money needed for taxes, travel, home improvements or other near-term spending from assets intended for longer-term goals. It is also worth checking whether savings are earning a competitive return.

Borrowers with adjustable-rate loans, home-equity lines or other variable-rate obligations should understand how interest costs are affecting cash flow. Anyone planning a major purchase should consider how new debt would interact with retirement savings and other priorities.

Cash and debt can be managed intentionally rather than carried forward without review.

5. Prepare for employee benefit decisions

Open enrollment often leaves employees with little time to make important choices. Reviewing benefits during the summer creates more time to consider whether health, life and disability coverage still match the household's needs, particularly after a marriage, divorce, new child, home purchase or change in income.

Employees eligible for a health savings account can reassess their contribution pace and consider how the account fits into their broader plan.

Executives may also need to review stock options, restricted stock, deferred compensation or company-stock concentration before election deadlines arrive.

These choices affect taxes, cash flow and investment risk, and deserve more than a rushed year-end review.

6. Review estate documents before there is an emergency

Estate planning is easy to postpone when nothing feels urgent. Summer is a good time to ensure that wills, trusts, powers of attorney, health care directives and beneficiary designations still reflect the family's circumstances and long-term intentions.

Major life events — such as births, deaths, marriages, divorces, moves and significant changes in wealth — may also require updates to your broader financial plan.

For families considering significant gifts, planning should begin well before December, given valuations, legal documents and trust administration often require coordination among several advisers.

In conversations with clients, estate planning reviews often uncover practical issues that have little to do with estate taxes. An outdated beneficiary designation, an unfunded trust or a missing power of attorney can all create complications long before federal estate-tax exposure becomes relevant.

The goal is straightforward: Ensure the right people have the authority to act in an emergency and that your assets will be distributed as intended. Don't wait for an arbitrary year-end deadline to review your plan.

Act earlier to save stress later

Year-end planning will always matter. After all, certain tax, retirement and gifting decisions are tied to the calendar. But I believe that December should not be the first time you review and adjust your financial plan.

By summer, enough information is available to provide a clearer picture of your finances while still leaving enough time to make intentional adjustments without being rushed. Acting earlier can give investors the breathing room they need to make meaningful adjustments.

For many households, the most important question is simple: Has anything changed in the markets, my finances or my life that should change what I do next? Asking that question now — rather than in December — can lead to better decisions and less stress in the year-end.

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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 have millions saved in your 401(k) and IRA, that feels like a win, and it is. But there's one way a large balance quietly works against you: The more money sitting in tax-deferred accounts, the more likely the IRS is to tax the maximum allowable portion of your Social Security check.

That happens by default, unless you plan around it.

Most people who reach this point spent decades doing everything right: Saving consistently, maxing out their 401(k), following the advice they were given. That advice was built for accumulation, not for the withdrawal phase.

This is often called the Social Security tax torpedo. It shows up the same way in almost every retirement plan I, as the founder of MOKAN Wealth Management, review for the first time. It's not a mistake. It's what happens when there's no planning for the tax impact of retirement withdrawals.

How the IRS decides what gets taxed

The IRS uses a number called provisional income to decide how much of your Social Security check gets taxed: Your regular income, plus any tax-free interest, plus half of your Social Security benefit.

Once that number crosses certain levels, your Social Security starts getting taxed, and those levels have never been adjusted for inflation.

Married couples filing jointly start owing tax at $32,000 of provisional income. Above $44,000, up to 85% is taxable. Single filers cross at $25,000 and $34,000.

Frozen since the 1980s and 1990s, these thresholds mean a couple with a modest combined income can land at the maximum simply because the numbers are so outdated.

In retirement, income piles on top of itself:

• Your IRA withdrawal gets taxed
• Your Social Security gets taxed on top of that
• Medicare premiums climb along with both

If almost all your savings sit in a traditional IRA or 401(k), every dollar you pull out to pay the bills is fully taxable, and adding half your Social Security on top pushes most retirees past every threshold in year one, often by a wide margin.

Nobody made a bad decision. They just never built a different kind of account to draw from.

The one exception is a Roth IRA. Money pulled from a Roth doesn't count toward provisional income, doesn't show up on your tax return and doesn't raise Medicare premiums. It's the one source of retirement income the IRS leaves alone.

The three buckets every retirement needs

Think of your savings in three buckets:

• Money you've already paid tax on (a brokerage account, where you owe tax only on the growth)
• Money you haven't paid tax on yet (a traditional IRA or 401(k), where every dollar withdrawn is taxed as ordinary income and where most people hold nearly all their savings)
• Money you'll never pay tax on again (a Roth IRA, which grows and comes out tax-free and is invisible to the IRS)

When almost everything sits in the second bucket, every dollar you withdraw pushes more of your Social Security into the taxable zone.

Tax diversification means having enough in each bucket to choose which dollars to spend each year based on what creates the smallest tax bill.

Roth conversions: Moving money to the third bucket

The most reliable way to build the tax-free bucket is through a Roth conversion: Moving money from your traditional IRA into a Roth IRA and paying income tax on the converted amount that year.

After that, the money and all its future growth come out completely tax-free and never count toward provisional income again.

The window to do this well is shorter than most people think. It typically opens in the years just before or after retirement, before Social Security starts and before required minimum distributions (RMDs) force taxable income onto your tax return. Income is usually at its lowest point during that stretch, which means lower rates on any conversion done then.

Three approaches work well in practice:

• Filling your tax bracket by converting just enough each year to use up room in your current bracket
• Converting larger amounts over a shorter window when a balance is too large for small annual conversions to move the needle in time
• Converting more aggressively when the market is down, since the same number of shares costs less in tax

The biggest mistake is waiting. RMDs force taxable income onto your return at age 73 or 75 whether you need it or not — on a balance that's kept growing with the tax bill still attached.

A before-and-after example

John and Karen, both 60, have $1.8 million combined in traditional IRAs, $200,000 in a brokerage account and almost nothing in a Roth. They plan to retire at 63 and need about $150,000 a year to live on. Their combined Social Security benefit is roughly $70,000 at full retirement age, or about $53,000 if they claim benefits early at 63.

On the default path, they retire and claim at 63, then pull the remaining $97,000 they need straight from the IRA. Provisional income comes out to roughly $123,000, well past the $44,000 ceiling: The 85% maximum, or roughly $45,000 of taxable Social Security, stacked on top of the $97,000 IRA withdrawal.

On the coordinated path, starting at 60 while they're still working, they convert a portion of the IRA to Roth each year, paying the tax from income and the brokerage account so the full converted amount keeps growing tax-free.

They keep converting through their mid-60s and wait until 67 to claim Social Security, when the benefit reaches its full $70,000. By then, the Roth is large enough to cover roughly $40,000 of annual spending tax-free, with the remaining $40,000 from the IRA.

Provisional income lands around $75,000 instead of $123,000: Still above the ceiling, but with substantially less Social Security taxed and a large share of spending arriving with no tax bill.

Same retirement date, same lifestyle spending, a meaningfully different tax outcome for the rest of their retirement. The only difference was starting at 60 instead of waiting until the options had narrowed.

What to do now

Most people don't choose to pay the maximum tax on their Social Security. It happens because they didn't plan for it, which also means it's predictable enough to fix.

Run your own provisional income number. Figure out how much room is left in your current bracket. Then start moving money into the Roth bucket, even a few years before retirement. The window narrows every year you wait.

The Social Security Administration's benefit estimator and IRS Publication 915 are good starting points for running your own numbers.

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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.

Every financial plan you'll ever see puts heavy emphasis on getting money into retirement accounts.

Contribute early, get the match, max out the IRA and let it compound. That part of the advice is sound, and most disciplined savers follow it well.

What gets far less attention is what happens after the money is in there. For some retirees who did everything right and accumulated a large IRA balance, that account can quietly turn into a complicated tax problem for themselves, a surviving spouse and, eventually, their kids.

The culprit is required minimum distributions (RMDs). Once RMDs start, at age 73 or 75 depending on your birth year, that money adds to taxable income whether you need it or not, on top of whatever else you're already reporting. That's the part most retirees eventually hear about, usually from an accountant and usually a year or two too late.

What almost nobody discusses is where that balance goes after the RMD math is finished for the year.

A large IRA won't create a tax bill only for the original owner. It can create a bigger one for the spouse who is left filing alone and a different one for the kids who inherit what's left when they're in their peak earning years.

One account, three tax bills, three different taxpayers.

John and Jane did everything right

John and Jane are 64. They maxed out their 401(k)s for three decades, didn't touch the money early and rolled everything into IRAs at retirement. Between them, they're sitting on $2.3 million in traditional IRA balances, a paid-off house and modest investment income each year.

Fast-forward to age 75, when their RMDs begin. Assuming reasonable growth and no withdrawals, that $2.3 million could be $3 million or more, generating an RMD of roughly $122,000 in the first year.

Add combined Social Security of about $65,000 and an additional $45,000 of investment income, and they're looking at $232,000 to report on their tax return. It's far more than they need, and none of it is optional.

That $232,000 lands on John and Jane's return, and it's the most straightforward of the three tax bills this balance is about to generate.

The widow's penalty

The problem doesn't stop with John and Jane filing jointly. Assume John passes first, which is statistically likely. Jane's income marginally changes. She still collects the survivor Social Security benefit, still owns the investment account and still has to take RMDs on essentially the same IRA balance.

What changes is her filing status. She moves from joint brackets to single brackets, which are roughly half as wide through most of the income range. Her standard deduction shrinks by close to half as well, pushing more income into taxable territory.

Income that used to be taxed at 12% or 22% when John was alive is now landing at 24% or 32%, even though her income hasn't moved.

Many couples model their household income. Very few model what that same income looks like once one spouse is filing alone. For a couple with John and Jane's numbers, the bracket and deduction squeeze alone can mean $10,000 to $15,000 more in tax every year, for the rest of her life.

This is what is referred to as the widow's penalty and could cost the taxpayer additional tax for decades.

The beneficiary problem

Push the timeline out further. Jane eventually leaves the remaining IRA to their two children, and by then, it's worth roughly $3 million combined, about $1.5 million to each child.

Under rules in place since the SECURE Act, most nonspouse individuals must empty an inherited IRA within 10 years of the original owner's death. Withdrawals don't have to be even, but if the original owner was already taking RMDs, annual withdrawals are typically required throughout that window, too.

For a child who's in their peak earning years, that inherited IRA doesn't always arrive as a windfall. It arrives as $150,000 or more of additional taxable income, stacked directly on top of a salary, a bonus and whatever else they've already got going on. A meaningful chunk of that inheritance can go straight to the IRS.

John and Jane spent 30 years deferring tax on that money, and their children may pay more on it than John and Jane ever would have.

Why this matters now

Two recent changes make this the right moment to make the projection.

First, RMD ages have moved. The SECURE 2.0 Act pushed the starting age to 73, moving again to 75 in 2033. That gives people born after 1959 a longer runway before distributions are forced and more years to plan around it.

Second, the One Big Beautiful Bill Act made the current tax brackets permanent instead of letting them expire at the end of 2025. For years, planners hedged Roth conversion advice with "rates might go up, might go down." That uncertainty has diminished.

Neither change fixes the underlying problem: A large traditional IRA is still going to generate a large RMD. But both make it easier to plan while there is still room to act.

The planning runway

John and Jane have an advantage most people overlook: They're 64, retired, and neither Social Security nor RMDs have started. That runway is valuable, but it won't last.

They could consider a Roth conversion. Every dollar converted gets taxed at today's rate, while their income is relatively low, instead of at a future rate stacked on top of Social Security, RMDs and investment income. A smaller traditional IRA can mean smaller future RMDs, less pressure on a surviving spouse's tax return and less taxable income passed to children.

Another move is a qualified charitable distribution, or QCD, once they turn 70½. IRA owners can send money directly from the IRA to a qualified charity — up to $111,000 per person in 2026 — and that amount counts toward the RMD without showing up as taxable income.

For the charitably inclined, it's one of the few ways to satisfy an RMD and lower a tax bill at once.

Neither move is automatically right for everyone, not even for John and Jane. The goal isn't converting for its own sake, it's optimizing the tax bill across a lifetime, and Roth conversions and QCDs are tools for that, not the whole strategy.

What matters more than picking a tactic is running the numbers every few years, since today's right answer may not be right in five years.

The real problem isn't the balance

There's nothing wrong with having a large IRA. It means the saving worked. The problem is assuming that planning is finished once the account is funded.

Left alone, a large traditional IRA sets off a chain reaction:

• Bigger RMDs than you need
• A tax increase left for the surviving spouse
• A tax bill handed to your kids on money you spent 30 years deferring

None of it is inevitable, but all of it takes years of lead time to fix.

The best time to deal with a large IRA is before the RMDs force the issue, not after.

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

When to claim Social Security is usually framed around break-even analysis and longevity.

Claim at 62, and you'll receive reduced benefits for life. Wait until 70, and your monthly check rises roughly 76% (from delayed retirement credits of about 8% per year) — but you forgo eight years of payments.

What this misses: Timing, which is one of your most powerful tax-planning tools, capable of saving tens of thousands in lifetime taxes when coordinated with other income — often the difference between the 12% and 22% bracket, a swing that compounds over decades.

Understanding the Social Security taxation cliff

Up to 85% of your benefits can be taxed federally, depending on your combined income — adjusted gross income plus nontaxable interest plus half your benefits. The thresholds are low and haven't been adjusted for inflation since 1984:

For married couples filing jointly:

• Combined income of $32,000 or less: 0% of benefits taxable
• Combined income of $32,001 to $44,000: Up to 50% of benefits taxable
• Combined income above $44,000: Up to 85% of benefits taxable

For single filers:

• Income of $25,000 or less: 0% of benefits taxable
• Income of $25,001 to $34,000: Up to 50% of benefits taxable
• Income above $34,000: Up to 85% of benefits taxable

Here's where it gets painful: In the phase-in range, every extra dollar of income makes 85 cents of benefits taxable. In the 22% bracket, that dollar triggers about 40 cents in federal tax — a 40% effective marginal rate, approaching what's usually reserved for six-figure earners.

Strategy No. 1: Use low-income years for Roth conversions before claiming

The years between retirement and Social Security are a unique opportunity: Retire at 62 but delay until 70, and you have eight low-income years for strategic tax moves.

Consider a couple with $1.5 million in traditional IRAs who need $80,000 annually. Withdrawing that keeps them in the 12% bracket (which extends to $94,300 for joint filers in 2025), leaving room to convert another $14,000 to $20,000 to Roth — paying 12% now to avoid 22% or more later.

Once they claim at 70, a $60,000 benefit plus $30,000 in IRA withdrawals pushes them into the 22% bracket. Front-loading conversions beforehand shifts hundreds of thousands into Roth accounts. Those withdrawals won't affect Social Security taxation later.

Strategy No. 2: Coordinate RMDs with Social Security timing

Required minimum distributions begin at age 73, forcing taxable withdrawals from tax-deferred accounts — and their collision with Social Security can create a surge in your mid-70s.

Run the numbers first. If RMDs will push you into a high bracket regardless, delaying might not help. Claiming earlier and using those benefits to fund Roth conversions or spare your IRAs can be wiser.

If your balance is modest, delaying makes more sense: Withdraw at lower rates in your 60s, then lean on your higher benefit after 70.

Either way, model your income through your mid-80s to find the claiming age that minimizes lifetime tax.

Strategy No. 3: Use capital gains to fill low brackets before Social Security

Long-term capital gains and qualified dividends get preferential rates: 0% if taxable income is below $94,050 for joint filers in 2025, 15% for most others, 20% at the top.

The 0% bracket is an arbitrage opportunity: In pre-claiming years, if savings or modest IRA withdrawals keep income under the threshold, you can realize gains tax-free.

Consider a couple before claiming $50,000 from IRAs plus $44,000 in realized long-term gains is $94,000 of taxable income — all within the 0% capital gains and 12% ordinary brackets.

Once benefits and RMDs arrive, that same income lands them in the 22% bracket with gains taxed at 15%. Harvesting beforehand captures those gains tax-free.

Strategy No. 4: Consider state taxes in the equation

State-level taxation varies: Eight states tax benefits to some degree, while the rest exempt them entirely. If you're considering a retirement move, this could influence timing.

In a state that taxes benefits (Minnesota, Vermont, New Mexico), delaying can pay off if you move to a no-tax state such as Florida or Texas before claiming.

If you have high rates and plan to stay, claiming earlier to trim IRA withdrawals might keep you below state thresholds.

Strategy No. 5: Coordinate spousal benefits with tax planning

Married couples have added complexity and opportunity. Note that the threshold for married, filing separately is $0 — all benefits are taxable immediately — so you can't file separately to dodge the tax.

The strategy: The lower-earning spouse claims at full retirement age while the higher earner delays until 70, freeing cash flow for Roth conversions and gains harvesting while securing the survivor's maximum benefit. Keeping household income below the $44,000 threshold can also limit the 85% taxation.

Strategy 6: Factor in Medicare IRMAA surcharges

Social Security income counts toward the modified adjusted gross income thresholds that trigger Medicare's income-related monthly adjustment amount (IRMAA).

For 2026, surcharges run $70 to $419.30 per person monthly on Part B and $12.90 to $81 on Part D.

IRMAA is based on income from two years prior, so a large benefit claimed at 70 plus other income could push you above a threshold and add thousands annually to Medicare costs.

The opportunity: Model your income in your late 60s and early 70s to spot IRMAA cliffs. If delaying to 70 would push you slightly above a threshold, claiming at 69 — or funding expenses from Roth or cash reserves — might keep you below it. Advisers with tax-planning software can model the tradeoffs.

The holistic approach

Optimizing your claiming age for taxes isn't separate from optimizing for longevity or income — it's one part of a retirement tax plan that considers:

• When and how much to withdraw from IRAs
• When to convert to Roth and how much
• When to realize capital gains
• When to claim Social Security
• How to structure income to limit Medicare surcharges
• Whether income bunching or smoothing makes sense

Done well, this compounds meaningfully over a 30-year retirement. The worst approach is claiming based solely on when you need the money; the best is modeling scenarios with an adviser three to five years before you claim, while you can still position assets and income efficiently.

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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 from readers on tax breaks for victims of hurricanes, tornadoes, wildfires,and other federally declared disasters. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Extended tax relief for an uninsured car

Question: I live in the Midwest, and my car was totaled by a tornado earlier this year. I didn't have insurance. Can I deduct the damage to my car on my Form 1040?

Joy Taylor: Yes, you should be able to. Individuals can deduct personal casualty losses that are not reimbursed by insurance to the extent those uninsured losses are attributable to federally declared disasters which affect a wide area. Your loss is equal to the smaller of the damaged property's adjusted basis or decline in value, less any insurance proceeds you receive or expect to receive.

Before the Senate left for its August recess, it approved a House-passed bill that extends tax relief that was given to victims of disasters that occurred in 2020 to mid-2025. The legislation applies to disasters beginning before January 1, 2027. We expect President Trump to sign this bill within the next few weeks.

It allows individuals to deduct uninsured personal losses in excess of a $500 threshold without regard to the offset —10% of adjusted gross income (AGI) — that generally applies. This tax break is available for taxpayers who claim the standard deduction and filers who itemize on Schedule A. The IRS refers to these losses as "qualified disaster losses."

2. Deducting disaster losses in a prior year

Question: My home suffered damage in a federally declared disaster a couple of months ago. I heard I can deduct the loss on my 2025 Form 1040, even though the disaster occurred in 2026. Is this true?

Joy Taylor: Yes. Individuals can opt to take a loss for the disaster year or the year immediately preceding the disaster. Since the disaster damaged your home this year, you can claim the loss on your 2026 return or your 2025 return, which gives you flexibility to claim the loss in the year that delivers the greatest benefit.

If you decide to claim it for 2025 and you have already filed your 2025 return, you can amend your tax return by filing Form 1040-X. Note: For this purpose, the filing due date for a 2025 amended return is six months after the normal due date for filing your return (without extensions) for the year in which the loss took place. So for 2026 disaster losses, you would need to file an amended 2025 return by October 15, 2027.

3. IRS safe harbors for calculating the disaster loss

Question: A wildfire damaged my home and lots of personal items earlier this year. Does the IRS provide any help for taxpayers who are trying to figure out what losses they can deduct on their Form 1040?

Joy Taylor: Yes. Computing the amount of loss to your home or belongings can be difficult. Luckily, the IRS has multiple safe harbors to help you with this calculation.

For example, one method lets a homeowner with casualty losses of $20,000 or less take the lesser of two repair estimates to determine the decrease in the home's value. Another has a table to compute the replacement cost of personal belongings destroyed in the federally declared disaster.

You can find out more about these safe harbors in IRS Publication 547 and IRS Revenue Procedure 2018-08.

4. Lost tax returns and calling the IRS

Question: My house was destroyed in a wildfire. I lost all of my prior-year tax returns. How can I replace them?

Joy Taylor: Individuals who lost prior-year tax returns in a hurricane, fire or other disaster have multiple ways to get a tax transcript, which is a summary of key tax information.

• You can view, print or download your tax transcript in your IRS individual online account if you have one.
• You can call the IRS’s automated phone transcript line at 800-908-9946 and follow the prompts or mail Form 4506-T to the IRS.
• You can get a paper copy of your full return by mailing Form 4506 to the IRS, but that would take much longer.

The IRS has a dedicated phone line for disaster-related questions. That number is 866-562-5227. The agency also has FAQs for disaster victims on its website.

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: Estimated Tax Payments and Withholding
• Ask the Editor: Questions on Selling a Home
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Tax Rules for Landlords

Passing down your life savings shouldn't require surrendering thousands of dollars to court fees and probate lawyers. Yet every year, millions of families watch their inheritances chipped away by those costs.

To bypass the costly court process, some households turn to a trust.

It sounds simple enough — until you look at the price tag. With trust setup costs routinely running into the thousands, plus a dizzying choice between revocable and irrevocable options, it's easy to wonder:

Is a trust worth the headache, or is a basic will enough?

The short answer: it depends.

While an irrevocable trust can shield your wealth from taxes and nursing home costs, its legal complexity and ongoing maintenance fees might not suit your family.

On the other hand, a revocable trust can spare your kids the nightmare of probate court, but paying higher setup costs upfront doesn't always guarantee a net payoff for smaller inheritances.

We'll break down the differences between wills and trusts, what each really costs, why your state's laws change the math and how to choose the option that leaves the most money for your heirs.

Wills vs revocable and irrevocable trusts: Key differences

Before we dive into the numbers, let's start with the structural differences between a standard will, a revocable trust and an irrevocable trust.

Key differences are highlighted in the table below.

*Changes might be made easier by an independent trustee through a process of "decanting" — pouring assets from an old trust to a new one with approval — if your state allows.

**However, if you have a "grantor trust," the creator of the trust still pays the taxes on their personal return, thus potentially saving some money.

As you can see from the table, one of the general main advantages of a fully funded trust is skipping probate court.

• This can save your heirs time, keep legal filings private and prevent your personal estate details from entering public record.
• In addition to these benefits, an irrevocable trust removes assets from your taxable gross estate, shielding wealth from transfer taxes and potential creditors.
• If you anticipate needing long-term care (e.g., a nursing home), an irrevocable trust (such as a Medicaid Asset Protection Trust) can safeguard your savings while helping you qualify for government assistance, provided it's established well outside Medicaid's look-back window.

All those advantages come with one big disadvantage: Higher upfront costs.

You'll typically pay higher legal and accounting fees to set up your trust than you would for a standard will. The key question for most families is whether paying those higher fees today will save their heirs enough in court costs and taxes down the road to make the investment worthwhile.

How much do wills and trusts really cost you?

From a purely financial standpoint, the cost-benefit analysis of a trust hinges on location, estate complexity and overall asset value.

For instance, an estate that passes through a standard will might undergo probate for some or all its assets. Probate expenses (court and attorney fees and filing costs) generally run 3% to 8% of the probate estate's gross value, according to industry-wide averages.

But if your assets pass automatically through joint ownership or designated beneficiaries (such a 401(k) or IRA), probate might be minimal or bypassed entirely.

Below is a cost comparison showing what you might pay today vs what your heirs could pay later if you chose a will vs a trust. The data is compiled from nationwide legal surveys, consumer finance benchmarks and historical probate data.

Note: The table utilizes national averages for probate and administrative costs, not estate tax rates. Exact numbers vary depending on your geographic location, state laws, attorney rates and complexity of assets.

Households who opt for a revocable trust might do so to pay a larger amount upfront today to help save their kids from paying thousands in probate fees decades later.

But the savings aren't quite as high as you might think. Consider these facts, assuming a standard 2.5% to 3% long-term inflation rate, and an estate worth roughly $300,000 to $400,000.

• If a revocable trust saves your kids $15,000 in probate fees 30 years from now, those future savings might only be worth roughly $6,000 to $7,000 in today's dollars.
• If you paid $2,000 in setup costs today to save a net $5,000 in inflation-adjusted dollars down the road, it's still a win — but it's not the huge $13,000 windfall it would appear to be on paper.
• Whether those net savings of $5,000 justify the upfront effort and expense depends on your family’s priorities, estate complexity, and location.

Why where you live matters

Federal estate taxes typically only apply to very high-net-worth individuals ($15 million per person in 2026). However, individual state laws can dramatically alter the math for average-income families.

First, a handful of states impose their own estate or inheritance taxes with much lower thresholds. Second — and more commonly — probate fees, legal mandates, and court procedures vary widely from state to state.

That's why where you live (and die) matters to your heirs.

To see how this works, consider the following scenario.

A parent passes away, leaving $100,000 in non-real-estate probate assets to a child serving as an executor. In one scenario, the parent lived in Florida. In another, they lived in Missouri.

Note: The example provided represents averages and is not indicative of a particular taxpayer's financial situation.

In the table, the heir can save $3,355 more in Florida compared with Missouri. Why? There's a specific state rule about inherited personal property in the Show-Me State.

Under Missouri law, the threshold to file a simplified small estate return is capped at $40,000. That means the heir is forced into a standard, full court-supervised administration (the $3,300 in attorney fees).

Conversely, Florida allows a $100,000 estate to bypass the traditional court-supervised administration via Summary Administration (which applies to nonexempt personal assets up to $150,000 and exempt primary homestead property), meaning the heir can avoid formal executor appointments and ongoing court oversight entirely.

Meanwhile, in higher-cost states such as California or New York, statutory attorney fees and executor commissions can push probate expenses significantly higher, making revocable trusts far more attractive than standard wills in those states.

Do tax benefits outweigh the setup costs?

It depends entirely on your estate size and which type of trust you choose.

Revocable trusts vs wills.
A revocable trust or a standard will offers no direct income tax savings during your lifetime (beyond basic inheritance tax rules). Any income generated by assets inside either flows to your personal tax return (Form 1040) using your standard individual tax brackets.

From an annual tax perspective, a revocable trust and a standard will are treated almost identically. Don't expect to recoup your upfront setup costs through annual tax savings; they simply don't exist for wills and revocable trusts.

Irrevocable trusts.
An irrevocable trust offers structural estate tax savings by removing assets from your taxable personal estate. However, that benefit comes with two important annual tax trade-offs:

• Compressed tax brackets. If an irrevocable trust retains income rather than distributing it to beneficiaries, that income might be subject to the top federal tax bracket at much lower thresholds than an individual return. As a result, maintaining an irrevocable trust (non-grantor) can actually lead to higher annual taxes, even if it lowers the overall tax burden for your heirs when you pass away.
• Recurring maintenance costs. Because trust assets are legally separate from your estate, you must file a separate annual fiduciary tax return (Form 1041). This adds recurring accounting expenses every year.

Typically, irrevocable trusts make the most financial sense if your total net worth exceeds the federal estate exemption (over $15 million in 2026), if you live in a state with high death taxes, or if you need to protect assets from creditors or long-term care costs. In those specific scenarios, the long-term tax and asset protections can outweigh the setup and maintenance fees.

How to save your kids the most money

Ultimately, whether a trust or a will saves your kids the most money depends on high-end estate and gift taxes, as well as how you want to approach probate.

Here are a few sample scenarios outlining when a will vs a trust could be more beneficial for you or your heirs:

However, these scenarios don't cover every person's unique financial situation. Before deciding, review your state’s specific inheritance and probate rules, take inventory of how your accounts are titled, and consult a qualified estate planning attorney or tax professional.

This article does not cover state income tax and is for educational purposes only. The content does not constitute financial, legal, or tax advice.

Read More

• How Your Inheritance Gets Taxed: From Stepped-Up Basis to IRA Rules
• Avoiding the Widows' Penalty Tax Trap After a Spouse Passes
• States That Won't Tax Your Death
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?

"Ellen" called me on day 38.

I hear some version of that call every week.

She had sold an apartment building she had owned for 19 years. The closing went smoothly. Her attorney was good, her qualified intermediary was competent, and the proceeds were sitting safely in the exchange account.

The only problem was that she had seven days left to decide what to do with the rest of her life.

She had spent the first 38 days doing what most people do. She toured four buildings. Two were overpriced. One had a tenant problem she did not want to inherit. The fourth was fine, and she did not want it. Every week, the phone rang with someone who had heard she was flush with cash and had something to sell her.

By the time she called me, she was not evaluating anything. She was picking.

That is the 45-day trap. It has almost nothing to do with the calendar and almost everything to do with the sequence.

The two clocks and when they start

A 1031 exchange runs on two timers, and both start on the same day: The day you transfer the property you are selling.

You generally have 45 calendar days to identify a potential replacement property in writing, and you must receive the replacement by the earlier of 180 days after that transfer or the due date, including extensions, of your federal income tax return for that year. The IRS lays out the timing in Publication 544.

Now read that first sentence again. The clocks do not start when you find a buyer. They do not start when you go under contract. They start at closing — the moment you have the least attention and energy to spare, because you have just spent three months getting a deal to the table.

These are calendar days. Weekends count. Holidays count. December 25 counts. Day 45 does not move to Monday because it landed on a Saturday. Under the Treasury regulations governing deferred exchanges, the identification generally has to be in a signed writing, describe the property unambiguously and go to a permitted party in the exchange.

A conversation with your broker does not count, and neither does a note to your own accountant or attorney. The rules treat your own agents as disqualified recipients.

Three ways to identify and one way to undo your own work

Most investors know about the 45 days. Far fewer know that how you identify is its own trap.

Those same regulations provide three tests for identifying multiple replacement properties:

• The three-property rule. Identify up to three properties, at any value.
• The 200% rule. Identify any number of properties, as long as their combined fair market value does not exceed twice the value of what you sold.
• The 95% rule. Identify as many as you like at any value, but you must actually acquire at least 95% of the total value identified. This is a rule of last resort, not a planning tool.

Here is the part that costs people money. If you identify four properties and blow past the 200% ceiling, the extra identifications do not simply fall away and leave you with three good ones.

Unless you satisfy the 95% rule, or actually close on the property inside the 45 days, you can be treated as having identified nothing at all, and the exchange can fail. You would learn this in April, from your CPA, about a decision you made in October.

You can revoke or change an identification before the deadline, in writing, delivered to whoever received the original. After day 45, nothing changes. You may only buy from the list you filed.

Anyone can count to three. The failures happen when someone tries to keep options open on day 44 and quietly converts a valid identification into a void one.

The fourth-quarter problem

Here is a deadline almost nobody hears about until it has already cost them.

Your exchange period is not automatically 180 days. It ends on the earlier of day 180 or the due date of your return, including extensions.

Sell in June, and this is academic. Sell in late October or later, and it is not, because that is when day 180 starts landing after your return is due.

A November 15 closing puts day 180 in the middle of May. But if you file your return on April 15 without an extension, your exchange period ended on April 15. You lost roughly a month of runway and, quite possibly, the exchange along with it.

The fix is usually a one-page form. Most individual filers use Form 4868. Filed properly and on time, the extension is automatic, and you do not have to explain why you want it. File it by the original due date and your filing deadline moves to October 15, which pushes the end of your exchange period out past day 180.

The right form depends on how you file your return, whether as an individual, a partnership or a corporation, so confirm it with your CPA.

Two things to be clear about. An extension buys more time to file, not more time to pay. Any tax you expect to owe is still due on the original date. And do not file that return early. Once it is filed, you can no longer obtain an extension for that year, which leaves you capped at the original due date.

If you closed in the fourth quarter, file the extension even if you expect to finish the exchange in February.

Urgency disguises itself as conviction

The mechanical traps are the easy ones. The expensive one is psychological.

I have watched investors grow more certain as the deadline approaches, not because the property improved, but because the cost of walking away became visible. Once a large tax bill is attached to the decision, "I need more time" starts to feel like, "I am choosing to pay the tax." That is a very uncomfortable sentence to say out loud on day 40, so people stop saying it.

What follows is predictable. Contingencies get waived that would have mattered in any ordinary purchase. Capital expenditures get underestimated. Debt gets replaced with financing that is expensive or restrictive, because matching the debt became the only goal.

And the danger is not limited to obviously bad property. A perfectly respectable building can still be wrong for you. A 70-year-old who sold because he was tired of tenants can exchange into a replacement that quietly hands him the same job back. Someone who needs liquidity can defer a tax bill by buying an asset he cannot exit.

A successful exchange is not measured only by whether the tax was deferred. It should leave you owning something you would have bought without a countdown clock.

What to do before you close

The way to manage the 45-day window is to do most of the work before it opens. Before the relinquished property closes, and ideally before it is listed, I would want these six things done:

1. Know what the deferral is actually worth. Have your tax professional model the federal and state consequences, including depreciation recapture. You cannot rationally decide how much risk to accept in exchange for deferral until you know the size of what you are deferring.

2. Set the reinvestment range. Estimate proceeds, exchange equity and how much debt must be replaced to avoid taxable "boot." Decide in advance whether some cash should intentionally be retained and taxed rather than forced into a replacement.

3. Decide which structures are on the table. Directly owned property, passive fractional interests, or some combination. That should be driven by what you want your life to look like, not by what happens to be available in week six.

4. Write down your underwriting standards. Acceptable property types, markets, leverage, hold periods, deal-breakers. A written standard is much harder to negotiate away under pressure than an unwritten one.

5. Prepare more than one path. A primary replacement can fail inspection, financing or the seller. A backup should be something you would be content to own, not a placeholder typed onto an identification form on day 44.

One wrinkle worth knowing: If you identify three properties but intend to acquire only one, ask your qualified intermediary whether the others should be designated as alternates.

Otherwise, after purchasing one property, you may remain entitled under the exchange agreement to acquire the other two, and your intermediary may be unable to release any unspent exchange funds until the exchange period ends.

6. Assemble the team before the sale. The qualified intermediary must be engaged before closing; if the proceeds touch your hands, there is no exchange to salvage. You should not spend the first two weeks of a 45-day window finding the people you need to execute it.

A note on passive replacements

This is usually where Delaware statutory trusts (DSTs) enter the conversation, and because my firm advises clients on DST investments, I want to be careful not to present convenience as suitability.

A DST can come together quickly. You are not negotiating a purchase price or arranging property-level financing, and an open offering can accept an investor quickly. That is exactly why one so often appears late in an exchange.

Chosen deliberately, as part of a plan made before the sale, a passive replacement can be the right answer. Whether a DST fits you at all is a separate question, with its own set of tests.

Chosen at day 43, it is not a plan. It is whatever was available.

If a DST belongs in your exchange, it belonged in the plan before you closed. Not on day 43.

Back to Ellen

Ellen identified three potential replacements on day 44, including a DST, and ultimately invested in the DST on day 71.

The investment worked out. She receives distributions, she no longer fields calls about water heaters, and by any objective measure the outcome was fine.

But she did not choose it. She landed on it. And when she describes the sale now, 19 years of ownership come out in one sentence and the last six weeks take 20 minutes.

The deadline was never really the problem. It is fixed, published and knowable. The problem was that the most consequential financial decision of Ellen's life got made during the seven days when she had the most pressure and the least information.

You generally cannot extend the 45 days. But you can decide how prepared you are when they start.

If you are approaching a sale and want to work through these decisions while you still have time to make them, you can read more about Sera Capital's 1031 exchange planning process. We are a fee-only fiduciary firm and earn no commissions on any investment.

Related Content

• Nearing Retirement and Done Being a Landlord? Here Are All of Your 1031 Options
• Six Risks of Delaware Statutory Trusts in 1031 Exchanges
• I'm a Real Estate Investing Pro: This Is How to Use 1031 Exchanges to Scale Up Your Real Estate Empire
• Why Your Next 1031 Exchange Decision Might Not Be About Taxes (It Could Be About Life)
• A 1031 Exchange May Look Great for You on Paper, But It's Not Just About Taxes

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 more than 40 million people in the United States, federal student loans are an increasingly difficult financial burden to manage.

The high cost of living is part of the problem, but President Donald Trump's second administration has also introduced major student loan repayment changes, including the new Repayment Assistance Plan.

While attention usually focuses on monthly payments, important student loan tax consequences can be overlooked. Some can work in your favor, such as the student loan interest deduction, while others, surrounding tax-filing status or employer benefits, can be complex.

If that weren't enough to worry about, 2026 marks the return of federal taxes on some forgiven student loan debt. Here's more to know about that shift and navigating other student loan "tax traps."

Student loan repayment changes

Before we dive into student loan tax issues, it helps to look at how much the student loan landscape has changed in recent years.

New repayment options took effect on July 1, 2026, including the Repayment Assistance Plan (RAP) and Tiered Standard Plan. Other repayment plans have been restricted, and various rules governing which loans qualify for which plans have also changed.

The Trump administration has also pursued changes involving student loan forgiveness while tightening loan limits for some graduate and professional degree programs and adjusting collections processes.

Those shifts all matter, especially with average student loan monthly payments reportedly hovering around $430.

Avoiding student loan tax traps in 2026

It's important to note that this is not an all-inclusive list of potential tax issues and concerns surrounding federal student loans. It highlights some key concerns merely for educational purposes.

Because every borrower's situation is different, it's important to consult a tax or financial adviser familiar with your situation to determine the best course of action to potentially reduce your tax liability and student loan payment amounts.

1. The student loan 'marriage penalty'

If you’re married with student loans, your tax filing status can affect both your student loan payment calculation and your tax bill. This is especially important this year because of the new federal student loan Repayment Assistance Plan (RAP).

• RAP uses a borrower's income and family information to determine the federal student loan monthly payment.
• For married borrowers, tax-filing status can affect whether the calculation includes a spouse's income.

That creates a potentially significant trade-off for some couples.

Consider a married couple with $100,000 of combined adjusted gross income (AGI), split evenly between the two spouses. If only one spouse has federal student loans, filing jointly would put the couple's full $100,000 of income into the RAP calculation.

Under RAP's payment schedule, that could translate to a base payment of roughly $750 a month. If the borrower files separately instead, only the borrower's $50,000 in income would be used, potentially resulting in a base payment of about $167 per month. That's a difference of roughly $583 a month — or nearly $7,000 a year.

But that lower student loan payment comes with a glitch: Filing separately can increase a couple's income tax bill and generally makes them ineligible for the student loan interest deduction and/or other potentially valuable tax deductions or credits.

The couple would need to compare the potential $7,000 in annual student loan savings with the additional taxes and lost tax benefits of filing separately.

Disclaimer: This is a fictional illustrative calculation, not a prediction of what every borrower of $50,000 or $100,000 will pay. RAP also reduces payments for borrowers with dependents.

Remember:

• Married taxpayers who file separately generally cannot claim the student loan interest deduction.
• Other federal tax credits and deductions can also be limited or unavailable to married couples filing separately.
• That means borrowers shouldn't decide on filing status just by looking only at their student loan payment.

It’s good to consult with a trusted tax professional who can help you select the best filing status for you.

2. Taxes on student loan forgiveness

The idea of having the federal government forgive your student loan debt can be exciting. But if you anticipate having your loan debt forgiven in 2026, that relief could come with tax liability.

Why? A little history: During the pandemic, the American Rescue Plan Act (ARPA) temporarily excluded certain student loan debt discharged from 2021 to 2025 from federal taxable income.

• That broad temporary exclusion expired at the end of 2025.
• As a result, some borrowers whose student debt is forgiven or discharged this year (2026) could face federal income tax on the canceled amount.

Keep in mind: Whether forgiven student debt is taxable at the federal level depends on when and why the debt was discharged and whether a specific exception or exclusion applies.

• For example, the IRS says certain types of forgiveness and discharge remain excluded from federal taxable income, including Public Service Loan Forgiveness, Teacher Loan Forgiveness, and certain discharges due to death or total and permanent disability.
• Borrowers who are insolvent when debt is canceled might also be able to exclude some or all the canceled amount under general cancellation-of-debt rules.

But state taxes can add a wrinkle. States don't necessarily follow the federal tax treatment of forgiven student debt. Whether your state will tax your forgiven student loan amount might depend on the type of forgiveness and whether your state conforms to federal tax law.

If you expect a significant amount of debt to be discharged this year, try to understand the tax treatment before the forgiveness takes place. That might give you time to set aside money, adjust withholding or make estimated tax payments rather than being surprised when tax season rolls around.

3. Overlooking the student loan interest deduction

Student loans aren't all negative for your taxes. One commonly overlooked benefit is the federal student loan interest deduction.

• Eligible borrowers can deduct up to $2,500 of interest paid on qualified student loans during the year.
• The deduction is available even if you don't itemize deductions, although income limitations and other eligibility requirements apply.

The student loan interest tax deduction can be easy to miss because it doesn't reduce your tax bill dollar-for-dollar. Instead, it reduces the amount of income subject to federal income tax.

Your loan servicer generally reports qualifying interest payments on Form 1098-E, Student Loan Interest Statement. But receiving the form isn't enough to establish eligibility for the tax break. Your income, filing status and other circumstances come into play.

The student loan deduction can also interact with the filing-status decision that some married borrowers face.

• Married taxpayers who file separately generally can't claim the student loan interest deduction.
• If you're a couple considering filing separately to reduce an income-driven student loan payment, you should carefully consider the tax trade-offs.

4. Missing out on tax-free employer student loan assistance

Under federal educational assistance rules, employers can provide up to $5,250 a year in tax-free educational assistance, including qualifying payments toward an employee's student loans.

The 2025 Trump/GOP tax law made this student loan provision permanent.

• But there is an important distinction: This isn't a tax deduction an individual borrower can claim on their own.
• The employer must offer a qualifying educational assistance program.

It’s also important to note that employer educational assistance and tuition reimbursement are different.

Educational assistance programs can cover a broader range of expenses, including tuition, fees, books, supplies and student loan repayments. Tuition reimbursement programs, on the other hand, typically cover only tuition and related expenses for courses taken while employed.

Check with your employer if you’re unsure about education-related benefits they do or don’t offer.

5. Skipping retirement contributions while paying student loans

Student loan payments can also affect your retirement savings even if your employer doesn't directly help pay the loans.

Under the SECURE 2.0 Act, employers can treat certain qualified student loan payments as elective deferrals for purposes of making matching contributions to a workplace retirement plan.

That means some borrowers can receive an employer retirement match based on their student loan payments even if they're not making equivalent contributions to the retirement account themselves.

• To qualify, you must be making student loan payments and have a direct legal obligation to repay the loan (guarantors do not qualify).
• Parents paying installments on Parent PLUS loans* taken out for their children's education are also eligible.
• Total matched loan payments and direct 401(k) contributions combined can't exceed the annual federal IRS deferral limit ($24,500 for 2026, excluding catch-up contributions).

The provision could help address an increasingly common financial dilemma: Some people with student loan debt might not have enough money to make student loan payments and contribute enough to a 401(k) to receive an employer match.

As Kiplinger recently reported: "According to the American Institute of CPAs (AICPA), over half (53%) of personal and parent borrowers say student debt directly hinders their ability to save for retirement. For these households, the default reaction may be to reduce or even pause monthly 401(k) contributions."

This is optional for employers. Not every workplace retirement plan offers student loan matching, and the workplace plan's specific rules determine which payments qualify and how the match is calculated.

*Keep in mind that Parent PLUS loans (and consolidation loans containing Parent PLUS loans) are excluded from the Repayment Assistance Plan (RAP). These loans are now generally at $20,000 per year per student (with a $65,000 lifetime limit).

Check your employer retirement plan documents or ask your benefits administrator whether student loan payments qualify for matching contributions.

Related

• A Little-Known Tax-Free Way to Help Pay Your Student Loan
• Don't Miss the $2,500 Student Loan Tax Break
• What's in the 2025 Trump Tax Bill?
• The Silent 401(k) Drain Costing Thousands in Retirement Growth

Since becoming law, the One Big Beautiful Bill Act (OBBBA) has been generating headlines. While much of the conversation revolves around politics, the legislation created new opportunities for retirees to become more strategic with how and when they recognize income.

Significant opportunities for retirees

One of the more significant retirement provisions under the new law is the expanded deduction available to many retirees. But receiving the full benefit isn't automatic. Eligibility is based on your modified adjusted gross income, so withdrawals from traditional retirement accounts, pension income, capital gains and, even Roth conversions can all impact whether you qualify.

That makes coordinating when and how you recognize taxable income especially important. Taking time to plan may help some retirees keep the deduction while also reducing taxes on Social Security benefits.

Retirees may also want to revisit whether Roth conversions are appropriate. Moving money from a traditional IRA into a Roth IRA and paying taxes on the converted amount now may help some retirees reduce future taxable income. This can also create additional future tax flexibility.

The One Big Beautiful Bill Act permanently extends many of today's lower income tax rates, which gives retirees more certainty when evaluating whether converting assets over time make sense with their retirement plan. Combined with the delayed age for required minimum distributions (RMDs) under the SECURE 2.0 Act, many retirees may now have more time to strategically convert portions of their retirement savings before they must start taking withdrawals.

Rather than waiting for RMDs to increase taxable income, converting assets gradually over time may help retirees better manage future tax obligations while staying in a comfortable tax bracket.

Looking ahead

But tax planning isn't just about your taxes right now — it also includes considering how the decisions you make today might affect your spouse, your heirs, and your future decades from now.

A commonly overlooked scenario is the death of a spouse. Despite the fact that a household's income is often reduced after the death of a spouse, the surviving spouse will usually file as a single taxpayer the following year. Because single tax brackets reach higher rates at lower income thresholds than married couples who file jointly, many surviving spouses end up paying more in taxes.

However, taking time to plan strategies like Roth conversions while both of you are alive may help reduce that future tax burden, known as the widow's penalty.

This same principle also applies to estate planning. While many retirees hope they can give their remaining savings to their children or grandchildren, inheriting a large, pre-tax retirement account could also mean inheriting a future tax liability.

This can be overwhelming, especially to an heir who may not have been involved in your plan. However, including tax management strategies in your estate plan can help your loved ones avoid that risk. It may even help preserve more of those assets for future generations.

Take time to create a tax plan

Although it has introduced several new tax opportunities for retirees, the OBBBA alone isn't enough to determine how much you'll ultimately keep.

However, taking the time to make a thoughtful plan, with the help of a professional, can help.

Retirees who coordinate withdrawals and manage taxable income, while considering the long-term impact of today's decisions, may be better positioned to preserve more of their savings for themselves, their families and future generations.

Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor. BWA and Beckett Financial Group are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents.

Related Content

• How the OBBBA Affects Everyday Taxpayers
• 5 Ways the OBBBA Rewards the Midwestern Millionaire
• 3 OBBBA Tax Provisions Wealthy Families Should Act on Now, From a Financial Pro
• Buying an Annuity? Avoid These 3 Classic Mistakes
• Strategies to Optimize Your Social Security Benefits

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.

SpaceX went public in June in what is being called the largest IPO in history, and other large IPOs are not far behind.

Even for investors who don't hold a single share of any of those companies, the past 12 months have been strong. Markets have climbed steadily, with technology stocks leading the way. A lot of people are sitting on gains — and many of them are likely thinking about taxes.

For investors with appreciated stock, that tax exposure also creates a giving opportunity, and a donor-advised fund (DAF) is one of the most effective tools to act on it.

At DAFgiving360, one of the nation's largest DAF providers and where I am the director of the Charitable Strategies Group, we're having these conversations regularly with donors and advisers.

While DAFs have been growing in popularity in recent years, many investors may not realize the role charitable giving can play in their overall tax and wealth management planning. A DAF isn't just a charitable giving vehicle — it can be a tax and investment management tool with significant charitable outcomes.

For anyone holding appreciated non-cash assets such as stock, a private business interest or real estate, donating the assets directly to a DAF can unlock additional funds for charity in two ways:

• You can potentially eliminate the capital gains taxes that would be incurred if the assets were sold first and then donate the proceeds — which can increase the amount available to charity by up to 20%
• You may claim a fair market value charitable deduction for the tax year in which the contribution is made

Why a donor-advised fund is often the right vehicle

Most charities are not equipped to receive stock directly, particularly stock that comes with complexity: Shares subject to lockup restrictions, concentrated positions in newly public companies, equity compensation awards or holdings in private companies.

That's where a DAF becomes even more useful to both the donor and the receiving charity.

A DAF is a 501(c)(3) public charity that accepts the contribution on your behalf, handles the valuation and liquidation of the asset and holds the proceeds in your account.

A donor takes the tax deduction in the year they contribute (if they itemize deductions), and the contribution is invested for tax-free growth — creating additional available dollars for charity.

Then, on their own timeline — this month, next year or over the next few years — donors can recommend grants from the account to the charities they want to support.

DAFs typically have the resources and expertise for evaluating, receiving, processing and liquidating complex non-cash gifts that most individual charities are not equipped to handle.

Generally, the most complex asset contributions can be handled and processed by major DAF sponsors within five days.

You don't have to be an IPO insider for this to matter

The IPO headlines are attention-grabbing, but this strategy applies to anyone holding appreciated stock.

Tech-heavy portfolios, company stock held through an employee purchase plan or brokerage account, equity compensation that is vested over several years — any of these can create the same dynamic: Shares that have grown substantially in value, with a capital gains tax bill waiting whenever the assets are sold.

If you've been holding off on portfolio rebalancing or trimming a concentrated position because of the tax consequences, donating a portion of those shares to a DAF before selling is worth considering.

The tax rules are straightforward. Shares must have been held for more than one year to qualify for the full fair market value tax deduction.

The deduction for appreciated non-cash assets is generally limited to 30% of adjusted gross income in any given year, with a five-year carryover for any amount above that limit.

And all contributions to a DAF are irrevocable — once contributed, the assets belong to the charitable organization that sponsors the DAF.

The flexibility factor

One thing that surprises many donors is how much flexibility a DAF provides. Donors don't need to decide where their money goes before they contribute. Separation between the financial decision and the charitable decision removes a lot of pressure.

Major liquidity events tend to be busy and emotionally complicated. A DAF lets donors make the contribution now, while using their contribution to support both short- and long-term charitable giving goals.

If you have appreciated stock — whether from an IPO, years of market growth, equity compensation or a concentrated position you've been managing — now is the time to start thinking about how your philanthropic goals can align with your overall wealth management goals.

Related Content

• Give More But Pay Less: An Essential Guide to Tax-Smart Charitable Giving in 2026
• What Can a Donor-Advised Fund Do for You? (A Lot)
• Retirees: Put Charitable Gifts in a DAF (and Get a Tax Break)
• How a Donor-Advised Fund Can Slash Your Tax Bill With 'Charitable Bunching'
• How to Donate Your Life Insurance Policy to Charity

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.

Nearly every retirement calculator is built to answer the same question: How far am I from having enough saved to retire?

It's an important question, and if you've spent the last 30 or 40 years investing diligently for retirement, you've probably checked your progress more times than you can count.

Then one day you open your accounts, look at the balances and realize you've hit it. You've reached the number you've been working toward all these years. Naturally, you then ask, "Is it really enough?"

That's not the right question. What you should be asking is, "How will I turn my savings into the paycheck I'll be living on for the next 25 or 30 years?" That conversation is vital but, in my experience, far too few people are having it.

Reaching your number tells you that you've accumulated enough assets to support retirement. It doesn't tell you how prepared you are to make the transition from building wealth to living on it.

You've spent 40 years making one financial decision over and over: How much should I save? Retirement hands you a different set of decisions, starting with how much you can safely withdraw, where your income should come from, how taxes fit in and when to claim Social Security.

Each decision carries consequences that can last for decades. That's a conversation a retirement calculator, or an AI agent, simply isn't equipped to have.

Your portfolio has a new job

Managing your finances may have been relatively straightforward during your working life. You earned a paycheck, spent some of it and invested the rest. When the market dropped, you kept contributing because time was still on your side. If you made a mistake, there was another paycheck coming and another opportunity to recover.

Retiring changes the rules. The day your paycheck stops, your portfolio takes over. You're no longer asking how much you can save. Now you're asking how much you can safely spend.

And here's what surprises many new retirees: Two people can earn the exact same investment return and end up living very different retirements. It's not because of what they invested in, but because of how they withdraw the money.

Your discipline got you most of the way there. A strong market may have carried you across the finish line. We tend to assume the day we hit our retirement number is purely a function of years of disciplined saving, but that's only part of the story.

Here's what people easily overlook. A strong bull market may have helped push your portfolio over your retirement goal, but that doesn't necessarily mean it's the ideal time to retire.

If markets weaken just as you begin drawing income, those early retirement years can have an outsized impact on how long your savings last.

That doesn't mean retiring after a strong market is a mistake, or that you should wait around for "perfect" stock market conditions. No one knows when those will arrive.

It does mean that hitting your retirement number shouldn't automatically trigger your retirement date. It should trigger a different question: Not "Can I retire?" but "How should I retire?"

Your savings are only half the story now

Consider two couples who both retire at age 67 with $2 million saved. They invest the same way, earn the same returns and spend the same amount every year. The only difference is how they generate retirement income.

One couple simply withdraw money as they need it. The other intentionally coordinate withdrawals, Roth conversions and Social Security claiming to manage taxes over time.

Twenty-five years later, the second couple could realistically end up with hundreds of thousands of dollars more in after-tax wealth — not because they earned higher investment returns, but because they kept more of what they earned.

Research on retirement income planning has consistently shown that coordinated withdrawal strategies can add significant lifetime value for many affluent retirees. The exact benefit varies from household to household, but one point is remarkably consistent: How you withdraw your money can matter almost as much as how you invested it.

Ignoring withdrawal planning doesn't just cost you a little at the margins. It can blindside you years later, at exactly the wrong time.

Consider what's known as the widow's penalty. A married couple filing jointly enjoy lower tax brackets and a larger standard deduction. When one spouse dies, the survivor typically loses the smaller of the two Social Security checks, but required minimum distributions (RMDs) often remain largely unchanged because the retirement accounts themselves haven't disappeared.

Now much of that same income is taxed using the narrower single-filer tax brackets, while Medicare premium thresholds become much easier to exceed.

The result? It's entirely possible for a surviving spouse to pay tens of thousands of dollars more in lifetime taxes than they would have if the couple had gradually converted some of their traditional IRA to a Roth during the lower-income years they shared together.

Nobody made a bad investment. Nobody timed the market poorly. They simply never looked ahead and asked what their tax picture might look like after one spouse was gone.

There's another cost to not having a retirement income plan — and this one is emotional.

According to a 2025 survey from the Employee Benefit Research Institute, more than three-quarters of retirees say they could actually afford to spend more freely than they do. Yet nearly half admit they continue to hold back because they're afraid they'll eventually run out of money.

Imagine spending 40 years building your retirement savings, only to spend the next 30 afraid to use them.

That's the real cost of not knowing exactly where your retirement paycheck is coming from each month.

If you've just hit your retirement number, celebrate it. You've earned that moment. But before you decide today's the day to retire, take the time to pressure-test the income plan that will support the next 25 or 30 years of your life.

That's where a knowledgeable, fee-only retirement income adviser can make an enormous difference.

Reaching your retirement number answers one important question: Have I saved enough? Retirement immediately asks another: Do I know how to live on it?

Those are two very different questions, and the second one deserves every bit as much attention as the first. That's where retirement planning becomes far more interesting — and far more valuable.

Related Content

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• Do You Believe You Can't Retire? You Need to Read This

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 from readers on tax breaks for buying a vehicle, using a vehicle in your business and more. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Is there still an EV credit?

Question: I am planning to buy an electric vehicle for personal use. Can I get a federal income tax credit for buying the car?

Joy Taylor: No. Unfortunately, the electric vehicle tax credit has expired. The up-to-$7,500 tax credit for buying a new EV and up-to-$4,000 tax credit for buying a used EV expired for vehicles bought after September 30, 2025. Last year's One Big Beautiful Bill repealed this popular tax break.

2. What's the IRS's standard mileage rate?

Question: I am a self-employed real estate agent, and I use my car in my business. Each year, on Schedule C of Form 1040, I claim the IRS's standard mileage allowance as a deduction for my business driving. What is the standard mileage rate for 2026?

Joy Taylor: This year, calculating your mileage expense using the IRS's standard mileage rate is a bit more complicated than normal. For your business driving from January 1 through June 30, the rate is 72.5¢ per mile. The rate increases to 76¢ a mile for business driving from July 1 through December 31. The IRS opted to increase the standard mileage allowance due to higher gas prices at the pump caused by the U.S. war with Iran.

Note that the IRS also increased the standard mileage rate for medical travel to 23.5¢ a mile for the last six months of 2026. The rate is 20.5¢ a mile for January 1 through June 30, 2026.

3. Bonus depreciation for buying a new business vehicle

Question: I am self-employed and am planning to buy a new vehicle this year that I will use 100% in my business. Can you please tell me what tax breaks I might be eligible for by purchasing the auto?

Joy Taylor: Buyers of business vehicles get generous tax breaks, such as the following:

• If you buy a heavy SUV used for business and place it in service after January 19, 2025, then you can write off the full cost of the vehicle because of 100% first-year bonus depreciation.
• If you buy a big truck and put it into use this year, you can expense up to 100% of the cost (subject to the limit that the total amount expensed cannot exceed the taxable income from your business).
• For other passenger automobiles bought and placed in service this year, you can take annual depreciation deductions. With bonus depreciation, you can deduct up to $20,300 in 2026, $19,800 in 2027, $11,900 in 2028, and $7,160 in each year thereafter. Absent bonus depreciation, you can deduct up to $12,300 in 2026, $19,800 in 2027, $11,900 in 2028 and $7,160 in each succeeding year.
• If you finance the purchase of your business vehicle, you can deduct the interest that you pay each year on Schedule C.
  
  Read more: Tax breaks for the self-employed.

4. Deductions when buying an auto for personal use

Question: I bought a car earlier this year for personal use. I took out a loan from the auto dealership to finance the car. Can I take a tax deduction for the interest that I pay each year on the loan?

Joy Taylor: It depends. Last year's One Big Beautiful Bill gave individuals a temporary deduction of up to $10,000 a year for interest paid on loans to buy a new vehicle for personal use. This break kicked in for 2025 tax returns filed this year and ends after 2028, unless lawmakers agree to extend it. It is available to people who itemize on Schedule A of Form 1040 and to those who claim standard deductions. Filers use Part VI of Schedule 1-A to figure the deduction. There are several requirements to take this deduction:

• Only interest paid on the purchase of a new qualified passenger vehicle is eligible for the deduction. A qualified passenger vehicle is a car, minivan, van, SUV, motorcycle, or pickup truck with a gross vehicle weight rating of less than 14,000 pounds.
• Final assembly of the vehicle must take place in the U.S.
• The vehicle must be bought for personal use.
• You must purchase the vehicle in 2025 or later. So, for example, if you financed the cost of a vehicle that you bought in 2024 for personal use, you cannot deduct the interest that you pay on the car loan.
• You cannot deduct interest paid on a loan to buy a used vehicle.
• The tax write-off begins to phase out at modified adjusted gross income (AGI) over $200,000 on joint returns and $100,000 on other returns and ends at modified AGI above $250,000 on joint returns and $150,000 on others. Modified AGI is AGI shown on line 11 of the Form 1040 plus any foreign earned income exclusion, foreign housing exclusion, and certain income excluded because it was received from sources in Puerto Rico, Guam, American Samoa or the Northern Mariana Islands.
• The lender must file an information return with the IRS reporting the amount of interest received from the buyer of the vehicle and send a copy of that return to the purchaser. Note that the IRS provided some transitional relief on this requirement for 2025.

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: Estimated Tax Payments and Withholding
• Ask the Editor: Questions on Selling a Home
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Tax Rules for Landlords

For homeowners facing steep property tax bills alongside high housing costs, the state and local tax deduction (SALT) might offer some federal tax relief in 2026 — especially for those in high-tax states who itemize their deductions.

The SALT deduction is larger than before 2025, and this year's limit gets another increase due to scheduled inflation adjustments. These changes could allow some taxpayers to deduct substantially more of their property and state income taxes than they could under the $10,000 cap that had been in place for years.

Here's more to know.

New SALT tax deduction 2026 limit

The SALT deduction allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income.

For the 2026 tax year, taxpayers who itemize can deduct up to $40,400 in qualifying state and local taxes. The limit is $20,200 for married couples filing separately

That's a $400 increase from the $40,000 limit that applied for the 2025 tax year.

• The deduction can include qualifying state and local income taxes, sales taxes and property taxes, subject to the overall limit.
• Taxpayers generally can deduct either state and local income taxes or sales taxes, but not both.

The expanded limit is particularly notable for homeowners because property taxes can account for a significant portion of the annual cost of owning a home. Under the old rules, taxpayers could be limited to a $10,000 SALT deduction even if they paid far more in state and local taxes.

Higher-income SALT deduction phaseout

But keep in mind that the $40,400 deduction isn't available in full to every taxpayer.

• For 2026, the expanded SALT deduction begins to phase down when modified adjusted gross income (MAGI) exceeds $505,000, or $252,500 for married couples filing separately.
• The deduction is reduced by 30% of the amount by which income exceeds the applicable threshold.
• The reduction can't push the SALT deduction below $10,000, or $5,000 for married couples filing separately.

That means some higher-income taxpayers can still claim a SALT deduction, even after the expanded portion of the benefit has phased out.

You must still itemize

The higher SALT cap doesn't mean every homeowner gets a $40,400 tax deduction. (SALT is an itemized deduction, so taxpayers need to compare their itemized deductions with the standard deduction.)

For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.

For some homeowners, property taxes, combined with state income taxes, mortgage interest and other deductible expenses, could make itemizing worthwhile. For others, the standard deduction might still provide the larger tax benefit.

And remember: A tax deduction isn't a dollar-for-dollar reduction in taxes. It reduces the amount of income subject to tax.

The big SALT change came in 2025

The 2026 $40,400 SALT cap is part of a temporary expansion created by the Trump/GOP 2025 tax law overhaul.

First, a little background: Before 2018, there was no limit on the amount that could be deducted. But the 2017 Tax Cuts and Jobs Act (TCJA), also known as the "Trump tax cuts," imposed a $10,000 SALT deduction cap ($5,000 for married individuals filing separately) from 2018 through 2025.

In his second term as president and amid political debate about the cap being too low, Donald Trump called for increasing the SALT deduction limit. The SALT cap increased from $10,000 to $40,000 for 2025 and is scheduled to increase by 1% each year through 2029. The income threshold for the phaseout also increases by 1% annually.

Under current law, the SALT cap is scheduled to be:

2025: $40,000

2026: $40,400

2027: $40,804

2028: $41,212

2029: $41,624

2030: $10,000

*Income phase-outs for each of those years will also adjust accordingly.

Beginning in 2030, if Congress doesn't act with new legislation, the SALT deduction cap is scheduled to return to $10,000 for most taxpayers and to $5,000 for married couples filing separately.

Other homeowner tax breaks to know

SALT isn't the only federal tax break that might help offset some of the costs of owning a home.

Mortgage interest: Homeowners who itemize generally can deduct interest paid on qualifying mortgage debt, subject to federal limits. Interest on a home equity loan or line of credit can also qualify when the money is used to buy, build or substantially improve the home.

Mortgage points: Points paid on a mortgage used to buy or substantially improve a primary residence might be deductible, subject to IRS requirements.

Home sale gains: Homeowners who sell a primary residence at a profit might be able to exclude up to $250,000 of the gain, or up to $500,000 for married couples filing jointly, if they meet the ownership and use requirements.

Homeowner tax breaks that don't carry into 2026 are the federal credits for energy-efficient home improvements. The 2025 tax law ended the Energy Efficient Home Improvement Credit and Residential Clean Energy Credit for qualifying activity after December 31, 2025.

Related

• Federal Tax Brackets 2026 and Marginal Rates
• Capital Gains Tax Exclusion for Homeowners: How It Works
• The Mortgage Interest Deduction: What to Know
• New Bill Proposes $1 Million Capital Gains Exclusion for Homeowners 65-Plus

Back-to-school brings a familiar cash-flow crunch for parents. Between upcoming college tuition bills, essential supplies, and student loan obligations, families face tough financial trade-offs.

One of the costliest compromises is saving less for later in life.

According to the American Institute of CPAs (AICPA), over half (53%) of personal and parent borrowers say student debt directly hinders their ability to save for retirement. For these households, the default reaction may be to reduce or even pause monthly 401(k) contributions.

However, scaling back 401(k) savings may trigger a higher income tax bill and forfeit compounding growth — all while causing taxpayers to miss out on federal relief. Here's what you can do.

The hidden tax penalty of pausing 401(k) contributions

AICPA data shows that over 70% of parent and personal student loan recipients are worried about their ability to keep up with payments. To cope with this financial pressure, many borrowers may be quietly cutting back on long-term retirement savings.

But reducing pre-tax 401(k) contributions doesn't just free up cash; it can immediately raise your federal tax bill.

What does that look like in practice?

Suppose a family pauses their $8,000 annual pre-tax 401(k) contribution to pay down student loans.

Because 401(k) contributions lower their adjusted gross income (AGI) dollar-for-dollar, pausing them exposes $8,000 to the following potential tax traps:*

• Tax bracket creep: a higher AGI can push a portion of that income into a higher federal marginal tax bracket (e.g., jumping from 22% to 24%).
• Shrinking loan deductions: the student loan interest deduction (worth up to $2,500) phases out at higher income levels, meaning your tax break shrinks just as your taxable income rises.
• Loss of credits and Roth eligibility: a higher AGI can reduce your eligibility for child tax credits, education credits, and direct Roth IRA contribution limits.

*Note: The exact impact depends on your filing status and overall income.

In short, cutting retirement savings to cover student loans may improve cash flow today, but create a financial headache at tax time.

The SECURE 2.0 solution: the 'student loan match'

While it may feel like an all-or-nothing choice: pay off student debt or capture workplace retirement matching funds, you can actually use federal tax law to achieve both.

Thanks to the SECURE 2.0 Act, some employers now provide matching contributions to 401(k), 403(b), governmental 457(b), and SIMPLE IRA plans based on your qualified student loan payments (QSLPs).

How the rule works:

• To qualify, you must be making student loan payments and have a direct legal obligation to repay the loan (guarantors do not qualify).
• Parents paying installments on Parent PLUS loans taken out for their children's education are also eligible for this match (which may provide much-needed relief, as new caps of $20,000 per year and a $65,000 lifetime limit per student went into effect under the 2025 Trump tax bill).
• Total matched loan payments and direct 401(k) contributions combined cannot exceed the annual federal IRS deferral limit ($24,500 for 2026, excluding catch-up contributions).

Here's an example. Say your employer offers a 4% match on your 401(k), and you contribute at least 4% of your salary toward eligible student loans. Your employer can deposit the full match into your 401(k).

You also don't need to send every bank receipt to HR to qualify. Under IRS guidelines, you only need to provide a simple annual certification confirming your payment amounts and loan details.

The bottom line. You receive 100% of your employer's free retirement match money without putting a single new dollar directly into the 401(k) plan yourself. For more information, check out Kiplinger's report on the SECURE 2.0 Act.

How to find out if your employer offers a student loan match

However, not all companies offer student loan matching. So follow these steps to check your options and protect your budget:

1. Ask HR about "QSLP matching": Review your company's 401(k) plan documents to see whether student loan matching is enabled. Because employer adoption is optional, companies must proactively add this feature to their plan.
2. Scale back to a "micro-contribution" (if unsupported): If your employer doesn't offer student loan matching yet and you can't afford the full match amount, try contributing a small amount to your 401(k). Even contributing just 1% or 2% to a tax-advantaged account is better than nothing.
3. See if you're eligible for the $2,500 interest deduction: Check if you qualify for the federal student loan interest deduction. This tax break helps claw back some of the interest you pay to your loan servicer — and best of all, you can still claim the standard deduction.

Strategies for borrowers to protect retirement funds

If your employer hasn't adopted a 401(k) student loan match, here are some further ideas to help balance retirement savings with your monthly budget.

• Look into income-driven repayment (IDR) plans: An IDR plan bases your federal student loan payments on your income and family size instead of your total debt. This lowers monthly payments for some and may free up extra cash to put toward your 401(k). (Keep in mind: Parent PLUS loans have special rules and may need to be combined into a single direct-consolidation loan first.)
• Explore other tax-free employer assistance: Under Section 127 of the tax code, employers can provide up to $5,250 annually in tax-free student loan repayment assistance directly to employees. Ask your benefits department if this student loan benefit is available.
• Time extra payments wisely: If you have extra cash to save, prioritize capturing your full employer 401(k) match before making accelerated principal payments on low-interest student debt. An employer match represents an immediate 50% to 100% return on your investment, a rate that typically outperforms the interest saved by paying down low-rate loans early.

Managing student debt shouldn't force you to sacrifice your long-term financial security. By taking advantage of federal tax law, you may be able to pay down loans today without putting your retirement on hold.

Read More

• Does Your College Student Really Have to File Taxes This Year?
• Don't Overpay the IRS: 6 Mistakes That Could Be Raising Your Tax Bill
• SECURE 2.0 Act Summary: New Retirement Savings Changes to Know

For many retirees, managing taxes becomes just as important as managing investments. The way income is withdrawn in retirement can have a meaningful impact on how much of that income ultimately stays in your pocket.

While tax laws are complex, certain provisions can create valuable opportunities when used thoughtfully.

One such opportunity, sometimes informally referred to as the Big Beautiful Bill, offers a potential tax benefit for retirees who meet specific income thresholds.

Understanding how it works, and how withdrawals are structured each year, can make a noticeable difference in after-tax income. As a financial adviser and owner of New Smyrna Beach Retirement Solutions with more than a decade and a half in the financial industry, I can help with that.

What is the Big Beautiful Bill?

The Big Beautiful Bill is a colloquial term used to describe the One Big Beautiful Bill Act (OBBBA), a tax law that, among other things, allows eligible retirees to claim an additional deduction when their taxable retirement income stays at or below $150,000 per year.

For individuals age 65 and older, this bonus deduction can help reduce taxable income and lower overall tax liability.