Each week in our Ask the Tax 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. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

Q1. Can you still get a tax credit for an EV charger?

Question: I just bought a Tesla, and I am planning on installing an electric vehicle charger in my home so I can charge my vehicle. Can I get a federal tax credit for installing the charger?

Joy Taylor: No. The EV tax credit expired on June 30, 2026. That means you had to buy the charger and install it in your home by June 30. The federal tax credit is equal to 30% of the cost of equipment and installation of an EV charger or $1,000, whichever is smaller.

Q2. What's the IRS's mileage rate?

Question: What is the IRS's standard mileage rate for business driving for 2026?

Joy Taylor:
- From January through June 2026, the IRS's standard mileage allowance for business vehicle usage is 72.5 cents per mile.
- From July through December of this year, the rate is 76 cents per mile for business driving.

The IRS raised the standard mileage rate mid-year because of the higher gas prices at the pump.

Q3. Federal gas tax

Question: With gas prices so high this year, will Congress suspend the federal gasoline tax?

Joy Taylor: That is unlikely. Some Republican lawmakers have called for a temporary suspension of the (18.4 cents-per-gallon) federal gasoline tax. But many other lawmakers oppose the idea, saying it won't do enough to lower the cost of gas. Others have expressed concern about the already-struggling Highway Trust Fund, which is funded mainly by federal gas tax revenue and faces financial pressure.

Q4. Are online sports betting winnings taxable?

Question: I participate in online sports betting, specifically fantasy football. Are my winnings taxable?

Joy Taylor: Yes. Winnings from online sports betting are taxable as gambling income. This is true whether you are playing in fantasy sports leagues, in which cash prizes are based on the performance of professional athletes, or you are betting on the outcome of a particular event, such as the Super Bowl or a basketball game.

You report winnings on Schedule 1 of Form 1040. If you itemize on Schedule A, you can deduct gambling losses, but the write-off is limited to the lesser of (1) 90% of the losses or (2) the winnings from gambling.

Some gamblers can file Schedule C if their gambling activity is extensive enough to rise to the level of a trade or business, but this can be a tough hill to climb.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts in this Q&A series are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not, and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

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• Ask the Editor Archive
• Ask the Editor: Will I be Audited by the IRS?
• Ask the Editor: Is It a Hobby or a Business?
• 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 many years, sunshine, sandy beaches, great golf courses, warm year-round weather and exclusive luxury communities drew an influx of new residents to Southwest Florida and Tampa Bay.

It has also become more than just a paradise for sun seekers. The "best" coast is now one of the most desirable destinations for high-net-worth individuals looking to relocate — not only for its exceptional lifestyle but for financial reasons, as well.

This area of Florida has emerged as a strategic destination for wealth preservation and long-term financial planning. Favorable tax policies, strong asset protection laws and a business-friendly environment are attracting entrepreneurs, executives, investors and multigenerational families, seeking to optimize both their quality of life and financial future.

No state income tax

Florida has welcomed more than 2 million new residents in the past decade, which has led to significant job growth and created a powerful influx of capital, entrepreneurship and wealth migration.

The state's absence of a personal income tax continues to be a significant driver of relocation decisions, particularly among individuals whose income is derived from asset growth, liquidation events and investment returns.

As many affluent families evaluate their income tax exposure and state of residency, this can have a meaningful impact on overall wealth preservation and financial planning.

For investors, this tax advantage can enhance cash flow, improve capital retention and provide greater flexibility when pursuing investment opportunities, charitable giving and succession planning.

Homestead exemption can save thousands

If someone is considering making Florida their domicile state, there are several financial advantages to consider.

Residents of all states are subject to federal income tax, but Florida residents enjoy no state income tax, estate tax, inheritance tax or intangible tax. This usually means tax savings on IRA withdrawals, pensions, annuities and employment income. However, if you own assets or derive income in or from another state, you might still be subject to income and estate tax in that state.

For example, a Wisconsin resident making more than $280,950 pays a state income tax of 7.65% over and above the federal income tax. A Florida resident's savings in this case is more than $20,000. IRA withdrawals are considered income, too.

Florida residents also enjoy property tax savings and Florida homestead creditor protection. Making your Florida home your homestead with the property tax assessor can lead to a $50,000 reduction in the taxable assessed value of your home.

In addition, the Save Our Homes Property Assessment Cap (PDF) limits the increase in your home's assessed value to no more than 3% annually — regardless of that year's actual appreciation. There are even portability provisions if you sell your home and acquire a new one.

More money to heirs

For high-net-worth families, Florida's absence of a state estate tax and inheritance tax can offer a significant advantage in preserving and transferring wealth. Florida permits a greater portion of a family's wealth to pass to beneficiaries without state-level taxation, which can be particularly valuable for families with substantial investment portfolios, business interests, real estate holdings and other significant assets.

The resulting tax efficiency can also support long-term portfolio growth by allowing more capital to remain invested rather than being directed toward state tax obligations. Over multiple generations, these savings might compound substantially, enhancing overall family wealth and providing greater flexibility in estate and succession planning.

The Florida wealth management industry is well equipped to assist families with sophisticated investment management, trust administration, financial planning, wealth transfer strategies and multigenerational guidance.

A strong housing market

Tampa Bay and Southwest Florida are attractive locations for long-term real estate investments. Several factors driving high-net-worth individuals to invest in real estate include:

Continued population growth. From Tampa to Marco Island, the broader Gulf Coast corridor has experienced substantial population growth during the past decade, with six regional counties collectively increasing from roughly 3.2 million residents in 2015 to more than 4.0 million in 2025 — an increase of approximately 25%.

Limited coastal land. As affluent individuals and businesses continue relocating to the region, demand for premium properties is increasing while available land remains constrained. This supply-demand imbalance can support long-term property appreciation, pricing strength and wealth preservation for strategically positioned investors.

Strong tourism and rental demand. Despite several hurricanes, tourism numbers have increased significantly since COVID. Southwest Florida International Airport (RSW) reported a record 11.15 million passengers in 2025, marking the busiest year in the airport's history.

Ongoing redevelopment and reinvestment. Southwest Florida continues to appeal to affluent buyers because of its new luxury residences, upgraded properties and modern community amenities, which elevate market desirability. Meanwhile, infrastructure improvements can strengthen resilience to climate-related risks. These enhancements might also support long-term property appreciation, premium rental rates and stronger demand from financially stable, long-term tenants.

The bottom line

Florida's Central and Southwest Florida coastlines have evolved into far more than premier lifestyle destinations. They offer a distinctive combination of financial, legal and lifestyle advantages that resonate with high-net-worth individuals and families.

The absence of a state income tax, favorable estate planning environment, robust homestead protections and strong real estate fundamentals create a compelling framework for wealth preservation and long-term financial stewardship.

Coupled with a desirable quality of life and an increasingly sophisticated business and investment ecosystem, the region has established itself as a leading destination for those seeking to align their personal, family and financial objectives within a single strategic location.

Hood Craddock, CPA, is director of family office services at Florida Trust Wealth Management in Tampa Bay and relationship manager for many families. He specializes in serving clients with complex estates, alternative and special assets and real estate investments including development.

James McArthur is executive vice president on the family office services team at Florida Trust Wealth Management in Tampa Bay. He has more than 30 years of experience in management consulting, family office counseling, restructuring, special situations, turnarounds and commercial finance.

Related Content

• Florida Tax Guide
• The Real Cost of Retiring in Florida: Insider Tips for Newcomers From a Wealth Adviser Who Lives There
• Why Do People Retire to Florida? 9 Things You Must Know
• Thinking of Retiring to Florida? These Hidden Costs Could Drain Your Budget
• Retirement Location, Location, Location: Can Florida Be Beaten?

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

The IRS has released the 2027 standard deduction amounts you'll use for your 2027 tax return — and they're higher than ever.

The federal tax agency adjusts these amounts for each filing status every year. Since these adjustments are based on inflation, the standard deduction is higher for 2027 than in recent years.

Knowing the standard deduction for your status can help you determine whether you should plan to itemize or claim the standard deduction next year.

Here's more to know.

The standard deduction amount for 2027 (Returns normally filed in 2028)

2027 standard deduction age 65 and older 

Taxpayers age 65 and older, as well as those who are blind, can claim an additional standard deduction. For 2027, that additional amount is $1,700 ($2,100 if unmarried and not a surviving spouse).

Those eligible can add the extra standard deduction to the regular amount for their filing status. A single taxpayer 65 or older (or who is blind) can claim a total standard deduction of $18,700 on their 2027 federal tax return.

Additionally, as Kiplinger has reported, the 2025 Trump tax bill introduced a new bonus standard deduction of $6,000 for those age 65 and older.

This can be added to the 2027 standard deduction for each eligible individual and can be claimed by those who itemize.

However, the "bonus" amount is temporary and phases out for incomes above certain thresholds.

Standard deduction if you're claimed as a dependent

Your standard deduction amount might differ if you can be claimed as a dependent on another taxpayer’s federal tax return.

The 2027 standard deduction for dependents is limited to either $1,400 or the sum of $500 and the dependent's earned income, whichever is greater.

Note: The standard deduction for dependents cannot exceed the regular standard deduction for your filing status, even if your earned income is higher than the basic standard deduction amount.

What's the highest standard deduction amount possible?

Given the new senior bonus deduction, the existing extra standard deduction for those over age 65, and changes to the base standard deduction, the highest possible 2027 standard deduction amount is a whopping $48,600.

That amount is for married couples filing jointly who are both age 65 or older, qualify for the bonus deduction, and can claim the extra standard deduction for both spouses.

For more information on how to calculate your total standard deduction, see: The Extra Standard Deduction for People Age 65 and Older.

Read More

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• 3 Popular Tax Breaks Are Gone for Good
• New IRS 2027 Tax Brackets Are Set

The IRS has finally released the federal income tax brackets for 2027, giving taxpayers a clearer picture of how much taxable income they can have next year before moving into a higher tax bracket.

The tax rates remain unchanged, but the income thresholds for the seven federal tax brackets have increased as part of the IRS's annual inflation adjustments.

That means some taxpayers may be able to earn more in 2027 without being pushed into a higher marginal tax bracket.

Here's a closer look at the new brackets and corresponding marginal rates.

2027 federal income tax brackets

The federal income tax brackets determine how much tax you pay on different portions of your taxable income. The tax system is progressive, meaning higher rates apply only to the portion of income that falls within each bracket.

Here are the new IRS inflation-adjusted thresholds for 2027 (returns you'll typically file in early 2028).

New 2027 Tax Brackets: Single Filers and Married Couples Filing Jointly

New 2027 Tax Brackets: Married Couples Filing Separately and Head of Household Filers

The seven federal income-tax rates remain 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The annual adjustment changes how much taxable income falls into each bracket, not the rates themselves.

Tax brackets are also marginal. If your taxable income falls into the 22% bracket, you don't pay 22% on all of your taxable income. Instead, different portions of your income are taxed at different rates.

For example, if you're a single filer in the 22% bracket, only the portion of your taxable income that falls within the 22% bracket is taxed at 22%. The income below that threshold is taxed at the lower applicable rates.

Why the 2027 tax brackets are higher

The IRS adjusts many tax provisions each year to keep pace with inflation. These annual adjustments are supposed to help prevent "bracket creep," which can occur when wages and other income rise with inflation, but taxpayers don't necessarily have more purchasing power.

Without inflation adjustments, a taxpayer whose income rises with the cost of living could eventually move into a higher tax bracket even though their real economic position hasn't improved.

Higher tax-bracket thresholds can help reduce that effect.

For example, if your income increases in 2027 at roughly the same pace as the inflation adjustment, you may be able to earn more without moving into a higher marginal tax bracket.

That doesn't necessarily mean you'll pay less in taxes. Your actual federal tax liability depends on your taxable income, filing status, deductions, credits, and other factors.

The higher thresholds generally matter most if your income is expected to increase in 2027.

• If your salary, wages, or other taxable income rise by an amount similar to the inflation adjustment, you may remain in the same marginal tax bracket.
• If your income rises substantially faster than the bracket thresholds, however, some of your additional income could fall into a higher bracket.

And of course, the new brackets can also help with tax planning.

Your taxable income determines where you fall within the federal income-tax brackets. That makes deductions, credits, and other adjustments important when estimating your 2027 tax situation.

And because the brackets are marginal, moving into a higher bracket doesn't mean all of your income suddenly gets taxed at the higher rate.

The standard deduction is also higher for 2027

The standard deduction will also increase for 2027 as part of the IRS's annual inflation adjustments. The new standard deduction will be $16,600 for single filers and married individuals filing separately, $33,200 for married couples filing jointly, and $24,950 for heads of household.

The standard deduction reduces the amount of income subject to federal income tax for taxpayers who don't itemize deductions. As with the tax brackets, the annual adjustment helps account for changes in the cost of living.

For more information, see our report: New 2027 Standard Deduction Is Here.

New tax brackets: What to do now to prepare

*These suggestions are provided solely for educational purposes.

Everyone's financial situation is different, so consult a trusted tax professional or financial planner for guidance related to your specific situation.

1. Keep the Tax Year in Mind

First, remember these are the tax brackets you'll use for 2027 tax returns, typically filed in early 2028. You'll need the 2026 brackets for the upcoming 2026 tax season.

With that in mind, the new brackets can help you start thinking about next year's tax picture and whether any planning moves make sense before this year ends

2. Estimate Your Income for Next Year

Start with an estimate of your income next year, including salary and wages, bonuses, investment income, retirement-account withdrawals, business income, and other taxable income.

Then account for deductions and other adjustments to estimate your taxable income.

Comparing that figure with the new brackets can give you a better idea of where you stand and whether you're approaching a higher marginal tax rate.

3. Consider the Timing of Income

If you can control when you recognize income, the new tax brackets may affect whether you take income this year or next year.

This may matter for business owners, investors, and others who can control the timing of certain income.

The best strategy will depend on your circumstances and the type of income involved.

4. Revisit Roth Conversions

A Roth conversion generally counts as taxable income in the year you make the conversion.

If you're considering a Roth conversion next year, the new tax brackets can help you estimate how much additional taxable income you could recognize before reaching a higher marginal rate.

For some taxpayers, spreading conversions over multiple years can help manage the amount of income taxed at higher rates.

5. Review Your Investment Gains and Losses

Long-term capital gains are taxed differently than ordinary income, but your ordinary taxable income can still affect how much of your investment income is taxed.

If you expect significant investment gains or losses, factor them into your broader tax-planning picture rather than looking at your salary alone.

6. Check Your Tax Withholding

If your income or financial situation changes next year, review your federal tax withholding.

The new brackets don't automatically mean you need to change your withholding. But a significant change in salary, bonuses, investment income, retirement withdrawals, or other taxable income could affect whether the amount withheld from your paychecks covers your eventual tax liability.

Stay tuned for more updates from Kiplinger on 2027 tax changes and what they could mean for your taxes.

Related

• 2026 Federal Income Tax Brackets and Marginal Rates
• Capital Gains Tax Rates for 2026
• How Inflation Affects Your Taxes
• Midterm Elections Deliver Split Verdict on Taxes

The 2026 midterm elections brought major political changes that will impact public policy for years to come, but voters also weighed in on a wide range of state tax proposals on the November ballot.

The results were a mixed bag.

Voters approved tax limits and property tax breaks in several states, while other local tax measures failed.

Interestingly, in an election where affordability was often cited as a top issue, voters split on new taxes on high earners proposed in California, Colorado, and Washington state to fund public services.

Here's more to know.

Midterm tax measures reflect competing priorities

For the November 3rd election, tax policy appeared on ballots in 16 states, with around 30 tax-related proposals up for a vote.

Property taxes were the most common subject, accounting for 15 measures in more than seven states. Other proposals addressed income taxes.

For example, in Iowa, voters approved a constitutional amendment requiring a two-thirds vote in both chambers of the legislature to raise individual or corporate income tax rates or establish certain new income taxes.

More than 61% of voters in Arizona approved Proposition 316, a measure capping local grocery taxes at 2% and requiring voter approval before municipalities can impose or increase them.

About 62% of North Carolina voters approved a constitutional amendment lowering the maximum income tax rate the state can impose from 7% to 3.5%.

• The change doesn't automatically reduce the state's income tax rate, which is scheduled to fall to 3.49% in 2027 under existing law.
• Voters in the Tar Heel state also approved a separate measure requiring lawmakers to limit increases in local government property tax levies.

Speaking of property tax, as Kiplinger reported, Florida voters approved Amendment 3, expanding the homestead exemption for qualifying homeowners.

As a result, the additional exemption from non-school property taxes will increase from $50,000 to $150,000 in 2027 and $250,000 in 2028. Inflation adjustments begin in 2029.

Louisiana voters faced 10 proposed constitutional amendments, five of which involved property taxes.

• Louisianans approved several changes, including authorizing local governments to provide an additional property tax exemption for qualifying homeowners age 65 and older.
• The exemption can reach $30,000 in assessed value, depending on the homeowner's age, but local governments must choose to offer it.

Voters there also approved raising the income limit for a property tax assessment freeze to $150,000 for eligible older homeowners, disabled veterans, and surviving spouses. Another new measure allows surviving spouses of disabled veterans to transfer their property tax exemption once when they move.

Note: This is just a sampling of some of the state tax measures and results from the 2026 midterms.

Meanwhile…several other high-profile tax measures raised questions about who should pay more.

Colorado Amendment 87 narrowly leads

Colorado voters considered a significant change to the state's income tax structure.

If approved, Amendment 87 would replace the state's flat 4.4% income tax with graduated rates, lowering taxes for taxpayers with taxable income below $500,000 and increasing them for those above that level.

• The new rates would range from 3.7% on the first $25,000 of taxable income to 8.4% on taxable income above $1 million.
• State officials say the additional revenue would fund K-12 education, healthcare, and early childhood care and education.

As of this writing, votes favoring Amendment 87 were narrowly ahead at 50.5%.

Washington millionaire tax stays

Washington voters favored keeping the state's new 9.9% tax on annual income above $1 million, with approximately 58% of the vote.

Initiative 645 on the November 3 ballot would have repealed the tax and prohibited the state from imposing a broad individual income tax in the future.

The new tax, approved by state lawmakers earlier this year, is scheduled to take effect in 2028. The first tax returns and payments will be due in 2029. The levy is expected to raise billions of dollars for the state.

Note: Washington has long been one of the states without a broad individual income tax. However, it already taxes certain long-term capital gains.

California billionaire tax falls short

A majority of California voters cast ballots against Proposition 40, which would have imposed a one-time 5% tax on the covered assets of residents worth more than $1 billion.

The proposal, also known as the California Billionaire Tax, was intended to raise money for healthcare and other public programs. As of this writing, the latest AP results showed that about 55% of voters opposed the measure.

Worth noting: Golden State voters approved Proposition 3 by nearly 59%, indefinitely extending the state's existing higher income tax rates for top earners to fund education, which had been scheduled to expire in 2031.

Elections 2026: What the results mean for tax policy

Democrats' historic gains could reshape tax policy at both the state and federal levels.

In states where the party gained full control of the governor's office and legislature, Democratic leaders may have more room to pursue tax policies focused on family relief, healthcare support, and funding public services.

In Congress, this year's Democratic victories will give the party control of both the House of Representatives and the Senate beginning in the new year — and a potentially stronger position to influence the federal tax debate.

That could put proposals to raise taxes on high-income households, including billionaires, possibly end Trump-era tariffs, change existing tax breaks, and expand certain tax credits back on the agenda.

However…with President Donald Trump still in the White House, any major tax legislation could face a difficult path. The two parties would have to find common ground to avoid a presidential veto.

Related

• What to Know About Florida's New Homestead Exemption
• Types of Income the IRS Doesn't Tax
• Property Tax 101: What Homeowners Need to Know

For many individuals and families, purchasing life insurance can be an effective way to provide financial security for loved ones.

However, buying the policy is only part of the planning process. An equally important question is, "Who should own the policy?"

While many people own life insurance personally, high-net-worth families may also consider using an irrevocable life insurance trust (ILIT) to own and manage life insurance.

When structured properly, a life insurance trust can provide significant estate planning, asset protection and wealth transfer benefits.

What is a life insurance trust?

A life insurance trust is a legal entity created to own a life insurance policy on the insured's life. Rather than owning the policy personally, the trust becomes the owner and beneficiary of the policy.

Upon the insured's death, the life insurance proceeds are paid into the trust, and the trustee distributes or manages those assets according to the instructions contained in the trust document.

The estate tax advantage

One of the primary reasons affluent families use life insurance trusts is estate tax planning.

When an individual owns a life insurance policy personally, the death benefit is generally included in that person's taxable estate. For larger estates, this can increase federal and state estate tax exposure.

If an ILIT owns the policy, the death benefit may be excluded from the insured's taxable estate, potentially preserving a greater portion of the proceeds for heirs.

This can be especially valuable when life insurance death benefits reach several million dollars.

Example: Consider an insured with a $20 million estate that includes ownership of a $5 million life insurance policy. Under current estate tax law ($15 million exclusion in 2026), an estate tax may be assessed at death.

If, however, an ILIT owns the policy, the death benefit may be excluded from the estate, potentially reducing estate taxes and increasing the amount the beneficiaries ultimately receive.

Maintaining control over the distribution of assets

Many parents worry about leaving a large lump-sum inheritance directly to children.

A life insurance trust allows the grantor to establish rules regarding when beneficiaries receive funds, how funds may be used, whether distributions are made outright or in stages, protection against spendthrift behavior and long-term management for future generations.

For example, a trust may provide one third of assets at age 30, one third at age 35 and the remainder at age 40. Alternatively, the trustee may retain discretion to distribute funds for health, education, maintenance and support.

Protecting beneficiaries

Depending on applicable law, life insurance trusts can help protect inherited assets from various risks, including creditor claims from:

• Lawsuits
• Divorce settlements
• Financial mismanagement

Rather than distributing a large inheritance outright, trust assets can remain under the supervision of a trustee who manages distributions according to the trust's terms.

For families concerned about preserving wealth across generations, this protection can be invaluable.

Providing liquidity when it's needed most

Even when estate taxes aren't a concern, many estates face liquidity challenges.

Assets such as real estate, businesses, investment partnerships and family vacation properties may be valuable but difficult to sell quickly.

Life insurance proceeds held in a trust can help provide liquidity to help pay estate settlement costs, cover taxes, equalize inheritances among children, preserve a family business and prevent the forced sale of family assets.

Planning for blended families

Life insurance trusts can also serve an important role in blended family situations.

For example, an individual may want to:

• Provide income for a current spouse
• Preserve assets for children from a prior marriage

A trust can establish clear instructions regarding how and when proceeds are distributed, reducing the potential for disputes and helping to ensure the insured's wishes are carried out.

Important considerations

While life insurance trusts offer significant benefits, they aren't appropriate for everyone.

Some considerations include:

Irrevocability. An ILIT is intended to be irrevocable. The policy owner gives up direct ownership and control of the policy.

Administrative requirements. Trusts require ongoing administration, including trustee oversight, annual notices to beneficiaries (commonly known as Crummey notices) and proper documentation and recordkeeping.

Professional guidance. Because trust design, tax rules and estate planning objectives can be complex, it is important to work with qualified legal, tax, and financial professionals when evaluating whether an ILIT makes sense.

The bottom line

Purchasing life insurance is an important step in protecting your family's future. However, for many individuals, especially those with significant assets, the ownership structure of the policy can be just as important as the policy itself.

A properly designed life insurance trust may help:

• Reduce estate taxes
• Protect beneficiaries
• Control distributions
• Preserve family wealth
• Provide liquidity at death
• Support multigenerational planning goals

For families seeking to maximize the impact of their life insurance strategy, a life insurance trust can be a powerful planning solution that extends well beyond the death benefit itself.

Related Content

• Five Strategies to Keep Your Heirs From Blowing Their Inheritance
• Want to Leave Money to Your Descendants But Still Keep Control? Choose Your Trustee Wisely
• Is Your Estate at Risk? The 5 Trusts You Need to Understand
• Irrevocable Trusts: So Many Options to Lower Taxes and Protect Assets
• 8 Estate Planning Secrets You Can Borrow from the Ultra-Wealthy

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.

Florida homeowners will soon get some relief from rising property tax bills. On Election Day, November 3, voters approved Amendment 3 by about 62%, according to the Associated Press (the threshold to pass was 60^), setting the stage for a much larger homestead exemption on qualifying primary residences.

But...the change won't happen overnight, and not every homeowner will qualify for the full benefit when the measure takes effect. Here's more to know.

Florida voters approve Amendment 3 homestead property tax exemption

The big change Amendment 3 brings is how much of a home's assessed value homeowners can shield from non-school property taxes. Under the measure, that additional Florida homestead exemption increases from $50,000 to $150,000 in 2027, then to $250,000 in 2028.

The amount will then rise with inflation beginning in 2029.

That could make a noticeable difference on a homeowner's property tax bill.

For example, imagine your main Florida home's value is assessed at $400,000. In 2028, the new exemption would shield $250,000 of that value from non-school property taxes, leaving $150,000 subject to those taxes. (Of course, actual savings will depend on your local tax rate.)

Keep in mind: The larger exemption applies only to non-school property taxes. The existing $25,000 homestead exemption for school taxes remains in place. And if you own more than one home in Florida, the exemption applies only to your primary/main residence.

Timing also matters. Homeowners who maintained a permanent Florida residence by December 31, 2026, and qualify for the homestead exemption can receive the larger benefit as the measure phases in.

People who establish Florida residency after that date will have to wait longer.

• They'll initially receive the existing $50,000 exemption, adjusted for inflation beginning in 2028, and become eligible for the larger exemption in their fifth year of receiving it.
• Starting in 2030, counties and municipalities can vote to shorten that waiting period if they determine there is a critical local need.

Also: Under Amendment 3, beginning in 2027, the annual assessment cap for non-homestead properties, including many rentals, second homes, and commercial buildings, drops from 10% to 5%. (The limit applies to assessed value, not the property tax bill.)

Concerns about local government funding

A bigger tax break for homeowners sounds appealing, but it comes with a trade-off: Local governments rely heavily on property taxes to pay for services residents use every day, including police and fire protection, emergency medical services, road repairs, drainage projects, parks, and libraries.

Losing property tax revenue could force local governments to cut spending, reduce services, or seek other funding sources.

• Florida's Revenue Estimating Impact Conference projects that Amendment 3 could cut local property tax revenue by nearly $5 billion in 2027-28, rising to $8.8 billion the next year and nearly $11.9 billion by 2031-32.
• The estimates include both the larger homestead exemption and the lower assessment cap on other properties.

It's worth noting that the amendment restricts how counties and municipalities can use property tax revenue. It limits spending to specified purposes, including public safety, education, infrastructure, natural resources, debt obligations, and employee retirement benefits.

But critics note that doesn't guarantee police and fire departments will keep their current funding or prevent communities from having to make difficult budget choices.

And what about Florida renters? They don't qualify for the homestead exemption, which is reserved for eligible owner-occupied homes. Landlords could factor changes in their property tax costs into rental decisions, but whether rents will rise as a result of the amendment remains to be seen.

Could Florida further cut or eliminate property taxes?

The $250,000 exemption may not be the whole story when it comes to Florida property taxes. Amendment 3 also opens the door to potentially larger tax breaks for some Florida homeowners.

• Under the amendment, the Florida Legislature must establish a process allowing counties and municipalities to increase the homestead exemption for their own property tax levies.
• In some cases, that could eventually mean exempting the full assessed value of a qualifying home. (You may recall that Florida has long debated potentially eliminating property taxes.)
• Special taxing districts may also increase the exemption, but only with voter approval.

For now, the first changes under the measure are scheduled to take effect on January 1, 2027.

If you own a home in Florida, watch for announcements from your county property appraiser as the new rules move toward implementation.

Related

• Tax Breaks for Homeowners and Homebuyers
• Zero Income Tax Doesn’t Always Mean a Cheaper Retirement
• 10 Cheapest Places to Live in Florida

Imagine discovering that a criminal has already filed a tax return in your name and pocketed your refund. That's the annual nightmare for a growing number of American taxpayers — and untangling it can be agonizing.

According to the latest report from the Treasury Inspector General for Tax Administration (TIGTA), tax-related identity theft cases take an average of about two years to close. Most of that time is spent in administrative purgatory waiting for help to become available.

Staffing shortages further compound the situation. Last year, the IRS lost nearly 300 trained identity theft assistors to the Deferred Resignation Program alone, part of broader workforce cuts by the Trump administration that shrank the federal tax agency by nearly 30,000 workers.

With fewer agents available to help untangle fraudulent filings, taking proactive steps is essential. The IRS' most potent defense tool — the Identity Protection PIN (IP PIN) — can block scammers, but the online portal used to claim one is closing soon. Here's more of what to know.

Identity theft inflicts 'financial hardship' on taxpayers

Tax identity theft generally operates on a simple premise: whoever files first gets the refund. And criminals don't wait for the spring filing rush.

As yearly IRS Security Summit guidance points out, fraudsters spend late fall preparing schemes to submit bogus returns as soon as tax season opens in January.

• Scammers snatch names, birth dates, and Social Security numbers leaked through corporate data breaches or dark-web databases.
• From there, they fabricate Form W-2 or 1099 wage figures, pad faux tax withholdings, and claim refundable credits to generate an inflated refund routed to an untraceable account or prepaid debit card.
• Most tax identity theft victims don't realize their information has been used until they try to file in the spring, only to have the IRS reject their return because someone has already filed under their Social Security number.

In a congressional report, National Taxpayer Advocate Erin M. Collins called these fraud cases and subsequent delayed tax refunds "financial hardships," adding that the delay is "frustrating, burdensome, difficult to navigate, and time-consuming."

That administrative ordeal costs everyone involved. Over the past two years, the IRS paid taxpayers more than $124.2 million in refund interest solely because of resolution delays, according to TIGTA.

While the agency protected $7 billion in fraudulent refunds across 2024 and 2025, taxpayers have one preventative measure to stop fraudsters in their tracks: the IRS IP PIN. It's a six-digit code that prevents anyone from e-filing without it.

But the online "Get an IP PIN" tool goes offline each year for scheduled maintenance — meaning taxpayers who miss the impending deadline leave their Social Security numbers unprotected when the tax filing gates open.

So what's closing down?

Starting in mid-November, the IRS will take its online "Get an IP PIN" tool offline through mid-January for annual system maintenance.

An IRS IP PIN is a six-digit number assigned to eligible taxpayers to prevent fraudsters from using their Social Security numbers on fraudulent federal income tax returns.

Once the IRS attaches an IP PIN to an SSN, the electronic filing system automatically rejects any return that doesn't include the same six-digit code — even if the return is submitted earlier. Once enrolled, a taxpayer gets a new regenerated IP PIN every January.

However, there's one important caveat: you have to sign up.

• If you haven't signed up for an IP PIN before, you won't automatically get one in the new year.
• This gives cybercriminals two months to find your stolen personal information and file a faux return the moment the IRS starts accepting submissions for tax season.
• As a result, the IRS has repeatedly warned that obtaining an IP PIN is the single most effective way for filers to defend themselves against identity theft.

"By safeguarding their online account credentials and obtaining an IP PIN, taxpayers can help stop tax-related identity theft, file their tax return with greater confidence, and know they have done what they can to protect themselves from bad actors," said IRS Chief Executive Officer Frank J. Bisignano in a recent press release.

Here's the good news: securing an IRS IP PIN has never been easier. When the PIN system first launched, taxpayers could only secure one if they had already been a victim of tax fraud or met certain geographic criteria.

Since the program has now expanded to all taxpayers, approximately 51 million individuals use an IRS Individual Online Account to manage their taxes and secure their filings. Through this portal, verified users can check account balances, review past records, and voluntarily enroll in the IP PIN program — even if they're not required to file a federal return this year.

Action steps to take now

If taxpayers want to sign up for an IP PIN, there's still time, but not much, with the mid-November maintenance shutdown approaching. Here are the key steps to follow before the IRS portal goes dark.

1. Create and verify your IRS Individual Online Account. Go to IRS.gov and set up your account using ID.me to verify your identity. If you already have an account, log in now to make sure your credentials and multi-factor authentication are functioning.
2. Opt into the "Get an IP PIN" tool. Navigate to the profile or security settings within your online account and request your six-digit PIN before the mid-November freeze.
3. Guard your January code. Once the IRS issues your new annual PIN in early January, treat it like a bank PIN or password. Only share it with your trusted, verified tax preparer when you are ready to file (if applicable).
4. Protect dependents and non-filers. Children and older dependents are frequent targets for fraudsters looking for unused Social Security numbers. Ask your adult dependents to log into their own IRS accounts to opt in.

For minor children, you can request an IP PIN by mailing Form 15227 if your adjusted gross income (AGI) is below $84,000 for single filers or $168,000 for married couples. Anyone who cannot verify online and/or exceeds these income limits must schedule an in-person verification appointment at a local Taxpayer Assistance Center (TAC).

As the IRS braces for another high-volume filing season with overwhelmed backlogs, taxpayers can ensure as high a level of defense as possible. Using just a few minutes now to secure an IP PIN before the portal shutdown deadline may be the single most effective barrier between your tax refund and the black market.

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Affordability was a top concern for voters heading into the 2026 midterm elections, as rising prices squeeze household budgets. But interestingly, Social Security's future is also emerging as an important election issue for some.

An October AARP survey of likely voters in 43 competitive congressional districts found that 83% of voters age 50 and older see Social Security as very or extremely important when deciding how to vote. A Peterson Foundation survey of voters in five battleground states found that 81% were more likely to support a Senate candidate with a plan to prevent automatic benefit cuts.

Many would also support Social Security fixes that involve higher taxes for some workers.

The concerns come as Social Security's retirement trust fund is projected to deplete its reserves in just six years, 2032. To avoid an across-the-board reduction in scheduled benefits of about 22%, Congressional lawmakers will have to act before then to help close the program's funding gap.

Here's more to know about voter sentiment and what Social Security changes could mean for taxes.

Tax changes that could help shore up Social Security

First, Social Security isn't "going bankrupt," and benefits wouldn't completely cease if the trust fund reserves are depleted. However, without action from Congress, the retirement and survivor trust fund is projected to have only enough ongoing revenue to pay 78% of scheduled benefits after the reserves run out in late 2032, according to the 2026 Trustees Report.

Lawmakers could address the shortfall by increasing revenue, slowing benefit growth, or implementing a combination of changes. Given the latest midterm election results, it will be interesting to see when and how Congress passes bipartisan legislation.

In the meantime, several proposals are being floated.

Raise or eliminate the Social Security wage cap

One of the most widely discussed proposals would raise or eliminate the cap on earnings subject to Social Security payroll taxes.

• In 2026, workers pay the 6.2% Social Security tax on the first $184,500 in wages. Employers pay a matching amount, while self-employed workers generally pay the full 12.4%.
• Earnings above the annual cap/Social Security tax limit aren't subject to Social Security payroll taxes.

Sens. Elizabeth Warren (D-Mass.) and Bernie Moreno (R-Ohio), are calling for eliminating the Social Security payroll tax cap. The proposal would require higher-wage earners to pay Social Security taxes on more of what they earn.

But changing the Social Security tax cap would be more complicated than simply asking high earners to pay more taxes. Key questions Congress would have to address include how to change the cap and whether additional taxes would increase Social Security benefits for high earners.

The Peterson Foundation survey found that 72% of voters supported a proposal to impose an additional 1% payroll tax on earnings above the current 2026 $184,500 wage cap.

The Social Security Administration (SSA) estimates that eliminating the cap could close about 58% of the 75-year funding shortfall if additional taxed earnings don't count toward future benefits, or about 45% if they do.

Increase the payroll tax rate

Another option is to increase the Social Security payroll tax rate for workers and employers. The combined rate is currently 12.4%, split evenly between employees and employers. Self-employed workers generally pay both shares.

• The SSA has modeled a gradual increase of 0.1 percentage points annually beginning in 2032, bringing the combined rate to 14.4% in 2051.
• That would mean the employee share eventually rises from 6.2% to 7.2%, with employers paying the same increase.
• The change could close about 33% of the long-range funding shortfall.

A broader tax increase would bring in more revenue but would also likely impact workers across income levels — not just those earning above the current wage cap.

Tax investment income

Lawmakers could also look beyond wages for additional Social Security revenue. One SSA-modeled proposal would impose a separate 12.4% tax on net investment income for taxpayers with modified adjusted gross income (MAGI) above $200,000 for single filers or $250,000 for married couples filing jointly.

Such a proposal would:

• Apply to the lesser of net investment income or the amount by which MAGI exceeds the applicable threshold.
• Direct the additional revenue to Social Security, in addition to the existing 3.8% net investment income tax, which generally applies to certain investment income above those income thresholds and helps fund Medicare.

Note: The NIIT is a separate tax established under the Affordable Care Act; it does not fund Social Security.

This approach would shift some of the funding burden to higher-income households with investment income, rather than relying solely on payroll taxes on wages. SSA estimates that the proposal could close about 30% of the program's long-range funding shortfall.

Change to a fixed-rate cost-of-living adjustment

Under the current Social Security system, the annual cost-of-living adjustment(COLA) is a percentage based on inflation. The same percentage applies to each beneficiary's monthly benefit, so the dollar increase varies with the benefit amount.

• However, under a flat-rate SS COLA, the inflation-adjusted annual increase would be converted into a dollar amount based on the benefit of someone around the 20th percentile of the benefit distribution.
• Every beneficiary would then receive that same dollar increase.
• That would mean smaller annual increases for most beneficiaries, although people receiving lower benefits could fare better.

An AARP Public Policy Institute analysis found that 80% of beneficiaries would receive a smaller adjustment. For 2026, the average retired worker would have received an estimated $34.20 monthly increase under the proposal, compared with the actual $57.90 COLA.

The difference could compound over time. AARP estimated that a hypothetical retiree who began collecting benefits in 1998 would have received a benefit about 20% lower by 2026 under the flat-rate approach.

An analysis commissioned by the Committee for a Responsible Federal Budget (CRFB) found that giving smaller COLAs to retirees with higher benefits could close about half of Social Security’s long-term funding gap.

The SSA has studied a different approach: cutting annual COLAs by 0.5 or 1 percentage point, which estimates show could close about 24% or 46% of the gap, respectively.

Raising the retirement age

Another option would be to gradually increase the full retirement age (FRA), currently 67 for people born in 1960 or later. Workers could still claim retirement benefits as early as 62, but claiming before full retirement age permanently reduces monthly benefits. Raising the FRA would make those early-claiming reductions larger.

Supporters argue that longer life expectancies make a higher retirement age reasonable and that the change would reduce Social Security costs. But the actual effects wouldn't be the same for everyone.

• The SSA estimates that gradually raising the full retirement age to 68 could close about 11% of the long-range funding shortfall; raising it to 69 could close about 32%.
• In the Peterson Foundation survey, 52% of voters opposed gradually increasing the retirement age for younger workers.

What about Social Security for younger workers?

Speaking of younger workers…they may seem far removed from retirement, but they're already paying into Social Security and could face higher taxes or smaller future benefits depending on what Congress decides.

• Under the SSA's gradual payroll tax increase scenario, for example, the employee tax rate would eventually rise from 6.2% to 7.2%.
• For someone earning $50,000 a year, that would mean paying an additional $500 in Social Security payroll taxes annually once the increase is fully phased in.

Meanwhile, high housing, healthcare, and everyday living costs can make it harder for younger workers to save for retirement. With traditional pensions increasingly rare, many wonder how much they can count on receiving from Social Security when they stop working.

• A December 2025 Cato Institute survey found that only 34% of Americans under age 30 believed Social Security would exist when they retire.
• Nearly eight in 10 (78%) expected to receive less than their full scheduled benefits.
• A separate Nationwide Retirement Institute survey found that 45% of Gen Z and 39% of millennials believed they would never collect Social Security benefits.

And keep in mind, Social Security isn't just about retirement. The program also provides survivor benefits to eligible children and spouses when a working parent dies, as well as disability benefits to eligible workers who can no longer earn a living.

Social Security solvency: Bottom line

It's worth noting that even if Social Security reserves are depleted, payroll taxes and other incoming revenue would continue to fund a substantial share of scheduled benefits. So, Congress still has time to change the program's financing trajectory.

For now? Check your earnings record and estimated benefits through your Social Security account. Younger workers can use the estimates to understand what they may receive under current law, while those nearing retirement should compare benefits at different claiming ages and consider how Social Security fits into their retirement income plan.

But also stay tuned. With the 2026 midterms in the books and the 2028 presidential election on the horizon, pay attention to where your representatives stand on Social Security and what they propose to secure its future.

Related

This article is part of a mini-series on the tax impacts of various proposals to shore up Social Security.

• What a Flat-Rate Social Security COLA Could Mean for Retiree Taxes
• How Eliminating the Social Security Tax Cap Could Mean for High Earners

For more on midterm ballot measures, check out our reports: Midterm Election Tax Measures Target High-Income and Property Tax Changes on the Ballot in 7 States.

Each week in our Ask the Tax Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at five tax questions from readers. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Reverse mortgages

Question: I am planning to take out a reverse mortgage on my primary home. Will I owe federal income tax on the money I receive in the transaction?

Joy Taylor: No. The payments you get from a reverse mortgage are treated as nontaxable loan proceeds. Note that you cannot deduct the interest that you eventually pay on Schedule A of Form 1040. That's because you are not using the reverse mortgage proceeds to buy, build or substantially improve the home that is securing the mortgage.

2. 529 plans and college studies abroad

Question: I have a 529 plan for my son. He is currently in college in the U.S. and is planning to study abroad in the spring. I have been using 529 funds to pay for his college education. Can I use 529 funds to pay for his schooling abroad?

Joy Taylor: In your case, yes. A 529 plan can be used for any college that participates in the U.S. federal student aid program.

If a student is enrolled in a U.S. college and chooses to study abroad through the school's program for a semester or two, as your son appears to be doing, the study-abroad program will be 529-eligible, provided the U.S. college is eligible and the college accepts the study-abroad credits.

If a child decides to enroll in a non-U.S. college for his or her full college education, then that foreign university must participate in the U.S. federal student aid program. And believe it or not, many foreign colleges do participate and would therefore qualify as eligible schools for 529 purposes.

3. Pet insurance provided by an employer

Question: I have a dog, and my employer offers pet insurance as an employee benefit. Can I pay for pet insurance with pretax wages?

Joy Taylor: No. Unlike employer-paid health insurance for workers, which isn't included in an employee's taxable wages, the value of employer-paid pet insurance is taxable income to you. Most employers who offer pet insurance benefits don't subsidize the cost, however, and employees who opt in pay their share through post-tax payroll deductions.

4. Charitable donations

Question: My wife and I usually make large cash donations every year to charity and deduct the gifts on Schedule A of our 1040. Can we still deduct cash contributions up to 60% of our adjusted gross income, or did Congress change this rule?

Joy Taylor: Last year's "One Big Beautiful Bill" made permanent the rule that charitable cash contributions are deductible on Schedule A in a year only to the extent that total cash contributions don't exceed 60% of adjusted gross income (AGI). Excess contributions can be carried forward five years. The AGI limit for donations of capital gain property, such as stocks, bonds and shares in mutual funds, is generally 30%.

You should also be aware of the following new rule, starting with 2026 returns filed in 2027. Charitable deductions claimed by itemizers get a bit of a haircut. The Schedule A charitable write-off is deductible only to the extent that total charitable donations exceed 0.5% of AGI reported on your Form 1040. This is akin to the long-standing rule for deducting medical expenses on Schedule A, in which total medical costs are deductible only to the extent they exceed 7.5% of AGI.

5. How long to keep tax records

Question: How long should I keep supporting tax records, such as Forms 1099 and monthly brokerage records?

Joy Taylor: Generally, we suggest keeping tax returns, 1099 forms and other third-party information returns for at least three years from the due date of your return. But don’t automatically throw out all of your tax returns and records after three years. Look over old documents to see if you might need any parts of them in the future. And there are some records you can toss earlier than three years. How long you keep monthly brokerage statements depends on various factors.

Read more: How Long to Keep Tax Returns and Records and How Long Should You Keep Tax Records?

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts in this Q&A series are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not, and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

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• Ask the Editor: Tax Rules for Landlords

With rising mortgage rates, high home prices, and strict lending standards, intergenerational wealth is becoming the key to homeownership among younger adults.

A recent LendingTree down payment survey revealed that 40% of all current homeowners in the U.S. received financial help with their down payment. That's up from 35% in 2023. More importantly, over a third of those buyers admitted they couldn't have bought their home without that outside assistance.

Helping a child buy a house is an exciting family milestone. But cutting a check without analyzing the tax code can trigger unintended IRS reporting rules, potential capital gains liabilities, and complex estate-planning math.

Failing to plan before moving the money can transform a generous gift into one with unintended tax consequences. Read on.

Where down payment cash originates

The reliance on family wealth for a home down payment breaks down along sharp generational lines. LendingTree found that:

• Generation Z (ages 18–29): Nearly 78% received financial assistance with their down payment.
• Millennials (ages 30–45): Over half (56%) obtained financial help.
• Baby Boomers (ages 62–80): Just 12% received outside assistance when buying their current home.

The demographic splits reveal another layer. Women were far more likely to consider financial assistance necessary: 44% reported they couldn't have purchased without outside backing, compared to just 29% of men.

However, household income had less influence on who asks for help. Homeowners earning less than $30,000 (43%) and those earning $100,000 or more (42%) received down payment help at virtually identical rates.

Yet how that money gets structured dictates tax compliance. Almost half of recipients (48%) received the funds as a gift, 28% took the money as a loan, and 25% used a combination of both. For the gift cohort, tax rules kick in when the funds leave the parents' account.

The $19,000 exclusion rule

Perhaps the most common tax fear among parents is that wiring a gift triggers immediate taxes. In reality, the tax code protects almost all families from paying a dime out of pocket.

Recipients never pay federal income tax on cash gifts, regardless of the size. The donor rarely pays an immediate tax either; parents incur no federal gift tax liability unless their cumulative giving crosses a statutory threshold.

For 2026, the annual gift tax exclusion sits at $19,000 per donor, per recipient. This means:

• A single parent can give up to $19,000 in a calendar year without reporting anything to the IRS.
• Married filing jointly donors can contribute up to $38,000 per child without triggering paperwork.

The limit may be even higher for some families, according to financial experts at American Century Investments. If an adult child is buying a home with a spouse or partner, both parents can give $19,000 to each person in the couple. That allows two parents to transfer up to $76,000 in a single calendar year ($19,000 × 2 donors × 2 recipients) without triggering IRS reporting.

What happens when parents cross the cap

Exceeding the annual gift threshold doesn't trigger an instant tax payment from the parent. Instead, it triggers an informational reporting requirement.

The donor must submit IRS Form 709 (Gift and Generation-Skipping Transfer Tax Return) by the April 15 tax deadline following the year of the gift.

Form 709 tracks how much of the federal unified lifetime exemption has been used. The 2026 lifetime estate tax exemption sits at roughly $15 million per individual (or $30 million for a married couple).

Because that cap is so high, almost no one ever pays an actual gift tax. However, standard home down payments easily overshoot the annual allowance.

• Federal Reserve Economic Data (FRED) shows the national median home sales price hovering around $408,500 in the first quarter of 2026.
• At the same time, LendingTree data shows that buyers put down a significant amount to secure a home. For instance, 23% paid at least 20% to avoid private mortgage insurance (PMI) and minimize monthly payments.
• A 20% down payment on a median-priced home comes to about $81,700.

If a single parent wires $81,700 directly to a child's escrow account, the gift exceeds the annual exclusion by $62,700. The parent must file Form 709 the following spring.

While no tax is due, failing to file the form means the IRS statute of limitations never starts running. That leaves the transaction open to audit scrutiny indefinitely and can create messier estate reconciliation for heirs later.

Watch out for capital gains tax and asset traps

Although the cash transfer itself is rarely taxed, how parents generate that cash can create immediate financial liabilities. For instance, parents may liquidate investments — which can trigger three primary tax traps:

• Capital gains realization: Selling appreciated stocks or mutual funds in a taxable brokerage account triggers capital gains taxes in the year of sale. Depending on income, long-term capital gains tax rates can sit at 15% or 20%, plus a potential 3.8% net investment income tax (NIIT).
• Retirement account income spikes: Pulling cash from a traditional IRA or 401(k) counts as regular taxable income. Parents may be bumped into a higher federal tax bracket or trigger Medicare IRMAA surcharges if they tap these accounts for a down payment.
• Loss of the step-up in basis: Transferring appreciated property or assets directly during life forfeits the step-up in basis that heirs would receive upon inheriting the asset after death. (For more information, see Kiplinger's report, How Your Inheritance Actually Gets Taxed: From Stepped-Up Basis to IRA Rules.)

Before liquidating a portfolio, financial advisors often suggest that taxpayers consider state down-payment assistance programs first. For example, North Carolina offers a $15,000 forgivable mortgage for eligible first-time homebuyers.

If parents choose to move forward with financial help, experts typically also recommend explicitly formalizing whether the funds are a gift or a loan. The IRS requires private family loans to charge at least the Applicable Federal Rate (AFR), and lenders report that interest as taxable income.

Key takeaways for parents

Helping adult children secure a home provides a valuable financial leg up in a tight housing market. But making a large financial gift requires balancing parental generosity with sound tax management.

Before writing the check, parents should keep these three fundamentals in mind:

• Leverage gift timing: Use year-end timing across December and January to transfer larger sums without triggering extra paperwork. For example, a parent can give $19,000 before December 31 and another $19,000 in January without exceeding the annual exclusion in either tax year (though the 2027 annual gift tax exclusion may be higher).
• File Form 709 without fear. If a parent's gift exceeds the annual cap, file the informational return. It tracks against the multi-million-dollar lifetime exemption and will not cost taxpayers out-of-pocket tax dollars.
• Calculate the cost of cash. Parents should factor in the capital gains tax or retirement-income hit before liquidating assets, ensuring that helping their child buy a home doesn't compromise their own long-term financial security.

A quick conversation with a qualified tax professional and a clear paper trail today can ensure that parents helping their children build home equity doesn't create an unnecessary tax bill tomorrow.

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

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Scary stories are fun entertainment, but real-life money scares often take a much quieter form: Sneaky financial oversights that creep up when you least expect them.

While fictional monsters are easily forgotten once the lights turn on, financial blunders can linger in the shadows and take years to recover from.

Here are four overlooked financial mistakes that could haunt you now and into the future.

The haunting of neglected home repairs

One of the first things you learn as a homeowner is that maintenance is an ever-evolving (and seemingly endless) list of things to do that changes with the seasons. With winter around the corner, you might think your older furnace is in good shape and decide to forgo its maintenance.

However, this seemingly harmless omission could become an expensive problem down the road. See, doing the small things, such as seasonal HVAC inspections, can help technicians identify small issues before they morph into more expensive ones down the road.

A new furnace can cost between $2,823 and $6,897 per Angi. That's a cost you could avoid by preparing your home for winter in advance. Along with HVAC inspections, do the following:

• Reverse your ceiling fans so they push warm air downward instead of upward, lessening the work your furnace has to do
• Inspect your roof and replace any warped or damaged shingles to prevent leaks. If you don't feel comfortable climbing, hire a professional to handle the job for you.
• Clean the gutter to eliminate water damage impacting your home's roof, siding or wood trim
• Use a pocket thermal camera to scan windows, doors and your HVAC unit for any leaks. These connect to your smartphone, or you can buy a handheld model, showing heat maps of your home, so you can find any variations or cool zones where energy leaks occur.

Need help choosing a pocket thermal camera? Here are some of the top options, based on customer ratings, capabilities and price:

Meanwhile, if you plan to do a side gig to supplement income or freelance, don't make this mistake.

The phantom tax curse for the self-employed

Whether you work as a freelancer or do side hustles to help make ends meet, know that any income over $400 must be reported to the IRS. Self-employment taxes are also higher, at 15.3%, because you don't have an employer splitting the taxes with you.

That's why it can feel easy to forgo holding back any money to pay your taxes. Yet, when it comes time to file, you'll have a surprise awaiting you. And it will be hefty.

The IRS allows self-employed individuals to make quarterly payments, with the fourth quarter due on January 18, 2027. I recommend opening a separate savings account to store your tax liability, then use IRS Direct Pay to make your quarterly payments.

Meanwhile, if you plan to have significant deductions, look for accountants who specialize in working with self-employed individuals. They can take this headache off your plate so you have peace of mind knowing that when April comes, you won't owe the IRS, or your state, a kidney.

And remember: Just because you consider it a hobby doesn't mean the IRS does.

"Buy now, pay later" purgatory

Many buy now, pay later apps, such as Klarna and Afterpay, allow you to break down payments into manageable installments. This might work in a pinch if you have a surprise expense and don't have the cash or credit to pay for it.

However, it's easy to hop on the wheel and difficult to hop off. Also, keep in mind that each app charges fees in addition to whatever you finance per purchase. These fees raise the total borrowing costs, making it more expensive than paying outright or charging a credit card and then paying it off.

So, it becomes a case where you're paying more than the value of the product or service due to its convenience. That's why I recommend setting aside money in an emergency fund (if applicable) to help cover expenses.

Even if it's only $10 every week or two, that can add up fast. To do this, open a high-yield savings account, then set automatic transfers from your checking to your savings account on payday. Doing this allows your money to remain in an account that's there when you really need it.

For savings accounts, here are the top picks:

Blindly trusting a financial adviser

Handing over the keys to your life savings without asking questions can be nightmare fuel.

That's why it's important to take your time, research each adviser and look for the following things:

• Fiduciary: A fiduciary is someone who wants to help you reach your financial goals without the hidden motivation of pushing specific investments to earn a commission.
• Personal approach: When you meet with advisers, look for ones who really want to get to know you, your money goals and values. This makes it more likely they'll tailor solutions that help you reach your goals instead of making suggestions that could help them more than you.
• Regular touch bases: Financial goals can change like the seasons, so look for one who wants to have regular meetings to ensure your current plans align with your goals.
• Know when to go: If your adviser is too busy to answer your calls or your portfolio isn't performing well, it's time to cut them loose and try someone else.

If you don't have any adviser, you can use this Bankrate tool to find a reputable one quickly:

While this is the season of scary stories, don't let your finances mirror the season. Using these tips can help you avoid common, overlooked financial errors that can derail your goals and haunt you for years to come.

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Nothing brings out taxpayer "creativity" quite like pursuing a bigger refund. Every year, millions of Americans scour their bank statements and receipts, asking the age-old question: "Can I deduct this?"

While the federal tax code clearly allows deductions for legitimate expenses, the line between a brilliant tax strategy and an audit waiting to happen can be notoriously thin. From volunteer mileage and medical home upgrades to grandkid gifts, the IRS has seen it all — and has strict rules about what passes muster.

So whether you're a seasoned self-employed pro or just trying to navigate your return on your own, test your knowledge against these five real-world tax scenarios to see if you can spot a legitimate deduction from a tax-court disaster.

This article is for educational purposes only. The content does not constitute financial, legal, or tax advice. Talk to a trusted tax professional before claiming tax breaks on your federal income return.

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For some people, inheriting an IRA can feel like a financial windfall. But before you decide what to do with the money, there's a key question: How much will you actually keep after taxes?

The answer depends on more than the IRA balance. Where you live, your relationship to the person who left you the account, the type of IRA you inherited, and when you take the money out also matter.

That's why two people can inherit IRAs with the same balance and potentially face different tax bills. One beneficiary may have flexibility over when to take distributions, while another might have to empty the account within a set period. An heir in a state that taxes IRA distributions could owe more than someone in a state that doesn't.

Here's more to know about key factors that affect your inherited IRA tax burden.

Inherited IRA tax rules

To understand how much of an inherited IRA you'll keep, it helps to start with some basic tax rules.

Generally, inheriting an IRA isn't itself a taxable event for federal income tax purposes. Instead, taxes depend on the type of IRA you inherit and how you take distributions.

State tax rules can also affect how much you owe.

Things to keep in mind:

• Distributions from an inherited traditional IRA are typically taxed as ordinary income on your return, at applicable federal marginal tax rates.
• Qualified distributions from an inherited Roth IRA are generally tax-free.
• A 10% early withdrawal penalty often applies to IRA owners who withdraw money before age 59½, but it generally doesn’t apply to distributions from an inherited IRA, regardless of your age.
• Timing is also important. Many beneficiaries must meet distribution deadlines, and missing a required withdrawal can trigger a 25% federal IRS penalty on the amount you failed to take.

But those are federal rules. State tax laws can differ — sometimes significantly.

Some states tax IRA distributions based on where you live, while a handful impose inheritance taxes based on where the deceased person lived.

Together, these rules can affect how much tax you might owe on an inherited IRA and when you need to withdraw the money. Here are four key questions to consider.

1. Where do you live and where did the account owner live?

When it comes to state taxes, two questions can affect how much of an inherited traditional IRA you keep.

1. Does your state tax IRA withdrawals as income?

2. Did the person who left you the account live in a state that imposes an inheritance tax?

Five states currently impose inheritance taxes: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. (Whether you owe inheritance tax generally depends on where the deceased person lived or owned taxable property and your relationship to them.)

Estate taxes are different. The estate generally pays them before distributing assets to heirs. Twelve states and the District of Columbia impose estate taxes. Maryland is the only state that imposes both estate and inheritance taxes.

Note: At the federal level, taxable distributions from an inherited traditional IRA generally count as ordinary income.

An example: Suppose you live in Florida and inherit a traditional IRA from someone who lived in Pennsylvania.

Florida, a state without an individual income tax, generally won't tax your IRA withdrawals as income. Pennsylvania also generally exempts IRA distributions paid to a designated beneficiary.

But...Pennsylvania may impose its inheritance tax on the IRA balance if the deceased owner was age 59½ or older at death (or was disabled at death regardless of age).

When Pennsylvania inheritance tax applies, the rate depends on your relationship to the deceased:

• Surviving spouse: 0%
• Direct descendants and other lineal heirs: 4.5%
• Siblings: 12%
• Most other beneficiaries, including friends: 15%

Yes, it can get confusing and this is just one simplified example.

The takeaway: When inheriting a traditional IRA, consider both the state income tax on withdrawals and whether inheritance or estate taxes may apply. Rules differ by state, and the type of tax can affect how much you ultimately keep.

2. What was your relationship to the person who left you the IRA?

The rules can vary depending on whether you inherited the account from a spouse, parent, other relative, or someone unrelated.

A surviving spouse generally has options that most other beneficiaries don't. Depending on the circumstances, a spouse may be able to treat the inherited IRA as their own or keep it as an inherited account. Those choices affect the distribution rules and can influence when withdrawals are required.

An adult child who inherits a parent's IRA, however, generally can't simply treat the account as their own. Instead, the beneficiary rules apply.

• For many individual non-spouse beneficiaries who inherit from someone who died after 2019, the account generally must be emptied by December 31 of the tenth year following the year of the original owner's death.
• Exceptions generally apply to Eligible Designated Beneficiaries (EDBs), including surviving spouses, the owner's minor children (until they reach the age of majority, at which point the 10-year rule kicks in), disabled or chronically ill individuals, and beneficiaries not more than ten years younger than the deceased owner.
• The specific requirements depend on your beneficiary category and the circumstances of the owner's death.

It's also important to know that the 10-year rule for inherited IRAs doesn't mean every beneficiary can wait until the final year to withdraw the money. Depending on the rules that apply, you may need to take annual required minimum distributions (RMDs).

Additionally, your relationship to the deceased doesn't automatically set the federal income tax rate on a withdrawal. Rather, that relationship status determines which distribution rules apply and how much flexibility you have over timing.

The takeaway: Know your beneficiary category before you plan any withdrawals. Your relationship to the deceased may determine when you must take the money out, even though your taxable income generally determines the federal income tax rate you pay.

3. What kind of IRA did you inherit?

Not all inherited IRAs are taxed the same way. One key distinction is whether the account is a traditional IRA or a Roth IRA.

• With a traditional IRA, contributions may have received favorable tax treatment when the original owner made them.
• As a result, taxable withdrawals generally count as ordinary income for the beneficiary in the year the money is distributed.
• If you inherit a traditional IRA and take a large distribution, the added income could push some of your earnings into a higher federal tax bracket.

Note: If the original owner made nondeductible contributions, part of the account may represent after-tax money. In that case, the entire distribution may not be taxable.

A Roth IRA can produce a different result. Qualified Roth IRA distributions to beneficiaries are generally tax-free, provided the requirements are met. The five-year rule is relevant when determining whether a distribution qualifies for tax-free treatment.

But tax-free doesn't necessarily mean you can leave an inherited Roth IRA untouched indefinitely. Beneficiaries generally remain subject to distribution deadlines, although the specifics depend on the beneficiary and other circumstances.

The difference can be notable in some cases. Someone who inherits a traditional IRA may need to plan for income tax on withdrawals, while someone who inherits a Roth IRA may receive qualified distributions without owing federal income tax.

The takeaway: Find out whether the account is traditional or Roth before you estimate your tax bill. The account type you inherit can make a substantial difference in how withdrawals are taxed.

4. When do you take the money out?

Once you've sorted out your state residency, beneficiary status, and IRA type, another key question remains: When should you withdraw the money?

For many beneficiaries of traditional IRAs, timing can affect your tax bill.

For example, let's say you inherit a traditional IRA worth $300,000 and also earn a substantial salary. Taking the entire balance in one year could add a large amount of taxable income on top of your normal pay. Depending on your circumstances, some of that additional income could fall into a higher marginal federal income tax bracket.

Taking distributions over several years may help manage that. However, spreading withdrawals out isn't automatically the best strategy for everyone. You still have to comply with applicable deadlines and any annual required minimum distributions.

• For many non-spouse beneficiaries subject to the ten-year rule, the account must be fully distributed by the end of the tenth year following the original owner's death.
• Depending on when the owner died and whether required distributions had already begun, annual withdrawals may also be required during that period.

For example, if an IRA owner dies in 2026 and the beneficiary is subject to the standard ten-year rule, the account generally must be emptied by December 31, 2036. Other beneficiary categories may follow different rules.

A Roth IRA may offer a different planning opportunity because qualified withdrawals are generally tax-free, but distribution deadlines can still apply.

The key is to consider the inherited IRA alongside your other income, your expected financial needs, and the deadlines that govern the account. A withdrawal strategy that works for someone approaching retirement might not be ideal for a beneficiary in their peak earning years.

The takeaway: The amount you withdraw in a particular year can affect the income tax you ultimately owe. The challenge is balancing tax planning with the rules on how quickly you must empty the account.

Avoiding taxes on an inherited IRA: Bottom line

Inheriting an IRA doesn't necessarily mean you should take the money right away. And waiting as long as possible isn't always the best approach either.

Before you take a distribution, find out when you must empty the account and whether you have to take annual withdrawals. Then consider how a distribution would affect your taxable income in the year you receive it. Depending on your circumstances, coordinating withdrawals with your other income and expenses over several years may help mitigate the tax impact.

Also keep in mind that landing in a higher tax bracket doesn't mean all of your income is taxed at that higher rate. Federal income tax rates are marginal, so only the portion of your taxable income that falls within a higher bracket is taxed at that rate.

If the account balance is substantial, or you have questions about these or other key factors, consider consulting a tax professional before deciding. The goal is to make informed decisions that comply with the distribution rules and make sense for your finances over the entire period you'll be managing the inheritance.

Remember: This article is for general informational purposes and is not individualized tax or legal advice. Consult a qualified tax professional about your specific situation.

Related

• Inherited IRA Rules Every Beneficiary Should Know
• Why The IRS is Taking a Closer Look at Trusts
• Inheritance Tax vs Estate Tax: Who Actually Pays
• Are No-Income-Tax States Better to Live In?

In Sir Terry Pratchett's 1993 Discworld novel Men at Arms, Captain Samuel Vimes laid out his grand economic theory: A rich man spends $50 on a pair of good leather boots that last 10 years. A poor man, who can only afford $10 cardboard-soled boots, must replace them every year.

After 10 years, the rich man still has his expensive boots and dry feet. But the poor man has spent $100 and still has wet feet. As Vimes noted with characteristic cynicism, "The reason that the rich were so rich ... was because they managed to spend less money."

Retirees on a fixed income face similar traps with their income taxes.

For instance, maxing out traditional 401(k)s and IRAs to save on taxes during your working years feels like a sensible, frugal choice. But deferring taxes without a plan is the financial equivalent of buying cardboard-soled boots — it gives temporary relief today, only to push you into higher federal tax brackets tomorrow.

The good news? You don't need a fortune in cash to keep your feet dry. You just need to know how to patch your boots in retirement.

How the 'Boots Rule' of retirement tax planning works

The "boots rule" of retirement tax planning acknowledges a simple reality: Most retirees don't have wads of cash hanging around.

As Sam Vimes alluded to in the Discworld series, everyone would buy durable, high-quality boots if they could afford the upfront cost — or, put another way, retirees would make the "perfect" financial move if circumstances allowed.

Nowhere is this clearer than in traditional retirement accounts. During your working years, deferring taxes offers an immediate, affordable benefit: Get your employer's match, deduct your contributions today, then pay the taxes later.

However, deferring taxes means deferring them on decades of compound growth, creating a mounting tax liability down the road.

Then, when standard financial advice tells you to "just convert your 401(k) to a Roth IRA today," it ignores the immediate, out-of-pocket tax bill that conversion triggers. Just as the worker was forced to keep buying cheap boots, many retirees stay in tax-deferred accounts because they lack the upfront cash needed to buy their way into tax-free growth.

To overcome this, you can become a financial cobbler. Rather than paying a big upfront tax bill all at once, you can patch your financial boots on a modest budget using three core levers:

• Smart timing. Withdrawing money from specific account types during "low-income gap years" (the window between career retirement and when Social Security or required distributions begin) to minimize tax exposure.
• Bracket management. Intentionally filling lower federal income tax brackets (such as 10% or 12%) without accidentally spilling into higher marginal tiers.
• Account sequencing. Choosing the order in which you spend down your taxable, tax-deferred, and tax-free accounts to prevent artificial income spikes later in life.

Coordinating these three levers creates a personalized "repair strategy" that systematically plugs your tax leaks year by year using dollars you already have. This can help protect your retirement portfolio against unoptimized required minimum distribution (RMD) payments, higher taxes on Social Security benefits, expensive Medicare surcharges, and wasted charitable deductions.

Four 'leaks' to plug in your retirement dollars

Without proactive planning, four major tax traps act as the "cardboard soles" of retirement — quietly draining your portfolio year after year. Here's how to fix each leak using low-cost levers:

1. Required minimum distributions (RMDs). Starting at ages 73 and 75, mandatory pretax withdrawals from traditional IRAs and 401(k)s force taxable income into your bank account, pushing you into higher brackets whether you need the cash or not.

The "shoe repair": Use smart timing to execute targeted "microconversions" during your gap years. Moving smaller IRA amounts — maybe $1,000 annually — from a traditional IRA to a Roth systematically chips away at future forced RMDs (since Roths aren't subject to them). Roth distributions are also not taxable when withdrawn.

See also: 6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)

By only converting small amounts, you're less likely to push yourself into a higher marginal federal tax bracket. This type of bracket management might keep the federal tax on those annual Roth conversions as low as $100 to $220 per year (assuming a 10% to 22% marginal tax bracket rate).

2. The Social Security "tax torpedo." Unmanaged IRA withdrawals stack directly on top of your Social Security benefits. This triggers a compounding formula that can tax up to 85% of your Social Security income.

The "shoe repair": Blend tax-free Roth withdrawals or health savings account (HSA) funds to cover discretionary spending spikes (like home repairs or travel). Keeping ordinary income below the threshold limits helps protect your Social Security from taxation.

You can also draw down taxable brokerage accounts up to the 0% long-term capital gains tax threshold to fulfill your cash needs without raising your taxable baseline (or, as Kiplinger reported, utilize tax-loss harvesting to lower your tax bill).

3. Medicare IRMAA surcharges. One extra dollar of retirement income can cost you thousands. For instance, crossing an income-related monthly adjustment amount (IRMAA) threshold triggers automatic, high-cost monthly premium hikes on Medicare Parts B and D two years later.

The "shoe repair": Instead of draining pre-tax accounts first, sequence your annual withdrawals across three buckets: taxable, tax-deferred, and tax-free. Blending these sources keeps your modified adjusted gross income (MAGI) low, potentially helping your retirement income steer clear of IRMAA cliff edges. For more information on the three-bucket model, check out Kiplinger's report, The 40-Year Retirement Rule.

4. The RMD legacy and charitable waste. Donating cash directly from your checking account overlooks significant tax savings once you reach RMD age (and even a little before that).

The "shoe repair": If you are age 70½ or older, use a qualified charitable distribution (QCD) to transfer funds directly from an IRA to a qualifying charity (up to $111,000 per individual). This satisfies required distributions without adding a single dollar to your taxable income.

But if you want to donate outside an IRA, you can still get a tax advantage. Starting in 2026, the new charitable deduction for standard filers allows up to $1,000 in tax savings per individual on direct cash contributions.

Comparing your options side-by-side

To help evaluate your options, the breakdown below contrasts sticking with default standard tax-deferred accounts against a low-cost "boot repair" strategy.

The bottom line: Keeping your feet dry

Navigating taxes in retirement isn't about finding a magic bullet (or a magic shoe). As Sam Vimes realized, the real challenge is that short-term financial constraints often force choices that drain long-term wealth.

You don't need $5 million sitting in a bank account to protect your portfolio from future tax hikes, Medicare surcharges or mandatory distribution cliffs.

By making small, deliberate adjustments — filling low tax brackets, utilizing gap years and sequencing your withdrawals — you can patch your financial boots year by year using the money you already have. But financial strategy is highly personalized, and no one size fits all.

Take a look at your current account mix today. Identify whether your savings sit primarily in pre-tax accounts, and map out your income gap between retirement and forced RMD age based on your specific financial circumstances.

A few simple patches could help to keep your tax bill more predictable, your income intact, and your financial feet dry for decades to come.

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

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As we approach the 2026 midterm elections on November 3, affordability is a major concern for many voters across the United States.

People already worry about rising grocery and housing costs, insurance premiums, utility bills, and gas prices. Meanwhile, homeowners, in particular, are also concerned about another expense that keeps climbing: property taxes.

The average property tax bill on a single-family home reached $4,427 last year, up 3% from the year before, according to real estate data firm ATTOM. For households already feeling squeezed, that bill adds to the cost of staying in a home they may have already spent years paying for.

Some potentially good news? Some states are responding. This November, voters in seven states will decide on various property tax measures designed to provide some relief. Here’s what you need to know before you vote.

2026 ballot measures related to property taxes

Some of the following measures would cut bills for qualifying homeowners. Others would slow how quickly property tax assessments can grow, expand exemptions for specific groups, or limit what the state can do in the future.

Florida: Property tax Amendment 3 bigger homestead exemption

Florida voters will weigh two property-tax measures on the November ballot.

Amendment 3 would raise the non-school homestead exemption to $150,000 in 2027 and $250,000 in 2028, then adjust it for inflation.

It would also cut the annual assessment cap on non-homestead property from 10% to 5% for non-school taxes, let local governments expand exemptions further, and limit how they spend property-tax revenue.

Residents who weren’t in Florida on December 31, 2026, would get the larger exemption starting in their fifth qualifying year.

Amendment 2 would exempt farm equipment and other tangible personal property used for agriculture or agritourism beginning in 2027.

Supporters say larger exemptions mean immediate savings for homeowners and farmers. Critics warn that lost local revenue could squeeze police, fire, and other services, or shift costs onto other taxpayers.

Wyoming: New exemption for primary residences

Wyoming’s Initiative 1 would exempt 50% of the assessed value of a qualifying primary residence.

• The exemption would cover the structure, not the land beneath it, and would have no value cap.
• Owners would need one year of Wyoming residency and six months of occupancy in the prior tax year.
• It would stack on a 2025 exemption covering 25% of the first $1 million in value for owner-occupied single-family homes.

Proponents say the measure offers broad relief to people who live in their homes year-round. Opponents argue that, without a cap, the biggest dollar savings would go to owners of the priciest homes, while counties and schools could face shortfalls.

Oklahoma: Tighter limits on property tax assessment increases

Oklahoma’s State Question 847 would slow how fast a property’s taxable value can rise.

• Current caps of 5% for most locally assessed real property and 3% for homestead and agricultural land would fall to 4% and 1.75% beginning in 2027.
• The full value freeze for eligible older adults age 65 and older would become income-based limits.
• Older adults with the lowest income would keep a zero-increase limit. Others in Oklahoma would face caps of up to 1.75%.

Supporters say tighter caps bring predictability when housing markets heat up. Critics note that caps limit increases in value (but not in bills), since local governments can still raise rates, and some seniors now protected by a full freeze could lose that certainty.

North Carolina: Capping local property tax increases

North Carolina voters will decide whether to amend the constitution to limit increases in local property tax levies.

• The property tax levy amendment doesn't set a specific percentage. Lawmakers would write the limits later and could allow exceptions.
• A cap on the state government’s overall levy doesn’t necessarily mean an individual bill cannot rise.

Supporters say a constitutional check would restrain local spending and give taxpayers certainty. Critics say the open-ended wording leaves key details to future legislators and could hamper growing communities’ ability to fund schools and services.

Louisiana: Five property tax measures

Louisiana has the longest ballot when it comes to property taxes, with measures generally falling into three categories: help for specific homeowners, changes to local rate-setting, and incentives to fix up neglected property.

• Amendment 1: Lets the surviving spouse of a deceased veteran with a service-connected disability transfer a homestead exemption to a new home one time.
• Amendment 6: Adds an exemption for homeowners 65 and older who already qualify for the income-based assessment freeze. It rises with age to $30,000 in assessed value at 81 and older, with local approval required.
• Amendment 9: Raises that freeze’s income limit from $100,000 to $150,000, with inflation adjustments starting in tax year 2028.
• Amendment 2: Lets taxing authorities that have levied below their maximum raise rates toward a rate authorized in a prior year after reassessments.
• Amendment 10: Allows local exemptions for rehabilitated blighted or derelict properties.

Supporters call the first three targeted help for people on fixed incomes, while critics note they benefit only those who qualify and can reduce local revenue. Additionally, some backers say Amendment 2 gives local governments flexibility, and Amendment 10 revives neighborhoods.

But some opponents fear higher tax rates and short-term revenue losses with some of the measures.

Georgia: More land eligible for preferential tax treatment

Georgia’s Amendment 1 would double the maximum acreage one owner can enroll in the Conservation Use Valuation Assessment program, from 2,000 to 4,000 acres.

• The program taxes qualifying agricultural, timber, and conservation land on its current-use value rather than its market value.
• Owners must commit to keeping the land in eligible use. Georgia homeowners generally wouldn’t be affected.

Supporters say the change helps large farms and timber operations stay in business and keeps working land from being sold for development. Critics argue it shifts more of the tax burden onto other owners and mainly benefits large landholders.

Tennessee: Amendment 2 constitutional ban on a state property tax

Tennessee’s Amendment 2 would prohibit the Legislature from imposing a statewide property tax on real, personal, or mixed property.

• Notably, Tennessee has no such tax today, so the amendment wouldn't change current bills.
• Local property taxes levied by counties and cities would stay as they are.

Supporters see a permanent safeguard against a future tax increase. Critics say it ties lawmakers’ hands for a tool they might not use.

Property tax: What to know before voting

Property tax measures offer relief in different ways, and the details determine who benefits.

• Homestead exemptions reduce the portion of a primary residence’s value subject to tax.
• Assessment caps limit how quickly taxable value can rise, but don’t necessarily cap the bill.
• Senior exemptions and freezes often depend on age, income, and residency.
• Limits on local levies restrict how much a government can raise overall, with no guarantee of a lower bill for every homeowner.
• Agricultural and other targeted exemptions mostly benefit qualifying property owners, not homeowners across the board.

Before casting your ballot, make sure you know who qualifies for each measure, when the new rules take effect, and how a measure could affect your home’s taxable value.

It's also important to consider how or whether a measure might affect your bottom line in the near term or further down the road.

Related

• 10 States With the Lowest Property Tax
• Property Tax Changes Older Homeowners Should Watch in 2026
• Midterm Election Tax Measures Target High Income

Who likes paying taxes? Let me see a show of hands.

OK. No one.

Still, taxes are part of investing, and sometimes the determination to avoid them can lead to a worse financial decision than simply writing the check.

I know because I've done it.

Like many investors, I've held on to winners too long, in part because I feared paying a large capital gains tax bill. In 2021, I watched a roughly $1,500 investment in Adobe (ADBE) balloon to nearly $90,000. It was also a high-income year for me, so I decided not to take the profits.

Looking back, that feels like a mistake. Adobe shares subsequently fell dramatically from their 2021 highs. I was worried about the tax consequences of selling and, at the same time, suffered from a healthy dose of FOMO: What if I sold and the stock kept going up?

It didn't.

That experience has made me much less resistant to selling big winners in retirement.

Why is it so hard to let go of a successful investment? Maybe we become attached to the company. Maybe we like believing we're great stock pickers. Or perhaps the capital gains tax feels like an immediate, certain loss while the possibility of a future stock decline seems distant and theoretical.

For some investors, that can lead to tax paralysis: refusing to sell an appreciated investment primarily because of the tax bill, even after the position has grown far larger than makes sense for the portfolio.

When taxes become a behavioral problem

Behavioral finance helps explain why.

One phenomenon is sometimes called the tax-lock effect. An investor continues holding an asset that no longer fits his or her risk tolerance, investment thesis or desired asset allocation because selling would trigger a capital gains tax.

Then loss aversion enters the picture.

The concept, associated with psychologists Daniel Kahneman and Amos Tversky's prospect theory, holds that people tend to feel the pain of losses more strongly than the pleasure of comparable gains.

For a wealthy investor sitting on a large, appreciated position, writing a six-figure check to the IRS can feel like losing money rather than enjoying the result of a successful investment.

The potential future loss from owning too much of one stock can be harder to picture.

Jason Lilly, a financial adviser with Tenere Wealth Advisors in Hyannis, Massachusetts, sees several behavioral biases come together when clients resist trimming successful holdings.

Last year, he worked with a client who had about $1 million invested in Apple (AAPL). The client loved Apple products — "we are Mac people" — creating an emotional attachment to the company. Recency bias reinforced the reluctance to sell: The stock had been performing well, so why assume that would change?

Lilly approached the problem gradually. "As an adviser, my No. 1 fiduciary role is to help clients protect the downside. So that's how I frame the conversation. This client has 10,000 shares of Apple. We sold 100 shares at $290. Then the stock bumped up to $310 and an element of seller's remorse kicked in."

Lilly reminded the client that those 100 shares represented only about 1% of the Apple position.

"I continue to underscore the importance of having a highly diversified portfolio and a comprehensive financial plan. When I can get clients to truly see the big picture and look 10 years down the road, then they get more comfortable paying capital gains taxes," Lilly says.

For clients like these, Lilly and his team can also establish a capital gains budget for the next one to three years. Rather than treating every taxable sale as an unpleasant surprise, the investor decides in advance how much in gains he or she is comfortable realizing. So taxes become part of the plan.

When you may need a CPA

Tax planning for wealthy retirees can quickly get complicated.

Financial advisers increasingly use tax-planning software to model strategies, but an adviser generally is not a CPA or licensed tax professional. For higher-net-worth families, coordination among the financial adviser, CPA and estate-planning attorney can become increasingly valuable.

Some investors may benefit from engaging a CPA specifically for long-range tax planning. John Barut, CPA and owner of Providence Consulting CPA, PLLC in Charlotte, North Carolina, offers retirement tax planning for clients who want to estimate what their tax burden could look like five, 10 or even 25 years into retirement.

The exercise can incorporate stress testing the impact of Roth conversions, charitable giving, Social Security claiming decisions, required minimum distributions (RMDs) and tax-bracket management on the portfolio over time. Instead of evaluating each decision separately, the idea is to see how the pieces interact over decades.

Barut recently worked with a retired married couple in their 50s who had approximately $7 million in traditional IRA assets. Doing nothing with those accounts for the next 10 to 15 years could mean substantial required minimum distributions later in retirement. He developed a multiyear Roth-conversion strategy. This year, the couple plans to convert $250,000 from traditional IRA assets to a Roth IRA — and willingly pay the associated income tax now.

"This couple may live another 40 or 50 years and have to pay taxes every year on portfolio gains. But with an aggressive Roth conversion strategy, we can demonstrate how this couple can reduce their total tax burden by approximately $12 million over their lifetime. That's a significant savings," Barut says.

The exact result of any Roth strategy depends heavily on future tax rates, investment returns, longevity and other assumptions. But the larger lesson applies to many retirees: Sometimes paying taxes today can improve the long-term plan.

The hidden risk may be the stock, not the tax

Jamie Botsko, a senior family office wealth adviser at Greenleaf Trust in Grand Rapids, Michigan, works with wealthy families that have highly concentrated stock positions.

"HNW clients often misconstrue capital gains taxes as the primary risk when selling appreciated assets, when the actual risk is market decline and potential wipeout of their holdings because of a concentrated position," Botsko says.

Consider an investor with several million dollars tied up in the stock of one company. Perhaps the shares came from decades of executive compensation, an early investment in the business or ownership of a company that later went public.

The investor may have an extremely low cost basis. Selling creates a large taxable gain. Doing nothing, however, leaves a substantial portion of the investor's retirement wealth dependent on the fortunes of one company.

For clients with significant concentrated positions, Botsko may consider strategies such as charitable remainder trusts, exchange funds, variable prepaid forwards and long-short strategies, depending on the investor's circumstances.

"The key issue is not the tax hit itself, but rather the market risk that could derail clients' retirement plans. Proper planning should focus on diversification rather than tax avoidance," Botsko says.

A charitable remainder trust, for example, can allow someone with highly appreciated assets and charitable intentions to contribute those assets to an irrevocable trust. The trust may sell the assets and reinvest the proceeds without immediately triggering capital gains tax at the trust level. The donor or another beneficiary receives payments according to the trust terms, with taxes generally recognized as distributions are received. The remaining assets eventually pass to the designated charity.

An exchange fund takes a different approach. Investors contribute concentrated shares to a pooled fund containing stocks provided by other investors. In return, they gain exposure to a more diversified portfolio without immediately selling the original shares and realizing the gain. These vehicles can carry substantial restrictions, costs and complexity, so they aren't appropriate for everyone.

Other strategies, according to Botsko, including prepaid variable forwards and certain long-short approaches, can be even more complicated and typically require specialized tax, legal and investment advice.

"The goal isn't necessarily to eliminate taxes. It's to keep taxes from dictating the entire investment strategy," says Botsko.

Give yourself permission to enjoy your wealth

There is another side to tax paralysis that often emerges in retirement: Some investors become so reluctant to realize gains that they hesitate to spend money they can comfortably afford to spend.

Jason Dall'Acqua of Crest Wealth Advisors in Annapolis, Maryland, sees this with clients who have spent their working lives saving and investing.

The fear of not having enough can be healthy. It encourages saving, investing and planning. But habits built over 30 or 40 years don't disappear when someone retires.

Dall'Acqua recalls one client who takes an expensive family vacation each year but still wants reassurance that the expense is affordable, despite having sufficient assets. "An emerging part of my role is to help clients enjoy their wealth through meaningful experiences while addressing their concerns about spending," Dall'Acqua says.

Sometimes that means selling appreciated investments and paying taxes. No one enjoys doing that. But the purpose of accumulating wealth isn't simply to preserve every dollar indefinitely. Retirement portfolios are ultimately there to support your retirement, he says.

Lilly tells clients to view a capital gains tax bill from a different perspective. "This is a ‘good' problem to have. Think ahead. Be proactive. We appeal to clients' qualms about paying taxes on concentrated stock positions by using patience and framing the conversation around strategies like capital gains budgets, charitable giving, and gifting appreciated assets to manage taxes effectively."

Barut makes a similar case for looking ahead. "Having a better handle on future taxes — which many retirees don't plan for in their retirement budget — takes some of the uncertainty out of retirement planning. No one enjoys paying taxes, but showing clients their current and future tax burden makes them more open to tax mitigation strategies like Roth conversions and charitable giving," he says.

There may be one final psychological hurdle worth clearing: A capital gains tax bill usually exists because an investment made money. The true challenge is deciding when and how to pay some tax today to help protect the wealth you'll need tomorrow.

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As many people in the U.S. are dealing with high prices for everyday expenses, the growing gap between wealthy households and everyone else is a topic of debate. Now, United Airlines CEO Scott Kirby is weighing in, calling for a national wealth tax and inheritance taxes that could approach 100% for some.

In an interview with The New York Times published October 18, Kirby was asked about declining public trust in corporate executives. He responded:

"Wealth inequality has become a danger to our society, and we need to address that. We should have a national wealth tax — it won't work by state because people will just move. And I think we should have inheritance taxes that get close to 100 percent at some level. I would pay them."

Kirby, who is reportedly worth over $125 million, didn't offer a detailed plan for how new taxes would work. But his comments raise interesting questions about tax fairness in the United States.

The Center for American Progress reports that the wealth gap is the widest it's been in 30 years, with the top 1% holding nearly 32% of the nation's total wealth (roughly $55 trillion in assets). Meanwhile, the bottom 50% holds only about 2.5% of U.S. wealth.

To better understand what a national wealth tax could mean, it helps to look at what the U.S. tax system currently does and doesn't tax.

Types of income the IRS taxes

In the U.S., many types of income are taxable, including wages and certain investment gains. But the IRS generally doesn't tax accumulated wealth.

• For example, if someone's stock portfolio increases in value, they generally don't owe capital gains tax on those gains until they sell the investments, though other tax rules may apply.
• A national wealth tax, if ever approved, would require people to pay tax on the value of their assets even if they hadn't sold anything or received additional income.

However, the U.S. government can tax some wealth transferred after death. When applicable, the estate, not the heir, generally pays the federal estate tax, which tops out at 40%. But because the exclusion is so high, many estates owe no federal estate tax.

For people who die in 2026, the federal lifetime estate tax exemption is $15 million per person ($30 million for couples).

Also worth noting: Some states have their own estate taxes, with different rules and exemptions. For instance, five states — Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — tax certain inheritances.

The takeaway? Under current federal law, inheriting money doesn't automatically mean owing federal income tax or inheritance tax. The outcome depends on the asset type, the estate's circumstances, and the state involved.

What would a wealth tax change?

A wealth tax would generally target a person's net worth — generally, the value of their assets minus their debts at a given time — rather than the income they earn in a year.

Imagine someone owns $50 million in investments and other assets and has $5 million in debt. Their net worth would be $45 million. Under a hypothetical wealth tax on net worth above $20 million, some of that wealth could be subject to tax even if the person earned relatively little income that year.

Of course, the details would matter. Lawmakers would need to decide which assets count, how to value them, what threshold triggers the tax, and how often to collect it. Valuing private businesses, art, and other assets that don't trade on public markets could be especially complicated.

Interestingly, and as Kiplinger has reported, California voters will weigh in on similar questions this November.

• Proposition 40, on the November 3 midterm elections ballot, would impose a one-time tax of up to 5% on certain covered assets held by billionaires who were California residents on January 1, 2026.
• Covered assets would include businesses, securities, art, and intellectual property.
• Real estate, pensions, and some retirement accounts would generally be excluded.

Advocates say the measure is intended to raise money primarily for healthcare, with additional funding for education and food assistance. Estimates suggest it could generate tens of billions of dollars in temporary revenue over several years.

Opponents argue that the billionaire's tax could drive wealthy residents away and weaken state finances over time. A state analysis estimates that tax flight could reduce annual income tax revenue from billionaires by less than $1 billion.

The California proposal is a one-time state tax aimed at billionaires, not a recurring "wealth tax." But it highlights some of the same issues lawmakers would face in designing a broader national levy, including which assets to include, how to value them, and how to limit opportunities to avoid the tax.

Meanwhile, other states are debating tax changes aimed at high earners, though these proposals concern income rather than total wealth.

• Colorado voters will consider Amendment 87, which would replace the state's flat 4.4% income tax with graduated rates, including higher rates for people earning more than $500,000.
• Washington state voters, meanwhile, will decide whether to repeal a new 9.9% tax on annual income above $1 million.

The difference between wealth taxes and inheritance tax

It's also important to note that a wealth tax and an inheritance tax target different things. A wealth tax would generally apply to assets a person owns, while an inheritance tax applies to money or property someone receives from a person who has passed away.

An inheritance tax is also different from an estate tax. An estate tax is generally assessed on the estate before assets are distributed to beneficiaries. An inheritance tax (when applicable) is imposed on the recipient.

In any case, a tax rate approaching 100%, as suggested by Kirby, on very large inheritances would represent a major change from current federal law.

Supporters of higher inheritance taxes often argue that taxing large transfers of wealth could help reduce wealth concentration and raise money for public services. Critics counter that high rates could make it harder to pass family businesses or other assets to the next generation, potentially forcing heirs to sell assets to cover a tax bill.

The effects would depend heavily on how any new tax would be designed, including the size of the exemption, the rate schedule, and how assets such as closely held businesses would be treated.

And of course, there's politics: passing a national wealth tax would be difficult in a deeply divided Congress.

What new taxes mean for your financial plan

For now, Kirby's comments don't change the tax rules for your investments or inheritance. Most families also don't need to worry about the federal estate tax.

But if you're concerned about tax liability, don't overlook state taxes. Some states have estate tax exemptions well below the federal limit, and as previously mentioned, certain states tax some inheritances and estates.

As a result, depending on where you live and where the person leaving you assets lived, state taxes could affect how much you or your heirs ultimately keep.

Consult a trusted tax advisor or certified financial planner who knows your financial circumstances.

Related

• Midterm Elections Tax Measures Target High Income
• California Wealth Tax on the November Ballot: What to Know
• Capital Gains Tax Rates for 2026
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?

Retirement should simplify your life, but managing post-career income streams often adds unexpected tax complexity.

Once you retire, you lose the safety net of routine employer withholdings, making it easier to slip up under a new set of tax rules. For instance, a single misplaced IRA distribution or part-time coaching gig might inadvertently trigger steep Medicare surcharges — or cause the IRS to tax your Social Security benefits.

Here are five hidden tax traps that catch new retirees off guard, and how to adjust your withdrawal strategy to stay ahead of them.

Note: This article covers federal income taxes and municipal property taxes. State income tax provisions may differ. Consult a qualified tax professional when necessary.

1. The Social Security earnings test isn't permanent

After retiring, you can claim Social Security benefits as early as age 62, or wait until full retirement age (or "FRA," typically ages 66 to 67, depending on when you were born).

Most retirees know that claiming early permanently reduces their monthly benefit by 25% to 30% compared to what they would receive at their FRA. However, that rule changes if you're still working part-time while receiving early benefits.

The "gotcha": For 2026, if you are under FRA for the entire year and earn more than $24,480, Social Security withholds $1 for every $2 earned above that limit. Many retirees mistakenly believe this money is lost forever or that part-time work permanently destroys their benefits.

The reality: It's a temporary withholding, not a penalty. Once you reach your FRA, Social Security recalculates your monthly benefit upward to account for the amounts withheld earlier, returning those funds over time in higher monthly checks. (How much you recover ultimately relies on longevity, though.)

2. Medicare surcharges are for two years later

Many retirees don't realize their Medicare Part B and Part D premiums are calculated well before they even enroll.

That's because the government uses a two-year lookback period on your tax returns to determine if you owe an income-related monthly adjustment amount (IRMAA).

The "gotcha": If your income was high during your final working years — due to a peak salary, a home sale, or a large IRA withdrawal, for instance — Medicare applies a monthly surcharge to your premiums based on that amount two years later.

The reality: You don't have to pay a surcharge based on a salary you no longer make. If your income drops significantly due to a qualifying life event, like retirement ("work stoppage," as the Social Security Administration calls it), you can file Form SSA-44 with the SSA. This document requests an immediate premium recalculation based on your current, lower income.

3. Tax withholding percentages aren't customized

When folks retire, most roll over their 401(k) or other employer-provided retirement plan into an IRA; this often defers taxes until distributions are made.

But when you withdraw traditional IRA funds, most (if not all) of the withdrawal is treated as ordinary income and taxed at federal and state rates.

And unlike during your working years (when an employer might've withheld income taxes for you), you'll need to handle tax withholding on your retirement distributions yourself.

The "gotcha": IRA plan custodians generally default to a flat 10% federal withholding rate on distributions — and often withhold nothing for state taxes — unless you explicitly request otherwise. Withdrawing money without adjusting these defaults can lead to an unexpected bill and underpayment penalties in tax season.

The reality: Whenever you set up a one-time or recurring IRA distribution, you can specify your exact withholding percentages. For example, if your effective federal tax rate is 22% and your state rate is 6%, you can direct your custodian to withhold those exact percentages, or choose to make quarterly estimated tax payments instead.

4. More counts toward MAGI and combined income than you think

Modified adjusted gross income (MAGI) governs several key retirement tax thresholds, including Medicare IRMAA surcharges, traditional IRA deductibility, and net investment income tax (NIIT).

Meanwhile, the IRS uses a separate metric — "combined income" — to decide how much of your Social Security benefit gets taxed.

The "gotcha": Even non-taxable income can lead to higher federal income tax bills. For instance, tax-exempt municipal bond interest and tax-free Social Security benefits are added back to combined income. Once that figure crosses just $25,000 for single filers or $32,000 for joint filers, up to 50% to 85% of your Social Security benefits become federally taxable. MAGI also includes tax-exempt municipal bond interest, foreign earned income, and dividends.

The reality: Retirees can use a multi-tiered withdrawal strategy to keep both MAGI and combined income under key thresholds. For example, qualified distributions from a Roth IRA or Roth 401(k) are tax-free and don't count toward either metric, so you can access spending money without pushing yourself into higher tax tiers.

Related: 6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)

5. Property taxes and utilities often don't match COLA

Eliminating a mortgage is a milestone worth celebrating. But even though your principal and interest payments are gone, property tax, home insurance, and utility bills unfortunately continue indefinitely.

Some retirees might think that annual cost-of-living adjustments (COLAs) for Social Security will help cover some of these costs. However, that's not always the case.

The "gotcha": Social Security COLAs are tied to the Consumer Price Index for urban wage earners and clerical workers (CPI-W). This index reflects working-age household spending rather than older adult budgets, which lean more toward housing and healthcare. As a result, property tax hikes and utility rate increases frequently outpace annual COLA bumps.

The reality: Many states and municipalities offer older adult-specific tax relief programs, like homestead exemptions, property tax freezes, or tax rebates. If your area lacks these programs, you can also try building a liquid cash cushion in a high-yield savings account or Roth IRA. This safety net lets you absorb sudden tax or utility spikes without drawing additional traditional IRA funds that might bump you into a higher tax bracket.

See also: Social Security Tax Limit Rises for 2027: Who Will Pay More?

More Secret Tax Tips

• 5 Little-Known Senior Property Tax Breaks in 2026
• 5 Little-Known Senior Tax Deductions in 2026
• Most-Overlooked Tax Breaks for Retirees and People Over 65
• The Boots Rule of Retirement Tax Planning

I started to focus on retirement income planning about 15 years ago. One thing that struck me early in this journey was just how much our clients detest required minimum distributions (RMDs).

A large percentage of our clients were federal retirees with large pensions under the old system. They didn't need the money.

It wasn't that they were mad about having to take the funds — it was the taxes. On top of the taxes, there were also the other dominos that could fall — the phaseout of certain deductions, higher capital gains taxes and, perhaps the most hated, Medicare premium hikes (IRMAA).

Today, many of our clients still hate RMDs. This is not just because they all have large pensions, but many have put themselves in strong financial positions and do not like paying taxes on money they don't need. It's like paying the tolls on the Jersey Turnpike but having no desire to actually get where you're going.

We use many strategies to lower our clients' lifetime tax bills, but these three very niche strategies are designed to stop or delay the actual income you don't want, in turn, reducing or deferring the taxes.

1. Skip your first RMD

Everyone is eligible to defer the RMD in the year they hit their RMD age. This can be 70½, 72, 73 or 75, depending on your year of birth. This sounds better than it is, but it can make sense in the right situation.

Let's say you were born in 1960. Your RMD age is 75, and you will hit that in 2035. You can defer your 2035 RMD until 2036. Here's the catch: You'll then have to take two RMDs in 2036, one by April 1 and one by December 31.

Doing this without running the numbers can really backfire, because that lumpy distribution is more likely to cause more bad dominos to fall than if you'd split the distribution over two years.

Here are some situations where we've seen it make sense to skip the first RMD:

• You retire in 2035 and will have a significant income drop in 2036
• You sell your business in 2035

You have a lump sum from any other source in 2035 that causes your income to spike (unpaid leave, inheritance, inherited IRA distribution, home sale, etc.)

You see the theme. If your income is much higher in 2035 than you expect it to be in 2036, it could be beneficial to skip your first RMD. We rely on financial planning software to project out tax rates to make that determination. You can access a version of what we use.

2. Buy a qualified longevity annuity contract, or QLAC

When interest rates were hovering around zero, it rarely made sense to turn to a QLAC. Income guarantees move in the same direction as interest rates, so if there is any silver lining to inflation, it's that most fixed annuity rates moved up as the Fed raised rates to combat inflation. Merry Christmas!

A QLAC is a type of deferred annuity, basically meaning you give money to an insurance company in exchange for a future income stream. This is a unlike a single premium immediate annuity (SPIA), with which payments start immediately.

I believe that you need to approach this as longevity insurance first and as a tax tool second. Because many of these contracts will defer income until age 85, you are making a big bet on longevity.

The tax benefit is that you can move up to $210,000 per person (2026 limit) from your IRA into a QLAC. Round numbers: If RMDs start at 4%, you are delaying just $8,400 per year in RMDs.

"Delaying" is the key word. When that money does come out, it is still taxable.

Once again, this makes sense if you are already considering an annuity as a longevity hedge and like the idea of guaranteed income later in retirement.

3. Keep working

This one is not complicated but is often misunderstood. A costly mistake. If you are still working in any capacity as an employee and own less than 5% of the company, you can defer RMDs from your current employer retirement plan, but not from all your retirement plans.

Take the example of the client who started a manufacturing business that he sold to his employees. The business is his life. He tells me he'll work until the day he dies. I tell him he'll work until the day the new owners decide they can't take him anymore. He sort of laughs. He can defer RMDs until that day.

More commonly, we see clients continuing to work part-time in retirement. For anyone who is still working, and for employer retirement plans that accept rollovers into the plan, you may be able to roll funds from your IRA into your current employer plan and avoid RMDs on a much larger chunk of money.

This is the definition of the tax tail wagging the investment dog, which most textbooks caution against. But if you've got a good retirement plan at work and don't plan to stop working, it may make sense.

Most retirees spend more than their RMDs every year, so this is really an uptown issue for those who are really focused on taxes, as we are in our practice.

It is important to note that there are very few ways to completely eliminate the tax consequences, as you would if you did a qualified charitable distribution (QCD), so it's important to note that there is no prize for being the best tax deferrer. It only makes sense if your future tax rates will drop.

Related Content

• Missed Your RMD? 4 Ways to Avoid Doing That Again (and Skip the IRS Penalties), From a Financial Planner
• The 7 RMD Tax Traps Waiting for You in Your 70s — and How to Start Disarming Them in Your 60s
• New RMD Rules: Starting Age, Penalties, Roth 401(k)s, and More
• Got $2.5 Million Saved for Retirement? Here Are the Huge RMDs You Must Take at 73, 75, 80 and 85
• 5 Costly RMD Mistakes That Will Put a Dent in Your Savings (and How Early Planning Can Help)

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 there's one thing I've learned in my years advising real estate investors, it's this: The tax code doesn't care about your feelings. It does, however, reward you handsomely if you know which tools to pick up and when.

The problem is that most investors think of 1031 exchanges, Delaware statutory trusts and Qualified Opportunity Zones as one-size-fits-all solutions. They're not.

Recommending a 1031 exchange to every investor who walks through the door is like a doctor prescribing the same medication to every patient. Sure, aspirin is great, but it's not going to fix a broken leg.

So let's meet four very different investors, each facing a unique set of circumstances, and match them with the tax strategy that fits like a glove.

Henry: The stock market refugee

Henry spent 25 years building a seven-figure stock portfolio. Then came the tariff whiplash of late 2025 and the energy crisis of 2026, and Henry watched a decade of gains get rattled in a matter of weeks. He didn't just lose money — he lost sleep, his appetite and his faith in Wall Street.

Now Henry wants out. He's sitting on stock he'd like to sell, but the remaining gains still carry a hefty capital gains tax bill. And he wants something he can see and touch — something that doesn't swing 3% before breakfast.

Henry's play: A Qualified Opportunity Zone fund. When he sells his stock, those capital gains can be reinvested into a QOF within 180 days. The original gain gets deferred, and if he holds the QOZ investment for at least 10 years, any new appreciation is tax-free. The growth on his new investment owes nothing to Uncle Sam.

Better still, the One Big Beautiful Bill Act (OBBBA) has made the Opportunity Zone program permanent, introducing a rolling five-year deferral for gains invested after December 31, 2026, and a 10% basis step-up for those who hold for at least five years.

For stock market refugees like Henry who want to pivot into tangible real estate while getting a serious tax break, QOZs are the escape hatch.

One important note: Henry doesn't qualify for a 1031 exchange because he's selling stocks, not real estate. The QOZ program, unlike Section 1031, accepts capital gains from virtually any asset class: Stocks, crypto, businesses, art, you name it. That's what makes it the Swiss Army knife of capital gains strategies.

Rachel and Tom: The divorcing couple

Nobody gets married planning for a divorce, but here we are. Rachel and Tom own three rental properties together, and now they need to split everything up, ideally without handing a third of their equity to the IRS in the process.

Their situation is more common than you'd think and more treacherous than most people realize. If they simply sell all three properties and divide the cash, the capital gains taxes could be devastating: Potentially hundreds of thousands of dollars in federal and state taxes, plus depreciation recapture, gone before either party sees a dime.

Rachel and Tom's play: A 1031 exchange into Delaware statutory trusts. They sell the properties and use a qualified intermediary to execute a 1031 exchange, but instead of buying replacement properties together (which, given the circumstances, has obvious shortcomings), they each exchange into separate DST investments.

DSTs allow each of them to invest independently in institutional-grade real estate — think Class A apartment complexes or Amazon distribution centers — with minimum investments typically starting around $100,000.

Each party gets their own portfolio, their own monthly distributions and their own tax deferral. No more joint ownership. No more awkward phone calls about the leaking roof on Property No. 2.

The DST structure also eliminates the 45-day identification panic that sinks so many 1031 exchanges. Because DST properties are prepackaged and already acquired by the sponsor, Rachel and Tom can identify their replacement investments quickly, even under the emotional fog of divorce proceedings.

It's the cleanest possible split, with the least possible tax damage.

Sofia: The empire builder

Sofia is 42, owns a couple of single-family rentals and is hungry for more. She's not looking for a beach chair and a mailbox full of passive income; she's looking for a ladder. Her goal is to consolidate her smaller properties into larger, higher-performing commercial real estate and build serious generational wealth.

Sofia's play: The classic 1031 exchange, the way it was drawn up over a hundred years ago. She sells her two rental homes — let's say for a combined $800,000 — and rolls the full proceeds into a 20-unit apartment building worth $2 million, financing the balance with a mortgage. No capital gains taxes due. Every dollar of equity stays in the game.

This is the power of the 1031 exchange in its purest form: The ability to trade up without the tax drag. If Sofia had sold those two rentals and paid federal and state capital gains taxes, plus depreciation recapture, she might have lost $150,000 or more off the top.

That's not just money lost; that's leverage lost. It's the difference between a 20-unit building and a 12-unit building, between scaling an empire and treading water.

And Sofia doesn't have to stop there. Five or 10 years down the road, she can 1031 that apartment building into an even larger asset — a retail center, an industrial property, a portfolio of commercial buildings.

Each exchange defers the gains from the last one, creating a compounding effect that has made more real estate millionaires than any other provision in the tax code.

If she's strategic enough to hold her final property until death, her heirs receive a stepped-up cost basis, potentially wiping out every dollar of deferred gains along the way.

That's not just a tax strategy. That's a dynasty play.

Raymond: The high-income professional

Raymond is a plastic surgeon earning north of $800,000 a year. His tax bill is, to put it delicately, eye-watering. He wants two things: Passive income that doesn't require him to leave the operating room, and every legitimate tax deduction he can get his hands on.

Raymond's play: A combination strategy. First, he invests directly in DSTs that offer bonus depreciation. Under the newly restored 100% bonus depreciation rules, Raymond can potentially offset a significant portion of his passive income with accelerated depreciation from his DST investments — paper losses that reduce his tax bill without reducing his actual wealth.

Second, Raymond allocates a portion of his capital gains from stock sales or other investments into a Qualified Opportunity Zone fund, starting the 10-year clock toward tax-free appreciation. With the OBBBA making the OZ program permanent, Raymond has a long runway to compound gains without the drag of annual capital gains taxes.

The combination of DST depreciation benefits and QOZ tax-free growth creates a one-two punch that's hard to beat for high earners. Raymond gets monthly passive income from the DSTs, a meaningful reduction in his current tax liability and a long-term growth vehicle in the QOZ, all without ever picking up a wrench or answering a tenant's midnight phone call.

Your move

If you see yourself in any of these scenarios — or in some combination of them — the worst thing you can do is nothing. The tax code rewards action, and every day you delay is a day your money is working harder for the government than it is for you.

The best thing you can do? Find an investment adviser who understands not just one of these strategies, but all of them. Find someone who can look at your complete financial picture and recommend the right tool for the job, not just the only tool they happen to sell.

Because in the world of tax-advantaged real estate investing, the right strategy isn't the most popular one. It's the one that fits you.

Related Content

• How the Energy Crisis Is Reshaping Real Estate Investment Strategy (and Creating Opportunities Most Investors Don't See)
• When Is a 1031 Exchange Not the Right Move? A Real Estate Investing Pro Offers a Reality Check for Your Next Exit
• What a Delaware Statutory Trust Can Do for Your Kids That Your Will Can't
• DST Inventory Just Hit a Record $3.9 Billion: What 1031 Exchange Investors Should Do Next
• I'm a Real Estate Investing Pro: This Is How to Use 1031 Exchanges to Scale Up Your Real Estate Empire

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 Tax 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 deducting vehicle expenses, including the standard mileage allowance. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Standard mileage rate for Schedule C business driving

Question: I am retired but work part-time as a basketball referee. I am an independent contractor and file Schedule C. Can I claim the standard mileage allowance for driving from my home to the game site and back home?

Joy Taylor: Generally, no. The cost of business driving for self-employed individuals is a deductible business expense. However, the IRS generally considers the miles driven from your house to your first game site and the drive from your last game site back to your home as nondeductible commuting expenses. However, if you have multiple game sites in a day, you can claim the mileage traveling between game sites.

If you do take the deduction, you can claim either your actual expenses, including gas, repairs and depreciation on your car, or the IRS's standard mileage allowance. For 2026, the standard mileage rate for business driving is 72.5 cents per mile for the first half of the year and 76 cents per mile for July through December. If you use the IRS's standard mileage rate, you can also deduct the cost of any tolls or parking fees that you pay.

Be sure to keep a contemporaneous mileage log detailing each of your trips. It will make it much easier for you to figure out your total business mileage when you are preparing your tax return.

2. Employee driving

Question: I am a full-time employee and I get a W-2 each year. Sometimes, my job requires that I drive my own car between client meetings. My company doesn't reimburse me for any miles driven. Can I deduct the mileage expense on my tax return?

Joy Taylor: Unfortunately, no. Prior to 2018, employees who itemized on Schedule A were able to deduct miscellaneous itemized deductions, including their unreimbursed employee business expenses, to the extent the total amount exceeded 2% of adjusted gross income. The 2017 Tax Cuts and Jobs Act temporarily suspended these miscellaneous itemized deductions, and last year's "One Big Beautiful Bill" ended them permanently.

3. Buying a large pickup truck

Question: I bought a large pickup truck in March that I use 100% for my Schedule C business. I heard that I can expense the entire cost on my 2026 federal tax return. Is this true?

Joy Taylor: It depends. Yes, the federal tax laws allow self-employed individuals who buy a big truck that they use 100% for business to expense the full cost. However, there is a key limit to know when expensing business assets. The total amount expensed under Section 179 cannot exceed the taxable income from your business. First-year bonus depreciation doesn't have this limitation.

4. Tax breaks for business vehicles bought in 2026

Question: I am self-employed and am planning to buy a vehicle that I will use 100% in my business. Can I take a depreciation deduction for the auto?

Joy Taylor: Yes, you should be able to. There are generous tax breaks for business vehicles first put in use in 2026.

• For passenger vehicles, with first-year bonus depreciation, the first-year depreciation deduction is $20,300 for new and used cars. The second- and third-year depreciation caps are $19,800 and $11,900. After that, it is $7,160.
• For passenger vehicles for which bonus depreciation is not taken, the first-year depreciation cap is $12,300.
• For heavy SUVs, you can write off the full cost, thanks to bonus depreciation.
• For big pickup trucks, you can expense the full cost. Note that the total amount of business assets expensed can't exceed the taxable income from your business. Bonus depreciation does not have this limit.

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: Is It a Hobby or a Business?
• 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

Editor's note: This is the second article in a two-part series on how advisors can help clients move from reactive decision-making to intentional retirement planning. Part one is Are Your Client's Retirement Income Withdrawals Out of Whack? How to Help Them Get the Sequence Right.

Taxes are one of the most overlooked risks in retirement planning. The goal isn't simply to reduce taxes this year — it's to manage them across your lifetime while maintaining consistent, reliable income. This is where professional advice becomes critical.

At Wealthcare Advisors (WCA), this is what we believe an advisor's process should include.

Proactive planning before RMDs kick in

The years between retirement and age 73 (when required minimum distributions (RMDs) typically begin under current law) can be a window of opportunity. During that time, strategies may include gradually repositioning assets, managing taxable income levels and exploring Roth conversion opportunities while tax brackets are more favorable.

These three strategies should be at the top of your pre-call meeting with your team before the client discussion.

Social Security claiming decisions

Deciding when to start claiming Social Security impacts more than just the client's benefit. It affects:

• Their overall income structure and cash flow
• Taxation of benefits
• Longevity of their portfolio

Coordinating Social Security claiming with the withdrawal strategy you've developed helps create a more balanced and efficient income plan.

Adjusting for legislative changes

Tax laws change — and planning opportunities change with them. Taking advantage of provisions while they're still in place can create meaningful long-term benefits.

At WCA, an initiative-taking approach allows us to adapt strategies before the rules shift, rather than reacting afterward. And as specific provisions evolve, so do WCA strategies, meaning they're always tailored to current law at the time of planning.

Coordinating income for consistency and efficiency

Rather than pulling income from a sole source, we help design a blended withdrawal approach that:

• Maintains predictable income
• Reduces unnecessary tax spikes
• Positions assets efficiently for the future

It is not just about minimizing taxes — it is about integrating taxes into the larger income plan.

The '3L framework'

As you collaborate with clients approaching retirement, you can use WCA's "3L framework" to move them from reactive decision-making to intentional planning.

Start with what they will "lean on" — guaranteed or reliable income sources, such as Social Security, pensions and structured income streams. This is where thoughtful Social Security claiming strategies and coordination with other income sources can establish stability.

From there, guide them toward what they will "live on" — their portfolio distributions. This is where sequencing withdrawals, adapting to market conditions and proactively managing taxes before RMDs take effect all come into play. Helping clients understand not just which accounts to draw from, but why and when, positions you as a strategic partner rather than a transactional advisor.

Finally, anchor the conversation around what they will "leave behind," which naturally brings tax efficiency and long-term legacy planning into focus. This is where proactive planning — such as taking advantage of current tax provisions while they remain intact and managing lifetime tax exposure — can have a meaningful impact on legacy outcomes.

By framing these decisions within the "3L" structure, you're not answering your client's questions in isolation — you're delivering a coordinated strategy.

More importantly, you are helping clients replace a "ready, shoot, aim" mindset with clarity, confidence and a disciplined process that connects every decision back to their broader retirement objectives.

From reactive decisions to intentional retirement

The biggest mistake pre-retirees make isn't lack of preparation — it's assuming the hard part is over once they've saved enough. Distribution planning is just as important as accumulation.

With your help and before they set their retirement date, take the time to collaborate closely with your clients to explain which accounts will fund their lifestyle — and why. Explain how your joint plan will adapt to changing markets, and how taxes will be managed — not just this year, but over decades.

When your client and your team approach retirement with those answers in place, everything changes. Decisions become clearer. Income becomes more predictable. Confidence replaces uncertainty.

Why? Because your client's retirement should not start with "ready, shoot, aim." It should start with a plan.

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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 your accountant only contacts you during tax season, you might be paying for a glorified report card, not strategy. But your professional might not be entirely to blame.

The tax preparation industry has been caught in a severe supply-and-demand squeeze. On the supply side, a talent drain is hollowing out the industry, with more than 300,000 accountants and auditors leaving the workforce in two years, according to Bureau of Labor Statistics data.

On the demand side, clients are increasingly frustrated and ready to move. A new report from financial directory Sam's List reveals that 36% of people seeking personal tax help want new professionals to replace their current provider. This urgency is driven by affluent households, with more than half of those seeking a financial adviser reporting a net worth of $1 million or more.

That widening gap can leave overextended accountants concentrating on compliance and pushing strategic client conversations further down the road — often until tax season is already underway.

The problem: Tax preparers vs tax planners

Tax preparation and tax planning are distinct financial services, yet industry data show consumers often purchase basic compliance when their financial situations might require proactive planning.

"You can't expect an advisory relationship when you've only hired someone to prepare a tax return," tax strategist and enrolled agent David A. Perez told Kiplinger.

"If [the last time you spoke] was 'at my appointment in March,' nobody was looking at your tax situation while you were still making the decisions that affected your tax bill," he adds.

Perez, CEO of advisory service company Tax Maverick AI, suggests the disconnect stems from an industry business model prioritizing client volume over year-round advisory work.

"Think about the economics. When your pricing requires you to take on hundreds of clients, where does the time for deeper planning come from? At $1,000 per client, you need 300 clients to generate $300,000 in revenue — that's before expenses."

To maintain those revenue thresholds, many tax professionals work 50-to-80-hour workweeks during the traditional spring tax season, balancing expanding client rosters against smaller internal teams.

This high-volume workload correlates to a measurable drop in customer satisfaction.

• According to Sam's List, one in three taxpayers utilizing professionals are seeking a replacement.
• Among those taxpayers, 16% are unhappy with their current provider, and another 10% are seeking a more affordable option.

In addition to the CPA shortage, the friction is compounded as a new wave of buyers enters the market who might not have a clear baseline for service standards.

"For a lot of people, this is the first time they've hired anyone to help with their taxes," Kimberly Green, co-founder of Sam's List, noted in an email obtained by Kiplinger. "That's a big group starting from zero."

Who did you hire?

Most Americans first hire a tax professional at age 29, often hoping the expert will maximize their annual refund, as Kiplinger has reported. However, whether those expectations align with reality depends entirely on the specific service model you purchased.

While a tax preparer focuses on backward-looking compliance — logging what already happened — a tax planner focuses on forward-looking strategy executed before major financial decisions are made.

To distinguish between the two service models, Perez outlined three operational benchmarks that differentiate a planner from a traditional preparer:

1. Communication timing. If your tax pro last spoke to you in tax season, you are likely working with a preparer. Strategic planning requires ongoing conversations before major events occur — such as taking a raise, selling stock, acquiring real estate or launching a business.
2. Quarterly estimate methodologies. Standard preparation services often calculate your quarterly estimated tax payments based on the prior year’s bill to satisfy IRS safe-harbor rules and avoid underpayment penalties. A tax planner forecasts your current-year income trajectory and adjusts those estimated payments in real time, as circumstances change.
3. Actionable strategic deliverables. A traditional preparer reports what you owe. In contrast, a planner provides actionable recommendations, such as restructuring business entities, optimizing retirement vehicle funding, or timing capital expenditures, alongside projected tax savings from those moves.

Understanding your current tax model makes it easier to decide whether to add year-round strategy to your financial plan or hire a new professional. Tax preparer fees, such as those for a CPA, can range from $200 to more than $2,500 for one income return. Adding tax planning on top of that can price out some taxpayers' budgets.

High earner risks (and rewards)

For households earning $250,000 to $500,000 or more — including preretirees and retirees — the gap between basic tax preparation and proactive tax strategy carries steep financial consequences.

Without planning, high-net-worth taxpayers might encounter costly year-end tax traps, including:

• The net investment income tax (NIIT). Crossing $200,000 in modified adjusted gross income (MAGI) as a single filer or $250,000 for married couples triggers an additional 3.8% surtax on investment income, including capital gains, dividends and rental income. Strategically timing asset sales before year-end can keep your MAGI below those thresholds.
• The alternative minimum tax (AMT). High earnings combined with specific financial moves — such as exercising incentive stock options (ISOs) or claiming a large state and local tax (SALT) deduction — can unexpectedly trigger the AMT, disallowing your standard deduction and recalculating your tax bill at a higher rate.
• Uncoordinated Roth conversions. There are several reasons to convert a traditional IRA to a Roth IRA, such as achieving tax-free growth for your portfolio. But performing a conversion without modeling your overall bracket increases your current-year taxable income. This can accidentally bump you into a higher marginal federal tax bracket or trigger Medicare premium surcharges.

This risk exposure explains why higher-income taxpayers allocate significantly larger budgets to financial advisory services. Sam's List reports that two in three clients (66%) look for an accountant with a budget of $5,000 or less, while nearly one in five seekers plan to invest $20,000 or more annually.

Industry analysts estimate these larger budgets drive the need for year-round oversight, as proactive tax planners continuously evaluate income sources across multiyear horizons.

Steps to take in October and November 2026

Finding and sticking with a tax planner who meets your needs can feel daunting, particularly during the ongoing shortage of tax professionals. However, if you want to move from reactive filing to proactive tax strategy before the end of the year, there's still time to act.

"Schedule a real planning meeting now," Perez advises. "Not a quick email. Ask, 'What is my projected tax bill? What opportunities actually apply to me? What would I need to invest, and when do I need to act?' "

Some actions, such as updating your tax withholding or reviewing your required minimum distributions (RMDs), need to happen by December 31.

Other opportunities remain open after the year-end deadline, such as making certain IRA contributions or the fourth quarter estimated tax payment for the 2026 tax year (usually due January 15 of the following year).

If you want a fresh start for 2027, establish the planning relationship at the beginning of the year — agreeing on the scope, the investment, and when you'll meet long before filing season arrives. That way, when tax season finally rolls around, your return simply formalizes the work you've already done.

"Your tax return should reflect a plan you already worked on," Perez emphasizes, "not be the first time you find out you needed one."

Read More

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• The 'Mega IRA' Cap Is Back: What You Should Watch in 2026
• Types of Income the IRS Doesn't Tax

You probably know that money is taken out of your paycheck to help fund the Social Security program. But did you know there's a limit on how much of your income is subject to the tax?

That threshold is rising in 2027, which means higher-paid workers could see more money withheld from their paychecks next year.

The Social Security Administration (SSA) just announced a new wage base for 2027 (roughly 4.2% higher than the 2026 tax limit), along with the annual cost-of-living adjustment (COLA) for more than 70 million Social Security recipients.

The new 3.6% COLA will boost monthly checks for beneficiaries, while the wage base determines how much of a worker's income is subject to Social Security payroll taxes.

Also worth noting: These updated numbers come as some lawmakers weigh proposals to shore up Social Security — including whether to eliminate the Social Security tax cap. Here's more to know.

New 2027 Social Security payroll tax limit

Every year, the SSA sets a limit on how much of your earnings can be taxed for Social Security. Any money you earn above this limit — also called the tax cap or wage base — isn't taxed and doesn't count toward your future retirement benefits. This limit usually goes up each year based on average wage changes across the country.

For 2027, the tax limit is $192,300, up about 4.23% from $184,500 for 2026.

High earners. If you're at or above the taxable limit, you will pay the 6.2% tax on more of your income.

• The maximum tax an employee will pay in 2027 is $11,922.60, up from $11,439 for 2026.
• The taxable wage base is increasing by $7,800.
• An employee earning at least $192,300 will pay an additional $483.60 in Social Security taxes in 2027 (for example, 6.2% of $7,800).

Other workers. If your income is below the taxable limit, all of it is already subject to Social Security tax.

Note: The wage base also matters for future benefits. Social Security uses a worker's earnings history to calculate retirement benefits, generally based on the highest 35 years of indexed earnings. Earnings above the annual cap don't count toward that calculation.

How much Social Security is taken from a paycheck

Employees pay 6.2% of covered wages toward Social Security, and employers pay another 6.2%. The combined rate is 12.4%. Self-employed workers generally pay both portions, for a combined rate of 12.4% on net earnings up to the annual wage base.

Self-employed individuals can generally deduct the employer-equivalent portion of their self-employment tax when calculating adjusted gross income (AGI).

It's also important to distinguish Social Security taxes from Medicare taxes.

• Medicare payroll taxes don't have the same wage cap.
• Employees generally pay 1.45% in Medicare taxes on all covered wages, and employers pay another 1.45%.
• Higher-income workers might also owe an additional 0.9% Medicare tax on wages above $200,000 for single filers and $250,000 for married couples filing jointly.
• Those thresholds are separate from the Social Security wage base.

Will the Social Security tax cap be eliminated soon?

As Kiplinger has reported, Sens. Elizabeth Warren, D-Mass., and Bernie Moreno, R-Ohio, are calling for the elimination of the Social Security payroll tax cap. The proposal would require people with higher wages to pay Social Security taxes on more of what they earn.

If the tax cap were eliminated and assuming the 2026 limit, a worker earning $1 million, for example, would have another $815,500 of wages subject to the Social Security tax.

At the current 6.2% payroll tax rate, that would be about $50,561 more in Social Security taxes for the employee. The employer would generally owe another $50,561.

Warren and Moreno say the additional revenue could help protect Social Security benefits without raising the payroll tax rate for most workers (i.e., those whose wages remain below the taxable maximum).

But changing the Social Security tax cap would be more complicated than simply asking high earners to pay more taxes. Key questions Congress would have to address include how to change the cap and whether additional taxes would increase Social Security benefits for high earners.

• Social Security benefits are based, in part, on a worker's earnings history, and under current law, earnings above the existing cap don't count toward benefit calculations.
• Ultimately, the financial effect of eliminating the cap would depend partly on whether and how those additional earnings would be credited toward benefits.

For now, there's no major legislative change involving the tax limit, except for the just-announced annual adjustment.

Still, the debate surrounding Social Security taxes comes as the Social Security program faces a long-term funding shortfall. According to the 2026 Social Security Trustees Report, the retirement and survivors trust fund is projected to be depleted in late 2032 if Congress doesn't act.

At that point, continuing revenue would pay 78% of scheduled benefits. That could mean a 22% cut in benefits across the board. Stay tuned.

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• Federal Income Tax Brackets and Marginal Tax Rates for 2026

Budgeting for holiday giving can feel tough in a high-cost economy, but a new tax provision helps your charitable dollars go further this year.

Under the 2025 Trump tax bill, non-itemizers can now claim a tax deduction of up to $1,000 for single filers or $2,000 for married couples filing jointly for qualified cash donations.

Because roughly 90% of U.S. households claim the 2026 standard deduction rather than itemizing, this provision expands tax savings to an estimated 144 million taxpayers, according to data from Empower. However, the new standard-filer tax break carries strict limits.

Below are the primary rules governing the non-itemizer charitable deduction — and how the math shakes out for standard filers who donate in 2026.

Only cash counts, and there are no carryforwards

Unlike traditional itemized deductions, you cannot deduct physical goods or appreciated assets under the new standard deduction rule.

Only direct cash contributions, including payments made by check, credit card, debit card, or electronic transfers, are eligible up to the $1,000/$2,000 cap.

According to IRS guidelines, the following remain non-deductible for standard filers:

• Appreciated stocks, mutual funds, or cryptocurrency
• Household items, like furniture and donated clothing
• Cars, boats, RVs, and other vehicles
• Real estate or personal property
• Volunteer out-of-pocket expenses and mileage
• Contributions made to donor-advised funds (DAFs) or private non-operating foundations

Additionally, your donation must be made to a qualified 501(c)(3) public charity. If your eligible cash giving exceeds the $1,000 (single) or $2,000 (joint) ceiling, the excess can't be carried forward to future tax years — a key difference from traditional itemized contributions.

You get tax savings, not a direct reduction of your bill

Because the non-itemizer charitable tax break is structured as a deduction instead of a tax credit, it lowers your taxable income rather than reducing your final tax bill dollar-for-dollar.

For example, suppose a joint-filing couple has an adjusted gross income (AGI) of $200,000 and claims the maximum $2,000 deduction in the 22% marginal federal tax bracket.

Note: This example reflects an oversimplified tax situation. Actual tax savings depend on individual marginal rates, other tax breaks claimed, etc.

As shown above, this new deduction reduces your taxes owed less than a tax credit would. However, taxpayers in states that use federal taxable income as a starting point — like Idaho, North Dakota, and South Carolina — may indirectly capture the new charitable tax break savings on their state income returns. Consult a qualified tax professional or visit your state's Department of Revenue website for more information.

Detailed tax records are still required for the new tax break

One common misconception is that claiming the standard deduction waives record-keeping requirements for other eligible tax breaks. But the IRS enforces the same substantiation rules for non-itemized charitable deductions as it does for itemized filers. According to issued guidance:

• For any cash donation: You should retain written communication from the charity, bank statements, canceled checks, credit card records, or electronic receipts indicating the charity name, date, and amount.
• For donations of $250 or more: You must secure a formal contemporaneous written acknowledgment (CWA) from the qualifying charity before filing. The receipt must state whether you received any goods or services in return and provide a good-faith estimate of their value.
• Document retention: Keep all supporting tax records for up to seven years after filing to meet IRS review timelines.

Tracking cash donations throughout the year takes a little extra effort, but maintaining the proper receipts may help you claim every dollar of the new deduction when tax season arrives.

How the new tax rules change your giving strategy

As Kiplinger reported, recent federal legislation made major changes to the charitable deduction at both ends of the income spectrum.

For high-income itemizers, the rules grew tighter: federal provisions now require itemizers to exceed a 0.5% AGI floor before gifts become deductible, while top-bracket earners face a 35% cap on tax benefits. Nonprofit analysts warn these upper-tier limits could dampen large-scale donations from high-net-worth taxpayers.

Yet for the 90% of American households claiming the standard deduction, the new law opens a path to tax savings. The tax break of up to $1,000/$2,000 for charitable giving expands financial incentives for lower- and middle-income households — the groups that historically donate the highest percentage of their income, according to industry reports.

So if you plan on claiming the standard deduction this tax season, here's how much you might expect to save with this new charitable deduction, depending on your 2026 federal marginal tax bracket:

• Single filers in the 10% to 12% brackets might cut their tax bill by $100 to $120, while joint filers could save $200 to $240.
• Those in the 22% to 24% tax brackets could save between $220 and $480 on federal income taxes.
• Taxpayers in the 32% to 35% tax brackets might find up to $700 in direct savings.

A non-itemizer deduction won't double your refund overnight, but if you're eligible, claiming the new benefit may ensure your everyday holiday giving lends tangible tax relief when filing season arrives.

Read More

• 3 Major Changes to the 2026 Charitable Deduction
• How Charitable Donations Can Reduce Your Taxes
• 11 Overlooked Tax Breaks That May Lower Your Tax Bill

Required minimum distribution season sneaks up on many retirees.

RMDs are the amounts you must withdraw from tax‑deferred retirement accounts once you reach the required age, which is 73 for individuals born from 1951 through 1959 and 75 for those born after 1960.

Failing to take an RMD can be an expensive mistake. Vanguard research estimates that missed RMDs cost investors as much as $1.7 billion a year, and most of that loss is avoidable with better organization and planning.

Every year, millions of people log into their IRA, withdraw the smallest amount required and move on. The RMD becomes a chore to complete before December 31.

This approach misses the point. An RMD is one of the most important annual decisions in retirement planning. How you handle it can influence your:

• Taxes
• Medicare premiums
• Charitable giving
• Investment allocation

It can also affect the legacy you leave to heirs.

The question is not how to merely satisfy the RMD requirement, but how this year's distribution should fit into your spending, tax strategy, charitable goals and estate plan.

Get organized, then get clear on what you need

One of the biggest challenges with RMDs has nothing to do with taxes. It is simply tracking down every account and calculating what you owe, which turns into a headache when your savings are scattered across several institutions.

If you are approaching retirement, consolidate your retirement accounts wherever possible. Fewer accounts require a simpler calculation, and a simpler calculation means fewer costly mistakes.

Once your accounts are in order, determine how much money you actually need from your IRA.

If the full RMD covers your living expenses, the decision is straightforward.

If it does not, the RMD becomes a spending plan waiting to be written, one that can support charitable giving, fund a Roth conversion, get reinvested or build a cash cushion.

That shift — treating the RMD as a cash flow event rather than an automatic spending requirement — unlocks everything that follows.

Let charitable intent drive a QCD and watch your AGI

A qualified charitable distribution, or QCD, lets anyone who is 70½ or older send money directly from a traditional IRA to a qualified charity, excluding it from taxable income entirely.

For 2026, the limit is $111,000 per person, and each spouse with their own IRA gets a separate limit.

The temptation is to treat this purely as a tax trick. Resist that. Start instead with a simple question: How much were you already planning to give to charity this year?

If the answer is $25,000, a QCD is simply the most efficient way to move money you were donating anyway.

Here is where the strategy gets powerful. Picture a 75-year-old with a $1.5 million traditional IRA and a $60,000 RMD. She needs only $20,000 for living expenses and already gives $25,000 a year to charity.

Instead of taking the full $60,000 as taxable income and separately writing a $25,000 check, she can direct $25,000 straight from the IRA to charity through a QCD. That portion never touches her tax return. The remaining $35,000 comes to her as a normal distribution. Same total withdrawal, same charitable gift, considerably less taxable income.

The reason this matters goes beyond the tax bracket. Most people fixate on their marginal rate and stop there, but a QCD reduces adjusted gross income (AGI) directly, and AGI quietly drives a lot of other costs in retirement.

A higher AGI can trigger Medicare IRMAA surcharges, increase the taxable portion of Social Security benefits and push you past thresholds tied to other deductions.

Before adding an additional $30,000 or $50,000 to your income, do not just ask what tax bracket that lands in. Ask what it does to your entire financial picture for the year.

Time your RMD deliberately

There is a common instinct to take the RMD in January and be done with it. Unless you need the cash immediately, there is usually no advantage to rushing.

Waiting lets the year's full tax picture come into focus first, including income, charitable plans and whether a Roth conversion makes sense.

The RMD portion itself cannot be converted to a Roth IRA, but you can take the required distribution first and then, separately, convert an additional amount if your bracket allows it.

The real annual question becomes a combination of:

• How much goes out as the RMD?
• How much becomes a QCD?
• How much room remains for a Roth conversion?

Getting that mix right, year after year, is where real tax savings accumulate.

Also, remember that any amount withdrawn beyond your RMD does not carry over to reduce next year's requirement, since every year resets on its own. Extra distributions should have a clear purpose, whether that is a large expense, a gift or a Roth conversion, rather than being taken casually on the assumption they will count later.

Timing extends to the assets themselves, not just the calendar. When it is time to raise the cash, do not simply sell whatever happens to be sitting there. Look at the full portfolio first.

If stocks have run up and your allocation has drifted more aggressive than intended, the RMD is a natural chance to trim appreciated positions, generate the required cash and rebalance at the same time, turning a required withdrawal into a disciplined investment decision instead of an afterthought.

Think beyond this year

For retirees with substantial IRAs and genuine charitable interests, QCDs can become part of a longer-term legacy strategy.

IRA assets left to heirs are generally taxed as ordinary income when withdrawn, while assets given to charity through a QCD are not taxed at all.

Directing a portion of the IRA to charity during your lifetime, rather than leaving the whole balance to be taxed later, accomplishes the same charitable goal more efficiently than doing it through your estate. And by drawing down the IRA instead of a taxable account, which gets a step up in basis at death, you may leave your noncharitable heirs better off, too.

The retirees who handle this best treat it as an ongoing process rather than a once-a-year fire drill.

Early in the year, estimate income, review charitable intentions and identify the right RMD and QCD amounts.

Confirm everything is executed well before the December rush and keep simple records of every QCD, including the charity, the date and the amount, since documentation matters for tax reporting.

Markets shift, tax laws change and personal goals evolve, so an RMD strategy built once and never revisited will eventually fall out of step with your life.

The retirees who get the most value out of this season stop thinking of it as a withdrawal requirement and start treating it as one of the most useful planning conversations they have all year.

Related Content

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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.

More retirees are asking AI the money questions they used to ask financial advisers.

The appeal is obvious. AI chatbot answers arrive in seconds, nothing is embarrassing to ask, and it costs nothing. The problem is that a wrong or incomplete answer looks exactly like a right one.

This guide explains why AI gets retirement questions wrong and provides seven steps you can use to check an answer before you act on it.

Why AI gets retirement numbers wrong

A chatbot does not look anything up. It was trained on a large body of text gathered up to a cutoff date, and it answers by predicting which words most plausibly come next. When it states a figure, it is reproducing what appeared most often in that text — it's not reading a current government page.

Retirement rules are badly suited to that, because most of the important numbers change every year.

Contribution limits are the clearest case. For 2026, the amount that can go into a 401(k) rose to $24,500, and the IRA limit to $7,500. A year earlier, they were $23,500 and $7,000. A model trained before that announcement would provide last year's figures with complete confidence, and nothing in the phrasing would suggest the numbers are stale.

Other figures can be changed by legislation, after the former figure has circulated for years. For example, the age when retirees must start taking required minimum distributions (RMDs) used to be 70½, then it was 72, then 73, and it reaches 75 in 2033. All four ages appear across the internet, usually with no date attached.

Basically, AI handles concepts reliably and specifics unreliably. The seven steps below are built around that split.

Step No. 1: Check the year on every number

Any answer containing a dollar amount, an age, a percentage or an income threshold needs a date attached before it is worth anything.

Ask the chatbot directly which tax year the figure applies to. When asked, a chatbot will often admit its information may be outdated, even though it volunteered the number without hesitation a moment earlier.

Consider any figure with no year attached suspect.

Step No. 2: Ask which agency sets the rule

This is the one question a chatbot answers reliably, because it is a concept question rather than a numbers question.

Information about contribution limits, RMDs and tax treatment should come from the IRS.

Benefit amounts and claiming ages should come from the Social Security Administration.

Information about Medicare premiums and income surcharges (IRMAA) should come from Medicare.gov and the SSA.

Pension rules sit with the Department of Labor.

Knowing which agency oversees the rule turns vague verification into a single page to open.

Step No. 3: Verify at the source

Once you get an answer from a chatbot, go to the agency's own site rather than simply reading a summary. For example, federal agency pages will state which year a figure applies to.

Skipping this step could be expensive. Missing an RMD triggers a penalty of 25% of the amount that should have been withdrawn, reduced to 10% if corrected quickly.

On a $40,000 distribution, that is $10,000 for a deadline a chatbot might have gotten wrong.

Step No. 4: Feed it your own circumstances

A chatbot answers in generalities unless you provide specifics.

Supply the details that actually influence the outcome: Age, types of accounts, pension income, state of residence and marital status, including whether your spouse has their own earnings record. (Never provide details that are personally identifiable, though.)

Then compare the answer with the answer you get when you provide none of those details.

If the response barely changes, then the advice for your particular situation cannot be trusted.

This matters most when it comes to thresholds. Medicare's IRMAA works as a cliff rather than a gradual increase — income above $109,000 in 2026 for a single filer and $218,000 for a couple.

A chatbot that suggests you do a Roth conversion without making any reference to IRMAA can lead to you facing four figures in annual premiums two years later (since IRMAA is based on your income two years ago).

Step No. 5: Ask the same question twice

Pose the question again in different words, ideally on a different day, and see whether the original response holds.

Then change one detail, such as adding five years of age or removing pension income, and check that the answer moves in a direction that makes sense.

Answers that swing wildly when you rephrase the question are being generated, not recalled. When two responses conflict, the tie gets broken by checking the relevant agency's page, not by asking the chatbot a third time.

Rawad Baroud, CFO of ZeroGPT, says that consistency should never be confused with accuracy when evaluating AI-generated information. "Generative AI can produce an answer that is clear, detailed and convincing without having verified the facts behind it.

"Asking the question again can expose inconsistencies, but getting the same answer twice doesn't prove it is correct. For financial information, the final check still needs to be against an authoritative source."

So use repetition as a warning system, not as proof of accuracy. Whether the answers are different or the same, you should always verify any important numbers or rules.

Step No. 6: Ask what it left out

Chatbots answer the question asked and rarely flag what sits outside it.

Two prompts do most of the work here:

• Ask what assumptions the answer depends on
• Ask what would make this the wrong move

A recommendation to convert to a Roth, for instance, should surface the tax due this year, the effect on Medicare premiums and the five-year rule before it counts as complete.

According to Gregor Emmian, deputy chief growth and finance officer at Rise, "The most dangerous AI answers are the ones with no caveats attached. If a chatbot tells you to convert to a Roth or claim (Social Security) early without mentioning what could go wrong, that's not a complete answer — it's half of one.

"Retirees should treat 'what am I not being told?' as a mandatory follow-up question, not an optional one."

An answer that mentions no downside is incomplete — every retirement decision requires tradeoffs.

Step No. 7: Consult an adviser when an irreversible decision is involved

Some actions cannot be undone once you do them. Claiming Social Security, converting a large sum to a Roth, buying an annuity or taking a pension as a lump sum all belong in that category.

The cost of a wrong turn here is permanent. Claiming Social Security at 62, for someone whose full retirement age is 67, reduces the monthly benefit by about 30% for life, and that reduction extends to the survivor's benefit.

On a $2,400 benefit, it is roughly $720 a month, or more than $8,600 a year, for as long as either spouse lives.

For anything in this category, print the chatbot's answer and take it to an adviser or accountant. Ask which parts are wrong and why.

That conversation will be quicker and less expansive than one you start from nothing, and it puts the specifics in front of someone who can be held responsible for them, which no chatbot can.

The bottom line: If you're using AI this way, the main thing you should keep in mind is that the moment an answer sounds the most authoritative is the moment when you should question its accuracy and explore further, preferably through the relevant agency.

Related Content

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• 6 Ways to Use AI to Improve Your Financial Life
• How to Protect Your Privacy While Using AI
• Sitting on Housing Wealth? How to Safely Turn Home Equity Into Retirement Income
• An Expert Guide to Your Financial Priorities Decade-by-Decade: What to Focus on in Your 30s, 40s, 50s and 60s

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.

Shortly before 9:00 a.m., Diane, a 68-year-old retired middle school teacher, walks into her local library and notices a crooked display of flyers for after-school homework help. She straightens them before signing the volunteer timesheet at the front desk.

Over the next three hours, she shelves a stack of worn graphic novels, tidies the children's picture book bin, and hauls folding tables for Saturday's book sale. At noon, rolling her sore shoulders with a tired smile, she signs out and heads home to work in her fall garden.

For her morning's work, Diane doesn't receive a paycheck; instead, she earns a $45 credit toward her annual property tax bill. That's because her municipality participates in a "Tax Work-Off Program," which lets older residents lower their local taxes through community service.

While Diane is a composite snapshot, her morning routine reflects a real trend. According to AARP, older adults across the U.S. save up to $1,500 a year through these municipal programs.

So whether you're looking to trim your home expenses or simply stay active in retirement, here's how you might find — and make the most of — a tax work-off program in your hometown.

Why older adult tax relief is needed, and how it works

According to the National Institutes of Health (NIH), about 168,000 adults over 65 face eviction or forced displacement annually, while other reports indicate that homeowners over 50 make up 25% of all foreclosures.

Skyrocketing local assessments may drive many older adults into foreclosure by inflating property tax bills far beyond what fixed incomes can absorb.

To help combat this problem, some states have established frameworks for Tax Work-Off Programs (TWOPs), allowing qualifying households to contribute their skills in exchange for a direct reduction in their property tax liability.

Here's how these programs generally work:

• Eligibility: Residents typically must be 60 or older (sometimes 62 or 65, depending on local rules), military veterans, surviving spouses, or a person with a disability.
• Residency: Eligible homeowners must own and occupy their primary residence year-round within the participating municipality.
• Service: Volunteer work must be performed for municipal departments, like public libraries, community centers, or local administrative offices.
• Credit rate: Hours worked are credited toward the property tax bill at an established rate, usually tied to the state minimum wage or a fixed local rate.
• Tax benefit: Typically, the earned reduction is applied to your property tax bill after federal income taxes, Medicare, and any applicable state taxes are withheld (though federal exemptions for volunteer first responders are allowed).

Note: These guidelines vary by region. Check your local municipality's official website to verify specific property tax relief rules.

Which states allow property tax savings for volunteer work?

Because property taxes are levied locally, these programs aren't available everywhere.

Only eight states currently have legal frameworks allowing volunteer work to offset property taxes — and even in those states, each municipality or school district must individually vote to adopt the program:

• Massachusetts: Capped by commonwealth law at $1,500 per fiscal year (though towns can vote to increase the cap up to $2,000 or lower it). Qualifying residents earn credits at the state minimum wage rate.
• Maine: Municipalities may allow residents aged 60+ to earn up to the greater of $1,000 or 100 times the state minimum wage. Volunteer firefighters and EMS personnel can earn these tax benefits regardless of age. The benefit is applied as a local property tax reduction and can't reduce total tax liability below zero.
• New York: Active volunteer firefighters and ambulance workers who meet certain service and residency guidelines may receive up to 10% property tax exemption, if their local tax jurisdiction permits.
• Pennsylvania: Public school districts can implement "senior" tax rebate programs, offering older adults property tax credits in exchange for volunteer hours. While many districts cap this benefit between $550 and $1,000, some offer up to $1,200. Active volunteer fire and EMS personnel may also receive real estate tax rebates.
• Rhode Island: Eligible residents can earn up to $1,500 annually per person for qualifying municipal volunteer work.
• Washington: Participating local school districts offer tax work-off programs for those aged 62 or older.
• Colorado and Texas: Savings limits vary widely because local counties, cities, and school districts set their own caps and hour requirements.

But if your state or town doesn't currently offer a tax work-off program, there may still be ways to save. Many states offer property tax exemptions, freezes, and circuit breaker programs.

For instance, New Jersey has three property tax programs that allow up to $6,500 in relief per year for qualifying households. And Florida voters will soon decide on an increased homestead exemption for eligible residents.

For more information on how to save on property taxes, check out Kiplinger's report, Ways to Lower Your Property Tax Bill.

The health and social benefits of an active retirement

We've covered the obvious financial benefit of using volunteer work to ease a heavy property tax bill (if your town allows). But there's also an under-the-radar benefit of staying active in retirement.

Turns out, volunteering delivers profound physical, mental, and social health benefits for all, but specifically older adults, including:

• Mental health: According to AmeriCorps Seniors, serving just 1 to 2 years in volunteer work led to significant drops in depression, anxiety, and loneliness among older adults.
• Cardiovascular health: A Carnegie Mellon University study found that adults over 50 who regularly volunteered had a lower risk of developing high blood pressure.
• Longevity and mobility: An NIH survey found that older adults who volunteer at least 100 hours per year (roughly 2 hours per week) face a lower mortality risk, experience fewer physical functioning limitations, and maintain higher overall physical activity levels than non-volunteers.

Plus, studies suggest volunteering helps combat cognitive decline, improves sleep, and restores a sense of daily purpose for retirees missing the social connection of workplace colleagues.

Ultimately, whether you're like Diane and can use volunteer work to cut your property tax bill, or you live in a region exploring other tax relief options, getting involved in your local community can be a win-win — for your heart, your mind, and your body.

Read More

• 6 Steps to Appeal Your Property Tax Bill
• The New Retirement Math: Active Living Can Lower Your Taxes
• 5 Little-Known Property Tax Breaks for Older Adults
• The Boots Rule of Retirement Tax Planning

More than 32,000 Americans now hold $10 million or more in tax-advantaged accounts, with more than 1,000 holding balances above $25 million, according to Joint Committee on Taxation data.

These balances rarely stem from routine contributions to broad index funds. Typically, they trace back to startup founders, venture capitalists and corporate insiders placing low-cost, early-stage equity into self-directed IRAs and watching valuations compound over decades inside a tax-shielded wrapper.

Building that level of wealth is a remarkable achievement. Protecting it across generations, however, presents an entirely different planning challenge.

Mega-retirement accounts face growing scrutiny in Washington. Legislative proposals in the past decade have sought to cap total retirement balances or enforce mandatory distributions once balances surpass $10 million.

In today's dynamic tax landscape, affluent families must ask: Is an IRA still the optimal vehicle for long-term growth assets?

The traditional IRA drag: Ordinary income vs capital gains

Traditional IRAs deliver upfront deductions and tax-deferred growth, but every distribution is taxed as ordinary income — up to 37% federally, plus state taxes.

For rapidly appreciating equity, this dynamic creates a significant tax drag. Gains that would otherwise qualify for long-term capital gains rates (capped at 20% plus the 3.8% net investment income tax) lose their tax character entirely inside a traditional IRA. Decades of growth convert into ordinary income upon withdrawal.

The ordinary income vs capital gains tradeoff deepens for heirs. Under the SECURE Act, most nonspouse beneficiaries must fully distribute an inherited IRA within 10 years. A $20 million traditional IRA forced out over a decade can push beneficiaries into top tax brackets every year, surrendering nearly half the account to tax obligations.

The Roth trap: Income tax free, estate tax exposed

Roth accounts offer tax-free distributions and no lifetime required minimum distributions (RMDs), making them a natural candidate for high-upside equities. Yet, an often-overlooked exposure remains: The full Roth balance remains inside the owner's gross taxable estate at death.

Consider an entrepreneur seeding a Roth account with early-stage equity that grows to $50 million. While heirs receive an income tax-free windfall, they might face a substantial estate tax bill on the balance above the federal exemption limit ($15 million per person).

Another strategy is to withdraw from mega-Roth accounts after age 59½ and gift those funds — either directly or via trust structures. This approach can rapidly exhaust lifetime gift tax exemptions, restricting broader estate options.

Estate planning alternatives: Irrevocable trusts

To insulate high-growth assets from systemic tax drag and estate expansion, families expecting their wealth to trend above the federal estate tax exemption amount often look beyond retirement accounts toward irrevocable trust structures.

One has the choice of paying the trust's taxes over time by using a grantor trust. Because the grantor pays the annual income tax on behalf of the trust, the assets inside compound tax-free without diminishing the trust, principally providing a tax-free gift to beneficiaries each year.

To avoid paying the taxes of the irrevocable trust, the grantor might use a non-grantor trust in which the trust pays its own taxes. The grantor might "turn off" the grantor's trust status to convert the trust into a non-grantor trust.

Grantor trusts can be structured to allow indirect access to trust funds in more than one way. An independent trustee can be granted discretion to make distributions to beneficiaries based on health, education, maintenance or support needs, offering flexibility without giving the grantor direct control.

For married grantors, a spousal lifetime access trust (SLAT) provides a more direct route: It permits actual distributions to a spouse, who might then informally share that benefit with the grantor.

A non-grantor variation, the SLANT, can achieve similar goals, often for state income tax purposes. Because retaining a swap power would convert the trust back to grantor status, SLANT distributions rely more heavily on independent trustee discretion, which calls for more careful drafting.

While legislative discussions periodically evaluate changes to grantor trust rules, these vehicles remain primary pillars for intergenerational wealth transfer when executed with careful legal oversight.

Strategic asset placement across vehicles

Optimizing a complex wealth structure requires matching specific asset classes to the appropriate legal and tax wrappers. Note that these are general frameworks; the right approach for any given family will depend on their specific asset profile, complexity and risk tolerance.

• Traditional IRAs. Often best allocated to steady, yield-generating assets such as private credit or real estate investment trusts (REITs), where ordinary income tax rates match the income profile of the asset.
• Roth IRAs. Highly effective for strong growth equities, provided total household wealth remains within long-term estate tax exemption thresholds.
• Irrevocable grantor trusts. Ideal for high-upside, early-stage positions once family wealth exceeds federal estate tax thresholds, shielding future growth from federal estate tax.
• Taxable portfolios. Well-suited for core appreciated assets intended for transfer at death, leveraging the step-up in basis to eliminate unrealized capital gains. For concentrated, highly appreciated positions held prior to death, structured hedging and derivative strategies can help manage concentration risk, while other diversification tools such as direct indexing can allow for a more gradual transition out of the position.

Preserving generational wealth requires thoughtful vehicle selection, proactive risk management and staying ahead of changing tax frameworks. As balances grow, revisiting where assets sit, and why, can be one of the more overlooked ways to preserve wealth across generations.

Related Content

• Why So Many Families Are Unprepared for the Great Wealth Transfer — and What You Can Do About It
• The Inheritance Dilemma: How to Pass Down Wealth Without Destroying Ambition
• Our Taxpaying 'Golden Hour' Won't Last: These 4 Urgent Moves Can Help Insulate Your Wealth Before It's Too Late
• How to Build Your Financial Fortress Before a Siege: Why Timing Is Everything in Asset Protection
• 3 Things That the Ultra-Rich Do to Protect Their Wealth That You Can Do, Too

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 Tax 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 federal and state estate taxes. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. What's the lifetime federal estate and gift tax exemption?

Question: What is the lifetime federal estate and gift tax exemption for people who die this year? Will it be different for 2027 deaths?

Joy Taylor: The lifetime federal estate and gift tax exemption for people who die in 2026 is $15 million. This amount will go up each year with annual inflation. We don't yet know the figure for 2027 deaths.

2. How many estates pay federal estate tax?

Question: I'm curious how many estates actually pay estate tax, now that there is such a high lifetime federal estate and gift tax exemption.

Joy Taylor: In recent years, about 7,000 Form 706 estate tax returns have been filed with the IRS each year. More than half of these filings are from taxable estates of decedents, meaning estates that owe the federal estate tax.

The nonpartisan Tax Policy Center recently estimated that 6,890 federal estate tax returns would be filed for decedents dying in 2026, with 3,900 filed by taxable estates and 2,990 filed by estates that owe no tax.

3. Will the IRS tax me on inherited property?

Question: My grandmother recently died, and I inherited an appreciated, valuable piece of real property that she owned. Will the IRS tax me on my inheritance?

Joy Taylor: No. Inheritances are generally tax-free for federal tax purposes. And you would generally take a stepped-up tax basis in the inherited property equal to fair market value at the time of your grandmother's death. So if you sell the property shortly after her death, you shouldn't recognize much taxable gain from the sale.

4. Which states have their own estate, inheritance taxes?

Question: Which states have their own estate or inheritance taxes?

Joy Taylor: Most states do not impose taxes upon death. However, some do. Washington, D.C., and 12 states levy their own estate taxes on decedents. These states are Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington.

The estate tax exemption amounts in the 13 locales vary widely from state to state, and most are far below the federal exemption. Only Connecticut has hiked its estate tax exemption amount to close to the current federal level.

Five states impose an inheritance tax. They are Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania.

For more information, see our article on states with scary estate and inheritance taxes.

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 some retirees living on a fixed income, making ends meet can be especially challenging when everyday costs are high, as they are now. Just a couple of months ago, data showed that gasoline prices were up 27.4% from a year earlier, while grocery and housing prices keep rising.

When affordability is straining your budget, keeping more of the income you already have can make a difference. Enter taxes: another cost retirees have long had to contend with.

As you likely know, not all retirement income is taxed the same way. Some income is fully taxable, some is partially taxable, and some can be excluded from your federal taxable income altogether.

Knowing which income is tax-free can help you make the most of your retirement money and keep more of it available for everyday expenses. Here's a look at five common types of retirement income the IRS won't tax.

Nontaxable income in retirement

This is not an all-inclusive list of types of income the IRS won't tax. It's merely a sampling, for educational purposes, of some common sources of retirement income.

Because every individual's financial circumstances are different, consult a trusted tax advisor or certified financial planner who knows your situation and can offer tailored guidance.

1. Life insurance proceeds

Although life insurance typically isn't considered retirement income in a traditional sense, a surviving spouse or other beneficiary may receive a payout that helps cover living expenses or supplement other income.

Important to know: Life insurance proceeds generally aren't taxable income when paid to a beneficiary after the insured person's death.

For example, if your spouse has a $500,000 life insurance policy and you receive the $500,000 death benefit after your spouse passes, you generally won't owe federal income tax on those proceeds.

But...there are exceptions. Interest paid in addition to the death benefit is generally taxable. Special rules can also apply if you transferred a life insurance policy for value.

2. Qualified Roth account withdrawals

Qualified withdrawals from Roth IRAs and Roth 401(k)s are tax-free.

That's a key advantage of Roth retirement accounts. You contribute money after paying income taxes on it, so you don't get an upfront tax deduction. In exchange, you generally don't pay federal income tax on qualified withdrawals in retirement.

• For a Roth IRA, withdrawals are generally qualified if you've met the five-year holding period and are at least 59½.
• The five-year period generally starts with the first tax year for which you made a Roth IRA contribution.
• Other qualifying circumstances include becoming disabled or dying.
• Roth 401(k) distributions are also tax-free when they meet the applicable requirements.

A simplified example: If you withdraw $30,000 from a Roth IRA in retirement and the distribution is qualified, that $30,000 generally isn't included in your taxable income.

Not every Roth withdrawal is automatically tax-free, though. If you take a nonqualified distribution, the earnings portion may be taxable and could be subject to a 10% additional tax.

3. Municipal bond interest

Interest from many municipal bonds is generally exempt from federal income tax.

• States, cities, and other government entities issue municipal bonds to help finance public projects.
• For retirees and others who want investment income, tax-exempt municipal bond interest can provide cash flow without increasing federal taxable income.

For example, if you receive $5,000 in tax-exempt interest from qualifying municipal bonds, that interest generally isn't included in your federal taxable income.

There are exceptions. For instance, interest from certain private-activity municipal bonds can be subject to the alternative minimum tax.

State tax treatment can also vary. Depending on where you live and which bonds you own, you could owe state or local income tax even when the interest is exempt from federal tax.

4. Part of some pension payments

If you contributed after-tax money to a pension or annuity, you generally don't have to pay income tax again on the portion of your payments that represents your original investment.

This situation is more common with certain traditional pensions and annuities than with Social Security benefits or retirement accounts. The IRS generally refers to the after-tax portion as your "investment in the contract."

For example, suppose you contributed $50,000 of after-tax money toward a pension. When you begin receiving payments, you generally won't pay income tax on the portion of each payment that represents a return of that $50,000. The remaining taxable portion is generally included in your income.

The IRS has rules for determining how much of each payment is taxable and how much is tax-free. Depending on when your pension began and the type of annuity or pension you have, different calculation methods may apply.

So don't assume that your entire pension check is taxable simply because it comes from a traditional pension. Check your plan documents and tax forms (and/or consult a tax attorney) to determine whether you have an after-tax investment in the pension.

5. At least 15% of Social Security benefits

Up to 85% of your Social Security benefits can be subject to federal income tax, but the taxable amount depends on your income.

The IRS uses a measure called “combined income” to determine how much of your benefits, if any, is taxable. Generally, it includes your adjusted gross income, tax-exempt interest, and half of your Social Security benefits.

For 2026, your benefits generally are tax-free if your combined income is less than $25,000 for single filers or $32,000 for married couples filing jointly.

Above those thresholds, up to 50% of your benefits may be taxable. And as mentioned, at higher income levels, that figure can rise to 85%.

Another important consideration: Withdrawals from a traditional IRA or 401(k) can increase your combined income and may make more of your Social Security benefits subject to tax.

And...Under the 2025 Trump tax law, eligible taxpayers age 65 and older can claim an additional "senior bonus deduction" of up to $6,000 per person for 2025 through 2028. The deduction is subject to income limits and can reduce federal income tax owed, but it doesn't change the rules for determining whether Social Security benefits are taxable.

State taxes on retirement income

Federal and state tax rules can vary for retirement income. Income that isn't taxed by the IRS may still be subject to state tax, since states often have their own exemptions or deductions for retirement income.

• For example, nine states don't impose an individual income tax.
• Other states may exempt Social Security benefits but tax some or all pension income, traditional IRAs, 401(k)s, or other retirement accounts.
• Some also provide special deductions or exemptions for older taxpayers or for certain types or amounts of retirement income.

State retirement taxes can make a significant difference if you're considering where to retire. But don't judge a state's tax burden based solely on whether it has an income tax. As Kiplinger has reported, property taxes, sales taxes, estate and inheritance taxes, and other state and local levies can affect your overall cost of living.

If you're comparing states for retirement, look at how each one would tax your specific mix of income and assets, rather than relying on a state's reputation as being "tax-friendly" for retirees.

Retirement taxes: Bottom line

If you're worried about taxes eating into your retirement income, start planning before you need to take distributions. Traditional IRA and 401(k) withdrawals, for example, are generally taxable, as are many other common sources of retirement income, including interest, dividends, and capital gains.

Look at your expected income for the year and consider how a withdrawal, investment sale, or other financial decision could affect your overall tax picture. In some cases, it can help to spread income out when possible, rather than creating a large taxable-income spike in a single year.

As mentioned above, don't forget about state tax. If you're considering a move in retirement, compare the tax rules in the states you're considering based on your actual sources of income.

Related

• Types of Income the IRS Won't Tax in 2026
• Take Our Quiz: How Much Do You Know About Taxable Income?
• 5 Types of Gifts the IRS Won't Tax: Even If They're Big
• How All 50 States Tax Retirees