Tag Archive for: Retirement

One Big Beautiful Bill Act – Details we know about changes to Taxes, etc…

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One Big Beautiful Bill Act

What We Know About the New BBB Tax Bill So Far

Everyone wants to know more about the “One Big Beautiful Bill Act” (OBBBA) signed into law by President Donald J. Trump on July 4, 2025. As with any new tax legislation, the IRS is sure to weigh in on with clarifications later about certain provisions, especially as this bill is almost 900 pages long. But in the meantime, here are 10 things we know now:

1. Lower Income Tax Rates Were Made Permanent

The tax rates which have been in effect since 2017 by the passage of the Tax Cuts and Jobs Act (TCJA) are made permanent in the OBBBA. There are seven rates which vary by filing status per the IRS.

  • For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly).
  • 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
  • 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
  • 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
  • 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
  • 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
  • 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

2. Higher Standard Deductions Were Made Permanent

The TCJA of 2017 increased the standard deduction for people who don’t itemize; and the OBBBA made higher standard deductions permanent. Starting in 2025 the standard deduction amount will be $31,500 for joint filers and $15,750 for single filers. The standard deduction amount will be adjusted for inflation in subsequent tax years.

3.  Higher Lifetime Gift or Estate Exemption Amounts Were Made Permanent

The higher estate or lifetime gifting exemption amounts put in place by the 2017 TCJA are made permanent in the new bill. For the 2025 tax year, the exemption is $13.99 million per individual. Per the OBBBA, in 2026, the estate and lifetime gifting exemption amount will be $15,000,000.00 per person, ($30,000,000.00 for a married couple), with the new exemption amount indexed for inflation going forward.

4. The SALT (State and Local Income Tax) Itemized Deduction Cap Is Increased Temporarily

Before 2018, there was no limit on the amount that could be deducted for state and local income taxes. Then the 2017 TCJA imposed a cap of $10,000 for married couples filing jointly from 2018 through 2025. Per the OBBBA, the cap on the itemized deduction for state and local taxes is increased to $40,000 for the 2025 tax year, and increases by 1% through 2029, subject to a phaseout for taxpayers with incomes above $500,000. In 2030, the cap reduces back down to $10,000.

5 A Temporary Income Tax Deduction Was Created for Seniors

Mistakenly referred to as a Social Security tax cut, the OBBBA established a temporary income tax deduction for people age 65 or older. For tax years 2025 through 2028, $6,000 can be deducted per eligible filer—provided their modified adjusted gross income does not exceed $75,000 for single filers, or $150,000 for those married filing jointly.

6. A Temporary Income Tax Deduction Was Created for Those Who Claim Tips

7. A Temporary Income Tax Deduction Was Created for Overtime

Per the OBBBA, for the tax years 2025 through 2028, up to $25,000 of overtime compensation for married filers and $12,500 for single filers may be deducted from federal taxable income. The deduction phases out when adjusted gross income exceeds $150,000 for single filers and $300,000 for joint filers.<.li>

8. A Temporary Income Tax Deduction Was Created for Car Loan Interest

For the tax years 2025 through 2028, auto loan interest is made income tax deductible for new autos with final assembly in the United States. The deduction is limited to $10,000 and phases out when income exceeds $100,000 for single filers and $200,000 for joint filers.NOTE: The clean vehicle credit created by the Inflation Reduction Act of 2022 slated to be in effect through 2032 was abolished by the OBBBA for clean energy vehicles purchased after September 30, 2025.

9. The Child Tax Credit Was Increased Slightly, Deduction Amount Reduced, and Both Made Permanent

The child tax credit raised previously allowed eligible taxpayers to reduce their federal income tax liability by up to $2,000 per qualifying child, with a refund up to $1,700 per child if federal tax liability was not high enough to claim the credit. The OBBBA raised this amount to $2,200 per child for 2025, while lowering the refundable amount to $1,400 from its current$1,700; and earned income must be at least $2,500 to claim. Beginning in 2026, both are made permanent and will be indexed for infl ation.

10. New Trump Accounts for Kids for 2025 Through 2028

For American children born between Jan. 1, 2025, and Dec. 31, 2028 who have a Social Security number, the OBBB establishes a special trust designed to give children a head start financially. Formerly called “Money Accounts for Growth and Advancement,” or “MAGA accounts,” the Trump Accounts must be invested in an “eligible investment” in the stock market, such as a mutual fund or exchange-traded fund (ETF) that tracks an index like the S&P 500. A one-time $1,000 credit will be granted by the Department of the Treasury. The fund cannot have annual fees and expenses of more than 0.1% and must be comprised of “equity investments in primarily United States companies.”More details are forthcoming, but parents can establish the accounts, or the government will establish accounts for them. Although not required, parents, relatives, and others are also able to contribute up to $5,000 a year. Employers can chip in, though special rules apply to them; and a company can deposit up to $2,500 into an account for an employee’s eligible dependent child without adding to the worker’s taxable income.

Trump Accounts resemble traditional IRAs, except contributions made before the beneficiary’s 18th birth year aren’t deductible and have a lower annual cap. Unlike an IRA, there’s no earned income requirement to start. Contributions made after a child’s 18th year generally follow traditional IRA rules. The IRA contribution limit in 2025 is $7,000 for those under age 50. The money invested grows tax-deferred, and withdrawals are taxed as ordinary income.

https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year- 2025

https://www.kiplinger.com/taxes/salt-deduction-things-to-know https://www.littler.com/news-analysis/asap/what-employers-need-know-about-no- tax-tips-and-no-tax-overtime

https://www.congress.gov/crs-product/R41873

https://ktla.com/news/consumer-business/1k-trump-accounts-for-kids-how-do-they- stack-up/

https://www.npr.org/2025/07/08/nx-s1-5455647/trump-accounts-babies-what-to- know

https://www.cnbc.com/2025/07/11/when-provisions-from-trumps-big-beautiful-bill- go-into-effect.html

Do You Pay Income Taxes in Retirement?

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Do You Pay Income Taxes in Retirement?

3 MIN. READ

As you get closer to retirement, one question that may cross your mind is whether you still have to pay income taxes? This is a key question for retirees since typically they no longer earn a steady income. However, taxes are almost inevitable. So, with the proper planning, you can lower or potentially eliminate your income tax burden during retirement.

Taxes are certain

While retirement ends steady earnings and the daily commute to the office and never-ending Zoom meetings, one thing that remains unchanged is income taxes.

Therefore, to plan properly, it’s important to understand what taxes you must pay when you are retired and what portion of your income is taxable. The following are some basics considerations:

  • Some withdrawals from an annuity are taxable. An annuity is tax-deferred, which means you don’t pay income taxes until you begin withdrawing money. The IRS taxes withdrawals depending on whether you have a qualified or non-qualified annuity. Withdrawals from a qualified annuity are taxable. When you make a withdrawal from a non-qualified annuity only the earnings are taxable.
  • Funds from a tax-deferred investment are taxable. 401(k)’s and IRA’s are tax-deferred investments. Contributions to a tax-deferred account are not-taxed while the opposite is true when it’s time to withdraw your money. When you start withdrawing from a traditional IRA, the taxable amount is based on earnings. Any money you from your 401(k) is taxable.
  • Social Security benefits can be taxable. Retirees do not have a steady paycheck coming in, which means there are no federal tax, Social Security, or Medicare to pay. However, believe it or not, your Social Security benefits can be taxed. The taxable amount depends on any other retirement income you receive. According to the Social Security Administration (SSA), the IRS can tax up to 85% of your Social Security benefits.

How to lower your tax bill in retirement

Taxes in retirement could make up a large portion of your expenses, which is one reason to make sure you plan well. Although the part of your income that’s taxable varies, there are several tools you should be aware of that can help decrease or eliminate your taxes in retirement.

As you begin your financial planning, consider some of the following strategies:

  • Contribute to a Roth IRA. Think about opening a Roth IRA or, convert a traditional IRA to a Roth IRA. With a Roth IRA, you are not taxed on earnings or distributions in retirement. You must follow certain rules, for example, you must keep the account open for a minimum of five years.
  • Set up a health savings account. Contributions to a health savings account (HSA) account are tax-deductible, and the earnings and withdrawals you make for qualified medical expenses are tax-free. Therefore, an HSA serves two important purposes in retirement: reducing or eliminating taxes and providing an extra income source to cover healthcare costs. For 2022, the maximum contribution individuals can make is $3,650. For families, the maximum is $7,300. Also, those aged 55 and older may qualify for an annual $1,000 catch-up contribution.
  • Take advantage of untaxable income sources. For example, the proceeds you gain from selling your primary home are not taxable. The non-taxable proceeds from a home sale vary depending on whether you are single or married. You can also give some of your assets to family members to lower or avoid estate taxes.

Plan your retirement properly

Whether you’ve already started planning for retirement or are just about to start, it’s never too early or too late to talk to a financial advisor. A financial advisor will help you create a retirement plan that’s best suited for you and can provide guidance by adjusting your current investments.

Whether you start early or late, you’ll find that discussing your financial situation with an experienced financial advisor is beneficial in planning for retirement properly. This is especially true with so many investment and retirement options, each with its own unique and often overwhelming tax rules. Contacting a qualified financial advisor will certainly help you figure out if you’re on the right track or if there are other better options available for you.

Learn more about how taxes can affect your retirement by attending one of our Retirement Planning 101 Classes.

Benefits of Charitable Giving in Retirement

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Charitable Giving in Retirement

3 MIN. READ

As you planned and saved over the years of your working life, you might have also considered those in need. By year-end, you may have made enough charitable donations to qualified organizations to also enjoy the benefits of charitable giving. You felt good by doing good.

Now that you’ve retired, you can still take advantage of many charitable giving tax benefits. Here are some of the ways to do that.

Plan for giving

To start taking advantage of charitable giving during retirement, calculate your taxable income for this year and how much you can afford to give. You can use the standard deduction, which has increased considerably. You can deduct up to $600 in cash contributions to eligible organizations for the 2021 tax year. The maximum deduction for 2022 has not been determined but is likely to be either $300 or $600.

In any case, if you’re not sure how you’ll file or what your income might be, the best place to start is last year’s return. Unless your income or employment status has changed markedly, your prior year return is a good initial guide.

As noted, the IRS permitted standard-deduction taxpayers to deduct charitable donations of $300 in 2020 and $600 in 2021. The deduction should be available for 2022 gifts, although the IRS has not determined the allowable deduction.

Maximize your benefits

Here are other donation types which benefit not only the target organizations but also your own tax bill and pocketbook.

Qualified charitable distribution

You have the option to make a qualified charitable distribution directly from your IRA  to the charity of your choice. By contributing directly from your IRA, you can avoid paying income tax on the distribution. It also works when you must take Required Minimum Distributions (RMD) but don’t need the distribution for your daily living expenses. You can contribute up to the full amount of your RMD avoiding any tax consequences on the RMD for that year.

Form 1040 instructions explain how to account for charitable deductions. If the contribution came from a non-deductible IRA, additional tax documents may be required. Consult your tax professional for additional information.

Charitable gifts of assets

You can also make charitable gifts of assets, such as appreciated stocks or bonds. You won’t have to pay capital gains taxes on those instruments. By donating them, you deduct their appreciated fair market value without raising capital gains by selling them to donate cash to the qualified charitable organization. This allows the amount you would have paid in taxes to stay with the charity, which doesn’t pay taxes.

Once again, you’ll want to consider whether the standard deduction makes this a useful strategy for you or not. If you’re not itemizing, a $300 or $600 stock donation won’t avoid a lot of capital gains taxes.

Donor-advised funds

If you’re planning a lot of charitable giving and have sufficient assets, you can consider creating a donor-advised fund. This method lets you make distributions to the charitable organizations of your choice. A donor-advised fund is a separate account operated by a qualified charitable organization, called the sponsoring organization. The account includes contributions made by various donors.

As the donor, when you make a contribution, the organization has legal control over it. However, you or your representative can still advise about the distribution of funds and the investment of assets in the account.

You can deduct a significant portion of your donor-advised fund contribution. However, you should know that the IRS is aware of abuses related to the use of donor advised funds. So, do your due diligence and talk to your financial advisors to find the best options for you.

Charity still begins at home

As you can see, retiring doesn’t mean you can no longer make contributions to qualified charitable organizations. In fact, with IRAs and other retirement vehicles, it can even be easier to make them.

Another benefit of retirement is that you can make a gift that most charitable organizations are desperate for in today’s busy world — your time. At the beginning of this century, one in four Americans volunteered. Today that number is far less, especially since the pandemic began. Think about ways that you can be of value, both as a giver and a volunteer or even a cyber-volunteer. You’re still feeling good by doing good.