ChatGPT Image Nov 19, 2025, 07_26_16 PM

What Women Can Do About Rising Medicare Costs & a Small 2026 COLA

If you’ve seen the newly released 2026 Medicare numbers, you might be feeling a little frustrated. Part B premiums are jumping. Part D is climbing. And Social Security’s cost-of-living adjustment (COLA) is only 2.8%.

Most people think they’re powerless when Medicare costs rise faster than their benefits. But here’s the truth:

You are not powerless.
In fact, there are very real financial levers women (and couples) can pull right now, before 2026 shows up on the doorstep.

Let’s break them down clearly, simply, and in plain English.


1️⃣ Manage Income—Not Just Expenses (IRMAA Planning)

IRMAA (Income-Related Monthly Adjustment Amount) is the extra surcharge high-income retirees pay on Medicare Parts B and D. It’s based on your MAGI from two years prior, which means:

Your 2024 income determines your 2026 IRMAA charges.

There is still time to influence this.

Ways to keep Medicare-related income lower:

  • Shift income into tax-free buckets (Roth conversions—but sized correctly)

  • Reduce capital gains during key years

  • Delay big IRA withdrawals

  • Be strategic with RMD timing once required

  • Use Qualified Charitable Distributions (QCDs) at 70½ for charitable giving

  • Avoid unplanned income spikes (like selling property without a strategy)

This one step alone can save hundreds to thousands of dollars per year.


2️⃣ Build a Buffer Into Your Retirement Budget

Most retirees underestimate how fast medical costs rise. If premiums keep climbing while COLA lags behind, your budget must reflect that.

Practical steps:

  • Add a medical inflation line item of 5–6% annually

  • Revisit your retirement spending plan every year

  • Treat healthcare as a core non-negotiable expense, not a variable one

A 2.8% COLA simply won’t cover the reality of 2026. Planning for the gap is essential.


3️⃣ Keep Taxable Income Smooth—Not Spiky

Medicare doesn’t care about your average income.
It penalizes sudden spikes.

Women can help themselves by:

  • Spreading out IRA withdrawals

  • Avoiding one-time bursts of income

  • Using multi-year Roth conversion ladders

  • Coordinating Social Security and pension timing

Smoother income = fewer IRMAA surcharges.


4️⃣ Get Smart With Part D (Most People Don’t)

Part D premiums and IRMAA are both rising, but the good news is:
Part D is one of the easiest places to save money.

Each year:

  • Re-shop your Part D plan

  • Use Medicare’s official plan finder tool

  • Choose a plan based on current medications—not the one you picked five years ago

  • Look into Extra Help if you qualify

  • Use preferred pharmacies or mail-order options

Many people save hundreds per year simply by reviewing their plan annually.


5️⃣ Do Tax Planning Before Retirement, Not After

One of the biggest Medicare cost drivers?
Large pre-tax retirement balances.

Here’s what proactive planning looks like:

  • Roth conversions in your 50s and early 60s

  • Maxing out HSAs (if eligible)

  • Building brokerage accounts for flexible withdrawals

  • Using Roth 401(k) options when it makes sense

You can pay a little tax now—or pay a lot more later through higher Medicare premiums.
Planning early gives you options.


6️⃣ Appeal IRMAA if You Qualify

Most retirees don’t know this:

IRMAA is not permanent.

You can appeal using Form SSA-44 if you’ve had a qualifying “life-changing event,” such as:

  • Retirement

  • Marriage or divorce

  • Loss of income

  • Loss of pension

  • Work reduction

If your income drops significantly, you may be able to reduce—or completely eliminate—your IRMAA for that year.

To learn more about IRMAA and get step-by-step IRMAA appeal directions, check out our IRMAA webinar at: www.IRMAAWebinar.com and our resources at: www.NoIRMAAforMe.com.


7️⃣ Work With Someone Who Understands Medicare + Taxes

This goes beyond investments. This is strategic retirement planning that mixes Medicare rules, tax timing, Social Security, and income management.

Most people save money simply by working with someone who knows how these pieces interact. This isn’t investment advice, it’s retirement math and smart tax planning.

If you’d like to connect with a Medicare, tax, IRMAA, or Social Security expert, email Lynn at: lynnt@herretirement.com. We have a great company that helps you chooose the BEST Medicare options for you.


Final Thought: You’re Not At the Mercy of Rising Costs

Every year, I see women feel blindsided by Medicare increases. But many women can prepare. Many can smooth out income. Many can avoid unnecessary surcharges.

The sooner you understand the levers you can pull, the more control you regain.

Your Medicare costs don’t have to control your retirement, you can control your strategy.

To learn more about Medicare, check out my Medicare e-classe and resources at: www.MedicareforHer.com

To learn more about Social Security, check out my Social Security e-classe and resources at: www.HerSocialSecurity.com

And, we highly encourage you to learn more about the More for Her Collective offered by Her Retirement at: Her Retirement Collective – Her Retirement

ChatGPT Image Jul 13, 2025, 03_25_36 PM

The Big Beautiful Bill (2025): Unbiased Overview

On July 4, 2025, former President Trump signed the One Big Beautiful Bill (OBBBA) into law—an 870+ page tax and spending package with major implications for American households, businesses, retirees, and investors.

This bill:

  • Extends and expands many of the 2017 tax cuts that were set to expire

  • Adds new tax breaks for seniors, families, and workers

  • Introduces new savings vehicles like Trump Accounts

  • Cuts funding for several social programs to offset cost

  • Adds $2.4–$3.4 trillion to the national debt over 10 years

If that sounds like a lot to digest—it is. But you don’t need to read all 900 pages. Here’s your plain-English breakdown of the key provisions, who benefits, what critics are saying, and when everything goes into effect.


1. Tax Cuts Extended & Expanded

  • Permanent Extension of 2017 TCJA
    Individual income tax rate reductions and the 20% deduction for pass-through businesses (Section 199A) are made permanent. 
    Sources: time.com, en.wikipedia.org, rsmus.com

  • Note: The original Trump-era tax cuts passed in 2017 were set to expire after 2025 for individuals and small businesses. Without congressional action, this would have likely resulted in significantly higher taxes for many households starting in 2026. The 2025 bill prevents that expiration and locks in those provisions going forward.
  • Child Tax Credit Increased
    Raised from $2,000 to $2,200 per child, with additional temporary enhancements for lower-income families phased in through 2028.
    Sources: apnews.com, sfchronicle.com, bipartisanpolicy.org

  • New Targeted Deductions Introduced

    • Tax-free status for overtime and tipped income, up to annual limits.

    • Full expensing of certain domestic business investments.
      Sources: time.com, en.wikipedia.org, apnews.com

  • Standard Deduction Adjustments

    • Additional $1,000 for individuals and $2,000 for married couples (2025–2028).

    • Ongoing inflation indexing made permanent.
      Sources: kiplinger.com, bipartisanpolicy.org

  • Senior-Specific Deductions

    •  Seniors aged 65+ now receive a dedicated $6,000 standard deduction increase
      (not $4,000 as some earlier proposals suggested).
      • This is in addition to the regular standard deduction for all taxpayers.

      • The $6,000 benefit:

        • Applies whether or not you’re collecting Social Security

        • Applies whether or not you itemize

      • It is designed to help fixed-income seniors keep more of their retirement income, Social Security, and savings.

    • Phases out above $75,000 in income for individuals and $150,000 for married couples filing jointly.
      Sources: bipartisanpolicy.org


2. Cuts to Health, Benefits & Safety Net Programs

To offset the tax cuts, the bill includes major reductions in federal spending:

  • Medicaid & SNAP Cuts

    • Slower growth caps on Medicaid.

    • Tighter eligibility and reduced SNAP (food stamps) allocations.
      Sources: theguardian.com, apnews.com, thetimes.co.uk

  • Work Requirements & Co-pays

    • Federal assistance programs like Medicaid and housing aid now include work or volunteer requirements (20 hours/week in many cases).

    • Some Medicaid recipients face new co-pays for services.
      Source: apnews.com


3. Border & Defense Funding Increases

  • Over $350 billion allocated to defense, border security, and immigration enforcement over 10 years.

  • Expands ICE funding and builds on existing infrastructure.
    Sources: reuters.com, vanityfair.com, apnews.com


4. Deficit & Debt Impact

  • The Congressional Budget Office (CBO) and independent analysts estimate the bill will add between $2.4 and $3.4 trillion to the national debt over 10 years.
    Sources: reuters.com, en.wikipedia.org

  • Supporters argue that the bill will boost GDP by ~1.1% over a decade, citing increased consumer spending and investment.
    Critics counter that long-term debt pressures could lead to higher interest rates or future spending cuts.


When the Provisions Begin

According to USA TODAY’s July 2025 breakdown, provisions phase in over several years:

ProvisionStartEnd
Tax-free overtime & tipsJan 1, 2025Dec 31, 2029
$6,000 Senior DeductionJan 1, 2025Permanent
Trump AccountsJan 1, 2026Dec 31, 2029
Auto Loan Interest DeductionJan 1, 2026Dec 31, 2029
Boosted Standard DeductionJan 1, 2025Dec 31, 2028
Expanded Child Tax CreditJan 1, 2025Dec 31, 2028
529 ExpansionJan 1, 2025No expiration
SALT Deduction Cap ($10,000)ImmediateStill in place

What This Means for Women & Retirees

If you’re:

  • Working hourly or part-time → You’ll pay no federal tax on tips or overtime.

  • A senior on a fixed income → You’ll benefit immediately from the new $6,000 deduction (if you meet the income requirements)

  • Caring for children or grandchildren → You get more back via the child tax credit and expanded 529 flexibility.

  • Saving for your future → Trump Accounts and deductible auto loan interest could give you new savings advantages—if you act in time.

Critics vs. Supporters

Supporters SayCritics Say
Increases take-home payFavors the wealthy
Rewards working AmericansCuts essential services
Makes tax cuts permanentExplodes the deficit
Simplifies savings & investingTemporary benefits for most households

Final Thoughts: What Should You Do?

Even if you’re not political, this bill affects your:

  • Taxes

  • Health coverage

  • Retirement planning

  • Day-to-day cash flow

Here’s what we recommend:
✅ Review your 2025 tax withholding
✅ Talk to a tax advisor about timing deductions
✅ Update your retirement strategy to factor in these changes
✅ Explore new savings vehicles like Trump Accounts and 529s
✅ Be aware of benefit eligibility changes if you or a family member relies on Medicaid or SNAP

If you’re feeling overwhelmed, you’re not alone. Her Retirement is here to help you navigate this new landscape—with smart strategies, planning tools, and a supportive community. Learn more inside the Her Retirement Collective.

Should you have any questions about how the bill impacts your money and your retirement, reach out to us and we’ll connect you with a vetted expert in our network: retire@herretirement.com

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2025 is Around the Corner: 8 Smart Money Moves to Wrap Up the Year Right

As the year winds down, now is the perfect time to check off those financial to-dos. Here are 8 key money moves (plus a bonus tax hack to boost your credit card points) to consider making so you can head into the new year with less stress and set yourself up for financial success in 2025.


1. Use It or Lose It: Check Your FSA

If you have a Flexible Spending Account (FSA), be sure to spend any remaining funds before the end of the year to avoid losing them. FSAs typically come in three types: health care, limited-purpose (compatible with HSAs), and dependent care.

Some plans allow a small portion to roll over or offer a grace period into early 2025, but most require you to use the funds by December 31. Check with your employer to confirm your deadlines and eligible expenses, like medical co-pays, prescriptions, or child care.


2. Consider a Roth Conversion

If you’ve been debating converting a traditional IRA to a Roth IRA, now is the time to act. The deadline for a 2024 Roth conversion is December 31.

Why consider it now? If your retirement account balances are down, the tax bill on the conversion will also be lower, as it’s based on the value converted. You can transfer assets “in kind,” meaning no need to sell investments before converting, but you will owe taxes on the amount converted.


3. Maximize Contributions to Tax-Advantaged Accounts

Ensure you’re contributing as much as possible to accounts like 401(k)s, IRAs, and HSAs.

  • 401(k): For 2024, the contribution limit is $23,000, or $30,500 if you’re age 50 or older. The deadline for 401(k) contributions is December 31.
  • IRAs/HSAs: While contributions for 2024 can be made until the April 2025 tax filing deadline, HSA contributions made by December 31 through payroll deductions can avoid FICA taxes.

Pro tip: Use a year-end bonus to boost your retirement contributions or education savings in 529 plans, which may offer state tax benefits if funded by year-end.


4. Optimize Charitable Giving for Tax Savings

If you itemize deductions, consider making charitable donations by December 31 to reduce your 2024 tax bill.

  • Cash Donations: Deduct up to 60% of your adjusted gross income (AGI).
  • Appreciated Securities: Deduct up to 30% of your AGI and avoid paying capital gains taxes.

If you don’t normally itemize, try “bunching” donations. This strategy involves making several years’ worth of contributions at once to exceed the standard deduction in 2024. Donor-advised funds can help streamline this approach.


5. Don’t Forget RMDs if You’re 73 or Older

If you’re 73 or older, Required Minimum Distributions (RMDs) from traditional IRAs and certain retirement accounts are mandatory.

  • First RMD: Must be taken by April 1 the year after turning 73.
  • Subsequent RMDs: Must be taken by December 31 annually.

Avoid missing the deadline—there’s a 25% penalty for missed RMDs, though this can be reduced if corrections are made quickly.


6. Take Advantage of Tax-Loss Harvesting

Use tax-loss harvesting to sell investments at a loss to offset taxable capital gains.

  • Offset realized capital gains dollar-for-dollar.
  • Deduct up to $3,000 of investment losses against ordinary income ($1,500 if married filing separately).
  • Carry forward unused losses to future tax years.

Make sure you complete any loss-harvesting transactions by December 31 to apply them to your 2024 taxes.


7. Review Your Tax Withholding

If you’ve had significant changes in income, withholding adjustments may help avoid surprises come tax season. Use the IRS Tax Withholding Estimator to check if you need to fine-tune your withholding for 2025.


8. Plan for End-of-Year Expenses

Take stock of holiday expenses, travel, or any big-ticket items to avoid overspending. If you’re expecting a year-end bonus, create a plan for allocating it toward financial goals like debt repayment, savings, or investments.


Bonus Tax Hack to Get More Credit Card Points (from my friend Colin Stroud, Go Somewhere)

How I Earned 99,000 Chase Points from Paying My Taxes

This is what I call a next-level money move.

Here’s the situation: My wife needed a business credit card, and we also had a tax bill to pay. After some quick strategizing, we came up with a plan to turn this expense into a major points haul.

She applied for the Chase Ink Unlimited card, which has no annual fee and was offering a sign-up bonus of 90,000 points after spending $6,000 in the first 3 months. This card also earns 1.5% back on all purchases—including tax payments.

By using this card to pay $6,000 in taxes, we hit the spending requirement and earned:

  • 90,000 points for the sign-up bonus
  • 9,000 points from the 1.5% rewards on the $6,000 spent

That’s a total of 99,000 Chase points in one go.

Wait—You Can Pay Taxes with a Credit Card?

Yes, you can. The IRS allows credit card payments through third-party processors. The catch? There’s a small fee.

For this payment, we used a processor charging a 1.82% fee, which came out to $109 on a $6,000 tax bill.

Is It Worth It?

Absolutely. Here’s why:

  • For $109 in fees, we earned 99,000 points.
  • Those points can be redeemed for $4,000+ in travel when used strategically through Chase Ultimate Rewards (e.g., transferring to airline or hotel partners).

That’s a 36x return on the fee we paid.

Why You Should Consider This Hack?

If you have a tax bill (or any other large expense) and a great credit card offer, this is a fantastic way to maximize rewards. The key is ensuring:

  1. The processing fee is small compared to the value of the points.
  2. You can pay off the card balance in full to avoid interest charges.

So, why aren’t you doing this? It’s a simple and effective way to turn an unavoidable expense into major travel rewards!

Well Ladies that’s the 9 money moves you can make NOW. Remember, it’s Never Too Late to Plan

If you don’t check everything off your list this year, don’t stress—you can still take steps in 2025 to improve your finances (there’s several April 15, 2025 deadlines for 2024 like Roth IRA contributions). However, acting now can help you enter the new year feeling confident and prepared. But act quickly.

For personalized advice, consult a financial or tax advisor to see how these strategies (and others) could improve your financial outlook. I know a few who can hook you up. I can even hook you up with a complimentary financial or tax assessment. Email me: lynnt@herretirement.com or go to: https://herretirement.com/talk-to-a-retirementor

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Surprising Tax Stats: How to Save Big by Choosing the Right State

So, what are the lowest income tax states? Let’s start with the nine states that don’t have state earned income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. But don’t be misled—no state is truly tax-free. Many of these states make up for it with higher property taxes, sales taxes, or other fees.

If you’re a high-income earner, these tax savings can be significant. For example, if you earn $250,000 a year, moving from Vermont—where you could be paying over $15,400 in state income taxes—to a state like New Hampshire with a 0% tax rate on earned income (excluding dividends and interest) could save you a big chunk of money. If you invest that savings annually with a 7% return, it could grow to over $213,000 in just 10 years!

Similarly, if you’re earning $100,000 and move from a high-tax state like Oregon to a no-income-tax state like Florida or Texas, you could save about $7,200 a year. But, be careful—a move from Nevada, which has no state income tax, to Utah, where taxes are higher, could cost you an extra $4,000 annually.

Source: Fidelity
Charts assume income of $100,000. All income is assumed to be ordinary income subject to income taxation. A FICA tax rate of 7.65%, federal income brackets and state income taxbrackets are used. We assume that state adjusted gross income (AGI) is the same as the federal AGI and that the only deduction that applies is federal standard deduction based on filing status. We assume further that the additional federal standard deduction for age is included, and no credits are claimed. All data is as of 2023. Tax law may have changed between 2023 and the publishing date of the article. The combined FICA, effective state and federal income tax rates for a single filer earning $100,000 of income vary from a high of 29.16% in Oregon to a low of 22.72% in North Dakota. For a married couple filing jointly with the same income, the combined effective state and federal income tax rates range from a high of 21.64% in Oregon to a low of 15.89% in North Dakota. Assuming $100,000 in annual earned income, the lowest-tax states offer a combined effective tax rate of 21.91% for single filers and 15.89% for married people filing.

Among states with income taxes, top marginal rates range from a high of 9.3% in California to a low of 1.95% in North Dakota for someone earning $100,000. But rather than focusing on top rates, it’s smarter to look at your effective combined state and federal tax rate—this is the percentage of your income that actually goes to taxes after deductions and credits.

Your marital status can also impact your tax rate. For example, Oregon has the highest effective tax rates for both single and married joint filers, while North Dakota offers some of the lowest. Surprisingly, California, despite its reputation for high taxes, can be a good option for married couples, with a competitive effective rate for joint filers.

If saving on taxes is your goal, Florida and Texas are strong contenders, even with their rising costs of living. North Dakota and Ohio are also tax-friendly options. And if you’re married and don’t mind paying some state income tax, California or even New Jersey might be worth considering.

But here’s something you might not expect based on those same income parameters:

  • While the Northeast is known for high taxes, Oregon actually tops the list with the highest effective tax rates for both single and married joint filers. Hawaii isn’t far behind, with top rates of 28.27% for single filers and 20.44% for married filers.
  • Minnesota, Maine, and Montana also make the top 10 list for the highest income tax rates for both single and married filers.
  • California, despite being one of the most expensive states for single filers with an effective tax rate of 26.58%, ranks among the 20 best states for married couples filing jointly, with a rate of 17.58%.
  • New Jersey and Rhode Island are among the states with the lowest effective tax rates for married filers.
  • West Virginia lands in the middle for effective tax rates for both married couples filing jointly and single filers.

Source: Fidelity
Charts assume income of $100,000. All income is assumed to be ordinary income subject to income taxation. A FICA tax rate of 7.65%, federal income brackets and state income taxbrackets are used. We assume that state adjusted gross income (AGI) is the same as the federal AGI and that the only deduction that applies is federal standard deduction based on filing status. We assume further that the additional federal standard deduction for age is included, and no credits are claimed. All data is as of 2023. Tax law may have changed between 2023 and the publishing date of the article.

The bottom line is this: If you’re looking to keep more of what you earn, understanding these nuances can make a big difference. But remember, everyone’s tax situation is unique, so it’s always a good idea to consult with a financial or tax professional to figure out what’s best for you. And if you’d like to connect with retirement tax specialists, check out: www.TaxSmartRetiree.com. 

 

What Can Wealthy Boomers Do to Stay Wealthy?

One of the most valuable things wealthy boomers can do to protect their wealth is tax planning. Here’s some tax planning strategies to consider in your financial plan:

  • Roth Conversions: Convert traditional IRAs or 401(k)s into Roth IRAs over time. While you’ll pay taxes on the converted amount, Roth IRA withdrawals in retirement are tax-free, which can reduce your future tax burden.
  • Tax-Efficient Withdrawal Strategy: Plan how you’ll withdraw money from various retirement accounts (e.g., traditional IRAs, 401(k)s, taxable accounts). Aim to minimize the tax impact by strategically choosing which accounts to tap into each year.
  • Asset Location: Allocate your investments wisely between taxable and tax-advantaged accounts. For example, place tax-inefficient investments (like bonds) in tax-advantaged accounts and tax-efficient investments (like stocks) in taxable accounts.
  • Qualified Charitable Distributions (QCDs): If you’re charitably inclined, consider making charitable donations directly from your IRA using QCDs. This can satisfy your Required Minimum Distribution (RMD) and lower your taxable income.
  • Tax-Efficient Investments: Invest in tax-efficient funds or individual stocks that generate lower levels of taxable income, such as index funds and ETFs.
  • Tax-Loss Harvesting: Offset capital gains by selling investments that have declined in value, thus realizing capital losses that can offset gains.
  • Minimize Medicare IRMAA Surcharges: Be aware of how your income affects Medicare premiums. There are some strategies that can help reduce the impact of IRMAA.
  • Estate Planning: Implement effective estate planning strategies, such as gifting assets to heirs over time to take advantage of gift tax exclusions and reduce your taxable estate.
  • 529 Plans: Use 529 college savings plans for education expenses. They offer tax-free growth and withdrawals when used for qualified education expenses.
  • Health Savings Account (HSA): If eligible, contribute to an HSA, which provides a triple tax advantage – tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
  • Long-Term Care Insurance: Consider long-term care insurance to protect assets from potential long-term care expenses while keeping premiums tax-deductible.
  • Real Estate Strategies: Explore tax-efficient real estate investment options, such as real estate investment trusts (REITs) or like-kind exchanges (1031 exchanges).
  • Use Tax Credits: Take advantage of available tax credits for retirees, such as the Retirement Savings Contributions Credit (Saver’s Credit) or any state-specific tax credits.

If you’d like to chat with a retirement tax planning specialist, reach out to us at: retire@herretirement.com.

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Have Your Cake & Eat it Too: New PPP Basics and Tax Savings

Good news. The new Paycheck Protection Program (PPP) law enacted with the stimulus package adds dollars to your pockets if you have or had PPP money.

Did you miss out on the first two opportunities to receive your tax-free Paycheck Protection Program (PPP) cash? Many did miss out. Why?

One reason: the word “loan.”  Who wants a loan? No one. Well, almost no one.  But who wants a cash gift, tax-free?  If you do, read on for the details. But first, you should know that the big picture works like this:

  1. You obtain your PPP tax-free monies from a lender (it’s called a “loan,” but watch that word disappear as you read this letter).
  2. You spend all the PPP money on yourself if you are self-employed or operate as a partnership; on payroll (including pay to you, if that applies); and on other covered expenses such as rent, interest, utilities, operations, property damage, suppliers, and worker protection.
  3. You apply for loan forgiveness and achieve 100 percent loan forgiveness, which is easy-peasy when you spend 60 percent or more of the money on payroll (and yourself if you are self-employed or a partner in a partnership).
  4. You deduct the expenses that you paid with the PPP loan monies that were forgiven.

New Money on the Table

The new COVID-19 stimulus act sets aside $35 billion for first-time PPP applicants, with $15 billion of that made in loans for first-time applicants with 10 employees or fewer or made in amounts less than $250,000 to businesses in low-income areas.

New Deadline

The new deadline of March 31, 2021, replaces the expired deadline of August 8, 2020. The monies available in this new round of PPP funding are on a first-come, first-served basis. Don’t procrastinate. Get your application for your first-time PPP monies in place now.

Before we go further, please note the PPP money comes to you in what appears to be a loan. We say “appears” because you typically pay back a loan. Done right, however, the PPP loan is 100 percent forgiven. The word “loan” makes some businesses leery of this arrangement. Don’t be. The PPP monetary arrangement is a true “have your cake and eat it too” deal.

And this remarkable deal applies to your past PPP loan, the PPP loan you have outstanding, and the PPP loan you are about to get if you have not had one before. Here are the details.

Loan Proceeds Are Not Taxable

The COVID-related Tax Relief Act of 2020 reiterates that your PPP loan forgiveness amount is not taxable income to you.

Expenses Paid with Forgiven Loan Money Are Tax-Deductible

As you may remember, the IRS took the position that expenses paid with PPP loan forgiveness monies were not deductible.

Lawmakers disagreed but were unable to get the IRS to change its position. The IRS essentially told lawmakers, “If you want the expenses paid with a PPP loan to be deductible, change the law.”

And that’s precisely what lawmakers did. The COVID-related Tax Relief Act of 2020 states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”

In plain English, the expenses paid with monies from a forgiven PPP loan are now tax-deductible, and this change goes back to March 27, 2020, the date the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted.

Good luck to all small business owners as they navigate this new PPP process.

2018 Year End Contribution Reminders

Happy New Year, readers!

As we all know, tax season will soon be upon us. The Tax Cuts and Jobs Act passed last year implements changes to the tax code on our 2018 taxes. The most notable of the changes include a lowering of income tax rates and a near doubling of the standard deduction. In addition, a number of expenses that were allowed as itemized deductions in previous years have been severely restricted or eliminated. It is important to understand the changes that were made so that you can get ahead of preparing your return. Here are some of the changes that were made that may affect you in 2018:

Changes To Itemized Deductions

In 2018, the number of tax bracket stayed the same. However, the actual rates were reduced. The tax rate at the top of the scale was lowered to 37 percent. While the standard deduction increased, other changes to allowable itemized deductions may mean that you will actually have a higher tax bill to pay.

Tax prep fees, investment expenses, foreign real estate taxes paid, home equity loan interest that wasn’t used for home improvement and personal exemptions are no longer allowable as itemized deductions. Alimony payments for any divorce that is finalized in 2019 or after will also be added to that list and be applicable in 2019.

A Change To Charitable Donations

Charitable donations can only be used as a deduction if you decide to itemize. However, if you do itemize and have any cash contributions that were made to public charities, those can be deducted by as much as 60 percent of their AGI, which is up 10 percent from the previous limit which was 50 percent.

Tax Reform Only Offers A Few New Opportunities

529 plans have changed. You now have the ability to use as much as $10,000 per year from the plan to pay for tuition related to kindergarten through 12th grade. The advantage of using a 529 plan is that it provides tax-free withdrawals and tax-free growth at the federal level for all qualified expenses.

Another change concerns S corporations – partnerships and sole proprietorships. If you own one or more of these businesses, you may be eligible for a 20 percent deduction. However, this deduction does have some contingencies related to the type of business and the amount of income received.

Changes To The Alternative Minimum Tax For Individuals

Changes were also made to the Alternative Minimum Tax (AMT) for individuals. If you are married and filing jointly, exemptions have been raised to $109,400. If you’re single your exemption has been raised to $70,300. These start to phase out at the $1 million level if you are a couple and $500,000 if you’re single.

The Best Way to Prepare

It’s always a great idea to get started as soon as possible before the end of the year to understand how any changes in the tax reform will affect your filing. It also helps to use a professional tax advisor or CPA who understands the many different nuances of the new tax legislation. You want to make sure that you pay the appropriate amount for estimated taxes or for your withholding tax for the year.

For more info on how the new tax bill could affect your retirement plans, please contact us at lynnt@herretirement.com or call us at 508-798-5115.

5 Key Facts About the New Tax Bill

The enactment of the Tax Cuts and Jobs Act (TCJA) represents “the most sweeping overhaul of the U.S. tax code in more than 30 years.”1

For millions of Americans and businesses it means an altered financial and investment landscape with new opportunities and challenges in the years ahead. Keep in mind, however, that the information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties.

Here’s a brief look at 5 key changes:

Personal Taxes: Some of the TCJA’s key provisions include a reduction in most marginal income tax brackets, near doubling of the standard deduction, and a $10,000 cap on state and local tax deduction. The Tax Policy Center projects that taxes will fall for all income groups and result in an increase of 2.2% in after-tax income. The Tax Policy Center also cautions, however, that some individuals and households may see a higher tax bill.2

Investments: The TCJA did not adjust the preferential rates of 0%, 15% and 20% for long-term capital gains and qualified dividends. For example, the transition from 15% to 20% capital gains rate will continue to use the top tax-bracket thresholds of $425,800 for individuals and $479,000 for married couples.3

Retirement: The tax bill introduces several key changes for business owners, including the introduction of a 20% deduction for pass-through businesses. Business owners may want to review their current business structure (C-Corp, S-Corp, and LLC) and determine what entity is best structured to help them accumate retirement assets.

College Savings: 529 plans may now be used to fund private elementary and secondary education (for up to $10,000 in distributions per student each year). Prior, they were limited to any eligible post-secondary institutions.4

Estate Strategies: The estate tax exemption was raised to $11.2 million, a doubling of the $5.6 million that previously existed. As such, individuals benefiting from this change may want to re-evaluate the strategies they have in place to address the tax and liquidity issues that may no longer exist.

If you have questions about how to new tax bill will impact you or your retirement plan, please contact us.

Sources:

  1. The Wall Street Journal, December 20, 2017
  2. Tax Policy Center of the Urban Institute & Brookings Institution, 2017
  3. Kitces.com, 2017
  4. The tax implications of 529 College Savings Plans can vary significantly from state to state, and some plans may provide advantages and benefits exclusively for their residents. Please consult legal or tax professionals for specific information regarding your individual situation. Withdrawals from tax-advantaged education savings programs that are not used for education are subject to ordinary income taxes and may be subject to penalties.

Six Most Overlooked Tax Deductions

Who among us wants to pay the IRS more taxes than we have to?¹While few may raise their hands, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Let’s take a quick look at the six most overlooked opportunities to manage your tax bill.

7 Common Tax Questions Answered

Often, a single, well-thought-out tax strategy can put you in a position to keep significantly more of your investment earnings. That’s why it’s important to know the tax implications of your investment decisions. In the PDF below, are 7 common questions and answers. Once you have reviewed this document, if you still have more tax related questions, a Her Retirement tax specialist can answer any question you may have as part of our complimentary services.

UnderstandingTaxes QA_PacLife