New Tax Season, New Tax Code: What Changed In 2026 – And Why It Matters

As we approach another tax filing season, it’s a good time to take stock of the most meaningful changes that affect U.S. taxpayers for the 2026 tax year (returns you’ll file in 2027). This year’s filing period reflects not just inflation adjustments but also significant provisions of the One, Big, Beautiful Bill Act (OBBBA), the major tax law signed in 2025 that locked in and updated several key tax provisions. (IRS)

Understanding these changes can help you plan earlier in the year — not just react at tax time.

Key 2026 Tax Changes at a Glance

Below are three major areas where taxpayers will see meaningful adjustments for the 2026 tax year:

1) Updated Federal Income Tax Brackets

The IRS annually adjusts tax brackets for inflation. For 2026, the seven familiar federal income tax brackets remain (10%, 12%, 22%, 24%, 32%, 35%, 37%), but the income thresholds have shifted upward, helping many taxpayers avoid “bracket creep.”

2026 Federal Income Tax Brackets (Taxable Income) (OneDigital)

Tax Rate

Single Filers

Married Filing Jointly

10%

Up to $12,400

Up to $24,800

12%

$12,401–$50,400

$24,801–$100,800

22%

$50,401–$105,700

$100,801–$211,400

24%

$105,701–$201,775

$211,401–$403,550

32%

$201,776–$256,225

$403,551–$512,450

35%

$256,226–$640,600

$512,451–$768,700

37%

Over $640,600

Over $768,700

These adjustments don’t lower rates, but they mean you can earn more before moving into a higher bracket. That matters for retirement planning, RMD timing, Social Security taxation, and portfolio withdrawals.

2) Standard Deduction and Senior Deduction Updates

Along with bracket changes, the standard deduction rises for most taxpayers. For 2026:

  • $16,100 for single filers
  • $32,200 for married couples filing jointly
  • $24,150 for heads of households (NerdWallet)

For many taxpayers, these deduction increases reduce taxable income before rates are even applied.

Additionally, OBBBA introduced a new senior deduction lasting through 2028: taxpayers age 65 or older may be eligible for a $6,000 deduction ($12,000 if both spouses qualify), regardless of whether they itemize or take the standard deduction. (AARP)

3) Expanded Credits and Other Key Changes

The 2026 tax year also reflects broader changes that can impact refunds or tax liabilities:

Child Tax Credit: Indexed for inflation and slightly increased under the OBBBA for qualifying children. (IRS)

Itemized Deduction Changes: The bill significantly expanded the cap on state and local tax (SALT) deductions for many filers, although limits and phaseouts still apply.

Charitable Deductions: Non-itemizers can now deduct cash donations up to $1,000 (single) or $2,000 (joint) – a change that broadens tax benefits to more filers.

Preparation and Filing Notes: The IRS has updated forms, encouraged direct deposit for refunds, and provided resources and checklists for this filing season. (IRS)

Why This Matters for Your Planning

These tax changes are not just numbers on a chart – they affect when and how you plan income, retirement distributions, Social Security strategies, Roth conversions, and charitable giving.

Some actionable reminders for 2026 and beyond:

  • Review whether standard vs itemized deductions benefit you (especially with SALT changes).
  • Consider the timing of income that could push you into higher brackets.
  • Coordinate retirement distributions with Social Security claiming to manage taxable income.
  • Use expanded credits and deductions to your advantage throughout the year, not just at filing time.

Taxes are a major lifetime expense – often bigger than market returns or fees. Planning with the current tax code in mind helps you make decisions that support the life you want to live.

 

Planning 2026 with intention: 10 financial and life considerations for the year ahead

The start of a new year naturally invites planning. But for most people, planning quickly turns into optimization – more efficiency, better returns, tighter projections.

The more meaningful work often starts earlier than that.

Before adjusting numbers, it’s worth stepping back to ask whether your financial life is aligned with the life you want to live. As we look ahead to 2026, with several new planning rules and legislative changes becoming active under the OBBBA framework, this is an ideal moment to reset both direction and strategy.

As a kid of the ‘90’s and a David Letterman fan, I always waited for the part of the show when he revealed his (sometimes crazy, but almost always funny) Top 10 List.  Here is my attempt and a nod to Mr. Letterman with 10 financial and life planning considerations worth reviewing as you prepare for the year ahead, with a particular emphasis on building margin, clarity, and adventure into 2026.

1. Define What You Want 2026 to Feel Like

Before reviewing accounts or projections, clarify the experience you want the year to deliver.

Do you want 2026 to feel spacious or packed? Grounded or mobile? Predictable or exploratory?

Financial plans are most effective when they support a clearly defined life vision. Without that anchor, even strong financial results can feel disconnected.

2. Plan Adventure First, Not Last

Adventure is often treated as optional – something to squeeze in if time and money allow.

In practice, that usually means it doesn’t happen.

Whether adventure for you means extended travel, meaningful family trips, endurance events, or simply more time outdoors, plan it intentionally. Block the time on the calendar. Estimate the cost. Create a dedicated savings bucket.

When adventure is designed into the plan, money becomes an enabler rather than a gatekeeper.

3. Understand What’s Changing Under the OBBBA

Several provisions tied to recent federal budget and benefits legislation are now becoming relevant for 2026 planning. While the specifics vary by household, common planning areas affected include retirement contribution limits, including updated catch-up provisions for certain age ranges; required minimum distribution rules and beneficiary timelines impacting inherited retirement accounts; income thresholds for tax credits and deductions, with tighter phase-outs at higher income levels; and sunsetting provisions from earlier tax law, increasing the importance of proactive, multi-year tax planning.

The key takeaway is that understanding these changes early creates flexibility. Waiting until year-end often removes good options.

4. Revisit Your “Enough” Number

As income and assets grow, old targets often linger long after they stop serving your life.

Revisit what level of income actually supports your desired lifestyle, how much work is enough, and which trade-offs are no longer worth it.

Clarifying “enough” is often the most powerful financial decision you can make.

5. Align Cash Flow With Experience, Not Habit

Instead of asking where to cut spending, ask where your money is working well for you.

Which expenses consistently add meaning or enjoyment? Which ones feel automatic or outdated?

Redirecting cash flow toward experiences, travel, and flexibility often improves quality of life without increasing overall spending.

6. Strengthen the Safety Net

Adventure is easier to pursue when the foundation is solid.

The new year is a good time to review emergency reserves, insurance coverage, estate documents, and beneficiary designations.

These items rarely feel urgent – until suddenly they are. Proactive review reduces stress and creates confidence.

7. Simplify Where Complexity Has Crept In

Over time, financial lives naturally become more complex.

Multiple accounts serving similar purposes, legacy strategies that no longer apply, and complexity that adds confusion without value can quietly accumulate.

Simplification improves clarity, reduces friction, and makes decision-making easier when life changes quickly.

8. Use Tax Planning to Support Lifestyle Decisions

With updated thresholds and evolving rules, tax planning for 2026 should align with life choices.

This may include timing income around travel or sabbaticals, evaluating Roth strategies during lower-income years, or coordinating charitable giving with tax efficiency.

The goal is not minimizing tax in isolation, but ensuring tax decisions support the life you want to live.

9. Decide What to Stop Doing

Borrowing from the annual review approach popularized by Tim Ferriss, one of the most powerful planning exercises is deciding what to stop.

What commitments, habits, or financial behaviors create stress without meaning, consume time without return, or reflect an outdated version of you?

Stopping often creates more freedom than starting something new.

10. Build Margin Into the Plan

Finally, leave room.

Margin in your calendar allows spontaneity. Margin in your cash flow absorbs surprises. Margin in expectations builds resilience.

A plan with no margin may look efficient, but it is fragile. A plan with margin can flex and support opportunity when it appears.

Final Thought

Planning for 2026 isn’t about predicting every outcome. It’s about creating a framework strong enough to support responsibility and exploration.

When financial planning is aligned with experience, when adventure is treated as essential rather than optional, and when decisions are made intentionally rather than reactively, money becomes what it was always meant to be – a tool in service of a well-lived life.

The top 8 financial items to review before the end of the year

As the year draws to a close, many people feel an instinct to wrap things up. It’s a natural moment to pause, take inventory, and make sure nothing important is left undone.

In financial planning, year-end reviews aren’t about scrambling or chasing last-minute tactics. Done well, they’re about clarity – confirming that your financial decisions still align with the life you’re building.

Here are the most important areas worth revisiting before the calendar turns.

  1. Taxes: Reducing Regret, Not Just the Bill

    Year-end tax planning isn’t about perfection – it’s about intention. This is the time to review realized gains and losses, assess whether tax-loss harvesting makes sense, and confirm that income timing aligns with your broader strategy. For many families, charitable giving also plays a role here – not as a tax trick, but as a thoughtful extension of their values.

  2. Required Minimum Distributions (RMDs)

    For retirees and those nearing retirement, RMDs deserve careful attention. Confirming distributions are made on time, in the correct amount, and from the appropriate accounts is critical. It’s also worth reviewing how RMDs integrate with your overall cash-flow plan. This is ideally done in the first half of the year, but if you haven’t gotten to it yet, do not delay. The penalty for missing your RMD is significant!

  3. Charitable Giving with Purpose

    Year-end giving often happens quickly. A pause can make it more meaningful. Review how and where you give, and whether you’re giving still reflects what matters most to you. Going back to your RMD’s, if you are over 70.5, you can consider using a Qualified Charitable Distribution (QCD) from your IRA to fund those giving goals!

  4. Portfolio Alignment and Risk Exposure

    Markets have a way of feeling louder in December. Year-end is a natural time to rebalance, reassess concentration, and confirm that your portfolio still supports your long-term plan. Have you set aside enough funds in safe cash and short-term bonds to match several years’ worth of coming expenses? If you’re not sure, we should talk.

  5. Estate Planning and Beneficiary Reviews

    Time with family has a way of surfacing important questions. Review beneficiary designations, trustee and executor choices, and guardianship decisions if applicable. Your beneficiary designations on retirement accounts, insurance policies, etc. are legal agreements between you and the financial institution. This means that what ever is on file will trump what is stated in your will, so make sure they line up!

  6. Retirement Readiness Beyond the Numbers

    For those approaching retirement, year-end reflection often brings deeper questions. Financial readiness and emotional readiness don’t always arrive at the same time. Both deserve attention. I’ve seen the emotional transition into retirement impact clients much more significantly than the financial transition. Make sure you have spent time preparing yourself for both.  If you are only focused on what you are retiring away from and haven’t spent any time thinking about what you want to retire towards, then you’re not ready.

  7. Simplification and Organization

    Many people enter a new year craving less complexity. Consolidating accounts and reducing unnecessary financial clutter can create a surprising sense of relief. Everyone has a financial ‘junk drawer’, where things accumulate over the years, but have no rhyme or reason or coordination. Spend time emptying out the junk drawer to assess what you have and then be intentional about what you keep and what you get rid of.  Does it serve you anymore? 

  8. Family Support and Legacy Planning

    Supporting adult children or aging parents requires balance. These decisions are rarely about math alone – they’re about boundaries and stewardship. I have noticed that there is no magic formula or one-size-fits-all approach. Every family dynamic is different and requires a thoughtful, intentional approach to what is best for everyone.

Closing the Year Well

A thoughtful year-end review isn’t about checking boxes. It’s about asking:
Does our financial plan still serve the life we want to live?  If it doesn’t or you’re not sure, give us a call….we’re here to help.

Recent interest rate cuts: What they mean for savings, mortgages and cash management

The Federal Reserve recently cut its benchmark interest rate by 25 basis points, lowering the federal funds rate to 4.00% from 4.25%. This September 2025 Fed rate cut was widely expected, reflecting slower job growth, rising unemployment, and inflation that remains above target. The move signals a cautious shift: the Fed wants to support the labor market to keep people employed without reigniting inflation.

Why the Fed cut rates

Inflation in services has stayed sticky even as the broader economy shows signs of cooling. By trimming rates, the Fed is aiming to balance recession risks with its commitment to long-term price stability (known as the Fed’s Dual Mandate). Markets had largely priced in this cut, and future policy moves will likely hinge on labor market data and inflation trends.

Impact on savings accounts and money market rates

Here is where the rubber meets the road.  For savers, Fed cuts often translate into lower yields on savings accounts and money market funds. Online banks and credit unions may hold rates higher to remain competitive for a short period, but traditional deposit accounts usually adjust downward within months, if not immediately. Money market funds tend to react fastest, since they are directly tied to short-term rates.

This makes it essential for savers to compare account yields regularly. As rates decline, holding cash in a low-interest account could mean leaving money on the table.

Cash management programs

To maximize returns, many investors are turning to cash management programs.  One such example is Flourish Cash. These platforms sweep deposits into a network of FDIC-insured banks, offering:

  • Competitive, high-yield savings alternatives without fees or minimums
  • Extended FDIC protection beyond the standard $250,000 limit due to the number of banks involved in the sweep program
  • Daily rate adjustments that track prevailing market conditions
  • Liquidity and flexibility, allowing easy transfers in and out

Programs like Flourish Cash are designed to help cash balances earn more in both rising and falling rate environments. When rates go up, program yields can reset higher. When rates fall, these programs still provide better returns than most traditional checking or savings accounts, making them a valuable part of cash management in 2025.

Mortgage rates and refinance opportunities

A common misconception is that mortgage rates fall directly with Fed cuts. In reality, 30-year mortgage rates are tied more closely to long-term Treasury yields and investor demand for mortgage-backed securities (MBS). As a result, fixed mortgage rates may not drop much after a Fed cut.  However, borrowers with adjustable-rate mortgages (ARMs) or home equity lines of credit (HELOCs) often see more immediate relief, since these products reset based on short-term benchmarks.

For homeowners, mortgage refinance opportunities in 2025 depend on long-term yields. If Treasury and MBS yields decline alongside Fed cuts, refinancing can unlock real savings. Homeowners should weigh the potential monthly payment reduction against closing costs and the time they expect to stay in their home.

The bottom line

The recent Fed rate cut underscores the importance of staying proactive with your money. Savers should explore high-yield savings alternatives and consider cash management solutions to protect returns. Homeowners should track long-term mortgage rates to evaluate refinance opportunities, while those with ARMs or HELOCs may benefit more immediately from recent rate changes.

In today’s shifting interest rate environment, agility is key – aligning your cash, borrowing, and investment strategies ensures your money continues working for you, no matter how rates move.

Making your cash work: Smart management in a shifting monetary landscape

In today’s uncertain financial environment, idle cash doesn’t need to sit there. With high-yield, FDIC-insured options and rising awareness of monetary policy dynamics, you can make sure your liquidity still earns its keep. Here’s a look at standout solutions and what to watch.

Cash management options worth knowing
  • Flourish Cash

Flourish Cash is a brokerage-based cash sweep vehicle that partners with multiple FDIC-insured “program banks.” It offers competitive, variable interest rates—around 4.0% APY as of late April 2025—and spreads your deposits across many banks to expand FDIC coverage. You receive one statement and tax form no matter how many banks hold your funds, and transfers are generally seamless.

  • High-Yield Money-Market & Savings Accounts

High-yield savings accounts remain popular for their accessibility, though attractive rates are often promotional and can drop over time. Money-market funds typically offer higher yields—around 4–4.5%, with some pushing 5% in recent years. However, note that many of these are not FDIC-insured, and rates remain sensitive to Federal Reserve policy.

  • Cash‑Management Accounts (CMAs)

Offered by brokers and robo-advisors, CMAs blend checking, savings, and investing tools. They usually provide higher interest than traditional bank accounts, and your funds may or may not be insured via FDIC or SIPC. They facilitate payments, transfers, and even debit card access—helpful if you want seamless functionality without locking up funds.

How Monetary Policy shapes cash yields

Monetary policy – especially interest-rate movements by the Fed – has a direct, powerful effect on what cash earns.

  • When rates rise, as they did in recent years, money flows into high-yield instruments like money-market funds and sweep accounts. As of December 2024, money-market funds held roughly $7 trillion as inflows continued despite expectations rates would fall. Yields hovered around 4.39%, a stark contrast to average bank savings near 0.5%.
  • Looking ahead to 2025, some analysts expect rate cuts could shift investor behavior—less reward for idle cash may drive money into bonds or equities, especially as these markets show gains. Still, the high level of cash holdings suggests many investors may linger in money markets longer.
  • Institutional preference for stability remains evident—corporations are allocating more to high-yield money-market instruments to capitalize on elevated interest. As of late 2023, nonfinancial S&P 500 companies held 56% of their assets in cash and equivalents, seeing favorable returns.
Top 3 things to watch – and take action on
  1. Interest‑Rate Trends & Fed Signals – Fed rate changes directly impact cash‑account yields. Review your accounts regularly—are they outpacing or lagging current rates?
  2.  FDIC‑Insurance Structure & Coverage Limits – Tools like Flourish spread deposits across banks to maximize protection. If you hold a lot of cash, make sure you’re not exposed to single-bank FDIC caps. This is so important and something that I see many wealthy clients overlook regularly!
  3. Liquidity Needs vs. Yield Trade‑offs – Higher yield often comes with limitations. Define your cash needs—daily use vs. emergency reserve—and match them to the most fitting vehicle.

Cash doesn’t have to be passive. With the right tools and vigilance, your liquid assets can work harder without compromising security or flexibility.  Want to discuss this cornerstone topic further?  Let us know!

5 Key Provisions in the New Tax Bill That High Net Worth Families Need to Know

Congress just passed one of the most sweeping tax overhauls we’ve seen in years. It’s already being described as a “once in a generation” shift – both in scope and impact. While most headlines focus on broad middle class relief, the truth is that high net worth families and top earners will feel some of the most significant ripple effects. Changes to deductions, new savings vehicles, and shifting rules around charitable giving will require a fresh look at how you structure income, investments, and legacy planning.

With so much noise around the bill, I want to cut through the clutter and highlight the five provisions that matter most. More importantly, I’ll share what they could mean for your planning over the next several years.

  1. Expanded SALT Deduction (State & Local Taxes)

One of the most talked about changes is the overhaul of the SALT deduction. The federal cap on state and local tax deductions jumps from $10,000 to $40,000, though it phases out for households with income above $500,000 and reverts to $10,000 around 2030.

Why it matters: For those living in high tax states or holding significant real estate, this offers meaningful relief – especially if you itemize. It’s a chance to reclaim more of your property and state income tax payments, though timing will be critical given the phase out rules.

  1. New Deductions for Overtime and Tips

For 2025 through 2028, the law introduces a deduction for tips and overtime income income: up to $25,000 for tips and $12,500 for overtime. These deductions are available up to $150,000 AGI for individuals and $300,000 for joint filers.

Why it matters: If you own hospitality or service businesses – or employ tipped labor – this could reduce taxable income significantly. While the impact lessens for higher earners due to phaseouts, the deduction could still shape compensation strategies for your workforce.

  1. “Trump Accounts” for Children (A New Tax Advantaged Savings Vehicle)

Children born between 2025 and 2029 will automatically receive a $1,000 government contribution into a new tax advantaged savings account, with parents able to contribute up to $5,000 annually. Growth is tax deferred, and funds can be used for college, training, or first home purchases.

Why it matters: While modest in size, these accounts add a fresh layer to multi generation planning. High net worth families can leverage them as part of broader tuition or estate planning strategies, especially in states with their own gift or estate taxes.

     4. Charitable Giving Deduction Changes

Two major shifts affect charitable planning:

1. Above the line charitable deduction: Non-itemizers can now deduct up to $1,000 ($2,000 for joint filers) for donations.

2. Limits on high-income deductions: For top earners, charitable deductions now max out at 35% rather than 37%, and total deductions reduce slightly by 0.5% of AGI.

Why it matters: For families with significant giving goals, the tax impact of large donations shrinks slightly. It may be time to revisit giving vehicles – like donor advised funds or charitable trusts – to preserve tax efficiency while meeting philanthropic goals. You might also want to consider pulling in future donations to 2025 as the changes don’t go into effect until January 1, 2026.

    5. Re-Emergence of Itemized Deduction Phase-Out

The bill revives a version of the old “Pease limitation.” For taxpayers in the top bracket, each dollar of itemized deduction now yields a 35% benefit rather than 37%.

Why it matters: This subtle reduction affects deductions for mortgage interest, high property taxes, and charitable gifts. For ultra-high-net-worth households, this reinforces the value of pre-tax strategies – like maximizing retirement contributions and structuring investment income – rather than relying solely on itemized deductions.

Planning Opportunities

• Itemizing vs. Standard Deduction: The new SALT cap and higher standard deduction (rising to $31,500 for joint filers in 2025) change the math. We’ll analyze whether itemizing still makes sense or if bundling deductions into specific years creates better results.

• Employer Strategies: For business owners with tipped or overtime-heavy staff, timing and structuring pay to maximize deductions could save meaningful taxes – just watch the phase-out thresholds.

• Charitable Planning: Consider front-loading gifts in 2025 into donor-advised funds or split-interest trusts to optimize deductions under the new limits.

• Next Generation Funding: New children’s accounts can be incorporated into college and estate strategies, even if the dollar amounts are small relative to your broader plan.

Caveats and Watch Outs

• Phase-Outs: Many benefits diminish quickly as income rises – so expect targeted rather than sweeping savings at higher brackets.

• Expiration Dates: Several provisions sunset in 2028. Planning should factor in the potential for future reversals.

• Implementation Lag: Expect IRS guidance and payroll system updates over the next year. There may be temporary confusion around how new deductions are claimed.

Bottom Line

This tax bill reshapes how deductions and savings vehicles work – particularly for high income and high net worth households. While some provisions offer new opportunities (like the SALT increase or children’s accounts), others trim back existing benefits (like charitable and itemized deductions).

The real key is personalized planning: aligning your giving, investing, and income timing with these new rules to maximize after-tax results. Over the next few months, we’ll be reviewing client strategies and looking for ways to capture opportunities while minimizing surprises.

If you’d like to walk through what this means for your 2025 plan – or explore strategies before year end – let’s talk. These changes are too significant to navigate on autopilot.

What the Latest Tax Bill Means for You (Without the Jargon)

A significant tax and spending package – nicknamed the One Big Beautiful Bill (OBBBA) – recently passed the U.S. House and is now being debated in the Senate. This isn’t just Capitol Hill chatter – it has direct implications for your financial plans, and I want to make sure you’re informed without getting bogged down by technical jargon.

Here are five key areas currently up for discussion:

  1. SALT Deduction Cap: House Wants $40K, Senate Uncertain

The House-approved bill proposes raising the State and Local Tax (SALT) deduction cap significantly—from $10,000 up to $40,000 (joint filers), permanently. This is a notable change for anyone living in high-tax states or dealing with substantial property taxes.

The Senate, however, hasn’t fully embraced this increase yet. They’re leaning toward maintaining the current $10,000 cap, sparking intense negotiations.

What it means for you:

If you typically itemize and live in a higher-tax region, your deductions – and thus your tax bill – could swing substantially depending on the final agreement.

  1. Child Tax Credit and Family Incentives

Both chambers agree broadly on enhancing the Child Tax Credit. The proposal currently extends the credit at $2,000 per child permanently, with a temporary increase to $2,500 per child until 2028.

The House version also includes a novel initiative: $1,000 “baby bonus” accounts for newborns through 2029. The Senate is debating this component, but no firm commitments yet.

What it means for you:

Enhanced child credits or potential baby savings accounts might mean extra breathing room in your budget or additional savings opportunities.

  1. No Taxes on Tips and Overtime?

The bill includes bipartisan provisions to exempt certain tip income and overtime earnings from federal income tax, at least up to certain thresholds. This initiative targets workers in the hospitality industry, gig economy, and service sectors.

Both the House and Senate versions reflect strong support for making tips and overtime pay partially tax-exempt, potentially putting more money directly into workers’ pockets.

What it means for you:

If your income includes tips or overtime, your net earnings could rise, meaning immediate cash-flow improvements.

  1. Green Energy Credits Could Change Drastically

The House version plans significant rollbacks of existing clean-energy incentives introduced previously under the Inflation Reduction Act. The Senate prefers a more moderate path—keeping credits for geothermal, hydropower, and nuclear energy intact longer, but phasing out solar and wind incentives sooner.

What it means for you:

If you’ve planned home efficiency upgrades or renewable-energy installations, these changes might affect your timing or feasibility, depending on what incentives remain.

  1. Taxes on Social Security Income May Shift

An additional change currently debated is how Social Security income is taxed. The House bill includes proposals to raise the income thresholds at which Social Security benefits become taxable, meaning potentially fewer recipients would owe taxes on these benefits.

The Senate’s stance isn’t finalized yet, but similar adjustments are being seriously considered.

What it means for you:

Retirees—or soon-to-be retirees—might see significant shifts in their taxable income, impacting cash flow, retirement planning strategies, and possibly allowing greater flexibility in your spending plans.

Broader Implications and Timing

  • Deficit Impact:

    The Congressional Budget Office (CBO) estimates the bill could increase the federal deficit by $2.8–$3.8 trillion over the next decade. The tax cuts, expanded credits, and changes in income taxation are major drivers of this projection.
  • Medicaid and Healthcare:

The bill could also affect healthcare spending, potentially tightening Medicaid eligibility rules, which could indirectly affect financial planning for healthcare costs in retirement.

  • Timeline:

After passing the House on May 22, 2025, the Senate is aiming to finalize its version before the July 4 recess, intending to bundle it with a new debt-ceiling increase.  There is still disagreement on these even within the majority party, so the deadline is currently up in the air.

The Bottom Line (for Now)

Given these proposals are still in flux, flexibility will be essential in your financial strategy. Areas to watch closely include SALT deductions, family-related tax credits, changes in taxable income from tips and overtime, renewable-energy incentives, and especially the taxation of Social Security benefits.

We’re closely monitoring these developments. Rest assured that once the final details are clear, we’ll recalibrate your financial plan together – ensuring you’re positioned to make the most of these new opportunities or to mitigate any potential challenges.

Remember, my goal remains unchanged: helping you live your great life right now, confidently navigating whatever comes next. As always, I’m here if you have immediate questions or if any of these changes prompt you to rethink current plans.

4 Financial Best Practices for Year-End 2023

Scan the financial headlines these days, and you’ll see plenty of potential action items vying for your year-end attention. Some may be particular to 2023. Others are timeless traditions. If your wealth were a garden, which actions would actually deserve your attention? Here are our four favorite items worth tending to as 2024 approaches … plus a thoughtful reflection on how to make the most of the remaining year.  

 

1.     Feed Your Cash Reserves

With basic savings accounts currently offering 5%+ annual interest rates, your fallow cash is finally able to earn a nice little bit while it sits. Sweet! Two thoughts here:

Mind Where You’ve Stashed Your Cash: If your spending money is still sitting in low- or no-interest accounts, consider taking advantage of the attractive rates available in basic money market accounts, or similar savings vehicles such as short-term CDs, or U.S. Series I Saving Bonds (“I Bonds”). Your cash savings typically includes money you intend to spend within the next year or so, as well as your emergency, “rainy day” reserves. (Note: I Bonds require you to hold them for at least a year.)

Put Your Cash in Context: While current rates across many savings accounts are appealing, don’t let this distract you from your greater investment goals. Even at today’s higher rates, your cash reserves are eventually expected to lose their spending power in the face of inflation. Today’s rates don’t eliminate this issue … remember, inflation is also on the high side, so that 5% isn’t as amazing as it may seem. Once you’ve got your cash stashed in those high-interest savings accounts, we believe you’re better off allocating your remaining assets into your investment portfolio—and leaving the dollars there for pursuing your long game.  

 

2.     Prune Your Portfolio

While we don’t advocate using your investment reserves to chase money market rates, there are still plenty of other actions you can take to maintain a tidy portfolio mix. For this, it’s prudent to perform an annual review of how your proverbial garden is growing. Year-end is as good a milestone as any for this activity. For example, you can:

Rebalance: In 2023, relatively strong year-to-date stock returns may warrant rebalancing back to plan, especially if you can do so within your tax-sheltered accounts.

Relocate: With your annual earnings coming into focus, you may wish to shift some of your investments from taxable to tax-sheltered accounts, such as traditional or Roth IRAs, HSAs, and 529 College Savings Plans. For many of these, you have until next April 15, 2024 to make your 2023 contributions. But you don’t have to wait if the assets are available today, and it otherwise makes tax-wise sense.

Revise: As you rebalance, relocate, or add new holdings according to plan, you may also be able to take advantage of the latest science-based ETF solutions.  We’re not necessarily suggesting major overhauls, especially where embedded taxable gains may negate the benefits of a new offering. But as you’re reallocating or adding new assets anyway, it’s worth noting there may be new, potentially improved resources available.

Redirect: Year-end can also be a great time to redirect excess wealth toward personal or charitable giving. Whether directly or through a Donor Advised Fund, you can donate highly appreciated investments out of your taxable accounts and into worthy causes. You stand to reduce current and future taxes, and your recipients get to put the assets to work right away. This can be a slam dunk strategy to avoid an embedded capital gain and get a tax deduction for the full value going to the charity of your choice.  If you have appreciated assets, considering gifting these and holding on to your cash.

 

3.     Train Those Taxes

Speaking of taxes, there are always plenty of ways to manage your current and lifetime tax burdens—especially as your financial numbers and various tax-related deadlines come into focus toward year-end. For example:

RMDs and QCDs: Retirees and IRA inheritors should continue making any obligatory Required Minimum Distributions (RMDs) out of their IRAs and similar tax-sheltered accounts. With the 2022 Secure Act 2.0, the penalty for missing an RMD will no longer exceed 25% of any underpayment, rather than the former 50%. But even 25% is a painful penalty if you miss the December 31 deadline. If you’re charitably inclined, you may prefer to make a year-end Qualified Charitable Distribution (QCD), to offset or potentially eliminate your RMD burden.

Harvesting Losses … and Gains: Depending on market conditions and your own portfolio, there may still be opportunities to perform some tax-loss harvesting in 2023, to offset current or future taxable gains from your account. As long as long-term capital gains rates remain in the relatively low range of 0%–20%, tax-gain harvesting might be of interest as well. Work with your tax-planning team to determine what makes sense for you.

Keeping an Eye on the 2025 Sunset: Nobody can predict what the future holds. But if Congress does not act, a number of tax-friendly 2017 Tax Cuts and Jobs Act provisions are set to sunset on December 31, 2025. If they do, we might experience higher ordinary income and capital gains tax rates after that. Let’s be clear: A lot could change before then, so we’re not necessarily suggesting you shape all your plans around this one potential future. However, if it’s in your overall best interests to engage in various taxable transactions anyway, 2023 may be a relatively tax-friendly year in which to complete them. Examples include doing a Roth conversion, harvesting long-term capital gains, taking extra retirement plan withdrawals, exercising taxable stock options, gifting to loved ones, and more.

 

4.     Weed Out Your To-Do List

I love this one…it is at the top of my improvement goals.  Doing less instead of staying busy with more.  This year, we’re intentionally keeping our list of year-end financial best practices on the short side. Not for lack of ideas, mind you; there are plenty more we could cover.

But consider these words of wisdom from Atomic Habits author James Clear:

“Instead of asking yourself, ‘What should I do first?’ Try asking, ‘What should I neglect first?’ Trim, edit, cull. Make space for better performance.”

— JamesClear.com

 

Let’s combine Clear’s tip with sentiments from a Farnam Street piece, “How to Think Better.” Here, a Stanford University study has suggested that multitasking may not only make it harder for us to do our best thinking, it may impair our efforts. 

“The best way to improve your ability to think is to spend large chunks of time thinking. … Good decision-makers understand a simple truth: you can’t make good decisions without good thinking, and good thinking requires time.”

— Farnam Street

 

In short, how do you really want to spend the rest of your year? Instead of trying to tackle everything at once, why not pick your favorite, most applicable best practice out of our short list of favorites? Take the time to think it through. Maybe save the rest for some other time.

Cash is King + Mortgage Forbearance Options in the CARES Act

Photo by Thgusstavo Santana from Pexels

April 6th 2020

By Matt Miner

First, I hope you and the people you love are well as we slog though the Covid-19 pandemic. Here at our house, we’re trying to embrace the good parts about being together, get lots of exercise outside, and make progress on our daily work, yard, and house.

On Friday I released a video about conserving cash if your income is under pressure. It arose because of client inquiries, as well as Wall Street Journal reportage. This is the companion article.

Now is a good time to accumulate some cash. If your income is not reduced, cash should be accumulating automatically because there’s almost nothing you can go spend money on! This is why the economy is shrinking rapidly.

If you anticipate reduced income, here are some tactics to accumulate even more cash.

For federal student loan borrowers, take advantage of the government-offered deferral on your student loans until your earning situation becomes clear. Contact your loan servicer to exercise this option.

If you have debts you’re paying extra on, now might be a good time to press pause on those extra payments.

If you don’t forfeit an employer match, you might consider stopping contributions to your 401(k) or other retirement plan. You can always “make up” these contributions later in 2020 and still get the tax benefit. If ceasing contributions results in losing matching dollars entirely, you need to weight this carefully. Match dollars are compensation and losing comp is never fun!

This article was prompted specifically by client inquiries regarding mortgage relief in the CARES Act and two WSJ articles (paywall alert): “Struggling Borrowers Want To Pause Their Mortgage Payments. It Hasn’t Been Easy” and “How to Suspend Your Mortgage Payments During Coronavirus Turmoil“.

If you read those articles, you’ll see that even the people charged with implementing this legislation (FHA along with Fannie & Freddy) are going about it in different ways!

What we know:

The CARES Act seeks to provide relief for the 70% borrowers with mortgages owned or insured by the federal government or a federal agency if these debtors experience financial hardship because of the pandemic.

If your mortgage is eligible – a Federally Backed Mortgage under CARES Act (call your servicer and ask), you must make the request before the President rescinds the National Emergency declared on March 13th, 2020. Your servicer should have more information for you.

What we don’t know:

We don’t know how your lender will treat the payments. Will they be put on the end of the loan or will you owe a lump-sum payment at the end of the forbearance period? Different servicers answer this question differently. In the first case, you’re extending the time you pay your mortgage loan. In the second case, you’ll need to come up with a large sum of cash when the forbearance ends.

It is unclear whether you be subject to compound interest – interest on interest. Your servicer may tell you how they are handling this. When I reviewed the legislation, I could not find a clear answer to this question.

Here’s a quote in the WSJ from David Stevens, a former head of the Federal Housing Administration. “The messaging has not matched what’s established in policy yet. The confusion level is extremely high.” No surprise then that the rest of us are still figuring this out!

The article continues, “The Department of Housing and Urban Development sought to clear up some of the confusion this week, telling servicers they can compile the missed payments into a second, interest-free home loan for the borrower to pay off after the original mortgage. The guidelines apply to FHA insured mortgages, which make up about 15% of all active mortgages in the U.S. The federal regulator for Fannie Mae and Freddie Mac, the mortgage finance companies that back about half of the U.S. mortgage market, has instructed servicers to work with borrowers and to consider letting them tack their missed payments on to the end of their loan.”

Servicers Will Struggle to Help

As a savvy planner, you should know that mortgage forbearance sets up an existential conflict between mortgage debtors and mortgage servicers. Mortgage servicers are middlemen who handle payment processing, account reporting, and customer service for the owners of the mortgage. Servicers are required to keep making payments to the mortgage owners – even though their debtors are permitted to stop making payments to the servicer! This conflict means I don’t expect servicers to move especially fast to implement this relief – since it may doom their businesses!

Until the servicers can get their hands in the government cookie jar too….er, receive some relief from congress, my expectation is that they will slow-walk this process because the CARES legislation puts them in a completely untenable position from a cash standpoint.

My general financial planning recommendation about the mortgage relief provision in the CARES act is to steer clear unless your circumstances are dire. Here’s why:

1. You’ll spend time dealing with the mortgage company, and need to jump through whatever hoops are necessary

2. I am concerned they will mess it up, resulting in damage to your credit report. You will be able to repair these problems, but this result will require further effort on your part. I’m not saying this will happen. I’m just saying I don’t have confidence that it won’t happen.

3. No matter how the lender handles the missed payment, taking this route represent cash-flow relief at the expense of your wealth, since you’ll pay more interest over time – it amounts to increasing borrowing on your home. Mortgage forbearance may be better than credit cards or a family loan. But debt is my least favorite way to raise cash.

Pursuing the Mortgage Forbearance Option

If the mortgage forbearance provisions of the CARES act may still help your family, here is a potential tactic. Arrange a six month forbearance, and then at around the four-month mark, refinance your entire mortgage into a new note. This could buy you some time for your income to return to a more normal state. I don’t prefer this approach because it is contingent on three things you cannot directly control.

First, the mortgage you want will have to be available; if that caveat sounds dire, look at the economic carnage we’re experiencing right now.

Second, you need to have adequate income to acquire the new mortgage.

Third, you need to have adequate credit to qualify for the new mortgage.

Because no one knows the future and none of these things are directly under your control, in poker terms, this is a planning tactic for betting on the come. It’s not the type of conservative advice I prefer.

Finally, all this highlights the importance of your hefty-duty emergency fund. Warren Buffet has a gift for memorable language. He says, “When the tide goes out, you can tell who was skinny dipping.”

If this crisis exposed the need for more cash in your life, decide now that that will never happen again.

How will the CARES Act impact you?

There is a good chance that you have more unscheduled time these days as almost every state in the union moves to a stay-at-home orders, but have you used this extra time to read the full H.R. 748 Coronavirus Aid, Relief, and Economic Security Act, or CARES Act?  If you would rather use this newly found time in other ways, here is a time-saving summary of the CARES Act looking at 9 different provisions that may impact you.  This is a longer post than normal, but is formatted so that you can scan through pretty quickly to sections that are more relevant to you.  If you have any questions whatsoever, please be in touch!

CARES Act In General

  • Direct payments/recovery rebates: Most Americans can expect to receive rebates from Uncle Sam. Depending on your household income, expect up to $1,200 per adult and $500 per dependent child. To calculate your payment, the Federal government will look at your 2019 Adjusted Gross Income (AGI) if it’s available, or your 2018 AGI if it’s not. However, you’ll receive an extra 2020 tax credit if your 2020 AGI ends up lower than the figure used to calculate your rebate. This Nerd’s Eye View illustration offers a great overview:

From Michael Kitces at Nerd’s Eye View; reprinted with permission
  • Retirement account distributions for coronavirus-related needs: You can tap into your retirement account ahead of time in 2020 for a coronavirus-related distribution of up to $100,000, without incurring the usual 10% penalty or mandatory 20% Federal withholding. Please note that this is not a waiver of income tax on the distributions, but does allow you to prorate the payment across 3 years. You also can repay distributions to your account within 3 years to avoid paying income taxes, or to claim a refund on taxes paid.  There are some landmines here so be careful to follow the rules exactly should you tap in to your 401k.

 

  • Various healthcare-related incentives: For example, certain over-the-counter medical expenses previously disallowed under some healthcare plans now qualify for coverage. This also allows for expanded use of tax free money from an HSA.  Also, Medicare restrictions have been relaxed for covering telehealth and other services (such as COVID-19 vaccinations, once they’re available). Other details apply.

 

CARES Act For Retirees (and Retirement Account Beneficiaries)

  • RMD relief: Required Minimum Distributions (RMDs) are taking a much needed break in 2020 for those meeting the new age requirements, as well as beneficiaries with inherited retirement accounts. If you’ve not yet taken your 2020 RMD, don’t!  Let’s talk about other options.  If you have taken a distribution, please be in touch quickly with us so that we can explore potential remedies.

 

CARES Act For Charitable Donors

  • “Above-the-line” charitable deductions: Deduct up to $300 in 2020 qualified charitable contributions (excluding Donor Advised Funds), even if you are taking a standard deduction.  Not much here, but it is worth noting to save a little bit in taxes.

 

  • Donate all of your 2020 AGI: You can effectively eliminate 2020 taxes owed, and then some, by donating up to, or beyond your AGI. If you donate more than your AGI, you can carry forward the excess up to 5 years.  One big caveat: Donor Advised Fund contributions are excluded.

 

CARES Act For Business Owners (and Certain Not-for-Profits)

  • Paycheck Protection Program loans (potentially forgivable): The Small Business Administration (SBA) Paycheck Protection Program (PPP) is making loans available for qualified businesses and not-for-profits (typically under 500 employees), sole proprietors, and independent contractors. Loans for up to 2.5x monthly payroll, up to $10 million, 2-year maturity, interest rate 1%. Payments are deferred and, if certain employment retention and other requirements are met, the loan may be forgiven.  The program was set to open up today, April 3, but as of this writing, there is still much up in the air about the actual implementation.  If you haven’t already, touch base with your banker as soon as you can.

 

  • Economic Injury Disaster Loans (with forgivable advance): In coordination with your state, SBA disaster assistance also offers Economic Injury Disaster Loans (EIDLs) of up to $2 million to qualified small businesses and non-profits, “to help overcome the temporary loss of revenue they are experiencing.” Interest rates are under 4%, with potential repayment terms of up to 30 years. Applicants also are eligible for an advance on the loan of up to $10,000. The advance will not need to be repaid, even if the loan is denied.

 

  • Payroll tax credits and deferrals: For qualified businesses who are not taking a loan.

 

  • Employee retention credit: An additional employee retention credit (as a payroll tax credit), “equal to 50 percent of the qualified wages with respect to each employee of such employer for such calendar quarter.” Excludes businesses receiving PPP loans, and may exclude those who have taken the EIDL loans.

 

  • Net Operating Loss rules relaxed: Carry back 2018–2020 losses up to five years, on up to 100% of taxable income from these same years.

 

  • Immediate expensing for qualified improvements: Section 168 of the Internal Revenue Code of 1986 is amended to allow immediate expensing rather than multi-year depreciation.

 

  • Dollars set aside for industry-specific relief: Please be in touch for a more detailed discussion if your entity may be eligible for industry-specific relief (e.g., airlines, hospitals and state/local governments).

 

CARES Act For Employees/Plan Participants

  • Retirement plan loans and distributions: Maximum amount increased to $100,000 on up to the entire vested amount for coronavirus-related loans. Delay repayment up to a year for loans taken from March 27–year-end 2020. Distributions described above in In General.

 

  • Paid sick leave: Paid sick leave benefits for COVID-19 victims are described in the separate, March 18 R. 6201 Families First Coronavirus Response Act, and are above and beyond any benefits received through the CARES Act. Whether in your role as an employer or an employee, we’re happy to discuss the details with you upon request.

 

CARES Act For Employers/Plan Sponsors

  • Relief for funding defined benefit plans: Due date for 2020 funding is extended to Jan. 1, 2021. Also, the funding percentage (AFTAP) can be calculated based on your 2019 status.

 

  • Relief for facilitating pre-retirement plan distributions and expanded loans: As described above for Employees/Plan Participants, employers “may rely on an employee’s certification that the employee satisfies the conditions” to be eligible for relief. The participant is required to self-certify in writing that they or a direct dependent have been diagnosed, or they have been financially impacted by the pandemic. No additional evidence (such as a doctor’s release) is required.

 

  • Potential extension for filing Form 5500: While the Dept. of Labor (DOL) has not yet granted an extension, the CARES Act permits the DOL to postpone this filing deadline.

 

  • Exclude student loan pay-down compensation: Through year-end, employers can help employees pay off current educational expenses and/or student loan balances, and exclude up to $5,250 of either kind of payment from their income.  If you have a student loan, talk to your employer about this provision.  And also pay attention to the For Students section below.

 

CARES Act For Unemployed/Laid Off Americans

  • Increased unemployment compensation: Federal funding increases standard unemployment compensation by $600/week, and coverage is extended 13 weeks.  If you have lost your job, apply immediately.

 

  • Federal funding covers first week of unemployment: The one-week waiting period to start collecting benefits is waived.  Again, if you have lost your job, apply immediately.

 

  • Pandemic unemployment assistance: Unemployment coverage is extended to self-employed individuals for up to 39 weeks. Plus, the Act offers incentives for states to establish “short-time compensation programs” for semi-employed individuals.

 

CARES Act For Students

  • Student loan payments deferred to Sept. 30, 2020: No interest will accrue either. Important: Voluntary payments will continue unless you explicitly pause them. Plus, the deferral period will still count toward any loan forgiveness program you’re in. So, be sure to pause payments if this applies to you, lest you pay on debt that will ultimately be forgiven.

 

  • Delinquent debt collection suspended through Sept. 30, 2020: Including wage, tax refund, and other Federal benefit garnishments.

 

  • Employer-paid student loan repayments excluded from 2020 income: From the date of the CARES Act enactment through year-end, your employer can pay up to $5,250 toward your student debt or your current education without it counting as taxable income to you.

 

  • Pell Grant relief: There are several clauses that ease Pell Grant limits, while not eliminating them. It would be best if we go over these with you in person if they may apply to you.

 

CARES Act For Estates/Beneficiaries

  • A break for “non-designated” beneficiaries: 2020 can be ignored when applying the 5-year rule for “non-designated” beneficiaries with inherited retirement accounts. The 5-Year Rule effectively ends up becoming a 6-Year Rule for current non-designated beneficiaries.  This is still going to be tricky, so please contact us before taking any further distributions from an inherited retirement account.

 

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Now you are familiar with much of the critical content of the CARES Act! That said, given the complexities involved and unprecedented current conditions, there will undoubtedly be updates, clarifications, additions, system glitches, and other adjustments to these summary points. The results could leave a wide gap between intention and reality.  As such, before proceeding, please consult with us and other appropriate professionals, such as your accountant, and/or attorney on any details specific to you. Please don’t hesitate to reach out to us with your questions and comments. We look forward to hearing from you soon!

 

 

Josh, Mike, Matt, and Sandra

 

 

Reference Materials: