If one assumes younger investors are in a lower marginal tax bracket because they are earning less in the early stages of their career, this recommendation makes a lot of sense.
It is not relevant. The .5% floor operates strictly in the context of charitable contributions taken as itemized deductions. If anything, this new provision further underscores the utility and benefit of QCDs in lowering your AGI, as opposed to taking your RMD and then making charitable contributions.
The example you cited in the .5% floor on charitable deductions is even greater than what you cited. In 2026, this taxpayer not only will have to disallow $5,000 of the $10,000 charitable contribution, but will also only be able to deduct the remaining $5,000 of "allowed" charitable contribution at a 35% rate, instead of the full 37% rate, due to the modified Pease deduction rule now in effect.
That certain forms of income (tips, overtime) are now exempt from income taxes does NOT mean they are also exempt from FICA payroll taxes. This income will continue to be subject to these taxes, and hence help build their earnings record for future Social Security benefits.
For all of the complaints that this post demonstrates how the tax code is hopelessly complex, there is an easy fix: eliminate the preferential tax treatment for home sales altogether. That way, if you make a profit on your home, you pay capital gains taxes on the profit, just as you would when you sell Amazon stock for a profit. Of course, the majority of Americans who own their homes would howl in outrage, and that's why we have indecipherable tax regulations ...
For an ETF focused on AI and robotics, you may wish to take a look at the Robotics and Artificial Intelligence (BOTZ) ETF. I have a small holding in it in my taxable brokerage account. While NVidia is its largest holding at 14%, the next five largest holdings include firms such as Intuitive Surgical and Keyence -- e.g. non megacap stocks. Expense ratio is .69%. Perhaps worth a look: Robotics & Artificial Intelligence ETF (BOTZ) (globalxetfs.com)
There is a misconception for some that taking out a RMD obligates you to spend the money. Nothing prevents you from taking a RMD and then re-investing those funds in a taxable account, thereby maintaining your savings. An RMD simply ensures the government recoups taxes on the funds which were initially contributed on a tax-free basis. It is not a mandatory spending tool.
Thanks, Rick, you are correct here, based on the language in the IRS Publication. Frankly, I am surprised as you are generally required to report all income received, even if the income ultimately is not taxable. Thanks for the source citation here.
Technical comment: even if a 1099-S is not issued, you are still required to report the proceeds from a home sale on your tax return (and demonstrate that you qualify for the primary residence exclusion). This is no different than if you receive income from another entity, you are still required to report it even if you do not receive a corresponding 1099-MISC or 1099-NEC form. Now, in practice, the odds the IRS will follow up with you when no 1099-S is issued is next to nil, but the requirement is still there. Policy comment: when people wonder why housing prices have gotten so out of whack in our country, the Primary Residence exclusion is a contributing factor, as it effectively subsidizes home sale values. If Bob sells Amazon stock at a $250,000 profit after holding it for two years while Sally sells a primary residence for a $250,000 profit after living in it for two years. only Bob pays taxes on his capital gain. I remain flummoxed as to why anyone believes this is fair or good policy. Jofi Joseph, CPA
Comments
If one assumes younger investors are in a lower marginal tax bracket because they are earning less in the early stages of their career, this recommendation makes a lot of sense.
Post: One Big Beautiful Act: Tax Breakdown and Planning Strategies
Link to comment from August 20, 2025
It is not relevant. The .5% floor operates strictly in the context of charitable contributions taken as itemized deductions. If anything, this new provision further underscores the utility and benefit of QCDs in lowering your AGI, as opposed to taking your RMD and then making charitable contributions.
Post: One Big Beautiful Act: Tax Breakdown and Planning Strategies
Link to comment from August 20, 2025
The example you cited in the .5% floor on charitable deductions is even greater than what you cited. In 2026, this taxpayer not only will have to disallow $5,000 of the $10,000 charitable contribution, but will also only be able to deduct the remaining $5,000 of "allowed" charitable contribution at a 35% rate, instead of the full 37% rate, due to the modified Pease deduction rule now in effect.
Post: One Big Beautiful Act: Tax Breakdown and Planning Strategies
Link to comment from August 16, 2025
That certain forms of income (tips, overtime) are now exempt from income taxes does NOT mean they are also exempt from FICA payroll taxes. This income will continue to be subject to these taxes, and hence help build their earnings record for future Social Security benefits.
Post: One Big Beautiful Act: Tax Breakdown and Planning Strategies
Link to comment from August 16, 2025
For all of the complaints that this post demonstrates how the tax code is hopelessly complex, there is an easy fix: eliminate the preferential tax treatment for home sales altogether. That way, if you make a profit on your home, you pay capital gains taxes on the profit, just as you would when you sell Amazon stock for a profit. Of course, the majority of Americans who own their homes would howl in outrage, and that's why we have indecipherable tax regulations ...
Post: Are We Qualified?
Link to comment from January 17, 2024
Does your non-compete actually prevent you from being a volunteeer tax preparer?
Post: Taxing Our Brains
Link to comment from December 20, 2023
For an ETF focused on AI and robotics, you may wish to take a look at the Robotics and Artificial Intelligence (BOTZ) ETF. I have a small holding in it in my taxable brokerage account. While NVidia is its largest holding at 14%, the next five largest holdings include firms such as Intuitive Surgical and Keyence -- e.g. non megacap stocks. Expense ratio is .69%. Perhaps worth a look: Robotics & Artificial Intelligence ETF (BOTZ) (globalxetfs.com)
Post: Look Under the Hood
Link to comment from September 22, 2023
There is a misconception for some that taking out a RMD obligates you to spend the money. Nothing prevents you from taking a RMD and then re-investing those funds in a taxable account, thereby maintaining your savings. An RMD simply ensures the government recoups taxes on the funds which were initially contributed on a tax-free basis. It is not a mandatory spending tool.
Post: Under the Tree?
Link to comment from October 31, 2022
Thanks, Rick, you are correct here, based on the language in the IRS Publication. Frankly, I am surprised as you are generally required to report all income received, even if the income ultimately is not taxable. Thanks for the source citation here.
Post: Tax Shelter
Link to comment from June 13, 2022
Technical comment: even if a 1099-S is not issued, you are still required to report the proceeds from a home sale on your tax return (and demonstrate that you qualify for the primary residence exclusion). This is no different than if you receive income from another entity, you are still required to report it even if you do not receive a corresponding 1099-MISC or 1099-NEC form. Now, in practice, the odds the IRS will follow up with you when no 1099-S is issued is next to nil, but the requirement is still there. Policy comment: when people wonder why housing prices have gotten so out of whack in our country, the Primary Residence exclusion is a contributing factor, as it effectively subsidizes home sale values. If Bob sells Amazon stock at a $250,000 profit after holding it for two years while Sally sells a primary residence for a $250,000 profit after living in it for two years. only Bob pays taxes on his capital gain. I remain flummoxed as to why anyone believes this is fair or good policy. Jofi Joseph, CPA
Post: Tax Shelter
Link to comment from June 13, 2022