Taxes

So probably all of you with big wallets have discovered this years ago, but I just tripped over the NIIT for the very first time.  Like all good engineers with an interest in personal finance, I have spreadsheets of my spreadsheets.  I have been working the last few years to do some ‘bracket bumping’ with my Roth conversions and I thought this year I had it totally dialed in.  Like down to the dollar.  I put all of my numbers into freetaxusa.com and zipped right along…

Sharing an article from the NYT on 2025 Tax Changes.  A good overview, a few items have a bit more nuisance that the headline, e.g. “No Tax on Tips.”  Feels like the SALT changes will be the biggest opportunity for most filers.  I’m hopeful the charitable donations for those who don’t itemize ($1k single and $2k joint filers) will be helpful for the nonprofit world.
https://www.nytimes.com/2026/02/06/business/2025-taxes-return-refund-income.html?unlocked_article_code=1.K1A.iHXT.kv9jMyWndiZh&smid=url-share
Happy Tax Filing!
 

Just a reminder, all those little charitable contributions that we make in 2026, outside of Qualified Charitable Distributions (QCD), are deductible as an above the line tax deduction. The maximum deduction is $1000 single, $2000 married filing joint, and you need to save your receipts. 
Just to be clear, this isn’t for our 2025 tax returns. This is for tax year 2026.

A sensible recommendation is to invest 20% to 50% in foreign markets. That seems reasonable on the surface. But, which of the 3 sources of funds is best to invest in foreign markets? Broadly speaking, there are 3 big sources of funds: Tax-Free (Roth), Qualified (401k, IRA), or taxable brokerages.
My preliminary conclusion: Investing Tax-free and qualified funds in foreign markets would incur double-taxation. Taxable brokerage funds seem best.
USA has tax-treaty agreements with about 70 countries that avoid double-taxation.

I know in the US you don’t have to file your tax return until mid April. Here in the UK the filing date has just passed at the end of January. I’m always amazed by the sheer number of people who fail to meet the filing deadline, as if it somehow sneaks up on them despite being the same date every single year. Last year, even with reasonable extensions, it was close to 10% of the population who ended up getting hit with late fines.

A couple years ago I wrote a check to the IRS  for a tax payment with more than enough funds in my account to cover it.     The bank rejected the payment.  I went to the bank and they told me that the IRS was the one who rejected payment, not them.  Called the IRS a number of times as well as wrote them with all the relevant bank statements.  They said the bank denied payment.

HD contains numerous articles and comments about taxes, many of which talk about avoiding or minimizing those taxes. There are some like FICA that are certain. But income taxes are far more complicated and I guess you could say flexible.
I have the impression that Americans are unique in complaining about taxes, in part because they don’t see the connection between taxes and what they provide, at least not as much as many Europeans do. 
The United States is not a high tax country,

Just a short update on Trump Accounts.   https://trumpaccounts.gov/
Myself, I wish they had named these “Ben Franklin” accounts, in honor of the first American, the Favorite Founder. 200+ years ago, Ben showed us how to do super long term investing.
Read: M. Meyer, Benjamin Franklin’s Last Bet, The Favorite Founder’s Divisive Death, Enduring Afterlife, and Blueprint for American Prosperity, 2022, Harper Collins
Beyond Ben
Not only will you want to investigate this opportunity. You will also want to prompt your employer to consider adding Trump Accounts to your employer’s IRC 125 cafeteria plan (pre-tax contributions for health and welfare benefits –

MANY PEOPLE don’t know, but there is a net investment income tax of 3.8% that applies to some of your income. Today, I want to discuss what it is, how we can reduce its impact, and how we can save money.
Let’s dive right in:
Net Investment Income Tax (NIIT)
The net investment income tax is imposed on investment income if the modified adjusted gross income (adjusted gross income + foreign income exclusion) is more than $200,000 for single filers or $250,000 for those married filing jointly.

Here’s a link to a youtube video below between Ben Carlson & Mike Piper discussing the topic of Soc Sec going bankrupt. For those who may not recognize the names, Carlson is part of Ritholz Wealth mgt and author of “A Wealth of Common Sense” email blog. Mike Piper is a CPA, author of the “Oblivious Investor” email blog and creator of the Open Social Security calculator (https://opensocialsecurity.com/).  Here’s the url to their

I love a New Year. It’s a great time to evaluate your current situation and make changes as necessary. Here’s what I’ve been up to recently:

1. We adjusted the tax withholding for our Social Security payments. Current withholding options are 0%, 7%, 10%, 12% and 22%. We reduced our withholding from 15% to 7% since our income is lower than when we were working and refunds were getting too large.

2. We opened a new checking account with a $500 sign-up bonus and couldn’t be happier with the improved service.

I get a lot of questions from W-2 employees asking, “How can I save money on taxes?”
Many people know that business owners have a lot of flexibility to lower their tax bill, but what about W-2 workers? I’ll skip some of the more “obvious” strategies, like:

401(k)
Backdoor Roth
HSA/FSA

Here are some other ones you might want to think about:
 
Commuter benefits
Some companies offer pre-tax commuter benefits that can be used for transportation expenses such as transit passes or parking.

I received an alert from Fidelity today showing new tax issues to consider when planning a Roth conversion.
Essentially, the 2025 tax act added new benefits such as the senior tax deduction and higher limits on SALT deduction. Both have income limits based on MAGI income and thus both could affect the short-term value of a Roth conversion. The car loan interest deduction may also be a factor.
Could there be a short-term loss with a conversion? 

Currently our rental income exceeds 100% of our discretionary and non-discretionary annual expenses.  We are at the mercy of higher tax brackets and Irmma. I am 2 years from RMD’s, my spouse is 3 years away.  Should the market simply stay flat our RMD’s (both) will cover 100% of our annual expenses. We have been very fortunate.
Our IRA’s are in. Index funds, spread across large and small in an 84/16 stock/bond mix. Stocks are 46/38 between domestic and foreign in an approx 2/3 large cap and 1/3 smaller cap for both.

THE IRS RECENTLY announced inflation adjustments for the tax year 2026.
2 quick changes:

Standard deduction

For single taxpayers, the standard deduction rises to $16,100 for 2026, an increase of $350 from 2025.
For married couples filing jointly, the standard deduction rises to $32,200, an increase of $700 from tax year 2025.

Capital Gains Rates

For single taxpayers, long-term capital gains are taxed at 0% if the taxable income is up to $49,450 ($98,900 for married couples filing jointly).