taxes Archives - Money Managers, Inc.

Info re: 2025 tax changes

Marc Aarons — Tue, 03 Feb 2026 20:48:33 +0000

I hope you’re doing well. As we head into a new tax season, I wanted to share a quick guide to help make filing your 2025 taxes a little easier — and hopefully a lot less stressful.

One of the biggest updates this year is the passage of the One Big Beautiful Bill Act (OBBBA). It made some permanent changes that many expected would result in the Tax Cuts and Jobs Act (TCJA) expiring.

I’ve included a breakdown in the guide below. But if you have questions about how any of this impacts your specific situation, just reach out. I’m here to help.

General Tax Questions

1. How does the OBBBA affect the TCJA rules for 2025 and beyond?

The OBBBA passed in mid-2025, prevents most of the major TCJA provisions from expiring at the end of 2025. Instead of seeing higher tax rates and a smaller standard deduction in 2026, OBBBA makes many TCJA rules permanent — including the current rate brackets, the larger standard deduction, and the 20% pass-through deduction.

The bill also adds several new provisions mentioned above, such as updated vehicle credits, a new interest deduction for qualifying U.S.-assembled vehicles, and the return of 100% bonus depreciation for certain business assets. For most taxpayers, this means your 2025 return (filed in 2026) follows familiar TCJA rules, and many of those rules will continue into 2026 and beyond.

2. When is the deadline for filing taxes this year?

For the 2025 tax year, the deadline to file your federal individual income tax return and pay any taxes owed is Wednesday, April 15, 2026.

3. What are the rates and brackets for tax year 2025?

2025 Marginal Tax Rates	Single Filer	Married Filing Jointly	Head of Household	Married Filing Separately
10%	$0–11,925	$0–23,850	$0-17,000	$0-11,925
12%	$11,925-48,475	$23,850-96,950	$17,000- 64,850	$11,925-48,475
22%	$48,475- 103,350	$96,950-206,700	$64,850-103,350	$48,475-103,350
24%	$103,350-197,300	$206,700-394,600	$103,350-197,300	$103,350-197,300
32%	$197,300-250,525	$394,600-501,050	$197,300-250,500	$197,300-250,525
35%	$250,525-626,350	$501,050-751,600	$250,500-626,350	$250,525-375,800
37%	Over $626,350	Over $751,600	Over $626,350	Over $375,800

4. How do tax brackets work?

The IRS sets inflation-adjusted tax brackets annually. Your marginal tax rate is based on the bracket into which your total taxable income falls. However, your tax liability isn’t simply your income multiplied by your marginal rate.

Your effective tax rate, which is the rate you actually pay, factors in all of the progressive tax brackets you fall under and any tax credits you claim. This effective rate is generally lower than your marginal tax rate.

Here’s an example with 2025 tax year figures to show how it works:

Alicia is a single filer with $75,000 in taxable income.

Alicia’s marginal tax rate is 22% because she falls into that bracket for the highest portion of her income. However, her effective tax rate will be lower after calculating taxes for each portion of her income. Here’s how it looks:

10% bracket: $11,925 × 10% = $1,192.50
12% bracket: ($48,475 – $11,925) × 12% = $4,386
22% bracket: ($75,000 – $48,475) × 22% = $5,835.50

Total tax liability: $1,192.50 + $4,386 + $5,835.50 = $11,414

To find Alicia’s effective tax rate, divide her total tax liability by her taxable income:

$11,414 ÷ $75,000 = 15.2%.

5. What is the standard deduction for 2025?

For 2025, the standard deduction has increased to adjust for inflation.

Filing Status	2024	2025
Single	$14,600	$15,750
Married filing jointly	$29,200	$31,500
Married filing separately	$14,600	$15,750
Head of household	$21,900	$23,625

Note: If you are 65 or older or blind, your standard deduction is higher. For 2025, the additional standard deduction amounts are:

Single or head of household: Additional $2,000
Married filing jointly, married filing separately, or qualifying surviving spouse: Additional $1,600 per spouse, if eligible.
New bonus senior deduction: A separate, temporary deduction of up to $6,000 per eligible individual (or $12,000 for a qualifying married couple) is available for those 65 and older. The deduction starts to decrease for taxpayers with a modified adjusted gross income (MAGI) over $75,000 (single)/$150,000 (married filing jointly).

6. Should I itemize or take the standard deduction?

Choosing between the standard deduction and itemizing depends on which option effectively lowers your taxable income. Itemizing may be beneficial if your deductible expenses exceed the standard deduction. Common itemized deductions include:

Mortgage interest: Interest paid on a home mortgage
State and local taxes (SALT): The SALT deduction cap rises to $40,000 in 2025 and is indexed upward through 2029. In 2030, it’s scheduled to revert to the prior-law cap, and for higher-income households, the benefit gradually phases out until it effectively disappears.
Medical expenses: Out-of-pocket costs exceeding 7.5% of your adjusted gross income
Charitable contributions: Donations to qualified organizations
New for 2025: Tip income deduction: You can now deduct up to $25,000 in qualified tip income through 2028 for modified adjusted gross income earnings under $150,000 ($300,000 for joint filers). This is a brand-new benefit and may help lower taxable income for anyone working in tip-based roles.
New for 2025: Overtime deduction: Workers can deduct up to $12,500 in qualified overtime pay — or $25,000 for joint filers — until 2028 with phase-outs beginning at higher income levels above $150,000. This is a helpful break for anyone who regularly picks up extra hours.

If the total of these expenses surpasses the standard deduction for your filing status, itemizing could reduce your taxable income more than the standard deduction would. However, itemizing requires thorough record-keeping and documentation of all deductible expenses.

Since nearly 90% of taxpayers claim the standard deduction, it likely makes the most sense. Assessing your financial situation, however, is essential to determining which option is best for you.

Consulting with a tax professional can help you make an informed decision based on your circumstances.

7. What is a tax credit, and which ones should I take?

A tax credit directly reduces your tax liability, lowering the income tax you owe on a dollar-for-dollar basis. This is distinct from tax deductions, which decrease your taxable income. For the 2025 tax year, several tax credits are available to eligible taxpayers, including:

Child Tax Credit (CTC): This credit offers up to $2,200 per qualifying child under 17, with a refundable portion of up to $1,700. The credit begins to phase out for higher-income taxpayers.
Earned Income Tax Credit (EITC): Designed to assist low- to moderate-income workers and families, the EITC’s maximum amount is $8,046 for taxpayers in 2025 with three or more qualifying children. Income thresholds and phase-out ranges apply.
Child and Dependent Care Credit: This non-refundable credit allows up to $3,000 in expenses for one qualifying individual and $6,000 for two or more, helping those who incur care expenses work or seek employment. Find out if you’re eligible here.
Adoption Tax Credit: Providing up to $17,280 per eligible child for qualified adoption expenses, this non-refundable credit phases out for taxpayers with modified adjusted gross incomes above certain thresholds.
American Opportunity Tax Credit (AOTC): This credit offers up to $2,500 per student for qualified education expenses over four years. It is available to taxpayers with a MAGI of up to $80,000 ($160,000 for joint filers) and includes up to $1,000 as a refundable credit.
Lifetime Learning Credit: This non-refundable credit provides up to $2,000 per tax return (or 20% of up to $10,000) for qualified tuition and related expenses, with applicable income phase-out ranges.
Saver’s Credit: Offering up to $1,000 ($2,000 for married couples filing jointly) for eligible contributions to retirement plans, this credit requires being at least 18 years old, not a full-time student, and not claimed as a dependent on another person’s tax return.

8. Are there any deductions for student loan interest?

You may be eligible to deduct up to $2,500 of interest paid on qualified student loans during the tax year, even if you don’t itemize deductions. This deduction is gradually reduced and eventually eliminated for single filers with a modified adjusted gross income (MAGI) between $85,000 and $100,000 and for married couples filing jointly with a MAGI between $170,000 and $200,000. For more detailed information, refer to the IRS’s Student Loan Interest Deduction.

9. What are the standard mileage rates for 2025?

For the 2025 tax year, the IRS has set the standard mileage rates as follows:

Business use: $0.70 per mile, an increase of $0.03 from 2024.
Charitable organizations: $0.14 per mile, unchanged from 2024.

These rates apply to electric and hybrid-electric vehicles, as well as gasoline- and diesel-powered vehicles. Taxpayers can calculate the actual costs of using their vehicle instead of applying the standard mileage rates.

10. What are the medical travel and military mileage rates for 2025?

The mileage rate for medical travel and military moves is $0.21, unchanged from 2024.

Retirement Tax Questions

11. What are the retirement plan contribution limits for 2025?

For the 2025 tax year, the IRS has adjusted the contribution limits for various retirement plans:

401(k), 403(b), and 457 plans: The elective deferral limit has increased to $23,500. Individuals aged 50 and over can make an additional catch-up contribution of $7,500, bringing the total to $31,000. Those aged 60 to 63 are eligible to make a catch-up contribution of up to $11,250 if their plan allows.
SIMPLE IRAs: The contribution limit is now $16,500, with a catch-up contribution of $3,500 for those 50 and older, totaling up to $20,000. Those aged 60 to 63 can make a $5,250 “super” catch-up contribution.
Traditional and Roth IRAs: The contribution limit remains $7,000. Individuals aged 50 and over can contribute an additional $1,000 as a catch-up contribution, for a total of $8,000.

12. What about required minimum distributions (RMDs) for 2025?

For 2025, the key thing to know is that the newer RMD rules are now fully in effect. Most retirement account owners must begin taking RMDs at age 73, and the standard deadlines still apply: your first RMD is due by April 1st of the following year, and every year after that by December 31st.

For inherited IRAs, beneficiaries who fall under the 10-year rule may now be required to take annual distributions if the original owner had already started RMDs. If the original owner died before RMD withdrawals began, you generally have more leeway on timing. Just be sure the account is emptied within 10 years.

13. My property was affected by a natural disaster in 2025. What should I know?

If your property was damaged in a federally declared 2025 disaster, the IRS may offer several forms of relief. This can include extended tax-filing deadlines, the option to claim casualty-loss deductions, and special access to retirement funds through Qualified Disaster Recovery Distributions (QDRDs).

Under QDRD rules:

You may withdraw up to $22,000 from eligible retirement accounts without the 10% early-withdrawal penalty.
The income can be spread over three years, and you also have the option to repay the amount within three years to avoid taxation.

Beyond tax relief, be sure to document all damage, keep receipts for repairs, and review what your insurance covers — such as temporary housing, debris removal, or rebuilding costs. Because benefits vary by location, always confirm that your county is included in the official FEMA declaration and review the IRS disaster-relief page for your area’s specific guidance. Check the IRS website for specific extensions applicable in your area.

14. Are there any tax breaks for senior adults and retirees?

Yes! Here are a few to look for:

Extra standard deduction: Individuals 65 or older are eligible for an additional standard deduction. An extra deduction of $2,000 is available for single filers or heads of household aged 65 or older, and $1,600 per qualifying spouse for married couples filing jointly.
New $6,000 senior bonus deduction:Starting in 2025, adults 65 and older can claim a “senior bonus” deduction of up to $6,000 (or $12,000 for married couples when both spouses are 65+). It’s available whether you itemize or take the standard deduction.
- Full deduction at incomes up to $75,000 (single) or $150,000 (married filing jointly).
- Phases out above these limits and disappears entirely at higher income levels.
- This new deduction is scheduled to apply for tax years 2025-2028.
Credit for the elderly or disabled: Eligibility for the credit for the elderly or disabled depends on meeting IRS income limits and, if married filing jointly, both spouses must meet the age or disability criteria. The credit is calculated on Schedule R, starting with a base amount and reducing it by certain pension, annuity, or disability payments before applying a 15% credit rate. Because it’s a nonrefundable credit, it can lower your tax bill but cannot generate a refund. It’s most valuable for seniors and disabled taxpayers with lower to moderate incomes.
IRA contributions: Working spouses can contribute to spousal IRAs for non-working spouses. For 2025, the contribution limit is $7,000 per spouse under 50, with an additional $1,000 catch-up contribution for those 50 or older, allowing a total of $8,000 per eligible spouse.
Medicare premiums deduction: Taxpayers who itemize deductions can claim unreimbursed medical expenses that exceed 7.5% of their adjusted gross income (AGI). This deduction is particularly beneficial for individuals with substantial out-of-pocket medical costs.
Charitable contributions: Individuals aged 70½ or older can make tax-free charitable donations directly from their IRAs through Qualified Charitable Distributions (QCDs). Due to inflation adjustments, the annual QCD limit has increased to $108,000 per individual, up from $105,000 in 2024. Married couples, where both spouses are eligible and have separate IRAs, can collectively donate up to $216,000. These distributions can also satisfy Required Minimum Distributions (RMDs) for those aged 73 or older. To ensure the QCD is tax-free, the IRA trustee must transfer the funds directly to a qualified charity, and the donor should obtain a written acknowledgment from the charity confirming the contribution.
Property tax benefits: Many states and local governments offer property-tax exemptions, credits, and freezes for seniors — typically for homeowners 65 or older who use the home as their primary residence and meet income or residency requirements. At the federal level, property taxes can still be deducted as part of theSALT deduction if you itemize. For the 2025 tax year, the SALT deduction cap increases from $10,000 to up to $40,000, with the higher cap available to most taxpayers below certain income thresholds. For higher-income households, the deduction phases out and may revert to a lower cap.
Gifting to reduce taxable estate: In 2025, individuals can gift up to $19,000 per recipient without incurring a gift tax, thereby reducing the taxable estate.

Miscellaneous Tax Deductions

15. What are the lifetime estate and gift tax exemptions for 2025?

For the 2025 tax year, the federal estate tax exemption is $13.99 million per individual, up from $13.61 million in 2024. This means an individual can transfer up to $13.99 million upon death without incurring federal estate taxes. For married couples, the combined exemption is $27.98 million.

The annual gift tax exclusion is $19,000 per recipient in 2025, up from $18,000 in 2024. This allows you to gift up to $19,000 to individuals such as children, grandchildren, or others without triggering the need to file a gift tax return or affecting your lifetime estate and gift tax exemption. If you’re married, you and your spouse can each gift $19,000 to the same recipient, totaling $38,000 per recipient annually.

16. What are the capital gain rates for 2025?

If you sold stocks, mutual funds, or other capital assets you held for at least one year, the IRS taxes any gain at a 0%, 15%, or 20% rate. The 2025 rates have been adjusted upward, with thresholds increasing by approximately 3% across various filing statuses.

0% Rate:

Single filers: Taxable income up to $48,350.
Married filing jointly: Up to $96,700.
Married filing separately: Up to $48,350.
Head of household: Up to $64,750.

15% Rate:

Single filers: Taxable income from $48,351 to $533,400.
Married filing jointly: $96,701 to $600,050.
Married filing separately: $48,351 to $300,000.
Head of household: $64,751 to $566,700.

20% Rate:

Single filers: Taxable income over $533,400.
Married filing jointly: Over $600,050.
Married filing separately: Over $300,000.
Head of household: Over $566,700.

17. What tax incentives are available for making energy-efficient upgrades to my home?

Energy Efficient Home Improvement Credit:For qualifying improvements made to your existing U.S. residence and placed in service after January 1, 2023, and by December 31, 2025, you may claim a federal tax credit equal to 30% of the cost of eligible work. The credit is nonrefundable and cannot be carried forward. The annual credit limit is generally up to $1,200 for items like insulation, windows/doors, and air sealing, plus a separate up-to $2,000 limit for heat pumps, heat pump water heaters, and biomass stoves/boilers — meaning the maximum you could claim in one year is potentially up to $3,200 if you qualify in both categories. A key requirement for 2025 (and later) is that the goods must come from a “qualified manufacturer” and include the required identification number on Form 5695.
Residential Clean Energy Credit:For qualifying property (solar panels, wind turbines, geothermal heat pumps, fuel cells, battery storage systems of at least 3 kWh) placed in service between 2022 and December 31, 2025, you may claim 30% of the installation cost. There is no dollar cap on the credit (except for some fuel-cell property), and unused amounts can be carried forward. However, beginning January 1, 2026 no new property will qualify under the current law unless Congress acts again.

18. Are HSA contributions tax-deductible? What else has changed with HSAs?

Yes. The contributions to an HSA are tax-deductible, and the earnings (if invested) are tax-free, as are withdrawals for eligible medical expenses.

For 2025, you can contribute up to $4,300 for individual coverage and $8,550 for family coverage to your HSA. You report your contributions on Form 8889 with the total contributions transferred to and reported on your Form 1040. Remember, you have until April 15, 2026, to contribute to your HSA for the 2025 tax year.

19. What should I know if I bought health insurance from the Affordable Care Act (ACA) marketplace?

If you purchased a health insurance plan through the Health Insurance Marketplace (under ACA) for 2025 coverage, here are key points:

The Premium Tax Credit (PTC) is available to help reduce your monthly premium and/or your tax liability if you enrolled in a Marketplace plan and meet eligibility requirements.
For 2025, you must have a household income at or above 100% of the federal poverty level (FPL) for your household size.
Under the temporary rules extended through the 2025 coverage year, there is no upper-income cap (i.e., above 400% of FPL) on eligibility for the PTC. That means households with income above 400% of FPL may still qualify if they meet all other criteria.
You must enroll through the Marketplace or your state’s equivalent, opt out of your employer’s insurance (if applicable, which also means you’re ineligible for the premium tax credit with ACA), and you must file federal income tax returns including Form 8962 to reconcile any advance credit payments.
Because of the temporary elimination of the 400% FPL cap, many more households may be eligible in 2025.

20. Are charitable contributions eligible for a tax deduction in 2025?

Contributions — of cash or non-cash assets — received by December 31, 2025, are eligible for tax deductions. Generally, you may deduct up to 60% of your AGI for cash donations. Keep in mind that charitable contributions are deductible only if you itemize.

Deductions for non-cash contributions, such as property or appreciated assets, are generally limited to 30% of your AGI. The exact limit depends on the type of property donated and the recipient organization.

21. Are there any tax deductions for teachers in 2025?

Eligible K–12 educators can deduct up to $300 in qualified classroom expenses in 2025. This includes books, supplies, and technology used for teaching. To qualify, you must work at least 900 hours in the school year as a teacher, instructor, counselor, principal, or classroom aide. Married couples who are both educators may each claim the deduction.

22. What should I know about platforms like PayPal and Venmo for 2025?

For 2025, these platforms must send a 1099-K to anyone who receives more than $20,000 in payments and completes 200 or more transactions in a tax year.

Even if you don’t receive a form, you are still responsible for reporting all taxable income from these apps on your tax return. To calculate your income, review any 1099-K you receive, separate business or sales payments from personal transfers, subtract returns and related expenses, and report the remaining net amount as income.

23. What should I know about side gigs, freelance income, or selling items online in 2025?

Whether you drive part-time, freelance, consult, tutor, or sell items online, all income from side work must be reported on your 2025 tax return. Key points:

Platforms such as Uber, Etsy, and Rover may issue Form 1099-NEC, 1099-K, or both, depending on your activity.
Even if no form is issued, you must report all income from gig or platform-based work.
Ordinary and necessary business expenses — including mileage, supplies, equipment, home-office expenses, and platform fees — may be deductible.
With OBBBA making the 20% pass-through deduction permanent, many gig workers may qualify for the Qualified Business Income (QBI) deduction on net earnings.
If you expect to owe tax, you may need to make quarterly estimated payments to avoid penalties.

This category often catches taxpayers off guard, so good record-keeping throughout the year is essential, especially moving forward.

24. What vehicle tax credits or deductions are still available for the 2025 tax year?

For the 2025 tax year, the clean vehicle credit was still available — up to $7,500 for new electric vehicles (EVs) and $4,000 for used EVs — but it expired on September 30, 2025, so only vehicles purchased before that date qualify. The 2025 rules also introduced a new deduction of up to $10,000 in interest for new, U.S.-assembled personal vehicles financed after December 31, 2024.

Additionally, businesses can take advantage of the restored 100% bonus depreciation for qualifying vehicles placed in service in 2025 and later under OBBBA, allowing a full first-year deduction.

25. My buddy/neighbor/co-worker uses an online platform to file his taxes. He says it’s quick and easy. What should I know?

While online tax platforms are convenient, they are not right for everyone. Individuals with complex financial situations may benefit from the services of a local tax professional. The following individuals and scenarios are included:

Those with multiple income sources
Self-employed, contract workers, clergy, or small business owners
Those recently divorced or separated
Those who grew their families through adoption in 2025
Those who are considered high-net-worth individuals
Expats
Those with complex stock holdings
Individuals dealing with tax debt, liens, or levies

Unlike online tax return platforms, you can receive personalized guidance and insights. Moreover, the security of your financial data is a vital concern when entering sensitive data online.

Beyond that, partnering with a local tax professional means you have a trusted expert who’s readily available for face-to-face meetings whenever you need assistance, whether during tax season or any other time of the year.

So, while online options offer convenience, the long-term financial well-being and peace of mind that come with professional guidance and face-to-face support are well worth it.

I hope this guide gives you a clearer picture of what to expect when filing your 2025 tax return. If you know someone else who would find it useful, feel free to share it.

When you’re ready to set up your tax appointment, reply to this email or call our office. If you need anything in the meantime, don’t hesitate to reach out — that’s why I’m here.

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

Money Managers inc. Website

Investment advisory and financial planning services are provided by Money Managers, Inc. a registered investment advisor. Our CRD Number is 151602. To access our most recent version of our Form ADV, Form ADV Part 2A and privacy policy, visit https://adviserinfo.sec.gov/. This information is for educational purposes only. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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Social Security 2023 COLA Increase Kicks In

Marc Aarons — Fri, 16 Dec 2022 17:45:51 +0000

Social Security 2023 COLA Increase Kicks In

Presented by Marc Aarons

While you probably already found your notice in the mail, you may be curious about the COLA increase happening for Social Security recipients in the New Year. Starting in January, beneficiaries will see an 8.7% increase to help offset inflation and its effects on day-to-day costs.

This means a $146 increase in the monthly benefit for most retirees. Meanwhile, Medicare Part B premiums will shink back about 3% to $164.90, down $5.20 from last year; since these premiums are typically taken from Social Security benefits, that also bumps up the monthly payout.

While many retirees rely on Social Security for a significant portion of their retirement income, it’s important to remember those who collect payments while still earning income from work or some other source. Those still earning such income may want to consider adjusting their tax withholding.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc. for use by Marc Aarons. Money Managers, Inc.; is a Securities and Exchange Commission registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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End-of-the-Year Money Moves

Marc Aarons — Fri, 07 Oct 2022 18:31:47 +0000

End-of-the-Year Money Moves
Here are some things you might consider before saying goodbye to 2022.

Provided by Marc Aarons

What has changed for you in 2022? This year has been as complicated as learning a new dance for some. Did you start a new job or leave a job behind? That’s one step. Did you remarry? There’s another step. Did you retire? That’s practically a pirouette. If notable changes occurred in your personal or professional life, you might want to review your finances before this year ends and 2023 begins. Proving that you have all the right moves in 2022 might put you in a better position to tango with 2023.

Even if your 2022 has been relatively uneventful, the end of the year is still an excellent time to get cracking and see where you can manage your overall personal finances.

Keep in mind that this article is for informational purposes and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.

Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. If you are thinking about this move, consider seeking some guidance from a professional who can provide insights.¹

You could even take it a step further. Consider that you can deduct up to $3,000 of capital losses over capital gains from ordinary income. You can carry any remaining capital losses above that amount forward to offset capital gains in upcoming years.¹

Do you want to itemize deductions? You may want to take the standard deduction for the 2022 tax year, which has risen to $12,950 for single filers and $25,900 for joint. If you think it might be better for you to itemize, now would be an excellent time to get the receipts and assorted paperwork together.²

Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2022 ends? Your gift may qualify as a tax deduction. For some gifts, you might need to itemize deductions using Schedule A.³

While we’re on the topic of year-end moves, why not take a moment to review a portion of your estate strategy? Specifically, take a look at your beneficiary designations. If you haven’t checked them for some time, double-check that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to ensure it remains valid and up-to-date.

Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2023. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

^Citations

^{Investopedia.com, March 6, 2022}
^{IRS.gov, December 15. 2021}
^{IRS.gov, May 2, 2022}

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Retirement Preparation Mistakes Why are they made again and again?

Marc Aarons — Wed, 02 Feb 2022 18:40:28 +0000

Provided by Marc Aarons

Much is out there about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, some classic financial missteps plague retirees.

Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we prepare for and enter retirement.

Timing Social Security. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for higher retirement income. Filing for your monthly benefits before you reach Social Security’s Full Retirement Age (FRA) can mean comparatively smaller monthly payments.¹

Managing medical bills. Medicare will not pay for everything. Unless there’s a change in how the program works, you may have a number of out-of-pocket costs, including dental, and vision.

Underestimating longevity. Actuaries at the Social Security Administration project that around a third of today’s 65-year-olds will live to age 90, with about one in seven living 95 years or longer. The prospect of a 20- or 30-year retirement is not unreasonable, yet there is still a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents.²

Withdrawing strategies. You may have heard of the “4% rule,” a guideline stating that you should take out only about 4% of your retirement savings annually. Some retirees try to abide by it.

So, why do others withdraw 7% or 8% a year? In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures and an inclination to live a bit more lavishly.

Talking About Taxes. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming your retirement will be long, you may want to assign this or that investment to its “preferred domain.” What does that mean? It means the taxable or tax-advantaged account that may be most appropriate for it as you pursue a better after-tax return for the whole portfolio.

Retiring with debts. Some find it harder to preserve (or accumulate) wealth when you are handing portions of it to creditors.

Putting college costs before retirement costs. There is no “financial aid” program for retirement. There are no “retirement loans.” Your children have their whole financial lives ahead of them.

Retiring with no investment strategy. Expect that retirement will have a few surprises; the absence of a strategy can leave people without guidance when those surprises happen.

These are some of the classic retirement mistakes. Why not attempt to avoid them? Take a little time to review and refine your retirement strategy in the company of the financial professional you know and trust.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

^Citations

^{Forbes.com, December 9, 2021}
^{SSA.gov, January 24, 2022}

The post Retirement Preparation Mistakes Why are they made again and again? appeared first on Money Managers, Inc..

Tax Changes: What’s In, What’s Out?

Marc Aarons — Wed, 03 Nov 2021 13:43:13 +0000

While some initiatives are left behind, others are seeing renewed interest.

Provided by Marc Aarons

While it’s still too early to draw any final conclusions, Congress is getting closer to outlining what tax law changes are under consideration to pay for the proposed $1.75 trillion Build Back Better Plan.¹

For now, it appears that changes to capital gains and personal tax rates are off the table. The conversation is shifting to a new corporate minimum tax while adjustments to estate taxes may be still under consideration.¹

Investors cheered as some of the tax-law uncertainty was lifted. In October, the Standard & Poor’s 500 stock index tacked on nearly 7 percent.²

While some initiatives are left behind, others are seeing renewed interest. A growing number also appear to be warming up to the idea of a “billionaire’s tax,” a special tax designed to focus on the 800 or so wealthiest Americans.³

Critics of the billionaire’s tax remind the legislature that when the Alternative Minimum Tax (AMT) was introduced in 1969, it was targeted at 155 individuals with adjusted gross incomes above $200,000 who paid zero federal income tax on their 1967 tax return. But by 2017, nearly five million taxpayers were assessed a minimum tax.^4,5

“It ain’t over till it’s over,” said baseball legend Yogi Berra, when his 1973 New York Mets appeared out of the National League Pennant race. (The Mets eventually won the pennant but lost the World Series in 7 games to the Oakland Athletics.)⁶

If you’re feeling unsettled as Congress continues to work on these tax law changes, please reach out. Or if you want to talk about World Series baseball, give us a call.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^Citations

^{CNBC.com, October 25, 2021}
^{WSJ.com, October 31, 2021}
^{CNBC.com, October 25, 2021}
^{TaxFoundation.org, 2021}
^{CNBC.com, March 4, 2020}
^{BBC.com, September 23, 2015}

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Qualified Charitable Distributions

Marc Aarons — Wed, 17 Mar 2021 15:25:03 +0000

A choice for I.R.A. owners who want to reduce taxes linked to I.R.A. distributions.

Provided by Marc Aarons

Do you have an I.R.A.? As you enter your 70s, you may start to look at that I.R.A. not only as an asset, but also as a problem. By law, you must take required minimum distributions (R.M.D.s) from a Traditional I.R.A. once you reach age 72; there are very few exceptions to this. The downside of these R.M.D.s? The entire distribution is taxable. (You never have to take R.M.D.s from a Roth I.R.A., provided you are its original owner.)¹

While the income from the R.M.D. is nice, the linked taxes can be a headache. Relief for that headache might be available to you, though. Did you know that you can potentially satisfy some or all of your annual R.M.D. requirement in a way that can help you manage taxes and make a charitable impact?

Consider the Qualified Charitable Distribution, Q.C.D. This is a direct asset transfer from an I.R.A. to a charity or non-profit organization of your choice. The organization must be tax-exempt under Internal Revenue Section 501(c)(3).²

A Q.C.D., sometimes called a charitable I.R.A. gift, is intended to accomplish two things. One, it gives you a chance to contribute up to $100,000 in a single year to a cause or charity. Two, you can count the entire amount of the Q.C.D. toward your R.M.D. for the year, and the Q.C.D. amount may not be included in your gross income.²

You must be at least 72 years old to make a Q.C.D. In other words, no Q.C.D.s during the years when you don’t have to take R.M.D.s. (If you take an I.R.A. distribution before age 59½, it could be subject to a 10% federal income tax penalty.)²

You may want to coordinate a Q.C.D. with the help and guidance of a financial professional, because if you improperly manage the transfer of assets between your I.R.A. and the charity, the tax break you hope for could be lost. You also need to allow enough time for the asset transfer to occur, meaning Q.C.D.s are best arranged before the very end of a calendar year.^2,3

In 2020, the age limit for putting money into a Traditional I.R.A. was lifted, and some older I.R.A. owners wondered if they could make a Q.C.D. to a charity and simultaneously characterize it as an I.R.A. contribution. The Internal Revenue Service said no to that.²

That said, a Q.C.D. is a choice that you may want to look at, especially if you think of taxes when you think of your mandatory annual I.R.A. distributions. It should be noted that the tax treatment of I.R.A.s can change from year to year, and remember, this article is for informational purposes only and does not constitute real-life advice. If a Q.C.D. interests you, consider talking with a financial professional before making any move.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^Citations

^{Forbes, February 23, 2021}
^{TheStreet, August 31, 2020}
^{Investopedia, October 29, 2020}

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Tax Efficiency in Retirement

Marc Aarons — Wed, 24 Feb 2021 17:35:55 +0000

What role should taxes play in your investment decisions?

Provided by Marc Aarons

Will you pay higher taxes in retirement? Do you have a 401(k) or a traditional IRA? If so, you will receive income from both after age 72. However, if you have saved and invested much of your life, you may also end up retiring at a higher marginal tax rate than your current one. In fact, the income alone resulting from a Required Minimum Distribution could push you into a higher tax bracket.

While retirees with lower incomes may rely on Social Security as their prime income source, they may pay comparatively less income tax than you in retirement; some, or even all, of their Social Security benefits may not be counted as taxable income.¹

What’s a pre-tax investment? Traditional IRAs and 401(k)s are examples of pre-tax investments. You can put off paying taxes on the contributions you make to these accounts until you start to take distributions. When you take distributions from these accounts, you may owe taxes on the withdrawal. Pre-tax investments are also called tax-deferred investments, as the invested assets can benefit from tax-deferred growth.²

Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from a traditional IRA, 401(k), and other defined contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Contributions to a traditional IRA may be fully or partially deductible, depending on your adjusted gross income.

What’s an after-tax investment? A Roth IRA is a classic example. When you put money into a Roth IRA, the contribution is made with after-tax dollars. As a trade-off, you may not owe taxes on the withdrawals from that Roth IRA (so long as you have had your Roth IRA at least five years and you are at least 59½ years old). With distributions from a Roth IRA, your total taxable retirement income is not as high as it would be otherwise.²

Should you have both a traditional IRA and a Roth IRA? It may seem redundant, but it could help you manage your tax situation. Keep in mind that tax-free and penalty-free withdrawal from a Roth IRA also can be taken under certain other circumstances, such as the owner’s death.

Smart moves can help you manage your taxable income and taxable estate. If you’re making a charitable gift, giving appreciated securities that you have held for at least a year is one choice to consider. In addition to a potential tax deduction for the fair market value of the asset in the year of the donation, the charity may be able to sell the stock later without triggering capital gains.³

Remember, however, that this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your charitable giving strategy.

The annual gift tax exclusion gives you a way to remove assets from your taxable estate. You may give up to $15,000 to as many individuals as you wish without paying federal gift tax, so long as your total gifts keep you within the lifetime estate and gift tax exemption of $11.58 million for the year 2020 and $11.7 million for 2021.⁴

Managing through the annual gift tax exclusion can involve a complex set of tax rules and regulations. Before adjusting your strategy, consider working with a professional who is familiar with the rules and regulations.

Are you striving for greater tax efficiency? In retirement, it is especially important – and worth a discussion. A few financial adjustments may help you manage your tax liabilities.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^Citations

^{SSA.gov, February 22, 2021}
^{IRS.gov, November 16, 2020}
^{IRS.gov, March 25, 2020}
^{Policygenius.com, December 21, 2020}

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Tax Filing Season Is a Little Later This Year

Marc Aarons — Wed, 27 Jan 2021 15:54:54 +0000

What to know and dates to remember

Provided by Marc Aarons

Recently, the Internal Revenue Service (I.R.S.) announced that tax season will start a little later than usual. This year the I.R.S. will begin accepting and processing 2020 tax returns on Friday, February 12, 2021.¹

In light of the December 27 tax law changes which brought a second round of Economic Impact Payments and other benefits to many, the I.R.S. will use this additional time to update, program, and test their systems.¹

However, if you intend to work with a tax professional or use tax software, there’s no need to wait. If you prepare your return now, not only will you have your taxes done and out of the way, but your filings will be transmitted to the I.R.S. starting February 12.¹

Even with this new date in mind, your deadline to file is still April 15. To request an extension, make sure you do so by April 15. This may grant you until October 15 to file your 2020 tax returns. However, this is an extension for filing only. The I.R.S. still requires one to pay any taxes due by the original filing date of April 15.¹

Filing one’s tax returns can be a complicated and sometimes daunting process. It’s never a bad idea to speak with a tax professional before filing, or securing their services to file on your behalf.

Marc Aarons may be reached at(714) 887-8000 or marc@ocmoneymanagers.com

^{This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your tax-filing strategy.}

^Sources

^{IRS.gov, January 15, 2021}

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The 2020 RMD Income Tax Relief Deadline Is Almost Here

Marc Aarons — Mon, 17 Aug 2020 19:29:20 +0000

Important facts and a date to remember.

Provided by Marc Aarons

Are you one of the many retirement account holders who took a mandatory distribution this year? If so, you may be able to manage the taxes associated with Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s. There are some essential details to keep in mind, however. Here’s what you need to know.

Don’t forget the withholding. Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, those who hold certain retirement accounts can bypass the required minimum distributions for 2020. To do so, though, you’ll need to return the full amount of your RMD to your retirement account. Keep in mind, many retirement account custodians often withhold income tax, which will need to be returned as well—not just the net amount you receive.¹

Remember August 31^st. August 31st is the deadline by which you must return your RMD. But considering the widespread disruption caused by COVID-19, it may be wise to begin this process sooner rather than later. After all, with industries shuttering doors or modifying their hours of operation, it may be difficult to contact the various institutions necessary. If you’re not sure where to begin, speaking with your banking or financial professional is always a wise move.¹

Avoid the 6%. As many retirement account holders know, accidental excess contributions result in a 6% tax for every year the excess remains in the account. Typically, this is a non-issue for those working with a financial professional. But considering the flurry of changes to the tax code this year, it may be worth checking with your custodian to make sure they have tagged your transaction as a “return of funds.”¹

It pays to be sure. These are just some of the most important factors to keep in mind, but the longer you wait, the greater the potential for delay or mishap. In this case, it literally pays to work with your financial, tax, and banking professionals to make sure your RMDs are returned correctly.¹

Distributions from Traditional IRAs, 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. The change in the RMD age requirement from 70½ to 72 only applies to individuals who turn 70½ on or after January 1, 2020. Once you reach age 72, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in most circumstances. Workers over 72 can still contribute to an IRA, 401(k) or other retirement accounts, depending on specific circumstances.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^Citations.

^{IRS.gov, 2020}

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Tax-Loss Harvesting

Marc Aarons — Wed, 06 May 2020 15:15:25 +0000

A useful year-end move to counteract capital gains.

Provided by Marc Aarons

Even though this may end up being a subpar year for stocks, you may realize capital gains, which is a taxable event. What can you do about them? You can do what some investors do – you could recognize investments with a loss and practice “tax-loss harvesting.”

Keep in mind this article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax legal and accounting professional before modifying your investment strategy.

Selling losers to offset winners. Tax-loss harvesting means taking capital losses (you sell securities worth less than what you first paid for them) to help offset the capital gains you may have recognized. Keep in mind that the return and principal value of securities will fluctuate as market conditions change and past performance is no guarantee of future returns.¹

While this doesn’t get rid of your losses, it can be an approach to manage your tax liability.

The tax-saving potential. Sure, you can use this technique to put your net gains at $0, but that’s just a start. Up to $3,000 of capital losses in excess of capital gains can be deducted annually, and any remaining capital losses above that can be carried forward to, potentially, offset capital gains next year. But remember, tax rules are constantly changing, and there is no guarantee that the treatment of capital gains and losses will remain the same.¹

So, by taking losses this year and carrying over the excess losses into the next, you can potentially offset some (or maybe all) of your capital gains next year.

The strategy in action. It is really quite simple. Step A is to pick out the losers in your portfolio. Step B is deciding which losers to sell. Step C is giving the green light to those transactions. Your portfolio may reflect your time horizon, risk tolerance, and investing goals. So, before moving ahead with a trade, it’s important to understand the role each investment plays in your portfolio.¹

You must watch out for the I.R.S.’s “wash-sale rule,” however. You can’t claim a loss on a security if you buy the same or a “substantially identical” security within 30 days before or after the sale. In other words, you can’t just sell a security to rack up a capital loss and then quickly replace it. Your investment professional can illustrate how a “wash sale” works.¹

Watch the fine print on wash sales. The wash-sale rule applies to your entire taxable portfolio, not just one taxable account within it. So, as an example, if you sell individual holdings of stock in a company, you still must wait for the wash-sale window to close before you can purchase shares of that same firm. Also, the wash-sale rule applies to multiple taxable accounts – worth remembering if you and your spouse file your taxes jointly.¹

The (minor) drawbacks. It’s important to stress that you may not wish to alter a carefully chosen portfolio simply for tax-loss harvesting, especially if it has been built for the long term.

You can only practice tax-loss harvesting in taxable accounts; tax-advantaged accounts are ineligible for this strategy. Transaction costs can add up, so think about those potential costs versus the overall strategy before you begin.¹

Not just a year-end tactic, but also a year-round strategy. Some investors harvest losses throughout the year, not just in December. You may want to ask the financial professional you know and trust how you can harvest losses.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

_{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

_{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

_Citations.

_{1 – Investopedia.com, February 26, 2019}

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taxes Archives - Money Managers, Inc.

Info re: 2025 tax changes

Social Security 2023 COLA Increase Kicks In

Social Security 2023 COLA Increase Kicks In

Presented by Marc Aarons

End-of-the-Year Money Moves

End-of-the-Year Money Moves Here are some things you might consider before saying goodbye to 2022.

Retirement Preparation Mistakes Why are they made again and again?

Tax Changes: What’s In, What’s Out?

Qualified Charitable Distributions

Tax Efficiency in Retirement

Tax Filing Season Is a Little Later This Year

The 2020 RMD Income Tax Relief Deadline Is Almost Here

Tax-Loss Harvesting

End-of-the-Year Money Moves
Here are some things you might consider before saying goodbye to 2022.