327. What Tax Planning Strategies Should You Implement for 2026?

As a new tax year begins, it brings important updates that can significantly impact your retirement and tax strategy. On this episode of the A Wiser Retirement® Podcast, we break down what’s changing in 2026, what’s staying the same, and how to make smarter decisions early in the year, before opportunities slip away.

Related Podcast Episodes: 

Ep 86. Important things to Know About Taxes

Ep 262. Optimizing Your Tax Plan for 2025: Key Moves to Make

Ep 308. The Silent Tax: How Inflation Erodes Your Retirement

Related Financial Education Videos:

Second Home Considerations: Tax Implications of Multiple Residences

How do I minimize taxes as a small business owner?

How does the lifetime gift tax exemption work?

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Transcript

New Tax Year, What Changed

SPEAKER_03 0:00

It's a new tax year. Stay tuned for your tax playbook on how to get through 2026.

SPEAKER_01 0:06

Welcome to a wiser retirement podcast, where we cut through the noise and bring you real, honest conversations about investing, retirement, and building lasting wealth. No sales pitches, no gimmicks, just everything your financial advisor won't tell you.

SPEAKER_03 0:22

Welcome to Riser Retirement Podcast. I'm Casey Smith. Today I'm joined with Shauna Theriault, Senior Financial Advisor here at Rise of Wealth Management. Today we're discussing what tax planning strategies should you implement for 2026. Hello, Shauna.

SPEAKER_05 0:36

Morning.

SPEAKER_03 0:37

Morning.

SPEAKER_05 0:37

It's very exciting stuff.

SPEAKER_03 0:39

This is all very exciting stuff. We we uh were prepping for this and we're like, wow, this is really boring.

SPEAKER_05 0:45

But I actually I love tax. It's one of those things that it's I like it because it's challenging and it changes all the time. Yep. And it is like, you know, people need help with it. Well, here's confusing.

Standard Deduction And Seniors’ Add-On

SPEAKER_03 0:54

Here's here's kind of some takeaways real quick. Stay tuned for this part is that we're gonna give you some max numbers that you need to know. So I, you know, we meet with people all the time, and by September, they're like, oh, the max you can put in a 401k is 18,500, right? And like that was five years ago. Right. Um, the number's very different now. So we'll give you all these new numbers that that you need to know for this year to help you make better uh decisions or make sure you're saving enough. So well, exactly.

SPEAKER_05 1:20

Because I mean, in the beginning of the year, you look at your pay stub and what what are you deferring? Like you should be looking at that at the beginning of the year. So yeah, absolutely.

SPEAKER_03 1:28

Okay, so let's kind of talk about uh big picture. Um so many tax revisions that were questionable, I guess, over the last couple of years are now uh locked in. Uh really, we're just focused on inflation adjustments to those numbers. Right. Uh 2026, we're gonna see higher income thresholds, we're gonna see higher retirement contribution limits, new charitable deduction rules, and expanding gift and estate uh thresholds. So uh let's kind of start with some key numbers with the standard deduction. So this is where you decide do I take a standard deduction on my tax return or do I itemize? This is now the new baseline.

SPEAKER_05 2:08

Right, right. So single is 16,100. Um married filing jointly is 32,200, and then head of household is 24,150. Um, so most Americans don't itemize. Now there's gonna be a change in itemizations, which we'll talk about that a little bit, which may make it so you can itemize, but the standard deductions are so high now that most take the standard deduction.

SPEAKER_03 2:34

So you you really what we what we missed here uh was the additional six thousand dollars if you're over sixty-five years old.

SPEAKER_04 2:41

Yeah.

SPEAKER_03 2:42

That's not on here. That's per person.

SPEAKER_04 2:44

Yeah.

SPEAKER_03 2:45

So so think about that. If if your income is low enough, you have you could have an opportunity to move income out of an IRA after your RMD. Right. That potentially could be zero tax. Right. Uh if your income is low enough. Right. So you gotta pay attention to that. Low low wage, I want to say low low, that's not that's not super low, but no, it's not lower wage enters, uh, have the opportunities to get some tax-free transfers.

SPEAKER_05 3:11

Tax-free transfers, yes. If you man manage your other income and things like that, yeah, absolutely.

Estate And Annual Gift Exclusions Explained

SPEAKER_03 3:16

So pay attention to your parents and grandparents' tax returns and what their assets are, and you might have some opportunity there. Estate tax exclusion, does that is that say the same?

SPEAKER_05 3:25

It well, that that went up from 14 million. It was like 13,999 to 15 million. This is the new permanent estate tax.

SPEAKER_03 3:35

I thought that was a strange rounded number. So that makes sense.

SPEAKER_05 3:38

Yeah, yeah, I just started.

SPEAKER_03 3:39

That's not an inflation number, that's just the new number.

SPEAKER_05 3:41

That is the new number starting this year and it's permanent. So that was what was supposed to sunset and go back to old rules, but now they made that permanent and passed it. Yeah.

SPEAKER_03 3:50

So let's put that in layman's terms for everybody. Yes. So if you die.

SPEAKER_05 3:54

If you die and you have less than 15 million per person per person, then you do not have a state tax or inheritance tax. Now, some states have an inheritance tax, but there is no estate tax or inheritance tax on that, is what people refer to it as.

SPEAKER_03 4:07

Yeah, we have much lower thresholds uh in the northeast and some northwest, northwestern states.

SPEAKER_05 4:13

Yeah. There's not very many states that actually have a state tax. So this is the federal estate tax limit, but there's some states that have it. I don't know, maybe a handful, maybe 10 if I had to guess. I don't know off the top of my head. Yeah. Um, there's not very many states. You can you can go look that up and see if your state is one of them, but most states are not don't have a state tax either.

SPEAKER_03 4:32

That makes sense. Most people are going, what?

SPEAKER_05 4:35

Well, that's one of the questions we get when you inherit something is like, how much tax do I have to pay on this? Because I got this money inheritance, you know? And it's like, well, if it's in an IRA, maybe, but other than that, it's not taxable. So all right.

SPEAKER_03 4:45

Uh annual gift exclusion. So this is money that you can give to someone, anybody, yes, and there's no tax owed by either party.

SPEAKER_05 4:55

Correct. And that's$19,000 a person. And and I want to make it clear, and it's kind of confusing. So if you gift over$19,000 in one year to a person, you can, it's technically not taxable. You could just report the gift and just reduce the$15 million. Because the$15 million is the estate tax exclusion, but also your lifetime transfer.

SPEAKER_07 5:17

Yep.

SPEAKER_05 5:17

So, you know, if you gift more than that$19,000, it's still not taxable, but you're supposed to file a gift tax return and just reduce your$15 million, basically.

SPEAKER_03 5:26

That's right.

SPEAKER_05 5:27

So, you know, we get that question quite often as well.

SPEAKER_03 5:30

Yeah. So if you want to give someone$300,000, you write the check, give them$300,000, and then you can deduct that$300,000 from your$15 million.

SPEAKER_05 5:38

Right. So you would just file a gift tax return and then it would just reduce how much you can pass a state tax free in the future.

SPEAKER_03 5:44

And is that good through um this current administration or no, it made it permanent. It's permanent. Yes. So the only way to change it is to change it again. Change it again.

SPEAKER_05 5:53

Which it keeps happening.

SPEAKER_03 5:54

So well, before it was inflation and it was gonna reset.

SPEAKER_05 5:57

Right.

Progressive Brackets And Effective Rate

SPEAKER_03 5:58

And then it was gonna drop. Right. But now we're just we we're solidly at 15 million. Right. Okay. Let's talk about oh, tax brackets. You know, something that seems really simple, but people don't understand is the tax bracket. Uh there's six of them, seven, seven, seven different brackets. Uh, it's progressive. Everyone thinks that if you make so the top end is merit for married and filing jointly is 768,000. So if you make$768,000, you are now in the 37% tax bracket. Right. Everyone, not everyone, but a lot of people assume that dollar one through dollar 768,000 gets taxed at 37%. That's not how it works. No, it's progressive. So the first$24,800 you made as a married couple is taxed at$12,000.

SPEAKER_04 6:52

Right.

SPEAKER_03 6:52

Then then then above 24 to 100,000, it's taxed at taxed at 22. So you have a marginal rate, like kind of what what it all averages out to be, right? Right. Um, but this is um this this is how the tax system works.

SPEAKER_05 7:08

So you have your marginal rate, which is wherever you fall in. Oh, that's right. So if you fall into what you were saying, like 37%. Exactly. You'd that would be your marginal, but your effective rate is different.

SPEAKER_03 7:19

Effective rate, yes. Yeah.

SPEAKER_05 7:20

So it's really like how much total tax did you pay divided by your taxable income, and that is your effective rate because you have those breakpoints. Yep. So your full effective rate would be less than 37%, of course, but higher than the 12%.

SPEAKER_03 7:34

So$768,000 is the top bracket at 37%, but really it's higher than that because you want to apply your standard deduction to that.

SPEAKER_05 7:43

Right. Right. So you get, you know, you get your standard deduction, obviously. So you you're it that would bring down where that money is the money at zero tax. Right, right, right, right. Exactly. So um you get to deduct that against it too.

SPEAKER_03 7:57

Yeah, 30, 403,000 is the 32% tax bracket, 211 is the 24, 100 is the 22 for married. Uh single is a little different. Single top end is 640, midpoint, uh, the 32% is 201,000. So yeah, I don't expect anybody to kind of remember uh remember those. They kind of give you a visual picture of um of what that looks like.

Planning With Bracket Breakpoints

SPEAKER_05 8:19

Yeah, and really, you know, how do you manage around the break point? So it's important to know, you know, if you're looking at, you know, maybe Roth conversions or capital gains planning, um, maybe even smoothing out some business income, you know, so that way you can kind of work within these ranges. Um, so for example, you know, maybe you fill the maybe in the future your required minimum distributions are going to be much higher and you're gonna be in the 35% tax bracket marginal. That is so, you know, then maybe you'll want to do some Roth conversions now and use up the top of the 24% bracket. So the breakpoints just help you with overall tax planning. So it's good to know in the beginning, and sometimes we don't know because we may have bonuses that have not been paid out yet. Um, you know, you know, so it's looking at this throughout the year is good. I like to do tax planning at the end when I'm thinking of Roth conversions in general. Uh, but there's other things to think about. You know, we look at these tax brackets to go, okay, maybe should I be contributing to a Roth or a pre-tax, you know, so you can lower your overall effective and marginal rate by doing, you know, 401k pre-tax contributions. So that will affect where you fall in these numbers as well. So looking at what is my gross income gonna be for the year, you know, projected between myself and my spouse, and maybe, you know, that helps you decide in the beginning of the year where should you be contributing to. So, and look and understanding those breakpoints. So I think it's important to look at it just to understand where you're gonna fall.

SPEAKER_03 9:50

We know that capital gains gets taxed at either 15% or 20% or 23.8%. But if you have, let's say,$100,000 in income, so you're right at 22% tax bracket. But if you have$100,000 in capital gains, does that also push your push up your your um it does your overall tax?

SPEAKER_05 10:10

Yes. So it's your it, so that would increase where your ordinary bracket, but those capital gains are taxed still at the 15%. So your effective rate would still be lower, you know. So it can push you up to higher tax bracket. Um, but that portion of the capital gains is still going to be only taxed a little bit.

SPEAKER_03 10:26

Yeah, it only be taxed, but then your income will get could get would get taxed higher also.

SPEAKER_05 10:30

Yes, it can. Absolutely.

SPEAKER_03 10:31

So that capital gains uh will will push you into the higher income bracket.

Capital Gains Interact With Income

SPEAKER_05 10:35

But you'd be surprised how much you can have in capital gains before you're even taxable. Like let's say you're retired and you have just capital gains, you know, or whatever, or maybe it's like a you know, a young adult who doesn't have a lot of income yet um or isn't working yet, and they have a custodial account or something, you know, you can have pretty high capital gains before you're even taxed.

SPEAKER_03 10:56

Yeah.

SPEAKER_05 10:56

Um, because it's really falls at zero in the beginning. If you don't have any other ordinary income, it's like zero, 15, then 20.

SPEAKER_07 11:04

Yeah.

SPEAKER_05 11:04

So you you can really um, you know, capital gains are great. And capital gains, it's if you're selling property, appreciated property, um, usually investments, and it's been held for longer than a year. That's long-term capital gains. That's the rates we're talking about. If you have property that's held for less than a year, that's short-term capital gains, and then it would fall in these brackets. So I just want to be clear. I mean, I think most know that, but just in case.

SPEAKER_03 11:30

Yep, that makes sense.

SPEAKER_05 11:31

Yeah.

SPEAKER_03 11:32

Uh alternative minimum tax. This is something we really don't have to, I don't feel like we have to deal with that much.

SPEAKER_05 11:37

No, not really. Um, usually just, you know, um, single, the phase out starts at 500,000 and then married filing jointly, it's over a million dollars. So, you know, many individuals and couples don't fall within those thresholds, you know, just the average American don't fall within those thresholds. Um, some do. Yeah. So okay.

401k Limits, Catch-Ups, And Roth Rules

SPEAKER_03 11:58

Uh now the fun part when it comes to retirement planning, uh, we get a little bit of a bump in our max uh deferral for our 401k plans. Last year it was$23,500. This year it's$24,500. So you can add additional thousand dollars to that. If you're$50 or older, uh, you can add an additional eight thousand dollars to the 24-5. Then here's the weird part. Um, if you're between 60 and 63, you can add an additional$11,250. Not on top of the eight, but not on top of the eight, but instead of the eight, yeah, you can put eleven thousand dollars. So if you're turning 60 to 63 this year, uh, I would encourage you to take advantage of that, but because you can only do it for a very short time period.

SPEAKER_05 12:41

I wonder why they just did that for a few years. That's so strange. I wonder if it's because of COVID and people got behind on savings or something.

SPEAKER_03 12:47

I don't know. I figured there's a senator who wanted to put more money in his account.

SPEAKER_05 12:51

Maybe it just seems so random to me. I don't want this. Yeah, it is just seem I don't know.

SPEAKER_03 12:55

Also, this year, uh the Roth um the the the catch up has to go into the Roth now.

SPEAKER_05 13:02

Oh yeah. So it is the the catch up, yes, for your retirement plans if you're over a certain income.

SPEAKER_03 13:09

Yes.

SPEAKER_05 13:09

If you're over a certain income, then it has to go to either after tax or Roth.

SPEAKER_03 13:13

Yeah.

SPEAKER_05 13:14

That's um, so you know.

SPEAKER_03 13:17

And your your the how that mechanism will work is all handled in the in the background by your uh 400k company. So not a whole lot you can do about it.

SPEAKER_05 13:24

Yeah, they automatically do it. Most people should have gotten notices by now from your company if you were putting your catch up in, then you know, if you're over a certain income, then it would go to the after tax or uh Roth portion.

SPEAKER_03 13:37

Correct. Um, you know, something I I literally just get a phone call from um my wife's school. So my wife is a school teacher and it was HR and she told them to call me because she didn't know. But uh we didn't know. That's so interesting. They wouldn't call you. Teachers don't get a whole lot of pay. So uh take take the percentage with a grain of salt. But we want to max out her 403B, right? Yeah, so we we contribute um 48% is what I contributed last year. Well, in the meantime, they had a pretty sizable pay rate because this is a private school and they're all like severely underpaid. Um and but I left the percentage the same. So what happened was the 401k got maxed out by like October.

SPEAKER_06 14:25

Yeah.

SPEAKER_03 14:25

She didn't get any more matching from the half of half of October, November, or December because her company does not offer or her school doesn't offer a true up provision. This is again where wiser employees should be grateful that I think about these things. We have a true up provision. So if you if you tap out, you max out your 401k plan by July, you still get the match as if you were contributing. And she goes, Well, she wasn't contributing, so she didn't get the match. And I was like, I was like, look, I I know what you mean, but at the same time, uh, she maxed it out, therefore she could not put any more in. Right. So you guys should consider a true up provision. And they, yeah, she's like, thanks for letting me know that. But not nothing's gonna change.

SPEAKER_05 15:05

That's a great point.

True-Up Risk And Maximizing Employer Match

SPEAKER_03 15:06

So if you need to look at that, if you're not if you're maxing out your 401k plan, your company doesn't offer a true up, all the airline pilots are that are listening, uh contractually, true up is put into your 401k plan. Please don't email me, asking me afterward afterwards. But but the uh but yeah, if you're if you're maxing out your plan, you need to make sure if they don't have a true up provision, yeah, that you're that you're contributing at the proper percentage for the entire year. So you every single pay cycle you're getting the company match. Yeah. So I don't know. I think her match uh is like I think they match like 3% is really low. Yeah. So she'd make up miss out on a ton of money.

SPEAKER_05 15:41

It's still part of your total compensation.

SPEAKER_03 15:44

Yeah.

SPEAKER_05 15:44

But if you're a higher income earner too, and you're over, I think the threshold this year is 330. I have to look up that number. But if you're over a certain dollar amount in the 300 range, um, then all deferrals stopped also. And so, and the company doesn't match it anymore either. So it's kind of hard. So, you know, if you're with a company that doesn't have that true up provision, but then also you have a high income and it has to stop at a certain point, you still may not max out. So you really have to time it correctly and looking at your pay to be able to get your deferrals in, which would save you tax if you're making that much money. Right. And then you may just miss out on the match if they don't have that true, you know, provision. Correct.

SPEAKER_03 16:25

So which I think is normal. I think most companies do not have true provisions. Right. So yeah, you did something we need to pay attention to is you want to you wanna put that money in over over 12 months. 12 months so you get the you get all the match.

SPEAKER_02 16:38

Before we go back to the episode, have you thought about how taxes affect the inheritance you've been given? Download the tax impact on inheritance, a free guide from wiser wealth management. Understand your options, minimize taxes, and protect your legacy. Claim your copy now at wiserinvestor.com forward slash guides. Let's get back to the episode.

SPEAKER_03 17:02

Uh, you want to run through the IRA limits?

IRA Limits, Roth Phaseouts, Backdoor Options

SPEAKER_05 17:05

Absolutely. So the contribution limits for 2026, the IRA is what 7,500. And then if you're over 50, it's a thousand. So it's a total of 8,500. Um, so you know, it's it and really depends. We get this question a lot about IRA contributions and can I do it? Um, it depends, you know, if you have uh a 401k at work or your spouse does, there's certain rules surrounding that. It's very complex. So, you know, look talk to your advisor about that. Um, generally you cannot, you can make an after tax deduction potentially to your traditional IRA. Um, then the Roth IRA phase outs is, you know, between 153,000 and 168,000 single in the married filing jointly is 242 to 252. So basically, if you're single and you make one over 168, you can't do a Roth contribution. And if you're oh you make over 252, then you can't do a Roth contribution married filing jointly. You can do a backdoor Roth potentially. Um, you know, there's specific mechanics surrounding that. You have to pay attention to what you have in IRAs already, because most of that could be taxable if you make a, you know, non-deductible IRA contribution, subsequently convert it, is what that looks like. So um still may not be a bad deal. You just want to look at that. So um there's ways around that as well, you know, taking rollover assets and putting it in your 401k, for example, and making sure you don't have a lot of IRA assets to be able to do that. So there there are there are opportunities to do that.

SPEAKER_03 18:35

You could drill your IRAs into your 401k, and then that creates opportunity to do backdoor Roths if if you think that benefits you right long term. So there's some there's there's some planning that you need to decide. I I I think that hey, if you have the opportunity to do that, uh it it sort of makes sense, but also don't discount uh the ability to just put money into a um into a brokerage account.

SPEAKER_05 19:00

Yeah. Yeah, if you're a couple years from retirement and you're you're like, should I make this two years of IRA contributions of non-tack, you know, non-deductible? I mean, maybe, but it may just be better served in a brokerage account if you need that money in the future because you can invest it there too.

SPEAKER_07 19:14

Right.

SPEAKER_05 19:15

I think you know, some individuals think it has to be a retirement account to put it in investments, but that's not the case. You can open a taxable brokerage account and invest there as well. I like having the multiple buckets anyway.

SPEAKER_03 19:26

All right. Uh let's talk about itemized deductions, salt, and the standard deduction test.

SPEAKER_05 19:34

Yes. So this is basically, you know, what we were talking about in the beginning.

SPEAKER_03 19:37

The salt tax was pretty political in the last last year or so.

unknown 19:41

Right.

SALT Cap, Itemizing, And Charitable Math

SPEAKER_05 19:42

Well, the state and local taxes used to be able to deduct all of your real estate taxes, your state taxes, like our Georgia tax that we pay, um, you know, and and your local taxes if you live in in city proper. And so they capped that at$10,000. So that's where, you know, they raised the standard deduction. And then they capped that and they got rid of a lot of the miscellaneous deductions that we used to have. And so that's why so many Americans, you know, are just doing the standard deduction because it's so high and those caps that they put on it, where you know, they did increase that state and local tax deduction this year. That was part of the bill last year. And so now that cap has gone from 10,000 to 40,400. It's adjusted for inflation. So um, so it's 40,400 for this year, but it depends on your income. So if you uh have income over 500,000, then it starts phasing out where you may not be able to do the 40,000. So so to help with the higher income earners. So it's really when you're looking at the stand, so married finally jointly, as we mentioned, the standard deductions 32,200. So if your state and local taxes, which is like, you know, your state taxes in Georgia, um, obviously if you live in Florida, there's no state tax. So, you know, other other states surrounding us, um, but then your real estate taxes as well, uh, then, you know, it could be mortgage interest, charitable gifts. If it ex if it exceeds that 32,200, then you can deduct it. Um, so you know, it's like many people would say, you know, I want to do a charitable contribution to get a deduction, but they're getting the standard deduction. And so they're not really getting the benefit of the deduction, which is fine. You can still give to charity if you're charitably inclined, but you may not be getting the deduction you think you are, because it's really the amount over the standard deductions.

SPEAKER_03 21:28

Actually, that's our next topic. Um, non non-itemizers can deduct a thousand dollars. Yes. If you're single, two thousand dollars if you're if you're married. And right for the uh if you if you donate five thousand dollars, it doesn't really do anything for you. You just the max is two.

SPEAKER_05 21:43

The max is two if you don't itemize, but if you itemize, then you know, then you can obviously.

SPEAKER_03 21:48

So the formula it would be your your salt plus your mortgage interest plus charitable gifts that exceed that threshold.

SPEAKER_05 21:55

Well, then there's also yes, but there's also medical deductions still as well.

SPEAKER_03 21:59

That's true. Uh 10%.

SPEAKER_05 22:00

Yeah. Is that right? Uh well, is it seven or ten?

SPEAKER_03 22:04

It used to be seven and a half. I I'd have to look that up.

SPEAKER_05 22:07

I don't recall because I don't know if I don't know if it's changed this year.

SPEAKER_03 22:10

That's why I'm not sure if you have to hit that number. So if you make$100,000, you can't deduct any medical expenses until you're past$7,500. Right. Exactly. That's your zero mark.

SPEAKER_05 22:21

Right, exactly.

SPEAKER_03 22:22

It's a lot of something.

SPEAKER_05 22:23

Yeah. It is. It is a lot.

SPEAKER_03 22:26

Especially if you have healthcare because your healthcare is covering most of the costs anyway.

SPEAKER_05 22:29

Right. But a lot of individuals don't. So or they have high deductible health care plans and the like. So um, exactly.

Zero Percent Capital Gains Opportunities

SPEAKER_03 22:37

Okay. Uh let's talk about uh again, capital gains. There's actually a zero percent bracket. Earlier I said 1520 and to 23.8, because if you're over a certain amount of threshold, you have to pay the medical care tax. Uh, but there is a zero percent rate. Uh if we're married file and jointly, if your income's less than 98,900, then you could have zero percent capital gains. Now, this is where I kind of set you up earlier because I said, hey, if you have a hundred thousand dollars in capital gains, that gets added as part of your income. So you you really couldn't be in a situation where you took a hundred thousand in capital gains, even if you had zero income and still pay zero.

SPEAKER_05 23:17

Yes, that's the power of long-term capital gains. But if you had a hundred thousand of ordinary income, that would not be the case.

SPEAKER_03 23:23

Well, I'm saying if you had zero income, right, but you had, let's say, let's make it bigger,$150,000 in capital gains.

SPEAKER_05 23:29

Right. Then there's it may push that up to the 15% threshold. Yes, that's what I'm saying.

SPEAKER_03 23:34

You would still get pushed up to the 15% threshold for all of it. Right. Because it counts it just over that. It count it credit, it counts toward income, but it's not taxes income. Is that right? Does that make sense?

SPEAKER_05 23:44

Yes, exactly. So I mean, this is a planning opportunity, I think, for you know, custodial accounts or individuals that have maybe, you know, investment accounts with very little income outside of that, where you can actually reset your basis, if you will, where you can sell and reset your cost basis. Um, I know that's a planning opportunity. Because if you're single, you can have up to$49,000 worth of capital gains before you're even taxed. You're in the 0% tax bracket for long-term capital gains, that is. Um, so that is a planning point.

SPEAKER_03 24:21

Uh on our notes, I think we I think we had a slight error. Um there is a 0%, there is a 15. There is a 15. It's between that. Yes. Yes. I'm like, what happened to the 15% bracket in my notes?

SPEAKER_05 24:31

It's between 98, it's between 98 and that.

SPEAKER_03 24:33

Okay. Yeah. So it's between n yes, right. So 15% between 98,000 and 545,000. Or 613,000 married. Uh, if you make more than 613,000, um, then you're you're gonna have uh you'll be in the 20%. Right, exactly.

SPEAKER_04 24:51

At that point, exactly.

SPEAKER_03 24:53

So so yeah, we typically don't want to do any we're very capital gain sensitive in the 20% bracket.

Tax-Loss Harvesting And Managing Gains

SPEAKER_05 25:01

Some I was gonna say it's somewhat easy to manage your capital gains. It is because nothing triggers a capital gain unless you sell it. So you can manage it like that. You know, it's not like you can't control that, but you can also use losses to offset capital gains as well in harvesting tax losses. Um when times when the market goes down, you would harvest those tax losses so you could use against future gains. Yeah. So I mean, it does you can manage it a little bit better than say ordinary income being spit out that you don't control.

SPEAKER_03 25:28

I I I'm having flashbacks to uh planning from last year, but but there's always a there's always a uh decision to be made when you're retired prior to 65. So that means prior to Medicare and you want to get the ACA subsidies, right? But you also need to get out of these stocks that you've held for years and want to move to a more diversified portfolio, right? Yeah. And so you have to make decisions on how do I take income. Yeah. Yeah.

SPEAKER_05 26:02

So if you retire early, let's say you retire at 55, just making it up. And and I'm seeing more and more people retiring younger, to be honest with you, I feel like recently. So if you're retiring at 55, um, you have that 10-year period where you have to pay for your health insurance before you start Medicare at age 65. And so it can be expensive. I mean, I'm I'm seeing it run about$2,000 a couple right now. It's really, you know, just for insurance.

SPEAKER_03 26:28

For the full freight.

Early Retirement, ACA Subsidies, And Income

SPEAKER_05 26:29

Exactly. So if you have low, so many individuals may have most a lot of their money in 401k is a retirement account. So you don't get taxed on that until you make a distribution. And further, some may have Roths. So you could just pull it out and you're not taxed on it. So there's there's so many planning opportunities in that threshold. Um, you know, the subsidies through the ACA, um, the Healthcare Affordable Care Act, you know, it's they give you subsidies if your income is low enough. So even if you have five million dollars in retirement account, they may give you subsidies.

SPEAKER_03 27:03

That that's that's the point. Uh we'll get a little political here for a second. Uh I have a client who is very much on the left-leaning spectrum of of thinking, and they said, I can't believe all this stuff with uh this year, and they and they're getting rid of a lot of these uh subsidies for for healthcare for people. This is just terrible. I said, Well, from a planning perspective, let me give you a different angle on that. I have clients that have five million dollars and IRAs and Roths, they have three million dollars in their brokerage account, they are well under the RMD age, they're in their mid-sixties, right? Or before mid-sixties or before 65, early 60s, let's say.

SPEAKER_06 27:41

Yeah.

SPEAKER_03 27:41

And uh they are because they don't have any income other than the income coming from their dividends, which is relatively small speaking, right? Yeah, it's well under 70,000 a year, even though we would draw two three hundred thousand dollars a year, yeah, right? Yeah, and they have full subsidies in healthcare.

SPEAKER_06 28:00

Yeah.

SPEAKER_03 28:00

And she was like, What? She's like, but there's a there's a there's an asset uh limitation on on asset. No, there's not. There's no asset limitation. You could have$25 million net worth and you could get full healthcare from the government.

SPEAKER_05 28:15

Well, it's the same thing when you try to go get a mortgage, right? You try to go get a loan and it's like you don't have any income. So it's like, yeah, but I have like five million dollars in retirement. I can pay this off, but I don't want to because I don't want to pay the tax on it. You know, so it's like, well, you have to show an income. And so it's like it's the same concept, you know.

SPEAKER_03 28:31

Yeah, then we have to like fake a withdrawal to be able to start subsequent withdrawal and then stop it later.

SPEAKER_05 28:38

Because they don't need the money because they're living off of stuff that's not interest, but you know, lower interest bearing.

SPEAKER_03 28:43

The system's probably not not uh someone did not think this through. And this is this has been this way for many, many years. It's just not something new. It's always been this way.

SPEAKER_05 28:52

I mean, it might be hard because there's so many rules surrounding, like, can you take it out early without penalty? You know, if you're it depends if it's in a 401k or an IRA, the rule of 55 versus there's probably so many rules surrounding it in our tax code that it makes it confusing. So they just have to draw a line in the sand and say it's based on the and they you know taxable income.

SPEAKER_03 29:10

And they probably don't have the manpower to be able to approve these things by by assets, but I had to guess. I I don't I don't know.

SPEAKER_05 29:17

Probably not.

SPEAKER_03 29:18

I wouldn't, I would think that you know because they're really all they're looking at is tax returns. So if you had more income the prior year than you claimed, then you have to pay some of that back.

SPEAKER_05 29:25

True, because how would they manage that? Because they can just pull down IRS transcripts versus you know what I mean. Because they do that, so they look at what is your income going to be for the year. This is on an ongoing basis, and if it changes, then you have to pay them back if you had subsidies. So that's right. How else would I mean I wouldn't think that I think that would be really hard for them to manage that?

SPEAKER_03 29:44

It'd be hard the means test it.

SPEAKER_05 29:46

Right, exactly.

SPEAKER_03 29:47

So it's just other than maybe your initial application, uh, maybe they could do it that way. Right. I don't know.

SPEAKER_05 29:52

Then if you have a market correction and you did a bad investment, like I don't know, you know, I I can see how that's so like gray.

SPEAKER_03 29:58

Yeah.

SPEAKER_05 29:59

You know.

SPEAKER_03 30:00

Yeah. Anyway, we're not gonna solve that problem.

SPEAKER_05 30:02

No, we're not going, nor do I want to try.

SPEAKER_03 30:05

Just know that even a wealth management firm, we we uh have to know the ACA because very wealthy people are able to do that.

SPEAKER_05 30:11

Well, and then we have to manage the portfolio if it makes sense. Like sometimes you, you know, it's like, well, you could save this much money, but if you could make more investing in this, then let's make more investing in this.

Safe Harbor Payments And Avoiding Penalties

SPEAKER_03 30:21

We've had clients in the past, uh, they're over 65 now, but in the past that they had so they had zero, almost uh they were below the poverty line. Like they couldn't even get ACA. So we had to go in and sell securities for capital gains in order to push them above the poverty line into the ACA.

SPEAKER_05 30:38

Wow.

unknown 30:39

Right?

SPEAKER_03 30:39

Otherwise, they were gonna be put on Medicaid. Nobody wants to be on that.

SPEAKER_05 30:42

No, no, no, no, definitely not.

SPEAKER_03 30:44

So you're you're doing this stuff and you're just like shaking your head going, this is really messed up. Like these people, every one of these people can afford to pay the full the full premiums because that's how we budget their their retirement.

SPEAKER_05 30:54

Then what happens to us is that at 65, then they have Medicare and then they're like, Well, I don't want to pay the Irma tax. So if my income's too high, and then I don't want to pay a bump, then you're paying more for your premiums.

SPEAKER_03 31:05

More for the same service, basically.

SPEAKER_05 31:07

So, you know, it's I don't know, it's hard to manage for sure.

SPEAKER_03 31:11

I would say maximize, make sure you maximize your 401k, 24,500, uh, you know,$7,500 into an IRA, catch up in addition if you're eligible for that. Uh decide early, standard versus itemized, because if you're due itemize, then you're gonna need to um you might do charitable giving differently. Right. And how you pay your um state and local tax might be done a little differently.

SPEAKER_05 31:35

And you do that like initially just looking at where's your target tax bracket, you know, where where's your income gonna be for the year? And then it helps you decide where are you contributing for retirement accounts and should you focus on itemizer standing? You could bunch charitable contributions and things like that, you know. So if you know your income's gonna be higher this year because maybe you're getting a big bonus payout or some deferred comp or something, then um RSUs, you know, different things like that, then you could always, you know, look at where that's targeted to be and then, you know, itemize.

SPEAKER_03 32:05

Um I would add to the list, uh, go look at your tax return last year. If you owed money, yeah. Uh was there a penalty because you didn't pay in enough during the year? Yes. That's the case, go to your W4 for your employer and make your changes there needed to make sure you get enough paid in to avoid the penalty.

SPEAKER_05 32:21

Yeah. And so that calculation is called safe harbor. So it's okay to owe, but you don't want to have penalties because then you're just you're just throwing money away.

SPEAKER_07 32:28

That's right.

Action List And Final Takeaways

SPEAKER_05 32:29

So you want to pay at least 90% of the current tax year estimate, or you want to pay 100% of last year. Now, if your income was over 150,000 last year, then it'd be 110% of last year. So it's really depending on what your income is. So if your income's lower last year than it's gonna be this year for 2026, then maybe you make the safe harbor, you make sure that it's a hundred or a hundred and ten percent of last year. If your income is gonna be lower this year because maybe you had a big payout last year, then make it 90% of the current year. So just make sure you're it's okay to owe so long as you're good at saving. You don't want to have huge refunds unless you're not good at saving. But you know, it it you know, it's okay to owe, you just don't want to pay penalties. Right. And make sure you have the money to pay it during tax time, obviously, you know, obviously.

SPEAKER_03 33:15

So uh use your capital gains threshold intentionally. So make sure that if I would I I would flip that on its head a little bit. Uh the market's been been had a great year, but there's still some mixed results. So if you have assets that can be sold for losses, then take those, take those losses and reinvest elsewhere. Uh but make sure that if you're if you're on um uh if you need to make changes and it is going to be capital gains, then maybe you can time it where you're not going into 20% bracket, you can do it in the 15. Or if you're already retired, maybe you can get some out at zero. You should take those allowances every single year. Uh what I said earlier, I think at the beginning of the uh of this episode, uh, is looking for opportunities to pull free money out. I think that older clients with lower incomes, uh, our grandparents, things like that, are gonna have great opportunities to to do that. It may only be five or ten thousand dollars, but that's money you can pull out, reinvest somewhere else. Yeah, and not um that doesn't mean take it out and spend it. Pass it, pass it to the next generation and you know, already taxed, uh, which is which is very beneficial. Yeah. So I think that's uh I think that pretty much covers it. Uh Shauna, thank you for your expertise in this area. Uh and thank you for listening uh today's episode. If you're still learning more about wiser wealth management or want to schedule a consultation, meet with one of our fiduciary financial advisors, you can do so by going to wiserinvestor.com or you can click in the link in the episode notes. See you guys next week.

SPEAKER_00 34:42

Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestor.com and reach out. This podcast is strictly for informational purposes only and is not to be considered as investment advice or solicitation to buy or sell any financial products, securities, digital assets, or any other investment vehicles or basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guest may personally own securities, digital assets, or other investment vehicles mentioned on this podcast. Neither the host nor guest of the show are compensated for their participation, and no referral fees are paid to or received by any host or guest for clients, listeners, or similar interests. Investments involve risk, and unless otherwise stated are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional, andor legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.