April 2026 - Private Tax Solutions

23 Apr 2026

When it comes to retirement planning, many individuals believe it to be a linear process; they create a savings figure, set their retirement age, and prepare a single plan to support their future livelihood.

This plan operates on the belief that life will happen the way you believe it will happen. But unfortunately, life does not work that way; there are many things, like having personal goals, financial circumstances, and outside influences, that change your mind over time. Which is why having a single, fixed plan is not always right.

That’s exactly where the Odyssey Plan comes in. Instead of pinning all your hopes on one perfect retirement script, The Odyssey Plan encourages you to design three distinct versions of your future.

What exactly is the Odyssey plan?

The Odyssey plan is a simple and smart way to plan the future. The strategic approach of The Odyssey Plan encourages individuals to design multiple versions of their future, rather than relying on a single projected outcome.
It was initially developed at the Stanford Life Design Lab and described in the book “Designing Your Life,” where Bill Burnett and Dave Evans share how they used this method to create “three versions” of their retirements that provide stability, flexibility, and meaning in their final years.

Why does it matter for financial planning?

Person planning taxes with calculator, tax forms, and financial notes for 2026

When we talk about traditional financial planning, maybe the first thing that comes to your mind is the five-year plan, but when you actually think about it, the picture is clear: you move forward assuming

A single career trajectory
A fixed retirement age
A linear accumulation path

But the truth is, real-life situations are far more different than this. Careers may change unexpectedly. Financial priorities may shift. Health, family responsibilities, or personal interests may also influence your decisions over time. The Odyssey Plan matters because it prepares you for these changes instead of ignoring them.

Expanding Your Perspective: Creating multiple plans can help you expand your thinking beyond just having one way of dealing with all of the things that will happen when you retire.
Encouraging Flexibility: By having more than one way of doing something, you can adapt to new information as it arises. You can also adjust your plans along the way if necessary, which makes it easier to deal with new or unexpected events.
Understanding Trade-Offs: When you have a plan, you can see both the positives and negatives associated with choosing that option. The Odyssey Plan gives you a clear picture of what you gain from each option, and where you may need to make adjustments based on how much more money you are making each month than you originally expected.
Aligning Planning With Personal Objectives: Your financial plans should reflect the goals you want to achieve in life, not just what you will have to spend on things. The Odyssey planning process requires that you think about how your finances support the lifestyle you want to lead.

The Three Paths of The Odyssey Plan:

The Odyssey path is built around 3 basic life paths. Each path represents a different version of your future.

The Default Path is how you are currently traveling through life:

Continue with your career.
maintain your current way of life,
Continue on the path to build up your savings.

For example, you may have a target date for retiring, increasing your savings each year, and hopefully moving on to a secure retirement when you reach your target.

Because this path is so familiar and has an established format for moving forward, it is one of the safest paths to take. There is also a tremendous reliance on everything continuing to be expected.

The Alternative Path: Adapting to Change

The second path considers what might happen if your current situation changes or if you decide to take a different direction.

You may change careers or reduce working hours
You may adopt a more flexible lifestyle
You may adjust your spending habits

For instance, you might shift to part-time work, start a small business, or choose a simpler lifestyle with lower expenses. This path is important because it prepares you for uncertainty. It also helps you explore realistic options that may offer greater balance and flexibility.

The Dream Path: Exploring New Possibilities

The third path allows you to think beyond limitations.

What would you do if there were fewer constraints?
What kind of life would bring you the most satisfaction?

This could include traveling, pursuing personal interests, contributing to meaningful causes, or designing a lifestyle focused on freedom and purpose.

It is important to note that this path is not about unrealistic expectations. Instead, it helps you identify what truly matters to you and understand how it might be achievable with the right adjustments.

How to decide which path is right for you?

Get curious: Stay open-minded. Instead of thinking about what you “should” do, explore what truly excites you and what might be possible. Remember, nothing is final you can always adjust your path later if needed.
Talk to people: Speak with others who are already living the kind of retirement you are considering. Ask them honest questions about their daily life, the good parts, and the challenges. Real conversations give you valuable insights you cannot get from planning alone.
Try stuff: The best way to know if a path is right is to test it in small ways. You could visit a potential new location for a few weeks, try part-time work or volunteering in an area that interests you, or spend time on a hobby you want to turn into something bigger. Small experiments help you learn what you truly enjoy.

Final Thought

The Odyssey Plan changes the way we think about retirement planning. Instead of depending on a single fixed plan, it encourages you to explore different possibilities and stay open to change.

Retirement is not just about saving enough money. It is about building a life that gives you comfort, purpose, and satisfaction. By creating multiple paths, you give yourself the freedom to adjust as your priorities and circumstances evolve.

In the end, the goal is not to find one perfect answer but to feel confident that you have options. A flexible and thoughtful plan can help you move forward with clarity and peace of mind, no matter what the future holds.

FAQs: Frequently Asked Questions

Ques 1. How is the Odyssey Plan different from traditional retirement planning?
Ans. Traditional planning usually focuses on one fixed path. The Odyssey Plan encourages flexibility by helping you think about multiple possible futures.

Ques 2. Do I need to follow all three paths in the Odyssey Plan?
Ans. No, you do not have to follow all three. The purpose is to explore options and choose the one that best suits your goals and situation.

Ques 3. When is the best time to create an Odyssey Plan?

Ans. It is highly valuable during major life transitions, such as navigating a career pivot in your 50s or 60s, approaching traditional retirement age, or whenever you feel stuck in your current path.

Ques 4. How do I handle the financial part of the Odyssey plan?

Ans. While the initial plan is a creative brainstorming exercise, it should be supported by financial modeling. You can use financial tools to see the impact of each scenario on your long-term security, helping you understand the trade-offs between time, spending, and work.

by Donald Hayden

22 Apr 2026

Retirement is the time when you finally settle down, your income stabilizes, and your taxes decrease. Many people expect a simpler financial life after years of working, investing, and saving.

But what many people do know is that retirement income is more complex than they realize. Especially when RMDs come into play.

What are RMDs?

Required Minimum Distributions, also known as RMDs, are the mandatory withdrawals for retirees from certain retirement accounts such as traditional IRAs and 401(k). For this withdrawal, the IRS has a guideline that you can only start withdrawing once you reach the age of 73. And RMD withdrawals are treated as income, and so they are treated as your taxable income.

The RMD amount that you must withdraw every year should be taken before 31st December. If you don’t take them on time, or if you take less than the full amount, you have to pay an IRS penalty tax.

What is the link between RMD and Social Security?

At first, for a retiree, RMDs and Social Security benefits seem to be separate retirement income sources: one comes from your own savings after years of working; the other is a government-sponsored benefit. However, both forms of income are related. The taxability of both forms of income is determined by your total income.

Retirees mostly believe that receiving Social Security benefits is not taxable, but this is incorrect. Whether your Social Security benefit is taxable or not depends on the calculation referred to as “combined income” (also known as “provisional income”).

The calculation of your combined income is done through the addition of three components:

Your Adjusted Gross Income (AGI), which includes RMDs and other taxable income
Any tax-exempt interest income (such as interest from municipal bonds)
50% of your annual Social Security benefits

Once these three components are added together, your total combined income is compared to specific IRS thresholds.

Social Security Tax Thresholds

For single filers: If the income is between $25,000 and $34,000, then up to 50% of benefits may be taxed, and above $34,000, up to 85% of benefits may be taxed

For married couples filing jointly: If the income is between $32,000 and $44,000, then up to 50% of benefits may be taxed.

How RMDs Can Increase Social Security Taxes?

RMDs and Social Security Taxes

RMDs can significantly impact your combined income because they are included in your AGI. This means that when you start taking RMDs, your total income increases even if your lifestyle or spending hasn’t changed. As a result, RMDs can push you over the thresholds where Social Security benefits become taxable. For example:

Imagine a retiree who relies mainly on Social Security and has minimal other income. Their benefits may not be taxed at all. However, once RMDs start, even a moderate withdrawal can raise their combined income enough to trigger taxation.

This can lead to a situation where you pay taxes on your RMDs, and you also pay taxes on your Social Security benefits.

The ripple effect of RMDs on high income:
Along with increasing your taxable income, RMDs can also create a ripple effect on your overall financial situation. As your income rises, you may find yourself moving into a higher tax bracket, which means paying more tax on a larger portion of your income.

You may have to pay more taxes: When your income goes up owing to RMDs, you fall under the bracket of higher rates of taxation. Therefore, a larger amount of tax will be deducted from your income.

Your Medicare payments may rise: Since Medicare has to deduct more payments when your income exceeds a certain threshold level, you will end up paying higher premiums for Medicare owing to your increased income.

You could lose out on certain tax deductions: Certain tax advantages or deductions can only be made available to people who earn less. Higher income may deprive you of such deductions.

You may not see an increase in your savings: While your income would go up due to RMDs, much of this will be utilized for making tax payments and other additional expenditures, thereby leaving very little for yourself.

Smart Strategies to Minimize the Impact of RMDs and Social Security Taxes

Roth Conversions: Make use of the Roth conversion strategy. That is, transfer part of your IRA or your 401(k) funds to the Roth account prior to the beginning of your RMD age. While you have to pay taxes on the transferred amount immediately, you can enjoy tax-free growth and avoid RMDs while you are alive.
Qualified Charitable Distributions (QCDs): If you are at least 70½ years old, you are eligible to make charitable donations via Qualified Charitable Distributions. In particular, you can distribute up to $111,000 ($222,000 if married and filing jointly) from your IRA to any qualified charity without having this sum added to your adjusted gross income.
Voluntary Withdrawals at Age of 70: Make systematic withdrawals from your retirement savings prior to mandatory distributions, which will reduce the size of your required minimum distributions in the future.

Final Thought

RMDs and Social Security taxes may seem like two separate parts of retirement, but in reality, they are closely connected. Once RMDs begin, they can quietly increase your income, which may lead to higher taxes on your Social Security benefits, higher Medicare costs, and even push you into a higher tax bracket.

What makes this more important is that these changes often happen gradually, and many retirees don’t notice the impact until their tax bill increases.

The key takeaway is simple: retirement planning is not just about saving money; it’s also about understanding how your income will be taxed later. By planning ahead and being aware of how RMDs and Social Security work together, you can make smarter financial decisions and avoid unnecessary surprises.

FAQs: Frequently Asked Questions

Ques 1. I don’t even need my RMD money. Do I still have to take it?

Ans. Yes, you still have to take it. RMDs are the mandatory withdrawals once you reach the required age, even if you don’t need the money. If you skip it, you could face a penalty from the IRS.

Ques 2. Can I control how much RMD I take each year?

Ans. Not really. The IRS calculates a minimum amount you must withdraw each year based on your age and account balance. You can take more, but not less than the required amount.

Ques 3. Does everyone pay taxes on Social Security after RMDs start?

Ans. Not everyone is required to pay taxes when they receive Social Security benefits after RMD. The taxation largely depends on the individual’s total income level. When combined income reaches specific thresholds established by the IRS, up to 85% of Social Security can become taxable.

Ques 4. What if I have multiple retirement accounts?

Ans. If you have multiple rental accounts, then the RMD must be calculated and then withdrawn separately from each account; however, you can total these amounts and withdraw the entire sum from just one IRA or a combination of your choice.

by Donald Hayden

18 Apr 2026

A Roth conversion ladder is a powerful retirement saving strategy that allows you to access your funds before age 59½ without penalties. By gradually converting traditional retirement accounts into a Roth IRA, you can create tax-efficient income, reduce future tax burdens, and build a flexible early retirement plan. <a href="https://privatetaxsolutions.com/retirement-planning/roth-conversion-ladder-early-retirement-without-penalty/" class="more-link" rel="bookmark">Read More</a>

by Sanjay Kumar

15 Apr 2026

retirement-plan-form-investment-senior-adult-concept-2-1280x959.jpg

After years of saving, planning, and being financially responsible, retirement can be viewed as that time when one finally reaps what he sowed.

Nevertheless, for most individuals, retirement does not seem to be as easy as anticipated.

Rather than spending money freely, retirees tend to hold back and refrain from using their savings that were diligently accumulated. This is the point when retirement withdrawal turns out to be more complicated than it seems at first glance.

The Surprising Stats on Retirement Withdrawal Rates

Retirement plan

Recent research indicates that the average withdrawal rate from all retirement accounts (for couples with $100,000 or more in available investable assets) at age 65 is only 2.1%. The withdrawal rate for single individuals is 1.9%. That’s only about half of the widely accepted “4% rule” of thumb commonly suggested by financial experts as a reasonable amount to withdraw.

The 4% Rule was created to ensure that an amount sufficient for at least 30 years of your retirement period can be derived from the funds you withdraw during your first year (and then adjusted annually for inflation). The primary purpose of this rule was to provide you with a level of assurance that your funds would last for your entire retirement.

However, the reality is that retirees appear to be much more conservative and typically do not withdraw money from their retirement accounts for lifestyle needs; rather, they typically preserve their funds as an emergency fund for unexpected health care costs or an inheritance for family members.

The National Bureau of Economic Research conducted a study on retirees’ financial behavior and they found that on average, retiree households experience only slight decreases in total wealth. This study indicates that many retirees are reducing their overall spending habits due to the desire to continue saving for unexpected health-related costs or the intent to provide an inheritance to their children or grandchildren.

Couples generally have approximately twice the amount of net worth compared to single individuals across age cohorts, yet couples are still withdrawing small amounts as well.

The psychology behind why it is so hard to spend:

So why do many smart and responsible people have difficulty withdrawing from their retirement savings? It is not usually the math but instead the emotional and psychological impact.

The greatest reason people are struggling with their withdrawal is the fear of outliving their retirement savings. According to surveys, many retirees would rather face death than the possibility of running out of retirement funds long before they die! As a result, every time there is a dip in the stock market over the short term, retirees are in a constant state of fear that their money will not last, despite the overwhelming amount of evidence that shows the market always rebounds!

Another significant reason many retirees do not make withdrawals when needed is due to loss aversion. Research in behavioral economics has demonstrated that the loss of $100 is about twice the pain experienced when gaining $100. Therefore, when you withdraw money from your IRA or 401(k), you may feel that you are permanently damaging the hard-earned savings that will provide you with lifelong financial security, even if the mathematical calculations state that’s sustainable.

The next reason retirees have difficulty spending money relates to their identity. For 30-40 years, you have been a disciplined saver. Transitioning to spending mode overnight can feel difficult or irresponsible.

How to Break Free: Practical Strategies for Smarter Spending

The good news is you really can go from simply saving to actually enjoying your money, and you don’t have to mess up your future to do it. Here’s how to start:

Turn Withdrawals Into Your Paycheck: Don’t think of pulling money from your accounts as “spending down your savings.” Try automating a monthly transfer of about 3 to 3.5% per year into a separate checking or even a “fun” account. Treat it like a paycheck you’ve earned. This simple switch in perspective calms a lot of nerves.

Spend on What Matters Most: Focus your retirement budget on what makes you happiest: travel, hobbies, family, and causes you care about, not just the usual bills. Track what you’re spending for a month, then make adjustments. People are often surprised to see they can safely add another $500 or $1,000 each month toward things they love.

Layer Your Portfolio: Keep two or three years’ worth of expenses in cash or short-term bonds so you always have a cushion. Put the rest in income-focused investments. This way, using the “bucket strategy,” market swings won’t feel so risky when you need to take money out.

Use Smart Tax Moves: If giving back matters to you, use Qualified Charitable Distributions from your IRA; it counts toward your required withdrawals but doesn’t add to your taxable income. Converting to a Roth in lower-income years is another way to create flexibility for the future.
Make It a Habit, Review Every Year: Sit down with an advisor you trust at least once a year. If your investments keep growing, you might be able to give yourself a raise. A lot of retirees end up with even more at 80 or 85 than they had when they started out, which just goes to show you really can enjoy more along the way.

Give yourself permission to spend, and redefine financial success in retirement

Many retirees may find the concept of giving themselves permission to spend down their retirement assets to be the most difficult thing when it comes to utilizing those assets (retirement savings) for living expenses.

For many retirees, simply providing themselves with permission to spend and utilize their savings can make them feel bad, with decades of saving, working towards becoming independent, and not feeling as though they have the right to spend.

Yet, retirement savings are not just meant for existing in the bank; they are meant to be utilized in supporting you for the days you require them the most.

Financial success in retirement should be defined based on how well your resources (retirement withdrawal savings) support your lifestyle, retirement goals, and overall well-being, not just on how much you keep in your savings. A balanced spend-down approach to utilizing retirement assets can provide retirees with benefits like:

Financial independence is maintained
You have funds to handle unexpected expenses
Enjoy the lifestyle you worked hard for.

Conclusion

Retirement withdrawal shouldn’t feel dreadful or guilty. The stats are clear: most retirees withdraw just 2.1% (couples) and 1.9% (singles) at age 65, only half of the recommended 4% rule. But remember this, you didn’t save for decades just to watch the numbers grow. You saved to live freely. Give yourself permission to spend. Enjoy the retirement you worked so hard for. The richest retirements aren’t measured by the biggest balance but by the fullest life.

FAQs: Frequently Asked Questions

Ques 1. What’s a fun way to make spending feel less guilty?

Ans. Try the “Memory Jar” Method: For every special experience you fund with your retirement withdrawal, write a short note about it and add it to a jar. By year-end, you’ll see exactly how your money created lasting happiness.

Ques 2. Should retirement withdrawal change over time?

Ans. Yes, your retirement withdrawal strategy should evolve. Early retirement years may involve higher spending (travel, activities), while later years may require adjustments based on health and lifestyle changes.

Ques 3. When do I need to check on my withdrawal plan for retirement?

Ans. Once a year, at minimum, but preferably once every 12 months or when something important happens in your life, like a huge market move, a health problem, or receiving an inheritance. This will allow you to evaluate whether your investments are continuing to grow and, if so, whether you can increase your withdrawals or should even reduce them.

by Donald Hayden

13 Apr 2026

Retirement planning often feels like a distant concern, but the decisions made today regarding your Individual Retirement Account (“IRA”) will impact your financial outlook dramatically. An IRA is an effective means by which you can save on taxes and create wealth over time. It’s not difficult to establish an IRA; there are basically two major types: the Traditional IRA and the Roth IRA.

The Traditional IRA allows you to deduct your contributions from your taxes at the time of the donation while only being taxed at the time the account is depleted. Conversely, the Roth IRA allows you to pay taxes on the contributions prior to placing funds into the account; however, those funds will grow tax-free and be withdrawn tax-free when you reach retirement. Both methods of establishing and funding an IRA will enable your money to grow more quickly because the Internal Revenue Service will not take a percentage of your earnings every year.

Using the correct type of IRA at the appropriate time can help ensure that whatever you save today gets maximized by the time you retire! Here are some ways to use your Individual Retirement Account, regardless of age.

Why is IRA planning important for building wealth?

An IRA is just a savings account; it’s a tax-advantaged savings tool that gives your money two big advantages: it grows faster because of tax breaks, and you keep more of what you earn over the long run. The earlier you start using it, the more powerful it becomes.

IRA Planning

Stage 1. Start early, the foundation of wealth

The early stage should begin in one’s teens and early 20s. At this stage, you are usually in the lower tax brackets, which makes a Roth IRA an excellent choice. In which you pay taxes on the money before you put it in, but from that day forward, your money grows completely tax-free. When you withdraw it in retirement, you pay zero taxes.

Under a Roth IRA, you are allowed to put in $7,500 each year in 2026 if you are below 50 years old. There is no need to be intimidated by the figure mentioned above because even small amounts of money like $100 or $200 each month, make a big impact if started early. Arrange for automatic monthly investments to ensure that you don’t miss out on your savings.

Stage 2. Accelerate your savings (your early career stage: 20s-30s)

In this stage your career starts and grows, your earnings begin to increase, but at the same time, you may be in a lower tax bracket than what you may achieve in the future stages of life. For this reason, this particular stage is essential for maintaining consistency when managing an IRA.

A Roth IRA contribution during this time is an excellent choice. You will still have your earnings taxed at a relatively low rate, thus allowing your investment growth without further taxation for several decades into the future. This is one of the best approaches to accumulating wealth with plans for reducing future tax payments.

Apart from the regular IRA contributions, the next step is to contribute more as your earning capacity increases. Even a small increase in contribution percentage every year can help a lot in building savings. In case there is an employer-provided pension plan, it is necessary to maximize your contributions to get the total company match, which is free money.

Stage 3. Maximize the savings in your 40s-50s

These are the years when you reach your peak earning years. Although the earnings are at their peak, so are our expenses, like mortgage, children’s education, family responsibilities, and daily living costs.
So, in this stage, a traditional IRA is the most sensible option. You can deduct your contributions from your taxes right now, which helps you save tax immediately when it matters most. That tax saving can give you extra cash for current needs while your retirement account continues to grow.

Many people choose to split their contributions between a Traditional IRA and a Roth IRA. This “tax diversification” protects you whether taxes go up or down in the future. Try to increase your IRA contributions with every raise or bonus. Even an extra $50-100 per month can add up to a huge difference over time.

Stage 4. Catch Up and Prepare (Your Late 50s and Early 60s)

Once you turn 50, you get a special advantage called catch-up contributions. In 2026, you can add an extra $1,100 on top of the regular limit, for a total of $8,600 per year. This extra amount can seriously boost your savings in your final working years.

Your income is still high, so the tax deduction from a Traditional IRA can be very valuable. If you have a year with lower income (for example, after changing jobs or before full retirement), consider converting some money from a traditional to a Roth IRA. You pay taxes now at a lower rate, but enjoy completely tax-free withdrawals later.

If your spouse has little or no earned income, open a spousal IRA and contribute on their behalf. This doubles your household’s ability to save tax and build wealth. Keep your portfolio balanced still growing, but safer to protect what you have already built.

Stage 5. Enjoy and Protect Your Wealth (Your 60s and Beyond)

Retirement finally arrives, and the goal changes from saving to spending wisely. Now you want your money to last as long as possible while continuing to save tax.

If you have a Traditional IRA, you must start taking Required Minimum Distributions (RMDs) around age 73. These are taxable, so careful planning is important. A Roth IRA gives you more freedom because there are no lifetime RMDs.

Many smart retirees do Roth conversions in the early years of retirement when their tax rate is lower. You can also use IRA funds to make charitable donations, which helps lower your taxes. By mixing withdrawals from regular savings, a Traditional IRA, and a Roth IRA, you can keep yourself in a lower tax bracket each year and make your savings last longer.

Conclusion

No matter which stage of life you are in right now, an IRA is one of the simplest and most powerful ways to save tax and build wealth. The beauty of an IRA lies in its flexibility; it grows with you through every season of life. Start where you are today. Open the account (or both Traditional and Roth if it fits your needs), set up automatic contributions, and stay consistent. Small, regular steps taken over time can create real financial freedom and peace of mind in your later years. The best time to start was years ago. The next best time is right now. Your future self will thank you for the smart choices you make today.

FAQs: Frequently Asked Questions

Ques 1. Should I choose a Traditional IRA or a Roth IRA? I’m confused?

Ans. The best method would be to use your own tax status as a basis for decision-making. If you happen to be having a low income, or rather a lower tax bracket, at the moment, a Roth IRA would be the preferred choice.

Ques 2. What are some of the mistakes that people tend to make with their IRAs?

Ans. One major mistake that people tend to make is postponing their investments and failing to invest regularly. The second major mistake that people tend to make is failing to adjust their investment strategy as their income changes.

Ques 3. What exactly does an IRA do to help me save on taxes?

Ans. When you open a Traditional IRA, it reduces your taxable income for the current tax year. This means that you will pay less tax now compared to if you did not have a Traditional IRA. With a Roth IRA, you will have the ability to avoid taxes at the time of withdrawal by making tax-free withdrawals later in life. Both Traditional and Roth IRAs help you accumulate interest on the money that you save in them over a long time period.

Ques 4. I’m in my 40s now. Am I too old to build wealth in an IRA?

Ans. No, it’s not too late for you! You might have less time than someone in their 20s; however, you can still make a significant difference by increasing your contributions today.

by Donald Hayden

13 Apr 2026

Running a business comes with its own fair share of challenges. And taxes are one of them. But for business owners, whether small or large, in the USA, there are some of the most valuable opportunities available. And one of them is the section 199A deduction. Also known as the qualified business income deduction (QBI).

If you operate as a sole proprietor, through an LLC, partnership, or S corporation, this deduction can put up to 20% of your qualified business income straight back into your pocket or, more accurately, keep it from leaving in the first place.

But here’s the catch: it is not as simple as it sounds on paper. Taxable income is deducted under certain terms, such as income thresholds, industry-type limitations, and additional criteria. That is why you need section 199A deduction strategies.

Let’s understand the basics: What exactly is Section 199A?

Section 199a of the Internal Revenue Code is a deduction of up to 20% on your qualified business income (QBI). QBI basically is your business profit after taking away the regular expenses such as rent, salaries, utilities, and all other operational costs.

However, not all types of income can be used in calculating your profit. For example, capital gains, dividends, and interest are all examples of investment income that cannot be subtracted from your total revenue (and therefore do not count as being deductible). And you can only deduct expenses based on your taxable income and business classification.

In simple words, the government is giving you a benefit for the purpose of reducing your taxable income by allowing for certain business-related deductions to be deducted from your total revenue.

Who can claim this deduction?

Most small business owners of pass-through entities can qualify. This list includes single proprietors using Form C-Schedule, single-member LLCs, partnerships, and S corporations. This deduction is applied to your individual tax return and not your business tax return.
his tax treatment is another reason why most people consider it “found money.” You still have to pay self-employment taxes on your total profits, but you save the additional 20% on income taxes.

One notable exclusion would be those running their businesses as C corporations. C corporations cannot claim this benefit because they are not pass-through businesses.

How does the income threshold affect you?

Before you apply for any section 199A deduction, you need to know where your income stands first.

If your income is at or below the threshold amount, then in most cases you can claim the full 20% deduction, and you don’t have to worry about additional restrictions on that deduction. If you are over the threshold, things begin to become restricted, and if you are engaged in a specified service business (i.e., professional services like consulting, law, health care, or finance), your deduction may be limited or even eliminated depending on your income level.

Thus, it becomes very important for you to have a plan. If you do not have a strategy, you could easily miss out on a deduction that you otherwise could have claimed.

Section 199A deduction strategies

Simple and Powerful Section 199A Deduction Strategies:

Section 199A Deduction Strategies Every Small Business Owner Should Know

First, manage your taxable income: Managing your federal taxable income is one of the best-known ways to take advantage of Section 199A deductions. If you are just under the threshold, even small adjustments in income will have a big impact on your ability to claim any deductions.

You can control your federal taxable income by:

By making contributions to your retirement account (to the maximum amount).
Prepaying certain business expenses that will be incurred in the next financial year (to the maximum amount).
Deferring income until the next financial year (to the maximum extent possible).

By making these changes, you can decrease your federal taxable income and remain under the limit for claiming the full deduction

Plan Your Retirement Contributions: Retirement planning is one of the easiest ways to reduce taxable income. You can contribute to the plans, like 401(k), SEP-IRA. you not only save for the future but also bring your income down to a level where you may qualify for a higher deduction. This is one of those rare strategies that benefits both your present and future.
Invest in Business Property and Equipment: The deduction rules also give you credit for property your business owns. This can include cars, machinery, computers, office furniture, or even buildings.

You get an extra boost equal to 2.5% of the unadjusted basis of that qualified property. So buying equipment or vehicles before year-end can help increase your deduction when wages alone aren’t enough.

Many owners take this further: they move commercial real estate or heavy equipment into a separate LLC and lease it back to the main business at fair market rent. The rental income qualifies for the deduction.

Switch to an S Corporation for Better Control: One smart Section 199A deduction strategy is switching to an S corporation. This allows you to split your income into the following:
Salary (taxed normally)
Business profits (which may qualify for the QBI deduction)

By setting a reasonable salary, you can potentially increase the portion of income eligible for the deduction while also managing your overall tax burden. Although S corporations come with extra compliance and paperwork, it becomes important to evaluate it first if it’s the right fit for your business.

A few things to be careful about:

These section 199A deduction strategies are really powerful, but only when you do it right. Be sure that you have maintained detailed records for all wages, purchases of equipment, and any lease agreements.

Be cautious that your state may not have the same deduction rules as the federal government, so you may end up with lower federal deductions than anticipated.

From 2026 onwards, there will be a minimum $400 deduction available to you if your QBI is equal to or exceeds $1,000. You can use this limit as a safety net for smaller businesses.

Final thought: Using the Section 199A deduction strategy is a smart way for small business owners in the U.S. However, it does not automatically happen when your income increases, but requires proper planning and forecasting for the future.

You should consult with your CPA before tax time and run a few simple “what if” simulations in the fall to determine your possible exposures or benefits. Making a couple of small adjustments, such as purchasing new equipment, adjusting your salary, or hiring additional help during the year, may allow you to save $10,000, $25,000, or more in one year’s final income taxes due.

You created this business from scratch, and these section 199A deduction strategies will enable you to save some of the money you earned working hard so you can reinvest that money back into your company or enjoy solid peace of mind.

FAQs: Frequently Asked Questions

Ques 1. What are the income thresholds for the Section 199A deduction in 2026?
Ans. In 2026, you may qualify for the maximum deduction if your income falls under $200,000 for individuals and $400,000 for joint filers. Your deduction starts getting phased out after these levels and could be reduced or even nullified if you earn a high income and conduct business in certain services like consultancy, legal, or health care.

Ques 2. Does the QBI deduction lower my self-employment tax?

Ans. No, the QBI deduction impacts only the income tax liability and not the self-employment tax liability. The self-employment tax is calculated on the total profit from the business, irrespective of the QBI deduction. Additionally, starting in 2026, there is an additional deduction of $400 provided the taxpayer has income exceeding $1,000 from qualified business income.

Ques 3. How do I make use of the Section 199 A tax deduction when my salary exceeds the limit?

Ans. Some common 199A tax deductions include converting into an S-Corp entity in order to generate W-2 income; employing workers, including relatives, to perform genuine services; buying qualified business assets before the end of the year; or transferring your real estate and equipment to an LLC in order to lease it out at a market price.

Ques 4. I have a small retail business, and I have just started this startup. I’m looking for ways to reduce the tax. What is the Section 199A deduction, and can I claim it?

Ans. Yes, you can claim it. The Section 199A deduction (QBI deduction) lets you deduct up to 20% of your qualified business income. Since retail is a pass-through business (sole proprietorship, LLC, or S corp), most new startups qualify for the full 20% if your taxable income stays below the threshold. It’s one of the easiest ways to lower your tax bill from year one.

by Donald Hayden

13 Apr 2026

Filing your own taxes may seem like a cost-saving decision, but the true cost of DIY taxes often goes far beyond software fees. Missed deductions, filing errors, and compliance risks can quietly add up and lead to long-term financial consequences. Understanding these hidden costs helps taxpayers make smarter decisions when it comes to managing their finances.

Hidden Costs of Doing Your Own Taxes

DIY tax software simplifies the process, but it relies heavily on user input and assumptions. Many taxpayers unknowingly overlook deductions, misclassify income, or apply incorrect tax rules. These mistakes can result in higher tax bills, delayed refunds, or penalties that outweigh any upfront savings from filing alone.

Time Is Money

Preparing taxes without professional guidance can take hours or even days, especially for those with investments, side income, or changing financial situations. The time spent researching tax rules, reviewing forms, and correcting errors represents an indirect cost that many people underestimate when choosing a DIY approach.

Risk of Errors and Audits

Even small mistakes can increase the risk of audits or IRS inquiries. DIY filers may not recognize red flags that trigger reviews, such as inconsistent income reporting or incorrect deductions. Resolving these issues later often requires professional help, adding unexpected expenses and stress.

How a CPA Adds Real Value

A Certified Public Accountant provides more than tax filing services. CPAs analyze your financial situation, identify tax-saving opportunities, and ensure compliance with current tax laws. Their expertise helps reduce errors, optimize deductions, and provide peace of mind during tax season and beyond.

Long-Term Financial Benefits

Working with a CPA can support better financial planning year-round. From estimated tax payments to future tax strategies, professional guidance often leads to lower tax liabilities over time. For individuals and business owners alike, this proactive approach can turn tax preparation into a smart financial investment.

Is a CPA Right for You?

If your financial situation involves multiple income streams, investments, self-employment, or major life changes, hiring a CPA can be especially beneficial. While DIY taxes may work for simple filings, complex scenarios often require professional insight to avoid costly mistakes.

by Donald Hayden

06 Apr 2026

Selling cryptocurrency can trigger significant capital gains taxes, especially when assets have appreciated greatly over time. Traditional sales result in taxable events where the seller pays federal and possibly state taxes on the gain. However, one legal and sophisticated strategy used by high‑net‑worth investors is to sell crypto through a Charitable Remainder Unitrust (CRUT). This approach allows the sale of appreciated assets without an immediate large tax bill, and it combines investment planning with philanthropic goals.

What Is a Charitable Remainder Unitrust (CRUT)?

A Charitable Remainder Unitrust is a tax‑exempt entity that accepts appreciated assets from a donor. When the asset — such as cryptocurrency — is placed into the trust, it can be sold inside the trust without triggering capital gains taxes at the time of sale. The trust then reinvests the sale proceeds, allowing the tax‑deferred earnings to grow.

How the CRUT Strategy Works for Crypto

To use a CRUT, a crypto investor transfers the appreciated cryptocurrency into the trust before selling it. Because the CRUT is tax‑exempt, it can sell the assets without paying capital gains tax at that moment. The investor receives a charitable income tax deduction based on the value of the remainder interest that will eventually go to a charity. The trust can then reinvest the proceeds and distribute a percentage of the trust’s value annually to the investor or beneficiaries, offering income while deferring taxes.

Benefits of Using a CRUT

One major benefit of selling crypto through a CRUT is tax deferral. By deferring taxes on gains, the full sale proceeds remain available for reinvestment, potentially compounding growth over time rather than shrinking due to a large tax payment. Investors may also receive a charitable deduction in the year they fund the trust, which can reduce their taxable income.

Things to Consider with CRUTs

While CRUTs can provide tax advantages, there are trade‑offs. The investor must understand that income received from the trust is taxable to the beneficiary over time, and the remaining trust assets are ultimately destined for charitable organizations. Additionally, CRUTs have specific payout requirements and compliance obligations that must be followed to maintain tax‑exempt status.

Is This Strategy Right for You?

CRUTs are often most effective for individuals with significant appreciated assets who do not need immediate full liquidity and who have philanthropic intentions. Because of the complexity and legal requirements, investors considering this strategy should consult experienced tax professionals or estate planners to tailor the trust structure to their goals and ensure compliance with tax laws.

by Donald Hayden

02 Apr 2026

Investing in the stock market feels like the straightforward path to building wealth. But there’s one thing that people don’t look over easily: fees.

And, if you are beginning to invest or have already walked that road, knowing what your portfolio costs is very critical. For many everyday investors, mutual funds and ETFs (exchange-traded fund’s) provide the ability to get diversified investments without selecting individual companies. These funds can give you either the expertise of professional management or exposure to a complete set of market assets.

However, they also come with hidden fees that can lower long-term growth. And the tricky part is that these costs aren’t always obvious, which is why investors are paying just as much as they are gaining returns.

Some of the most commonly known fees associated with investment:

Trading and transaction fees: When you trade your funds, especially through a brokerage platform, certain transaction charges apply:

Purchase fees: These are charged when you initially buy any funds.
Redemption fees: when you sell or withdraw your investment.
Exchange fees: These are charged when you switch your investment from one fund to another within the same fund family.

Platform fees: When you are using trading apps like Vanguard and Robinhood, or a brokerage platform, or a robo advisor, there are often small fees attached, like account maintenance charges, transaction fees, or even extra costs for premium features.
Advisory fees: When you work with a financial advisor (human or robo-advisor), you’re probably going to have to pay for their advice. Usually, this payment is made based on the amount of assets you hold and manage.

The fees may not always be noticed:

Other than these obvious charges, there are also many indirect fees and expenses linked with mutual funds or ETFs that are hidden. The combined effects of all of these charges will end up as either what you invested or how much has grown based on market conditions over time.

Expense ratios and their various components: an expense ratio is the annual fee, which is shown as a percentage, and it is automatically deducted from the transaction before the investor sees their performance results. Components of this expense ratio are divided into parts:
Management Fees: Portfolio managers and research teams are paid from these fees. Actively managed portfolios have higher levels of management fees than passively managed portfolios because actively managed portfolios use professionals to attempt to outperform the market.

12B1 Fees: Overhead expenses associated with marketing, selling, and possibly providing shareholder services can be up to 1% and are generally associated with actively managed mutual funds.
Other Operating Expenses: Legal, accounting, auditing, record-keeping, and administrative costs are also included in this ratio
Sales Loads and Commissions: Many mutual funds charge sales loads; basically, it is a brokerage fee or the fees paid to the financial advisor for selling fund shares. These vary depending on the share type:
Class A Shares: These are the front-end load, meaning a percentage is taken right when you put your money in.
Class B Shares: Typically use a back-end load, meaning the less time your money has been invested, the lower it will be.
Class C Shares: May not charge a large front-end load, but they do charge higher 12b-1 fees.

No-load funds avoid all these fees, allowing your money to begin working for you immediately.

Internal trading cost: When you are trading, you incur brokerage fees and other market-related expenses. These costs are not included in the expense ratio but still affect the fund’s performance. Funds with high turnover rates, meaning they buy and sell assets often, tend to have higher hidden trading costs.
Tax implications: Another frequently ignored expense comes from taxes. Considerably larger funds. If, for example, a fund realizes gains by selling assets, it can distribute those gains to investors as distributions, causing taxes to be owed by investors even when investors haven’t sold their investment.

While ETFs tend to be more tax-friendly due to their structure, it is also much easier for them to minimize capital gains distributions.

Why is it so important to understand these fees?

Let’s understand it with an example. You have 2 portfolios, each with $100,000 and 7% return before costs. One has an annual cost of 0.8%, while the other has an annual cost of only 0.1%. After 30 years, the lower-cost portfolio may have $80,000 – $120,000 more than the higher-cost one. portfolio due to the power of compounding. Any dollar that you pay in fees reduces your retirement funds due to a lack of growth.

Here are some things you can do to save on fees:

Make sure you are using no-load, low-cost index funds or ETFs.
Use prospectuses to compare funds and free online tools to compare funds.
Review your portfolio at least once a year and replace funds that are too costly with options that are less costly.
If using an advisor, choose fee-only advisors who are transparent and who will provide you with a complete breakdown of all fees that they charge.
Use retirement planning calculators to see the impact that different fees will have on your retirement nest egg.

Final Thoughts

As we’ve seen, mutual funds and ETFs are still a fantastic way for regular folks to invest in the markets. However, the true potential of these investments can only be realized if we grasp and control the hidden costs associated with them. So, what are you waiting for? Start reading your statements and your prospectuses, and make sure your money is working for you, not against you, and not quietly siphoned away by unnecessary fees and costs.

The more we save ourselves from unnecessary costs and fees, the richer our retirement years will be!

FAQs: Frequently Asked Questions

Ques 1. Why do taxes apply even if I do not sell my mutual fund?

Ans. If you haven’t sold your mutual funds, capital gains tax will still apply. That’s because when someone buys and sells investments within the fund, any profits can be passed on to you as distributions, even if you didn’t personally sell a single share.

Ques 2. Are ETFs cheaper than mutual funds?

Ans. Not necessarily, but mostly. Many ETFs, especially index funds, tend to have lower expense ratios. However, other fees, like brokerage fees, are associated with trading ETFs, depending on your brokerage firm.

Ques 3. How do I find the true cost of a mutual fund?

Ans. You can find this information in a mutual fund’s prospectus under the sections entitled “Expense Ratio,” “Sales Charge,” and “Share Class.” You can also check your brokerage statement for platform and advisory fees.

by Donald Hayden

01 Apr 2026

When you think about really making an impact, giving to charity has to be right up there, doesn’t it? When you give to a local cause, help with disaster relief, or support an organization you really care about, it’s always been about more than just the money; it’s about what that giving actually does.

“If you’re thinking about donating to charity in 2026 for tax purposes, you should know that the deduction rules have changed.” Staying informed can really help you get the most out of your money and make sure everything you contribute follows the rules.

So, here’s a big thing that’s really changed how a lot of things work this year, and it all comes down to something called the One Big Beautiful Bill Act, or the OBBBA Act if you want to be quick about it.

What has actually changed under the OBBBA Act?

“So, with this new OBBBA rule, charity work isn’t just seen as a nice thing you do anymore, at least not when it comes to taxes.” Now, things are a bit more structured. Every donation needs to clear higher hurdles for documentation and meet the rules if you’re hoping to get that tax deduction. So, it seems that just having good intentions isn’t enough to get a tax break anymore; things have changed, and now they’re looking for clear proof and a solid purpose behind what you’re doing.

New Deduction parameters for Non-Itemizers

Before we get into this, what does “itemizing” actually mean? Itemizing is when you list out specific expenses, like mortgage interest, medical bills, and charitable donations, instead of taking the standard deduction. Most people don’t itemize because the standard deduction is simpler and often higher.

But, for those of us who don’t itemize, there’s a new above-the-line deduction we can finally take advantage of. So, if you’re filing solo, you can claim up to a thousand bucks for cash donations. Now, for those who are married filing together, that number goes up to two thousand. The nice thing about this is that you don’t have to itemize on Schedule A at all.

When we talk about “cash” in this context, it’s pretty straightforward. We’re really just talking about your standard ways of paying: checks, credit cards, bank transfers, or even money taken straight from your paycheck. By the way, donating stocks or household goods won’t cut it for this specific tax break, just a heads-up.

Updated standard deduction limits:

Also, keep in mind that the standard deduction has gone up. It’s now $16,100 for single filers, $32,200 if you’re filing jointly, and $24,150 for heads of household. With these higher limits now in place, there’s a possibility that more people might just opt for the standard deduction, and that’s perfectly fine. But if you find your itemized expenses, like mortgage interest, state and local taxes, medical bills, and, of course, charitable donations, add up to more than that new threshold, then taking the time to itemize could still really work in your favor.

So, what’s new for those who do itemize their deductions?

Alright, so for those of you who go through the trouble of itemizing, there are a couple of small, but actually pretty significant, changes that you’ll definitely want to keep an eye on. Now there’s a small change coming, just a little bit of a difference. Your charitable donations are subject to a 5% floor based on your AGI adjusted gross income.

To put it simply, only the part of whatever you donate that goes beyond that small limit is actually considered. People who have an adjusted gross income of $100,000, keep in mind that the initial $500 of your charitable donations isn’t tax-deductible.

However, any amount you contribute beyond that threshold can be claimed.

For those who are in the top tax bracket, the 37 percent one, the deduction is only going to net you about 35 cents on one dollar. It’s still a good deal, just not quite as impressive as it used to be.

Well, one good thing is that the 60% AGI limit for cash donations to public charities? That’s here to stay now. You see, you can be really generous in one year, and you don’t have to fret about any leftover amount going to waste; it simply rolls over for as long as five years.

What exactly qualifies for a charitable deduction under the new rule?

“Just because something feels like a good cause doesn’t automatically mean it qualifies for a charitable deduction, and getting a handle on that distinction is really important.”

We’re talking here about donations that truly count, you know, the ones that are made to organizations like churches, the Red Cross, universities, your local animal shelter, and pretty much any of those well-established nonprofits. Those are the ones that actually count.

You must be wondering what kinds of contributions qualify for a deduction.

Cash donations are fully deductible. However, you must subtract any benefits you receive in return for your donation. For other kinds of donations, like clothing or household items, you can value them based on what they would normally sell for in a thrift shop. For donations of appreciated items, like stocks or land, they are usually valued at what they are currently selling for in the market. The advantage here is that you are not taxed on any capital gains but can still claim the full value as a deduction. Finally, any out-of-pocket expenses you incur while volunteering can also qualify for a deduction. These can include things like travel expenses (calculated at 14 cents per mile) or supplies you buy to do your charity work.

But what doesn’t qualify?

Contributions to individuals or political campaigns are not qualified for this deduction, especially for those who are not itemizers.

What documents are required?

Now, the IRS does want to see your paperwork, but honestly, it’s not as daunting as you might think. When we are talking about gifts under $250, a straightforward bank statement or an emailed receipt that clearly shows the charity’s name, the date of the donation, and the amount given should be perfectly acceptable. For amounts over $250, you’ll definitely want to get something in writing from the organization confirming your donation. Most times, they’ll just send that right over to your email without you even having to ask. So, for those non-cash gifts, if they’re worth more than five hundred bucks, you’ll need to fill out Form 8283. And if you’re donating something valued over five thousand dollars, you’ll also need to get a qualified appraisal for it. Just take a quick picture of whatever you’re dropping off and make sure to hold onto those emails. That should cover you. A little bit of work up front can save a lot of head-scratching down the road.

Conclusion

Charitable giving in 2026 continues to be a meaningful way to support causes you care about, but it now comes with more clearly defined tax rules. With changes introduced under the OBBBA Act, understanding eligibility, maintaining proper documentation, and choosing the right deduction method have become more important than ever.

Whether you choose to take advantage of the new above-the-line deduction or itemize your contributions, a well-informed approach can help you maximize both your impact and your tax benefits. By planning your donations carefully, you can ensure that your generosity not only makes a difference but also works efficiently from a financial perspective.

Frequently Asked Questions (FAQs)

Ques1. If I normally only take the standard deduction, how much will I actually be saving by donating cash this year?

Ans. The savings will vary depending on your income bracket. For example, if your income bracket is 22 percent, donating the single-filing maximum of $1,000 could save you about $220. Not a huge savings, but it’s a nice perk for something you’re already doing anyway. Plus, it’s super easy because you won’t have to deal with itemizing.

Ques 2. My AGI is relatively high, at $250,000. Does this mean that this floor of 0.5% basically means that even donating won’t help me?

Ans. Yes, pretty much. So if your AGI is $250,000, that means the floor will be $1,250. So if your total donations are less than that, none of that will actually count towards your itemized deduction. This is why people are bunching their donations. They’re waiting until they have enough saved up to donate at least that much to actually get the benefit.

Ques 3. Can I donate stocks or properties to avail tax benefits?

Ans. Yes, you can donate stocks and properties and still avail yourself of the tax benefits. But the condition is that if you are donating the property or the stock, it should be the appreciated stock of the property. Which was held by you for over a year, at least.

Older Posts