Missives

Section 70114(a)(b) provides that starting in 2026 the definition of ‘losses from wagering transactions will include any allowable deduction tied to a wagering activity but limits deductions to 90% of the loss amount, capped by gambling winnings. Congress estimates that with this change in allowable deductions from gambling, $1.1 billion will be generated over the next 8 years.

Planning strategies for charitable deductions to optimize a donor’s tax benefits going forward will turn on if the individual itemizes his/her tax deductions, or does not itemize his/her tax deductions, keeping in mind that about 90% of individuals do not itemize their income tax deductions.

While cutting taxes for seniors is a good thing, it is not the same thing as eliminating taxes on Social Security, as claimed in the Social Security Administration’s recent letter to millions of recipients. Sadly, the SSA appears to have conflated two issues [a tax deduction and impact on Social Security] for political purposes (surprise, surprise) which in turn creates unrealistic expectations for many seniors who live on fixed incomes and rely on the government benefits for their existence.

The One Big Beautiful Bill Act (OBBBA) modestly expanded the scope of Health Savings Accounts.

When it comes to encouraging charitable giving, the One Big Beautiful Bill Act (OBBBA) is, at best,  a ‘mixed bag.

The phaseout provisions of the One Big Beautiful Bill Act (OBBBA) could lead to implicitly higher marginal income tax rates. As we know from prior experience, the Tax Code is full of hidden traps. The OBBBA has just added a few more traps, like ‘non-published’ marginal tax rates, triggered by its many new phaseout rules. Maybe folks should not work so hard to earn their bonuses if the result is that they are phased out of some of these helpful income tax deductions.

We are only just learning the pros and cons of a Trump Account, compared to a 529 account or some of the other tax-deferred savings rules in the Tax Code. Fortunately, the IRS has the better part of a year to come up with Proposed Regulations that will provide examples and also answer some of the lingering questions.

Naming a trust as the beneficiary of an IRA results in several computations, starting with determining the payment period (i.e., does the trust qualify as a ‘see-through’ trust), then determining the required minimum distribution (RMD) amount for the year, and then following the RUPIA 90%-10% allocation, and finally allocating the IRA’s internal income when distributions are made from the trust. Best to add a provision to the trust, if it is expected to receive a large IRA, to specifically address the trustee’s allocation responsibilities and try to avoid some of the default provisions of the RUPIA.

The new Tax Act provides a new auto interest loan deduction, but how many borrowers will really benefit once all the law’s conditions are satisfied? The phaseout level starts at low amounts for individuals who are likely to be able to afford a new car. And as mentioned, given the price differential between new and used cars, the tax-savings of deducting loan interest will probably not be enough to justify purchasing a new car just to claim the interest deduction.

Some possible changes are afoot regarding 401(k) plans, including who is eligible to participate in the plan, and the prospect of opening 401(k) plans to private market investments.