Tax Strategies

What Can You Really Use Your HSA For? A Deep Dive Into Eligible Expenses

An HSA (Health Savings Account) is a special savings account available to individuals with a high-deductible health plan (HDHP). Contributions are tax-deductible, earnings grow tax-free, and withdrawals are also tax-free when used for qualified medical expenses.This triple-tax benefit makes HSAs a powerful way to save for both current and future healthcare costs—especially in retirement. To learn more about the benefits of HSA's, see my article A Healthy Investment: Discover the Surprising Benefits of Health Savings Accounts – Gilbert Wealth. What Can You Use the HSA for? HSA funds can be used for a wide range of qualified medical expenses, as defined…
Read More

How to Report Donations to a Donor Advised Fund (DAF) On Your Taxes

Donor Advised Funds (DAF) allows donors to contribute assets, receive immediate tax deductions, and later direct grants to their preferred charitable organizations. They are simple, yet powerful tools to use in a giving strategy. See Charitable Giving through a Donor Advised Fund – Gilbert Wealth for more information on why DAF's are so powerful.If you've decided to use a DAF, now you need to correctly reporting these donations on your tax return is crucial to ensure compliance with IRS regulations and to fully benefit from the available deductions. The Tax Benefits of DAF's Immediate Tax DeductionOne of the main advantages of donating to…
Read More

Guide to the IRMAA Exemption Form (SS-44)

Medicare beneficiaries with higher incomes are subject to an additional charge on their Part B and Part D premiums, known as the Income-Related Monthly Adjustment Amount (IRMAA). This surcharge is based on modified adjusted gross income (MAGI) from past tax returns. Read more about IRMAA here: Understanding IRMAA: What It Is and Its Impact on Medicare Premiums – Gilbert WealthHowever, if you've experienced a significant life-changing event, such as retirement or a reduction in income, you may qualify for a reduction in your IRMAA. Form SSA-44 allows you to report such events and request an adjustment to lower your Medicare…
Read More

Gifting and the Annual Exclusion

Lifetime gifts are a wonderful way to bless your loved ones and make a meaningful impact on their lives. Whether it's helping a child with educational expenses, supporting a family member in need, or simply sharing your wealth to enhance their financial security, gifting allows you to express your generosity while witnessing the benefits of your support firsthand. Beyond the emotional rewards, thoughtful lifetime gifting can also provide financial advantages by reducing the size of your taxable estate and taking advantage of tax-free gifting opportunities. With proper planning and an understanding of the applicable tax rules, you can ensure your gifts provide…
Read More

The Differences Between Short-Term and Long-Term Capital Gains

Capital gains occur when you sell an asset for more than its purchase price. The distinction between short-term and long-term capital gains is important for tax purposes, as each is treated differently under U.S. tax law. Short-Term Capital GainsShort-Term Capital Gains are gains from the sale of assets held for one year (365 days) or less are considered short-term.These gains are taxed as ordinary income, meaning the tax rate depends on your marginal tax bracket which is the highest tax rate applicable to you.  Currently, ordinary income rates range from 10% to 37%. For the latest rates, see Latest Ordinary Income…
Read More

Understanding Estimated Capital Gains Distributions

Understanding Estimated Capital Gains Distributions Capital gains distributions are a critical aspect of mutual fund and exchange-traded fund (ETF) investing. They represent the profits a fund makes when selling securities that have appreciated in value. While distributions are a normal part of investing, understanding them and their timing can help investors manage their tax liability and align their portfolios with their goals. How Are Capital Gains Distributions Generated? Capital gains distributions occur when a mutual fund or ETF sells investments within its portfolio for a profit. These gains are classified as either: Short-term capital gains: Generated from securities held for…
Read More

What Are Required Minimum Distributions or RMD’s?

Required Minimum Distributions (RMDs) can feel like a complex and imposing topic, but they play an essential role in retirement planning. The rules surrounding RMDs are important for anyone with a tax-deferred retirement account, as understanding them can help you manage your income, reduce tax burdens, and ensure compliance with IRS regulations. This guide will help clarify what RMDs are, why they matter, and how you can navigate them effectively. What are Required Minimum Distributions (RMDs) RMDs are the minimum amounts that you must withdraw annually from your tax-deferred retirement accounts once you reach a certain age. These accounts include Traditional…
Read More

Major Time Milestones in Roth Conversion Planning

Roth conversion planning involves strategic timing to maximize tax efficiency and financial benefits. Several key age-related milestones directly affect the optimal timing and impact of Roth conversions. Below is an in-depth overview of each milestone, including both required dates and opportunities for enhancing long-term financial outcomes. Age 59 ½: Penalty-Free Withdrawals from Retirement AccountsAt age 59 ½, individuals gain the ability to withdraw from traditional IRAs and 401(k)s without incurring the 10% early withdrawal penalty. This milestone is crucial for Roth conversions since it allows pre-retirees to convert part of their tax-deferred accounts into Roth IRAs without worrying about withdrawal…
Read More

A Brief History of U.S. Tax Brackets: The Evolution of Income Taxation and Why You Should Care

Taxes Rise The U.S. tax system has evolved significantly since its introduction in 1913, with tax brackets and rates changing to reflect the country’s economic needs and policies. Early on, tax rates were modest, with the highest rate set at 7%. However, during World War I and the Great Depression, rates rose sharply, reaching 77% in 1918 for incomes above $1 million (about $20 million today).The most dramatic increase came during World War II, when the top marginal tax rate reached an astounding 94% in 1944-1945 on incomes over $200,000 (equivalent to over $3.5 million today). During the post-war years, top rates…
Read More

Understanding AGI, Taxable Income, MAGI, and Provisional Income

In the realm of personal finance and taxation, several key terms frequently arise that are crucial to understanding how your income is calculated and taxed. Four of these terms are Adjusted Gross Income (AGI), Taxable Income, Modified Adjusted Gross Income (MAGI), and Provisional Income. Each plays a distinct role in determining your tax obligations and eligibility for various credits and deductions. This primer aims to provide a comprehensive overview of these concepts.Adjusted Gross Income (AGI)Adjusted Gross Income (AGI) is a critical figure in your tax calculations. While you are not taxed on AGI, serves as the starting point for determining…
Read More