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Cornering CPA: Riding Through the Tax Season

Das MotorRad

Das MotorRad

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Name
Chris

⚠️ Important Legal Disclaimer: No Tax Advice​



Please read this carefully before participating in this thread.

The information, opinions, and discussions in this thread—including any comments or answers provided by the thread creator (a CPA) or other members—are for educational and informational purposes only.

  1. Not Professional Advice: This content does not constitute and should not be relied upon as professional tax, legal, financial, or accounting advice. It is a general discussion of current and potential tax law changes.
  2. No Client Relationship: Your participation in this discussion, including asking or receiving answers to questions, does not create a CPA-client relationship between you and the thread creator.
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  5. Consultation is Required: Before making any financial decision or taking any action related to your tax situation, you must consult with a qualified, licensed tax professional (such as a CPA or tax attorney) who can review your specific details and provide personalized, binding advice.
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Figured it would be nice to have a new tax thread that can be used to distill some of the noise into facts. There will be changes to taxes for 2025 and forward.

Based on a recent BARF poll, a majority of you will enjoy an additional standard deduction (over 65).

There will be some adjustments to tax on tips and overtime as well.

If you have been disappointed with deducting only $10k of state taxes, well you may be able to deduct up to $40k for the next few years.

You may be disappointed to hear that you will be limited to deducting interest on only the first $750k of mortgage debt for the foreseeable future.

I'm pretty busy so I will update and respond as I can, thanks for your patience.
 
Hi Das, Here's a funny situation for you and would appreciate your opinion. For 2025, let's say someone has minimal earning income (let's say, less than $10,000.) That hypothetical person is jointly (married). Same person is sitting on a large amount of stock with substantial long term capital gains. Same person intends to sell some of it and take about 95k (or the max entitled to) that will qualify for the preferential 0% LTCG rate.

Here is where it gets complicated. Say they want to gift their child a substantial amount of stock. let's say, an amount with 40k in accrued LTCG. How would the "kiddie tax" work here? Generally speaking, and not applicable to any personal situation, would the child also be eligible for 0% LTCG rate on this?
 
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mercurial said:
Hi Das, Here's a funny situation for you and would appreciate your opinion. For 2025, let's say someone has minimal earning income (let's say, less than $10,000.) That hypothetical person is jointly (married). Same person is sitting on a large amount of stock with substantial long term capital gains. Same person intends to sell some of it and take about 95k (or the max entitled to) that will qualify for the preferential 0% LTCG rate.

Here is where it gets complicated. Say they want to gift their child a substantial amount of stock. let's say, an amount with 40k in accrued LTCG. How would the "kiddie tax" work here? Generally speaking, and not applicable to any personal situation, would the child also be eligible for 0% LTCG rate on this?
Click to expand...
Hey @mercurial, thanks for the message. Good question! Unfortunately the child would be paying around $4500 ($1400 if long term capital gains) in federal tax on the $40k of capital gain due to the kiddie tax rules. The minor dependent does not get the same large allowance for 0% capital gains as is enjoyed by the parents.

Instructions for Form 8615 (2024) | Internal Revenue Service

www.irs.gov www.irs.gov

edit: original response used short term capital gain rates for the kid, long term makes it so about up to $40k will just get hit with the 3.8% tax.
 
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Thanks for the insight! Where does that 3.8% come from, mechanically? It doesn't seem related to any income tax bracket or capital gains tax bracket.
 
mercurial said:
Thanks for the insight! Where does that 3.8% come from, mechanically? It doesn't seem related to any income tax bracket or capital gains tax bracket.
Click to expand...
Net investment income tax
 
can you redo the depreciation schedule on my rental and then redo the last three years on that new schedule?
 
Heads up to anyone on Covered California or other marketplace insurance plans who get subsidized premiums...It is getting close to end of open enrollment for healthcare...

The past few years you could go over the income limit and just pay back the difference with your tax returns.

For 2026 (taxes filed in 2027) if you go over your income limit you have to pay back ALL of the subsidy you received. For a family of four it is around $130k.

This is referred to as a 'subsidy cliff' because if you go over the limit by $1 you have to pay back the entire subsidy.

www.healthinsurance.org

‘Subsidy cliff’ will return in 2026 if Congress doesn’t act

If Congress doesn’t extend enhanced Marketplace subsidies, hundreds of thousands of Marketplace enrollees will face the return of the so-called “subsidy cliff.”
www.healthinsurance.org www.healthinsurance.org

I recommend keeping a close eye on things to see how and when is the best time for you to lock in coverage for 2026 health insurance. It may be a good idea to overestimate your income in order to get a lower subsidy. That way you still have the ability to reconcile to your true subsidy when you file 2026 tax returns in 2027.
 
RMD question. My wife needs to take RMDs beginning this year. I have used various online calculators (AARP, Voya Retirement, Fidelity), and they all agree her Life Expectancy Factor is 26.5. I calculated her RMD using this factor. The IRS table, as I understand it, suggests I use 16.4 as the factor. I am 6 years younger than my
wife, hence the use of table 1. Am I misunderstanding something? I will confirm which is correct with my tax attorney / preparer next month.

If any of you who are not yet retired are not aware of the RMD rules (quite a few folks at my place of work were oblivious to them), please look into it and plan ahead. It can cause quite a tax hit for many people.
 

Attachments

  • IRS RMD table 1.pdf
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900ss said:
RMD question. My wife needs to take RMDs beginning this year. I have used various online calculators (AARP, Voya Retirement, Fidelity), and they all agree her Life Expectancy Factor is 26.5. I calculated her RMD using this factor. The IRS table, as I understand it, suggests I use 16.4 as the factor. I am 6 years younger than my
wife, hence the use of table 1. Am I misunderstanding something? I will confirm which is correct with my tax attorney / preparer next month.

If any of you who are not yet retired are not aware of the RMD rules (quite a few folks at my place of work were oblivious to them), please look into it and plan ahead. It can cause quite a tax hit for many people.
Click to expand...
You are looking at a table meant for people who inherited a retirement account, check the Uniform Table and you will find the 26.5 factor referenced by the brokerage.
 
When deciding whether to convert traditional ira to Roth, I like to compare my current tax rate against my expected tax rate once reaching rmd age. A year of low income can be an opportunity to convert at a lower rate.
 
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Das MotorRad said:
You are looking at a table meant for people who inherited a retirement account, check the Uniform Table and you will find the 26.5 factor referenced by the brokerage.
Click to expand...
You know, I don'k now how many times I read "For use by beneficiaries", and for it to not click is...... shame on me. But Mr. IRS agent, I am her beneficiary! :unsure:

Thank you again Chris for your time and input. Please let me know if there is anything I can do in return.
 
Das MotorRad said:
When deciding whether to convert traditional ira to Roth, I like to compare my current tax rate against my expected tax rate once reaching rmd age. A year of low income can be an opportunity to convert at a lower rate.
Click to expand...
Our income will be fixed going forward. My wife retired years ago and I effectively retired last July. I will begin taking SS in February, on my birthday. The amount of her RMD's should be enough to fill any need for additional $, along with some sales of stock that I am considering. We have no debt, other than HOA dues (2x), insurances, etc. I am researching Roth IRA conversions for myself, as I have a few years left before RMDs become a factor for myself.
 
900ss said:
Our income will be fixed going forward. My wife retired years ago and I effectively retired last July. I will begin taking SS in February, on my birthday. The amount of her RMD's should be enough to fill any need for additional $, along with some sales of stock that I am considering. We have no debt, other than HOA dues (2x), insurances, etc. I am researching Roth IRA conversions for myself, as I have a few years left before RMDs become a factor for myself.
Click to expand...
If your tax bracket is 12% now and will be 22% or more once RMD kicks in, then you should convert to Roth and pay 12% now instead of 22% later. Same story if you are at 24% now and will be 32% with RMD. Often people are at 22% and will still be 22% or maybe a little into 24% once RMD kicks in and in those cases it really doesn't make a whole lot of difference.
 
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