What To Understand About The One Big Beautiful Bill

Contributed by: Michael Brocavich, CFP®, MBA

On July 4th, 2025, President Trump signed into law ‘The One Big Beautiful Bill’. The massive 940 page bill has a lot of provisions that will affect taxes for both individual filers as well as business filers.  As we study the provisions of the bill and see how our clients will be affected, we wanted to send out an overview of the provisions that we feel will be the most important to our clients.  As this list is thorough it is by no means a comprehensive overview of the entire bill.  As we continue to review the bill and understand the provisions within it, we will pass along those updates to you.  Please remember that some of the tax provisions will still need some guidance from the IRS on how they will be implemented so some provisions could face delay or require additional clarification before they can go into effect.

• Made permanent tax brackets from the Tax Cut and Jobs Act of 2017 which were set to expire in 2026.  The bill also includes additional inflation increases for the lower tax brackets 10%, 12% and 22%.

• Increased standard deduction – for the 2025 tax year, the standard deduction will be $15,750 for single filers and $31,500 for joint filers.

• Senior Bonus Deduction – Taxpayers age 65 and older can claim an extra standard deduction ($2,000 foe single filers, $1,600 per qualifying spouse in a couple) on top of the standard deduction.  In addition, from 2025 through the 2028 tax year seniors will also be able to deduct a bonus deduction of $6,000 per qualifying spouse. (Phase out of bonus deduction beginning at $75,000 / $150,000 for single/joint filers) This means that a couple both 65 or older with income of $120,000 can take the standard deduction of $31,500 for a joint filer, plus the existing age-related bonus of $3,200, PLUS the new bonus of $6,000 each for a standard deduction of $46,700.

• Increase in SALT Deduction - Temporarily raised to $40,000 in 2025, $40,400 in 2026 and then 1% annual increases over the prior year for 2027, 2028 and 2029. Reverts to $10,000 in 2030. Phases down (but not below $10,000) for those with modified adjusted gross income (AGI) over $500,000 in 2025 and $505,000 in 2026, and then increased 1% annually in each of the three following years.

• Charitable contributions for non-itemizers – Taxpayers who do not itemize their deductions can take an above-the-line deduction of $1,000/$2000 for single/joint filers for charitable contributions made in that tax year.

• Charitable contribution for tax filers who itemize their deductions – The bill also adds a new floor for charitable giving of 0.50% of income for individuals and 1% for corporations.  For example, an individual with $100,000 of income that is itemizing deductions and has a Charitable deduction of $10,000 will only be able to deduction $9,500. ($100,000 X 0.50% = $500 for the floor).

• Estate & Gift tax exclusion – Individual lifetime exemption increased to $15,000,000 per person and $30,000,000 for married couples.

• Tax on Tips – Up to $25,000 of qualified tip income is deductible.  Must be cash or credit card tips from an occupation that customarily received tips on or before December 31st, 2024.  Phases out for income over $150,000/$300,000 single /joint. Sunsets after 2028.

• Tax on Overtime – Up to $12,500/$25,000 single/joint of qualified overtime income can be deducted.  Phase out for income $150,000/$300,000 single /joint. Sunsets after 2028.

• Car Loan Interest Deduction – Taxpayers can deduct up to $10,000 of interest on new car loans.  To qualify, the final assembly of the vehicle must have been completed in the US and the deduction phases out for income of $100,000/$200,000 single/joint.

• Electric vehicle tax credits – Individuals will no longer be able to claim an EV tax credit for new car purchases after September 30th, 2025.  Home energy efficiency projects must be completed by December 31st 2025.

• ACA Eligibility Verification – For taxpayers that are receiving premium credits for health insurance under the ACA will face changes after December 31st, 2025.  Enhanced premium tax credits will expire at the end of 2025.  For those that will still qualify for tax credits, they will now have to go through re-verification annually rather than being automatically enrolled.  Lastly, the cap to recapture any excess tax credit has been removed and taxpayers will be required to pay 100% of any recaptured tax credit.

Higher Income Individuals

For the higher income earners, there are a few important provisions that you should be aware of.

• SALT Deduction - Phases down (but not below $10,000) for those with modified adjusted gross income (AGI) over $500,000 in 2025 and $505,000 in 2026, and then increased 1% annually in each of the three following years.

• Limits on Itemized Deductions – New limit reduces all itemized deductions, including SALT, by 2/37 of the lesser of total itemized deductions or amount of taxable income in excess of 37% bracket threshold. Essentially all deduction in the 37% tax bracket will only receive a 35% deduction.

• AMT tax – Permanently extends TCJA’s individual AMT exemption amounts in 2026, as inflation-indexed. Thresholds for phaseout of the exemption revert to 2018 levels ($500,000 – single filers; $1 million – joint filers), inflation-indexed thereafter. Phaseout is increased from 25% to 50% of amount by which taxpayer’s AMT income exceeds the applicable exemption phaseout threshold.

Important Provisions for Small Business Owners

• Business SALT no limits

• QBI Deductions – The bill made QBI deduction permanent at 20%. Expands deduction limit phase-ins from $50,000 to $75,000 (single filers) and from $100,000 to $150,000 (joint filers), including for specified service trades or businesses and pass-through entities subject to wage and investment limitations.

• 100% Bonus depreciation – qualifying assets will now be able to be expensed in the year that they were purchased.

• Immediate Expensing for Domestic R&D.

Reminder of Provisions That Are Set to Expire

If these are provisions that you qualify for, you will want to understand when they would expire so you can make sure to take full advantage of them while they are in effect.

• Senior Bonus deduction – Through 2028 tax year

• Tax on Tips – Ends December 31st, 2028

• Tax on overtime – Ends December 31st, 2028

• Car Loan Interest Deduction – Ends December 31st 2028

• SALT deduction – Ends December 31st, 2029

• Credits for EV/Energy Efficient home projects – EV credits expire after September 30th 2025 and home efficiency projects must be completed by December 31st, 2025.

The "One Big Beautiful Bill" brings substantial changes to the tax landscape, impacting individuals, businesses, and higher-income earners. While some provisions offer immediate benefits, others require careful planning to maximize their advantages. As we navigate these changes, our commitment is to keep you informed and help you make the most of the new opportunities. Stay tuned for more updates and feel free to reach out with any questions or concerns.

Michael Brocavich, CFP®, MBA is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He has an extensive background in both personal and corporate finance.

The information contained in this letter does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Michael Brocavich, CFP®, MBA, and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

Smart Tax Strategies to Protect Your Retirement Income

Contributed by: Matt Trujillo, CFP®

You've spent decades building your nest egg—now it's time to enjoy it. But without the right tax strategies, Uncle Sam could take a bigger bite out of your retirement income than you expected. The good news? With some thoughtful planning, you can minimize your tax burden and make your savings last longer. Below are key strategies to help protect your retirement income from unnecessary taxation.

1. Understand Your Tax Bracket in Retirement

Most retirees assume their tax rate will drop, but that's not always the case. Required Minimum Distributions (RMDs), Social Security, pensions, and investment income can all push you into a higher bracket than you planned. Know your projected income sources and work with a tax professional to estimate your future tax brackets.

2. Use Tax Diversification in Your Accounts

Ideally, your retirement savings should be spread across three types of accounts:

• Tax-deferred (Traditional IRA, 401(k)): taxed when withdrawn.

• Tax-free (Roth IRA, Roth 401(k)): tax-free withdrawals if rules are followed.

• Taxable brokerage accounts: taxed annually on dividends and capital gains.

This mix gives you the flexibility to manage income and control tax exposure each year.

3. Delay Social Security (If You Can)

Delaying Social Security benefits until age 70 increases your monthly payout and can reduce the number of years your benefits are taxed. Since up to 85% of Social Security benefits can be taxable depending on other income, using withdrawals from tax-free or low-tax sources early on can help keep those benefits tax-efficient later.

4. Use Roth Conversions Strategically

A Roth conversion moves money from a traditional IRA or 401(k) into a Roth IRA. You pay tax now at current rates, but future withdrawals are tax-free. This strategy is particularly powerful in years when your income is temporarily lower—such as early retirement before RMDs start at age 73 (for those turning 72 after 2022).

Tip: Be careful not to trigger a higher tax bracket or affect Medicare premiums (IRMAA surcharges) when doing a conversion.

5. Withdraw in a Tax-Efficient Order

Here's a general rule of thumb (though personal situations vary):

1. Withdraw from taxable accounts first (use capital gains rates if favorable).

2. Then tax-deferred accounts (IRA, 401(k), subject to ordinary income tax).

3. Save Roth accounts for last, allowing them to grow tax-free as long as possible.

This approach helps manage taxes today while preserving long-term tax-advantaged growth.

6. Manage RMDs Carefully

Once you hit RMD age, you must begin taking minimum distributions from your traditional retirement accounts, which are taxed as ordinary income. Failure to take RMDs results in severe penalties. Strategies to reduce future RMDs include:

• Roth conversions before RMD age.

• Qualified Charitable Distributions (QCDs), which let you donate up to $100,000 per year directly to charity tax-free.

7. Take Advantage of the Standard Deduction and Tax Credits

In retirement, many people itemize less and rely on the standard deduction, which increases with age (currently higher for taxpayers 65+). Smart timing of deductions or capital gains can help you stay under taxable thresholds. Also, check for available tax credits, such as the Credit for the Elderly or Disabled.

8. Be Aware of State Taxes

State taxes can significantly impact your retirement income. Some states tax Social Security, pensions, or IRA withdrawals, while others (like Florida, Texas, or Nevada) have no state income tax. If you're planning a move in retirement, consider the state's tax treatment of retirees as part of your decision.

Taxes don't stop when your paychecks do, but with the proper planning, you can keep more of your hard-earned retirement savings. Whether you're just starting retirement or already enjoying it, work with a financial advisor or tax professional to tailor a strategy that fits your goals, lifestyle, and income needs.

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Matthew Trujillo, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® A frequent blog contributor on topics related to financial planning and investment, he has more than a decade of industry experience.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 72.

Social Security Taxation

Contributed by: Nick Defenthaler, CFP®, RICP®

In my experience, there is typically a high level of confusion when it comes to understanding how Social Security benefits are taxed (consumers AND many financial advisors!). Understanding how other forms of income interact with Social Security is imperative when constructing a tax-efficient retirement income for a client. As we'll explore in this article, the impact other forms of income can have on Social Security can often make or break a financial planning/tax decision in a given year.

Social Security Tax Basics  

Are you ready for your head to spin? The taxation formula and application of this formula for Social Security benefits is tricky! Let's start with the formula for what's known as 'provisional income' or 'combined income.' An individual's provisional income will then determine how much of their Social Security benefit will be included in their overall income for the year.

• Adjusted Gross Income (AGI) + tax exempt bond interest + ½ Social Security benefit = Provisional Income (PI).

What income counts as AGI? Great question! Income from pensions, annuities, employment wages, dividends, interest, capital gains, and pre-tax 401k/IRA distributions would all be included in AGI.

• Provisional income less than $25,000 for single filers, $32,000 for joint filers = $0 tax paid on Social Security benefits.

• Provisional income between $25,000 - $34,000 for single filers, $32,000 - $44,000 for joint filers, up to 50% of Social Security benefits will be taxable.

• Provisional income above $34,000 for single filers or above $44,000 for joint filers, up to 85% of Social Security benefits will be taxable.

Provisional Income Example

As you can see, there are many moving parts, so let's look at an example. Mark and Jenny have a pension income of $40,000, distribute $36,000 each year from their Traditional IRAs, and recently started their Social Security benefits, which total $50,000. To determine their provisional income, we would complete the following calculation:

$76,000 AGI (pension + IRA distributions) + $0 tax exempt bond interest + $25,000 (50% of total Social Security benefits) = $101,000 of provisional income.

Given $101,000 of income, $42,500 (or 85%) of Mark and Jenny's Social Security combined benefit of $50,000 will be included in their income for the year.

• Pension = $40,000

• IRA Distributions = $36,000

• Social Security = $42,500

• Total Adjusted Gross Income = $118,500

The IRS has a great resource on its website that will help you calculate your provisional income and help forecast the taxability of your Social Security benefit – click HERE to check it out.

Reducing Tax on Social Security

As you can see from the example above, increasing one's provisional income will inevitably increase the taxability (and possibly the rate of tax) of one's Social Security benefit. The timing of realizing income such as capital gains, IRA distributions, or Roth IRA conversions is all important when creating a well-thought-out income plan that takes Social Security taxation into consideration.

We have seen many examples before where, on the surface, a Roth IRA conversion appeared to make sense for a client, given their current tax bracket. However, after running the numbers and seeing how much their provisional income would increase as a result of the conversion, we ultimately advised against converting funds to Roth. In many cases, the increased taxability on Social Security benefits diminishes the value of a Roth IRA conversion and can even be the source of increasing one's Medicare premiums and subject you to 'IRMAA' (Click HERE to read one of my past articles on this topic).

The impact of taxes on Social Security is a very important aspect of your retirement income plan. There are multiple 'push and pulls' when determining how much tax you'll pay on your benefit. While quite confusing, it's critical your advisor understands these nuances to help ensure your retirement income stream is as tax efficient as possible!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Center for Financial Planning, inc. is not a registered broker/dealer and is independent of Raymond James Financial Services. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James.

Exploring the Mega Backdoor Roth: Is It The Right Strategy For You?

Contributed by: Kelsey Arvai, CFP®, MBA

As financial planning professionals, we often seek advanced strategies to maximize clients’ retirement savings. One such strategy that has gained considerable attention is the Mega Backdoor Roth IRA. But is this complex approach suitable for everyone? In this blog, we’ll explore what the Mega Backdoor Roth is, how it works, and whether it might be a beneficial option for your financial planning strategy.

What is a Mega Backdoor Roth?

The Mega Backdoor Roth IRA is an advanced retirement savings technique that allows high-income earners to contribute more to their Roth IRA than traditional limits permit. Typically, Roth IRA contributions are capped at $7,000 annually for individuals under 50 (or $8,000 for those 50 and older). However, the Mega Backdoor Roth strategy enables individuals to funnel significantly larger amounts into a Roth IRA by leveraging after-tax contributions made to a 401(k) or 403(b) plan.

How Does It Work?

Here’s a step-by-step breakdown of how the Mega Backdoor Roth works:

1. Contribute to Your 401(k) or 403(b) Plan: Start by contributing to your retirement plan up to the annual limit of $23,000 for individuals under 50, or $30,500 for those 50 and older, through pre-tax or Roth contributions.

2. Make After-Tax Contributions: Once you reach the annual pre-tax or Roth contribution limit, you can make additional after-tax contributions to your retirement plan. The total defined contribution limit for 2024 is $69,000, including employee and employer contributions.

3. Convert to Roth IRA: Periodically, or as your plan allows, you can roll over the after-tax contributions and any earnings into a Roth IRA. This conversion avoids taxes on the earnings as Roth IRAs grow tax-free.

Benefits of the Mega Backdoor Roth

• Increased Contribution Limits: The Mega Backdoor Roth allows you to contribute significantly more to your Roth IRA than the standard limits, which can be a substantial advantage for high-income earners seeking to maximize their tax-free retirement savings.

• Tax-Free Growth: Contributions to a Roth IRA grow tax-free, and qualified withdrawals in retirement are also tax-free. This can be particularly beneficial for individuals who expect to be in a higher tax bracket during retirement.

• Flexibility: Roth IRAs offer flexibility in terms of withdrawal options. Contributions (but not earnings) can be withdrawn at any time without penalties or taxes, providing added financial flexibility.

Considerations Before Implementing

While the Mega Backdoor Roth offers compelling advantages, it’s not suitable for everyone. Consider the following factors before deciding if this strategy is right for you:

• Plan Availability: Not all retirement plans permit after-tax contributions or in-service withdrawals, which are necessary for executing the Mega Backdoor Roth strategy. Review your plan’s rules to ensure this option is available.

• Income and Contribution Limits: Ensure you are within the income limits and contribution caps that apply to your situation. The strategy is generally most beneficial for high-income earners who have already maxed out their regular 401(k) and IRA contributions.

• Administrative Complexity: Implementing the Mega Backdoor Roth can involve additional administrative steps and paperwork. Ensure you are comfortable with these requirements or seek assistance from a financial advisor to navigate the process effectively.

The Mega Backdoor Roth IRA is a powerful tool for those looking to significantly boost their Roth IRA contributions beyond standard limits. It offers the potential for substantial tax-free growth and flexible withdrawal options, making it an appealing strategy for high-income earners with the proper 401(k) plan structure. However, it’s important to weigh the benefits against the complexities and ensure they align with your overall retirement planning goals.

If you’re considering the Mega Backdoor Roth strategy, consult with a financial advisor to evaluate whether it fits your financial situation and to navigate the process efficiently. The right strategy can make a significant difference in your long-term retirement savings, and the Mega Backdoor Roth might be just the key to unlocking greater financial growth.

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kelsey Arvai, MBA, CFP®, and not necessarily those of Raymond James.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Contributions to a traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

1099 Details for Tax Season

Contributed by: Nick Defenthaler, CFP®, RICP®

Tax season is in full swing (everyone’s favorite time of year, right?!), and 1099s are in the process of being developed and distributed by investment broker-dealers and custodians. The two most common accounts clients own are retirement accounts (Roth IRAs, Traditional IRAs, SEP-IRAs, etc.) or after-tax investment/brokerage accounts (Joint brokerage account, individual brokerage account, trust brokerage account, etc.). Because retirement accounts and after-tax accounts are vastly different from a tax perspective, the 1099s that are generated will be much different as well. Let’s review the differences.

Retirement Accounts (Traditional IRAs, Roth IRAs, SEP-IRAs, 401k, 403b, etc.)

Retirement accounts produce what’s known as a 1099-R. Yes, you guessed it – the “R” stands for retirement account! Because retirement accounts are tax-deferred vehicles, the IRS only cares about how much was withdrawn from the account and if there was any tax withheld on those distributions (the 1099-R is also accompanied by form 5498, which also shows any contributions to the retirement account). Because of the simplicity and what’s captured on this tax form, I commonly refer to a client’s 1099-R as their “retirement account’s W2”. Because of the tax-deferred nature of retirement accounts, portfolio income such as dividends, interest, and capital gains are completely irrelevant from a tax reporting standpoint. Because these income sources do not play a role within the 1099-R, there’s far less accounting that goes into producing the 1099-R, which means they are released early in the year – typically in late January/early February (around the same time most W2s are produced for those still working).

**Important Tip: For those over 70 ½ that have chosen to utilize the Qualified Charitable Distribution or ‘QCD’ strategy (click here to learn more about QCDs) and gift funds directly from their IRA, please note that not all investment companies will report these gifts on your 1099-R! If the gifts you made from your IRA directly to charity do not appear on your 1099-R, it will be your responsibility (or you can ask your advisor) to communicate how much you’ve gifted throughout the year to your tax preparer to ensure you’re receiving the tax benefits you’re fully entitled to! If gifts are missed, you would be able to file an amended tax return, but this is a time-consuming and sometimes costly step I would recommend avoiding, if possible.**

After-Tax Investment/Brokerage Accounts (Trust accounts, joint accounts, individual accounts, etc.)

After-tax investment or ‘brokerage accounts’ are very different compared to retirement accounts when it comes to tax reporting. Because these accounts are funded with after-tax dollars and not held in a retirement account, there is no tax-deferral. This means that income sources such as dividends, interest, and capital gains are taxable to clients each year – the 1099 produced for these accounts captures this data so your tax preparer can accurately complete your tax return each year. Within the 1099 summary, there are three common sections:

• 1099-Div: Reports dividends paid throughout the year

• 1099-Int: Reports interest paid throughout the year

• 1099-B: Reports capital gains or losses generated throughout the year

Unlike retirement accounts that are tax-deferred, dividends, interest, and capital gains/losses play a significant role within the 1099 because they are reportable on your tax return each year. Because of this, a significant amount of accounting from the various investments within your account is required to ultimately determine these figures that will be captured on your 1099. Because taxes are not withheld in these accounts if distributions ever occur, withdrawals are not captured on these 1099s as they would be on a 1099-R. Given the extensive accounting that occurs to ensure errors are not made on reportable income, the earliest these 1099s become available is typically mid-February. That said, it’s quite common for many 1099s to be distributed closer to mid-March. Because of this, I always recommend consulting with your tax professional to see if filing a tax extension would be appropriate for your situation.

As you can see, there are important differences between these different tax reporting documents. Having a better understanding of each will hopefully make your upcoming tax season a bit more manageable. 

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Important Information for Tax Season 2024

Contributed by: Andrew O’Laughlin, CFP®, MBA

As we prepare for tax season, we want to keep you apprised of when you can expect to receive your tax documentation from Raymond James.

2024 Form 1099 Mailing Schedule

• January 31 – Mailing of Form 1099-Q and Retirement Tax Packages.

• February 15 – Mailing of original Form 1099s.

• February 28 – Begin mailing delayed and amended Form 1099s.

• March 15 – Final mailing of any remaining delayed original Form 1099s.

Additional Important Information

Delayed Form 1099s

In an effort to capture delayed data on original Form 1099s, the IRS allows custodians (including Raymond James) to extend the mailing date until March 15, 2025, for clients who hold particular investments or who have had specific taxable events occur. Examples of delayed information include:

• Income reallocation related to mutual funds, real estate investment, unit investment, grantor and royalty trusts, as well as holding company depositary receipts.

• Processing of original issue discount and mortgage-backed bonds.

• Expected cost basis adjustments including, but not limited to, accounts holding certain types of fixed income securities and options.

If you do have a delayed Form 1099, we may be able to generate a preliminary statement for you for informational purposes only, as the form is subject to change.

Amended Form 1099s

Even after delaying your Form 1099, please be aware that adjustments to your Form 1099 are still possible. Raymond James is required by the IRS to produce an amended Form 1099 if notice of such an adjustment is received after the original Form 1099 has been produced. There is no cutoff or deadline for amended Form 1099 statements. The following are some examples of reasons for amended Form 1099s:

• Income reallocation.

• Adjustments to cost basis (due to the Economic Stabilization Act of 2008).

• Changes made by mutual fund companies related to foreign withholding.

• Tax-exempt payments subject to alternative minimum tax.

• Any portion of distributions derived from U.S. Treasury obligations.

What Can You Do?

You should consider talking to your tax professional about whether it makes sense to file an extension with the IRS to give you additional time to file your tax return, particularly if you held any of the aforementioned securities during 2024.

If you receive an amended Form 1099 after you have already filed your tax return, you should consult with your tax professional about the requirements to re-file based on your individual tax circumstances.

And Don’t Forget…

As you complete your taxes for this year, a copy of your tax return is one of the most powerful financial planning information tools we have. Whenever possible, we request that you send a copy of your return to your financial planner, associate financial planner, or client service associate upon filing. Thank you for your assistance in providing this information, which enhances our services to you.

We hope you find this additional information helpful. Please call us if you have any questions or concerns about the upcoming tax season.

Andrew O’Laughlin, CFP®, MBA; is the Director of Client Services at Center for Financial Planning, Inc.® He has the CERTIFIED FINANCIAL PLANNER™ certification.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

2025 Retirement Account Contribution and Eligibility Limits Increases

Contributed by: Robert Ingram, CFP®

The IRS has recently announced the annual contribution limits for retirement plans and IRA accounts in 2025. And while the increases to most of the limits are modest, there are some notable increases. In particular, the legislation Setting Every Community Up for Retirement Act of 2022 (SECURE Act 2.0) adds some special contribution limits starting in 2025. Here are some of the adjustments to contribution limits and income eligibility limits for some contributions that you should keep on your radar as you plan your savings goals and targets for the New Year.

Employer retirement plan contribution limits (401k, 403b, most 457 plans, and Thrift Saving):

• $23,500 annual employee elective deferral contribution limit (increases $500 from $23,000 in 2024)

• $7,500 extra "catch-up" contribution if age 50 and above (remains the same as in 2024)

• Total amount that can be contributed to a defined contribution plan, including all contribution types (e.g., employee deferrals, employer matching, and profit sharing), will be $70,000 or $77,500 if age 50 and above (increased from $69,000 or $76,500 for age 50+ in 2024)

*SECURE Act 2.0 contribution limit change

Under a change made in SECURE ACT 2.0, starting in 2025, there will be a higher catch-up contribution limit for employees aged 60, 61, 62, and 63 who participate in the above plans.

• $11,250 is the "catch-up" contribution for those aged 60, 61, 62, and 63  ($3,750 more than the age 50 and above "catch-up" amount)

Traditional, Roth, SIMPLE IRA contribution limits:

Traditional and Roth IRA

• $7,000 annual contribution limit (remains the same as in 2024)

• $1,000 “catch-up” contribution if age 50 and above (also remains the same as in 2024)

Note: The annual limit applies to any combination of Traditional IRA and Roth IRA contributions. (i.e., You would not be able to contribute up the maximum to a Traditional IRA and to up the maximum to a Roth IRA.)

SIMPLE IRA

• $16,500 annual elective contribution limit (increases $500 from $16,000 in 2024)

• $3,500 “catch-up” contribution if age 50 and above  (remains the same as in 2024)

*SECURE Act 2.0 also sets a higher “catch-up” contribution limit to a SIMPLE for those aged 60-63)

• $5,250 “catch-up” contribution if aged 60, 61, 62, and 63 ($1,750 more than the age 50 and above “catch-up” amount)

Traditional IRA deductibility (income limits):

You may be able to deduct contributions to a Traditional IRA from your taxable income.  Eligibility to do so depends on your tax filing status, whether you (or your spouse) is covered by an employer retirement plan, and your Modified Adjusted Gross Income (MAGI). The amount of a Traditional IRA contribution that is deductible is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For example,

• Filing Single

  • You are covered under an employer plan

    • Partial deduction phase-out begins at $79,000 up to $89,000 (then above this no deduction) compared to 2024 (phase-out: $77,000 to $87,000)

•  Married filing jointly

  • Spouse contributing to the IRA is covered under a plan

    • Phase-out begins at $126,000 to $146,000 compared to 2024 (phase-out: $123,000 to $143,000)

  • Spouse contributing is not covered by a plan, but the other spouse is covered under a plan

    • Phase-out begins at $236,000 to $246,000 compared to 2022 (phase-out:  $230,000 to $240,000)

Roth IRA contribution (income limits):

Similarly to making tax-deductible contributions to a Traditional IRA, being eligible to contribute to a Roth IRA depends on your tax filing status and your income. Your allowable contribution is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For 2025, the limits are as follows:

• Filing Single or Head of Household

  • Partial contribution phase-out begins at $150,000 to $165,000  compared to 2024 (phase-out:  $146,000 to $161,000)

•  Married filing jointly

  • Phase-out begins at $236,000 to $246,000 compared to 2023 (phase-out: $230,000 to $240,000)

If your MAGI is below the phase-out floor, you can contribute up to the maximum. Above the phase-out ceiling, you are ineligible for any partial contribution.

Eligibility for contributions to retirement accounts like Roth IRA accounts also requires you to have earned income. If you have no earned income or your total MAGI makes you ineligible for regular Roth IRA contributions, other strategies such as Roth IRA Conversions could be good alternatives in some situations to move money into a Roth. Roth Conversions can have different income tax implications, so you should always consult with your planner and tax advisor when considering these types of strategies.

As always, if you have any questions surrounding these changes, don’t hesitate to contact us!

Have a happy and healthy holiday season!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

Any opinions are those of Bob Ingram, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Three Financial Planning Questions for Small Business Owners

Contributed by: Lauren Adams, CFA®, CFP®

One of the most rewarding types of clients we have the honor of working with are business owners. These folks have built their companies from the ground up across a wide variety of industries or worked their way up through the ranks to now serve at their company’s helm. They are masters of their fields of expertise and savvy strategists. However, they are often frustrated when their expertise in their domain doesn’t translate into know-how to manage their finances. This is why many choose to outsource the management of their finances to professionals. If you are a business owner devoted to your business and perhaps putting your own planning on the back burner, we’ve put together a few questions for you to consider.  

1. Are you optimizing your retirement savings?

Two of the most popular retirement savings vehicles for small business owners are the SEP (Simplified Employee Pension) IRA and the solo 401(k).

SEP IRAs are one of the most common retirement accounts for self-employed individuals and small business owners; they are popular for their simplicity and flexibility. They are similar to traditional IRAs in many ways but with some twists. With a SEP IRA, you can most likely contribute much more than a traditional IRA. Depending on your business entity structure, a business owner’s limit is generally the lesser of 25% of compensation (up to $69,000 in 2024). These accounts tend to be ideal for folks who have very few (or zero) other employees because owners must contribute proportional amounts for each eligible employee.

SEPs also offer a lot of flexibility: you can freely roll over the account into a Traditional IRA in the future, and you can make contributions until your taxes are due the following year. Some limitations to consider: you don’t have the ability to take a loan from your SEP IRA (like you can from a 401(k)), there is no Roth contribution option with SEPs (contributions will always be tax deductible up front and withdrawals will always be taxed when taken out), and typically the self-employed person would need to earn a lot to be able to max out their annual contribution limit ($300k+ in 2024).

Solo 401(k)s are a simplified version of the popular corporate 401(k) savings plan. They might be a fit for owner-only businesses whose only employees are the owner or the owner and spouse. With solo 401(k)s, the owner gets to decide how much to contribute as the employee and the employer. Contributions can be pre-tax or Roth, and 401(k)s do allow for tax-free loans (if the proper procedure is followed). There are some nuances to the employee and employer contribution limits, but solo 401(k)s have the same high contribution rate as SEP IRAs, and typically, you can get there faster (with an overall lower level of total compensation) than the SEP. A downside of solo 401(k)s is that they have some added cost and complexity. Plan documents need to be established, and the IRS requires owners to file a Form 5500 if it has $250,000 or more in assets at the end of the year.

Luckily, these are both great savings options for business owners to build long-term retirement savings and diversify the wealth they are building inside their businesses. We have experience assisting our business owner clients with both types of plans.

2. Are you taking advantage of the QBI deduction?

The qualified business income (QBI) deduction is a potential 20% deduction for self-employed individuals and owners of pass-through entities like LLCs, partnerships, and S corps that was created by the 2017 Tax Cuts and Jobs Act. There is a threshold and phaseout of this deduction if you make too much money, and the rules and calculations around it are complex. We won’t get into the nitty-gritty here, but we want to ensure it is on our business owner clients’ radar. In our experience, many business owners are not aware of this deduction, or they may be paying themselves too high a salary than legally necessary (thus increasing their FICA taxes and limiting their profits and the amount of the potential deduction they are eligible for).

Also, this benefit is scheduled to sunset on December 31, 2025 (unless Congress votes to extend it). So you want to make sure you’re making the most of it while you can, as it can translate into potentially large tax savings under the right circumstances. Don’t wait – call your CPA today and discuss ways you can maximize this benefit while it is still around.

3. Are you planning for the future?

As business owners ourselves, we understand how easy it is to get caught up in working “in” the business instead of “on” the business. That’s why we’ve found helpful tools like Gino Wickman’s Traction and the EOS Resources (https://www.eosworldwide.com/). Dedicating time to work on the business itself can pay dividends in your own quality of life and the equity value of the business itself.

If you are contemplating a sale in the future, don’t assume that you need to wait until after you cash out to call a financial advisor. We can employ many tactics leading up to your business sale (such as tax-loss harvesting strategies like direct indexing or tax-advantaged charitable giving) to help mitigate the tax bite of this watershed moment in your life.  

We hope these questions have helped get you thinking about some opportunities you might be missing and showcase how important prioritizing your own financial planning can be. Reach out to talk through your personal situation together. We’d love to help!

Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Adams, CFA®, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

The Widow’s Penalty: Lower Income, Higher Taxes

Contributed by: Nick Defenthaler, CFP®, RICP®

A newly widowed example client, whom we'll call "Judy," receives communication from Medicare that her Part B and D premiums are significantly increasing from the prior year. To make matters worse, she also notices that she's now in a much higher tax bracket when filing her most recent tax return. What happened? Now that Judy's husband is deceased, she is receiving less in Social Security and pension income. Her total income has decreased, so why would she have to pay more tax and Medicare premiums? Unfortunately, she's a victim of what's known as the "widow's penalty."

Less Income and More Taxes. What Gives?

Simply put, the widow's penalty is when a surviving spouse ends up paying more taxes on less income after the death of their spouse. This happens when a widow or widower starts filing as a single filer the year after their spouse's death.

When the first spouse dies, the surviving spouse typically sees a reduction in income. While the surviving spouse will continue to receive the greater of the two social security benefits, they will no longer receive the lower benefit. In addition, it's also very likely that the surviving spouse will either entirely or partially lose income tied only to the deceased spouse (ex., employment income, annuity payments, or pensions with reduced or no survivor benefits). Depending on how much income was tied to the deceased spouse, the surviving spouse's fixed income could see a sizeable decrease. At the same time, the surviving spouse starts receiving less income, and they find themself subject to higher taxes.

With some unique exceptions, the surviving spouse is required to start filing taxes as single instead of as married, filing jointly in the year following their spouse's death. In 2024, that means they will hit the 22% bracket at only $47,150 of taxable income. Married filers do not reach the 22% bracket until they have more than $94,300 of income. To make matters worse, the standard deduction the widow will receive will also be cut in half. In 2024, for a married couple (both over 65), their standard deduction will be $32,300. A single filer (over the age of 65) will only have a $16,500 deduction! Unfortunately, even with less income hitting the tax return, widowed tax filers commonly end up paying higher taxes due to the compression of tax brackets and the dramatic standard deduction decrease for single filers.

Medicare Premiums Increase

Tax brackets are not the only place surviving spouses are penalized. Like the hypothetical example above, many surviving spouses see their Medicare premiums increase even though their income has decreased because of how the income-related monthly adjusted amount (IRMAA) is calculated (click HERE to visit our dedicated Medicare resource page). Whereas there is no surcharge until a married couple filing jointly reaches an income of $206,000, single filers with a modified adjusted gross income (MAGI) of more than $103,000 are required to pay a surcharge on their Medicare premiums. This means that a couple could have an income of $127,000 and not be subject to the Medicare IRMAA surcharge. However, if the surviving spouse now has income over $106,000, their premium will increase by almost $1,000 per year. In this same example, the widow could now be in the 22% bracket (as compared to the 12% bracket with $120k of income filing jointly) and be paying approximately $3,600 more in federal tax.

Proactive Planning

Short of remarrying, there is no way to avoid the widow's penalty. However, if your spouse has recently passed away, there may be some steps you can take to minimize your total tax liability.

For most widows, the year their spouse dies will be the last year they will be allowed to use the higher married filing jointly tax brackets and standard deduction. In some cases, it can make sense to strategically realize income during the year of death to minimize the surviving spouse's lifetime tax bill. A surviving spouse might do this by converting savings from a Traditional IRA to a Roth IRA while they are still subject to the married filing jointly rates.

Let's look at a hypothetical scenario with a couple we'll call John and Mary. After several years in a long-term care assisted living facility, John sadly passed away at age 85. Because John and Mary did not have long-term care insurance, they had sizeable out-of-pocket medical expenses that resulted in a significant medical deduction in the year of John's passing. Several months after her husband's passing, over $100,000 was converted from her IRA to a Roth IRA. Because this was the last year she could file jointly on her taxes and had the significant medical deduction for the year John passed, Mary only paid an average tax rate of 10% on the $100,000 that was converted. As we stand here today, Mary would now be filing single and find herself in the 24% tax bracket (which will likely increase to 28% in 2026 as our current low tax rates expire at the end of 2025).

The widow's penalty should be on every married couple's radar. It's possible that while both spouses are living, their tax rates will always remain the same, as we've highlighted above. Unless both spouses pass away within a very short period of time from one another, higher taxes and Medicare premiums are likely inevitable. However, proper planning can help dramatically reduce the impact of this penalty on your plan.

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James.

Raymond James and its advisers do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

These examples are hypothetical illustrations and are not intended to reflect any actual outcome. they are for illustrative purposes only. Individual cases will vary. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making any investment decision, you should consult with your financial advisor about your individual situation.

You've inherited an IRA – Now What?

Contributed by: Kali Hassinger, CFP®, CSRIC®

Receiving an inheritance can be confusing and filled with mixed emotions. However, when inheriting a traditional IRA, the confusion can be compounded by the multitude of rules, regulations, and tax implications surrounding these accounts. How you manage the account in the future can depend on several factors, such as your relationship with the deceased and the age of the deceased at death.

You've Inherited an IRA from your Spouse

If you inherited an IRA from your spouse, and you are the sole beneficiary, you have several options on how to manage the account in the future. The first option is to simply allow the account to remain in your deceased spouse's name.  In this example, if your spouse hadn't yet reached RMD or Required Beginning Date age (as of right now, this is age 73, but it has changed several times in the last few years), you wouldn't need to begin taking Required Minimum Distributions (RMDs) until your spouse would have reached age 73. With this process, you will have additional elections to make regarding which life expectancy table will be used to determine your RMDs.

Spouses can also transfer the account assets into their own traditional IRA. This option is specific to spouses only. With this election, the account is treated no differently than an IRA established in your name. Required Minimum Distributions would not begin until your RMD age. 

However, if you want to access the funds earlier than 59.5 without a 10% tax penalty, it could make more sense to open a beneficiary IRA. This account will be subject to annual required distributions, but again, without a tax penalty.

You've Inherited an IRA from Someone Else

If you recently (since 2020) inherited an IRA from someone else, such as a parent, aunt, or uncle, and as long as they were more than ten years older than you, you will likely need to open an inherited IRA and distribute the entire account within ten years!

If the deceased was subject to Required Minimum Distributions before their death, you must also take an RMD each year (Note: This requirement has been waived in recent years but is set to begin in 2025.) Given that traditional IRA withdrawals, whether inherited or not, are subject to ordinary income tax, this can create significant tax implications for beneficiaries. Purposeful tax planning is essential to avoid unforeseen or forced distributions in later years.

The options discussed here are certainly not exhaustive, and rules differ for beneficiaries who are disabled, chronically ill, minors, or entities (as opposed to individuals). These differing rules also apply to instances in which the beneficiary is less than ten years younger than the deceased account holder.

If you've inherited an IRA and are looking for guidance on which option or planning path is best for you, we are here to help.

Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC® and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.