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Your Parents Left You Their IRA: 6 Rules That Can Make an Inherited IRA Surprisingly Complicated

August 22, 2026 by Brandon Marcus Leave a Comment

Inheriting an IRA can feel like receiving a financial gift with one tiny catch: the gift comes with a rulebook. The account may contain a meaningful amount of money, but the IRS controls how and when many beneficiaries can take it out, and those rules depend on who inherited the account, when the original owner died, and whether the owner had already reached the age for required minimum distributions.

That makes an inherited IRA one of those financial situations where doing nothing can feel like the safest move, even though procrastination can create problems. A beneficiary who knows the basic rules can make smarter decisions about withdrawals, taxes, and deadlines instead of discovering an unpleasant surprise when tax season rolls around.

1. The 10-Year Rule Does Not Mean “Ignore It for 10 Years”

For many non-spouse beneficiaries, the SECURE Act created a 10-year deadline that requires the entire inherited IRA balance to leave the account by December 31 of the 10th year following the original owner’s death.

That sounds wonderfully simple until another rule enters the room, because some beneficiaries must take annual required minimum distributions during that 10-year period when the original owner died on or after the required beginning date. The IRS finalized regulations that apply these beneficiary RMD rules beginning in 2025, so the old assumption that every beneficiary can simply wait until year 10 no longer works in every situation.

2. Your Relationship to the Owner Changes the Rules

A surviving spouse gets options that a typical adult child does not, including the ability in many circumstances to treat an inherited IRA as their own IRA or roll it into their own IRA. That choice can significantly change when withdrawals become mandatory and how the account fits into the spouse’s broader retirement strategy.

An adult child generally falls under the 10-year rule, while certain beneficiaries receive special treatment. The IRS classifies a surviving spouse, a minor child, a disabled or chronically ill individual, and an individual who stands no more than 10 years younger than the account owner as eligible designated beneficiaries, although different rules can apply once a minor child reaches the age of majority.

3. The Original Owner’s Age Matters More Than You Might Expect

The date of death does not tell the whole story, because the IRS also looks at whether the IRA owner had reached their required beginning date for RMDs. If the owner died after that point, a beneficiary subject to the 10-year rule generally must continue taking annual RMDs during the 10-year window, then empty the remaining balance by the deadline.

If the owner died before the required beginning date, a beneficiary subject to the 10-year rule generally can wait until the 10th year to empty the account, although taking earlier withdrawals may make sense for tax or financial-planning reasons. This distinction creates a particularly sneaky trap because two people can inherit similarly sized IRAs from parents who die around the same time and face different withdrawal schedules.

4. Traditional and Roth Inherited IRAs Behave Differently at Tax Time

Money from an inherited traditional IRA generally counts as taxable income when the beneficiary withdraws it, because the original account owner typically deferred income taxes on those retirement dollars. That does not mean every dollar automatically faces tax, but it does mean a large withdrawal can push taxable income higher in the year of the distribution.

An inherited Roth IRA usually offers a much friendlier tax picture, since qualified Roth distributions generally avoid federal income tax, but beneficiaries still must follow inherited-account distribution rules. The IRS notes that earnings from a Roth IRA can face tax in certain circumstances when the original Roth account had not satisfied the five-year requirement, so “Roth means everything is automatically tax-free” goes a little too far.

5. Taking Everything at Once Can Create a Giant Tax Bill

An inherited IRA beneficiary can generally take a lump-sum distribution, but “can” does not necessarily mean “should.” A large traditional IRA withdrawal can pile taxable income onto wages, investment income, or other retirement income during the same year, potentially producing a much larger tax bill than a beneficiary expected.

Spreading taxable withdrawals across several years can sometimes make more sense, particularly when the beneficiary expects lower income in certain years. A beneficiary who inherits a sizable traditional IRA should consider the tax consequences before transferring a large chunk of the account into a checking account simply because the money has become available.

6. The Paperwork and Beneficiary Details Matter

The inherited IRA needs proper handling with the custodian, and the beneficiary should confirm the account’s registration, beneficiary designation, date of death, account type, and applicable distribution schedule. Multiple beneficiaries can create additional complications, while trusts and estates can trigger different rules from those that apply to an individual beneficiary.

The year-of-death RMD can also matter, because if the original owner had an RMD due and did not take the full amount before death, the beneficiaries generally must handle the remaining amount. Keeping statements, beneficiary paperwork, withdrawal records, and tax forms together can turn an inherited IRA from a paperwork scavenger hunt into a manageable financial task.

The Best Inheritance May Be a Plan, Not a Payout

An inherited IRA can look deceptively straightforward on a brokerage statement, but the tax treatment and withdrawal schedule can change depending on the beneficiary, the original owner’s age, the date of death, and whether the account holds traditional or Roth money. The biggest mistake often involves treating the 10-year rule as a universal “do nothing until year 10” permission slip, because some beneficiaries face annual RMD requirements along the way.

Before moving substantial money, a beneficiary should confirm the applicable rules with the IRA custodian and consider getting personalized tax advice when the account carries significant value or unusual beneficiary circumstances. The IRS itself recommends reviewing the IRA’s plan documents or checking with the custodian or trustee for specific provisions, which makes sense when one wrong assumption can turn a generous inheritance into an unnecessarily complicated tax problem.

Which inherited IRA rule do you think would catch the most people by surprise?

IRS Proposes New Eligibility Rules for Refundable Payments From 4 Tax Credits

August 21, 2026 by Amanda Blankenship Leave a Comment

IRS refundable tax credit proposal — The IRS and Treasury have proposed regulations that would change eligibility for the refundable portions of four federal tax credits. The proposal has not yet taken effect. Tada Images/Shutterstock

The Internal Revenue Service and the Department of the Treasury have issued a notice of proposed rulemaking that would classify the refunded portion of certain federal refundable tax credits as a “Federal public benefit” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). The proposal was published in the Federal Register on August 20, 2026.

Four Tax Credits Would Be Affected

Under the proposed rule, individuals who are not considered “qualified aliens” under PRWORA would become ineligible to receive the refundable portion of four specific federal income tax credits: the adoption tax credit, the American Opportunity Tax Credit, the child tax credit, and the earned income credit. The non-refundable portions of these credits are not addressed by the proposal; only the amounts that would otherwise be paid out as a refund to the taxpayer are at issue.

Who Would Meet the Proposed Eligibility Standard?

PRWORA, enacted in 1996, generally restricts certain federal public benefits based on immigration status. Its definition of a “qualified alien” includes categories such as lawful permanent residents, refugees, asylees, and certain other noncitizens who meet statutory requirements. Because immigration classifications can be complicated, taxpayers should not determine their eligibility based solely on a general list in a news article.

The Proposal Applies to Refundable Amounts, Not Every Dollar of the Credit

The IRS stated it is issuing the proposed rule under authority granted by section 7805(a) of the Internal Revenue Code, as well as section 404 of PRWORA, which requires federal agencies administering a federal public benefit to notify the public and benefit recipients of any eligibility changes.

The proposed rule is identified as REG-119882-25 and covers amendments to 26 CFR Part 1 under Internal Revenue Code sections 23, 24, 25A, and 32, which govern the adoption tax credit, child tax credit, American Opportunity Tax Credit, and earned income credit, respectively.

The distinction between a refundable and nonrefundable tax credit matters. A nonrefundable credit can generally reduce the federal income tax someone owes, while a refundable amount can potentially result in money being paid to the taxpayer beyond their income-tax liability. Under the proposal, it is the refunded portion of the affected credits that would be treated as a federal public benefit under PRWORA. The proposal therefore should not be described as making affected taxpayers completely ineligible for all four tax credits.

Nothing Changes for Taxpayers Yet

The IRS has set a public comment deadline of October 5, 2026. A public hearing has been scheduled for October 14, 2026, though it will be cancelled if no requests to speak are received by the October 5 deadline. Requests to attend the hearing must be submitted by 5 p.m. ET on October 9, 2026. Comments may be submitted electronically through the federal rulemaking portal at regulations.gov using docket number REG-119882-25, or by mail to the IRS address specified in the Federal Register notice.

The proposal could be particularly important for households that qualify for refundable credits even when their federal income-tax liability is relatively low. For example, someone might use part of an eligible credit to reduce their tax liability to zero and potentially receive another portion as a refund. Under the proposed framework, PRWORA eligibility would affect the refunded amount rather than automatically eliminating the entire underlying credit. Taxpayers should not change how they file based solely on the proposal because it has not been finalized.

Because this is a proposed rule, it has not yet taken effect. Taxpayers and advisors who may be affected by changes to eligibility for these credits should monitor the rulemaking process and verify their specific circumstances directly with the IRS or a qualified tax professional.

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Amanda Blankenship

Amanda Blankenship is the Chief Editor for District Media. With a BA in journalism from Wingate University, she frequently writes for a handful of websites and loves to share her own personal finance story with others. When she isn’t typing away at her desk, she enjoys spending time with her daughter, son, husband, and dog. During her free time, you’re likely to find her with her nose in a book, hiking, or playing RPG video games.

Your 401(k) Has $500,000 — How Much of That Money Is Really Yours After Taxes?

August 20, 2026 by Brandon Marcus Leave a Comment

A $500,000 401(k) balance can look like a giant neon sign announcing, “Retirement is going to be fine!” Then taxes walk into the room and quietly pull up a chair. If that $500,000 sits in a traditional 401(k), the account balance does not represent $500,000 of spendable money because most withdrawals generally count as ordinary taxable income.

That does not mean the IRS gets to swipe a quarter-million dollars just because the account crossed a nice round number. The actual tax bill depends on how much comes out, what other income arrives that year, the account’s tax treatment, filing status, deductions and other factors. The big takeaway matters more than any single estimate: a $500,000 401(k) balance and $500,000 in your bank account are two very different things.

The $500,000 Balance Comes With a Tax Asterisk

Traditional 401(k) contributions generally receive favorable tax treatment while the money goes into the account, but that tax bill does not disappear forever. When taxable money comes out, the IRS generally treats the distribution as income for the year, rather than giving it special long-term capital-gains treatment.

That distinction becomes especially important if someone decides to pull the entire $500,000 out in one giant retirement payday. The withdrawal can stack on top of other taxable income and push portions of the distribution into higher federal tax brackets, which means the last dollars withdrawn can face a higher marginal rate than the first dollars. A giant withdrawal can therefore create a much uglier tax result than several smaller withdrawals spread across different years.

The math gets more interesting when 2026 tax brackets enter the picture. For a single filer, the 2026 federal brackets range from 10% to 37%, while the standard deduction stands at $16,100; for married couples filing jointly, the standard deduction reaches $32,200.

So, What Could $500,000 Actually Become?

Consider a simplified example: a single taxpayer has no other income, takes the entire $500,000 from a traditional 401(k) during 2026 and claims the $16,100 standard deduction. That leaves $483,900 of taxable income, producing a federal income tax bill of roughly $138,134 under the 2026 tax brackets, leaving about $361,866 after federal income tax.

That calculation does not represent a universal answer, because retirement rarely follows a neat spreadsheet. A married couple filing jointly with no other income would face a different result, and the same $500,000 withdrawal would produce roughly $102,608 in federal income tax after the $32,200 standard deduction under the 2026 brackets, leaving about $397,392 before any state tax.

Neither example includes state or local income taxes, other income, credits, deductions beyond the standard deduction, charitable strategies or other circumstances that could change the final bill. The numbers also assume the entire withdrawal qualifies as taxable traditional 401(k) money, rather than including Roth or after-tax contributions that could receive different treatment.

That is why multiplying $500,000 by one tax rate gives a misleading answer. Federal income tax uses brackets, so a taxpayer does not suddenly pay the highest applicable rate on every dollar simply because the total withdrawal reaches a particular bracket.

The Sneaky Problem With Taking It All at Once

There is another number worth knowing: 20%. If a taxable eligible rollover distribution from a 401(k) goes directly to the account owner instead of directly to another eligible retirement account, the plan generally must withhold 20% for federal income taxes.

That withholding can make a $500,000 check look dramatically smaller before the money even reaches the bank. But withholding is not necessarily the same thing as the final tax bill, which means someone could still owe additional tax when filing the return. Conversely, someone who chooses a direct rollover can generally move the eligible distribution to another retirement account without that mandatory 20% withholding.

The bigger issue involves deliberately choosing how much money to withdraw each year. Someone who needs only $50,000 or $60,000 annually may have no reason to create a $500,000 taxable-income explosion in a single year, especially if a multi-year withdrawal strategy better fits the household’s needs.

There is also an age-related wrinkle. Generally, taxable withdrawals before age 59½ can trigger an additional 10% early-distribution tax unless an exception applies, although the rules contain several exceptions.

A Big 401(k) Is Better Viewed as Future Income

A $500,000 balance becomes much easier to evaluate when it stops looking like a pile of cash and starts looking like a source of future income. Instead of asking, “How much of this $500,000 can be spent today?” a more useful question becomes, “How much can this account provide over several years without creating an unnecessarily large tax bill?”

That shift can change the entire retirement conversation. A retiree might combine 401(k) withdrawals with other income sources and adjust the withdrawal amount from year to year, rather than automatically emptying the account. The goal involves coordinating income, taxes and spending instead of treating the 401(k) balance like a checking-account balance with extra zeros.

It also pays to know whether the account contains traditional money, Roth money or a mixture of tax treatments. Roth 401(k) money can follow different distribution and tax rules, so the simple “$500,000 minus income tax” calculation does not apply automatically to every account.

And there is one more reason not to panic when the tax number looks large: paying taxes on retirement money does not mean the strategy failed. The entire point of tax-deferred retirement savings involves postponing taxation, and a well-planned withdrawal strategy can help control when and how much taxable income arrives.

The $500,000 Question Has a Better Answer

A $500,000 traditional 401(k) could leave a single filer with roughly $361,866 after federal income tax under the simplified 2026 example above, while a married couple filing jointly could retain roughly $397,392 under the same assumptions. Those figures demonstrate the central point, not a personalized tax forecast.

The smarter move involves looking at the entire retirement-income picture before deciding how much to withdraw. Tax brackets, filing status, other income, state taxes, account type and withdrawal timing can all change what ultimately lands in the checking account. A $500,000 401(k) therefore deserves to be treated less like a jackpot and more like a valuable pile of future income that needs a withdrawal strategy.

How much of your $500,000 401(k) would you actually want to withdraw each year in retirement, and would taxes change your strategy?

IRS Proposes New Restrictions on Refundable Tax Credits for Some Immigrants

August 20, 2026 by Amanda Blankenship Leave a Comment

The Department of the Treasury and the Internal Revenue Service have issued proposed regulations that would clarify eligibility requirements for the refunded portions of certain individual income tax credits, according to an official IRS announcement designated IR-2026-93.

The proposed rules seek to strengthen enforcement of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), a federal law that limits access to federal public benefits to U.S. citizens, U.S. nationals, and qualified aliens. Treasury and the IRS are now proposing that the refunded portions of certain refundable tax credits constitute federal public benefits under that law.

Four Tax Credits Are Included in the Proposal

Four specific tax credits are covered by the proposal: the adoption tax credit, the child tax credit, the American Opportunity Tax Credit, and the Earned Income Tax Credit (EITC). Importantly, the proposed rules apply only to the refunded portion of these credits — defined as the amount by which the combined eligible credits exceed a taxpayer’s income tax liability for the year. Taxpayers who do not qualify to receive the refunded portion may still use the non-refunded portion of an applicable credit to offset their income tax liability, according to the announcement.

The proposal follows a legal analysis by the Department of Justice’s Office of Legal Counsel concluding that refunded portions of the affected credits qualify as federal public benefits under PRWORA. Treasury Secretary Scott Bessent and IRS Chief Executive Officer Frank J. Bisignano both issued statements indicating the rules are intended to direct these benefits to eligible taxpayers and protect the integrity of the tax system.

This would not necessarily eliminate the entire value of an affected tax credit for someone who does not meet the proposed eligibility requirements. Treasury and the IRS are distinguishing between the portion used to reduce federal income tax liability and the refundable amount that can result in money being paid to a taxpayer beyond that liability. The proposed PRWORA restrictions would apply to the latter.

The Rules Are Not in Effect Yet

If finalized, the regulations would take effect for tax years ending on or after the date the final regulations are published. No final effective date has been set, as the rules are still in the proposed stage.

Treasury and the IRS have invited public comments and requests for a public hearing on all aspects of the proposed regulations. Instructions for submitting comments are included in the proposed regulations.

The EITC in particular is widely used by lower- and middle-income working households, making these proposed changes potentially significant for a broad segment of taxpayers and tax filers who claim refundable credits.

Readers with questions about their specific eligibility for any of the affected credits should consult the IRS website at IRS.gov or speak with a qualified tax professional, as individual circumstances vary.

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Amanda Blankenship

7 Questions to Ask Before Moving Money From a 401(k) Into an IRA

August 18, 2026 by Brandon Marcus Leave a Comment

Moving money from a 401(k) into an IRA can look like a simple retirement housekeeping chore: transfer the money, pick some investments, and move on with life. But that little rollover button can affect investment choices, fees, taxes, withdrawal rules, and even how much control comes with the account.

That makes a rollover worth examining before making the leap. An IRA may offer useful flexibility, but an old 401(k) can also contain valuable features that disappear once the money leaves the plan. Seven questions can help separate a genuinely smart move from a financial game of musical chairs.

1. What Will the IRA Actually Give You That the 401(k) Doesn’t?

Start with the reason for moving the money, because “everyone says IRAs are better” does not qualify as a retirement strategy. An IRA may offer a broader menu of mutual funds, exchange-traded funds, individual stocks, bonds, and other investments, while a 401(k) typically limits choices to the investments selected by the plan. An IRA can also make it easier to consolidate several old retirement accounts into one place. The attraction makes sense when an old 401(k) feels like a forgotten drawer full of financial paperwork. But convenience alone should not decide the move.

Look at the actual investment lineup before transferring anything. If the 401(k) already offers low-cost funds, useful institutional pricing, or investments that would cost more to replicate elsewhere, leaving the account alone could make plenty of sense. The IRS notes that rolling a workplace plan into an IRA can consolidate investments and make them easier to track.

2. How Much Will the New Account Cost?

Fees deserve a close inspection because a seemingly tiny percentage can quietly nibble at a retirement balance for years. Compare the 401(k)’s investment expenses, administrative fees, and other charges with the IRA provider’s fund expenses, account fees, trading costs, and advisory charges. Do not assume an IRA automatically costs less simply because advertisements make it sound wonderfully cheap. Some IRAs offer inexpensive index funds and commission-free trades, while others bundle investment management into an ongoing advisory fee. The important comparison involves the actual dollars and percentages attached to the accounts under consideration.

Ask for a complete fee schedule rather than relying on a cheerful “low-cost” label. A 401(k) statement can reveal plan-level charges, while an IRA provider can explain expenses tied to particular investments or services. If an adviser recommends the rollover, ask exactly how that adviser gets paid and whether the recommendation creates a financial incentive to move the account.

3. Will the Rollover Trigger a Tax Bill?

A direct rollover from a traditional 401(k) into a traditional IRA generally does not create current federal income tax. That changes if the money moves into a Roth IRA, because untaxed amounts generally count as taxable income in the year of the conversion.

The method of transfer matters, too. A direct rollover sends the money from the 401(k) administrator to the receiving retirement account without the participant taking possession of the funds, while a payment made to the participant generally faces mandatory 20% federal withholding. That 20% can create an unpleasant surprise if someone intends to roll over the entire balance but lacks outside cash to replace the withheld amount. A direct rollover usually keeps this particular headache off the kitchen table.

4. Does the 401(k) Have a Feature Worth Keeping?

Some 401(k) plans offer features that an IRA cannot duplicate, so the old account deserves more than a ceremonial goodbye. One especially important consideration involves employer stock, because special tax treatment can apply to certain distributions of qualifying employer securities. Another involves the age-based withdrawal rules that may make some workplace plans useful for people who leave an employer during or after the year they reach 55. Those rules can differ from IRA withdrawal rules, so age and employment status can change the calculation. A rollover that looks brilliant at 45 can look considerably less brilliant at 55.

The account’s creditor protections and plan-specific benefits also deserve attention. Federal law provides strong protections for many employer-sponsored retirement accounts, while IRA protections can depend partly on applicable law and circumstances. Before moving a large balance, check whether the existing plan offers unusually good investment pricing, withdrawal provisions, or other benefits that would vanish after the rollover.

5. What Happens to Required Minimum Distributions?

Required minimum distributions, or RMDs, can turn an apparently simple rollover into a timing puzzle. Traditional IRAs generally require withdrawals beginning at age 73, while a 401(k) participant who continues working may generally delay RMDs from that plan until retirement, provided the plan permits it, and the participant does not own more than 5% of the sponsoring business.

That distinction can matter for someone who keeps working later in life. Moving the money into an IRA could eliminate the ability to use the workplace-plan exception for delaying RMDs. Anyone approaching RMD age should calculate the consequences before initiating the transfer, particularly if continued employment plays a role in the retirement strategy.

6. Could the Rollover Affect a Future Roth Conversion?

A rollover can also change the tax landscape for someone considering Roth conversions later. Traditional, SEP, and SIMPLE IRA balances can affect the taxable portion of a Roth conversion when the tax rules require consideration of IRA basis and the total value of applicable traditional IRAs. That can make a seemingly innocent rollover more complicated than it first appears.

For example, someone with a large traditional IRA may face a different tax result from a Roth conversion than someone who keeps pretax retirement money inside a 401(k). After-tax contributions can complicate matters further because the IRS generally treats distributions from an account containing pre-tax and after-tax money proportionally. A tax professional can help model the consequences before money changes accounts.

7. Who Will Control the Investments After the Move?

An IRA can provide tremendous investment freedom, which sounds fantastic until an investor discovers that freedom includes several hundred ways to make a questionable decision. A carefully chosen 401(k) lineup may encourage a straightforward portfolio, while a brokerage IRA can offer thousands of securities, funds, and strategies. More choices do not automatically produce better results. The right question asks whether the available choices support a sensible long-term investment plan rather than merely providing more buttons to push.

Consider who will make the investment decisions after the rollover. If an investor plans to manage the account personally, the IRA should offer tools and investments that fit that approach without unnecessary costs. If an adviser will manage it, investigate the adviser’s compensation, services, and investment approach before transferring the money.

The Best Rollover Is the One With a Reason Behind It

A 401(k)-to-IRA rollover can be an excellent move when it improves investment choices, simplifies account management, reduces costs, or fits a carefully designed retirement strategy. It can also create tax complications, eliminate useful plan features, or introduce fees that were not obvious at first glance. The IRS generally allows eligible 401(k) money to move directly into an IRA without current taxation, but not every distribution qualifies for rollover treatment, and required minimum distributions cannot simply roll into another retirement account.

Would you keep an old 401(k) where it is or roll it into an IRA, and what would make the decision for you?

Federal Estate Tax vs. State Estate Tax: What Ordinary Families Need to Know

August 15, 2026 by Brandon Marcus Leave a Comment

Federal estate tax and state estate tax sound like two versions of the same financial headache, but they follow different rules and can affect different families. In 2026, the federal estate tax basic exclusion amount reaches $15 million for someone who dies during the year, which puts the federal tax far outside the reach of most households.

That does not mean every family can forget about estate taxes forever. Some states impose their own estate taxes with much lower thresholds, while a handful impose inheritance taxes that focus on the person receiving the money or property. A family can therefore face no federal estate tax and still encounter a state tax issue, particularly when an estate includes valuable real estate, a business, investment accounts, or property in more than one state.

The Federal Estate Tax Has a Very Large Front Door

For someone who dies in 2026, the federal basic exclusion amount stands at $15 million. The IRS generally looks at the value of the decedent’s gross estate, along with certain adjusted taxable gifts, when determining whether the estate must file Form 706.

That figure does not mean an estate automatically owes federal tax once its value crosses the line, because deductions and other estate tax rules affect the final calculation. A surviving spouse can also benefit from the federal portability rules, which can allow an executor to transfer a deceased spouse’s unused exclusion to the surviving spouse through a timely estate tax return.

State Estate Taxes Play by Their Own Rulebook

Here comes the part that can make estate planning feel like a board game with several sets of instructions: states create their own estate tax systems. As of 2026, a dozen states plus the District of Columbia impose estate taxes, and their exemption amounts can sit well below the federal $15 million threshold.

For example, an estate could fall comfortably below the federal threshold while still exceeding the estate tax threshold in a state such as Massachusetts, Oregon, Minnesota, Illinois, or Washington. State rules also differ on rates, deductions, portability, property located elsewhere, and other details, so a family should not assume that the federal number answers the state question.

Estate Tax and Inheritance Tax Are Not Twins

An estate tax generally focuses on the estate itself before assets reach beneficiaries, while an inheritance tax generally focuses on the person who receives the property. That distinction matters because an heir could face an inheritance tax even when the estate itself does not owe a traditional estate tax.

Only a small group of states currently impose inheritance taxes, and the rules can vary according to the beneficiary’s relationship with the deceased person. Spouses and close family members often receive more favorable treatment than distant relatives or unrelated beneficiaries, but the exact exemptions and rates depend on state law.

The Family Home Can Change the Conversation

A common mistake involves looking only at bank and investment accounts while forgetting the house, land, business interests, life insurance, retirement accounts, and other property that may contribute to an estate’s value. Picture a family with a valuable home, retirement savings accumulated over decades, a small business, and several investment accounts: the estate can look very different once someone adds everything together. That does not automatically create a federal estate tax bill, but it can make state rules much more important.

Property in another state can add another wrinkle, especially when an estate includes real estate or other assets tied to a different jurisdiction. Washington, for example, states that its estate tax can apply to a Washington resident’s property wherever it sits and can also apply to certain Washington property owned by a nonresident.

Smart Estate Planning Starts With the Right Tax Question

The useful question is not simply, “Will the IRS tax the inheritance?” A better starting point asks where the deceased person lived, what the estate owned, whether property sat in another state, whether the estate included substantial gifts during life, and whether a surviving spouse could benefit from portability. Those details can determine which tax rules matter and which ones do not.

Families also need to separate estate taxes from ordinary income tax issues that arise after death. The IRS’s 2026 guidance for seniors highlights the importance of keeping federal tax records and Social Security information accessible, including documents such as Forms SSA-1099 and SSA-1042S. Good recordkeeping will not eliminate a tax, but it can save an executor from playing detective during an already difficult period.

The $15 Million Federal Number Is Not the Whole Story

For 2026, the federal estate tax threshold gives most ordinary families considerable breathing room, with the basic exclusion amount set at $15 million for deaths during the year. The bigger surprise may come from state law, because several jurisdictions impose estate taxes at substantially lower levels. Inheritance taxes add another layer because they can focus on the beneficiary rather than the estate. The result makes location, asset type, family relationships, and estate size far more important than a single federal number.

What has surprised you most about the difference between federal and state estate taxes? Share your thoughts in the comments.

IRS Issues New Guidance on Expanded Paid Family and Medical Leave Tax Credit

August 10, 2026 by Amanda Blankenship Leave a Comment

The Department of the Treasury and the Internal Revenue Service have issued official guidance on an expanded employer tax credit for paid family and medical leave (PFML), according to an announcement from the two agencies. The guidance, published as Notice 2026-28, addresses changes made under legislation called the Working Families Tax Cuts (WFTC).

Paid Family and Medical Leave Tax Credit Becomes Permanent

According to the official announcement, the Working Families Tax Cuts makes permanent the employer credit for paid family and medical leave and expands eligibility and coverage for employers who offer PFML benefits to their employees. Previously, the credit had been temporary in nature.

Treasury Secretary Scott Bessent stated in the announcement that the permanent expansion gives businesses — particularly small businesses — greater incentives to provide paid leave so workers can care for a newborn, other family member, or recover from a serious illness without sacrificing their financial security. IRS Chief Executive Officer Frank J. Bisignano noted that the changes encourage businesses to provide paid family and medical leave benefits.

The guidance in Notice 2026-28 is intended to provide employers with clarity on how to claim the enhanced credit under the new permanent rules. The announcement indicates the changes affect both the scope of employers who may be eligible and the coverage provisions related to the credit.

Employers Should Review the New IRS Guidance Before Claiming the Credit

The credit is relevant to employers across business sizes, with the announcement specifically highlighting potential benefits for small businesses. Workers who receive paid family and medical leave through qualifying employer programs may indirectly benefit if the credit encourages more employers to offer such leave.

Employers and tax professionals seeking to understand how the expanded credit applies to their specific situations should review Notice 2026-28 directly on the IRS website or consult with a qualified tax advisor, as the details of eligibility and compliance requirements may vary by circumstance. Readers are encouraged to verify their specific situation with the IRS or a tax professional, as this announcement provides general guidance and individual circumstances may differ.

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What Happens to a Joint Bank Account When One Owner Dies?

August 10, 2026 by Brandon Marcus Leave a Comment

Understanding Joint-Account Assumptions That Can Create Estate and Tax Problems — A joint bank account can make everyday money management easier, but ownership, survivorship, taxes, probate, and estate-planning rules can create unexpected consequences. Reviewing account arrangements before a crisis can help prevent costly family disputes and tax surprises – Shutterstock

A joint bank account can look like the ultimate financial shortcut. Add a spouse, adult child, or trusted relative, and suddenly someone else can pay bills, access money in an emergency, or step in when managing finances becomes difficult. The trouble starts when everyone assumes that adding a name to an account answers the much bigger question of who actually owns the money.

That assumption can create a mess at exactly the wrong time. A joint account can affect probate, inheritance, gift-tax considerations, creditor exposure, family disputes, and the way an estate handles assets after someone dies. The Consumer Financial Protection Bureau also warns about financial exploitation and encourages planning tools that can help older adults protect their money while still getting assistance when needed.

A Name on the Account Does Not Tell the Whole Story

Joint accounts often give each owner broad access to the money, but access and ultimate ownership can involve different legal questions. For example, an aging parent might add an adult child to a checking account so the child can pay household bills without creating a separate financial-management arrangement. That setup may work perfectly well while the parent remains alive, but other family members could later question whether the child owned the money, merely helped manage it, or received a gift. The account agreement, state law, the source of the funds, and the owners’ intentions can all matter. In other words, the name printed on the monthly statement does not magically settle every estate question.

The situation becomes even more interesting after death. Many joint accounts include a right of survivorship, which can allow the surviving owner to receive the account without sending the asset through probate, but that result depends on the account’s actual terms and applicable state law. A will also may not control an account that passes through a separate beneficiary or survivorship arrangement. That can surprise families who carefully divide an estate in a will only to discover that a jointly owned account follows a different path. Anyone using a joint account as part of an estate plan should therefore confirm exactly how the account transfers at death rather than relying on assumptions.

The Tax Question Gets Trickier Than “It’s Joint”

Adding another person to an account does not automatically create a federal gift-tax bill, but certain transactions involving jointly held funds can raise gift-tax issues. Consider a parent who contributes $100,000 to a joint account with an adult child and then allows the child to withdraw money for personal use. Depending on the circumstances, that withdrawal could represent a gift from the parent to the child rather than simply an ordinary banking transaction. The tax consequences depend on facts such as who contributed the funds, who withdrew them, and how the owners intended to use the money. A tax professional can evaluate those details before a seemingly harmless transfer turns into paperwork with teeth.

The federal estate-tax picture also deserves a reality check. For people who die in 2026, the federal estate-tax basic exclusion amount stands at $15 million, so many estates will never owe federal estate tax at all. That does not make joint-account planning irrelevant, because estate administration, state-level taxes, probate, and income-tax consequences can still matter even when federal estate tax does not. A jointly held account can also affect the amount of an asset included in the deceased owner’s estate, depending on the ownership arrangement and applicable rules. The important lesson is simple: “joint” describes an ownership arrangement, not a universal tax treatment.

The Basis Surprise Can Show Up After Death

Income taxes can create another wrinkle that families often overlook. When someone dies, certain inherited assets can receive a new tax basis under federal tax rules, which can reduce the capital gain that an heir eventually recognizes after selling an appreciated asset. Jointly owned property does not necessarily receive a full basis adjustment just because one owner dies. The portion that receives an adjustment can depend on the ownership structure, who contributed the property, and other circumstances.

That distinction can matter with assets that have appreciated substantially over the years. Imagine two people jointly own an investment account containing shares that originally cost $50,000 and later grow substantially in value. If one owner dies, the surviving owner should not simply assume that the entire account receives a new basis equal to its value at death. Different rules can apply to different portions, and special rules can apply to married couples in community-property states. A professional should review the account before anyone sells valuable inherited investments, because guessing at basis can produce an unpleasant tax bill.

Joint Accounts Can Solve a Problem and Create Another

Joint ownership sometimes makes excellent practical sense. A married couple may use a joint checking account to handle household expenses, or an older account holder may need another person to help with everyday financial tasks. The CFPB’s resources for older adults emphasize planning, fraud prevention, and ways to get assistance without unnecessarily surrendering control of finances. The bigger mistake involves treating joint ownership as the only available tool.

Sometimes a power of attorney, trusted contact arrangement, beneficiary designation, or properly structured trust can accomplish a specific goal with fewer unintended consequences. Those tools serve different purposes, so replacing one with another requires careful planning rather than a quick trip to the bank. A trusted contact, for example, can give a financial institution someone to reach if suspicious circumstances arise without automatically giving that person ownership or unrestricted access to the account. That distinction can matter when protecting an older adult from fraud or financial exploitation.

The Family Meeting May Be Worth More Than the Extra Signature

A surprisingly effective estate-planning tool involves something that costs absolutely nothing: explaining the plan while everyone can still ask questions. If a parent adds one child to an account for bill-paying convenience, the family should know whether that child should ultimately receive the money or simply help manage it. Clear documentation can reduce the chance that siblings later interpret the same account in completely different ways. It also gives the account holder an opportunity to explain why the arrangement exists.

That conversation should include the account owner, the people involved in managing the money, and the professionals handling the broader estate plan when appropriate. Account statements, wills, trusts, beneficiary designations, and powers of attorney should tell a consistent story instead of behaving like five strangers who accidentally showed up at the same family reunion. Reviewing the arrangement after major life events can help catch problems before they become expensive. Marriage, divorce, a death in the family, a significant inheritance, or a change in financial responsibility can all justify another look.

Give Every Account a Job, Not a Guess

The smartest joint-account strategy starts with a very specific question: What problem should this account solve? If the goal involves convenience, bill paying, emergency access, inheritance, or long-term estate planning, each objective may call for a different tool. The account should then match that objective instead of forcing one banking arrangement to do everything. That approach can prevent an innocent attempt to simplify finances from quietly rewriting an estate plan.

State and account rules vary, and federal tax treatment can depend heavily on the facts, including who supplied the money, the type of ownership, marital status, and what happens to the account at death. The IRS’s 2026 figures also show why current tax rules matter, including the $15 million federal estate-tax basic exclusion amount for deaths in 2026. Anyone dealing with substantial assets, complicated family circumstances, or significant appreciated property should get individualized advice from a qualified estate-planning attorney and tax professional before changing ownership. A few minutes of careful planning can be much cheaper than untangling a family financial mystery later.

What has caused the biggest surprise in a joint bank account or estate plan: ownership, taxes, probate, or something else? Share the experience in the comments.

Tax Records You May Be Throwing Away Too Soon

August 9, 2026 by Brandon Marcus Leave a Comment

A Practical Guide to Tax Records People Throw Away Too Soon — Tax returns, receipts, investment records, and home improvement documents often deserve a much longer life than many people expect. A simple filing system today can prevent costly problems years later – Shutterstock

Tax season ends, the refund arrives, and suddenly that stack of paperwork looks like clutter begging for a trip to the recycling bin. It feels satisfying to clear the desk, but that quick cleanup can create a frustrating headache months or even years later. Some tax records deserve a much longer life than many people realize, especially when questions, audits, or amended returns enter the picture.

Keeping every scrap of paper forever makes little sense, but tossing everything after filing makes even less. A smart filing system saves time, reduces stress, and prevents expensive mistakes. The good news is that building one does not require color-coded binders worthy of a spy movie. It simply requires knowing which documents deserve a permanent home and which can eventually make a graceful exit.

Keep Tax Returns Longer Than Many People Expect

A completed tax return often becomes the first document people consider disposable once another filing season rolls around. That decision can create problems because old returns frequently answer questions from lenders, insurance companies, financial advisors, and even future tax filings. A previous return also provides valuable information if someone needs to amend a return or verify income years later. The IRS generally recommends keeping records that support a tax return for as long as they may be needed to administer federal tax law, and many taxpayers find that keeping complete returns for several years provides valuable peace of mind. Retention needs vary depending on individual circumstances, so general IRS guidance should serve as a starting point rather than a one-size-fits-all rule.

Supporting documents deserve almost as much attention as the return itself. W-2 forms, 1099s, receipts for deductible expenses, charitable donation records, and other documentation help prove the numbers reported on a return. Throwing away the paperwork while keeping only the return creates a bit like saving a recipe but tossing every ingredient halfway through dinner. If questions arise later, those supporting records become the real stars of the show.

Receipts Can Matter Long After the Purchase

A receipt often looks insignificant until it suddenly becomes priceless. Home improvement projects provide a perfect example because many renovations increase a home’s tax basis. Those records can reduce taxable gains when the property eventually sells, potentially years or even decades after the work took place. Kitchen remodels, room additions, roofing projects, and certain major upgrades all deserve careful recordkeeping.

Investment records also deserve a long stay in the filing cabinet. Purchase confirmations, dividend reinvestment statements, and records showing cost basis help calculate gains or losses accurately when investments sell. Losing those documents can turn tax preparation into an expensive detective story. Digital statements help, but keeping organized copies remains a smart habit because brokerage firms may not always maintain every historical record forever.

Medical, Business, and Retirement Documents Need Extra Attention

Medical expenses sometimes play a role on tax returns, especially when someone qualifies to deduct certain healthcare costs. Receipts, insurance statements, and payment records can support those deductions if needed. Health Savings Account records also deserve careful organization because contributions, distributions, and qualified expenses all create important tax documentation over time.

Self-employed individuals should exercise even greater caution. Business income records, mileage logs, invoices, equipment purchases, and expense receipts create the foundation of an accurate return. Small business owners often collect these records throughout the year, yet many mistakenly treat them as temporary paperwork once filing season ends. Good records not only support deductions but also simplify bookkeeping, budgeting, and future business planning.

Retirement account records also deserve a secure home. Contributions to traditional IRAs, Roth IRAs, and employer-sponsored retirement plans may affect future tax situations. Distribution records become equally valuable after retirement begins. Keeping organized files helps avoid confusion over taxable and nontaxable amounts years down the road.

Digital Copies Make Life Much Easier

Paper files still work well, but digital storage offers impressive advantages. Scanned copies stored in secure cloud storage or encrypted external drives remain accessible even after floods, fires, or coffee spills attack the original paperwork. Clear file names with dates and document types also make searching much easier than digging through overstuffed folders.

Organization matters just as much as storage. Creating folders by tax year allows every return and supporting document to stay together in one place. Adding subfolders for income, deductions, investments, and property records creates an orderly system that saves valuable time later. The goal involves finding a needed document in minutes instead of launching an archaeological dig through old boxes in the basement.

The IRS continues expanding online services and provides updated resources for taxpayers, including information tailored to older adults during the 2026 filing season. Even with growing digital access, maintaining personal copies of important tax records remains a wise habit because taxpayers ultimately remain responsible for the information reported on their returns.

A Little Filing Today Can Prevent Big Headaches Tomorrow

Nobody dreams about spending a Saturday afternoon organizing tax paperwork, yet future versions of almost everyone appreciate the effort. A few labeled folders and a simple filing routine can eliminate frantic searches before loan applications, home sales, retirement planning, or unexpected IRS questions. That small investment of time often pays off far more than expected.

Every tax situation comes with unique details, so record retention should match individual circumstances whenever possible. General IRS guidance offers an excellent framework, but major life events, business ownership, investments, inherited property, or complex financial situations may require longer retention periods. A carefully organized collection of tax records does not simply reduce clutter. It creates confidence, protects important financial information, and makes future tax seasons feel far less intimidating.

Which tax documents have earned a permanent spot in the filing cabinet, and which ones created the biggest surprise after learning they should stay longer? We want to hear your thoughts and opinions below.

5 IRA Contribution Errors That Can Trigger Extra Tax

August 8, 2026 by Brandon Marcus Leave a Comment

An IRA can be one of the most useful tools for building retirement savings, but a small contribution mistake can turn a smart money move into an unwanted tax headache. The IRS sets annual limits and eligibility rules, and missing those details can create extra paperwork, penalties, or tax complications.

The good news? Most IRA mistakes happen because the rules feel more complicated than they look. A little attention before moving money into an account can help avoid the kind of financial surprise that arrives with a tax bill instead of a retirement boost.

1. Contributing More Than the Annual IRA Limit Creates a Tax Problem

The first mistake happens when someone puts too much money into an IRA during the year. For 2026, the combined contribution limit for traditional and Roth IRAs is $7,500, or $8,600 for individuals age 50 or older, as long as the contribution does not exceed taxable compensation. This limit applies across all traditional and Roth IRAs, not separately to each account.

Picture someone with a Roth IRA at one brokerage and a traditional IRA at another who contributes $7,500 to each without realizing the limits combine. The extra contribution does not disappear into a magical retirement loophole, unfortunately. The IRS treats excess contributions as a problem that needs attention, and correction options generally involve removing the excess amount and related earnings within the applicable rules. Keeping a simple contribution tracker can prevent a retirement account from accidentally becoming a tax paperwork machine.

2. Ignoring Roth IRA Income Rules Can Lead to Trouble

A Roth IRA offers attractive tax benefits, but not everyone can contribute the maximum amount every year. Income limits affect Roth IRA eligibility, and the IRS adjusts those thresholds over time. A person who receives a large bonus, changes jobs, or earns more than expected may discover that a planned Roth contribution no longer fits the rules.

This mistake often surprises people because the contribution itself looks perfectly normal when the money leaves a bank account. The issue appears later when tax forms reveal that income rules changed the picture. Correction options generally involve removing excess contributions or using other IRS-approved approaches depending on the situation. A quick income check before making a large Roth contribution can save plenty of frustration.

3. Forgetting That IRA Contributions Need Eligible Compensation

An IRA contribution requires taxable compensation, and this rule catches some people who assume anyone can simply deposit the annual limit. The IRS states that IRA contributions generally cannot exceed annual limits or the individual’s taxable compensation for the year. Compensation usually includes income from work, but certain types of income do not count the same way.

A common example involves a spouse who stops working but continues adding money to an IRA without checking eligibility. Another example involves someone who has investment income but little or no earned income from work. Those situations require extra care because the contribution rules do not operate like a simple savings account deposit. Checking income sources before contributing can help avoid an unpleasant tax surprise later.

4. Mixing Up IRA Rules With Workplace Retirement Plans

Many savers juggle multiple accounts, and that creates plenty of opportunities for confusion. An IRA limit does not work the same way as a 401(k) limit, and each account type follows its own rules. For 2026, the employee contribution limit for 401(k) plans rises to $24,500, which stands apart from the IRA contribution limit.

The confusion often appears when someone maxes out a workplace plan and assumes that means an IRA contribution is no longer allowed. In reality, contributing to a 401(k) and an IRA may fit within the rules, although income limits can affect certain tax benefits. A worker might also make a mistake by tracking only one account and forgetting another IRA already received contributions. A yearly retirement account checklist can keep these moving pieces from bumping into each other.

5. Waiting Too Long to Fix an IRA Contribution Mistake

Finding an IRA error can feel like discovering a flat tire five minutes before a road trip. The mistake does not mean the entire retirement strategy falls apart, but timing matters when correcting contribution problems. The IRS provides rules for addressing excess contributions, and the right correction depends on the type of mistake and the circumstances involved.

The best response involves gathering account records, reviewing contribution dates, and contacting the financial institution that holds the IRA. Many corrections require careful calculations because investment gains or losses connected to the excess amount may matter. Avoiding the issue rarely makes it vanish, since tax reporting can reveal problems even years later. A small correction today usually creates far less stress than a surprise tax issue down the road.

Smart IRA Habits That Keep Retirement Savings on Track

IRA rules may seem like a maze of numbers and exceptions, but a few simple habits make the path much easier to follow. Check annual IRS limits before contributing, especially when tax years change. Review income eligibility before making Roth IRA deposits. Keep records of every contribution so multiple accounts do not accidentally push totals beyond allowed limits.

Retirement savings works best when the process feels routine rather than mysterious. A quick yearly review can catch mistakes before they grow into expensive problems. The biggest IRA wins often come from consistency, patience, and paying attention to the details that sit quietly in the fine print. A retirement account should help build financial security, not create a tax-season scavenger hunt.

Which IRA mistake do you think causes the most confusion, and what retirement account lessons have you learned along the way?

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