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Here’s How To Take A Page From The Ultra-wealthy Playbook And Make Full Use Of Roth Individual Retirement Accounts
Personal Finance
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We’ve all heard the term “the rich get richer.” According to a report released from ProPublica, it turns out that one of the ways that truism is perpetuated is through the strategic use of tax-sheltered Roth individual retirement accounts (IRAs). The good news is that the same approach is available to the man on the street. The only thing you need is the know-how. How the ultra-wealthy use Roth IRAs The story details how ultra-smart people have become ultra-wealthy, accumulating millions and billions of dollars through the Roth’s tax sheltering properties. Where these accounts don’t offer the upfront tax break that you get with traditional 401(k) plans and IRAs, they are tax-advantaged when it comes time to make withdrawals. And the same investors who are blocked from contributing directly to a Roth due to their higher income have the option of converting assets that are held in a traditional IRA or 401(k) into a Roth. Though they still need to pay taxes on the money that they roll into the new account, once it’s there it can be withdrawn with no tax impact after it’s been held a minimum of five years and the account holder reaches the age of 59 1/2, or it can be kept in the account where it grows tax free. The ProPublica report explains that this strategy grew an account valued at under $2,000 in 1999 to one worth $5 billion for Paypal founder Peter Thiel, who sheltered his investments in what is known as a self-directed Roth IRA, which offers identical tax advantages of untaxed distributions and growth as a standard Roth IRA, while at the same time providing more investment opportunities such as shares in private companies or in real estate. That’s how Thiel grew his account, holding shares of PayPal long before it became a publicly traded company. As attractive as self-directed IRAs sound, there are some caveats. You are not going to be able to invest in them through traditional firms like Vanguard or Fidelity Investments. Instead, you’ll need to contact a specialized custodian who can facilitate your purchase but will not provide you with any advice on your investments, including telling you if what you’re doing is legal or not. Choosing to get involved in a self-directed IRA is a decision to go it alone and accept the consequences. You need to do your homework, both on what is allowed and isn’t and on the value of the alternative assets you choose. It may seem like an insignificant detail, but not paying attention to it puts you at risk for breaking tax laws. All the cautionary notes aside, investing in assets within a self-directed IRA gives you the advantages of the tax-free Roth products and allows you to sell what you’re holding at a profit and then roll those gains into new asset purchases within the same account. Alternatively, you can go the more traditional route and select the standard Roth IRA and invest in high growth potential investment options. Doing so helps bypass worries about liquidating traditional IRA or 401(k) holdings after retirement and risking higher future tax rates, as well as having to meet the Required Minimum Distribution amounts that those accounts impose on you if you are the original account owner and you reach the age of 72. If you have questions about tax-advantaged retirement savings options, contact our office.
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Tax and Financial Insights
by NR CPAs & Business Advisors
2026 IRS Mileage Rates: Key Updates and Insights
The IRS has rolled out the inflation-adjusted mileage rates for 2026, offering taxpayers an efficient way to claim deductions for vehicle-related expenses incurred for business, charity, medical, or moving purposes. These adjustments reflect the continued economic shifts impacting car operation costs.
Effective January 1, 2026, the new standard mileage rates are established as follows:
- Business Travel: Increased to 72.5 cents per mile, inclusive of a 35-cent-per-mile depreciation allocation. This marks a rise from the 70 cents per mile rate set for 2025
- Medical/Moving Purposes: Reduced slightly to 20.5 cents per mile, down from 21 cents in the previous year, reflecting the variable cost considerations.
- Charitable Contributions: Consistent at 14 cents per mile, a fixed rate unchanged for over a quarter-century.
As is typical, the business mileage rate considers the integral fixed and variable costs of automobile operation. Meanwhile, the medical and moving rates remain contingent on variable expenses as determined by the IRS study.
It is critical to note that the One Big Beautiful Bill Act (OBBBA) held firm on disallowing moving expense deductions except for specific cases within the Armed Forces and intelligence community, marking a substantial shift since 2017.
When engaging in charitable work, taxpayers might opt for a direct expense deduction over the per-mile method, covering gas and oil costs. However, comprehensive upkeep and insurance costs are non-deductible expenses.
Business Vehicle Use Considerations: Taxpayers can alternatively compute vehicle expenses using actual costs, which might benefit from shifting depreciation rules, particularly through bonuses and first-year advantages. Keep in mind, however, reverting from actual cost calculations to standard rates in subsequent years is restricted, particularly per vehicle protocol and when exceeding four vehicles in concurrent use.
Additionally, parking, tolls, and property taxes attributable to business can be deducted independently of the general rate, an often-overlooked advantage by many business owners.
Tax Strategies for Employers and Employees: Reimbursements based on the standard mileage framework, providing the right documentation is in place, remain tax-free for employees. Meanwhile, the elimination and continued prohibition of unreimbursed employee deductions continue, with particular exceptions offered to qualified personnel across specific occupations.
Opportunities for Self-employed Individuals: Entrepreneurs remain eligible for deductions on business-related vehicle use via Schedule C, with potential to account for business-use interest on auto loans.
Heavy SUVs and Deduction Advantages: Heavier vehicles exceeding 6,000 pounds but under 14,000 pounds open opportunities for substantial tax deductions through Section 179 and bonus depreciation avenues. The lifecycle of such a vehicle bears implications on recapturing initially claimed deductions, urging cautious tax planning.
For professional guidance on optimizing your vehicle-related tax deductions and understanding their implications on tax strategies, contact our office in Coral Gables, Florida, where expert advice and strategic insights are just a call away.
Educator's Deduction Reform: Key Changes Under OBBBA
The One Big Beautiful Bill Act (OBBBA) introduces significant enhancements for educators' tax deductions starting in 2026, offering both strategic opportunities and planning considerations for educators who qualify. With the reinstated itemized deduction for qualified unreimbursed expenses, educators have a broader spectrum of financial relief. This is complemented by the retention of the $350 above-the-line deduction, allowing educators to maximize their tax benefits by selectively allocating expenses between these avenues.
Understanding the nuances of these changes is crucial for educators and financial advisors alike. The dual-option deduction strategy can potentially enhance tax efficiency, thereby aligning with broader financial planning goals.
At NR CPAs & Business Advisors, based in Coral Gables, Florida, our expertise in tax preparation and planning provides invaluable support to educators navigating these changes. Our comprehensive approach, combined with personalized advice from our experienced team, ensures compliance and optimization in line with the latest tax legislations.
Given these updates, it is imperative to engage with seasoned professionals to fully leverage your deduction strategies. Contact us today to streamline your tax planning under OBBBA's new guidelines and maximize your deductions for upcoming tax years.
