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Naming Your IRA Beneficiary – More Complicated Than You Might Expect
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Article Highlights:How Naming Beneficiaries Impacts Traditional IRA DistributionsThe Impact of Naming Your Trust as a BeneficiaryIRA Beneficiary TaxationThe decision concerning whom you wish to designate as the beneficiary of your traditional IRA is critically important. This decision affects:Who will get what remains in the account after your death, andHow that IRA balance can be paid out to beneficiaries.What's more, a periodic review of your IRA beneficiaries is vital to ensure that your overall estate planning objectives will be achieved considering changes in the performance of your IRAs and in your personal, financial, and family situation. For example, if your spouse was named as your beneficiary when you first opened the account several years ago and you’ve subsequently divorced, your ex-spouse will remain the beneficiary of your IRA unless you notify your IRA custodian to change the beneficiary designation.The issue of naming a trust as the beneficiary of an IRA comes up regularly. There is no tax advantage to naming a trust as the IRA beneficiary. Of course, there may be a non-tax-related reason, such as controlling a beneficiary’s access to money; thus, naming a trust rather than an individual or individuals as the beneficiary of an IRA could achieve that goal.Generally, trusts are drafted so that IRA required minimum distributions (RMDs)will pass through the trust directly to the individual trust beneficiary and, therefore, be taxed at the beneficiary’s income tax rate. However, if the trust does not permit distribution to the beneficiary, then the RMDs will be taxed at the trust level, which has a tax rate of 37% on any taxable income in excess of $15,200 (2024 rate). This high tax rate applies at a much lower income level than for individuals.Distributions from traditional IRAs are always taxable whether they are paid to you or, upon your death, paid to your beneficiaries. Once you reach age73(years 2023 through 2032),you are required to begin taking distributions from your IRA. If your spouse is under the age of73upon inheritance of your IRA he or she can delay distributions until he or she reaches age73.The rules are tougher for non-spousal beneficiaries, who generally must begin taking distributions based upon a complicated set of rules. The following details the distribution options from an IRA inherited after 2019 by a non-spousal beneficiary, which includes several categories of beneficiaries.SURVIVING SPOUSE BENEFICIARY The options available to surviving spouse beneficiaries include:Treat it as their own IRA by designating themself as the account owner.Treat it as their own by rolling it over into their own IRA, or to the extent it is taxable, roll it into a:a. Qualified employer plan (Sec 401(k) plan),b. Qualified employee annuity plan (Sec 403(a) plan),c. Tax-sheltered annuity plan (Sec 403(b) plan),d. Deferred compensation plan of a state or local government (Sec 457 plan), orTreat themself as the beneficiary rather than treating the IRA as their own.Treating It As Their Own – The surviving spouse will be considered to have chosen to treat the IRA as their own if:Contributions (including rollovers) are made to the inherited IRA, orThe surviving spouse does not take the required minimum distribution for a year as a beneficiary of the IRA.The surviving spouse will only be considered to have chosen to treat the IRA as their own if:The surviving spouse is the sole beneficiary of the IRA, andThe surviving spouse has the unlimited right to withdraw amounts from it.However, if the surviving spouse receives a distribution from the deceased spouse's IRA, the surviving spouse can roll that distribution over into their own IRA within the usual 60-day time limit for rollovers, provided the distribution isn’t an RMD. This is true even if the surviving spouse is not the sole beneficiary of the deceased spouse's IRA.Surviving spouse is sole designated beneficiary – If the IRA owner died on or after the RMD required beginning date and the surviving spouse is the sole designated beneficiary, the life expectancy the spouse must use to figure the RMD may change in a future distribution year. This applies where the spouse is older than the deceased owner or the spouse treats the IRA as his or her own.Special Rules for Sole Surviving Spouse:
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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.
