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New Tax Rules for Retirees
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Article Highlights: IRA Age Limits Repealed Required Minimum Distribution Age Increased Qualified Charitable Contributions Impacted IRA Beneficiary Options Limited If you are at or approaching the age of 70, you need to be aware of some changes that Congress made to the tax laws, effective starting in 2020. These changes will have direct impacts on you and the decisions you make related to your retirement accounts. Not only will they affect your federal taxes, but depending upon your state’s income tax laws, they may impact your state tax status as well. Required Minimum Distribution (RMD) Age Changed from 70½ to 72 In the past, people with traditional IRAs and qualified retirement plans like 401(K)s could begin taking distributions once they reached age 59½ without penalty, but once they reached the age of 70½, they became subject to the RMD rule, which required them to begin taking distributions from the accounts. On December 19, 2019, Congress changed the law, effective beginning in 2020, by increasing the RMD’s required starting age from 70½ to 72. This change doesn’t help those who turned 70½ in 2019 and were required to begin distributions in 2019 but could delay the first distribution until April 1, 2020, by using the first-year delayed RMD provision. Note that any distribution to these accounts will be taxable unless the original contributions were nondeductible. Congress Moved to Eliminate the Maximum Age for Traditional IRA Contributions In previous years, taxpayers’ ability to make contributions to traditional IRA accounts ended when they reached the age of 70½. Effective beginning in 2020, that cutoff has been eliminated, meaning you can continue making contributions if you have employment income. The contribution limit is either $6,000 ($7,000 if you are 50 or older) or your income from working, whichever is less. Although higher-income taxpayers can make contributions, the tax deductibility of the contributions will phase-out when incomes reach certain levels. However, a traditional IRA may not be the best option, and you should contact this office before making a contribution. In addition, if you are also making qualified charitable distributions (QCDs), the IRA contribution can have a detrimental impact on the QCDs. A QCD is a direct transfer from an IRA to a qualified charity and is discussed further in this material. Qualified Charitable Distributions The change will have a direct impact on those who make QCDs. These direct transfers from an IRA to a charity have long allowed retirees to transfer up to $100,000 directly from their IRA to a qualified charity without being subject to taxes. At first glance, this may not appear to provide a tax benefit. But in addition to counting toward your RMD (if an RMD is required), by excluding the distribution from taxation, you will lower your adjusted gross income (AGI), which will help with other tax breaks (or penalties) that are pegged at AGI levels, such as for medical expenses, passive losses, and taxable Social Security income. In addition, non-itemizers essentially receive the benefit of a charitable contribution to offset the IRA distribution. However, because the age restriction for making traditional IRA contributions has been repealed, starting in 2020, you can make an IRA contribution and also make a QCD. For that reason, Congress included a provision requiring a taxpayer who qualifies to make a QCD to reduce the non-taxable QCD portion by any traditional IRA contribution that is deducted and made after reaching age 70½, even if the QCD and IRA contribution are not in the same year.
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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.
