What Triggers the Alternative Minimum Tax (AMT)?
In contrast to the regular income tax, which permits different deductions and credits , the Alternative Minimum Tax (AMT) is a flat tax of 26% or 28% for the larger income base, which can be higher than your normal tax rate. It’s true that ISOs could have substantial impact on taxpayers under the AMT however, there are other reasons to be aware of in addition. With exemption levels for AMT set to decline in 2026, understanding these triggers can aid in reducing the AMT liabilities. What are the triggers for AMT? 1. High Income If your household earnings exceed the thresholds for phaseout of $1,252,700 for married couples, and $626,350 for other households, you may be liable to AMT, especially if you make a lot of itemized deductions. Beginning in 2026, these thresholds will be reduced down to $1 million for joint filers, and $500,000 for other filers. If your AMT earnings exceed those thresholds, exemption will expire twice as quickly (e.g. 50 cents per dollar as opposed to the 25 cents currently per dollar). 2. Important itemized deductions The claim of itemized deductions for example, local and state taxes as well as the interest charged on mortgages that are used for other purposes than buying or building your home increases the chances of triggering AMT. In addition, the AMT calculations require that dental and medical expenses to be greater than 10% of your AGI to be deductible (versus 7.5% for the non AMT calculation). 3. Exercising Non-Qualified Stock Options (NQSOs) Similar to incentive stock options (ISOs), the exercise of Non-qualified Stock Options (NQSOs) can substantially increase the amount of tax deductible income. What’s the difference between exercise prices and fair market value of the stock will be classified as normal income in the regular tax system. This extra income can cause you to be pushed over the threshold for phaseout of AMT. For instance, a taxpayer who earns $200,000 exercises and sells vested NQSOs and earns $400,000 in additional tax-deductible income. The combined $600,000 of income is close to the AMT threshold for phase-out of $626,350. At this point the effect of AMT could be real, potentially reducing the benefits of deductions while increasing the total obligation. Engaging in NQSOs can dramatically alter tax income in one year. Proper planning for example, the spread of option exercises across multiple tax years, or combining exercises with charitable contributions or co-ordinating using other strategies for tax can help reduce the chance of accidentally activating the AMT. AMT can significantly impact your tax liability if you’re not prepared. Explore our Business Taxes & Compliance: The Complete 2026 Guide for Texas Business Owners for deeper tax planning strategies. 4. Income from investments Investment income like significant capital gains, or earnings from tax-free municipal bonds for private activities could boost your earnings above the exemption phaseout threshold. 5. Standard deduction AMT rules do not allow for the standard deduction even when you include it on your regular return. Strategies to deal with the AMT The timing of deductions and income The ability to defer income into a year with less AMT liability, and then accelerating deductions to years with a higher AMT liability could reduce AMT liability. For example, a high earner anticipating a substantial bonus, stock sale and large deductions such as charitable donations or property taxes could defer income until the next year, and then accelerate deductions to this year. With thresholds for exemptions set to fall and the tax rate getting steeper by 2026, the timing will be important more than ever before. Maximize tax credits Make use of tax credits, like the foreign tax credit, or the tax credit for dependent and child care to lessen the tax burden you face under the AMT. Diversify your investments If you spread your investments across different categories of assets, while also trying to avoid significant gain on capital, you can lessen the impact of AMT-triggered investments and lower your tax burden overall. Certain investments, such as municipal bonds that are private activity can trigger AMT. Tax-efficient investments, like municipal bonds (not specifically classified as private-activity bonds) are exempted from federal tax, and they do not create AMT. Monitor exemptions as well as phaseouts For the tax year 2025, AMT deductions and exemptions start to fade out when your income is above $626,350 for solo filers, and $1252,700 for married couples who file jointly. When you reach those thresholds it might be beneficial to take proactive steps to reduce your tax burden by increasing the amount of tax-deductible expenses like the charitable contribution or property tax or by increasing the amount of contributions towards retirement savings. There will be a more steep phase-out with thresholds set to decrease in 2026 and reach $500,000 for filers who are single, and $1 million for couples who are married. When you recognize possible AMT causes, you could be able to anticipate and alter your financial choices to limit AMT exposure. A qualified tax professional and remaining up-to-date on changes to tax laws can also aid taxpayers in navigating the complexities that are associated with AMT and maximize their tax planning strategies overall. Not sure if AMT applies to your situation? Dive into our 2026 Texas Business Tax Guide for clear insights on tax rules, compliance, and planning. How Parr & Ibarra Can Help Here at Parr & Ibarra CPA in Keller, TX, we understand what taxation under the Alternative Minimum Tax can easily take even the most careful taxpayers by surprise. With exemption levels expected to be tightened in 2026, a strategic approach is vital to keep ahead. Our team can help clients anticipate AMT triggers, maximize deductions, and plan income efficiently to limit the risk of being exposed. Through an active, data-driven approach and ensuring that your tax strategy is in line with the latest regulations and the upcoming adjustments. By having our team as your trusted advisor, you will be able to manage the complexities of AMT with confidence and ensure that your
Homeowners Insurance and Property Tax Planning: What Frisco Homeowners Need to Know
The ownership of a house in Frisco is a major milestone and a huge obligation. Between the rising value of property, rising tax rates and the requirement for dependable homeowners insurance, homeowners often end up making difficult financial choices. Although property taxes and insurance could seem like separate problems, smart planning can aid Frisco owners manage them efficiently, ensuring the security of their investment while keeping expenses under control. Why Homeowners Insurance Matters Homeowners insurance provides financial protection against hazards like the possibility of fire, theft, extreme weather, or liability in the event that someone is injured on the property. In the case of Frisco families, whose houses are both valuable and susceptible to Texas weather, insurance isn’t only a legal requirement for lenders, but an essential protection to ensure financial stability over the long term. A properly-drafted policy will ensure that you don’t need to cover huge costs out of pocket after a catastrophe. It also gives you assurance that one of your biggest assets, your home, is properly secured. The Rising Challenge of Property Taxes in Frisco In the meantime, homeowners in Frisco have to deal with another financial issue: rising property taxes. As Frisco grows and property values rise, the tax burden can increase too. Taxes on property fund schools as well as infrastructure and community services, but the homeowners taxes could be a major burden on budgets of families. Knowing the method of calculating property taxes and utilizing the available exemptions or deductions can have a major impact. The Connection Between Insurance and Property Taxes Although insurance premiums and property taxes are distinct expenses, they’re part of the overall picture of the homeownership cost. Mortgage lenders usually combine both in an escrow account. This implies that a change in one will increase the monthly payment. Examples: This double effect demonstrates the importance of Frisco homeowners to handle the two aspects strategically. Tax Deductions and Planning Opportunities One method to lessen the tax burden on property is through deductions. Although federal tax deductions for state and local taxation (SALT) can be set at a maximum, homeowners could still gain from: Frisco homeowners are also advised to look into homestead exemptions, which can reduce the value of taxation for the primary home. These exemptions could save you thousands over the years and offer ongoing relief when property values rise. Insurance Strategies That Support Tax Planning Even though homeowners insurance premiums aren’t directly tax-deductible for primary residences, the insurance is still a factor when it comes to tax-planning. Here’s how: By reviewing your coverage every year and making sure it is reflective of the value of your home and your financial goals, it is possible to maintain a manageable premium and avoid any unexpected increase. Real-World Example: A Frisco Homeowner Take a look at an example of a Frisco homeowner whose value has increased dramatically in the last five years. The property tax bill for them has almost doubled, while at the same time their insurance company increased the premium after a hailstorm claim. In total, these changes boosted their escrow account by a few hundred dollars each month. Through reassessing their homeowner’s policy, slightly raising their deductibles, and requesting the homestead exemption, they managed to reduce the overall cost without cutting protection. The balance helped keep monthly payments reasonable and avoided excessive financial stress. Practical Tips for Frisco Homeowners To better manage both taxes on property and insurance, consider these strategies: Why Professional Guidance Matters A homeownership involves many moving parts, ranging from taxes to insurance, to longer-term financial plans. Little mistakes can lead to large costs over time. With the help of experienced advisors, you are aware of how these elements work together and how to organize them for the greatest financial gain. Final Thoughts For Frisco homeowners, balancing insurance and property taxes isn’t just about paying the bills. It’s about safeguarding assets and ensuring financial stability. By combining the appropriate homeowners insurance policy with an effective tax strategy and tax planning, you can protect your investments while keeping costs under control. At Parr & Ibarra CPA firm in Keller, TX, we are here to assist Frisco families face these challenges without fear. From analyzing the policies of insurance to understanding tax savings opportunities. Our team is ready to assist you each step of the way. Get in touch with us today to learn the ways that smart strategies to protect your home and finances will protect your home and ease the burden on your finances.
Understanding the Federal Education Tax Credit Program Under the 2025 Tax Reform
Provision 70411 of the recently adopted P.L. 119-21, also known as the Republicans’ “One Big Beautiful Bill Act” has created the federal tax credit for education program that offers individual taxpayers with a dollar-for-dollar tax credit. The law, which was approved by president Trump on the 4th of July, 2025 introduced new sections of the Internal Revenue Code (IRC) applicable to tax years that end on or after December 31st, 2026. IRC Section 25F permits the tax credit for eligible elementary and secondary education scholarships as well as IRC Section 139K permits those scholarships to be tax-free for those who qualify. IRC Section 25F The newly established IRC Section 25F permits tax credits as high as $1,700 for individual citizens or residents of the United States. The credit amount is the amount of qualified contributions paid from the taxpayer’s account to a scholarship-granting organisation (SGO) during the tax year. The amount claimed as a tax credit cannot be considered a deduction for charitable contributions, and will be decreased by the value of state tax credit claimed in qualified distributions taken by the taxpayer throughout the tax year. Any credit not utilized that is federal level, could be carried forward for five years from now and is applied on a first-in, first out basis. To be eligible for the federal tax credit, the contribution must meet: The usage for an SGO is mandatory. In general, an SGO is a 501(c)(3) entity that is exempt from taxation under IRC Section 501(a) and is not a private foundation. SGOs aren’t permitted to combine funds and must keep at least one separate account specifically for qualified contributions. To be classified as an SGO, an organization must award scholarships to at least 10 students who do not all attend the same school. The company must also spend at minimum 90% of their earnings on scholarships for students who qualify. These scholarships should be used to pay for eligible elementary or secondary education costs that include all expenses for a qualified student for example: The complete list of eligible expenses is provided within IRC Section 530(b)(3)(A). Priority award requirements also need to be fulfilled. SGOs must first offer priority to students who were awarded a scholarship during the previous school year, then to those who have siblings who have received a scholarship from the SGO. The earmarking or setting aside of the scholarships of a particular student is not permitted, nor are the acts of granting scholarships to people who are disqualified according to IRC Section 4946. Additional responsibilities for an SGO includes confirming the household income of the applicant to receive the award, and ensuring that the applicant is an eligible student and the household income is not more than the area median of 300% gross income amount. The classification of SGO status starts at the state level. A state that is covered must voluntarily choose to be a part of the program by January 1st of every calendar year and identify SGOs to operate within the state that meet all requirements to the Secretary of the Treasury. Typically, governors from the state are required to make the decision on their own. Additional guidelines for governors of the electing states will be given when the Secretary of the Treasury decides on the enforcement actions required to fulfill these responsibilities. IRC Section 139K Furthermore, IRC Section 139K was made through the Act to exempt the amount of gross income paid to individuals as grants for eligible secondary or elementary education expenses that are provided from an SGO. Implications and Planning Opportunities While the Act allows for the expansion of education opportunities for students of secondary and elementary school however, many of the details remain unclear in the midst of awaiting additional guidance from both Federal and State levels. Common questions include: Luckily, there is time before the effective date to allow additional guidance to be issued, hopefully to answer some of the questions above. Private schools must now plan on how they can promote this tax-free incentive to their donors and communities, as well as how to work with other non-profit organisations to broaden their reach. How Parr & Ibarra Can Help To learn more about the impact these changes have on your company and to devise an appropriate strategy, get in touch with Parr & Ibarra CPA in Keller, Texas. Our team is prepared to assist you in navigating the tax landscape of today with confidence and clarity.
Trump’s Tax Bill Explained: Who Benefits and Who Doesn’t
The wealthy and business-focused Americans have been among the top winners of the tax bill signed by President Donald Trump. Those hit the hardest by the sweeping package include elite universities, which face levies and also immigrants. The House approved the bill in a 218-214 vote, just one day before Trump’s self-imposed July 4 date. Here’s who won and who lost in the legislative core to the President’s agenda for domestic policy Winners: Multimillionaires The wealthy gain the capacity to transfer more wealth to their heirs and dodge a tax increase. The bill includes $4.5 trillion in tax cuts, as per a Saturday estimation from the Joint Committee on Taxation. The estate tax exemption rises to $15 million for individuals, totaling $30 million for married couples, and then adjust with inflation. The 2017 Trump tax cuts for income also remain permanent with the tax benefits tilting towards the wealthy. Taxpayers in states with high taxes The maximum amount for the tax on local and state deduction increases to $40,000 per year for a period of five years. The write-off phase out for those who earn more than $500,000 in a year. After five years the limitation is lowered to the $10,000 threshold that was imposed by the tax law in 2017. Small-scale business owners The law passed in 2017 that allows pass-through companies to be able to deduct up to 20% of their qualified business earnings from their taxable income will be permanently extended starting in the year 2026 of taxation. The deduction is available to the owners of sole proprietorships, LLCs and partnerships. Private equity The tax-free interest deduction that benefits private equity, venture capital and real estate partnership is still in place despite the president’s attempt to cut it off. Private equity also benefited from an extended tax exemption for interest. Domestic car dealers Up to $10,000 in interest on loans for the U.S.-made vehicles are tax-deductible until 2028, which is an advantage for auto dealers seeking to close sales. But the break is phased out slowly for individuals earning greater than $100,000 in earnings and couples earning over $200,000 in income. Manufacturers The bill restores several beneficial tax laws for companies which include bonus depreciation for production upgrades as well as a research and development tax break, winning the endorsement of the National Association of Manufacturers. The final bill makes these breaks permanent, which were only temporary in the older version which was passed by the House in May. Fossil fuel producers Industries such as oil, coal and natural gas get tax breaks as well as new regulations to make more federal land for drilling, while tax breaks for rival green energy technologies are being phased out. Elderly and tipped workers As a nod to Trump’s populist promises during his campaign, taxpayers aged 65 and over receive a higher deduction than the standard deduction, and tips and overtime payments are exempt from taxation on income. The rules include limitations that reduce their costs and expire after 2028. Parents The maximum child tax credit increases by an additional $200 from $2,000 starting in tax year 2025 and is permanently indexed to inflation. Parents may open up”Trump accounts” for their children that are seeded with a $1,000 government grant for babies born between 2025 until 2028. Telecommunications The bill auctions off huge amounts of radio spectrum to be used in wireless broadband. This is an opportunity for companies such as SpaceX’s Starlink and 5G as well as future mobile networks in 6G. Corporations Other tax hikes which were thought to be a threat for big business for example, the increase of stock buyback tax or a cap on the local and state deduction for corporations however, were mostly turned down. Defense contractors The plan increases defense spending by $150 billion, with a large portion of the money going towards new weapon systems developed by major contractors. Space The bill will provide around $10 billion in funding for initiatives, including efforts to reach the Moon as well as Mars and, eventually, remove the space station from orbit. Losers: Low-income citizens The majority of the expenses for the tax bill can be covered by reductions to Medicaid health insurance and food stamps both of which are a boon to those with low incomes Americans. The legislation will cost the bottom 20% of taxpayers around $560 a year, as per a Yale Budget Lab analysis. The legislation introduces new work requirements for Medicaid beneficiaries, unless they are disabled, elderly or have children who are less than 14 years old. Medicaid recipients who were granted eligibility under the Affordable Care Act will have to cover a portion of the cost through charges such as co-pays. Food assistance for lower-income Americans is cut by expanding the work requirements of federal food stamps to include beneficiaries up to 65 years old. In 2028, states are also required to cover a percentage of the cost for food benefits which are currently covered fully through the federal government. Renewable energy The clean energy industry is hit by this Republican program, which rolls back a number of provisions by former president Joe Biden’s landmark climate law. Tax credits for wind and solar panels will soon be phased out but the legislation will take time to end other renewable energy sources and investment credits. Tax credits to help with energy efficiency home improvement and residential installation of solar or other renewable energy improvements are cut at the end of the year. Technology companies The Senate squelched a controversial idea to prevent U.S. states from regulating artificial intelligence. The result was victory for the tech industry critics and a blow to the likes of Microsoft Corp. and Meta Platforms Inc. as well as venture capital companies such as Andreessen Horowitz. Trump administration officials and GOP allies in Silicon Valley had pushed the measure, claiming it would prevent a patchwork of cumbersome state-by-state regulations. Electric vehicle manufacturers Tesla Inc., General Motors Co. and a host of other electric vehicle makers
Why Risk Management Matters More Than Returns for Asset Managers
Returns that are high-quality are important, however it’s not sufficient. Unfortunate mistakes in valuation, fees or compliance could undermine confidence in investors and cause sales to suffer, as well as stall fundraising. While these problems can remain in the shadows for a while, if they do surface they could severely affect the assets under management (AUM) and damage reputation and hamper long-term growth. Companies that consistently outperform counterparts do more than just invest wisely. They establish trust, stability, and resiliency through solid control and governance. This isn’t just for big asset managers. Companies of all sizes are able to adopt the approach of the best performers. The Hidden Divide in the Industry The industry of asset management is massive, with more than 15,000 Securities Exchange Commission (SEC)-registered firms in the U.S. Of these around 125, a majority are public and are subject to the Sarbanes-Oxley Act (SOX) Section 404(b) in which the company must undergo an external audit of internal controls for financial reporting. That’s over 99% of the market is operating without an internal control framework in place. Although many public asset managers are required to comply with SOX 302, which requires confirmation of the completeness and accuracy in internal control and information disclosures, it’s SOX 404(b) that requires rigorous, independent testing the majority of firms do not have. For companies that are smaller or growing this gap is understandable. Complete SOX compliance can be costly and a full-time internal audit function might seem out of reach. In reality, many companies have been operating successfully for years, using small teams, and have only performed external financial audits that were used to evaluate internal controls. Relying on informal processes might appear to be “good enough” , until it’s not. If control issues, regulatory findings or due diligence mistakes are made, the consequences are not only costly but also high profile and public. The Real Risk Isn’t About Performance: It’s About Losing Trust The regulators, institutional clients and private investors are looking beyond the returns. They also evaluate a company’s operating model, risk-management method and transparency level. Many times, they ask: Reactive or vague answers to these questions usually indicate concern, even if investments are sound. It’s because trust is among the most valuable assets an asset manager could hold. It’s not just about fraud prevention, but also showing that a company has been designed to stand the test of time. What the Data Actually Shows Effective controls do not hinder the performance of the business, but rather protect it. A well-functioning control system helps to ensure more stable earnings, minimizes the risk of legal liability and increases confidence among employees, investors and strategic partners as well as potential buyers. Why Growing Firms Get This Wrong Many managers at the beginning of their growth don’t see the risk due to their inattention. More often, they’re resource-constrained, focused on growth or haven’t encountered a serious issue, making oversight feel like overhead. However, the earlier a control foundation is laid the simpler and efficient it is to expand. When a company is acquiring institutional capital or is preparing for an exit from the public market, the gaps can be more difficult and more costly to close. What are the things that are most often overlooked? Even if they’re not bound by SOX, institutional clients typically anticipate SOX-like discipline. Getting It Right Without Overspending An Internal audit department of 12 people or an investment of $2 million SOX program isn’t required to establish a solid foundation for risk management. However, having a plan is crucial. Firms that have a good risk management strategy tend to: When it is approached in a thoughtful manner, the control program can become more than just a tool for compliance. It could be an advantage for competitive purposes. The importance of oversight is: Closing Thoughts: Resilience Is a Choice Risks in asset management firms are a wide range of forms. Markets, regulatory, information technology, valuation and operational,to name the most common. Although not all risks are completely eliminated, the most important thing is knowing what risks to take on and which ones to control, and those to stay clear of altogether. A well-functioning control system doesn’t ensure success. However, a weak control environment will increase the risk and potential impact of setbacks. The most successful businesses acknowledge the significance of risk management as well as control and make early investments in building trust from the inside out. Are you ready to grow with confidence? If your business is expanding, whether for an institutional capital raise, merger, acquisition or new product launches, now is the perfect time to build your base. Contact us, we at Parr & Ibarra CPA in Keller, TX assist asset managers in expanding the scope of compliance, internal audit, and SOX using practical, risk-based strategies that match the growth of the business. Let’s work together to build resilience.
What Should S Corporations Know About SEP-IRAs?
The Simplified Employee Pension(SEP), Individual retirement account (IRAs) offer an effective retirement savings solution for small companies, including S- corporations. These plans are straightforward, flexible, and tax-advantaged, making them appealing to business owners and employees alike. For a comprehensive overview of IRS rules, reporting requirements, and retirement plan options, check out our IRS tax filing and retirement guide to ensure your business stays compliant. They are designed with efficiency and simplicity in mind, SEP-IRAs are beneficial to both employers as well as employees. For those who are an S- corp manager, owner or advisor who is weighing retirement plans, there are some essential things to bear in mind when considering the flexible retirement vehicle. What is a SEP-IRA? SEP-IRAs are the type of retirement plan which allows employers to contribute to traditional IRAs that are set up for employees. These plans are simple to establish, require little documents and have large contributions limits. They are particularly popular with entrepreneurs and self-employed persons. They are also easy to establish and maintain, SEP-IRAs provide advantages that are appealing to small-sized businesses as well as S-corporations. Benefits of SEP-IRAs that are important to consider: How SEP-IRAs Work in an S-Corporation For S-corps, SEP-IRA, contributions are based solely on W-2 wages that are paid to employees, which includes the owners. The distributions or shareholder draws do not contribute to SEP calculation. So, S-corp owners have to be paid a fair salary to pay SEP contributions for themselves. In addition, the employer must provide the same amount of the salary of all employees who are eligible. If, for instance, that you make a contribution of 20% of salary to a SEP-IRA, you have to make a contribution of 20% to every salaried employee’s W-2 income in addition. Eligibility Rules When setting up a SEP-IRA, it is crucial to determine who’s eligible to contribute. The IRS sets out specific requirements to determine eligibility for employees. Employees are eligible if: Tax Implications The contributions to a SEP-IRA account are not part of the employee’s tax deductible income. They also do not have to pay Federal Insurance Contributions Act (FICA), Medicare or Federal Unemployment Tax Act (FUTA) taxes. If you are an S-corp this is an expense that is tax-deductible for business and reduces the overall tax burden.Refer to our detailed IRS guide on retirement contributions and taxes to navigate deductions and employer reporting accurately. Example: Imagine that an S-Corp owner named Sarah pays herself an annual W-2 of $120,000. She decides to give 25% of her earnings to SEP-IRA. This is a contribution of $30,000, completely tax-deductible by the business. In the event that she has two workers that are eligible for the participation in the plan and earning $50,000 per annum, she has to pay 25% of their salary ( $12,500 for each) in their SEP IRAs. This illustrates the uniformity rule and the potential costs if employees are involved. SEP-IRA Vs. Others Retirement Plans SEP-IRAs are more straightforward and provide higher limits on contributions than traditional IRAs but they do not permit employee deferrals and Roth contributions. Businesses seeking greater flexibility, especially solo proprietors may want to consider a solo 401(k) which permits both employer and employee contributions. Who Should Consider a SEP-IRA? The choice of a retirement plan depends on the structure of your company and goals, as well as the size of your team. SEP-IRAs can be an ideal option in these scenarios: Key Takeaways SEP-IRAs can be a useful retirement planning instrument to S-corp owners who want to cut down on tax-deductible income as well as save money for retirement. They are simple, flexible and have significant tax benefits. If you’re considering options for retirement plans for your company, a SEP-IRA might be a smart and wise choice. Choosing the right retirement plan for your S-corporation is essential to maximize tax savings and plan for the future. Review our IRS guides and resources to make informed decisions for your business and employees. Are you thinking about the possibility of a SEP-IRA in your S-corp? Contact us to begin the discussion. The experts from Parr & Ibarra CPA in Keller, Texas will assist you in evaluating your options and figure out the most appropriate retirement plan to meet your needs.
5 Ways to Reduce RMD Taxes After Age 73
Turning 73 can be considered a key milestone for retirement planning. It’s when Required Minimum Distributions (RMDs) are implemented for the majority of people. You’ll have to begin withdrawing your money from tax-deferred accounts such as 401(k) and IRAs. RMDs are taxable, so they can trigger significant tax bills. With the right strategies, however, you can reduce your RMD tax burden to help preserve your hard-earned assets. 5 Ways to Potentially Reduce RMD Taxes after Age 73 Consider these five strategies when managing RMDs: 1. Convert Traditional IRA Funds into a Roth IRA Roth IRAs are not subjected to RMDs. This makes them an effective tool to reduce your retirement income. You may be able to reduce overall balance subjected to RMDs due by converting portions of a traditional IRA into a Roth IRA. At age 73 you may consider converting a part of your IRA in a year where your other income is limited, for example, after completing a large home sale or another major expense. Remember that Roth conversions will be taxable the year in which they are made. It is therefore important to estimate the tax implications in advance. Explore our complete tax planning guide to learn how retirement income strategies, Roth conversions, and account structuring can help reduce your lifetime tax burden. 2. Make Qualified Charitable Distributions (QCDs) Qualified charitable distributions can offer you a double benefit. You’ll be able to support causes that you care about and reduce your tax liability. You can transfer up to $100,000 annually directly from your IRA into a qualified charity using a QCD. For example, a 74-year old who has met their financial needs could use a QCD as a way to donate a portion or the entire RMD to their favorite charity. This would help to ensure that it does not increase their tax liability. This strategy can be very effective in reducing your taxes, without increasing your Adjusted Gross Income (AGI), which could impact other tax factors such as medicare premiums. 3. Strategically Withdraw to Manage Future RMDs If you are over 73 years old, withdrawing strategically more money from your tax-deferred account may help reduce future RMDs and their potential tax impact. This involves taking distributions so that you stay in lower tax brackets. It prevents larger RMDs later on. A 74-year old, for example, could withdraw funds to cover expenses in advance or reinvest them into a taxable account. This would allow maintain control over his taxable income. Planning ahead can help you to avoid tax increases and still meet your financial goals. Reducing RMD taxes is just one part of a successful retirement strategy.Explore our Retirement & Wealth Planning Guide for more ways to manage retirement income, minimize taxes, and preserve your wealth over the long term. 4. Adjust the Investment Allocations Your retirement account’s mix of assets can impact the size of your RMDs, as well as the growth rate of your balances. To manage the potential growth of RMD-triggering accounts, it may be helpful to shift investments that produce lower returns in tax deferred accounts but higher returns in taxable accounts or tax-free ones. A 73-year old might prefer to hold income-generating bonds within their IRA while keeping growth-focused stocks within their Roth IRA. This could prevent the traditional IRA growing so much that future RMDs are inflated. 5. Use RMDs to pay for Qualified Expenses For those aged 73 or older, using RMD funds to pay for essentials could reduce the need to tap into other tax accounts. For example, you could use RMD funds to cover qualified medical expenses, home modifications, or long-term care insurance premiums. These costs may qualify for tax deductions if they exceed a certain percentage of your AGI. You can use this method to offset the tax impact of your RMDs. How to get help planning for RMDs You can reduce the tax burden of required minimum distributions, even though they are not avoidable. You can make your retirement plan more tax-efficient by using strategies such as Roth conversions and charitable contributions. Our Parr & Ibarra CPA firm in Keller, Texas is here to help you if you are unsure of how to manage RMDs. We help individuals to understand their options, reduce tax liabilities, and develop tailored strategies that align with long term financial goals. Contact us to receive professional advice for a more tax-efficient and smarter retirement. Dive into our comprehensive tax planning guide to discover advanced strategies for minimizing RMD impact and keeping more of your retirement savings working for you. Looking beyond RMD tax reduction?Our Retirement & Wealth Planning Guide covers the broader strategies needed to optimize retirement income, protect assets, and support your long-term financial goals.
Top Tax Strategies for High-Income Professionals
A higher income may mean that you pay more taxes, both at the federal and state level. Graduated tax rates at the federal level, and even at the local level, can take a bigger chunk of your income as you move up the income ladder. But by familiarizing yourself with the rules, you can optimize the tax strategy and save more of your money. A financial advisor who has tax planning expertise can optimize your financial plan in order to minimize your taxes. Before applying advanced strategies, it’s helpful to understand the full system, this IRS tax overview and filing guide provides a strong foundation. What Is Considered High Income? For many people, a high-income can mean different things depending on where they live and their unique circumstances. High-income earners typically make $500,000 per year or more. It’s possible to technically meet the IRS definition for a high income earner, even if you don’t realize it. According to the IRS, a taxpayer is considered as a high income earner if they report taxable income of at least $200,000 in Adjusted Gross Income (AGI) or $250,000 in Total Positive Income (TPI) on their tax return. A TPI is a sum of the positive amounts reported for each course of income on an individual tax return. Federal Income Tax The federal tax bracket you are in is the amount of tax that you owe the IRS, based on certain ranges of taxable income. Your taxable income is your AGI, less any itemized or standard deductions you claim. Knowing how these calculations work in detail is essential, this guide to IRS income rules and deductions can help you optimize your taxable income correctly. The highest tax bracket for the 2025 fiscal year is 37%. This bracket will apply to taxable income for single filers in 2025 that is greater than $626,350 ($609,350 in 2024) or married couples filing jointly who have a taxable revenue of $751,600 ($731,200 in 2024). Explore our complete tax planning guide to discover advanced ways to reduce your tax liability and structure your income more efficiently. Tax Savings Strategies for High-Income Earners In general, reducing your tax bill if you earn more money doesn’t mean applying just one single method. You can try a variety of tactics to reduce your tax bill. You can perform some of them yourself, while others may require your financial advisor’s assistance. Here are the best ways for high-income earners to reduce their tax burden. A structured approach using this IRS-based tax planning resource can help you apply multiple strategies effectively without compliance risks. 1. Fully Fund Tax-Advantaged Accounts Maximizing tax-advantaged accounts can reduce your annual taxable income. You may be able to lower your tax bracket by reducing the amount of taxable income that you report. You may want to max out the following accounts: You can make catch-up payments to IRAs and workplace plans if you are 50 or older. HSAs allow catch-up contributions starting at age 55. Also keep in mind that the amount you can deduct for traditional IRA contributions will vary depending on whether or not you and your spouse are covered by a workplace retirement plan. 2. Consider a Roth Conversion Roth IRAs offer 100% tax-free qualified distributions during retirement. As a high-income earner ,you may not be able to make a Roth IRA contribution if your income is above a certain level. However, you can convert assets from a traditional IRA to a Roth IRA. On your tax return for that year, you would have to pay the tax due on the conversion. You can make withdrawals of qualified amounts from your Roth account in the future without having to pay income tax. You can also avoid required minimum distributions starting at the age of 73 (75 for those born after 1960). 3. Add Money to a 529 Account A 529 College Savings Account is a tax-advantaged account that helps you pay for educational expenses. Federally, the money you deposit is not deductible. However, some states offer tax breaks for 529 contributions. The money in the account is tax-deferred, and withdrawals for eligible education expenses are tax-free. Contributing to a 529 may not affect your current income tax situation, but can have a positive impact on your estate tax liability. You can, for example, contribute five times your annual gift tax exemption limit to a 529 at one time. This would remove the contributions from your gross taxable estate. 4. Donate More to Charity Contributions to charity are a popular way for high-income earners to save on taxes. IRS rules allow you to deduct up to 60% of your adjusted gross income as charitable contributions. The deductions for non-cash assets are limited to 30%. You can take advantage of charitable tax deductions in several ways, including If you are over 73 years old and do not need to take RMDs from a traditional IRA, you may want to consider the last option. IRA owners who are over 70.5 years old can make a donation of up to $100,000 each year through a QCD . This can reduce their taxable income. Remember that you don’t get to claim this amount the same as a charitable contribution. If you want to deduct other cash donations or assets that are not in cash, you will need to itemize these on Schedule A. 5. Review and Adjust Your Asset Allocation It’s important that you allocate assets to the best places. Some investments are more tax-efficient. It’s generally a good idea to place more tax-efficient funds, such as Exchange-Traded Funds (ETFs), in your taxable account and reserve higher-impact funds for a 401(k), IRA or other retirement plan. Consider investing in municipal bonds that are tax-exempt to reduce your taxes. These bonds’ interest income is not included in the Medicare surtax calculation and is also exempt from federal income tax. Municipal bond income may be exempt from state income taxes. Remember that you can also use tax-losses to your advantage. Harvesting losses
Form BE-13 Explained: 2025 Foreign Investment Reporting Requirements
Foreign companies and investors, who are not U.S. Citizens, want to invest in America because of the country’s political stability and its growing economy. The United States is known historically for supporting foreign investors and entrepreneurs who wish to establish businesses in the country. Many high-tech companies and pharmaceutical firms were founded by non-U.S. residents, according to research. These companies have made a significant contribution to the American economy. This is why this chance to start a company is beneficial for everyone. Foreign investors and business owners that have invested or wish to invest in U.S. companies must adhere to a set of requirements. This includes filing a BE-13 form. This is a complicated process, as there are different types of BE-13 forms that businesses must fill out based on their activity. There are also time limits for filing. Non-filing is a serious offense that can result in fines and penalties. The process of filing BE-13 can be confusing, especially to those unfamiliar with U.S. laws. This BE-13 form guide will help you to better understand the filing process, and also answer some of your most common questions you have in 2025. Parr & Ibarra CPA, a reputable business consulting, accounting and tax firm, has many years’ experience working with foreign investors and can help with the BE-13 process. Understanding Form BE-13 Requirements The BE-13 form, or the Survey of New Foreign Direct Investment, is an annual survey that’s conducted by the U.S. Bureau of Economic Analysis (BEA) through a form. This form is mandatory and must be filled out by U.S. companies when foreign investors invest directly or indirectly via an existing U.S. affiliate. What is the purpose and scope? The BEA uses the form BE-13 to collect information about foreign investments in the United States, and their potential impact on the American economy. The form also assists the U.S. Government in tracking new investments and their sources. This information can have a significant impact on foreign policies and national safety. This form is also applicable to expansion activities carried out by businesses that have substantial foreign investments. Filing Thresholds It’s important to note that not all U.S. entities have to file this form. You must file this form only in the following scenarios: Who Must Report? The form BE-13 must be filed by U.S. businesses that have previously filed the BE-13B or BE-13D but the established or expanded entity is still under construction. When the BEA contacts the U.S. enterprise, but the entity does not meet any of the filing requirements for the other forms, a claim for exemption may be filed. A claim for exemption is also possible when the U.S. enterprise meets all requirements, except the $3million threshold required to file other forms, but has not been contacted by BEA. If you fail to comply with the restrictions, you can face civic penalties up to $44,539. And imprisonment for a year with a penalty of up to $10,000 for Wilful non-filing. The business must also file the BE-13 form correctly with all the details of foreign investors. Incorrect data could lead to additional consequences, and waste time and resources. Parr & Ibarra CPA can help you better understand the BE-13 form. You can contact us for more information about filing BE-13 forms as we are an experienced firm that has helped thousands of entities to file the correct BE-13 form. Types of Transactions Reportable BE-13 forms are available in different types based on the investment scenario. This rule applies to investments that are over $3 million. The scenarios below and the BE-13 forms to be used accordingly are listed. Direct Acquisitions When a U.S. company is acquired directly or indirectly by a foreign investor or company, Form BE-13A must be filed. The new investor, however, must hold more than 10% of the voting rights in the U.S. business. This filing applies even when segments or operating units of a U.S. company were directly acquired by a foreign entity with the same voting rights. The investment must also be greater than $3 million Establishment of new Entities If a new U.S. company is formed and more than 10% voting rights are directly or indirectly held by a foreign entity, then the firm must file form BE-13B. This rule applies to any business enterprise, whether it is incorporated or has a physical location. This rule does not apply when a company is formed solely for the purpose of acquiring another business within 30 days after its formation. The entity in this case will be treated as an acquisition and the entities must submit form BE-13A. Expansion Activities The business entity that is an existing U.S. subsidiary of a parent company from abroad must submit form BE-13D when it expands its operations. The expansion is defined as the construction and leasing of a new facility. This includes an expansion of a structure that already exists, provided new structures are added. Changes in Ownership If an existing U.S. subsidiary of a foreign parent acquires or merges a U.S. company, it must submit form BE-13C. If the total cost is less than $3 million then an exemption can be filed. As each of these categories has its own form, you must be certain that you are filing the correct form. If you have any doubts, consult our CPAs who are experts in U.S. taxation and accounting. Filing Deadlines and Process To avoid penalties, you must submit BE-13 forms accurately and within the deadlines. These forms are used for statistical analysis only and not taxation or investigations. Documentation Required Every BE-13 form is comprehensive and includes all the required information that an entity has to provide. No other documentation is needed. For each foreign entity or parent, separate pages must be submitted if there is more than one. Select the appropriate BE-13 Form and complete the details. Timeline requirements The Form BE-13 is to be submitted within 45 days after a transaction. Entities claiming exemptions must also submit within this period.
Potential End of EV and Homeowner Tax Credits in 2025
The United States House of Representatives passed a sweeping tax and spending measure, dubbed the “One Big Beautiful Bill.” This bill has significant tax implications for electric vehicle (EV) buyers and homeowners. The bill, in particular, eliminates federal tax credit for clean vehicles and certain energy-efficient home improvements after December 31, 2025. You may want to take action soon if you are considering buying an EV, or upgrading the energy efficiency of your home. Otherwise, they could disappear. The Senate is currently considering a proposed bill that could affect the incentives. Tax credits for clean vehicles The House bill would end the following tax credits for new and used clean vehicles after 2025, with a limited exception. Credits for new clean vehicles (Section 30D): According to the Inflation Reduction Act, buyers of new clean vehicles that meet certain requirements can receive nonrefundable tax credit amounts up to $7500, depending on specific mineral sourcing requirements and battery component specifications. Even if a vehicle only meets one of the criteria, it is still eligible for a credit of $3,750. Clean vehicles are EVs, hydrogen fuel cell cars and plug-in hybrids also qualify. This credit is available under current law until 2032. Other eligibility rules include The manufacturer suggested retail price (MSRP) cannot exceed $80,000 for vans and sport utility vehicles and pickup trucks or $55,000 for other vehicles. The MSRP is not always the price that you pay. It includes manufacturer-installed options, accessories and trim but excludes destination fees. A taxpayer also has to meet the modified adjusted gross income (MAGI), which is capped at $300,000 for joint filers, $225,000 for heads of households and $150,000 for all other filers. Credits for clean used vehicles (Sections 25E). Buyers of used clean vehicles may qualify for a credit of 30% of the sale price, up to $4,000. To be eligible for the credit: There is also an income limit for used vehicles. However, it’s lower than the limits for new vehicles. MAGI for used vehicles is $150,000 for married couples filing jointly, $112,500 if you are a head of household, and $75,000 for all others. The two credits are not refundable, and they cannot be carried over unless they are claimed as general business credits. Taxpayers may transfer their credit to a dealer in order to lower the purchase price, or claim it on their tax return. There are only two dealer transfers per year allowed. IRS Form 8936 must be completed to claim the EV credit or transfer it to a Dealer. Important: The House Bill provides an exemption for small-volume manufacturers, allowing manufacturers who have sold less than 200,000 clean vehicles that qualify to retain their eligibility for the current credit through 2026. The Energy Efficient Home Improvement Tax Credit The House bill also eliminates energy-efficient home improvements tax credits after 2025, such as for qualified exterior doors and windows. If these provisions become law, 2025 may be your final chance to offset some of the cost of high-efficiency home improvements through tax savings. The Section 25C, Energy Efficient Home Improvement Credit allows homeowners to claim up to 30% of the cost for eligible improvements every year until 2032. The annual limits are as follows: These upgrades must meet Energy Star certification requirements. The Key Takeaways These credits are on the chopping block, so now is a great time to buy an electric vehicle or upgrade your home to become more energy efficient, especially if these were investments you had planned to make. Keep all receipts and certificates for upgrades that qualify. Tax credits can become more complicated due to potential legislative changes. The House bill keeps these green tax credits through the end of the year, but the Senate may make changes to its bill. (This bill would have to be passed by the House before it could become law.) At Parr & Ibarra, our tax advisors can help you determine if you qualify for these credits. Claim them now while they are still available. Visit the IRS website to learn more about Clean Vehicle Tax Credits as well as Energy-Efficient Home Improvement credit.
