Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
As usual, the analysis on the Kitces site is outstanding. I spot checked a few areas that I'm focused on this year or have been in the past and the subtleties and calculations are presented with great clarity.
I've exercised options in that past and looked for the statement that paying AMT is often a timing issue - you're paying taxes now instead of down the road when you sell your stock - but you're not paying more.
It's worth remembering that paying AMT on an ISO exercise creates an AMT credit, which can offset regular tax in future years to the extent that the taxpayer's regular tax exceeds AMT. For clients who receive ISO grants only sporadically or on a one-time basis, paying AMT in one year isn't necessarily a problem if they'll eventually recover it through the AMT credit.
I'm in the process of helping a non-married taxpayer decide on the size of their 2025 Roth conversion. Someone below RMD age who won't need the RMD amounts later. So converting more now is better.
The column notes that with the phaseout of the $6K senior credit, tax brackets for singles get multiplied by 1.06 (until fully phased out). A 22% bracket becomes a 23.32% bracket (6% higher). That's still better than edging into the 24% bracket in the future. But for couples, the multiplier is 1.12, so the 22% bracket becomes a 24.64%. For couples it might be better to just keep the T-IRA money and pay 24% on it later.
Then there's the elimination of energy efficient home improvement credits. Trigger warning - here's where we get into politics. I expect to be able to wait until tax credits are revived. We try to keep our place set at 76° - 78° so we haven't been taxing our HVAC as severely as some of our neighbors who recently replaced their units (with obsolete 2024 models that use an old, high Global Warming Potential coolant)
Given that COP30 was another disappointment, and climate change related damage is increasing rapidly in the US, we may see those tax credits revived sooner rather than later.
One subtlety that was left out from this column but does appear in an earlier Kitces column is that MAGI for the purpose of the OBBBA "below the line deductions" includes tax exempt interest from territories (Puerto Rico, US Virgin Islands, etc.) and the foreign earned income exclusion.
Comments
I've exercised options in that past and looked for the statement that paying AMT is often a timing issue - you're paying taxes now instead of down the road when you sell your stock - but you're not paying more. I'm in the process of helping a non-married taxpayer decide on the size of their 2025 Roth conversion. Someone below RMD age who won't need the RMD amounts later. So converting more now is better.
The column notes that with the phaseout of the $6K senior credit, tax brackets for singles get multiplied by 1.06 (until fully phased out). A 22% bracket becomes a 23.32% bracket (6% higher). That's still better than edging into the 24% bracket in the future. But for couples, the multiplier is 1.12, so the 22% bracket becomes a 24.64%. For couples it might be better to just keep the T-IRA money and pay 24% on it later.
Lots of moving parts. I've included the multiplier effect table from the Kitces site column for various phaseouts:
https://www.kitces.com/wp-content/uploads/2025/10/03-Magnifying-Effect-Of-OBBBA-Deduction-Phaseouts-On-Marginal-Tax-Rates-2000x1062.png
Then there's the elimination of energy efficient home improvement credits. Trigger warning - here's where we get into politics. I expect to be able to wait until tax credits are revived. We try to keep our place set at 76° - 78° so we haven't been taxing our HVAC as severely as some of our neighbors who recently replaced their units (with obsolete 2024 models that use an old, high Global Warming Potential coolant
Given that COP30 was another disappointment, and climate change related damage is increasing rapidly in the US, we may see those tax credits revived sooner rather than later.
https://abcnews.go.com/International/cop30-delegates-agree-minute-deal-falls-short-expectations/story?id=127785289
https://www.ncei.noaa.gov/access/billions/state-summary/US
(There are no updates from NOAA after 2024 to "align[] with evolving priorities, statutory mandates, and staffing changes".)
See Nerd Note in this column:
https://www.kitces.com/blog/obbba-one-big-beautiful-bill-act-tax-planning-salt-cap-senior-deduction-qbi-deduction-tax-cut-and-jobs-act-tcja-amt-trump-accounts/
or this Kiplinger piece on how MAGI means different things in different contexts:
https://www.kiplinger.com/taxes/what-is-modified-adjusted-gross-income