3 minute read
I recently wrote about the deduction phaseouts in the One Big Beautiful Bill Act (OBBBA). That article introduced the idea of becoming a Phaseologist - someone who understands when tax benefits begin to disappear.
But then I faced a real challenge - a client who earned $250,000 and was 65 years old.
What deductions was this client actually entitled to?
That question led me to create a second phaseout cheat sheet, this time with client income taking center stage.
My goal is to help you become a true Phaseologist.
When Are Deductions Safe?
At what income level are all of your deductions protected? And at what levels do they start phasing out, including the deductions your clients care most about?
For example, many assume their $40,000 State and Local Tax (SALT) deduction is safe. But cross certain thresholds, and that deduction starts to vanish.
The Vanishing Act
Cross certain income thresholds, and every single tax benefit starts shrinking. Every deduction phases out at different income levels with different rules.
For example, with $500,000 in income, your $40,000 in state and local tax (SALT) deduction begins disappearing. For every dollar over $500,000, you lose 30 cents of your SALT deduction. So at $600,000 income, your SALT deduction drops from $40,000 to just $10,000.
That is $30,000 lost deductions simply by earning more money.
The Hidden Tax Brackets
These phaseouts create hidden tax brackets. Your marginal rate is not just the published rate, but it also becomes the value of disappearing deductions.
It adds a level of complexity to tax planning that Phaseologist should be better equipped to handle.
Your Phaseout Guide
Want to see exactly where deductions disappear - sorted by income?
Click here or the image below for the full Phaseout Guide
This guide shows how income levels affect key deductions like SALT, senior benefits, and more, so you can better plan with clients who face these thresholds.
Become a true Phaseologist and help your clients keep more of what they earn.
Disclosures:
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service
Federal and state laws and regulations are complex and subject to change, which can materially impact your results.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc. Trust services offered through Dunham Trust Company, an affiliated Nevada Trust Company.