Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.

Section 529 Qualified Tuition Plans v. Trump Accounts

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  • mike   

Section 529 Qualified Tuition Plans (QTPs) and Trump accounts are two important education savings tools. Some families might want to use both. I’m going to compare highlights of these two alternatives here.

Note that I’m not covering all of the details for these accounts. You can find more details at https://trumpaccounts.gov/ and, including more education tax benefits, in Publication 970 (https://www.irs.gov/pub/irs-pdf/p970.pdf).

Note that state income tax rules for these accounts might be different from the federal tax rules discussed here. Consult with a tax advisor familiar with the state’s rules or otherwise find out the rules that apply for your state.

Trump accounts were created in the One Big Beautiful Bill Act enacted July 4, 2025. They were the fulfillment of a campaign promise for the U.S. government to set up a $1,000 education savings account for newborn children born in the United States. Trump accounts were created to receive those payments with many more features.

The name “Trump accounts” may be a turn-off for many, but they should hold their noses and consider having them for their children, anyway.

QTPs have been with us for a while and have significant advantages compared to Trump accounts.

What is a Trump account? A Trump account is a special type of IRA that can be set up for an individual who has not attained age 18 before the end of the calendar year in which an election to set up a Trump account is made and for whom a social security card was issued before the election was made. The child is the owner of the account (who I’m calling the beneficiary) and an authorized individual, usually a parent, is the custodian before the beneficiary reaches age 18. Unlike other traditional IRAs, contributions to the account aren’t based on earned income. The account grows tax-deferred and then converts to a traditional IRA when the beneficiary reaches age 18. No distributions from the account are allowed until the beneficiary reaches age 18. At age 18, the beneficiary becomes the owner of the account. Investments are limited to certain index funds or exchange traded index funds.

What is a Qualified Tuition Plan (QTP)? A QTP is a program established by a state or an eligible education institution to prepay a student’s qualified education expenses or accumulate funds on a tax-deferred basis to pay a student’s qualified education expenses.

Trump account Pilot program

Trump accounts are the only accounts that can receive the $1,000 “pilot program” contribution from the federal government. An authorized individual must elect to open an initial Trump account to receive it, using Form 4547. An eligible child is a qualifying child who is born during the 2025, 2026, 2027 or 2028 calendar years, has had no previous pilot program election made by any individual, and is a United States citizen. If nothing else, there is no reason not to accept this “gift” from the U.S. government.

Number of accounts

A child can only have one Trump account. The balance can be rolled over, but only one Trump account can hold funds for a beneficiary at any time.

There can be multiple QTPs for a beneficiary. They are not generally aggregated. They are accounted for separately. However, there is an overall limit to the amount QTP accounts can hold, which is the amount required to fund the beneficiary’s expected education expenses. For example, a student at Stanford University has expected annual education expenses of $96,513. A California resident student at UC Berkeley has expected annual education expenses of $45,053 while a California nonresident student has expected annual education expenses of $62,611.

Who can set up an account?

An initial Trump account is set up by the Secretary of the Treasury (via the IRS) based on the election using Form 4546 filed by an authorized person. You can find a link to set up an account online at www.irs.gov. Under a proposed ordering rule, the authorized individual would be, in order of priority, a legal guardian, parent adult sibling, or grandparent of the eligible individual.

Apparently, anyone can set up a QTP for a beneficiary to pay their qualified education expenses. Whoever sets up or contributes to an account should coordinate with other donors to avoid excess contributions.

What are the maximum contributions for an account?

Contributions from the pilot program, qualified general contributions (such as from a state government), or qualified rollover contributions to a Trump account aren’t subject to an annual contribution limit. The total of other contributions before the beneficiary reaches age 18, including from employer contributions and contributions by parents and relatives, are subject to an annual limit of $5,000 (subject to cost of living adjustments after 2027.)

The IRS has issued a transfer tax safe harbor (Rev. Proc. 2026-25) that excludes most contributions to a Trump account from federal gift tax reporting, as gifts of a present interest. Taxpayers who make present interest gifts exceeding $19,000 for a donee are still required federal gift tax returns, Form 709. Since beneficiaries don’t have access to the funds until they reach age 18, there was a concern the contributions should be considered future interests.

Contributions to a QTP are treated as present interests, eligible for the $19,000 annual exclusion. If a contribution exceeds $19,000 for 2026, the donor may elect to have it treated as made over a five-year period, so a husband and wife could each contribute up to $95,000 ($190,000 for both) for a student for 2026. THIS IS A MAJOR ADVANTAGE OF QTPs. When that election is made, federal gift tax returns must be filed for each of the five years. Any amount that hasn’t been reported on a federal gift tax return when a donor dies is included in the donor’s taxable estate.

Otherwise, as I said before, the total amounts accumulated in QTPs for a beneficiary can’t exceed their expected education expenses.

Employer contributions to Trump accounts

Employers may set up employee benefit plans, including cash or deferred arrangements, for payments to a dependent’s Trump account, to make contributions of up to $2,500 per employee per year (subject to cost of living adjustments after 2027) to their employees’ dependents’ Trump accounts. (See Proposed Regulations at REG-101355-26.) This is an employee benefit that is excluded from the employee’s taxable income. The employer must have a written plan that doesn’t discriminate in favor of highly-compensated employees.

The term employee does not include a self-employed individual within the meaning of section 401(c)(1), such as a partner in a partnership, a sole proprietor, a director solely by reason of service as a director, or a 2-percent shareholder of an S corporation within the meaning of section 1372(b). Therefore, these individuals aren’t eligible to participate in the plan and are disqualified from the $2,500 exclusion from income.

There is no employee benefit plan for contributions to a QTP. Any employer contributions to a QTP of an employee’s dependent would be included in the employee’s taxable wages.

Qualified Education Expenses

When a Trump account beneficiary reaches age 18, the account converts to a traditional IRA and the beneficiary gets control of the account as an owner. Amounts withdrawn from the account are allocated to taxable ordinary income and nontaxable return of capital to recover nondeductible contributions to the account. Employer contributions on behalf of dependents of their employees are not included as capital, so they are included in ordinary income when they are distributed. The income is taxable to the beneficiary/owner.

Distributions from an IRA, including any taxable amounts distributed from a Roth IRA, before reaching age 59 1/2 are generally subject to a 10% of taxable IRA income early distribution penalty. Distributions that are used to pay qualified education expenses aren’t subject to the early distribution penalty.

Distributions from a QTP that are used to pay qualified education expenses are exempt from federal income tax. THIS IS A MAJOR ADVANTAGE OF QTPs. Qualified education expenses that are used to compute an American Opportunity Credit or Lifetime Learning Credit aren’t eligible for the exclusion. The portion of distributions in excess of qualified education expenses that is accumulated untaxed income is ordinary taxable income. The income is taxable to the individual(s) who set up the account, not the designated beneficiary of the account. A 10% penalty applies to the taxable income, with certain exceptions, such as amounts reimbursed from a tax-free scholarship or fellowship grant.

The definition of qualified education expenses is the same for IRAs and QTPs. They are referred to in the Internal Revenue Code and IRS publications as “qualified higher education expenses”.

They include tuition, fees, books, supplies and equipment required for the enrollment or attendance of a designated beneficiary at an eligible education institution, expenses for special needs services for a special needs beneficiary which are incurred in connection with such enrollment or attendance, and expenses for the purchase of computer or peripheral equipment, computer software, or internet access and related service when the equipment, software and services are used primarily by the beneficiary (not family members) during the years the beneficiary is enrolled at an eligible educational institution. Room and board are included only when the student/beneficiary attends the institution at least half time. Qualified expenses are reduced by tax-free education benefits (such as scholarships and employer-provided education assistance) plus the amount of qualifying expenses counted for computing an education credit.

A cumulative amount up to $10,000 of payments for principal or interest for a qualified student loan for either the beneficiary or their sibling is a qualified education expense. Interest paid using QTP funds doesn’t qualify for the student loan interest tax deduction.

An eligible educational institution is generally an accredited college or university, or an eligible elementary or secondary school.

Up to $20,000 of qualified elementary and secondary education expenses of a designated beneficiary also are eligible for distributions from a QTP that are excluded from taxable income. Qualified expenses include tuition, curriculum and curricular materials, books or other instructional materials, online educational materials, tuition for tutoring or educational classes outside of the home when the tutor isn’t related to the student, fees for nationally standardized norm-referenced achievement tests, advanced placement examinations, or any examination related to college or university admission, fees for dual enrollment in an institution of higher education, and educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies.

Effective for distributions after July 4, 2025, qualified postsecondary credentialing expenses, including tuition, fees, books, supplies, equipment and other expenses, also qualify, and testing fees required to obtain or maintain the credential and continuing education fees required to maintain the credential are qualified education expenses. (Helps those with professional designations.)

Transferability

The rules for transferability of traditional IRA accounts apply to Trump accounts, so they generally can’t be transferred to someone else during the beneficiary/account owner’s lifetime. A remainder beneficiary can be named for who will inherit the account after the account owner’s death, including possibly naming a trust as the remainder beneficiary.

Unlike IRAs, the designated beneficiary of a QTP can be changed during lifetime or after death to a member of the designated beneficiary’s family, including the beneficiary’s (1) spouse; (2) child, stepchild, foster child, adopted child or other descendant; (3) brother, sister, half brother, half sister, stepbrother or stepsister; (4) father, mother, or ancestor of either; (5) stepfather or stepmother; (6) son or daughter of a brother, sister, half brother or half sister; (7) brother or sister of father or mother; (8) son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; (9) the spouse of any of the previously-listed people; or (10) first cousin.

This gives a lot of flexibility for unused balances in a QTP or for if the designated beneficiary decides not to pursue further education. The person who set up the account generally retains the right to designate another beneficiary. THIS IS A MAJOR ADVANTAGE OF QTPs.

Roth conversion

When the beneficiary/owner of a Trump account reaches age 18, he or she may elect to rollover or convert the account to a Roth IRA account. Reasons to do this include changing the account so that any distributions in the future (after a five-year waiting period) will be tax-free, the account owner will not be subject to the requirement to take required minimum distributions during his or her lifetime, and distributions to his or her successors after death will be income tax-free. The conversion can be done over several years to minimize or avoid any income tax liability for the conversion.

Up to a lifetime cap of $35,000 for a designated beneficiary, QTPs may be rolled over to a Roth IRA, subject to these requirements: (1) The QTP must have been maintained for the same designated beneficiary for at least 15 years; (2) The Roth IRA must be owned by the designated beneficiary of the QTP, not another account owner; (3) Amounts attributable to contributions to the QTP during the preceding five years, plus earnings on those contributions, aren’t eligible to roll over; (4) The rollover counts as part or all of the designated beneficiary’s annual Roth IRA contribution limit, and can’t exceed the designated beneficiary’s earned income for the year. A rollover from a QTP also reduces the limit for any other Roth IRA or traditional IRA contributions for the year.

The best way to make the transfer is a trustee-to-trustee transfer.

ABLE account rollovers

Achieving a Better Life Experience (ABLE) accounts are a way to grow tax-deferred savings for individuals who are blind or disabled under the social security disability insurance program or have a disability certification that was filed with the IRS for the tax year, and (effective 2026) the blindness or disability occurred before the individual reached age 46. The accounts are maintained by a state agency and an individual can only have one ABLE account.

Distributions from an ABLE for qualified disability expenses are tax-free, and qualified disability expenses are fairly liberally defined.

For 2026 the annual contribution is limited to $20,000 plus an additional contribution amount for disabled individuals who work equal to the lesser of the individual’s earned income or the federal poverty line of $15,650.

For more information, here is the URL for the Social Security website about ABLE accounts. https://secure.ssa.gov/poms.nsf/lnx/0501130740

Trump accounts aren’t eligible for rollovers to an ABLE account.

Distributions from a QTP may be rolled over tax free (including a trustee-to-trustee transfer) to an ABLE, provided they are transferred within 60 days to an ABLE of the same designated beneficiary or a member of the family of the designated beneficiary. The rollover is limited to the annual limit for contributions to an ABLE, and reduces the ability for other contributions to the ABLE account.

A member of the family includes the same individuals listed above for changing the beneficiary of a QTP.

Which is better?

A QTP is clearly a better vehicle for investing to provide for a student’s education than a Trump account.

QTPs have more investment flexibility than Trump accounts.

Distributions from QTPs to pay qualified education expenses are tax-free. Distributions from Trump accounts (converted to traditional IRAs), except capital recovery for certain contributions, are taxable. Distributions from traditional IRAs for qualified education expenses before age 59 1/2 aren’t subject to early distribution penalties.

QTPs can make limited distributions for elementary school and secondary school expenses. Trump accounts are prohibited from making distributions before age 18.

Potential gift-tax free contributions to QTPs are much greater than for Trump accounts, creating a bigger fund to grow tax-deferred and potentially tax-free to fund an expensive education. (Consider the election to have contributions to a QTP reported as gifts over a five-year period.)

The designated beneficiary of a QTP can be changed to another family member if excess funds remain after a designated beneficiary graduates from university or decides not to pursue higher education.

Other choices to avoid taxation for excess funds in a QTP include limited tax-free rollovers to a Roth IRA or an ABLE account.

Initially, a Trump account must be created to receive a $1,000 federal “gift” for qualifying children born during 2025-2028.

A Trump account can be a way to start building a retirement account for a child without requiring earned income for contributions.

When the child who is the beneficiary/owner of the Trump account reaches age 18, the account converts to a traditional IRA that is eligible to be converted to a Roth account, resulting in current taxable income and future tax-free growth.

Families that can afford it should consider having both QTPs and Trump accounts for their children. Remember, present interest gifts of contributions to QTPs and Trump accounts might exceed the $19,000 limit (for 2026) for the annual gift tax exclusion, but the lifetime estate and gift tax exemption for U.S. residents is $15 million for an individual.

Two little words that might save your grandchild’s inheritance

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  • mike   

When my father passed away, I helped my mother rollover his traditional IRA to her own name.

I helped her designate my brother, my two sisters and myself as beneficiaries for the account, by simply listing our names.

Sadly, one of my sisters died from cancer before my mother’s death. No changes were made to the beneficiaries of my mother’s IRA after my sister’s death.

After Mother’s death, I went to her credit union to arrange for distributing the balance of the IRA. I was surprised to learn my deceased sister’s share didn’t go to her children, my two nephews. Since my sister predeceased my mother, her name was simply removed as a beneficiary and her share was divided equally by my mother’s remaining children.

Fortunately, my mother’s revocable living trust had language that preserved the share of my sister’s children for her remaining assets.

My nephews, who were adults, felt fortunate to receive any inheritance from their grandmother, and the balance of the IRA was small, so they weren’t concerned.

Their father, my brother in law, was more sensitive about his sons’ inheritances. I was embarrassed to explain that his sons wouldn’t receive a couple of thousand dollars each from the IRA. He also let the matter go.

For many families, the largest assets in a decedent’s estate are the family residence and the decedent’s retirement accounts. Making beneficiary designations for the retirement accounts is very significant, and most of us don’t consult with an estate planning attorney when making those designations. We just quickly “fill out the forms”.

Since we don’t normally think about our retirement accounts as accessible assets, they can be “invisible” assets that are even neglected by attorneys for estate planning. This is a big mistake. Whenever working on an estate plan with an attorney, remember to include your retirement accounts, including your beneficiary designations.

If my mother had included two little words after my sister’s name, her share of the IRA would have gone to my sister’s children. The words are “per stirpes”.

They are a legal phrase that roughly mean “by right of representation”. For example, for the beneficiary designation “Mary Smith, per stirpes”, if Mary predeceases the IRA owner, her share is divided equally by her children. If Mary and one or more of her children predecease the IRA owner, a deceased child’s share would be divided equally by that child’s children (Mary’s grandchildren via that child). Etc.

My understanding is “per stirpes” isn’t used when naming a spouse as a beneficiary. In that case, children, per stirpes could be named as successor beneficiaries for the contingency of the spouse’s death.

After my experience after Mother’s death, I changed the successor beneficiaries of the retirement accounts for my wife and myself, listing our children, per stirpes, as successor beneficiaries.

I recommend that you consult with an estate planning attorney to create your estate plan, including discussing your retirement accounts. While that’s in process, consider adding “per stirpes” to your beneficiary designations.

Michael Gray, CPA is the co-author of How To Use Roth & IRA Accounts To Provide A Secure Retirement, 2025 Edition. rothirainvestingbook.com

Tariff controversies after Supreme Court ruling

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  • mike   

On February 20, 2026, the Supreme Court ruled in Learning Resources v. Trump that tariffs imposed by President Donald Trump exceeded his authority under the 1977 International Emergency Economic Powers Act.

Three conservative Justices, Chief Justice John Roberts and Justices Amy Coney Barrett and Neil Gorsuch, joined the court’s three liberals in the 6-3 majority.

Chief Justice Roberts wrote in his opinion, “The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope. In light of the breadth, history, and constitutional context of the asserted authority, he must identify clear congressional authorization to exercise it.”

The ruling doesn’t apply to national security tariffs imposed on specific industries, including automobiles and auto parts, steel and aluminum, copper and softwood lumber.

Since the trade agreements Trump has been making with other countries involved relief from high tariffs, those agreements could be reopened.

The Court’s ruling didn’t include whether or how about $175 billion collected from the tariffs would be refunded. According to Treasury Secretary Scott Bessant, a lower court will need to decide the issue. “The Supreme Court remanded it down to a lower court. And, you know, we will follow what they say, but that could be weeks or months.”

The Tariff Refund Act of 2026 has been introduced by Democrats in the Senate and the Restoring Economic Lifelines for Independent Enterprises and Family Business Act has been introduced by Democrats in the House of Representatives, which would require refunding the tariffs plus interest, eliminating the need for individual applications or formal protests. Since the Democrats don’t have control of the Senate or the House and President Trump is unlikely to approve these proposals, they probably won’t be enacted.

Meanwhile, about 1,000 companies have filed protective refund lawsuits, including Costco. FedEx filed for a refund on February 23. Maybe there will be a class action lawsuit to reduce legal expenses of recovering tariffs paid?

President Trump is furious with the Supreme Court’s ruling. “The Supreme Court’s ruling on tariffs is deeply disappointing, and I’m ashamed of certain members of the Court — absolutely ashamed — for not having the courage to do what’s right for our country.”

President Trump believes the Supreme Court has left the possibility of using alternative theories to continue broadly imposing tariffs. Trump and his team had a “Plan B” ready to implement.

Immediately after the Supreme Court ruling on February 20, President Trump signed an Executive Order imposing a 10% tariff on worldwide imports to the United States under Section 122 of the Trade Act of 1974, effective February 24, 2026. Less than 24 hours later, he announced the tariff to be increased to 15%, the maximum under Section 122. Under Section 122, the tariff may be imposed for up to 150 days, unless Congress agrees to extend it. Since Section 122 has never been invoked before, it’s unknown if Trump could invoke it again after the 150 days expires.

Exemptions apply for the 15% tariff that are similar to those that were invalidated by the Supreme Court, with carve outs for specific products within sectors such as energy, pharmaceuticals, autos, and aerospace, and shielding goods from North American neighbors under the U.S. Mexico-Canada Agreement, which was signed by President Trump during his first term.

It isn’t clear that President Trump has the authority to impose tariffs under Section 122 of the Trade Act of 1974. The tariffs were meant to be imposed when the United States faces “fundamental international payments problems” requiring emergency action. The legislation was enacted when the United States suffered a balance of payments problem under fixed currency exchange rates that were later replaced with floating currency exchange rates.

Three circumstances qualify for the temporary surcharge: (1) dealing with “large and serious United States balance-of-payments deficits”; (2) preventing “an imminent and significant depreciation of the dollar in foreign exchange markets”; or (3) cooperating with other countries “in correcting an imbalance in international payments.”

Note that trade deficits aren’t included on the list.

Section 122 was written for something specific: a crisis where a country is running out of the foreign exchange or gold reserves needed to honor it’s international obligations. That was the world scenario during 1971.

According Bill Riley, director of the Free Trade Initiative, “Section 122 only makes sense under a fixed exchange rate, which hasn’t existed in the U.S. in more than 50 years.” The economic conditions for Section 122 can’t arise under the current monetary system.

It seems likely the 15% tariff will be litigated and, in light of the Supreme Court’s ruling in Learning Resources v. Trump, could be subjected to emergency court injunctions.

Make your Section 83(b) election online

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  • mike   

Employees or service providers who receive restricted or unvested property, such as employer stock, as compensation should consider making a Section 83(b) election online. A Section 83(b) election is used to accelerate the taxation for unvested property received as compensation.

The most common situation where we see it in Silicon Valley is when a nonqualified stock option has an early exercise privilege (isn’t vested). For example, when an employee exercises a nonqualified stock option that has an early exercise privilege doesn’t work a certain number of years, the unvested stock is forfeited back to the employer.

When a vested nonqualified stock option is exercised, the excess of the fair market value of the stock over the option price is taxed as ordinary compensation income. When a nonvested nonqualified stock option is exercised, the ordinary income event is when the stock vests. When a Section 83(b) election is made, the exercise is treated “as if” the stock was vested. The option holder makes the election because he or she expects the price of the stock to grow in the future.

Similar rules apply for restricted/nonvested stock grants, but not for restricted stock units (RSUs).

In addition, the holding period for the stock for qualification for long-term capital gains is generally measured from the later of the exercise date or the vesting date. Since a Section 83(b) election results in vesting being disregarded, the holding period when the election is made starts on the exercise date.

For incentive stock options, a Section 83(b) election is only effective for the alternative minimum tax. Incentive stock option benefits from holding the stock more than two years after the grant date and more than one year after exercise only apply for regular tax reporting, and the incentive stock option rules superscede Section 83 when an incentive stock option is exercised.

During April, 2025, the IRS issued new Form 15620 for making a Section 83(b) election. The election can still be made with alternative written election language.

According to the instructions for the paper Form 15620, the employee or service provider should “Submit this completed and signed Form 15620 to the IRS via mail with the IRS office with which the person who performs the services files a federal income tax return.”

The IRS also (quietly) allows Form 15620 to be submitted online using its idME portal. According to the instructions on the idME site, Form 15620 may be submitted “either online (preferred), or by mail, but not both.” The Section 83(b) election may only be submitted using Form 15620 when it is submitted online using the idME portal.

To my knowledge, the IRS has made no public announcement of this alternative.

Here is a link for the IRS’s “mobile-friendly form”. https://tinyurl.com/83online

You need an IRS idME online account to file the form online and you can do it using the above URL if you don’t already have one.

An advantage of filing online is you are assured the IRS has received it and shouldn’t misplace it.

The IRS prefers electronic filing because it’s far more efficient for the IRS to process electronic forms. They call paper forms “kryptonite”.

To be effective, a Section 83(b) election must be filed within 30 days after the option is exercised or restricted/unvested stock is granted.

A signed copy of the election must also be submitted to the transferee of the property and the person/company for whom services were performed.

A Section 83(b) election is generally irrevocable — you can’t change your mind later.

Employees or service providers who receive a nonqualified stock option with an early exercise privilege or a restricted stock grant should consult with a tax advisor who knows these rules.

Tax advisors should alert their clients who issue or receive stock-based compensation of this choice for making a Section 83(b) election.

Take mailed estimated tax payments to a USPS retail counter

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  • mike   

On November 24, 2025, the U.S. Postal Service published a notice in the Federal Register clarifying its postmark policies, effective December 24, 2025. https://www.federalregister.gov/documents/2025/11/24/2025-20740/postmarks-and-postal-possession

The new policy is also explained in this article from the USPS Newsroom. https://about.usps.com/newsroom/statements/010226-postmarking-myths-and-facts.htm

Instead of dating the postmark when an item of mail is accepted by the USPS, the postmark is generally dated when the item is processed at its automated processing facility, which might be several days after its accepted.

This might cause an issue for items mailed, but not postmarked, by a critical due date, such as a tax filing due date or voting day for a mail-in ballot.

Here are three ways to ensure a postmark showing the date of delivery:

  1. Request a Manual Postmark. Take the mailpiece to a USPS retail counter and request a “manual (local) postmark”. The postmark will be applied when the item is accepted. There is no additional charge for this service.
  2. Postage Validation Imprint (PVI). When postage is purchased at a retail counter and a PVI label is printed, the label will indicate the date of acceptance.
  3. Certificates of Mailing. A customer may purchase a Certificate of Mailing, or use Registered or Certified Mail, to get a receipt serving as evidence of the date the item was presented for mailing.

Note that the date on customer-applied pre-printed labels, such as from self-service kiosks, Click-N-Ship, or postage meters is not evidence of the mailing date or when the USPS accepted the item.

So, when you’re mailing a tax form, such as the next estimated tax payment due on January 15, 2026, or sending a mail-in ballot close to the deadline, take the item to a USPS retail counter and request a manual postmark, a Postage Validation Imprint, or a Certificate of Mailing.

Very high-income taxpayers should probably accelerate donations to 2025

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  • mike   

Not all of the tax law changes in the One Big Beautiful Bill Act (OBBBA) enacted July 4, 2025 favor high-income taxpayers.

For example, effective for tax years beginning after 2025, under Section 70425 of the Act, the charitable contributions tax deduction for individuals is reduced by 0.5% of the taxpayer’s contribution base for the taxable year.

The contribution base is the taxpayer’s adjusted gross income, computed without regard to any net operating loss carryback to the taxable year.

For most taxpayers, this reduction might not seem significant. For example, if John has adjusted gross income of $1,000,000, the reduction would be $5,000.

Taxpayers with much higher income are hit harder. For example, if Jane has adjusted gross income of $20 million, the reduction would be $100,000. Jane would be in the 37% marginal federal income tax bracket plus 3.8% for the net investment income tax, or 40.8%, so this tax law change could increase Jane’s federal income tax liability by $40,800 for 2026 compared to 2025. If Jane makes $100,000 of charitable contributions each year, she should consider accelerating the contributions she would normally make during 2026 to 2025.

Charitable contributions disallowed because of the 0.5% of contribution base reduction are added to the charitable contributions carryover amount that might be deductible during the 5 subsequent tax years. They are only added to the charitable contributions carryover if the deduction ceiling amount is exceeded, such as 60% of the contribution base for cash contributions to qualifying charities. Otherwise, the deduction for the disallowed charitable contributions are lost. In the example above, if Jane made $100,000 of charitable contributions for 2026, the 60% limitation would be $12 million, so the tax deduction for $100,000 would not be added to the charitable contributions carryover and would be lost.

Another OBBBA change effective after 2025 reduces the tax benefit of itemized deductions by 2/37 (about 5.4%) of the lesser of (1) itemized deductions before the “haircut”, or (2) the taxable income of the the taxpayer, before itemized deductions, that exceeds the threshold for the 37% tax bracket. Note this “haircut” applies to itemized deductions after the 0.5% reduction of charitable contributions.

For example, Jane has taxable income for 2026, before itemized deductions, of $20 million, and itemized deductions before the “haircut” of $1,000,000. The 2026 threshold for the 37% tax bracket for a single person is $640,600. The taxable income, before itemized deductions, exceeding the threshold is $20 million – $640,600 = $19,359,400. The “haircut” would be $1,000,000 X 2/37 = $54,054.

Note that taxpayers age 70 1/2 or older may make qualified charitable distributions (QCDs) from a traditional IRA of up to $108,000 for 2025 and $111,000 for 2026. QCDs aren’t taxable and aren’t subject to the contribution base limits that apply for other charitable contributions. QCDs also “count” for satisfying required minimum distribution (RMD) requirements for traditional IRAs that currently apply for taxpayers who reached age 73 during 2025 or the ages when RMDs applied for earlier years.

Taxpayers who haven’t decided where to donate their charitable contributions yet can “park” the funds in a donor advised fund, community foundation or a private foundation. Lower maximum deduction thresholds might apply.

The 0.5% reduction of the charitable contributions deduction and the 2/37 “haircut” of itemized deductions are only two of the significant changes in OBBBA that are making tax planning more complicated, with many different effective dates and thresholds. Taxpayers should consult with tax advisors who work with tax planning software that incorporates these changes and understand the rules for charitable planning.

When Iceland’s Women Took the Day Off

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  • mike   

The United Nations declared 1975 “The International Women’s Year”, leading to a Women’s Congress in Iceland during June, 1975.

Icelandic women gained the right to vote in 1915 and elected the first woman to parliament in 1922. In 1975, only 5% of the representatives in parliament were women.

Women were fed up with earning much less than men, having a “glass ceiling” at work, and performing most of the housework, with little or no appreciation for the importance of their contribution to Iceland’s economy. 60% of Icelandic women worked outside the home.

Led by the feminist group called the Red Stockings, the women at the Women’s Congress decided to do something about it. They proposed having a strike, but strikes were illegal in Iceland, except for labor unions and employer’s associations. So, they decided to “take a day off” on October 24, 1975.

Bear in mind that the population of Iceland in 1975 was 219,262 and there was only one national television station and one national radio station. Such an effort would be much more difficult in the United States.

There was a massive effort, supported by publicity in the media, to get participation. Women mailed postcards and letters, handed out brochures and flyers, went door to door, and made phone calls.

The morning of the “Day Off”, the front page of every newspaper in Iceland featured the Women’s Day Off. The morning newspaper, Morgunblaðið, promised to put the story on the front page provided typesetters who were taking the day off came in early to get the newspapers out, so they came in at midnight to get the job done.

90% of the women in Iceland participated in the Day Off. About 25,000 Icelandic women flooded the streets of Reyjkjavic to participate in protests.

Housewives told their husbands to prepare their own meals, care for the children and do the chores. Many husbands took their children to work. Grocery stores ran out of easy-to-cook sausages. Men called the day “The Long Friday.”

Banks and most other businesses closed for the day. Schools closed. Telephone service was shut down.

In response, Iceland adopted several women’s rights-related policies, including universal childcare and a law making paternity leave more accessible for fathers. In 1976, Iceland passed an equal rights law. In 2018, Iceland became the first country in the world to enforce equal pay for women and men for companies or organizations with 25 or more employees.

The percentage of women in parliament increased from 5% in 1983 to 46%.

In 1980, Vigdís Finnbogadóttir became the fourth president of Iceland, serving 16 years to 1996, and was the first woman in the world elected president of a country. The current president of Iceland is Halla Tómasdóttir, elected in 2024. The current prime minister of Iceland is Kristrún Frostadóttir.

Women still face challenges in Iceland. Although Iceland has more wage parity than any other nation, there is still a wage gap. Gender-based violence is widespread and women still perform the lion’s share of housework.

During 2024, director Pamela Hogan and producer Hrafnhildur Gunnadsdóttir released their documentary movie of the Day Off, The Day Iceland Stood Still. The movie has been shown on a very limited basis in the United States. It is currently available on Iceland Air international flights.

The World Economic Forum has named Iceland as the world’s most equitable society for women for 16 years. In 2025, nearly all of Iceland’s top positions, including the prime minister, president, chief of police and heads of all public and private universities, are held by women.

Project 2025 and Women’s Rights

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2025: Mandate for Leadership provides the agenda for President Trump’s presidency and the Republican leadership in Congress. Although the agenda claims to support equal rights for women, it actually appears to be an attempt to return women’s status to the 1950s.

The status of women during the 1950s and before was documented in The Feminine Mystique by Betty Friedan.

During the 1950s, the role of American women was to be mothers and housewives. Women went to college to find a husband and often dropped out before graduation. The proportion of American women attending college dropped from 47% in 1920 to 35% in 1958. By the mid-1950s, 60% of women dropped out of college to marry, or because they were afraid too much education would be a marriage bar.

During the 1950s, the average marriage age of women in America dropped to 20. Fourteen million girls were engaged by age 17. American families had an average of 3.7 children.

Almost all articles in women’s media related to marriage, relationships and the family.

Many women sought psychological therapy because they found they were losing their individual identity and weren’t achieving self-actualization goals. Psychologists suggested they work on their marriages and not on themselves. Alcoholism was rampant among American housewives.

Women who achieved professional success were social outcasts. They didn’t fit the social norms of the time.

The 1960s and 1970s were a sea change for women in the U.S. Women joined together to fight for women’s rights. Contraceptives, especially the contraceptive Pill became widely available. The Supreme Court ruled in Roe v. Wade that women had the right to safe abortions. Women gaining control over their own bodies gave them the freedom to pursue professional and self-actualization goals.

With high inflation and slow wage growth, American families found both spouses had to work to keep up with the cost of living.

The age for a first marriage for a woman in 2024 was 28.6. The average number of children for American families was 1.9.

Women comprised 58% of all college students in 2020. In 1979, about 200,000 more women were enrolled in college than men. By 2021, the difference had grown to about 3.1 million more women than men in college. For 2022, the graduation rate was 67.9% for women and 61.3% for men for first-time, full-time degree-seeking students who entered a degree-granting four-year institution in the fall of 2016.

52% of J.D. recipients today are women, v. 30% in 1980. 51% of Doctor of Dental Surgery or Doctor of Dental Medicine recipients are women, v. 13% in 1980. 50% of MD recipients are women, v. 23% in 1980.

In 2024, women made up about 47.2% of all employed workers in the U.S. The labor force percentage rate for women was about 57.6%.

The strategy of Project 2025 was to identify initiatives in advance and identify people loyal to Donald Trump to replace those who were not loyal to him to adopt changes quickly. You’ll notice the early months of Trump’s second term felt like a blitzkrieg of change. This was largely accomplished with a rash of executive orders, bypassing Congress. The Republicans wanted to accomplish as many initiatives as possible before the mid-term elections, in case the Democrats got control of either the House of Representatives, the Senate, or both, possibly blocking further initiatives.

One of the purposes of 2025: Mandate for Leadership and Project 2025 is an attempt to impose Christian Fundamentalist religious values on Americans, returning women to a subservient role.

Contraception, such as the contraceptive pill would no longer be widely available. Safe abortions would be outlawed.

“Pro-Life” initiatives would be adopted. Health and Human Services would be renamed “Department of Life.”

Employer-provided health insurance would be prohibited from providing “anti-pro life” (contraception and abortion) benefits.

Marriage is promoted and alternative sexual lifestyles are condemned. “Men and women are biological realities that are crucial to the advancement of life sciences and medical care and that married men and women are the ideal, natural family structure because all children have a right to be raised by the man and woman who conceived them.” (Even if they are abusive parents.)

The Trump Administration has attacked Diversity, Equity and Inclusion initiatives in the Federal government, in states and communities receiving federal funding, universities, and corporations.

The DOGE initiative has resulted in massive layoffs in the Federal workforce, disproportionately eliminating jobs for women and people of color.

Corporations that are requiring employees to return to the office after remote work during the COVID pandemic are disproportionately laying off women who can’t get child care and people of color.

A Baylor study found that 46% of women employees ordered to spend more time in the office negotiated taking on lower-level positions that allowed them to maintain their flexible working arrangements. Those moves involved women employees taking paycuts.

Since January 2025, more than 450,000 women have left the U.S. labor force. There was a net increase of men joining it.

In government agencies with a predominantly female workforce, such as the Social Security Administration (66% women), layoffs and cuts were widespread.

Even the right for married women to vote is under threat. The House of Representatives has passed the Safeguard American Voter Eligibility (SAVE) Act. Under the SAVE Act, anyone registering to vote or changing their registration would have to appear in person at an election office with original or certified documents proving identity and citizen status, usually with a passport or a birth certificate. A state-issued drivers license wouldn’t be adequate on its own. The passport or record of naturalization and the birth certificate would have to have a matching name. Since most married women change their last name to their husband’s at marriage, processing their voter registration would be complicated. Only half of U.S. citizens currently have a passport.

The bill includes a provision ordering states to allow registrants to provide “additional documentation” to prove their citizenship when discrepancies arise, but it does not specify what types of documents states could accept.

Making this change could prevent millions of women from voting until they can document their identities. It could also result in changing the custom of adopting a partner’s name at marriage to avoid the hassle of documenting your identity to vote.

Adopting the SAVE Act also would create an inconvenience for all voters whenever they change their address. They would have to visit a voter registration office to make the change.

The SAVE Act hasn’t been passed in the Senate. Maybe some “bugs” can be worked out when and if it is adopted.

Most of the initiatives in Project 2025 have not become laws yet, and lawsuits are in process for some, like defending diversity, equity and inclusion. The Supreme Court has been inclined to disregard precedent rulings and support President Trump and Project 2025, even when their initiatives appear on their face to be unconstitutional.

What can women do to defend their rights?

  1. Vote in the upcoming 2026 midterm election for candidates (preferably women) who support women’s rights, and do not support President Trump and Project 2025. (President Trump won the last election because fewer Democrats voted in 2016, probably because they were unhappy with how President Biden handled Israel’s war on Gaza.) (If you are in a relationship where your partner is dictating how you vote, consider asserting yourself or getting out of it. Look for local support resources online.)
  2. Join protests against the Trump Administration. www.nokings.org
  3. Call or write representatives in Congress to express your opposition to Project 2025 initiatives and the SAVE Act. https://www.congress.gov/members/find-your-member
  4. Attend local Town Hall meetings of representatives in Congress to express your opposition to Project 2025 and the SAVE Act.
  5. Donate to the American Civil Liberties Union to support litigation defending women’s rights. https://www.aclu.org/
  6. Join with other women in the National Organization for Women to fight for women’s rights. https://now.org/
  7. Start your own business or seek employment of women-led businesses or organizations. More women are educated than men, and they have the skills or can get the skills they need to run successful businesses. Women-led business often do better than business led by men. https://www.stash.com/learn/why-companies-led-by-women-may-do-better/
  8. Re-examine the tradition of paternalism and consider adopting the philosophy of partnership of the sexes. https://breakingdownpatriarchy.com/

Do you have more ideas? Please send me your suggestions.

Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.