As part of our ongoing By Your Side Chat series, Advisor Jess Geary, CFP® sat down with our trusted tax professional Bryan Kisiel, CPA, to discuss timely tax topics that are coming up more frequently in client conversations—particularly as new legislation reshapes the planning landscape.
The discussion focused on practical tax considerations that affect investors, retirees, and families alike, from understanding dividend taxation to navigating new deductions created by recent tax law changes. Below is a recap of the most relevant topics covered.
Qualified vs. Non-Qualified Dividends: Understanding the Tax Difference
Dividend income often appears straightforward on the surface, but the distinction between qualified and non-qualified dividends can have a meaningful impact on your tax bill—and on the timing of your tax documents.
Qualified dividends receive preferential tax treatment and are taxed at long-term capital gains rates, while non-qualified dividends are taxed as ordinary income. Whether a dividend qualifies depends on the type of security held, how long it was held, and the nature of the issuing company. U.S. corporations and certain foreign companies with U.S. tax treaties generally produce qualified dividends, while REITs, mutual fund interest, and certain foreign investments often do not.
Because many investors hold funds rather than individual securities, investment companies must analyze the underlying holdings before determining how dividends are classified. This extra layer of reporting is a common reason 1099s are delayed into February or even early March. Draft 1099s may be issued in the meantime, but final versions are required before a return can be accurately filed.
Key Takeaways
- Qualified dividends are taxed at lower capital gains rates, while non-qualified dividends are taxed as ordinary income.
- Dividend classification often depends on underlying fund holdings, which can delay final 1099s.
- Draft 1099s should be treated as estimates only; final forms are necessary for filing.
Filing a Tax Extension: A Strategic, Not Negative, Decision
Tax extensions are often misunderstood. Filing an extension does not indicate a problem with your return, nor does it increase your risk of audit. In fact, extensions are a common and practical solution when information needed to file accurately is not yet available.
Late-arriving 1099s, K-1s from publicly traded partnerships, or revised dividend classifications can all necessitate additional time. Filing an extension allows your CPA to prepare a complete and accurate return the first time, rather than amending it later.
It is important to note, however, that an extension only applies to filing—not payment. If you expect to owe taxes, an estimated payment should still be made by the April deadline to avoid penalties and interest.
Key Takeaways
- Extensions are common and do not increase audit risk.
- They provide time to file accurately, not extra time to pay.
- Estimated taxes must still be paid by the original deadline if a balance is expected.
Estimated Tax Payments: Not Just for Business Owners
Estimated tax payments are often associated with self-employed individuals, but they also apply to many investors and retirees. Any time income is received without withholding—such as capital gains, dividends, or real estate sales—there is potential for an underpayment issue.
If a taxpayer expects to owe at least $1,000 in federal taxes at filing, estimated payments are generally required. Pennsylvania and other states have their own thresholds. The IRS does offer safe harbor rules, which can help taxpayers avoid penalties if certain payment benchmarks are met, but these rules depend on income level and prior-year tax liability.
Regular monitoring throughout the year allows adjustments to be made proactively, reducing the likelihood of unexpected tax bills.
Key Takeaways
- Estimated payments may be required when income is not subject to withholding.
- Large investment gains or property sales commonly trigger estimated tax needs.
- Safe harbor rules exist, but proactive planning is essential.
Key Provisions of the “One Big Beautiful Bill”
Recent tax legislation introduced both permanent and temporary changes that will influence planning decisions over the next several years.
One of the most impactful outcomes is that the 2017 tax brackets and rates are now permanent, preventing a reversion to higher rates beginning in 2026. The enhanced standard deduction was also made permanent and continues to be indexed for inflation, meaning fewer taxpayers need to itemize deductions.
For those who do itemize, the cap on state and local tax (SALT) deductions was increased significantly, restoring deductibility for many households previously limited under the $10,000 cap.
In addition, the legislation introduced several temporary deductions available from 2025 through 2028. These include deductions related to qualified tips, qualified overtime, interest on loans for U.S.-assembled vehicles, and a new senior deduction for taxpayers age 65 and older. While these deductions reduce taxable income and, in some cases, adjusted gross income, they are subject to income phase-outs and are scheduled to expire unless extended.
Key Takeaways
- Current tax brackets and the higher standard deduction are now permanent.
- The SALT deduction cap increased for those who itemize.
- Several new deductions are available through 2028 but are subject to phase-outs.
Social Security Taxation: What Has—and Has Not—Changed
Despite widespread discussion in the media, Social Security benefits remain taxable under current law. Depending on income, up to 85% of benefits may still be included as taxable income.
While the new senior deduction may help offset some tax liability, it does not eliminate the taxation of Social Security benefits. Retirement income planning continues to play an important role in managing overall tax exposure.
Key Takeaways
- Social Security benefits are still taxable for many retirees.
- The new senior deduction does not replace existing Social Security tax rules.
- Income coordination remains critical in retirement planning.
Caring for Aging Parents: Tax Considerations to Know
For families supporting aging parents, understanding dependency rules and property tax implications is increasingly important. A parent may be claimed as a dependent if the taxpayer provides more than half of their financial support, including medical or care expenses. This can be particularly valuable when medical costs help push total deductions beyond the standard deduction threshold.
When a parent’s home is transferred—whether by gift or purchase—and later sold, the transaction is generally treated like the sale of any other investment. Gains may be taxable based on the property’s established cost basis, and Medicaid look-back rules may apply, making professional guidance essential.
Key Takeaways
- Parents may qualify as dependents when support thresholds are met.
- Medical expense deductions often provide the greatest tax benefit.
- Property transfers require careful coordination with tax and estate planning.
Charitable Giving Strategies for Retirees
For retirees subject to Required Minimum Distributions, Qualified Charitable Distributions (QCDs) remain one of the most effective tax-planning tools available. QCDs allow taxpayers age 70½ or older to direct IRA distributions to qualified charities, satisfying RMD requirements without increasing taxable income.
Upcoming reporting improvements will simplify this process further, and new above-the-line charitable deductions will allow additional giving benefits even for those who do not itemize. When coordinated properly, charitable giving can support personal values while improving tax efficiency.
Key Takeaways
- QCDs can satisfy RMDs without increasing taxable income.
- Annual limits apply, but are indexed for inflation.
- Additional charitable deductions may still be available beyond QCDs.
Final Thoughts
This conversation reinforced the importance of proactive, coordinated tax and financial planning. When wealth advisors and CPAs work together throughout the year—not just at tax time—opportunities to reduce taxes legally and intentionally are easier to identify and more effective to implement.
Our By Your Side Chat series is designed to support this type of ongoing planning. Rather than limiting meaningful conversations to an annual review meeting, these twice-monthly discussions allow our Wealth Management team to keep clients closely connected to the issues that matter most—whether they involve tax legislation, retirement income strategies, or evolving financial priorities. These sessions are one of the ways we remain actively engaged with your financial life throughout the year, not just once annually, and reflect our commitment to educating, informing, and caring for your wealth in a thoughtful and intentional way
If any of the topics discussed here apply to your situation and you are a client of our firm, we encourage you to bring them into your next Financial Physical so we can evaluate how they fit within your broader plan.
If you are not currently working with a financial advisor who is taking this level of care and coordination into consideration for your portfolio, we would welcome the opportunity to connect and discuss how a comprehensive planning approach could support your financial goals.