Answers to The Top Tax Questions

Tax season is here again. It always inspires a wonderful range of responses that run from “sigh” to “%^&!” but never “Oh, goodie!” Even if your taxes are simple and you’re accustomed to getting a nice refund, filing your taxes still can be a bit stressful. Maybe you’re wondering what you’ve overlooked that may reduce your tax liability or perhaps there was a unique tax event that you’re not sure how to handle.

These questions are reasons why it’s always important to work with your qualified  tax professional. As tax planning strategists, we want to help you get started providing you with some answers to three common questions we get during tax season.

Whether you’re working on your 2025 taxes or looking for 2026 strategies, you may be able to use these high-level answers as a jumping-off point. Remember, consult with your tax professional to determine how these answers relate to your personal situation.

1

How can I reduce my taxes?

Understandably, this is the question we always get the most. There are many ways to reduce one’s tax liability. While we can’t address all of them here, below is a refresher on two tax credits, which could be relevant now or in the future. We’ll also share some tax strategies around charitable donations that could help you while helping others.

Tax credits – Two to consider if you haven’t already

Energy tax credits

Innovation and the high cost of fossil fuels has resulted in new ways to upgrade your home or transportation, giving you the opportunity to save energy costs while getting a tax break in the process. Here are several:

• The Residential Clean Energy Credit enables you to claim up to 30% of the cost of installing solar panels, windmills or geothermal heat pumps.
  • Due to the OBBBA, this tax break expired on December 31st, 2025, so this only applies for installations made prior to the expiration date. This credit will no longer be available for the 2026 tax year.
• The Energy Efficient Home Improvement Credit provides a tax credit of up to $1,200 for energy-efficient upgrades to heating, cooling or added insulation, plus up to $2,000 for qualified heat pumps, biomass stoves or biomass boilers.
  • Due to the OBBBA, this tax break also expired on December 31st, 2025, so this only applies for installations made prior to the expiration date. This credit will no longer be available for the 2026 tax year.
• Did you decide to quit fossil fuel (at least for driving) and buy an electric vehicle? You might be able to claim a tax credit of up to $7,500, depending on your income and the type and cost of the vehicle and where it was made.
  • Due to the OBBBA, this tax break also expired on September 30th, 2025, so this only applies for installations made prior to the expiration date. This credit will no longer be available for the 2026 tax year.

Child and dependent care credit

It’s not getting any cheaper caring for young children or for any dependent who is unable to care for themselves. While the care you provide may be out of love, you also may be able to get back at least a portion of the cost.

• The Child and Dependent Care Credit covers child care expenses for children under 13 (when the care was provided) or the care of a spouse or parent who is unable to care for themselves.
  • The credit covers expenses of up to $3,000 for each qualifying individual (max 2).
  • Eligible expenses are reduced by pre-tax dependent care account contributions at work.

Charitable donation strategies

Many people donate to charities consistently during the year. Of course, that’s a good thing, and why not use the donations to help reduce your taxes? Here are a couple of strategies:

Bunching

• Starting in 2026, charitable contribution itemized deductions are subject to a .5% floor.
  • Non-itemizers are allowed a standard deduction ($1,000 for single filers/$2,000 for those filing jointly) for cash donations to charity.
• Also starting in 2026, the benefit of itemized deductions (including charitable contributions) for taxpayers in the 37% bracket will be 35%.
• If the amount of your donation falls below a certain threshold, you may end up taking the standardized deduction.
• However, if you have a favorite charity that you give standard amounts to each year, then consider bunching those amounts into one year. That could provide a nice deduction, especially in a year when you have higher income.
• Keep in mind that the deduction of your charitable cash contribution itemized deductions are limited, and usually only up to 60% of your Adjusted Gross Income, so consult a tax professional.

Donor-advised funds

• Another way of bunching your charitable donations is through setting up a donor-advised fund, which can offer immediate tax benefits while allowing you to distribute funds to charities over time.
• One way to establish a DAF is through a one-time contribution. You can contribute cash, stocks or other assets and decide later which charities to support.
• That amount can be eligible for an income tax deduction, depending on the type and value of the assets given to the DAF and your Adjusted Gross Income.

Qualified charitable donations

• If you’re age 70 1/2 or older and you have a substantial IRA, then you may be looking at material Required Minimum Distributions (starting at 73), which will drive up your income and can mean you pay more in taxes.
• You can donate a part of your IRA to charities tax-free before your RMD age with qualified charitable donations, and thereby, could reduce future RMDs and related taxes.
• You can also use a QCD to satisfy some or all of your RMDs each year.
• The annual QCD limit is $108,000 for 2025 and $111,000 for 2026.

2

I’ve sold my home that I have lived in for years. What are my taxes?

Selling a family home you have lived in for years starts a new chapter in your life and can result in a nice profit as well. What does this mean for your taxes? Here are some basics:

• If the title company issues you a 1099-S after the sale, you must report the gross proceeds on the form and file it with your taxes, regardless of whether the gain is taxed.
• Up to $250,000 of capital gains on the sale is excluded from tax for individuals and up to $500,000 for married couples filing jointly.

Here’s the “fun” part. The capital gains exclusion has several criteria:

• You have owned the residence for two out of the last five years before the sale.
• It has been your main residence for two out of the last five years before the sale.
• You have not excluded another sale of a residence from tax within two years of the sale.

Also, if you ever operated the home as a rental property, you may have to pay taxes on a portion of the gain, even if you meet the requirements.

3

When I move to a different state, what are my tax considerations?

State taxes vary widely, so research the tax impact of your move in depth with a tax professional. In general, you are either moving to a state with higher or lower taxes, overall, than where you live now, but how much higher or lower they are will vary depending on your personal situation.

Before you move to a state with no income taxes or with a reputation as a low-tax state, look closer.

There are a variety of elements to state taxes. For example, a state with no income taxes may have higher property taxes than you are paying now – and those property taxes may vary within the state itself. The state may also have a higher sales tax. Small-business owners or owners of rental properties may be subject to state business income or excise taxes, even if the state doesn’t have an individual income tax.

If you’re retired or near retirement, there is another layer of considerations. For example, if you live in a state like Pennsylvania, you generally won’t pay any state taxes on your retirement income, including income from tax-deferred accounts like a 401(k), as well as pensions and Social Security. You may lose this benefit if you move, as most states do tax retirement income. And some states have estate or inheritance taxes while others don’t, so you need to consider your estate plan when moving.

REMEMBER TO GET PROFESSIONAL GUIDANCE

We recommend doing your taxes with your qualified tax professional, but keep the bigger picture in mind. Your tax planning strategies should always be integrated with your overall financial plan.