America 250- Income Taxes Future

 As I noted in my two previous posts, I taught a new class called Income Taxes: Past, Present, and Future on April 15 as a small part of the nationwide America 250 effort. Previously, I described the past history of income taxes in America and current tax regulations in effect.

 

This post discusses future plans and predictions for income taxes in the future:

 

What We Know for Sure

 

2028- Temporary tax deductions put into effect under the 2025 OBBBA law are scheduled to expire at the end of 2028. This includes the “no tax ons” (for tips and overtime pay), the auto loan interest deduction, the $1,000 government “seed money” for newborn (in 2025-2028) children, and the bonus senior deduction for income-qualified older adults.

 

2029- The $40,000 state and local tax (SALT) deduction cap, enacted under OBBBA, applies to the 2025 through 2029 tax years. It will expire at the end of 2029 with the cap reverting to $10,000 for the 2030 tax year.

 

Big Concern

 

Wars have impacted income taxes throughout U.S. history. The first income tax (later repealed) began in 1862 as the Civil War was underway. Income taxes rose significantly in 1918 to pay for expenses incurred during World War I (top tax rate of 73%) and in 1944 to fund World War II (top rate of 94%). 

Since the U.S. is now involved in heavy warfare in the Middle East, many are wondering if a tax increase to pay for it will soon be implemented as was done previously. Mounting national debt and income inequality are other key factors that could impact future income taxes.

 

Future Predictions

 

What could happen in the future? Nobody knows for sure but the following ideas have been floated:

 

§  New tax laws (almost a given)

§  Higher taxes on wealthy taxpayers

§  Higher taxes on capital gains which were once taxed at ordinary income tax rates

§  Changes to the “stepped up basis” for inherited securities upon an account owners death

§  Tax on unrealized capital gains

§  Increased IRS reporting and enforcement

§  Closing tax loopholes (e.g., backdoor Roth IRAs)

§  Expanded retirement savings incentives

 

Only time will tell how income taxes will evolve. Stay up to date with blogs, podcasts, and other reputable information sources to learn about future tax law changes and how they will affect you.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

America 250- Income Taxes Present

 

As I noted in last week’s post, we are in the final stretch of 2025 income tax season and I am teaching a new class called Income Taxes: Past, Present, and Future on April 15 as a small part of the nationwide America 250 effort. Previously, I described past history of income taxes in America.

This post discusses class highlights relating to current income tax laws and policies.

 

Gross and Adjusted Gross Income (AGI)- Under current law, taxpayers start out with their gross (total) income from sources such as wages, dividends, taxable interest, business income, alimony received, and required minimum distributions from retirement plans. Adjustments to income, often referred to as “above the line deductions,” include educator expenses, student loan interest, 50% of self-employment tax, health insurance for self-employed workers, and retirement plan contributions.

 

Individual Income Tax Rates- The U.S. federal income tax system uses progressive tax rates, meaning higher levels of income are taxed at higher percentages. As of 2026, the tax brackets range from 10% to 37%. Each rate applies only to income within its bracket, so taxpayers pay gradually higher rates as their taxable income increases.

 

Long-Term Capital Gains- Long-term capital gains are taxed at preferential rates of 0%, 15%, or 20%, depending on taxable income and tax filing status. Long-term capital gains are calculated by subtracting the cost basis (usually the initial purchase price plus additional deposits such as reinvested dividends) from the selling price of an asset held longer than one year.

 

Standard Deduction- The standard deduction is a fixed amount that taxpayers can subtract from their AGI before calculating federal income tax. It reduces taxable income without requiring taxpayers to itemize individual deductions. For 2025 returns filed in 2026, the standard deduction is $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household. Taxpayers age 65 or older or blind may claim an additional standard deduction amount.

 

Senior Tax Deductions- There is an additional standard deduction available to taxpayers age 65 or older that reduces taxable income beyond the regular standard deduction. For 2025 tax returns, the extra deduction is $2,000 for single filers and $1,600 per eligible spouse in married couples filing jointly. The bonus senior deduction under the OBBBA tax bill is an additional temporary increase to the standard deduction designed to reduce taxable income for income-eligible older adults.

 

Required Minimum Distributions (RMDs)- RMDs originated with the creation of individual retirement accounts in 1974. They are the minimum amounts that retirees must withdraw each year from most tax-deferred retirement accounts, such as traditional IRAs and employer savings plans. Under the SECURE 2.0 Act, RMDs generally begin at age 73. The required withdrawal is calculated using IRS life-expectancy tables based on age and account balance at the end of the previous year.

America 250- Income Taxes Past

It’s the final stretch of tax season! On April 15 (when else?), I am teaching a new class called Income Taxes: Past, Present, and Future. As a small part of the nationwide America 250 effort, the class describes taxes in America since its founding in 1776. 

For almost 100 years, there was no income tax at all (until a short-lived tax that began in 1862 to help fund the Civil War) and the country earned revenue from customs duties, tariffs, and excise taxes on alcohol, tobacco, and, yes, even slaves.

In this post and the next two, I will present class highlights starting with past tax history. Below is a chronology of some key historical tax-related legislation, events, and trends:

 

1776-1861- No federal income tax existed

1862- First federal income tax to fund the Civil War and Office of Internal Revenue established

1872- Income tax repealed

1894- A 2% peacetime tax was passed by Congress and the Bureau of Internal Revenue was created

1895- The Supreme court ruled that the new tax was unconstitutional and the tax bureau disbanded

1909- President Taft recommended a constitutional amendment for government taxing authority

1913- 16^th amendment to establish an income tax was ratified and first 1040 form introduced

1918- The Revenue Act of 1918 significantly increased taxes to fund World War I (73% top tax rate)

1931- Al Capone was convicted of tax evasion and sentenced to 11 years in prison

1943- Income tax withholding was introduced

1944- Standard deductions were created and top tax rate of 94% for income over $200,000

1945-1963- Top tax rate of 91% for nineteen tax years!

1954- The tax filing deadline changed from March 15 to April 15

1969- Alternative minimum tax (AMT) created after wealthy people boasted that they paid no tax

1981- The Economic Recovery Act of 1981 lowered marginal tax rates and expanded IRA access

1986- The Tax Reform Act of 1986 simplified the tax code and lowered top tax rate from 50% to 28%

1986- Limited electronic income tax filing began

1992- Taxpayers who owed money were allowed to file tax returns electronically

2001 and 2003- Bush tax cuts reduced income tax rates and capital gains taxes

2010- The Affordable Care Act introduced the Net Investment Income Tax (NIIT) to help fund Medicare

2017- The Tax Cuts and Jobs Act (TCJA) greatly overhauled the tax code and nearly doubled standard deduction

2024- About 93% of individual taxpayers filed their income tax returns electronically

2025- The spending and tax bill known as OBBBA passed and made the 2017 TCJA tax cuts permanent 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

First Quarter Summary of Webinar Take-Aways

 

We are already one-quarter of the way through 2026 and it’s time for another summary of takeaways from webinars that I have recently attended. Below are nine nuggets that stood out to me as I reviewed notes taken in my personal learning journal:

Retirement Challenges- Retirement is more of an adaptive challenge than a technical one. With adaptive challenges, there is no expert to help you. Rather, it is up to retirees to look inside themselves to determine their purpose and what brings them joy.

 

Non-Financial Changes- Many retirees face the following: Loss of work identity and a sense of purpose, increase in unstructured time (about 2,500 hours per year), increased time with spouse or partner, reduced social connections outside of work, and health challenges from the aging process.

 

Retirement Resources: Eight things can help retirees thrive: 1. Spirit (meaning and purpose), 2. Physical health, 3. Heart (optimism and resilience), 4. Connection (nurturing relationships), 5. Mind (creativity and mental challenges), 6. Work (paid or volunteer) to contribute personal talents, 7. Place (having a “sense of home,” and 8. Money (managing resources to live within your means).

 

Relationships- The greatest satisfaction in life comes from relationships. Think of relationships as an investment portfolio that requires ongoing deposits and maintenance and will change over time. Time is a finite resource so ask yourself what investments you want to make in different people.

 

Sequence of Returns Risk- Losses in an investment portfolio early in retirement is a risk that cannot be diversified away from. To avoid withdrawals from equity assets during a market downturn, spend conservatively and/or meet spending needs from other sources (e.g., cash asset buffer account). Big caution: retirees’ income plan should not overly rely on market performance.

 

Financial Education- 30 states have passed laws requiring a semester-long financial education course for high school graduation. The true ROI of these courses is what students do with the knowledge they gain (e.g., early investing, less debt) and expanded horizons for their future.

 

Wealth Accumulation- Wealth is what people don’t see. Everything can be bought with borrowed money. It is not what people earn that creates wealth but how they spend it. Money is not a goal in and of itself but a tool to allow you to reach lifetime financial goals.

 

Tax Planning- A “permanent” tax law change is one that is not set to expire. Congress can always pass future tax laws. Three ways to lower modified adjusted gross income to reduce taxes are tax-deferred plan contributions, Roth conversions, and qualified charitable distributions (QCDs) after age 70 ½. Some people roll an employer account balance into a traditional IRA to make a QCD later.

 

LinkedIn Tips- LinkedIn is the #1 way that people find jobs and “put themselves out there.” Ways to stand out on LinkedIn include a professional head shot, an interesting “About” section, highlighting your skills and experience, regularly posting new content, a customized URL, endorsements, and completing as many profile sections as possible.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Credit: A Building Block for Building Wealth

 

I recently participated in an Experian #creditchat titled Building Wealth, Not Just Credit: How Credit Fits into Long-Term Financial Success. Its purpose was to explore how credit can be used as a building block for wealth accumulation over time.

Below are the seven questions that were asked and my responses:

What does “building wealth” mean to you, and how does credit play a role in that journey?

Building wealth means gradually increasing your net worth over time by increasing assets, reducing debts, or both. Wealth-building is slow in your 20s/30s but is impressive as investments grow. A good analogy is the progression of prizes on the Who Wants to Be a Millionaire? game show.

 

When you think about credit beyond approval/denial, what role does it play in long-term wealth creation?

Credit provides leverage to use OPM (other people’s money) to buy appreciating assets. Case Example #1: A mortgage. Most people need to borrow money to buy a home that increases in value over time. Case Example #2: Student loans to build human capital to earn a good income.

 

What’s are common myths about credit that actually holds people back financially?

Myth: “Checking my credit score hurts it.” Checking your own credit is a soft inquiry and doesn’t affect your score at all. Not checking your credit history can let errors linger for years. Myth: “I should avoid credit cards entirely.” Actually, avoiding them can hurt your credit history. Responsible use (small charges, paid in full) builds a positive track record.

 

What role does financial education play in helping consumers use credit as a wealth-building tool?

A substantial body of research shows that financial knowledge and skills influence financial decisions that help shape wealth outcomes. Examples of financial education impact include higher credit scores, fewer defaults, and higher savings

 

How can building credit early impact financial success later in life?

Good credit helps people qualify for loans and perhaps a job and lower insurance premiums. Also, it is difficult to travel for business without a credit card, which could hinder your career. Finally, lower interest associated with good credit can save tens or even hundreds of thousands of dollars over time

 

How can having access to credit at the right time influence wealth-building opportunities?

Many wealth-building opportunities are time-sensitive. Credit allows people to act when opportunities appear. Also, credit can accelerate compound interest. The earlier someone acquires an appreciating asset, the longer it has to grow.

 

What is one piece of advice about handling credit for your younger self?

Build a positive credit history by making payments on time and in full and keeping balances low.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.