Death and Taxes

09/14/2026

You have to be a sick person if you want to itemize!

Itemized deductions vs. standard deduction

Both in my professional return tax preparation and my volunteer work (Give it up for AARP TaxAide!) I have struggled with how to explain to clients why itemizing their deductions will not help them. So let’s take a simple example, using 2026 numbers.

Jim and Kaie bought their first home. Their adjusted gross income (AGI) is $120,000. Their mortgage interest is $12,000 for 2026. The real estate taxes are $6,000. Their tax table sales tax is $2,000 and they paid $1,000 of sales tax on a new car; their state income tax is $5,000, total cash donations are $4,000 and their total donations of goods are $1,000. They have $3,000 of unreimbursed medical expenses.

Last things first. The medical expenses don’t even go into the hopper. There is a threshold of 7.5 percent of AGI. In this case that is $9,000. Since their expenses are below this, nothing gets added in. If they had $10,000 of expenses, $1,000 would be added in.
They can choose to deduct the higher of the sales tax, or $3,000,
and the state income tax, $6,000. They’ll choose $5,000. Running total - $5,000.
Real estate tax is deductible. – Running total - $11,000. (Note – after 2029, the $10,000 cap will apply again, so they will only be able to deduct $10,000.)

Mortgage interest on loans under $750,000 is fully deductible. Running total - $23,000

Charitable contributions are deductible. Running total - $28,000.
The standard deduction for a married couple filing jointly is $32,200. Being financially literate, they will choose the standard deduction.

A couple of notes. First, all those receipts for Goodwill/Salvation Army donations will not help. Second, when the realtor told you you’d get a big tax break for the home purchase, he or she lied.

When will itemizing actually help lower your taxes

Itemizing can help wealthy Americans. The person with a $750,000 mortgage will have about $45,000 of mortgage interest. They’ll probably have over $10,000 of state and local taxes. So they are over the $32,200 hump. If they have a piece of art which they bought for $10,000 and they get an appraisal for $60,000, they can donate it to Houston Public Media or Main Street Theater and deduct (with certain limits) $60,000. Not to mention their cash donations (which, for most wealthy Americans, is not worth mentioning).

When will itemizing actually help lower your taxes

For the average portion, the only time itemizing helps is when they have astronomical medical expenses – typically skilled nursing care. Let’s say James and Katie have Luigicare and they get hit with a $60,000 medical bill. $51,000 is deductible.

One of the things that should trigger questions for the preparer is a sell-off of assets. A couple that sells, say, $10,000 of mutual funds every year for five years and suddenly sells off $$60,000 probably has some unexpected expenses and the most likely reason, in the US, is medical care.

09/12/2026

In 2016, Mediate published an article that Hillary’s emails had classified information that done strikes that had already happened were carried out by the CIA. Duh! In July , Natalie Harp published photographs of the nuclear codes on Instagram. Which means that until the Defense Department changed the codes, we were sitting ducks Which is more dangerous? But her emails!

09/10/2026

Fetterman should look up Zell Miller. He made a speech at the Republican convention in 2004 and was never heard from again.

09/09/2026

All questions answered (or at least I'll try)

My wife noticed I don't invite people to ask questions. I'm thinking, DUH! So, apologies for not doing this earlier. Ask away.

09/09/2026

US Income taxes for moderate income expats

This article is designed for Americans who live abroad and work for small to moderate wages – say, $130,000 a year or less. There are certain hoops you have to jump through if you are a US citizen or green card holder and live abroad. These taxpayers produce very little tax for the IRS and cost the IRS far more to process than any revenue generated. Even the IRS wishes these rules could go away, or that one could file a one-page form with eight or ten boxes to tick and pay a $100 user fee. If DOGE was really about efficiency, this would have already happened in 2025.

Reporting taxable income and computing the tax

Not all people who live abroad are making the big bucks. One useless facet of US taxes is that citizens and green card holders are required to file a tax return even if no taxes are owed, if the income is above the standard deduction amount. For example, the standard deduction for a single person for 2026 is $16,100. If you have $16,000 of income, you aren’t required to file a return. If you have $16,200, you are.
There’s a strategy to filing even if you don’t have to. Suppose your wages are $16,000 and you forgot about that $1,000 of tips you received. If you just forgot, the statute of limitations starts running and three years later the year is closed. No tax can be assessed and no refunds can be paid.
The reason I say this is useless is because it generates a lot of paperwork and very little tax revenue. Let’s take that hypothetical $17,000 in total wages (paycheck and tips). Your US tax would be $90 ($17,000 minus $16,100 = $900 times 10% base rate.) If you’re in Europe, you probably pay more than $90 to the host country on that income. You use Form 1116 for this and Turbotax Deluxe supports this. Any excess carries forward for ten years. So the tax revenue generated, if any, doesn’t cover the cost of processing the return.
If you’re in the Middle East, there usually is no tax. This does not mean you fork over the $90 to the IRS. You can probably take advantage of the foreign earned income exclusion. You can exclude up to $132,900 of foreign income as long as you either have a tax home in a foreign country (i.e. really live there) for any period including one full calendar year or if you are out of the U.S. for at least 330 days in any rolling 365- or 366-day period. You use Form 2555 for this and, again, Turbotax Deluxe supports this.
The wages are normally mostly paid in foreign currency. You normally use the yearly average exchange rate. The easiest source to convert such currency is https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates. For example, suppose you made 50,000 euros during 2025. The yearly average exchange rate was 0.886 euros per dollar, so that translates to $56,433. This is what gets reported on Form 1040, line 1(h) putting it into income and on Form 2555 and Schedule 1, line 8(d) taking it back out.

Information returns

There are certain information returns that must be filed that do not affect taxable income.
1 FINCEN Form 114 - low to moderate income taxpayers
The threshold for this is $10,000 of foreign bank accounts or financial accounts. The accounting is tricky. For example, if the total amounts in foreign banks tops $10,000, you have to file an information return called the Foreign Bank Account Report, or FBAR (I usually remember it as FUBAR). For foreign currency, even if the accounts are all closed by year end, you use the year-end rate. This is at https://fiscaldata.treasury.gov/datasets/treasury-reporting-rates-exchange/treasury-reporting-rates-of-exchange.
This is the indirect result of the friends of Richard Nixon in the early 1970’s stashing their wealth abroad (usually in low-tax countries) and not paying tax on the income. Certain members of the Grand High and Exalted actually used such laundered funds to overthrow the Allende regime in Chile in 1971. Nowadays, you probably can’t even overthrow a city council seat in a town of 50 people for that amount of money, but there it is.
These rules are hairy. For example, if you have $5,001 in one account and move it to a second account, that’s two accounts with a total of $10,002, even though it’s the same money and never reaches a level of $10,000 on any given day. If you read the instructions and think it through, you can do it. Remember, when in doubt, over report balances.
You file the report online at BSA E-Filing System - Welcome to the BSA E-Filing System separately from your return.
2 – Form 8833 for claiming double tax treaty benefits - low to moderate income taxpayers
Certain assets are presumed to create taxable income, but there are provisions in tax treaties that mitigate this. For example, the default rule is that an employer’s contribution to a foreign pension fund is taxable and the income generated is taxable. Treaties can make most or all of these contributions non-taxable until you withdraw money from the pension in your old age. But you must actively claim the benefit on this form. You can download a fillable pdf from the IRS, print it and the return, and mail them, certified, to the IRS. Consider it a type of protest that they put you through this grief for nothing. Or hire a pro.
3. Form 3520 – moderate to high income taxpayers
If you receive gifts from foreign trusts, estates, or individuals, you must report those if the total exceeds $100,000. If you receive these from a corporation or a partnership, the threshold drops to $20,000. You’ve got the money – hire a pro.
4. Form 8938 – moderate to high income taxpayers
If your foreign bank accounts plus other foreign assets (stocks, bond, mutual funds, etc.) exceed $300,000 at any point or $200,000 at the end of the year, the assets must be reported on Form 8938. Just hire a pro, at least until you understand it. You’ve got the money – hire a pro.

Due dates

When living overseas, you get an automatic extension to file until June 15, and, if you request it on time (before June 15), you can request a further extension until October 15 using Form 4868. If you cannot meet the requirements of the foreign earned income exclusion by the time you file your return, you may file Form 2350 which extends the due date until 30 days after you meet the requirements for the foreign earned income exclusion. For example, you move abroad on April 1, 2027. On December 31, 2028, you meet the requirements for the bona fide residence exclusion. You file the Form 2350 by April 15, 2028 and have until January 30, 2029 to file your return.

09/16/2025

One more reason I hate partnerships. If you invest in a partnership, you are doing business in every state where the partnership does business. Think about it. If Starbucks was a partnership and you bought 100 units, you’d be doing business in every state.

Oh, you say, but I only made $200 in Alabama based on the schedule. Surely I’m under the threshhold for filing. Wrong. May have been true in the Fifties, but not now. Say your Federal income was $100,000 and the Alabama tax on $100,000 is $5,000. You’re already over the filing thresshold because your Federal income is what counts. So you owe Alabama $10 (200/100,000 times $$5,000) an your return preparer is going to charge you a minimum of $200 for preparing the Alabama return. (It would be $300 if it were California or New York.)

For the umpteenth time, think before you buy one of these publicly traded partnerships.

09/07/2025

I was thinking that YouGov is an excellent pollster. It's run by the Economist and has no dog in the hunt on US politics. But then I thought "You have to be able to use a computer for something besides social media and video games and they have "Are you paying attention to what's being asked?" so you have to read carefully. That immediately means liberal bias.

07/16/2025

Old joke. Santa Claus, Travis Kelce, and a cheap tax accountat are walking down the street. They see a thousand dollar bill. Who picks it up?

Answer: Travis Kelce. The other two are figments of your imagination.

Now this stretches the point a bit. Most people con’t even need a return preparer. They can pull out TaxAct, Turbotax, TaxSlayer, or any other of the software programs and if they are not 100%, pure D DA’s, they can get their tax right within a few dollars. (I use the DA exception because I saw one at AARP in 2023 where the dude didn’t file his 2021 return, so he just put his 2021 and 2022 W-2’s on the 2022 return. That takes the prize.)

Where a cheap return preparer can really cost you money is when you have foreign (non-US) stuff. Say you worked in the UK and had a savings account worth $12K. You need to file a report with FINCEN reporting the acount and the highest balance. The penalty could be up to $10,000 each year. Now say you invested that amount in a private pension. You have to file form 3520 and 3520-A. And you will probably need separate extensions.

Let’s say you and a Brit you met in a bar decide to form Widgets, Inc. (a Wyoming corporation) to import and export widgets, 50-50. You have to file Form 5472 with the corporation’s return. Say the cheap preparer is doing your personal return and the corporate return but blows the extension for the corporation. Files on April 20. Surprise! You have a penalty of $25,000 and you have to beg and plead to get it reduced or go to Tax Court.

Don’t like it? Write your Congressmen. The IRS is just doing its job.

07/11/2025

For those who are over 70 and a half, you know what a qualified charitable distribution is. You can tell the broker that handles your IRA to send a grand or two to your church, mosque, museum, Main Street Theater, whatever. It’s not income to you and a charitable deduction – it never comes into your tax return at all.
The thing is, ALL of it must be a charitable donation. No “membership”, no coffee mug, no T-shirt, no free tickets to a gold tournament. Nada back! Squat! Zip! Nothing but the nice thank you letter acknowledging the gift.

An enormous amount of QCDs is coming of IRA’s – the total amount in the US increased nearly 74% from 2017 to 2018. Coincidence? No – that’s about when the first Boomers started having to withdraw from their IRA’s and they chose to be savvy and do QCDs rather than write a check to the charity. In 2024, the national total was almost $593 billion.

Those charities with some snap have a separate form for these, or at least a separate page on the website telling you where you tell the broker to send the money. Then there are those who don’t. They are stuck in the Twentieth century. Tell them so and if thery send you a coffee mug, quit giving to them. If they can’t manage this simple thing, they can’t be saved.

06/07/2025