By: Chad Warrick
Co-President & CEO
As February rolls along, many of us are going through the familiar process of gathering tax documents and getting ready to file. Even though the tax year is behind us, this stretch before the deadline is a good opportunity to slow down just enough to make sure your return reflects what actually happened and finalize any planning-related details for 2025.
For those approaching retirement (or well into it), taxes tend to be less about one big decision and more about how everything fits together. Social Security, IRA withdrawals (including required minimum distributions), pensions, investment income, and charitable donations all interact. A small change in income can have a ripple effect, influencing not only taxes owed but sometimes Medicare costs as well. Filing season is a logical time to make sure those pieces are working together as intended.
One tool that continues to be especially effective for many charitably minded individuals is the qualified charitable distribution (QCD). If you’re 70½ or older, you can direct money from your IRA straight to a qualified charity. When done correctly, this distribution is not included in taxable income and can count toward your required minimum distribution. While QCDs had to be completed by December 31 to apply to last year, February is still the right time to confirm they were reported properly on your tax return. We often see QCDs completed correctly but reflected in a way that accidentally makes the income look taxable, which can usually be fixed before filing.
This tax season also includes a helpful update for taxpayers. Recent legislation created a temporary additional tax deduction for people aged 65 and over, which is available for tax years 2025 through 2028. Eligible individuals may receive an extra deduction, and married couples where both spouses qualify may receive a larger combined amount. The deduction applies whether or not you itemize and can reduce taxes on social security benefits for many people. Since the benefit begins to phase out at higher income levels, accurate reporting of IRA distributions and charitable activity is especially important.
Even though the tax year has ended, there are still a few things to consider before filing. In some cases, IRA contributions for the prior year may still be possible if there is earned income. It’s also a good time to check whether enough tax was withheld from IRA distributions and to make adjustments for the year ahead. If things feel rushed or unclear, filing an extension is an option that allows for more time to get the details right without rushing decisions.
As you wrap up work on your return, it’s also worth keeping Medicare in mind. Medicare premiums are based on income from two years prior, which means your 2027 Medicare costs will be tied to your 2025 income – if it crosses certain levels, premiums go up. These increases are not gradual; they happen in steps, so even a relatively small amount of additional income can lead to higher monthly premiums later. This is one reason why thoughtful timing of IRA withdrawals and charitable giving matters.
Good tax planning doesn’t have to be complicated. It usually comes down to coordination, accuracy, and timing, to making sure strategies are used correctly and are aligned with your goals. Taking a little extra care before filing can help close out the year cleanly and set things up right for the future.
As always, if you have questions or want a fresh pair of eyes to check how things are coming together, we’ll be more than happy to help.
