I wrote “Don’t Run Out of Money in Retirement: How to increase income, avoid taxes, and keep more of what is yours” in 2022. Chapter Six (“How the rich avoid taxes, and you can, too”) boiled the ultra-wealthy playbook down to four moves: harvest losses, strategically locate and decumulate investments, borrow instead of sell, and give strategically.
The good news is that those four still do most of the heavy lifting. The latest news is that Congress has been busy, most notably with the so-called One Big Beautiful Bill Act (OBBBA). It is time to mention a couple of updates and add some new tricks. Let’s picture Dan, a small-business owner and wealthy investor who volunteers and donates financially and wants to be a good steward of the community—but does not want the government to control how he spends his money. To that end, Dan wants to avoid taxes (legally) and give generously on his own terms.
It worked in 2022, and it works in 2026.
- Borrow against assets instead of selling them. Dan has a $2 million trust account. (By the way, if you have a seven-figure net worth, you should be thinking of using a trust—not a joint or brokerage account—for tax-avoidance purposes and other reasons.) Dan needs to make a significant purchase, but he does not want to liquidate his stock positions, which would trigger a capital gains tax. A securities-backed line of credit (also called a “pledged asset” account) lets him tap liquidity without selling the securities. If the borrowed money is used for qualified investments, the interest may be deductible as investment interest (subject to limits). (IRC §61; §163(d))
- Tax loss harvesting. After the stock market crashed in April 2025, Dan sold a stock that got pummeled to lock in a loss, then bought a different (but similar) investment to maintain sector exposure. The loss offset realized gains; his losses exceeded his gains, so the excess carries forward. The key is to avoid the wash-sale rule; do not buy “substantially identical” securities too soon. (IRC §1211(b); §1212(b); §1091)
- Put “ordinary income” assets in tax-sheltered accounts and leave “growth” assets in taxable accounts. According to the Vanguard Adviser’s Alpha study, tax allowances and asset location can contribute as much as three-quarters of one percent of gains for an investor annually.Dan holds a bond and an S&P 500 index ETF. The bond pays ordinary interest each year; it is often appropriate to place it in an IRA or another tax-deferred account. The stock index fund, which mostly grows through capital appreciation, is typically more tax-friendly in a trust account. (IRC §408; §401; §103)
- Donate the asset, not the cash. Dan gives $25,000 a year to charity. Instead of writing a check, he transfers $25,000 of stock he bought years ago for $5,000—a security with an unrealized $20,000 gain. Selling the stock would trigger capital gains; donating it does not. Dan still gets a charitable deduction (assuming he itemizes) and avoids the capital gains tax that would have applied if he sold first. Bonus move: He can reinvest the “saved cash” into the same stock, resetting his cost basis. (IRC §170)
- “Bunch” your giving so the deduction actually matters. If Dan’s annual giving does not push him above the standard deduction, he can front-load three years of donations into one year using a donor-advised fund. He gets the deduction now, then makes grants over time. One big deduction beats three small ones that the IRS ignores. (IRC §170; §4966)
- If you are over 70 and six months, turn required distributions into tax-free philanthropy. Dan’s parents are charitable and dislike the fact that IRA withdrawals increase their adjusted gross income and, as a result, make their Medicare more expensive. A qualified charitable distribution (QCD) allows IRA funds to be transferred directly to charity, excluding the amount from taxable income. (IRC §408(d)(8))
- Use Roth IRA conversions. Dan converts just enough from a traditional IRA to a Roth IRA each year to “fill up” a lower bracket, especially in years with large deductions or lower business income. He is trading a known tax rate now for fewer mandatory taxable distributions later. (IRC §408A(d)(3))
- Turn “overfunded 529” anxiety into a retirement head start. Dan’s daughter gets a scholarship, and suddenly the family’s 529 plan looks too big. Beginning in 2024, limited rollovers from a long-standing 529 can move into the beneficiary’s Roth IRA—no penalty and generally no additional taxable income. (Subject to guardrails, including the 529’s age, a “recent contribution” lookback, annual Roth limits, and a lifetime cap.) Used carefully, it is a way to turn leftover education money into decades of tax-free compounding. (IRC §529; §408A)
- Selling a business? Massachusetts hates business owners. Want proof? The state’s so-called “millionaires’ tax” penalizes owners 4.3 percent when they sell and retire. If Dan wants to sell his company, he could consider an installment sale, which can spread the gain over multiple years, smoothing brackets and possibly reducing surtaxes that kick in at higher income levels. It is not right for every deal (risk matters). (IRC §453) (Pro tip: It might make more sense to move out of the state.)
New tax avoidance strategies from the One Big Beautiful Bill Act
- 529 plans just became less “college-only” and more “family education fund.” The OBBBA expands the definition of qualified education expenses for 529 accounts to include additional K–12 and homeschool costs (such as curriculum, books, tutoring, online materials, certain tests, and therapies). It also adds certain post-secondary credentialing expenses. (IRC §529)
- HSAs: The “stealth IRA” got bigger for certain taxpayers. The OBBBA increases health savings account contribution limits for certain eligible individuals, with a phase-out tied to adjusted gross income. If you are in the eligible window, this is one of the cleanest “above the line” shelters available: deductible going in, tax-free for qualified medical going out. (IRC §223(b)(9))
- Business owners got two serious levers back: 100 percent bonus depreciation and domestic R&D expensing. If you buy qualifying business equipment (or certain software) and place it in service, the OBBBA restores 100 percent bonus depreciation. And if you spend on domestic research and experimental costs, the law allows current deductions again for a period (instead of forced amortization). (IRC §168(k); §174A / §174)
- The pass-through deduction got bigger, and it is no longer scheduled to vanish. The OBBBA made the qualified business income deduction permanent and increased it from 20 percent to 23 percent. (IRC §199A)
- A big estate-planning headline: The gift and estate exemption got larger. The OBBBA raises the base amount used to calculate the federal estate and gift tax exemption and makes it permanent, beginning in 2026. For families already planning large gifts, this matters. For everyone else, it is a reminder that tax planning is not only about April 15, it is also about what happens to assets when you’re not around to sign the return. (IRC §2010(c); §2505)
You may need a “Paycheck Replacement Plan.”
A practical note: Although I list the Internal Revenue Code sections for reference, most of these strategies are not “forms”; they are planning. And don’t forget the tried-and-true practice of maximizing your contributions to retirement accounts and, when possible, deferring capital gains from short term to long term. (Gains generally are considered long term if held longer than one year and are then taxed at a preferential rate.) Many of these tactics are easier to manage when accounts are consolidated; it is a lot, and too many accounts can impede action due to decision fatigue and good old-fashioned confusion.
Lastly, decumulation is important. If you are a retiree or soon to be, you may be asking, “How do I replace my paycheck?” Maintaining, or even increasing, your cash flow in retirement could depend on knowing what securities to sell (track your cost basis), when (be conscious of holding periods), where (from which account should you withdraw cash), and who (is there a taxable advantage to draw from one spouse’s account or the other).
Allen Harris is an owner of Berkshire Money Management in Great Barrington and Dalton, managing more than $1 billion of investments. Unless specifically identified as original research or data gathering, some or all of the data cited is attributable to third-party sources. Unless stated otherwise, any mention of specific securities or investments is for illustrative purposes only. Advisor’s clients may or may not hold the securities discussed in their portfolios. Advisor makes no representation that any of the securities discussed have been or will be profitable. Full disclosures here. Direct inquiries to Allen at AHarris@BerkshireMM.com.
