I open every class with one question: you owe $2,000 — would you mail a check for $8,000? In all the years I've been asking it, not one hand has ever gone up.
Of course nobody would. That would be overpaying on purpose. But here's the turn: what if you're overpaying by accident? You never knew the number was lower. Intent doesn't change the outcome — and the IRS does not send thank-you notes for the extra.
I taught this material recently with Frank Gramlich, CPA. He carried the technical tax content, I carried the application. We took no appointments from the stage, and this article asks nothing of you either. What follows is the part of the night people asked us to write down.
There are two tax systems in America
Not rich and poor. Not employed and self-employed. Informed and uninformed.
- Plan the tax before the year ends
- Choose when income shows up
- Keep what the law lets them keep
- File the return and hope
- Let the calendar decide
- Pay whatever shows up
Which group keeps more? You already know the answer.
Tax preparation is a history report. Tax planning is a forecast.
Your preparer is graded on what already happened. In most families, nobody at all is looking ahead.
I ask for a show of hands in every room: who has ever had someone look at your return before the year ended? Two or three hands go up, out of fifty. That gap is the whole reason we teach this.
Frank says it better than I do. By the time a return reaches his desk, nearly every decision that could have lowered the bill is already made. Most planning moves close on December 31. That isn't a criticism of preparers — it's two different jobs, done at two different times of year, and almost nobody is hired for the forward-looking one.
Every dollar you own lives in one of three buckets
This is the most useful picture in the whole class. Once you see it, you can't unsee it.
Bucket 1 — Taxable
Checking, savings, brokerage. It's the bucket with holes in it: interest, dividends and gains get taxed every single year, whether you touched the money or not.
Bucket 2 — Tax-deferred
401(k), 403(b), traditional IRA. Nothing owed today. Every dollar taxed later as ordinary income — on a schedule the IRS controls, not you.
Bucket 3 — Tax-free
Roth IRA, Roth 401(k), HSA. Taxed once on the way in. Then never again — including all of the growth on top.
Most households I sit with hold a large second bucket, a small first bucket and almost nothing in the third. The opportunity in front of most families isn't exotic. It's simply moving the balance.
You don't have a $500,000 retirement account. You have a $500,000 account with a partner who has never told you his percentage — and who reserves the right to change it.
When I say that out loud in a room, it gets quiet. That reframe does more work than any number I can put on a screen.
Three doors into the tax-free bucket
Most people know about one of them. There are three — and they are not the same size.
The front door
$7,500 — Roth IRAContribute straight to a Roth. Simple and powerful — and it closes if you earn too much. That's exactly what door two exists for.
The back door
$7,500 — no income limitFund a non-deductible IRA, then convert it. One serious trap: the IRS doesn't look at that one account. It adds up every traditional IRA you own on December 31. If an old employer rollover is sitting in an IRA, most of your conversion becomes taxable. People trip this every year without knowing.
The big door
Up to $72,000 — plan-wide ceilingAfter-tax contributions inside a 401(k), converted to Roth. By far the largest — if your plan is built for it. And it's a ceiling, not a bonus: start at $72,000, subtract your own deferrals, subtract the employer match. What's left is your room.
2026 limits. Add $1,100 to the IRA figures if you're 50 or older. The big door requires a plan that permits both after-tax contributions and in-plan Roth conversion — many plans allow one and not the other.
Picture the decade ahead. A dollar that lands in the third bucket compounds for twenty or thirty years and arrives whole. That's what makes these doors worth walking through now rather than later.
The new deductions do less than you think
"Start a business for the write-offs"
The 6,000-pound truck, and the part the pitch leaves out
You've heard this one: buy a heavy vehicle, write the whole thing off. Here's the arithmetic on a $90,000 truck at over 50% business use, in a 32% bracket.
Buy the vehicle because the business needs the vehicle. Business use prorates — at 60% use you deduct 60%, commuting doesn't count, it requires a mileage log rather than a memory, and if business use later drops below 50% part of the deduction is recaptured into your income.
Compare that to a Solo 401(k). Similar order of magnitude in deduction, completely different outcome — because that deduction leaves the money in your name instead of someone else's.
What makes all of it hold up
Every strategy above rests on four plain things. This was Frank's closing slide, and he's right that it's worth more than any single strategy in the deck.
- 1
A separate bank account
One for the business, one for the family. Mixing them is the fastest way to make a real business look like a hobby.
- 2
Records written when it happened
Not reconstructed in March. "I probably spent that" isn't a receipt — the IRS doesn't accept probably.
- 3
A business-use percentage you can defend
Car, phone, internet, a room in the house. At 60% business use you deduct 60% — and you need a reason for the number.
- 4
Books your CPA can see before December
Every item above is decided during the year. By filing season, the only question left is how to report what you already did.
Your advisors are working in silos. So is your tax bill.
You have a CPA. Maybe an advisor. An attorney who did the trust. A bookkeeper — or a spouse at the kitchen table on Sundays. Do they know each other?
The families I work with who keep the most are almost never the ones with the most elaborate strategies. They're the ones whose team actually talks. Somebody catches the S-election window in October instead of March. Somebody flags the big income year before it shapes a Medicare premium two years out. Somebody says wait — you have an old rollover IRA before the conversion, not after.
Coordination isn't a strategy you buy. It's a habit a team builds. And it runs entirely on clean, shared numbers.
Four things you can do this month
- 1
Put your three buckets on one page
Add up what sits in taxable, tax-deferred and tax-free. Most people have never seen those three numbers side by side.
- 2
Ask your 401(k) provider two questions
Does the plan allow after-tax contributions? Does it allow in-plan Roth conversions? Yes to both opens the big door.
- 3
Check whether you own a traditional IRA
If you do — and you've been making backdoor Roth contributions — the pro-rata rule may already have applied to you.
- 4
If you have side income, separate the bank account
Before any strategy, before any write-off. It takes one afternoon, and everything else rests on it.
Want a second set of eyes?
I'll sit down with last year's return alongside your current statements and walk you through what I see — the same way we do it from the stage. It's free, and it obligates you to nothing. Then you decide what the next ten years look like.
Connect with Bryan at NewLifeFinancialPlanning.com →Leave a Legacy, Not a Mess®
Important disclosures. This article is educational only. It is not tax, legal or accounting advice, and it is not a recommendation to buy or sell any security or insurance product. Please consult your own CPA or attorney regarding your specific situation.
All figures reflect 2026 federal tax law as of the publication date, including the One Big Beautiful Bill Act (P.L. 119-21), IRS Rev. Proc. 2025-32 and IRS Notice 2025-67. Tax law changes. Several provisions discussed are scheduled to expire after tax year 2028. Any examples shown are hypothetical illustrations intended to demonstrate a concept.
Bryan Daly, CFP®, RICP® is the founder of New Life Financial Planning, LLC in Jupiter, Florida. Frank Gramlich, CPA provides tax and accounting services through his own firm, independent of New Life Financial Planning, LLC and Royal Fund Management, LLC. Advisory services offered through Royal Fund Management, LLC, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. Insurance products offered through Gallagher Life & Annuity Brokerage. Bryan Daly is separately licensed as an insurance agent and may receive commissions on insurance products, a conflict of interest disclosed in Royal Fund Management's Form ADV Part 2A.