Have you completed a draft of your 2025 tax return?
Posted on August 29, 2025
This post has a spreadsheet that you can download for your 2025 federal tax return. This is the one for a single filer over age 65. This is the one for married, joint filers, both over age 65. You first enter the gross sales proceeds of securities that you’ll sell from your portfolio in December for your spending in 2026 – generally your estimate of your Safe Spending Amount (SSA, Chapter 2, Nest Egg Care [NEC]).
Why is it important know your tax return before you have to file it by April 15 next year? (I’ll do a draft now. I’ll update it at the end of November, and I will finalize it at the end of the year.) I have five reasons:
1. I need to decide where I am selling securities to get the after-tax dollars for our spending in 2026. I particularly want to avoid taxes that Patti and I don’t have to pay. I enclose a table that shows transition points or tripwires that you may cross on your 2025 return.
I particularly want to dodge a nearby IRMAA tripwire that we could otherwise avoid. (IRMAA = Income Related Medicare Adjustment Amount.) If I botch this, Patti and I could pay at least $2,200 in added Medicare premiums that we don’t need to pay.
For the same total amount of security sales, I can change total taxable income to a degree. Our final Adjusted Gross Income (that determines IRMAA for us) can change by our mix of sales from our Traditional IRAs, our taxable securities, and my Roth. Also, QCD will lower total income on our RMD.
I described the tactics in this post last year. Next week I’ll give an example using the tax template of how you can plan your tax return to avoid an IRMAA tripwire.
2. I may not be near an IRMAA tripwire. If not, I want to know how much headroom I have to convert traditional to Roth before I hit the next tripwire. I normally would try to convert some traditional to Roth every year.
The new tax bill makes this less attractive than before for most of us over age 65. But it’s still worth converting if you have no Roth. You’ll gain much more than the effective tax you pay to convert when you use it to stay under an IRMAA tripwire in the future.
I converted a meaninful amount of traditional to Roth primarily in 2019 and 2020; Patti and I can use Roth to duck under a nearby IRMAA tripwire for a number of years. I don’t look to convert more for at least four years.
3. I want to know how much to withhold for taxes when I take our RMDs the first week of December. I withhold no taxes during the year; in effect, I’m getting an interest-free loan from the IRS. I want to make sure I don’t withhold too little and get penalized for under-withholding. I don’t want to withhold too much: I’d be giving the IRS an interest-free loan. The minimum to withhold without penalty is 90% of our actual taxes owed.
4. I need a picture of our tax return as a check on the one I prepare with TurboTax. (I’d want this even if I paid someone else to prepare our taxes.) Specifically for TurboTax, I need an accurate estimate of final taxes owed or the refund amount on my final return. That’s the summary number TurboTax shows as I enter data into it. It does not let me see the line items on our complete return before I hit the “pay now” button. When TurboTax’s display is very close to the amount I think I owe (or the refund amount), I know I’ve entered all the information correctly. Then I’ll pay and see my full return. I’ll check all the line items again.
5. I want to review with Patti what her tax return would look like and the amount she’d have for spending if I was not alive. I duplicate the entries our estimated married, joint return as a single filer. The primary change I make is to eliminate the lower Social Security benefit. As a single filer, Patti will have less income, more tax, and will cross at least one IRMAA tripwire that we don’t cross. Net cash for spending is roughly 90% of what the two of us have.
== It’s more complex this year ==
The tax return for those over 65 is a bit more complex this year. Standard Deduction is now a calculated amount. The new bonus is $6,000 per taxpayer over age 65, but it phases out over a range of income. I think my spreadsheet correctly calculates Standard Deduction, but I’m not a tax expert. Also, those with very high state and local taxes may be able to itemize, since the limit on the portion deductible is now $40,000, not $10,000.
Conclusion: This post has a template that you can use to get a good picture of your 2025 tax return.
I always want a picture of my current year tax return before I take our RMDs in the first week of December, and I want a darn accurate picture at year end.
1) I want to make sure I have the correct mix of where I will sell securities to avoid taxes that I will never have to pay; I focus on IRMAA.
2) I may have headroom before I get to an IRMAA tripwire. If I have too little Roth, I’ll convert traditional to Roth. That’s going to help be avoid an IRMAA tripwire in the future.
3) I want to withhold the proper amount of taxes when I take our RMDs; I don’t want to incur a penalty for under-withholding.
4) I want a picture of my tax return to compare to the one that I will submit to the IRS: I don’t want to mis-record income.
5) I want to review with Patti what her tax return would look like if I was not alive. I want her to see the amount she’ll have after taxes for her spending.