Texas charges no state income tax on retirement income, so the federal bill is usually the single largest expense a Texas retiree faces. Five levers move that number more than anything else: the timing of required minimum distributions, how much of your Social Security becomes taxable, Medicare IRMAA surcharges, Roth conversions, and the order you withdraw from your accounts. Kraus Capital is a CFP®-led fiduciary firm in Boerne, Texas that builds the tax plan first, then coordinates it with your CPA and your estate attorney.
You picked up a business partner somewhere along the way, and nobody asked your permission.
Every dollar you put into a 401(k) or traditional IRA over the last thirty years went in with an IOU attached. Your statement shows one number. What is actually yours is that number minus whatever bracket the money lands in on the way out. On a $2 million pre-tax balance, the IRS share can run well into six figures.
Nobody sends you a bill for that. It stays invisible until required distributions start, until a spouse passes away, or until a Medicare surcharge letter arrives two years after a decision you had already forgotten about.
Our job is to make that liability visible, then shrink it. You should not pay more than your fair share of taxes. In retirement, the gap between a fair share and a wasted one is often six figures across a thirty-year horizon.
| Schedule a Retirement Tax Review with Kraus Capital · (210) 224-1600 · Book your free review |
Taxes work differently once the paycheck stops
While you were working, your taxes were largely decided for you. Your salary was your income. Withholding handled the rest. Your only real lever was how much you deferred.
In retirement that flips. You decide how much taxable income you report each year. Which account you draw from, when you convert, when you realize a gain, when you claim Social Security: every one of those is a tax decision before it is an income decision.
That control is the entire opportunity. Your retirement paycheck is something you build, and each piece of it carries a different tax character. Build it in the wrong order and you hand back money you never needed to spend. Our retirement income planning work and our tax planning work are really the same conversation held twice.
How much will RMDs add to your taxable income?
Required minimum distributions begin at 73 if you were born between 1951 and 1959, and at 75 if you were born in 1960 or later. The first distribution is roughly 3.8% of your December 31 balance, and the percentage climbs every year after that.
On a $2 million pre-tax balance, that first distribution is about $75,000 of income you did not ask for. It stacks on top of Social Security, pension income, and whatever your portfolio already distributes.
| Age | IRS life expectancy factor | Percent of balance | On a $2,000,000 IRA |
| 73 | 26.5 | 3.77% | $75,472 |
| 75 | 24.6 | 4.07% | $81,301 |
| 80 | 20.2 | 4.95% | $99,010 |
| 85 | 16.0 | 6.25% | $125,000 |
| 90 | 12.2 | 8.20% | $163,934 |
| 95 | 8.9 | 11.24% | $224,719 |
Source: IRS Uniform Lifetime Table, Publication 590-B. Figures assume a constant $2,000,000 balance and are shown to illustrate the shape of the schedule, not to project any account.
The problem is not the distribution itself. It is that by the time the distribution arrives, the years when you could have done something about it are behind you.
How much of your Social Security is taxable?
Up to 85% of your Social Security benefit becomes taxable once provisional income crosses $44,000 for a married couple filing jointly. The first threshold sits at $32,000. For single filers those numbers are $34,000 and $25,000.
| Provisional income (married filing jointly) | Provisional income (single) | Portion of benefit that is taxable |
| Under $32,000 | Under $25,000 | None |
| $32,000 to $44,000 | $25,000 to $34,000 | Up to 50% |
| Above $44,000 | Above $34,000 | Up to 85% |
Source: Social Security Administration.
Those thresholds were written into law in 1983 and 1993 and have never been indexed for inflation. A benefit designed to be tax-free for most retirees is now partly taxable for most of the households we work with. Claiming age changes this number, which is why we treat it as one decision rather than two. Our guide on when to take Social Security covers that side of it.
What are the 2026 IRMAA brackets?
Medicare Part B and Part D carry income-related monthly adjustment amounts, known as IRMAA, based on your tax return from two years earlier. For 2026, the standard Part B premium is $202.90 per month, and your 2026 surcharge is set by your 2024 return.
| 2024 income (single) | 2024 income (married filing jointly) | 2026 Part B premium | Part D surcharge |
| $109,000 or less | $218,000 or less | $202.90 | None |
| $109,001 to $137,000 | $218,001 to $274,000 | $284.10 | $14.50 |
| $137,001 to $171,000 | $274,001 to $342,000 | $405.80 | $37.50 |
| $171,001 to $205,000 | $342,001 to $410,000 | $527.50 | $60.40 |
| $205,001 to $499,999 | $410,001 to $749,999 | $649.20 | $83.30 |
| $500,000 or more | $750,000 or more | $689.90 | $91.00 |
Source: Centers for Medicare & Medicaid Services, 2026 Medicare Parts A & B premiums. Amounts are per person, per month.
IRMAA is a cliff, not a ramp. One dollar over a threshold triggers the entire tier, for both spouses, for a full year. A Roth conversion, a land sale, or a large capital gain today sets your Medicare premium two years from now. That is why IRMAA belongs inside the tax plan and not inside a separate healthcare planning conversation held later.
Is a Roth conversion still worth it in 2026?
Yes, for most households with a large pre-tax balance, but the reason has changed.
For several years the standard argument for converting was a deadline. Tax rates were scheduled to snap back at the end of 2025, so the advice was to convert before they did. That deadline no longer exists. The One Big Beautiful Bill Act made the seven current brackets permanent. If your conversion plan was built around beating a rate increase, the reason it gave you has expired.
The remaining case is stronger, because it has nothing to do with Congress and everything to do with you. Most households retire into a valley. You stop earning, you have not claimed Social Security yet, RMDs have not started, and for several years you sit in the 12% or 22% bracket. Then RMDs arrive, Social Security stacks on top, and you move into the 24% bracket and stay there. Your heirs then inherit an account they must empty within ten years, usually during their own peak earning years.
Conversions are not about beating a future federal rate. They are about flattening your own lifetime rate curve. Our Roth Conversion Guide walks through when converting makes sense and when it does not.
There is one real deadline in 2026
The same law created a temporary deduction for taxpayers 65 and older: $6,000 per person, or $12,000 for a couple where both spouses qualify. It is available for tax years 2025 through 2028, and then it is gone.
It phases out at 6% of modified adjusted gross income above $150,000 for joint filers and $75,000 for single filers, disappearing entirely at $250,000 and $175,000 respectively.
| HYPOTHETICAL ILLUSTRATION Consider a Boerne couple, both 66, both retired, with no earned income. In 2026 they stack a $32,200 standard deduction, $3,300 in additional age-65 deductions, and the $12,000 senior deduction. That is $47,500 of income before a single dollar is taxed at the federal level, and Texas takes nothing on top of it. This example is hypothetical, does not represent any actual client, and is provided only to illustrate a concept. |
One catch is worth knowing. The senior deduction reduces taxable income but not modified adjusted gross income. It does nothing for IRMAA, nothing for the taxation of Social Security, and nothing for ACA subsidies. A conversion has to respect two ceilings at once, the top of your bracket and the IRMAA line, and they are rarely in the same place.
The conversion window closes twice
The first closing is RMDs. The second is less discussed and more damaging.
The year after a spouse dies, the survivor typically files as a single taxpayer. Same portfolio, largely the same income, roughly half the brackets and half the standard deduction. Conversions completed while both spouses are alive are done at joint rates. Conversions delayed are not. That is also why the survivor picture belongs in your estate and legacy planning from the beginning, not at the end.
What order should you withdraw from your accounts?
The conventional rule is to spend taxable accounts first, then tax-deferred, then Roth. It is easy to remember, and for households with a large pre-tax balance it quietly costs money.
Spending only from the brokerage account in your low-income years means you report almost no taxable income during exactly the years when reporting income is cheapest. Meanwhile the IRA keeps compounding into a larger RMD.
A better approach is deliberate bracket filling. Draw from the taxable account for spending, then add enough IRA distributions or Roth conversions to fill the 12% or 22% bracket to the top, stopping short of the IRMAA threshold and the senior deduction phase-out. Roth still comes last, because it is the account you want your surviving spouse and your children to inherit.
Two supporting moves belong in the same conversation:
- Asset location. Interest-bearing bonds and REITs belong in the IRA, where their income is not taxed annually. The highest-expected-growth holdings belong in the Roth, where the growth is never taxed at all. This is a core part of how we approach investment management.
- Qualified charitable distributions. From age 70½ you can send up to $111,000 per person in 2026 directly from an IRA to charity. It counts toward your RMD and never enters your adjusted gross income, which means it lowers your Social Security taxation and your IRMAA exposure in a way that writing a personal check does not.
| Not sure which bracket you should be filling this year? Start with the Retirement Tax Checkup |
Three Texas advantages most retirees do not use
Texas hands retirees three structural benefits. Most households we meet are only using one of them.
1. No state income tax
This is not just a lower cost of living. It changes the math on every conversion you will ever consider. A $200,000 Roth conversion in Texas carries a federal cost only. The same conversion in California or New York carries the state on top of it. Texas retirees can convert more cheaply than almost anyone in the country, and comparatively few of them act on it.
2. Community property and the double step-up
In Texas, community property generally receives a full step-up in basis on both halves at the first spouse’s death. In a common law state, only the deceased spouse’s half steps up. For a couple holding decades of appreciated stock or Hill Country land, that difference is enormous, provided the property is actually titled and characterized as community property. Verify that with your attorney before it matters rather than after.
3. Homestead and creditor protections
Texas homestead and retirement account protections are among the strongest in the country. They rarely change what you invest in, but they should change how you think about umbrella coverage and asset titling. That is a conversation for insurance and risk management rather than portfolio design.
One related update is worth flagging. The federal estate exemption did not fall in 2026 as previously scheduled. It rose to $15 million per person and $30 million per couple, and it is now permanent and indexed for inflation. If your documents were drafted around a $7 million exemption, the trust structure inside them may be doing work that no longer needs doing.
Where this fits in the Legacy Blueprint
Everything above sits in the Keep layer, the Shield layer of The Legacy Blueprint. Keep more, grow more, leave more, in that order, because the tax plan touches every other decision in the plan.
We build the tax picture first: what you hold, in which type of account, what it could be worth when the distribution rules force your hand, and which years between now and then are the cheapest ones you will ever have. Then we design the withdrawal order and the conversion schedule around it. We revisit it every year, because the tax code moves and so does your income.
This work is coordinated with your CPA and your estate attorney. We are not a replacement for either one. We are the firm that makes sure all three plans agree with each other. Most of the people we do this for are already retired or within five to ten years of it.
Retirement tax questions from Boerne and Hill Country retirees
Does Texas tax retirement income?
No. Texas has no state income tax, so IRA withdrawals, 401(k) distributions, pensions, and Social Security benefits are not taxed at the state level. Your federal bill is what remains, and for most retirees it is the single largest expense of retirement. The absence of a state tax also makes Roth conversions cheaper in Texas than in almost any other state.
When do required minimum distributions start?
RMDs begin at age 73 if you were born between 1951 and 1959, and at age 75 if you were born in 1960 or later. Your first distribution is roughly 3.8% of your prior December 31 balance, and the required percentage rises every year after that. On a $2 million pre-tax balance, that first RMD is about $75,000 of taxable income.
How much of my Social Security benefit is taxable?
Up to 85% of your benefit becomes taxable once provisional income passes $44,000 for a married couple filing jointly, or $34,000 for a single filer. Between $32,000 and $44,000 jointly, up to 50% is taxable. Those thresholds were set in 1983 and 1993 and have never been adjusted for inflation, so more retirees cross them every year.
What is IRMAA and how much is it in 2026?
IRMAA is an income-related surcharge added to Medicare Part B and Part D premiums. In 2026 the standard Part B premium is $202.90 per month, and surcharges begin once 2024 modified adjusted gross income exceeds $109,000 for single filers or $218,000 for joint filers. Part B surcharges run from $81.20 to $487.00 per person per month, with up to $91.00 more on Part D.
Is a Roth conversion still worth it now that tax rates are permanent?
For most households with a large pre-tax balance, yes. The old argument was about beating a scheduled rate increase, and that deadline is gone. The remaining case is about your own lifetime curve: converting during the low-income years between retiring and starting RMDs, so you are not pushed into a higher bracket permanently once distributions and Social Security stack up.
What is the new senior deduction for people 65 and older?
It is a temporary federal deduction of $6,000 per person, or $12,000 for a couple where both spouses are 65 or older. It applies to tax years 2025 through 2028 and then expires. It phases out at 6% of modified adjusted gross income above $150,000 jointly or $75,000 single. Note that it lowers taxable income but not MAGI, so it does not help with IRMAA.
What order should I withdraw from my retirement accounts?
The common advice is taxable first, then tax-deferred, then Roth, and for large pre-tax balances that order often costs money. A better approach is to spend from taxable accounts while deliberately filling the 12% or 22% bracket with IRA withdrawals or conversions, stopping below the IRMAA threshold. Roth still comes last, because it is the best account to leave behind.
Can I lower my taxable income by giving to charity from my IRA?
Yes. From age 70½ you can make a qualified charitable distribution of up to $111,000 per person in 2026, sent directly from your IRA to a qualified charity. It counts toward your RMD and never enters your adjusted gross income. That is different from writing a personal check, because it also reduces your Social Security taxation and your IRMAA exposure.
Your next step
Bring your most recent tax return and your latest retirement account statements. We will show you what your required distributions could look like at 73, what your bracket and IRMAA exposure look like between now and then, and how much of that is still in your control. There is no cost for the review and no obligation attached to it.
| Schedule your Retirement Tax Review · (210) 224-1600 · Get your free assessment |
Kraus Capital Management is a registered investment adviser located in Boerne, Texas. This material is for educational purposes only and is not individualized tax, legal, or investment advice. Examples are hypothetical and are provided to illustrate a concept. They do not represent any actual client and are not a guarantee of any outcome. Tax law figures cited are for the 2026 tax year and are subject to change. Consult your CPA or attorney regarding your specific situation.
