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The Mid-Year Tax Decision Audit: Five Decisions Before September

Five-decision tax audit worksheet on an oak desk next to a July 2026 calendar — illustrating the Mid-Year Tax Decision Audit framework

By Frank Lovaglio, RFC® · Senior Partner, Security Financial Management · CRD #1299700
Reviewed by Mike Allen, CFP® · CRD #2587441 · July 6, 2026 · Last reviewed July 6, 2026

Securities offered through Kestra Investment Services, LLC, member FINRA/SIPC (Kestra IS). Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS). Security Financial Management, Bluespring Wealth Partners, LLC, Kestra IS and Kestra AS are affiliated through common ownership by Kestra Holdings.

The Bracket-Window Audit in five practical decisions, run in order, before the year-end execution window closes.

Tax decisions made in November are constrained by what is already on the books. Decisions made in July still have room to be sized — bracket capacity is visible, IRMAA exposure can be modeled, and capital-gains room can be reserved. July is the audit month. September is the deadline.

This is the practical companion to the Bracket-Window Audit framework Mike Allen named this month. Five decisions, run in order. Each one builds on the previous one. Skip a decision, and the next one is sized against incomplete information.

Decision 1 — How Much Tax Bracket Capacity Exists This Year?

The first audit question is mathematical. Q2 income is now visible, so the household’s 2026 run-rate is no longer a forecast — it is a number. Subtract that number from the ceiling of the household’s target bracket. That difference is the bracket capacity available for a Roth conversion, a capital-gains realization, or any other event that adds taxable income this year.

For 2026, the relevant ceilings are: the 24% bracket caps at $197,300 taxable income for single filers and $403,550 for married filing jointly. The 32% bracket caps at $250,525 single. The 2026 standard deduction is $32,200 MFJ / $16,100 single, which means a household with $300,000 gross income MFJ has roughly $267,800 taxable, and roughly $135,750 of remaining capacity inside the 24% bracket before the next bracket hits.

This capacity is the upper bound on Decision 2 through Decision 4. None of the following decisions can be sized without it.

Decision 2 — Will This Year’s Conversion Move 2028 Medicare Premiums?

The Income-Related Monthly Adjustment Amount — IRMAA — applies to Medicare Part B and Part D premiums on a sliding scale. The trigger is MAGI, not taxable income, and the lookback is two years. The 2026 IRMAA tier thresholds published by CMS begin at $109,000 MAGI for single filers and $218,000 for married couples, with the top tier capping at $500,000 / $750,000.

Three details that change the audit:

  1. IRMAA is a cliff, not a slope. A household $1 over a threshold pays the full next-tier surcharge for the entire year. The differential between adjacent tiers can be $1,200 to $2,400 per person, per year — meaning a $2,400 to $4,800 annual cost for a married couple from a single dollar of misalignment.
  2. The 2026 standard Part B premium is $202.90 per month. Inside IRMAA tiers, total Part B premiums range from $284.10 to $689.90 per month. Part D surcharges layer on top, ranging from $14.50 to $91.00 per month.
  3. The two-year lookback means 2026 MAGI determines 2028 premiums. A conversion sized in July 2026 affects what the household pays in 2028. There is no correction window.

For households inside ten years of Medicare eligibility, IRMAA modeling is not optional in the audit. It is the second number after bracket capacity.

Decision 3 — How Many Years Until RMDs Begin?

The SECURE Act 2.0 raised the RMD age from 72 to 73 effective January 1, 2023, and then to 75 effective January 1, 2033. Households born between 1951 and 1959 begin RMDs at age 73. Households born in 1960 or later begin at age 75. The first RMD is due by April 1 of the year after the household reaches RMD age; all subsequent RMDs by December 31.

The conversion math changes meaningfully based on years remaining in the pre-RMD window. Households with eight or more years remaining typically have room to spread conversions across several years inside the 22% or 24% bracket. Households with three or fewer years remaining often need larger annual conversions to move enough pre-tax money before RMD income compresses available bracket space — and the math may justify accepting a temporary IRMAA tier crossing to preserve long-run tax efficiency.

Roth 401(k) and Roth 403(b) accounts no longer require RMDs as of January 1, 2024. Traditional IRA, traditional 401(k), and 403(b) RMDs remain in force at the applicable age.

Decision 4 — Is There Room in the 0% Capital Gains Bracket?

The 2026 long-term capital gains rates remain 0%, 15%, and 20%. The 0% bracket extends up to $49,450 taxable income for single filers and $98,900 for married filing jointly. For households inside that bracket — typically retired couples with modest run-rate income before RMDs kick in — the 0% LTCG window is one of the most under-used tools in the audit.

The critical detail: the 0% LTCG bracket and the Roth conversion bracket compete for the same income space. Adding $50,000 of Roth conversion income consumes $50,000 of the 0% LTCG room that could have realized $50,000 of long-term gain at zero tax. For households with appreciated taxable assets, this is a coordination decision — not a sequencing decision. The two events have to be sized together.

Decision 5 — When Do These Decisions Compete for the Same Bracket?

The fifth audit question is the one that ties the first four together. A household with bracket capacity, IRMAA room, three years to RMD onset, and 0% LTCG room rarely has enough space to maximize all four. The audit’s job is to decide which event takes priority this year and which gets deferred — and to confirm the deferred event still has a year it can be executed before RMD income closes the window.

The order we use:

  1. Lock the IRMAA ceiling first. The IRMAA cliff is the most expensive single misalignment in the audit — confirm the ceiling before sizing anything else.
  2. Reserve 0% LTCG room next. Appreciated taxable assets benefit more from realization at zero tax than the same income benefits from being inside a Roth, in most $1M–$3M households.
  3. Size the Roth conversion against remaining bracket capacity. Whatever space is left after Decisions 2 and 3 is the conversion capacity for this year.
  4. Confirm RMD timing does not collide. If RMDs begin next year, the conversion gets sized larger this year — even at a small IRMAA cost — because next year’s bracket space will be smaller.
  5. Re-audit annually. The plan is not “convert this much over six years.” It is “convert this much this year, re-audit next July, size next year based on actual numbers.” This is what the Five-Document Review Checklist from last month’s coordination pillar calls “Re-audit every twelve to eighteen months” — the same discipline, applied to tax decisions instead of estate documents.

“Tax decisions don’t fail from prediction. They fail from coordination across years.”

What to Do Before September

July is when the audit gets built. August is when it gets reviewed against any Q3 income surprises. September is the practical execution deadline for the household to have the plan locked, because Q4 brings two distractions — year-end giving and tax-loss harvesting — that compete for the same advisor and CPA time. Households that wait until November to run the audit get fewer conversion years than households that ran it in July, because by November the bracket capacity has either been used or expired.

Frequently Asked Questions

Can I run the Bracket-Window Audit without an advisor?

The first decision — bracket capacity — is calculable from a tax return and a Q2 income summary. The other four require modeling that compounds: IRMAA cliff math, multi-year RMD projection, 0% LTCG coordination, and event sequencing. Most households who attempt the full audit alone underestimate Decision 5 — the coordination layer where the four decisions compete. The single-decision view is calculable. The coordinated view is where the tax efficiency lives.

How often should the audit be re-run?

Annually, in July. Q2 income is the cleanest mid-year visibility window the household will have. Re-running in November is too late to size for the year; re-running in March is too early because Q1 alone is not a reliable run-rate signal.

What if Q3 or Q4 income deviates materially from the July run-rate?

The audit’s output is a plan, not a commitment. A material Q3 surprise — a bonus, a property sale, a large dividend — triggers a re-size before year-end. The conversion can still be executed at the revised number, provided the household has a window to act before December 31.

Does this audit apply to households below $1M in retirement assets?

The math applies, but the dollar impact is smaller. The IRMAA cliff is most material for households inside the $100K–$300K MAGI range and within ten years of Medicare eligibility. The Roth conversion decision is most material for households with $500K–$3M in pre-tax retirement accounts. Households below those thresholds usually have the audit answered by simpler decision rules and do not need the multi-year framework.

“Tax decisions don’t fail from prediction. They fail from coordination across years.”

Continue with the July Coordination Pillar

  • Read the Insight: Why Most Roth Conversions Fail Coordination Math (Not Market Timing)
  • Listen to the Conversation: Roth Conversion & RMD Coordination — Best Advice Podcast Guys (publishes mid-July)
  • Read the Market Commentary: Mid-Year Inflation, Rate Path, and Conversion Sizing (publishes Wed Jul 15)
  • Read this month’s Brief: July 2026 — Tax Decision Coordination: The Month in One Read (publishes Tue Jul 28)

Next month — August 2026 — we move to the asset-side decisions: portfolio drift, rebalancing windows, and the cost-basis math that determines how taxes hit when assets actually move.

Schedule with Security Financial Management

A 15-minute call confirms whether the household’s audit needs all five decisions or just a refresh of two. Coordinating these five before September is where the year’s tax efficiency is decided.

Schedule a 15-minute call →

About the Author

Frank Lovaglio, RFC® · Senior Partner, Security Financial Management. Frank has guided multigenerational families through coordinated retirement and estate planning since 1989. Named to AdvisorHub’s 2025 Advisors to Watch, Over $1B. 36 years of industry experience, zero disclosures. Dave Ramsey SmartVestor Pro.

Disclosures

The information presented is for educational purposes only and does not constitute legal, tax, or investment advice. Security Financial Management, Inc. is a registered investment advisor under Kestra Advisory Services, LLC. Tax planning strategies should be coordinated with qualified tax professionals familiar with your specific situation. Past performance is not indicative of future results.

Securities offered through Kestra Investment Services, LLC, member FINRA/SIPC (Kestra IS). Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS). Security Financial Management, Bluespring Wealth Partners, LLC, Kestra IS and Kestra AS are affiliated through common ownership by Kestra Holdings.