💰 The backdoor every high earner uses

Good morning! It is now officially the time of year when Americans forget the IRS exists for approximately three months, which is exactly when the IRS does its best work. Let’s get into it.

This week’s lineup:

Business & Gigs

🚗 70 cents or $80,000: pick your deduction

There are two types of people in this world. The first throws every crumpled gas station receipt into a shoebox, convinced those coffee-stained scraps of paper will one day save them thousands. The second feels a wave of existential dread looking at the shoebox and just tracks their mileage instead.

For 2025 tax returns, the government has decided to reward both of them, in very different ways.

The easy route: 70 cents per mile. You drive for business, you log the miles, the IRS gives you a flat rate. Drive 10,000 miles to visit clients, get a $7,000 deduction. Clean, simple, audit-resistant. The downside: if you just bought a $90,000 SUV, 70 cents a mile is like emptying a swimming pool with a teaspoon.

The heavy hitter: actual expenses. This means tracking everything — gas, insurance, repairs and the big one, depreciation. The OBBBA reinstated 100% bonus depreciation for qualified property acquired after Jan. 19, 2025. Translation: if you buy a vehicle with a gross vehicle weight rating over 6,000 pounds (Ford F-150, Mercedes G-Wagon, Tesla Model X), you can write off the entire purchase price in year one.

Buy an $80,000 truck for 100% business use. Get an $80,000 deduction. Immediately.

One catch: If you choose actual expenses, you’re married to it for the life of the vehicle. No switching back to standard mileage. Ever.

The new bonus: The OBBBA also created a deduction for personal vehicle loan interest up to $10,000. If your car is 60% business and 40% personal, you deduct 60% of the interest on Schedule C and the remaining 40% on Schedule A. For the first time, you might get a tax break on every dollar of interest you pay the bank.

The rule of thumb: Check the sticker on your driver’s door. Under 6,000 pounds? Take the mileage. Over? Talk to your CPA about actual expenses. You might be driving a tax shelter.

Money Moves

💰 The backdoor Roth IRA: the legal workaround hiding in plain sight

The Roth IRA is one of the best deals in the tax code. Money goes in after tax, grows tax-free and comes out tax-free in retirement. The government, in a rare moment of self-awareness, decided this was too good a deal for high earners and slapped income limits on it.

For 2026, if you’re single and earn more than $168,000 or married filing jointly above $252,000, you can’t contribute directly. The door is closed.

The backdoor, however, is wide open.

Here’s how it works: You contribute to a traditional IRA. You skip the tax deduction. Then you convert that money to a Roth IRA. There’s no income limit on traditional IRA contributions (you just can’t deduct them above certain income thresholds) and there’s no income limit on Roth conversions. Two steps, perfectly legal, and the IRS has been watching people do it for over a decade without objecting.

For 2026, you can put in $7,500 (or $8,600 if you’re 50 or older). The OBBBA didn’t touch the strategy. Congress has floated closing the backdoor in past proposals and dropped it every time.

The trap to watch for: the pro-rata rule. If you have existing pre-tax money in any traditional IRA, a rollover from an old 401(k), deductible contributions from years ago, the IRS doesn’t let you cherry-pick which dollars you’re converting. It calculates the taxable portion proportionally across all your traditional IRA balances. The fix: roll any pre-tax IRA money into your current employer’s 401(k) before converting. Clean slate.

The paperwork: File Form 8606 every year you make a nondeductible contribution or conversion. Skipping it risks double taxation, paying tax on money you already paid tax on. The penalty for not filing is $50 but the cost of the confusion it creates is significantly higher.

The front door has an income limit. The back door doesn’t. The IRS knows. They just haven’t locked it yet.

Filing 101

💝 Is your GoFundMe taxable? Probably not. But the tax form doesn’t know that.

Your house floods. Your community rallies. A friend sets up a GoFundMe and before long $30,000 has appeared in your account from coworkers, neighbors and strangers who read your story and felt moved.

Then a tax form shows up. Panic ensues.

Here’s the thing: that form probably doesn’t mean what you think it does.

It’s called a 1099-K. Payment processors issue it when the money flowing through your account crosses a reporting threshold. The form doesn’t know why you received the money. It just reports an amount. And because it goes to both you and the IRS, you have to address it on your return whether the money is taxable or not.

For most personal GoFundMe recipients, it isn’t. The IRS defines a genuine gift as something given out of “detached and disinterested generosity,” which is bureaucratic phrasing for the donor gave because they wanted to help and got nothing back. Medical crises, house fires, natural disasters those donations are gifts. Gifts aren’t income.

When it is taxable: Donors received something in return (a product, early access, a handmade item). Your employer contributed. The funds were raised for a business purpose. In those cases the IRS treats the money more like income than generosity.

The threshold: The One Big Beautiful Bill Act restored the federal 1099-K threshold to more than $20,000 and more than 200 transactions, retroactive to 2022. Most personal campaigns won’t trigger the form at all. A handful of states like Maryland, Massachusetts, Vermont and Virginia, still require it at lower amounts.

If you do get one: Document everything. Screenshot the campaign page. Save donor comments (“so sorry, hope this helps” is the kind of language that supports the gift characterization). Track where the money went. The 1099-K isn’t the problem. Not knowing what to do with it is.

Wild Tax Tales

🤠 Willie Nelson owed the IRS $16.7 million (and paid it off with an album)

On Nov. 9, 1990, federal agents showed up at Willie Nelson’s Texas ranch and took everything. Gold records, master tapes, touring equipment, a piano, the ranch itself. The IRS had decided he owed $16.7 million in back taxes — the result, the singer said, of mismanaged earnings and terrible advice from his accountants.

Before they arrived, his daughter Lana had already sent his guitar, Trigger, to Hawaii for safekeeping. Priorities.

The root cause wasn’t hidden income or offshore accounts. In the early 1980s, Nelson invested in tax shelters recommended by his advisors. Those shelters were later deemed illegal by the IRS. He sued his accounting firm, Price Waterhouse, for $45 million. Price Waterhouse said buying into the shelters had been his own decision. The IRS, characteristically, didn’t care whose fault it was.

This is the problem with aggressive tax shelters. They feel like a win until they don’t. When the IRS disallows one, you don’t just owe the original taxes — you owe penalties and interest stretching back to the year you took the deduction. The IRS demanded $6 million from a 1984 deduction plus an additional $10 million in penalties and interest compounding all the way back to the 1970s. Years of interest on a bet that didn’t pay off.

The IRS auctioned his possessions. Texans mostly refused to buy them — or bought them just to give them back. Nelson’s friends organized low-ball bids and held the items for him. A fan bought his ranch as thanks for Farm Aid.

To pay off what remained, Nelson released a compilation album under a revenue-sharing agreement with the Internal Revenue Service. First time that had ever happened. He settled the whole thing by 1993 for $6 million.

If your accountant is pitching you a tax shelter, ask one question first: what happens if the IRS disagrees?

The quick (and slightly prickly) stories we didn’t have time to get to:

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.