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Dadvesting |
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Friday, October 2, 2026
The tax advice your dad gave you expired in 2020
We ran the family money advice we each inherited through a date check, the way you sniff the milk at the back of the fridge. 2 of the 3 had expired, 1 of those expired twice, and the 3rd was never good to begin with.
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In this issue
| 01 3 pieces of inherited tax advice, 2 expiration dates, and the $2,200 figure that replaced the oldest one |
| 02 $5,000 against $7,500: the childcare FSA cap that moved for the first time since 1986, worth about $790 a year |
| 03 The 0.37% account against the 4.2% one, plus 4 other things to do before December 31 |
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Family tax advice is like the milk at the back of the fridge… it had a date on it the whole time
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We've both filled out payroll paperwork at 11pm with a person asleep on our chest. And both times a voice said "claim 1 per kid, that's what Dad did."
That voice was right. In 2019.
Nobody sends a memo when a tax rule dies, so we took the 3 pieces of family money advice we hear most and checked the date on each one.
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"Claim 1 allowance per kid on the W-4."
Best by 2019
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Step 3: $2,200 per kid under 17 on the 2026 form |
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"Put grandma's gift in the kid's Roth."
Best by never
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Earned income only. For a baby, $0 |
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"Elect $5,000 in the childcare FSA, same as last year."
Best by 2025
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$7,500 cap from 2026, if your employer adopted it |
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1. "Claim 1 allowance per kid." Allowances left the W-4 with the 2020 redesign. The IRS FAQ says "allowances are no longer used," which is about as plain as the IRS gets.
What replaced them is Step 3: kids under 17 times a flat dollar figure. Our own research file from 6 weeks ago had that figure at $2,000, so we pulled the 2026 form on Monday to check.
It's $2,200. Even the correction had a date on it.
Some payroll portals still show a dropdown labeled "allowances." That dropdown is a fossil, and the form wins every argument with it.
Run a stale count and your withholding lands wrong in 1 of 2 directions: a surprise bill in April, or an interest-free loan to the IRS all year. Neither one comes with a thank-you note.
2. "Put grandma's $500 in the kid's Roth." This one never had a good year. A kid's Roth only takes what the kid earned at a real job, and a 6 month old's job history is thin.
Grandma's money can go in, but only up to what the kid earned.
Neither of our kids has filed a W-2. They have strong opinions about GoGo squeeZ and $0 of taxable compensation.
Put it in anyway and the IRS charges 6% on the excess, every year, until it comes back out. A recurring fee for being generous in the wrong account.
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The number that held
from 1986 to 2025
$5,000
39 years without a raise
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The cap by law
for plan years from 2026
$7,500
about $790 a year at 24%, payroll tax included
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3. "Elect $5,000 in the childcare FSA, same as last year." That $5,000 cap was set in 1986. It's older than both of us, and it got its first raise in 2025, 39 years later. Top Gun got a sequel faster.
For plan years starting in 2026 the cap is $7,500. The extra $2,500 of pre-tax money is worth about $600 a year in federal income tax at the 24% bracket, plus $191 in payroll tax it skips, so about $790 for changing 1 number.
The trap: your employer's plan has to adopt the new number, and a portal that still stops at $5,000 is the tell that yours hasn't. Open enrollment is running right now, which is the 1 window a year that number moves.
Nobody who handed you these was lying. 2 of them were right in their year, and the rules broke between 2020 and 2026 while everyone was busy with a diaper.
The advice went bad because it's milk. Nobody in the industry gets paid to print the date on it, so we did.
If you've been running 2019 rules until this morning, the biggest fix is 1 number in a benefits portal and about 5 minutes. That's the entire cost of being late.
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Nobody sends a memo when a tax rule dies.
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7 Stocks to Ride The A.I. Megaboom
The next A.I. boom could create massive winners just like the 1990s tech surge.
We identified 7 small tech companies positioned to benefit from the next phase of A.I. growth.
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Watch it play out
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The box your uncle told you to fill in on the W-4 is gone. The 2019 form and the 2026 form, side by side, and the 1 line that replaced it.
Step 3 on the 2026 form: kids under 17 times $2,200. 60 seconds, no dropdowns.
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The Short List
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A bank bonus beats a savings rate for cash that sits 90 days. Associated Bank pays $300 to $600 through October 31, 2026 for a $1,000 to $10,000 average balance in a new checking account, 9 Midwest states. The fine print wants a real paycheck direct deposit, and a brokerage transfer doesn't count. |
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The average savings account pays 0.37%. That's the FDIC's own figure as of September 21, 2026. The top online accounts pay about 4.2% APY as of September 28, 2026, so $10,000 earns $37 in 1 and about $420 in the other. |
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Grandparent 529 money no longer touches federal aid. Since the 2024-25 FAFSA it isn't reported on the form at all, a $0 hit. The old trick of routing it through the parent's 529 first is folklore now. |
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A kid's UTMA has $2,700 of tax-free room every year. For 2026 the first $1,350 of unearned income is untaxed and the next $1,350 is taxed at the kid's rate. Above $2,700 it's your bracket. |
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EE bonds pay 2.40%, unless you hold them 20 years. Then Treasury guarantees they double, which works out to about 3.53% a year. The 2.40% holds for bonds bought through October 31, 2026. |
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Tweet of the Week
u/ |
Correct-Sea-198
u/Correct-Sea-198 · r/daddit · Aug 10, 2026
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Our 8 year old is naturally athletic and loves soccer. He’s been playing rec league for 5 years and tried out for the travel team and made it. He’s stoked, we are stoked, and then I start getting the list of what we need. Uniforms - $400 for practice and game uniforms! The jacket and backpack are “optional” but what kind of parent lets their kid be the only one without it? … At least it’s not hockey!
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What the math says
For the general case, $2,500 more of pre-tax childcare money is worth about $600 a year in federal income tax at the 24% bracket, and closer to $790 once the payroll tax it skips is counted, which makes the FSA the biggest of the 3 by a mile. The W-4 line is $2,200 per kid under 17 on the 2026 form, and a baby's Roth ceiling is $0 until the kid earns something, so there's no variable on that one. The variable on the other 2 is the employer: the $7,500 only exists if the plan adopted it, and a W-4 only changes when a new one lands in payroll.
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Which of the 3 did your family hand you? Hit reply with 1, 2 or 3. We read every one.
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We wish somebody had told us the advice came with a date on it instead of letting April do it. If you're still in the first year and want the whole list in order, the free before-five checklist is here, and what you elect is your call.
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Until next week,
Mason & Bryce
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One thing before you go: we're 2 dads who read the same statements you do, not licensed advisors or fiduciaries. Everything here is what we're doing and learning, not personal advice for your situation. Different family, different plan. Talk to a fee-only fiduciary before you move real money if you have questions.
Legal disclaimer: Dadvesting is a media and publishing company. It is not a registered investment adviser, broker-dealer, or financial planner, and nothing in this publication constitutes investment, tax, or legal advice or a recommendation to buy or sell any security. Content is for general informational and educational purposes only and reflects the personal views and experiences of the authors. No advisor-client, fiduciary, or other professional relationship is created by reading, subscribing to, or interacting with this publication. Before making any financial decision, consult a licensed, fee-only fiduciary financial advisor, tax professional, or attorney qualified to advise on your specific circumstances.
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