1 00:00:00,080 --> 00:00:02,991 Speaker 1: Hi, I'm Stacey Hyde and I'm back for another episode 2 00:00:02,991 --> 00:00:07,184 of Better Financial Health in 15 minutes or less, and today 3 00:00:07,264 --> 00:00:10,271 I'd like to talk about the One Big Beautiful Bill Act. 4 00:00:10,271 --> 00:00:14,627 Unless you've been under a rock , you know that it passed, and 5 00:00:15,467 --> 00:00:18,353 what's been a little bit surprising to me is some of the 6 00:00:18,460 --> 00:00:24,091 misconceptions around the bill, because it did do a lot, but 7 00:00:24,131 --> 00:00:25,974 then there's some things that it didn't do. 8 00:00:25,974 --> 00:00:28,806 You know tax-free Social Security. 9 00:00:28,806 --> 00:00:30,951 That's not exactly what the bill did. 10 00:00:30,951 --> 00:00:35,610 What it did was to provide an extra standard. 11 00:00:35,610 --> 00:00:41,003 It's actually an extra deduction for anyone 65 years 12 00:00:41,064 --> 00:00:43,231 and older of $6,000. 13 00:00:43,231 --> 00:00:48,232 So for a married couple, that's an extra deduction of $12,000, 14 00:00:48,420 --> 00:00:51,512 whether you itemize or whether you take the standard deduction, 15 00:00:51,512 --> 00:00:57,847 and that's huge, although it does phase out if your income as 16 00:00:57,847 --> 00:01:00,451 a couple is over $150,000. 17 00:01:00,451 --> 00:01:05,706 And it completely phases out by the time your income hits $250. 18 00:01:05,706 --> 00:01:13,540 So you really have a window there that you're looking at and 19 00:01:13,540 --> 00:01:16,186 you don't even have to be taking Social Security to get 20 00:01:16,206 --> 00:01:17,090 this. 21 00:01:17,090 --> 00:01:19,135 So if you're still working or you've decided you're going to 22 00:01:19,174 --> 00:01:23,325 delay your Social Security to $67, you still get this extra 23 00:01:23,364 --> 00:01:26,129 standard deduction, which is pretty cool. 24 00:01:26,129 --> 00:01:27,534 That's a big one. 25 00:01:27,534 --> 00:01:33,834 The other is you can exclude income from tips from your 26 00:01:33,935 --> 00:01:37,302 income, if your income is below certain levels, and those levels 27 00:01:37,302 --> 00:01:38,242 are quite high. 28 00:01:38,242 --> 00:01:45,612 So if you're a server or if you are a cosmetologist or do 29 00:01:45,673 --> 00:01:49,442 something like that and you have tip income, your taxes are 30 00:01:49,504 --> 00:01:51,027 likely going to be a lot lower. 31 00:01:51,027 --> 00:01:57,164 One key thing to remember is that if you are a server and 32 00:01:57,343 --> 00:02:00,754 your employer for large parties puts a mandatory tip on there, 33 00:02:01,236 --> 00:02:04,346 that doesn't really count as a tip, because that wasn't 34 00:02:04,445 --> 00:02:06,632 somebody choosing to add that. 35 00:02:06,632 --> 00:02:11,129 So I think you're going to see a lot less of those get. 36 00:02:11,129 --> 00:02:14,585 On the larger checks, there can be a lot of discretion because, 37 00:02:14,585 --> 00:02:19,521 yes, you run the risk of not being tipped properly, but if 38 00:02:19,622 --> 00:02:25,050 you don't, then it won't be tax-free like it would be 39 00:02:25,251 --> 00:02:25,771 otherwise. 40 00:02:25,771 --> 00:02:28,155 So that's a key point there. 41 00:02:29,561 --> 00:02:34,534 One other one that comes up is the increase on what are known 42 00:02:34,594 --> 00:02:37,461 as SALT taxes state and local government taxes. 43 00:02:37,461 --> 00:02:40,846 So property taxes, state income taxes. 44 00:02:40,846 --> 00:02:44,349 That was capped at $10,000. 45 00:02:44,349 --> 00:02:48,740 It's now up to 40, unless you are a high income taxpayer, and 46 00:02:48,760 --> 00:02:49,824 then it's still at 10. 47 00:02:49,824 --> 00:02:54,903 The key thing here is the marriage penalty is still alive 48 00:02:54,963 --> 00:02:55,346 and well. 49 00:02:55,346 --> 00:03:00,741 A single person can take up to 40, but a married couple is also 50 00:03:00,741 --> 00:03:01,844 limited to 40. 51 00:03:01,844 --> 00:03:05,125 So that's a big planning consideration there. 52 00:03:05,125 --> 00:03:09,645 So more people will be able to deduct their state and local 53 00:03:09,686 --> 00:03:14,284 taxes, particularly if you pay property taxes and also live in 54 00:03:14,324 --> 00:03:17,481 an income tax state, that's something to consider. 55 00:03:17,481 --> 00:03:22,225 That is an itemized deduction, but if you live in a state where 56 00:03:22,225 --> 00:03:24,687 you are paying a lot in taxes, this will really really if you 57 00:03:24,602 --> 00:03:25,127 live in a state where you are paying a lot in taxes, this will 58 00:03:25,127 --> 00:03:25,824 really really help you. 59 00:03:25,824 --> 00:03:28,610 I know I've run some projections for some of our 60 00:03:28,650 --> 00:03:32,739 clients, particularly our single clients, and it's made a huge 61 00:03:32,818 --> 00:03:36,485 difference in their tax burden projected for 2025. 62 00:03:37,307 --> 00:03:41,759 The other thing that's a little bit strange is that up to 63 00:03:41,819 --> 00:03:49,008 $10,000 of car loan interest is deductible and to have that 64 00:03:49,109 --> 00:03:52,117 level of car loan interest, that's a lot. 65 00:03:52,117 --> 00:03:56,306 So a lot more people will be able to get some help if they're 66 00:03:56,306 --> 00:03:58,337 needing to buy a new car. 67 00:03:58,337 --> 00:04:02,908 But like most things you know mortgage interest and things 68 00:04:02,968 --> 00:04:07,138 like that you still you're paying interest and a deduction 69 00:04:07,959 --> 00:04:13,968 only offsets whatever percentage of that interest that coincides 70 00:04:13,968 --> 00:04:15,217 with your tax rate. 71 00:04:15,217 --> 00:04:19,867 So if you're in the 22% tax bracket, being able to deduct 72 00:04:19,906 --> 00:04:23,502 that interest is only going to save you 22 cents on the dollar 73 00:04:23,783 --> 00:04:24,526 of that interest. 74 00:04:24,526 --> 00:04:27,576 So don't think, hey, it's deductible, I'm going to go out 75 00:04:27,596 --> 00:04:30,341 and buy a car, although I'm sure the car salesman would love to 76 00:04:30,401 --> 00:04:31,024 tell you that. 77 00:04:31,024 --> 00:04:33,182 So those are kind of the key things. 78 00:04:33,182 --> 00:04:37,507 The child tax credit has also gone up a little bit. 79 00:04:37,507 --> 00:04:41,500 We're going to see more inflation indexing of this. 80 00:04:42,442 --> 00:04:46,507 And also, starting next year, if you give to charity but don't 81 00:04:46,689 --> 00:04:53,615 itemize, you're going to. 82 00:04:53,615 --> 00:04:55,603 If you think back during COVID, people were able to deduct $300 83 00:04:55,603 --> 00:04:57,290 or $600 from their tax return for charitable giving, even if 84 00:04:57,310 --> 00:04:57,752 they didn't itemize. 85 00:04:57,752 --> 00:04:59,798 Well, they brought back a version of that. 86 00:04:59,798 --> 00:05:05,327 Starting next year it's $1,000 or $2,000, even if you don't 87 00:05:05,447 --> 00:05:07,096 itemize to charity, which will be great. 88 00:05:07,096 --> 00:05:12,187 The downside is is if you're very charitably inclined and you 89 00:05:12,187 --> 00:05:16,379 give a lot of money away, starting next year, if you 90 00:05:16,678 --> 00:05:20,442 itemize the first half percent of your AGI. 91 00:05:20,442 --> 00:05:27,290 So if you made $100,000, the first $500 that you give away is 92 00:05:27,290 --> 00:05:31,862 not going to be deductible, even if you itemize Now above 93 00:05:31,942 --> 00:05:36,137 that amount, you can deduct it, but you're going to lose that 94 00:05:36,257 --> 00:05:39,483 first half percent, which I think that was a revenue 95 00:05:39,562 --> 00:05:40,925 generator for that. 96 00:05:40,925 --> 00:05:42,918 That is not true of this year. 97 00:05:42,918 --> 00:05:47,557 So if you are a big charitable giver, you may want to go ahead 98 00:05:47,619 --> 00:05:51,548 and accelerate some charitable deductions into this year. 99 00:05:53,235 --> 00:06:01,029 The key thing to remember is most of these um options do have 100 00:06:01,029 --> 00:06:02,651 income caps on them. 101 00:06:02,651 --> 00:06:06,920 So you want to really look at it and they're based on your 102 00:06:07,084 --> 00:06:09,874 adjusted gross income, not your taxable income. 103 00:06:09,874 --> 00:06:14,166 Your adjusted gross income is all of your income that comes in 104 00:06:14,166 --> 00:06:14,166 . 105 00:06:14,166 --> 00:06:16,915 So if you're on Social Security , it's the taxable portion of 106 00:06:16,954 --> 00:06:20,726 your Social Security, it's your IRA distributions, it's your 107 00:06:20,747 --> 00:06:26,333 pension, it's your salary Whatever it shows on your W-2 is 108 00:06:26,333 --> 00:06:27,353 your taxable income. 109 00:06:27,353 --> 00:06:33,060 So you want to pay real close attention to that because it 110 00:06:33,139 --> 00:06:34,500 could have an impact. 111 00:06:34,500 --> 00:06:43,249 That might be a reason if you're and some of these are 112 00:06:43,269 --> 00:06:45,353 absolute like if you're over a certain amount, your state and 113 00:06:45,394 --> 00:06:47,406 local taxes are capped at 10, not 40. 114 00:06:47,406 --> 00:06:53,302 So it's real important that you fall where you expect to fall 115 00:06:53,403 --> 00:06:55,045 if you are a higher income taxpayer. 116 00:06:55,065 --> 00:06:55,987 Same thing with tips. 117 00:06:55,987 --> 00:06:59,951 The tax-free portion of tips is $25,000. 118 00:06:59,951 --> 00:07:05,858 There's also some starting next year's tax-free portion of 119 00:07:06,060 --> 00:07:08,607 overtime, which is also going to help out a lot of people. 120 00:07:08,607 --> 00:07:16,459 But the tax-free overtime is just it's not the base pay that 121 00:07:16,500 --> 00:07:22,555 you get paid for those extra hours, it's that 50% or 100% 122 00:07:22,615 --> 00:07:26,790 that you get paid for the extra hours and there's some income 123 00:07:26,829 --> 00:07:28,074 caps on those as well. 124 00:07:28,074 --> 00:07:32,923 But the crazy thing to remember is all these income caps are 125 00:07:33,023 --> 00:07:33,384 different. 126 00:07:33,384 --> 00:07:36,615 It would be so easy if everything was the same. 127 00:07:36,675 --> 00:07:41,274 That said, if you make less than $100,000 as a single and 128 00:07:41,314 --> 00:07:43,499 $200,000 is a couple, these are the rules. 129 00:07:43,499 --> 00:07:48,211 No, the rules are different for every single item in these, 130 00:07:48,350 --> 00:07:51,019 which is why I'm not going through and saying them. 131 00:07:51,019 --> 00:07:58,653 We will include a link on our website to a good summary of 132 00:07:58,713 --> 00:08:02,225 these so that if you want to look at them, you can and get 133 00:08:02,286 --> 00:08:05,567 the see if different ones apply to you and if you need to pay 134 00:08:05,608 --> 00:08:06,069 attention. 135 00:08:06,069 --> 00:08:11,826 But just remember, most all of these are tied to adjusted gross 136 00:08:11,826 --> 00:08:15,536 income, so that's your income before you take any deductions 137 00:08:15,637 --> 00:08:20,170 away, and so that's the number that you want to look at and 138 00:08:20,209 --> 00:08:21,333 potentially manage. 139 00:08:21,333 --> 00:08:27,750 If you can make more pre-tax 401k contributions or if you're 140 00:08:28,271 --> 00:08:31,983 older and can contribute to charity through your IRA as a 141 00:08:32,023 --> 00:08:34,528 qualified charitable distribution, those kind of 142 00:08:34,568 --> 00:08:37,514 things actually hold down your adjusted gross income. 143 00:08:38,777 --> 00:08:43,837 A lot of things can pull down your taxable income, but that's 144 00:08:43,918 --> 00:08:48,692 not going to help you qualify for some of these, for example, 145 00:08:48,753 --> 00:08:50,076 the extra senior deduction. 146 00:08:50,076 --> 00:08:56,148 So be mindful of that and I do think for most people they will 147 00:08:56,187 --> 00:08:59,912 pay less in taxes next April and in the next three years next 148 00:09:00,111 --> 00:09:04,235 April and in the next three years, but beyond that we will 149 00:09:04,296 --> 00:09:05,216 see what happens. 150 00:09:05,216 --> 00:09:10,721 And because they did say that the tax rates were permanent. 151 00:09:10,721 --> 00:09:18,129 But the thing you have to remember about our tax system is 152 00:09:18,129 --> 00:09:19,572 many things are permanent. 153 00:09:19,572 --> 00:09:21,456 It means it's permanent for the next, probably through the end 154 00:09:21,495 --> 00:09:25,041 of this administration, because then there'll be a new Congress, 155 00:09:25,041 --> 00:09:29,014 there'll be a new president and they will have different goals 156 00:09:29,075 --> 00:09:29,756 and priorities. 157 00:09:29,756 --> 00:09:33,154 So I think the only thing we can plan on is change. 158 00:09:33,154 --> 00:09:36,552 But that doesn't mean that you shouldn't spend a little bit of 159 00:09:36,591 --> 00:09:40,408 time seeing whether any of these apply to you and if you can 160 00:09:40,447 --> 00:09:43,230 save a little money by being proactive. 161 00:09:43,230 --> 00:09:44,533 Thanks for tuning in. 162 00:09:44,533 --> 00:09:47,878 This has been another episode of Better Financial Health in 15 163 00:09:47,878 --> 00:09:48,619 Minutes or Less.