WEBVTT 00:00:00.080 --> 00:00:10.271 Hi, I'm Stacey Hyde and I'm back for another episode of Better Financial Health in 15 minutes or less, and today I'd like to talk about the One Big Beautiful Bill Act. 00:00:10.271 --> 00:00:25.974 Unless you've been under a rock, you know that it passed, and what's been a little bit surprising to me is some of the misconceptions around the bill, because it did do a lot, but then there's some things that it didn't do. 00:00:25.974 --> 00:00:28.806 You know tax-free Social Security. 00:00:28.806 --> 00:00:30.951 That's not exactly what the bill did. 00:00:30.951 --> 00:00:35.610 What it did was to provide an extra standard. 00:00:35.610 --> 00:00:43.231 It's actually an extra deduction for anyone 65 years and older of $6,000. 00:00:43.231 --> 00:01:00.451 So for a married couple, that's an extra deduction of $12,000, whether you itemize or whether you take the standard deduction, and that's huge, although it does phase out if your income as a couple is over $150,000. 00:01:00.451 --> 00:01:05.706 And it completely phases out by the time your income hits $250. 00:01:05.706 --> 00:01:17.090 So you really have a window there that you're looking at and you don't even have to be taking Social Security to get this. 00:01:17.090 --> 00:01:26.129 So if you're still working or you've decided you're going to delay your Social Security to $67, you still get this extra standard deduction, which is pretty cool. 00:01:26.129 --> 00:01:27.534 That's a big one. 00:01:27.534 --> 00:01:38.242 The other is you can exclude income from tips from your income, if your income is below certain levels, and those levels are quite high. 00:01:38.242 --> 00:01:51.027 So if you're a server or if you are a cosmetologist or do something like that and you have tip income, your taxes are likely going to be a lot lower. 00:01:51.027 --> 00:02:06.632 One key thing to remember is that if you are a server and your employer for large parties puts a mandatory tip on there, that doesn't really count as a tip, because that wasn't somebody choosing to add that. 00:02:06.632 --> 00:02:11.129 So I think you're going to see a lot less of those get. 00:02:11.129 --> 00:02:25.771 On the larger checks, there can be a lot of discretion because, yes, you run the risk of not being tipped properly, but if you don't, then it won't be tax-free like it would be otherwise. 00:02:25.771 --> 00:02:28.155 So that's a key point there. 00:02:29.561 --> 00:02:37.461 One other one that comes up is the increase on what are known as SALT taxes state and local government taxes. 00:02:37.461 --> 00:02:40.846 So property taxes, state income taxes. 00:02:40.846 --> 00:02:44.349 That was capped at $10,000. 00:02:44.349 --> 00:02:49.824 It's now up to 40, unless you are a high income taxpayer, and then it's still at 10. 00:02:49.824 --> 00:02:55.346 The key thing here is the marriage penalty is still alive and well. 00:02:55.346 --> 00:03:01.844 A single person can take up to 40, but a married couple is also limited to 40. 00:03:01.844 --> 00:03:05.125 So that's a big planning consideration there. 00:03:05.125 --> 00:03:17.481 So more people will be able to deduct their state and local taxes, particularly if you pay property taxes and also live in an income tax state, that's something to consider. 00:03:17.481 --> 00:03:25.824 That is an itemized deduction, but if you live in a state where you are paying a lot in taxes, this will really really if you live in a state where you are paying a lot in taxes, this will really really help you. 00:03:25.824 --> 00:03:36.485 I know I've run some projections for some of our clients, particularly our single clients, and it's made a huge difference in their tax burden projected for 2025. 00:03:37.307 --> 00:03:52.117 The other thing that's a little bit strange is that up to $10,000 of car loan interest is deductible and to have that level of car loan interest, that's a lot. 00:03:52.117 --> 00:03:58.337 So a lot more people will be able to get some help if they're needing to buy a new car. 00:03:58.337 --> 00:04:15.217 But like most things you know mortgage interest and things like that you still you're paying interest and a deduction only offsets whatever percentage of that interest that coincides with your tax rate. 00:04:15.217 --> 00:04:24.526 So if you're in the 22% tax bracket, being able to deduct that interest is only going to save you 22 cents on the dollar of that interest. 00:04:24.526 --> 00:04:31.024 So don't think, hey, it's deductible, I'm going to go out and buy a car, although I'm sure the car salesman would love to tell you that. 00:04:31.024 --> 00:04:33.182 So those are kind of the key things. 00:04:33.182 --> 00:04:37.507 The child tax credit has also gone up a little bit. 00:04:37.507 --> 00:04:41.500 We're going to see more inflation indexing of this. 00:04:42.442 --> 00:04:53.615 And also, starting next year, if you give to charity but don't itemize, you're going to. 00:04:53.615 --> 00:04:57.752 If you think back during COVID, people were able to deduct $300 or $600 from their tax return for charitable giving, even if they didn't itemize. 00:04:57.752 --> 00:04:59.798 Well, they brought back a version of that. 00:04:59.798 --> 00:05:07.096 Starting next year it's $1,000 or $2,000, even if you don't itemize to charity, which will be great. 00:05:07.096 --> 00:05:20.442 The downside is is if you're very charitably inclined and you give a lot of money away, starting next year, if you itemize the first half percent of your AGI. 00:05:20.442 --> 00:05:40.925 So if you made $100,000, the first $500 that you give away is not going to be deductible, even if you itemize Now above that amount, you can deduct it, but you're going to lose that first half percent, which I think that was a revenue generator for that. 00:05:40.925 --> 00:05:42.918 That is not true of this year. 00:05:42.918 --> 00:05:51.548 So if you are a big charitable giver, you may want to go ahead and accelerate some charitable deductions into this year. 00:05:53.235 --> 00:06:02.651 The key thing to remember is most of these um options do have income caps on them. 00:06:02.651 --> 00:06:09.874 So you want to really look at it and they're based on your adjusted gross income, not your taxable income. 00:06:09.874 --> 00:06:14.166 Your adjusted gross income is all of your income that comes in. 00:06:14.166 --> 00:06:27.353 So if you're on Social Security, it's the taxable portion of your Social Security, it's your IRA distributions, it's your pension, it's your salary Whatever it shows on your W-2 is your taxable income. 00:06:27.353 --> 00:06:34.500 So you want to pay real close attention to that because it could have an impact. 00:06:34.500 --> 00:06:47.406 That might be a reason if you're and some of these are absolute like if you're over a certain amount, your state and local taxes are capped at 10, not 40. 00:06:47.406 --> 00:06:55.045 So it's real important that you fall where you expect to fall if you are a higher income taxpayer. 00:06:55.065 --> 00:06:55.987 Same thing with tips. 00:06:55.987 --> 00:06:59.951 The tax-free portion of tips is $25,000. 00:06:59.951 --> 00:07:08.607 There's also some starting next year's tax-free portion of overtime, which is also going to help out a lot of people. 00:07:08.607 --> 00:07:28.074 But the tax-free overtime is just it's not the base pay that you get paid for those extra hours, it's that 50% or 100% that you get paid for the extra hours and there's some income caps on those as well. 00:07:28.074 --> 00:07:33.384 But the crazy thing to remember is all these income caps are different. 00:07:33.384 --> 00:07:36.615 It would be so easy if everything was the same. 00:07:36.675 --> 00:07:43.499 That said, if you make less than $100,000 as a single and $200,000 is a couple, these are the rules. 00:07:43.499 --> 00:07:51.019 No, the rules are different for every single item in these, which is why I'm not going through and saying them. 00:07:51.019 --> 00:08:06.069 We will include a link on our website to a good summary of these so that if you want to look at them, you can and get the see if different ones apply to you and if you need to pay attention. 00:08:06.069 --> 00:08:21.333 But just remember, most all of these are tied to adjusted gross income, so that's your income before you take any deductions away, and so that's the number that you want to look at and potentially manage. 00:08:21.333 --> 00:08:37.514 If you can make more pre-tax 401k contributions or if you're older and can contribute to charity through your IRA as a qualified charitable distribution, those kind of things actually hold down your adjusted gross income. 00:08:38.777 --> 00:08:50.076 A lot of things can pull down your taxable income, but that's not going to help you qualify for some of these, for example, the extra senior deduction. 00:08:50.076 --> 00:09:05.216 So be mindful of that and I do think for most people they will pay less in taxes next April and in the next three years next April and in the next three years, but beyond that we will see what happens. 00:09:05.216 --> 00:09:10.721 And because they did say that the tax rates were permanent. 00:09:10.721 --> 00:09:19.572 But the thing you have to remember about our tax system is many things are permanent. 00:09:19.572 --> 00:09:29.756 It means it's permanent for the next, probably through the end of this administration, because then there'll be a new Congress, there'll be a new president and they will have different goals and priorities. 00:09:29.756 --> 00:09:33.154 So I think the only thing we can plan on is change. 00:09:33.154 --> 00:09:43.230 But that doesn't mean that you shouldn't spend a little bit of time seeing whether any of these apply to you and if you can save a little money by being proactive. 00:09:43.230 --> 00:09:44.533 Thanks for tuning in. 00:09:44.533 --> 00:09:48.619 This has been another episode of Better Financial Health in 15 Minutes or Less.