This is the Truth Network. Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well with Certified Financial planner Tom Griffith today. And so we are very fun. We have Tom here. And we have a really amazing, very timely topic.
Believe me, I think you will be glued to your seat as you hear this. What is the new tax law? Benefits to retirees and seniors. And having reviewed the information, I can tell you I learned a ton that I clearly totally misunderstood.
So I think you're going to find this to be amazing in so many different ways. But, you know, as I was thinking about this from a biblical standpoint, that we are certainly blessed in this country in so many different ways. And this new tax law is a huge bless. And as a matter of fact, we're blessed to be a blessing. As God said in Genesis 12:2 to Abraham, He said, I'll make you a great nation, and I will bless you, and I will make your name great, and you will be a blessing.
And so. One of the neat things, from my standpoint, Tom, is this is going to be a huge blessing, this tax bill. Not only are we not going to raise taxes, but then we've got new benefits for seniors, all sorts of different little things that give us an opportunity to be a blessing. Yeah, I mean, I think it's great. And Robbie and I were talking before the show, and you know.
The way I view this, or how I view this, is: you know, through good planning, if you are able to keep more of your money, not paying taxes on it, you can then turn around and bless others with that. And so, I think understanding these provisions and understanding how this works for you and what planning opportunities are there, I think is extremely important. And I think that, like Robbie said, there's a lot to get through today. I think it will be very helpful to provide some guidance around this bill. Just to specifically tell you what we're talking about, is on July 4th, Trump signed this big beautiful bill, is what we're calling it.
It's what he calls it, and it's actually the name of the bill. And in there, there are a lot of provisions. I mean, it touches a lot of different things. There's no way we could do a show on all of it today. And we have a YouTube show on this, and really, we wanted to focus on the areas that most directly impact seniors or retirees or people approaching retirement.
So there's plenty of stuff we're not even going to address today on today's show. Not to say it's not important, it's just that's not what directly affects us. But in our business, But I think that sort of gives some good context here. And one of the things that the biggest benefit of this bill, the big overarching thing that it was really trying to do was to prevent tax rates from going up.
So in Trump's first administration, they signed the Tax Cut and Jobs Act, which reduced taxes, which was great. But in that original law, there was a sunset provision built in. And so under that old law, in 2026, tax rates were set to go back up to what they were previously. And so what they wanted to do with this bill is to extend the lower tax rates, and they were successful in doing so. And so what that means for next year, for 2026, tax rates will not increase.
Now, they're not going down, so you won't necessarily see a tax decrease, but you won't see it increase either.
So I think that's an important context.
Some people actually might see their taxes decrease a little bit. We'll get into that a little bit later. But the rates themselves are staying the same, which is still very, very beneficial. But don't maybe go in expecting your taxes to be way less. than what they were previously.
Yeah, there is a lot of information. I I love it that um we've got this show in such a timely way because, right, for people who are doing conversions and things like this, this changes the the playing field uh in a lot of good ways, but nonetheless it's changed. Oh, yeah. I mean, there are a lot of changes. I mean, the tax rates, again, that was probably the biggest thing that impacts kind of everybody.
But some of the stuff we'll get through, you'll start seeing that there are some really cool things in here, some things that will really benefit you. It makes our job a little bit harder. There's more things we need to keep track of and thresholds we got to watch out for. But at the end of the day, I think this will benefit a lot of people, specifically on the tax side of things. And there are cuts in other areas, and we'll get to that a little bit.
But I think this will be pretty helpful.
So what I thought we would do, and if you know, we have a YouTube show that goes through a lot of these. The radio show is tied with a YouTube video. And so I would encourage you to watch it. It's a little bit longer video. We're going to have to try to speed it up a little bit on the radio show to try to get through as much as we can.
But I'm just going to start going sort of piece by piece of some of the major changes that are happening. Talk through how they impact you, and then talk about where there's maybe some planning opportunities or things to watch out for when you're getting into retirement. I mean, does that sound good to you, Robbie? Yeah, that's perfect.
Okay, so we're going to start. We already talked about the tax rates, how they're not going back up. I'm not going to give you all the brackets like where they are. You can go look that up. But just to give you an idea, currently the marginal rates are 10%, 12%, 22%, 24%, 32, 35%, and 37%.
So those are all staying the same. The income to get to those brackets, those get adjusted for inflation over time. You can go look up what those are. But I think that those, again, that's the major part of the bill. Another thing is the capital gains rates.
Those are staying at 0%, 15%, and 20%.
So all those are the same. One big difference between this bill and the old one is now there is no sunset provision.
So there is no end to those rates. Those are in there indefinitely. In the law, I guess it would be permanently, but we know tax law changes frequently.
So, you know, I like to say for the foreseeable future, that's what we have. Another administration could come in. They could have another law. This could change in the future. But for right now, this is what we're dealing with.
We don't expect any changes in the immediate future.
So that's really helpful. One thing they did as well is they increased the standard deduction.
So back in the old law, they really greatly increased the standard deduction, which really means about 90% of people just take the standard deduction, which is helpful. You don't have to keep track of things like your gifting. You don't have to keep track of homeowners' interest and state and local taxes. And so it simplifies it from that standpoint, which I think is good. But what they've done is they've taken it and they've increased the standard deduction.
So it was $15,750 for a single tax filer. That's what it's going to. And then it's going up to $31,500. For a couple. And so those are just sort of the standard one.
Everyone gets that regardless of what you have going on. What they have also done, though, and this was still in the old law, but they increased the numbers a little bit, was if you're over 65, you also get an additional $2,000 if you're a single tax filer or $3,200 if you're married filing jointly over 65.
So that's just sort of the standard deduction. There's another extra senior deduction we'll get to in a second. But everybody who's listening to this show, if you're filing a standard deduction, that increase will benefit you under this new big... this one big, beautiful bill that Trump signed.
So I think that's going to be helpful. Again, that doesn't have a sunset like it did in the old bill. This one was extended out until I guess other tax laws happen. But for right now, that's what we have. And we can pretty well count on that for the foreseeable future.
And so that's none of those have been big changes. This next one, this is where we get into sort a really big sort of fundamental change, which really does impact a lot of our clients. What impact you, Robbie. And this is what they're calling this a senior deduction. And so I'll tell you how it works and I'll talk a little bit about how to position this.
But essentially, if you are over 65, you are able to take an additional deduction of $6,000 per person who is over 65.
So if you're married and you're both over 65, that's $12,000 of additional deduction that you get to take on top of the standard deduction. Or if you're itemizing deduction, it also goes on top of that one.
So it really is going to really decrease your taxable income by that number, which is be really beneficial. A couple of this might get a little bit too into the weeds here, but it's what they call a below-the-line deduction, meaning it doesn't reduce your adjusted gross income, but it does reduce your taxable income. That becomes important because there's other things that are driven by your adjusted gross income, like Medicare premiums, like other, some of these phase-out ones we'll talk about here in a second.
So it comes after that, but it's still very, very helpful. It reduces the Income. And again, this is really beneficial for seniors. If you've seen things talked about, the reduction of taxes on Social Security, this bill does not have anything that directly targets Social Security. There's nothing there.
The calculation is still the same. It's this provisional income, multiplied all these crazy formulas. But it doesn't address that at all. But what it does do is it adds this additional deduction. And so I think it's important to understand that it didn't get rid of the taxation on Social Security, but what it did do is add this additional deduction for someone who's 65 or older, which the net effect could be paying less taxes, but it doesn't.
Do they overall. And I think that's an important important context. And I think Robbie, that's one area that that was new you hadn't quite understood. Is that right? Oh yeah.
To me, this is thi this is the crux of what I think most people over sixty five are like, oh goody, they're telling us they're no longer taxing our Social Security benefits. And this new direction is wonderful, and I'm so excited about the ramifications of it, but it creates this big confusion. Like, oh, so. You're still gonna take my income. You know, and and and Tax the Social Security as part of it, you know, based on your formulas like you talked about.
And there are a lot of crazy formulas, but nonetheless, you know, if you're working and you're getting Social Security, even if you're past your full retirement age, you're certainly paying taxes on your Social Security. And what this does, obviously, is offset that in a great way. That's wonderful, but it's a bit misleading, in my own opinion, that they tell you we're not going to tax your Social Security anymore. But what they're really doing is they're giving you an additional deduction, which may in fact be that, but it may not be, right? Yeah, so there will still be plenty of people if your income is high enough, which is again a blessing, right?
I mean, that's what is you're in a good situation if you're having to face this. But it does mean that your social security portion of it could still be taxable. But at the end of the day, this extra deduction certainly helps.
Now where it becomes a little bit tricky is one there is a sunset to this one so in the current law it's good it starts this year 2025 is immediately available and it goes through 2029 and so once we get to 2030 if it's not extended this will end and so again will they extend it it's hard to know like we don't have that crystal ball um but when we're doing some planning it does give us a window of time where we might want to think about maybe dialing back some of the roth conversions and then the reason i say that is there's also an income phase out range and so you're if your income is above certain thresholds you lose this deduction and so for a single tax filer that starts at 75 000 is if your income is above 75 000 you start losing some of this deduction and so it's not a cliff it doesn't lose it all at once But it is phased in over time. And if you're a single tax filer and your income is above $175,000, so $100,000 more than the start of the phase out, then you lose the deduction completely. And so we talk a lot about Roth conversions: if you do a Roth conversion, that increases your income and it could make you lose this deduction. And so we want to be careful with that. Same way with a married couple, the number is a little bit higher.
That phase out starts at $150,000, it goes to $250,000. And so we just need to be a little bit more thoughtful about. Looking at Roth conversion, not saying you should never do it.
Sometimes it still makes a lot of sense to do it, but we need to do it with the knowledge that we might be losing out on this deduction. And again, there at cardinalguy.com. You're going to find Hans's book, The Complete Cardinal Guide to Planning, Foreign Living, and Retirement. And in my opinion, the all-important contact Hans and Tom page, right? And so you have questions that are important to you.
Why not get up with somebody that can really help you with the whole planning? And you do that at cardinalguy.com.
So we'll be right back with a whole lot more on the big beautiful bill or slash the new tax law, benefits and retirees for retirees and seniors. We'll be right back. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM. a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Tom Griffith today. How fun is this? And we're talking about this, what you may know as the Big Beautiful Bill, but it's a new tax law.
It's been signed into law. It affects us this year. In other words, this year's tax return, when you fill it out, it's going to be changed a lot based on what we're talking about today, the benefits to retire and seniors. And so, Tom, there's a lot here. There is a lot, so we're going to try to get it through as much as we can.
And if we don't get through all of it, go watch our YouTube show because we do spend more time there than we have on the radio to get into more of the details. But we'll get into the next provision that I think this one actually probably won't impact a ton of listeners, but if it does impact you, it's beneficial. And it's the estate tax and gift tax exemption. And so, again, this is something that was set to sunset, it was going to sunset in 2026. It was going to essentially be cut in half, and they have just kept it at the higher levels that it is.
For 2025, the estate tax exemption, this is federal estate taxes, is almost 14, just under $14 million. And so, you don't have to worry about estate taxes if your overall estate, your property, your investments, your house, everything is less than $14 million, which is most people, by the way. You don't have to worry about this.
Now, if you are in a position where maybe you have a business or you have something Haired, whatever it is, however, you've received it. If your estate is above that, the good news is it's not getting cut in half, it's staying higher.
Next year in 2026, it's going up to 15 million, and then it will be increased with inflation moving forward after that.
So, ultimately, this one doesn't impact as many people from a number standpoint, but the ones who are impacted certainly helps keep more of the money in their estate able to be passed on to future generations and hopefully benefit people that way. The next provision and this one got a lot of there was a lot of back and forth on this one and through Congress and the Senate, a lot of fighting, a lot of sort of held up was around this piece of it.
So I'll try to explain sort of where things landed, where it's important, where it's maybe not as Impactful, but it's this, you'll see it often called the SALT deduction or S-A-L-T. It stands for State and Local Tax Deduction. And so what that is, is if you are in a state that maybe has high income taxes or high property taxes, it used to be that you could deduct those taxes that you paid. against your federal taxes as an itemized deduction. Back in the Tax Cut and Jobs Act that Trump passed in his first administration, they limited that to $10,000, which really hurt people in Some of those higher income states or higher property taxes specifically.
And so that capped it at 10,000. There was some back and forth on that. And then in the current bill, what they've done is they've increased that cap. to $40,000. Which again, for people this impact is really beneficial.
One of the things that is a little bit, again, tricky with this is there is an income phase-out limit. And so I'll get to where this maybe doesn't impact as many people as they might think. But if your income, and another interesting thing is this is for single and married, it's the same income number. But if your income is above $500,000, which granted is not a ton of people, but if it is, then it starts being phased out where you're not able to take advantage of this. But if your income is below that and you're in a state like California or New York or New Jersey has high property tax states.
It will really be very impactful to reduce it adds to the itemized deductions, probably bringing back in more people who can itemize versus taking the standard deduction. Again, very, very beneficial. And if you remember what I had talked about on that extra senior deduction, if you're over 65. Is that extra $6,000 per person gets added on top of if you're taking the standard deduction or if you're itemizing can be added on top of that. And so one of the things that Hans and I got talking about this one is if you start thinking about who is going to have really high State income taxes.
Well, sort of by definition, that means they have a high income. And so that high income likely is going to phase them out of this deduction anyways. And then they're still capped at 10,000.
So we'll see how many people this impacts. But I had a call with a client earlier this week who's in California, retired, looking at doing Roth conversions. And this is really what we're targeting: this phase-out limit: let's not convert any more where your income is above that. His IRAs are quite large.
So we can take advantage and reduce his federal taxes by what he's having to pay in state taxes.
So again, it's helpful. It is beneficial for those people that it impacts. The next one, and this one is actually really important for a lot of our listeners, is they have changed some rules. around charitable deductions. And so You know, when they increased the standard deduction, which again, I think was helpful, it simplified tax returns, is it meant a lot of people weren't itemizing.
Well, a lot of our listeners, your biggest itemized deduction might be your charitable gifting to the church or some qualified charity. If you go back and look at your tax return, even though you might be keeping track of it, you're really not taking any, you're not getting any tax advantage for it.
Now, granted, that's not the reason you're giving. That's not what we're called to do. But it is nice to get a tax benefit if we can. But since most people are taking the standard deduction, you don't really get that itemized deduction of the gifting to charity, so you really haven't benefited from that. What they've added in, and there was a year during COVID that this existed as well, so you might have seen this before, but they added in that you can take a charitable deduction up to $1,000 for a single tax filer and $2,000 for a married couple, even if you were taking the standard deduction.
So another way to put that is you still can take the standard deduction. It got increased with this bill and get a benefit from the $1,000 if you're a single or $2,000 extra deduction for giving to charities. And so if you're giving that amount and taking the standard deduction, you get to take both.
So I think that will be very, very helpful for a lot of listeners. And so if you are listening and you haven't really been tracking your gifting, well, you might want to start doing that.
Now, that one actually doesn't take effect until 2026.
So we got a little bit of time to start thinking through that. But I think that will be helpful. From a planning standpoint, a lot of things we'll talk about on the show are these QCDs, qualified charitable distributions. Again, just real quickly, that's when you're 70 and a half. you give directly to a charity out of an IRA.
Which is really beneficial. But what you might want to do if you're doing that already is the first $2,000, if you're married, you might want to give that just out of cash that you have.
So you get to take this deduction on top of the standard deduction and then do the QCD. You've done the 2,000 with other stuff.
So I don't want to spend too much time on that. We've got more stuff to get through. If you have questions on that, call us. We can walk you through how to do that. I have a question.
Just, you know, is it all that tends to apply to me? Sure, exactly.
So if I'm understanding, right, my income based on is under that 200 or under 150,000 for a couple to begin with.
So there's no hit to the $6,000 additional deduction.
So you get the full deduction that the Whatever that was, $15,000. Then you get the $6,000 for so in 2026, since clearly it would be given a lot more than $2,000, that's like the same thing. is getting eight thousand, right? Exactly, yeah.
So let me I'll take an example. Um I'll I'll pick on Hans because both him and Ronda are over 65, so I can the math is easy for me. Um but let's say they're both over 65, they're taking the standard deduction. Um That standard deduction alone without the additional one is $34,700.
So they get that. And even if you're under, or I guess if you're under $65, it'd be a little bit less than that. But $34,700.
Now they also get, assuming their income is below $150,000, they also get that additional $6,000 per person, or $12,000 as a couple on top of that.
So we add that to the $12,000.
So now we're up to $46,700.
Now let's say they also give more than $2,000, which they do.
So we add an additional $2,000 to that.
So their total deduction would be $48,700 in that example. Yeah, and you can see that's the blessing we're talking about right there.
So that's beautiful. Yeah, thank you. And so another way to put that is they could have 50,000, roughly 50,000 of taxable income, but they have a deduction of almost 50,000, and their tax bill would essentially be next to nothing, right? I mean, maybe a little bit, but it would be very, very small. And so when we talk about people getting to keep more and how it relates to Social Security and stuff, it's that kind of math that's going on.
It doesn't mean that Social Security isn't being taxed or isn't part of that tax calculation. It just means that we get to deduct a lot of things against your overall income. It just doesn't spe specifically carve out Social Security. Right. And I know we took some time on that 'cause unfortunately we only have about another minute and a half.
Um but I think it's well worth it 'cause that's the kind of stuff that really applies to almost all people over sixty five, right? Yeah, absolutely. I think a lot of our listeners, this will Greatly benefit you because that is a very common scenario, right? Where they're taking the standard deduction, we're giving more than 2,000, we're over 65. I mean, if you meet all those criteria and your income is below 150, which again is probably most people in retirement, you know, you get a deduction of 48,700.
I mean, that's really, really beneficial. It is. It is. Let me get to one more provision and then we'll probably have we probably won't have time for any more. It also has to do with charitable deductions.
And this one actually is potentially a little bit harmful, but it's only for high-income earners. But essentially what this is, is starting in 2026, so again, it doesn't start this year, is if you are itemizing deductions.
So this isn't that 2001 we just talked about.
So you're itemizing, you're taking your gifts that you're giving and you're doing it that is they will start reducing the amount that you're able to claim as an itemized deduction. You know, it's half of 1% of your adjusted gross income. I probably don't have time to get into an example of that.
So if you're in that situation, call us. We can walk you through how that works. And there could be some things we do. That's where QCDs start becoming, again, more attractive to take advantage of. Yeah, and again, the beautiful thing is they have an amazing video, right?
And that's why I want to remind you that the show is brought to you by CardinalGuide, CardinalGuide.com. And if you go to that, you know, seven worries tab, you're going to find the taxes. When you click on that, you're going to see this video on the new tax law. And, you know, I think it's 38 minutes long, so it's pretty detailed on a lot of the other littler provisions that are going to affect a lot of people, retirees and seniors. And so I highly recommend that, as well as all the notes and the backup information to show you how they arrived at these things, as well as Hans's book.
If you go to Cardinal Guide, you're going to find Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And of course, Just as Tom said, the contact Tom and Hans page. Very, very important. It's all there at cardinalguide.com. There's a lot of great stuff here.
Thank you, Tom. Yeah, thank you. God bless. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you.
Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word.
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