This is the Truth Network. Yeah. 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 Hans Scheil and Today's show Great news, we got the 2026 federal income tax brackets and rates. And before you jump out and think that doesn't bother me, well, just listen to what I'm going to share with you. You know, in Matthew 13, Jesus describes what he called the parable of those four soils. You may be familiar with it.
And in those soils, as he began the parable, he said, if you're going to understand parables, you need to understand this one. Because it has to do with sewing. and sowing specifically the word of God as he explains what that is. But it begins by saying, A sower went out to sow, and as he sowed, some seed fell by the wayside, and the birds came and devoured them. And the point of that is, if you think about the wayside, it's actually sort of the path, or it might be a road.
And the challenge with those is they get ruts in them as they get traveled on time and time and time again. And unfortunately, certainly with our money, we go down the same road or we get in the habit of doing things a certain way. We do our taxes a certain way, and we look at things a certain way. And when you do that, um you get hardened to any idea of doing things differently. And so as we begin to sow the seeds of finishing well here today or talk about new ideas that could these seeds could grow up and be fruitful for you and bear some fruit you have not been enjoying.
But in order to do that, you got to plow that ground a little bit and say, wow, there might be a better way here if we could sow some seeds.
So as we look at these tax brackets in a new light today and also the standard deductions, some other things you may not have thought about so much because you didn't think about taxes, I hope you can glean things that would help your finances be more fruitful, Hans.
Well, you know, if you're sixty-five and over, Taxes are different. Much different. than they were when you were under 65. And I've used that as a title on Some of my videos.
Some of my blog posts, radio shows, and boy, I've had some people write in, no, they're not, they're exactly the same. And you know, there's the same rates, the same brackets and There's some truth in that, but I'm just talking about bottom line, is if you were under 65. The way you did your taxes, the amount of taxes that you're paying. It's different. Much different.
Than the over 65. And so if you get that out of this today's show, I'm going to prove that.
So, and what today's show is about is we just got the 2026 brackets they were just announced. Yeah. It's really nothing more than an inflationary increase. They don't need to pass a new law. Two.
uh increase the things by about 3%.
Something like that, 4%. I I never did uh calculate the exact percentage, but the new numbers are out. The rates are exactly the same. You got a 10% bracket, you got a 12% bracket. 22, 24.
thirty two, thirty five and thirty seven. And so the first thing I want you to get is when you were coming up to 65, maybe you're in that situation now. You're working. You're getting a paycheck. They withhold the taxes out of your paycheck.
And then if you have investments, you maybe have to file quarterlies. You're going to have substantial investments if you're doing that. Um But most people just take a very passive approach. They never even know what these rates are. Or they kind of hear about 'em, but You know, the way they look at it is they They're held out of their check.
They don't really have much control over it.
So why worry about it? And then at the end of the year, You get your pasto or you get your W-2. Uh in the mail and then you then file your tax return and you either get a refund or you owe money. Yeah. Um that's the way people are.
Now when you're retired It's a different ball game because Now you're going to have Social Security. If you don't have it right at 65, you're going to have it at some point. You got your Social Security check. If you're fortunate enough to have a pension, you got that. Um But a lot of folks don't have that.
And then If what a lot of folks have instead is a big IRA account. And you know, big is relative to each person, but they have a what looks very large to them. Um a big hunk of money and they've never paid tax on that money. And people are reluctant to spend any of it until they have to. simply because They don't want to pay the taxes.
And as simply also because They don't want to run out of money when they get to be 80 or 90 years old, so they just don't touch it as long as they can possibly wait. And I'm going to flip all that on side. First I'm going to tell you is A lot of people aren't fortunate enough to delay taking money out of there because they need it to go with their Social Security to live.
Okay, and if that's you Then I want you to still listen to the show and the taxes, but if we've got to take out twenty thousand dollars out of your IRA every year from now on for your 401k whichever one, we got to pull that out for you to live. Um Then it's just necessary, and that's what it's for.
Well, then maybe this doesn't apply to you as much as the rest of the folks. But I run into a lot of people that are just taking they're in their 60s And they're taking nothing out of their 401k. and they're getting by on their Social Security. and whatever savings they have. trying to postpone taking a dime out of there.
And that could possibly not be the right tax strategy. Are you with me so far? Absolutely. Absolutely. And and again, that that idea of Uh You know, if you Begin to look at all that money as this opportunity to.
you know, sew into things and w and all the things that you originally you know, wanted to save it for, it seems like it's hard to begin to spend it because you're thinking that the you know, I may need that. But again, it's all part of a a plan and and sowing those new seeds. Yeah. So I'm not expecting my clients, my viewers, listeners too. You know, memorize these tables or anything, or even to study them for that long, but I want them to understand.
that we do And when you come to us for planning, some of our thinking, I mean, Tom and I both have these pasted up on our. thing at our desk so we can just look at them.
So, when we're talking to somebody, it's kind of like once you're retired and you've got this situation where you got this big bucket of money in a 401k IRA. you you've got an opportunity every year to choose How much of that do you want to pull out of there and pay the taxes? You can choose your tax rate and choose your tax bracket.
So, and where that's especially important is rates are as low. As I've ever seen them, you know, is the top of the 24% tax. bracket or where you can use the 24% rate for a married couple is 403,000. in 2026. You know, the top of the 22% bracket is 211,000.
The top of the twelve percent bracket is one hundred thousand.
So you say, well, why does that matter to me? I mean, you're just telling me something about it. They're going to calculate the tax.
Well, it matters if you've got... a $900,000 IRA over here that you're not touching. You're just getting by on your Social Security and whatever else you have. It it matters because You're going to have to pay tax on this $900,000 in this IRA sooner or later. Either you're going to have to pay the tax.
or your heirs are going to pay it. in a big large way or your surviving spouse.
Somebody's going to pay the tax. And if it's growing and growing and growing and not touched, those taxes are going to grow and grow and grow and grow. And we don't know what tax rates are going to be in the future.
So My point is. You can every year we sit down with a number of our clients and we decide, okay. How much Roth conversion do we want to do? or how much money do we want to pull out of the IRA and pay the taxes and just spend and enjoy it. I mean, you don't have to put it in a raw conversion.
I'm just saying that recognizing the taxes. at a rate which you choose along with our help. makes a lot more sense than just sitting back and making taxes be whatever they are. Exactly. Yeah.
Have to Look at the you know, I love the way you do this 'cause it it For me, I you know, for years and years and years, all I did was just simply You know, saw what they took out of my check and then hoped I'd get a big refund. But you know, now that you're beginning to look at all of your money and when you where you could possibly save money in the long run, it's a completely different look at it rather than just what does it affect me this year, it's really a long-term view, right? Yeah, so let's take a look at a you know a single guy. An example. These his income, you know, he's got his Social Security.
And he took it at 66 in eight months, or whatever. And so he's got his 3,000 a month. And then he takes out of his IRA. enough to get him up to about 90 grand a year. Yeah.
Um The problem is this guy's got like two and a half million. in a four hundred one K or a various number of them because he's done quite well. Even though he didn't really make that much more than he's living off of right now.
So he's used to living at that. He's single, he doesn't have any children, he doesn't really have anybody to leave it to. Yeah. You know, we got Mm-hmm. We kind of drilled down with this fella, and it's like, well, what's this money for, and who is it for?
Um You know, if it's not you, then it's got to be for somebody else, or it's got to be for God. And so the nice thing is, I've gotten him onto QCDs. He's not quite at the QCD level yet, but of this large, he's going to start giving away substantial. Money to the church. Um Like next year, and we're going to get on a plan with that.
And that doesn't enter into the tax brackets anywhere.
So that's accomplishing our objective of getting that. taxable IRA balance down and yet He's not having to actually pay the tax because he's given it away. But I also got out of him that he'd like to spend some more money than he's spending and enjoy. He guy's worked hard all his life. And saved it all in an IRA.
He'd also like to pull out some money and gift it to his nieces and nephews. This would be actually a really good time to remind you that this show is brought to you by Cardinal Guide. CardinalGuide.com. And where you go to CardinalGuide.com, you're going to see the seven worries tabs. And in those seven worry tabs, one of those is taxes, which we're talking about today.
And you can find a wonderful YouTube video that's there that has a board and charts and show notes to show you all this stuff so you can see the numbers on paper, so to speak. And if you go to cardinalguy.com, you will also find Hans' book, The Complete Cardinal Guide to Planning Foreign Living in Retirement, as well as the contact Hans's. Hans and Tom Page. If you're looking at your own taxes and you want to get another view on this, they would love to consult with you on that. And it's all there at cardinalguide.com.
We'll be right back with a whole lot more on these 2026 federal income tax. brackets and rates. 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. Welcome back to Finishing Well, a certified financial planner Hans Scheil, and today's show. 2026 federal income tax. brackets and rates.
And when we left our example of We've got a little more to talk about. Yeah, so this this fellow He You know, he's just he he's been pulling off something which is paying about I don't know, about fourteen percent federal tax, and he lives in Texas, so He he doesn't have any state income tax. And he he kind of feels like he's getting away with something that he's living on about the take-home pay that he had before he was 65, before he was retired 'cause he you know, he had a nice salary and But they take a lot out of that salary: taxes, state taxes, income taxes, federal income taxes. unemployment Social Security, 401k contribution of which he was very C so so he really didn't end up keeping a lot of his money. And now he's in retirement.
Yeah, and he doesn't have to contribute to all that stuff anymore. And he's just kind of arrived at about 90 grand a year. and he pays very little taxes. I mean he was so proud of that. And he gets in touch with me.
I mean, we're talking about five, six, seven grand a year. is all he was paying. On what before he he had felt like he was paying half his paycheck. Yeah. So we dissected that and we said that, you know, that may be a really good accomplishment to just be paying five grand in taxes.
based on this $90,000 income. But once I explained that he's leaving money on the table, Every year. And like when 2025 is over with, if he doesn't take advantage of a Roth conversion or just making an extra withdrawal. and paying taxes at this 22% rate. That opera it's gone.
I mean, we got in a new year, so every year that passes where you don't take advantage. of these low tax rates and low-ish brackets. is a year you won't have. We've got this fellow on a conversion plan. of about $100,000 a year.
And then as soon as he gets to Um 70 and a half He's going to start giving away a substantial amount in a QCD every year. And that doesn't enter into these numbers up and down the bracket. It's just going to be. Um it's just going to be uh Taken off, it's not going to show up anywhere because the charity does not pay tax, the church doesn't pay tax. And he doesn't pay any income taxes on the money coming out of the IRA.
So, a combination of those two things. is really what he got out of this tax bracket lesson. That's awesome. Absolutely. Yeah.
So now let's talk a little bit about the standard deduction and the changes. That You know, I'm showing these as 2026 changes. But the reality is this is under that one big beautiful bill. Passed in July. Which really wasn't a tax cut.
It was just an extension. Of that. Tax cut, which is the Tax Cut and Jobs Act, is that was supposed to expire at the end of this year. But in any case, We'll just go right to the single fellow that I was talking about. Because His standard deduction is sixteen thousand one hundred dollars.
just for being a single person with one person on the return. And then add to that $2,100 of deduction for being $65 plus.
So it's up 18,200. And then Um If his income was less than 75,000, he would get an additional $6,000.
So In his case, He was already over the 90,000, over it by, you know, at 90,000, he was 15,000 over. Um but he was thinking about lowering his income. just so he could take advantage of this. $6,000 standard deduction. And I'm saying your thinking is backwards.
I mean it just the six extra six grand that you're going to get is only worth twelve percent of that to you.
So it's it's only worth about 700 bucks. um seven hundred and fifty bucks or something because At 75,000. or less of income Which you have to have to get that extra senior deduction of six grand. You. You know, you're just giving up so much on the Roth conversion.
And once he went through that, But in any case, he's going to have $18,200 of standard deduction. off of that ninety thousand dollars that he's taken in right now.
So his taxable income is going to be down to $71,000. And that's where we go find him in the bracket. Most of his Income is going to be taxed at 10% and 12% and just a small amount at 22%. Make sense? Oh yeah, and I I think that's A lot of people misunderstand the standard deduction.
Um, just based on you know, a lot of people uh donate money to the Jesus Labor Love are You know Charity for single moms, widows and families in crisis, or they donate a car and they think. Gee, I need to keep I need to make sure that I got a recede and all this because I'm gonna file this on my taxes. When they increase the standard deduction to such huge amounts. All of a sudden, charitable deductions had a different look on it altogether, right? Because you'd have to.
Have a ton of charitable contributions, et cetera, et cetera, and all your other tax-deductible items to overcome the standard deduction since they're so big. And so this standard deduction number becomes huge in understanding the taxes that you're going to pay. You know, it changes so many things of the way that we used to do taxes. But also in in Now From what I understand, they're adding something next year when you talk about 2026 for charities to start to give that back as well.
Well, there is.
So if you're claiming the standard deduction. Which This fella is. I mean he does he's not itemizing deductions.
So he's going to take. an $18,200 Deduction just without having to prove anything. I mean, you just get that for. being alive and being sixty five on over and being single. Um He's not itemizing his deduction, but yet next year, 2026 and beyond.
They're going to add a $2,000 Uh deduction for charity In addition to the standard deduction.
So he's going to be able to give away $2,000. or if he's already giving money, he can take two thousand of it And it essentially adds to this standard deduction. It's a deductible expense. That's separate from the standard deduction. And the reason they did this is a lot of charities have reported.
a reduced giving. Simply because once people figure this out, well, I'm not getting any tax deduction that I'm not already getting, so I guess I'll give less or I won't give any at all. At least that's their theory. And so that was thrown back in there so that some giving up to $2,000 is going to be a credit there for the taxpayer. Um And you're right, Robbie.
Most people don't understand this. And then when you throw in this change in 2026, that's going to get them even further confused because now they're going to be back They need that receipt from you. All right. Because $2,000 of it, if they didn't give anything else separately, is deductible. Yeah, and then there's a lot of folks when you explain that, they go.
Oh, I'm going to get $2,000 back on my taxes. No. No. You're going to get your gross income reduced by $2,000. Your tax rate is it goes back to those brackets that you were talking about again.
It's just like the guy I was telling you: is this $6,000 deduction? Just for being over sixty five And having a single person income of 75 care lessons. He's going ka-ching, kaching. You know, I was kind of doing that when I'm reading the new tax law until I got down to the part of the $75,000 maximum. For a couple, it's $150,000.
Um But Uh in any case When I did that backwards for him, I said, okay, so let's see what this $6,000 extra senior deduction is worth to you. He's in the 12% bracket. it's worth like 700 bucks. Right. And once I showed that to them, That's how much tax you'll save.
It's not nothing, but if it's not enough and give up on a tax planning strategy that involves Roth conversions. Because his heirs Whoever he leaves this to Or he himself, once he gets to uh minimum distributions RMDs at 73 And higher He's just going to be forced he's going to be forced into these higher brackets. And he's not going to be happy.
So, what we're doing is working on a plan for that. Let's jump over to the married. filing jointly. standard deduction as well. We got The standard deduction for a married filing jointly is 32,200.
in 2026. Okay. And then if you're 65 and over, And there's two of you, 65 and over. You add $3,200. $1,600 a piece.
So now you're up at 35,400. is your standard deduction married couple over sixty five, both of them. And then that extra deduction is worth It's $12,000, $6,000 of deduction for each of you. or twelve thousand now to qualify for that Your adjusted gross income needs to be one hundred fifty thousand or less.
So Um But that, you know, that picks up a lot of people.
So if you qualify for that. you know, say your income is $140. I mean, you've got 35,400 plus 12,000. You've got 47,400. of deductions without proving a single thing.
Wow. Pretty amazing. Yeah, absolutely. Absolutely. Yeah.
I mean under a hundred grand. And Yeah, and so, and again, I think that Tom brings this out in the video. I'm going to take a few seconds and explain it. When you go over these brackets after they've adjusted your income, It's not like, wow, I just went.
Now, everything's going to be taxed at the higher rate. No, you still get the first, what is it, $12,000 at 10% and whatever. And so it's worth the effort to actually do the math to see what actually is happening. And from my standpoint, all the more reason to go to CardinalGuy.com. Go to CardinalGuy.com and get the contact Hans and Tom page because Tom will gladly.
Put your numbers in his 1040 spreadsheet that he has and show you, well, here is the actual result of us making this move. And it's sometimes really shocking of what it may be compared to what you might think it might be. And so that contact Hans and Tom Page at cardinalguide.com is huge, as well as, of course, the seven worries tabs that we always talk about with today's being taxes. And again, the video that they did on this is absolutely wonderful. Got a board you can look at, show notes on all those things, as well as, of course, Hans's book and workbook, The Complete Cardinal Guide to Planning for and Living in Retirement.
Great show, Hans. Thanks. Thank you, and God bless you. 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. 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.
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