This is Andy Thomas from the Masculine Journey Podcast where we discover what it means to be a wholehearted man. Your chosen Truth Network Podcast is starting in just seconds. Enjoy it, share it, but most of all, thank you for listening and for choosing the Truth Podcast Network. Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now, let's get started with Finishing Well.
Well, welcome to Finishing Well. I'm certified financial planner, Hans Scheil, and today's show is 2024 tax planning. Now, that may sound dry to you, but let me just tell you that the simple answer that I learned from watching their video is this is so you can keep more of your money.
I mean, this is worth listening to, and oh, one of the things that I learned from watching this video, and I know you're going to get from listening to today's show, but as you do, you're going to find that when it comes to the 2024 taxes, there's a lot of brackets that are involved, and understanding these brackets will really help you keep more of your money. Well, it's interesting that my wife asked me a very good question the other day because I was telling her about, you know, our battle is not against flesh and blood. It's against spiritual forces in high places as talked about in Ephesians 6, and she goes, hold on right there, because what do you mean there's war in heaven? You know, I thought that heaven was going to be a place of peace. I just don't understand that at all, and I said, well, honey, there's different levels of heaven. As Paul described, and you want to go look in 2 Corinthians chapter 12, it says he was called up to third heaven. In other words, there's different brackets of heaven, and the good news is that if you are absent from your body, that you can be present with the Lord, meaning you go to the top bracket where there is perfect peace, and you have that which we think about as heaven, but underneath that there is a spiritual battle that's described in the book of Daniel.
You might recall it's definitely worth reading 7, 8, and 9 of Daniel to understand about this battle that's going on where angels are stopping things from happening. No, that battle is not in the upper level, you see, because it's all based on authority, and Jesus talked a lot about authority. And so when it comes to taxes, it's based on authority. It's the same kind of thing, and it's amazing to me in order to finish well, we really have to understand the authorities involved and what brackets we're dealing with, right, Hans?
Well, that's exactly right. We're not studying these in 2024 tax planning. Tom and I don't study these so that we can prepare people's tax returns properly for 2024. I mean, maybe a little bit, but we're tax planners. We're financial planners.
We're thinking about 2025, 2026, 2029, 2035, and the further we go out, the less accurate our predictions or whatever you want to call them if they're not really predictions, but they're calculations. But we're focused on what can we do now? What can you do now to affect your tax bill in the future? What moves can you make? And there's plenty. And then, as we were talking about last week in estate planning, then there's things you can do now and moves you can make to make your estate go to your beneficiaries in a more tax efficient or smaller taxes.
So there's all kinds of decisions and plannings and strategies that we can take. Yeah, most people don't do any of that. Most people just you know, collect their money, they do withholding at work, or if they're retired, they just do withholding that they do quarterly estimates based on last year. And then they just wait for April 15. For the surprise, how much do I owe?
Or how much do I get back? Yeah, that's a passive stance. And it's fine. I mean, it's just, but my sense is, if you're listening to the show, you're probably a little curious, like, what could I do to make my tax bill in the future less, like starting with 2025. And so that's kind of at the crux of our studying with this. And looking at this tax chart all the time. And I think what, you know, so we went over the tax brackets for ordinary income tax.
And we've been over those show after show after show. And when you go in the video, they're just up there in the upper left hand corner of the board. And what we were talking about today in the video is the capital gains, tax rates and qualified dividends.
Yeah, the capital gains rate can be as low as 0%. I mean, did you realize that before you watch this video? I was blown away.
I really was I had no idea that. Again, the illustration that you made of this person having this huge capital gain and yet paid no more income tax just blew my mind. And but it was a matter of understanding the bracket and planning that capital gain ahead of time.
Yeah, I mean, it's just so you got the 0% tax bracket for capital gains, or qualified dividends that you receive every quarter on stock that you own outside of an IRA, if you have stock, they're under the same lower capital gains tax rates. He had that tax rate is 0%. And for married filing jointly, it's from zero capital gain to $94,050. And for a single person, it's zero to $47,000. So, you know, does that mean if you had an $80,000 capital gain, you pay no income taxes?
Well, just hold your horses a little bit. Maybe the answer to that is maybe if you had no other income, other than this capital gain, and you had an $80,000 capital gain, you're and you're married, filing jointly, your tax rate would be 0% of that capital gain. But right, well, that has to happen first, is we've got to have your income on your ordinary income, like your Social Security, which is only a percentage taxable, and your pension and your interest and withdrawals from the IRA. So we got to come up with your tax bracket on the ordinary income tax side. And then we're going to add the capital gain on top of that. And Tom gave an example during the video that I'll let you talk about that for a second, Robbie.
Yeah, which I think is just beautiful. You know, you guys talk about Roth conversions all the time, you talk about living off your Social Security. So if you're living off your Roth IRA, and your Social Security, you have no income, essentially. But this couple, still, they had about a $30,000 income, and I might have been about $40,000 income, because what I remember is they had like $50,000 in both capital gains between selling some stock, and there was something else that they had done. But they added this $50,000 worth of capital gains, but they ended up paying no, like zippity income tax.
And I was like, oh, my goodness, how could this be possible? But then, you know, after I watched him do it all numerically, then you came back to the example. And again, you made it clear that the capital gains bracket is like 92 or 90, whatever it is, $93,000.
Yeah, 94. But yeah. And so since they were under it, you know, there was, as far as capital gain, you know, there was no tax. But again, it speaks to how important those Roth conversions are, and how important it is understanding that Social Security, if you don't have other income, is not taxed. Well, yeah, and so let's take somebody that realizes a $200,000 capital gain. I mean, let's just say you sold some real estate, some farmland that you owned, and maybe you, your parents, or when you inherited from your parents, or when you bought it, you paid $100,000 for it.
And you're now selling it for $300,000. And so you got a $200,000 capital gain. And so people are ready for most of that to be gone from taxes.
And it's not near as bad as they think it is. So if these are people that have like a $50,000 a year income, and a married couple, so we're going to take, you know, $50,000, they're going to have just regular income that they're going to pay their tax on that, which isn't a lot, but it's the tax on that. And then the $200,000 capital gain would be put on top of the $50,000 of income. So they're going to pay 0% on the part of that gain up to $94,000. And then 15% tax on the part from $94,000 to $583,000. So you know, probably going to pay about $27,000 a tax on this $200,000 capital gain.
Not too bad. Darrell Bock Yeah, that's the part that also takes a little thinking. But I'm so glad you guys illustrated it so well, is that the idea of these brackets are just because you jump up into the bracket doesn't mean that all that is taxed at that bracket. You got a freebie to the $94,000. And then after that, you get the other part. So when you combine them, it doesn't end up being that you're all taxed at that higher bracket.
David Morgan That's exactly right. Yeah. You know, if we can spread this gain over several years, we maybe can inch it in in the $94,000. I mean, the way you do that is you just do an owner financing. If you're selling this to your neighbor, farmer, and you know, somebody you trust, and maybe you haven't put some money down, and then he pays you over time with an interest rate, you're going to have to pay ordinary income tax on the interest. But the capital gain can be spread out over like five years if you finance it over five years, and then we can stay in under that $94,000 bracket. So there's a lot of ways to take advantage of this. I just want everybody to know that there's a 0% capital gains tax for somewhat smaller amounts.
Darrell Bock Yeah, that's that's amazing. But I had a question back a little earlier, you said something I did not know. So, which is not unusual. But anyway, you said that dividends like if you had stocks, and you had outside of an IRA, you had dividends, that those are counted as capital gains? Yeah, I mean, that's just, it's actually capital gains and qualified dividends. So they're both treated at the same tax rate. Okay, so let's go over to an example of that. Let's take this couple that has $50,000 of ordinary income, but then they own some stock that is paying, let's just say $10,000 a year in dividends, right?
And they collect those quarterly and they they get those dividends, their tax rate on the dividends are going to be 0%. Okay, well, we got this a great time to segue. This show is brought to you by Cardinal guide. And so you have questions like I do, then you go to cardinal guide.com. And you look for the contact Hans contact Tom page. And of course, go from there. And of course, there's a seven world of seven worries tabs and all these different worries.
One of them is taxes. And that's what's today's show is under amazing, amazing, some of the best show notes I've ever seen in my life are right there under this particular show that the video that they did on the same topic of the 2024 tax plan. Of course, Hans has booked the complete cardinal guide to planning for and living in retirement. So we're gonna be right back more right back with more of the 2024 tax planning 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, Hans Scheil. And today's show is 2024 tax planning, a way you can keep more of what you earn.
Hans? Yeah, well, you know, what I want to stress to people is when we're giving advice on financial planning, I mean, we're looking at this, we'd like to come in before you make the move before you do whatever you're going to do. And by that I mean, if you're going to sell a piece of property, if you own some land, and it's not have your own personal residence on it, you're going to have to pay taxes on the amount you gained on it over the years. And there's a smart way to do that. And there's the passive way, which is just sell the land, collect the money and find out how much the taxes. Yeah, I was just saying before we hung up there is you can spread, you can do a finance sale where the people pay for it over time, and then you recognize a little bit of the capital gain every year, you spread it out as long as you want. That's kind of a smart way to work the 0% tax rate on capital gains and qualified donors.
Now, where that applies to our clients is we're just looking at the future and we're figuring out when they're going to sell capital assets. So I want to move down to just talk about the standard deduction a little bit, because we kind of skip over that real quick. This was a new addition in the Tax Cuts and Jobs Act, starting in 2018. And so we've had this for now, the standard deduction at its current levels, has said for what about eight years, actually six years. So right now the married filing joint for a couple, both of them over 65, which is going to be my wife and me this year, $32,300 is what we get to put down as deductions. We can either do that or we can itemize our deductions.
And I do that because there's limits on things. Anyhow, and it sure is easy to do your tax return because you don't have to show them all the receipts. And charitable giving is affected by this because in charitable giving, you know, if you give $5,000 a year to the church, if you give $10,000 a year to the church, and you take the standard deduction, well, you're getting a deduction for these contributions, but it's just in the standard. It's just figured you're not getting a separate deduction unless you itemize. And that's why I'm such a big fan of QCDs, qualified charitable distributions, if you're over 70 and a half, because with them, you can take the standard deduction, and then you can just give your $5,000 or $10,000 a year to the church.
You can give that through a QCD, and then you're effectively getting a deduction for the church. You're effectively getting a deduction because you're not paying tax on that money coming out of your IRA. For a married couple under 65, $29,200. And for single people, if you're over 65, $16,550 is what you get to take for deductions.
And for a single person under 65, $14,600. This has helped a lot of people simplify their taxes filing, and it also has just brought a lot of people down to either very low tax or no tax, because your Social Security isn't fully taxed, and you have people that have an income in the $40,000, $50,000, $60,000, $70,000 department. By the time they take off this $32,000, they're not paying much federal tax.
Right. And to me, that all speaks to the importance of this being a 2024 plan, is that in 2025, unless something radical happens in the law, we're going to lose this giant standard deduction. We're going back to the way that it was before the tax cuts happened. And so this is a great year to take advantage of the all these different brackets and QCDs and, you know, Roth conversions and all that stuff, right?
Well, it definitely is. And it's actually 2026 that it's changing. So you got two more, you got this year, and you got next year, where you can pretty much count on being able to take this amount. And then in 2026, unless they change the law, which they could do, this is going to revert back to the way it was before 2018. So take advantage of this while you can. And understand, it's probably going to change in 2026. And it's going to revert back.
And we'll have a bunch of new rules to learn. Now, I want to talk a little bit about trust tax rates. And you say, Well, why are you talking about trust tax rates? Because it affects some of our clients, especially the people that have special needs. They have a special needs trust, which they've set up to look after their adult child beyond their lifetimes.
Okay, and I, you know, I have a case study that I'm working with right now. And these are people behind the forgetting study, and they have a special needs trust. And most of their money is still in an IRA.
Now, fortunately, we've been able to convert a good amount. But the lion's share of their money is still in a pre tax IRA. And so I was just showing him, this is how trust tax rate so if they die, they pass the money into the trust.
Both of them have to be gone. And then the IRA money goes in there. The 10% bracket stops on a trust at $3100. The 24% bracket stops at 11,000. The 35% brackets at 15,000 a year, and 37% is at 15,200.
So over 15,200. So when I showed these to this gentleman, he is a CFP PA himself, retired now. And he did, but he was just shocked. He says that's the kind of tax rate that the special needs trust is going to pay. You know, so the moral of the story is that trust tax rates have very slim brackets.
And they're much higher. And it's just the theory behind this is that from the government standpoint is rich people have trust. And we're not going to let them get away with taxes evasion by sticking all their money in the trust. So we're going to make trust tax taxes higher, or at least equal, but we're going to make them higher than they are on just ordinary people.
And so have I got your attention now? Yeah, well, it's a difficult thing, right? But those special needs trusts are critical, you know, having worked with special needs families. I mean, that's a really hard situation. And it seems like somebody ought to lobby or do something about it.
But nonetheless, you still got to do it, right? Well, yeah, I mean, we're just so what the special needs trust is for is, we've got to protect the government benefits that his son has, there's a whole bunch of government benefits that he gets that he's getting now, even though his parents are very well off. He gets all those, he's especially going to need those after they're gone. And so the law has been made in such a way that you can stuff the money in the special needs trust. And it's there for his benefit, but it doesn't count against him for the government benefits.
So you can stay on the government benefits. And then you can dole money out to him, you don't actually give the money to him, you have to pay for things directly, the trustee does, like his housing, his entertainment, his travel to see family, gifts, I mean, there's a whole way to properly way to properly spend this money. And this father and mother are most concerned about, he's lived in nice homes, his whole life, I mean, because he's with them. And they want him to continue there, where they come from down in Texas, and they've moved to North Carolina. But where they come from, there's in Dallas, there's some very big, like schools or places that he could go and they could pay, you know, like a lot of money, like four or $5,000 a month, six, seven $8,000 a month, like an assisted living for special needs kids. That's a really nice place. And I'm sure they have those around here.
They just haven't found them yet. Yeah, we don't have the need for this right away. But he wants to make sure after both of them are gone, that his son is able to live in a place that is expensive. And this can all be set up. In fact, we're setting it up for him. The fly in the ointment is that he just realized that this trust is going to pay a bunch of taxes if it receives IRA money.
So we've I mean, when you just look at these rates, they were just shocking to him. And so what we're going to do is we're going to purchase a sizable life insurance policy on him. He's still a select or a preferred rate class, because he's in good shape, doesn't have any chronic conditions.
His wife does have some difficult things. Now, if she was in real good health as well, we would be putting them on a second to die or a survivorship policy. But we can get a better deal, just put it on him, and then make it the beneficiary of the special needs trust, because the the trust is going to receive the life insurance money when he dies tax free. But since the trust is getting this money, essentially, since it's coming to life insurance, it's not taxable, then it doesn't fall under that income bracket, right? Well, it doesn't, but it's going to earn interest over the years that it's paying. So it's still going to pay some pretty significant tax on the interest that it earns. Right.
And I'm sure many of you listening like me are thinking, gee, that's a little more than my brain can handle. So I know that I need to know it's cardinalguide.com. And if you go to cardinalguide.com, that's cardinalguide.com, you can contact Hans, right? And Tom, with your special situation, whatever that may be, and they can think through these strategies and do some serious planning, you know, again, as we have time with the current tax brackets, and you can kind of see how important these brackets are, you know, certainly our prayer that you can finish well with those, you go to cardinalguide.com. And there, you're going to see the seven worries tab again, today's show is taxes. And so it's going to be under that one. And amazing show notes. So they did such a good job of showing these brackets showing how this works.
If you want more information on that, just again, go to the cardinalguide.com, look at the seven worries tab under taxes. And then you're going to see a video that they did on the same thing with all sorts of illustrations, absolutely beautiful stuff, as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And so great show, Hans. Yeah, thank you very much. And God bless you.
Thank 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, 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 Whale is designed to provide accurate and authoritative information with regard to the subject covered. 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. We hope you enjoyed Finishing Whale 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 Hans' 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 Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.
