Optimizing Your Tax Strategy Video from Savant Wealth Management

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Good afternoon. Welcome to Savant’s webinar series.  we love doing these webinars to talk about various financial planning topics. My name is Joel Cundick. I’m a certified financial planner, financial adviser in Savant’s Vienna, Virginia office. Thrilled to be with you today  about a very exciting topic, but a very timely topic. This is the time of year to be thinking about taxes, whether you think it is or not. Everybody thinks they should be thinking about taxes February, March, April, and then shelving it, not thinking about it at all after that until it’s next tax season. The problem is that’s not when you strategize. That’s when you report. All right, we’re in the strategizing season right now and I’m glad we can be talking as a result. Okay.  we’re going to be covering a broad range of topics today. There’s generally going to be two main topics.  well, one focusing on those who are salaried employees and the second sections covering those who are self-employed or business owners. We’ll also add a section at the end just because the new tax act is so recent. think it’s important that we cover that as well. So, we will talk about new tax law changes which I think is very timely for most of the people on this call. Many of us may not even know what those provisions are yet.  So, we’ll cover those various topics. If you have a question, please post it into the Q&A box.  we’re going to get to them as we can. I can tell you I’ve got a lot to cover today, but I’m going to try and leave as much time as I can for questions. If you don’t get your question answered and you put and you put it in the Q&A box with your name associated with it, we’re going to get back to you. We’re going to make sure somebody gets an answer to you.  If you post it anonymous, we can’t really know who you are.  so there’s only so much we can do there. Also though, if you feel at the end of the webinar that there was something that was missing that, oh, I wish I had posted this in the Q&A box. You’ll get a survey. In that survey, which I’d encourage you to fill out, please. We really are looking for feedback. We want to make sure that these are as relevant and useful as they can be in that survey. Just type in the question that you have and we’ll get back to you that way as well. So, lots of different ways that we want to make sure people get answers to their questions. Our goal in this webinar series is not to present a sales presentation. It’s to present content. And I hope that you find that to be true today. We’re going to really go through topics that are hopefully relevant to your situation. There’s going to be, you know, different lenses we’re looking at. So, not all of it is going to be relevant to everyone. Hang tight and we’ll make sure we cover what is on your mind, I hope. All right. So, the first thing we need to do as salaried employees is to remember that our income is largely baked at the beginning of the year in most cases, right? We know what our salary is going to be.  in many cases, similar to what it was last year when we’ve had a job change, it may not be similar. All right? So, when we have a job change, we’re going to want to watch special things like, have I max-funded my 401k and my old job, and am I now being given the opportunity to defer into a new 401k? Keep in mind, you can’t double dip. You have to have only maximized one 401k or if you limited your contributions in your last 401k, you can make the remaining contributions to the end of the year for the new one. But those are the kinds of things we’re worried about as salaried employees. Another thing to watch out for as a salaried employee, you’re going to defer into social security taxes at your first employer. You’re going to get your new employer, if you change jobs in the year, they’re also going to have to withhold social security taxes. Now, you may be in a situation where you max out the social security withholdings.  you’re going to get a big tax refund, but there’s no way to avoid that in the current year. All right? So, there’s some things when we cross jobs during the year we have to be mindful about, but I’d encourage you to look at your paystub at this time of year. Take a look at your year-to- date income and the taxes that you have withheld. Compare that against the percentage that you withheld last year. Maybe something substantial changed and you didn’t account for it. Maybe somehow your tax withholdings got reset. The way you’re going to track that is you’re going to look at your total dollars withheld for federal and state if you have them. Divide that by your total income for the year. And then pull up your tax return for last year. Take a look at the total dollars you paid for federal taxes. Divide by your total income. Total state taxes divide by total income. If those are lining up pretty well, you’re probably in good shape, unless there’s been some major life changes this year, which we will talk about in a little bit. All right? But we want to avoid surprises. The best way to avoid surprises is to think about what’s surprising happened this year. All right? Did I sell a home? Did I sell a large piece of stock that I inherited from someone?  Did I make a large withdrawal from an IRA that was unexpected because I was trying to buy a house? These are the kinds of things that can change our tax situation. Did I decide to become a day a day stock trader, right? and end up with all kinds of buys and sells this year. That that would be new. There’s going to be tax implications there. Did I start a contracting business? Did I withhold taxes properly there, right? If I have a side job in addition to my full-time job, sometimes it’s hard to remember that that side job may not necessarily withhold taxes. And so, you think of all that money is yours. And then you get to the end of the year and you get a surprise of, wait, I earned $10,000 from a side job. No taxes were withheld. and now I’m going to owe 20% federal tax and maybe 5% state tax, which is be a $2,500 tax bill that was unaccounted for. If we think about it now, there’s things we can do to set aside funds because we still have six months until taxes are due. All right? So, or at least depending on when you file and when you’re extending to, we have some time until taxes are due.  we want to make an adjustment to our W4 potentially. And the way we’re going to evaluate that is we can go actually the IRS website. You can see at the bottom there in this source   the tax withholding estimator site. You can navigate to that website and you can enter all of your tax information of what you estimate your numbers to be for the year. So, I know a lot of times people feel like, man, the tax software doesn’t come out until January, February of the next year. I wish I could plug in some numbers now. You can go into your tax withholding estimator  on the IRS website and you can come up with a relatively good idea of what taxes might be whether you’re lined up to get a large refund in which case you might want to take down your withholdings for the rest of the year so you’re not giving all this extra money to the government to have  or in case you need to increase your withholdings. many cases you are  your tax preparer is going to want to set you up as something called save harbored which means you withhold a certain percentage relative to last year’s taxes. Your tax preparer is not typically going to care if you owe extra dollars on taxes at year end. They’re just going to want to make sure that you don’t owe penalties. Penalties happen when you’re under withheld relative to what you should have had set aside. And you may not feel the same way about that. I know I’ve talked to many people who kind of feel like, well, that’s all well and good, but I’d like to know well in advance if I’m going to owe extra even if I’m not going to owe penalties. So, if you work with a preparer, great time of year to reach out to the preparer to have them do this for you. If you don’t, you work do it on your own. Use the tax withholding estimator on the IRS website. All right. Coming out of that, you may decide, I need to make some adjustments to my W4. You can do that. You can go to your employer website largely is where you’re going to handle this in your payroll screen tab, whatever that is on your employer site, and you can input updates to what your W4 should say. Important updates. Well, if you have a new child, right, that’s going to affect things. And you can have that child born all the way up until December 31st, and they count as a full year for this year. For those of you who really want to tax plan your children, you can if you’re going to have a marriage, right, that is significantly going to change your tax situation. You’d want to make a change there on your W4 as soon as possible. If you’re going to buy or sell a home, and there’s going to be major implications for you from a tax perspective. The buy side, it’s probably because you’re going to have a mortgage and that’s going to give you a very large, itemized deduction that you may not have had in the past. On the sell side, it could be because you realized a gain from selling that home. There’s sometimes things you can do to mitigate gains, particularly if that home was rental property. You want to make sure well in advance of selling a rental property that you’ve talked to a tax expert because you may be able to roll those gains into a new rental property. All right? There’s ways of exchanging property so that you can embed those gains in the new property and not have to pay taxes. All things that you need to think about in advance. You don’t want to be doing this at tax time next year. Oh, I wonder if there’s something I could have done there. All right, the next thing we’re going to want to do is revisit tax deductions and credits. So, we want to know what is there available to me. We want to account for our life changes. We said maybe you have a child tax credit. Maybe you started   dependent care expenses this year and you could be eligible for a dependent care credit. These are things that are big life changes and are going to change your tax situation and so you want to make sure you accounted for it. Now, we’ve got a couple places, right? If we have a child, the child number one is going to change our tax status because we’re going to get a credit for the child and potentially if we’re paying for dependent care for that child, we’re going to have another credit there on our taxes. So, there can be a big impact. If you don’t mind over withholding to the IRS and just getting a big refund back next year, fine. No, no, no, no, no criticism here. There’s a number of advisers out there that say, “No, you’d never want to do that. That’s awful.” And, you know, I’ve worked with clients for a number of years. I understand that some people just like getting that refund. Why? Well, because it’s a large lump sum of money that they wouldn’t have had otherwise. They just kind of embedded it through their tax return and they can do one large a one-time thing with that, like a home improvement or something like that. I is that costing you a little bit by giving the money to the government to accrue interest in yourself? Perhaps. But I know some people who say, “Well, but if it were in my bank account, it would be spent.” So, I I’m not going to judge on that respect, but I do want to make sure we’re accounting for the life changes and if we’re going to get a large refund next year from the government, it’s expected. Okay. We want to track our itemized deductions. Now, the tax cuts and jobs act that has been superseded by OB, but in essence extended by OB means that the standard deductions in this country are much larger than they used to be. All right? So many of us no longer itemize, but we do want to kind of see am I have I got large charitable donations that I make? Do I have home mortgage interest that I’m paying for the first time? Oftentimes, right? And we’re looking at changes from last year. State and local taxes. You’re going to see a slide later on today that’s going to talk about some big changes with state lo local taxes that may impact your tax situation. And the other one that we don’t put up here, it’s pretty uncommon is but what if you have large medical expenses? And I mean medical expenses that exceed 7 and a half% of your income. So, they have to be pretty big. But if they do, if you have if you put a parent into long-term care and you’re providing for them and they’re depending on you, right? Or a spouse in a long-term care facility, there can be or or care coming into the home. There could be extended amounts that are available to reduce your taxes. All right? And as I said before, let’s just see what are the surprises. Did I sell a business? Did I sell a house? Did I sell a big investment? Did I get a large onetime bonus? Am I a salesperson who had a shoot the lights out year? These are all reasons to take a look at your taxes now and not wait until later on. Okay, we want to maximize all tax advantage strategies available to us. And what do I mean this? We’re trying to income shift. Many people think of like retirement accounts as this ideal way to save for retirement, the only way to save for retirement. Really the number one reason to my mind why you fund a retirement account is to shift income out of the current year into a future year. At least if you’re doing the tax deferred version, the traditional version. If we’re doing Roth, then we’re getting taxes in this year. And that’s a scope topic for outside the scope of discussion here. Definitely go to our website and check out our Roth versus traditional conversations to see which one of those you should go with. But if I’m trying to knock income out of this year into a future year, the best vehicle I have for doing that is putting money into a retirement account. All right, I can take money out of this year, not be subject to taxation, push it out to a future year.  So, 401ks, IAS, SE IAS, these are all different vehicles.  403bs, the TSP if you’re here in the DC area and a federal employee, these are all ways of shifting income out of this year. Okay. Then we also want to look at HSAs and FSAs. Hopefully you’ve heard of those at this point. A flex spending account is a use it or lose it plan. You have to take all that you decide at the beginning of the year how much you want to set aside into the plan and over the course of the year you need to use all those funds. I think you get three months after the end of the year within which to use them. So, a total of 15 months. If you don’t use the funds, you lose them. So don’t put more into the flex spending account than you’re planning on actually using. The superior account in many ways is the health savings account because this account is money that you are setting aside just like a flex spending account for medical care. However, you get to accumulate it. If you do not use it by the end of the year, that’s okay. You can accumulate additional funds in there. Both vehicles get income out of this year potentially into the f future year or potentially never tax, right? And I have, if we want to look at extra credit here, I have some clients who choose, man, a health savings account is the best way for me to save for retirement actually because I put the money in  pre-tax and I get to take the money out tax-free and I get to grow it tax free. That’s kind of the trifecta of investment savings. So that’s a way to maybe, you know, pay health care expenses out of pocket and max fund that HSA for the future. But at minimum, let’s make sure that what other health expenses we have, we’re funding into that HSA or FSA because then we’re getting a tax deduction even though we do not exceed 7 and a half% of our income. If we want to itemize, we have to exceed 7 and a half% of our income. Let’s shift over here a little bit to business owners who have a very different tax status. In many ways, more important to be checking taxes in the fall and winter. All right; we do not want to be waiting until April to be evaluating our taxes as a business owner. So, let’s take a look at what estimated payments we’ve made year to date. All right, let’s look at what our profit and loss is so far this year, and let’s look at what we thought our profit and loss was going to be. If we’re having a very good year relative to past years, maybe we need to adjust our estimated payments upward if we want to make sure that we are not going to owe dollars. Largely as a business owner, you’re going to be safe harboring with your accountant and so you’re not going to owe penalties. But if you want to make sure you don’t owe dollars next April, you might need to up your estimated payments now if you’ve had an unusually good year. Maybe we have the opposite though. Maybe you’ve had an unusually poor year. We’re looking for any way we can to preserve money and cash, right? And we’ve got one more required estimated payment in 2025. It actually occurs in January 2026, but we want to look at, hey, do I have to make that payment? If my income has been enough lower than it was last year, maybe I can forego that fourth quarter payment. Definitely something to talk to your tax preparer about. That’s something that could be very helpful. We want to track all our income. This applies to those who are business owners, self-employed, or working for other companies. You just want to make sure if you’re getting side money, right, that you’re recording all that income. This is going to come up in an audit. Otherwise, you want to make sure if you got some kind of side gig, track the income and make sure you pay taxes on it. All right. Then we want to look at our business deductions. If we’re business owners, what can we take advantage of? One is to just make sure that we’ve properly tracked all of our expenses. I can’t tell you the number of times that a business owner has been looking to do things right but just has not properly tracked all their expenses for the year. They’re not disciplined enough with making all their expenses on their company card. They blend different cards. They don’t enter into their accounting software, all of the expenses properly. This is a little push to remind you to make sure you get that in order. And don’t wait until next year. The farther you get removed from when the actual expense happened, the more difficult it is to remember what was actually done and the more you’re hunting through credit card statements and checkbooks trying to track what might have actually happened. So, organize your digital records. Make sure you’re using good accounting software for that. There’s the accounting software is going to pay for itself generally. All right? And making sure that you are properly tracking all expenses throughout the year. We want to plan capital expenditure. So, we’ve got extra money. Okay? Because our business has done very well this year. We got a lot of cash. Well, maybe we can look at purchasing major equipment at this time of year or taking advantage of section 179 bon depreciation, bonus depreciation, right? To take assets that otherwise might have to be depreciated over multiple years and depreciate them all in the current tax year to get a tax-saving result from a very high-income year. All right. We also want to make sure you’re tracking all other deductions. Are you using the home office deduction properly? This goes both ways, everyone. One to the to the downside, lots of people are taking the home office deduction when they shouldn’t. To use the home office deduction, you need to have a portion of your home specifically reserved for whatever your business is. It cannot be used for other things. If you do business at your kitchen table and you also eat dinner at your kitchen table, that is not permissible to be used as a part of your home that is used for the business. But if you have a dedicated office where all you do in there is business, we have the other side of this problem. Many people are not using that deduction the way that they should. Now, if you’re employed, if your W2 income, I’m not talking about I’m really talking to your business owners out there. If there’s a section of your home specifically devoted to your business and you think, “Oh, I’m sure that won’t save me that much money.” It will save you a lot of money, okay? It makes potentially a portion of your mortgage deductible when you’re doing things like this. Okay? It definitely makes that space of your home deductible on your taxes and it could be meaningful. Business mileage, make sure you’re tracking miles that you drove for your business. Make sure you are tracking your self-employment taxes. Remember that that’s going to be a deduction that you can use. It’s and you might as well use it, right? It’s it’s self-employment tax is one of the biggest taxes you have to pay. So, getting the deduction for half of your self-employment taxes can be very helpful. So, then what are some proactive strategies we can use to manage our taxes? Well, one, I kind of referred to it earlier. We’re going to maximize our retirement plans. Some of you don’t have a retirement plan right now in place, and you’re wondering, should I get one in place? Well, now is the time of year to think about this. Some plans you can’t set up after year end. So, you want to be thinking before your end, should I set up some kind of retirement plan, a solo 401k, if only I and or maybe I and my spouse work in the business, maybe a solo 401k is an option. A SE IRA to set up for a small business. Now, we’re going to have to make deferrals for employees, but maybe some of our key employees, we want to make deferrals for them as well. All right. Make sure if we have income that we don’t want to track in this year and we want to shift it to a future year, we’re using a tool like a retirement plan to do it. Let’s revisit our business structure. Look with a tax preparer, accountant or a business strategist to help you understand should you be the sole proprietor that you are right now or should you be an S corp or should you be a CC corp, right? Are there any business form changes that you should make over the current year? Maybe this seminar could be a little bit of the push. Yeah, I’ve been meaning to do that. Put it at the top of your list. Now is the time of year to do it. You’re not going to want to do it at the holiday season. I promise you. Take care of it. Now, how about tax credits? I mean, are there any research and development tax credits that you can use? This is something you’re going to want to do hand-in-hand with a tax preparer, right? If you’re a business owner, you’re going to want to make sure that you fully explored the tax code to look for the credits that are available to you and take advantage of them. All right. So, now we’ve talked about some salaried folks. We’ve talked about some professional folks, the business owners, self-employed. Let’s talk a little bit about the new tax law changes. All right. So, in the summer of this year, we passed the One Big Beautiful Bill Act shortened. We call it OBBBA.  We always have to have abbreviations for this and OBBBA is much simpler to say.  The basic element of OBBBA, the most important part of OBBBA was really that it extended the Tax Cuts and Jobs Act of 2017 to make those changes permanent. A lot of changes that were scheduled to sunset at the end of 2025 are no longer sunsetting. They’re staying the same. Okay. So, is it a bill that’s going to save people money? Well, in the idea that 2026 was going to be a much harder tax year for some folks and now it’s going to remain similar to this year, that you could call that tax savings, but it might not be unexpected tax savings. Maybe you thought already, hey, this is probably going to change there. There’s an extra year of inflation on the 10-12% brackets that’s going to happen in 2026. That’s a very minor change.  there’s no changes to the current capital gains tax rates. That’s important. So, if you’ve been building models for yourself of overselling investments and how would you pay taxes on them, you’re in a very similar tax structure in 2026 and beyond to what you were in before. The standard deduction, I told you earlier that the standard deduction was really changed in 2017 and that change was made permanent with OBA. Okay? So, you got a situation now that in many cases you’re actually going to be using the standard deduction, not itemized. Some of you are going to be saying, “I know that’s crazy. I itemize every year. I give my tax repair all my charitable giving statements and they use those on my taxes.” Well, what you want to look for on your 1040 is on the line whether it says itemize your standard deduction. Is that a whole dollar amount or is that a, you know, weird dollar amount. If it’s a weird dollar amount, you’re probably itemizing. If it’s a whole dollar amount, you’re probably taking the standard deduction and maybe you don’t need to do as much work at tax time pulling things together as you’re currently doing. either that or you need to find additional things that you could potentially lump in those itemized deductions. But we boiled down to four things. We can deduct state and local taxes, charitable giving, mortgage interest, and medical expenses greater than 7 and a half%. So, there there’s not near as much latitude and creativity as is allowed in the itemized deduction space as there was prior to 2017.  you we’ve got up here on the screen what the standard deductions are under OPA. If you’re single, $15,000 for 2025. If well 15750 went up a little bit, right? The one-year inflation. If you’re married filing jointly was going to be 30,000. Now it’s going to be 31,500. Very similar deductions. Some things have changed.

In 2026, you are going to be able to deduct $1,000 of charitable contributions if you’re single, $2,000 if you’re married filing joint straight on your tax return. So, this is going to help those of us out there who are not getting any benefit from our charitable giving right now because we don’t itemize enough to exceed our standard deduction, but we are doing some charitable gifts and we want to get some tax benefit for them benefit for them. We can get up to $2,000 of tax deduction, not tax credit in 2026 and beyond over and above the standard deduction for our charitable gifts. We have to be using the standard deduction. You can’t use itemize and then also claim this over here. You’re either using your charitable deductions on your itemize space or you’re using them here. Okay? The donations must be made in cash. They cannot be made in securities. They cannot be made in kind. They must be with cash and they cannot be put into a donor advice fund. They have to go straight to a charity. Okay. We also have some changes to state and local tax cap. And I referred to this earlier. This is going to be the biggest change out there that you’re going to see. Okay. Starting in 2025, current tax year. This was a change really pushed by  lawgivers in New York, California, New Jersey, high income tax states. You’re going to have $40,000 as your cap to what you can deduct on state local taxes. This is income taxes and property taxes. All right? It’s been $10,000 up to this point. Importantly, this is only for those with modified adjusted gross income of $500,000 or less. And that’s if you’re single or joint. Once you start moving over those thresholds, you start getting lower and lower benefit from that $40,000 inching down to $10,000. And if you cross $600,000, now you’re back down to just being able to use $10,000. Okay?  this is not permanent. This only lasts through 2029. So, and this is the way that tax codes work, right? When tax bills work. When they make change, they have decided, am I going to make something permanent, which is going to cost a lot more, and we’re going to make something temporary. So, keep in mind, this is a temporary cut. We don’t know what’s going to happen in 2030, but at least as of now, everything will reset to the $10,000 maximum. All right? So, then we have this itemized deduction change, and this is going the other way of the charitable contribution standard deduction. Right? You can use the thousand if you’re using the standard deduction. If you are itemizing your first.5% of AGI charitable contributions are not going to count towards what you can deduct. So, the example that we have here, we have AGI of $100,000. We give $50,000 of appreciated stock to a public charity. That’s making things probably a bit needlessly complex because we can only deduct up to 30% of that. But let’s just go to the point below. $50,000, which should have been my charitable deduction, is now going to turn into only 49,500 because the first 0.5% of my AGI is not deductible. This is very similar to what we have over in the medical space. It’s just much bigger. Right? I said if your medical expenses do not exceed 7 and a half% of your modified adjusted gross income, you cannot deduct them. Similar here. Now, if your charitable giving does not exceed 0.5% of your adjusted gross income, then you’re not going to be able to deduct that on your taxes. Most people who give are probably giving more than 0.5%. But they’re just going to get a haircut in in what’s going to be allowed. Right? These are again these are ways that they’re saving money. So, they gave extra benefits other places. They’re trimming benefits elsewhere. So, there’s a 0.5% reduction.  so keep that in mind. Maybe if you give a lot then 2025 is going to be a better, a more powerful year for you to give than 2026. Maybe if you don’t give that much, 2026 is going to be a better year to give than 2025 because you’ll get that $1,000 or $2,000 charitable deduction over and above the standard deduction next year. Itemized deductions change. Now, this is only for those who are making a lot of money. What they said this year is they’re saying, “Hey, we know that you’re all itemizing. If you are itemizing and you’re in the 37% tax bracket, we’re not going to let you save 30% 37%. Okay? We’re only going to let you save 35%.

 

So, they’re capping the tax deduction at the 35% level, even if you’re in the 37% tax bracket. So, if I had itemized deductions totaling $100,000 and that was going to save me $37,000 in taxes, it’s now only going to save me $35,000 in taxes. Again, not going to be a big deal for many of the people on this call, but for some, it is going to be something that that they want to watch out for. And as a result, itemized deductions are more powerful in 2025 than they’re going to be in 2026 in those cases. What other itemized deduction changes do we have? Well, a lot of more permanent things. So, we now know on an ongoing basis that the deductible mort mortgage interest is limited to the first $750,000 of home acquisition debt. What does that mean? If you buy a house and you get a million- dollar mortgage, only 75% of that mortgage interest is going to be deductible on your tax return. We cap deductible mortgage interest at $750,000. And it has to be acquisition debt. So that’s really important. We have to be careful when we’re going to be taking out a home equity line of credit. We thought we could use a deduction there. You’re going to have to talk to a preparer to see if that’s going to be something you can use as a deduction or not. Okay. Casualty losses. We can only deduct casualty losses now from federally declared disasters. No state declared disasters as well. So, casualty losses, we can now take certain state declared disasters as casualty losses on our returns. Okay? So, if you know who you are, you had some kind of horrific event happen to you the past year where there was a hurricane or flooding that came through and you’re in a site that was a state declared disaster but not federal. It’s a good chance that you might be able to deduct that casualty loss now. And then again, what was made more permanent miscellaneous itemized deductions, you are going to only be limited to 2% of your AGI, exceeding 2% of your AGI for any miscellaneous itemized deductions, but you can now also include some educator expenses in there. So, if you’re a teacher, it’s beyond the scope of this for me to dive deeper into that, but if you’re a teacher, be mindful of that. See what you could, you know, could that result in some savings for you? some new temporary deductions. I already said that that we had a temporary deduction on the salt provision, right? The state local tax. We also have some headline tax savings that are temporary. So, no tax on tips. If you make under $150,000 and you’re single or $300,000 and married filing joint, you can deduct up to $25,000 for any amounts you received as tips. So, tips that would normally have been counted as taxable income are now accompanied by a deduction to wipe out that income from taxability. Okay? Cannot be used if you’re married filing separate. You’re still going to have to pay payroll taxes on that because that was deducted at the time of the tip being paid. And there’s still going to be some guidance needed by Treasury. It’s not certain that this is going to be all occupations. Okay. Also on overtime, we said, you know, that the headline was, “Hey, no taxes on overtime.” Yes, for the next few years 2025 through 2028, eligible taxpayers can claim a deduction up to $12,500 if you’re single, $25,000 if you’re joint for any amount that you received as overtime pay. This has the same deduction phase out. If you make over $150,000 as single filer, it’s going to start to be phased out. If you make over $300,000 as a joint filer, it’s going to start to be phased out. So, you want to be mindful of that. And same thing is that as in so many other things in this country, if you’re married filing separately, you don’t get the deduction. Auto loan interest.  if you’re an eligible taxpayer, which we’re not going to go into detail on here, largely because some of this has not been clarified yet, but you can deduct up to $10,000 of qualified passenger vehicle loan interest on new cars only where the final assembly took place in the United States. There’s some, you know, social policy trying to be accomplished with this, no doubt.  it’s a phase out. If you make more than $100,000 single or $200,000 married filing joint and it’s only on new cars, you can’t use it on leases. Okay.  If you’ve refinanced a qualifying vehicle loan, if you then you can typically still use the deduction.  a new one, senior deductions. So, we’ve always as seniors been able to take a small extra deduction. So, you see on the fourth bullet here, if you’re 65 and over and you’re a single filer, you’ve been able to take a $2,000 tax deduction in addition to the standard deduction. If you’re married filing joint, you’re both over 65, you’ve been able to take a $3200-tax deduction. Now, because the headline was no taxes on social security, you’re going to be able to get a tax deduction of an additional $6,000. It’s going to phase out if you’re more than $75,000 in a modified adjusted gross income if you’re single and $150,000 if you’re joint. So, there’s a huge cross-section of this country that is not going to experience this tax deduction. The headline was no taxes on social security, but as you can see here, that is not how it works. It’s an additional tax deduction for those 65 and over who make under $75,000 single or $150,000 married filing joint. Okay, this is not something you need to itemize for. This is something you get even with your standard deduct. Okay, child tax credit was made permanent. It’s up to $2,200 instead of $2,000 per child and up to $1,700 refundable credit for 2025.  so that means a portion of that child tax credit you can actually get paid to even if you owe no taxes. There’s income phase outs here. 400,000 for married filing joint, 200,000 for single. That hasn’t changed. And the full child tax credit is now going to start to be indexed for inflation. That’s a big win. Anytime we can get any of these credits tagged to inflation instead of pegged at the same flat number, that means that it’s going to have the same impact on your taxes in future years, it’s not going to lessen each future tax year.  child independent care credit, it’s going to go up from $5,000 to $7,500 as the max you can put into a flex spending account in 2026 and beyond. Okay. The alternative minimum tax is let’s just say that the income thresholds are going to be made high more permanently. They’re not going to be quite as high as they have been up to this point. Right now, it’s 626 for single 1.25 million for filing joint. It’s going to go to 500 for single, a million for joint, but we’re still in a territory where most people in this country are not going to have to worry about the alternative minimum tax. If you are going to have to worry about it, please talk to your tax preparer. That’s a pretty unique situation. What’s another way that they paid for all this? Well, they’re eliminating all of these clean energy credits. So, you have a very short window. If you’ve been thinking of putting solar panels on your home, if you’ve been thinking of getting alternative fuel vehicles, so like an EV charging equipment, these kinds of things, you have to do it soon. All right; the deadlines are up here, and I would say you don’t have that long, right? Because they have to be paid for the residential clean energy credit and placed in service for the energy efficient home improvement credit. So, be very mindful of this. If you’ve been inclined to do clean energy type stuff, you have deadlines. We’re saying now that gambling losses are now only deductible up to 90% of gambling winnings. This is hard for those who gamble out there because now you can be in a situation where you lost money for the year on your gambling and you actually still owe taxes on the losses because only 90% of the losses are deductible. And then we have these filing thresholds for if you have a 1099 miscellaneous, it had a requirement to issue a 1099 miscellaneous if any income over 600. Now it’s over $2,000. Same thing for 1099K. It used to have to be $600. Now it’s 200 transactions and $20,000. So, making some of those tax documents a little bit easier sometimes don’t need to be issued where otherwise they might have to be issued. Last, and this is a big one, when we are focused on estate gift and generation skipping transfer tax, if you have a lot of money, this is a big deal. There was a concern that potentially in 2026, we were going to go from $14 million deductible exempted from  estate tax to a situation of seven or 7.5 million  exempted. So, there were all these trusts that estate attorneys were considering putting in place of cross- gifting and things like this to soak up whatever exemption you had. It’s been moved to $15 million. It’s indexed for inflation.  we still can give up to $19,000 a year annually excluded. For many of us, that $19,000 is irrelevant because actually we’re nowhere close to $15 million in net worth. Okay? And we still get the step up in basis which is one of the biggest tax deductions available in this country. We have some student loan changes. Many plans are going to be repealed. The save pay and ICR plans. Borrowers are going to be able to choose from just two plans. The standard repayment plan 10 to 25 years or a repayment assistant plan that can go up to 30 years and have remaining a loan loan amount forgiven. Okay. And then ACA and bronze plans. There’s some big changes coming.  Depending on how this government shutdown goes, you’re going to have to watch how much our ACA plans going to cost. There’s some big premium changes potentially happening there. But bronze plans are now going to be considered high deductible plans, which is going to broaden the amount of plans that qualify for HSA contributions. Medicaid and Medicare, in 2027, many able-bodied adults are going to have to do 80 hours of monthly work. I’m not commenting on the this is a good or a bad thing. This is just the way that the new bill is going to work. It’s going to say if you want Medicaid, you have to work a certain number of hours per month. There are exemptions for certain disabilities and parents caring for young children and states can also decide for some hardship waiver provisions there. Okay.  And then the act also is now only going to make US citizens and lawful residents to be eligible for Medicare. This was true in many circumstances already, but it’s made it more defined.  So, certain refugees, asylum recipients, individuals protected status are no longer going to qualify for Medicare. So, if you’re in the 37% tax bracket, think about making your itemized deductions in 2025, not 2026.  if you’re charitably inclined and you give a lot, think about giving your deductions in 2025, not 2026. If you’re charitably inclined, but just small amount, maybe you want to use the standard deduction this year and you want to give that amount to charity in 2026 because you’re going to be able to get a tax deduction for it over and beyond the standard deduction in 2026.

I’m not going to go through every one of these, but I thought it was very helpful to have in one place what the phase out ranges are going to be for all of these different tax provisions under OBA. Okay, so all these different and you can see they’re very different. This is how tax bills work. We don’t like how they work. It certainly keeps accountants and financial advisors employed, but there’s very different thresholds you need to be mindful of for certain the different deductions. Okay. All right. So, next steps. What should you be doing as a taxpayer right now? What am I encouraging you to do regardless? Please gather your documents. Get everything together now. Let’s not be waiting until January of next year. Because when you gather your documents, you’re going to look over your documents and you’re going to start thinking, “Oh, here’s a surprise for this year. Here’s something I should be mindful of. Oh, is this going to change my tax situation?” We want to review our business structure. This is a great time to be doing this. So, if you have changes that could make you could make to save you taxes, don’t wait anymore. All right? Save the taxes. If you have big life events coming up, think about how those big life events are going to affect you. A new child, a retirement that your income is totally going to change, a child starting college. Make sure you talk about it. Be mindful about it. And please, if you’re in a complex tax situation and that it’s always overwhelming to you, consider lining up a time to talk with a tax professional and do it midyear. Don’t wait until the following tax year. There’s nothing you can do, almost nothing you can do in March of the following year to affect your tax bill. You have to make the changes within the tax year. Okay? Please, if any of this has been helpful to you and you’d like to get a 15-minute phone call to talk about how tax savant might be able to be of service to you and your tax or wealth management or estate planning or charitable giving situation. We’d be happy to have a conversation anytime. There’s going to be a link that’s popping up here in the chat. There will also be the opportunity in the survey that you can select that you’d like to talk with someone, and we would be more than happy to talk. This is what we do full-time. Hopefully, you’ve understood that. We love it, right? It’s what we dive into every day. Okay, I do have some time for questions here at the end. Let me answer a few of them for you. Okay, let’s see here. If I’m inheriting money, is there anything I need to consider on taxes? Okay, that’s a big question.

First of all, yes, this is something very good to be looking at within the tax year. All right, because there may be things that you can do. For example, let’s say that you inherited an IRA and you’re not required to take money out of that IRA until the year after the death of your parent or sibling or whoever left you the IRA. You may want to move income into this year if this is an unusually low year of income for you so that you can spread those distributions over 11 years instead of 10 years. That could be something you want to do.  you want to be mindful about the allocation that the person you inherited from had. You could be in a situation where they didn’t make any changes because there would have been huge tax implications that for you there would not be because they had the money in a taxable brokerage account. Everything received a step up on a cost basis and now what would have been a huge tax bill for them to sell is a zero-tax bill for you to sell. Those are the two biggest things I’d be thinking of. Sometimes maybe you’re thinking of gifting money to others from that inheritance. That’s certainly something to be considered, you know how that might impact you on taxes. It’s not going to have a strong impact on taxes. I’ll tell you though, either way, that’s something I want to make sure people know. Everybody gets really worried about how do gifts impact me on taxes. The recipient is not going to have to pay taxes on your gift. You’re not going to have to pay taxes on the gift. You are, if you give more than $19,000 going to have to report that gift. So, it uses up a piece of your lifetime exemption. But if you were going to be able to give $14 million before and now, you’re only able to give $13,980,000 for many people that has not created a tax problem in any way. And so, I would encourage you actually to just not be as concerned about gifting as maybe you might be. A lot of articles are written off of this annual amount, $19,000, that you can give. Beyond that, you have to worry about it. Not most people. It’s just a reporting issue, not a tax issue. Okay. Is it better for me to give charitably? Okay, I think we talked about this in 2025 or 2026. This really depends on the amount of money you give to charity. So, if you give a little, and I’m talking about the one to $2,000 range, then you may want to shift your charitable giving to 2026 because you’re going to be able to deduct that where you couldn’t this year. You probably were using the standard deduction this year. If you give a lot to charity, you may want to accelerate your giving into 2026 because you’re going to have a 0.5% minimum that that you have to exceed of adjusted gross income before your charitable gifts count for you in 2026. Money in the margins, but hey, let’s make as much as we can.  how much should I contribute to a retirement plan? Okay, so it depends. And then that’s going to be answer for most questions that are posed on here.  you should contribute to a retirement plan. Well, certainly you should start with what you can afford, right? What is income that you’re not needing this year.  if you’re young, you’re in a low tax bracket, I want you to be maxing out that Roth 401k as much as you can. Get that money after tax into a retirement plan so it can all grow tax free. no better retirement vehicle than the Roth IRA or Roth 401k when you’re young. If you’re in a high earning bracket and you’re in your 50s and 60s, that Roth is not going to be nearly as powerful. In fact, what may be much more powerful is that tax deferral effect of getting income out of this year from taxation and pushed into a year after you’re retired when you might have much lower income, be subject to a lower rate. But I think the biggest thing I’d look at on deciding how much to contribute to a retirement plan is look at where your total income is this year relative to the tax brackets. All right? And if you’re right close to a tax threshold, you may want to consider, you know, hey, I’m in the 32% bracket. Okay, man. If you could get a lot of money out of that 32% bracket and get yourself down to where you’re only paying max in the 24% bracket, that’s pretty useful, right? If it’s 24 versus 22, it’s not as helpful. If it’s 22 versus 12, getting money out of the 22% bracket, that was a big jump. Hey, if you could avoid that, avoid it. So, I’d be mindful about the brackets. I look up on, you know, just Google tax brackets 2025 single or tax brackets 2025 married filing joint. Look at the brackets. Look at your paystub where you expect to finish the year. That can give you some information about how much to contribute to a retirement plan.  When do I need to open a retirement plan by?  that depends on the retirement plan type. But what I would tell you be thinking about it now because many of them the opportunity expires on December 31st. And so, you don’t want to be waiting until tax time next year if you’re trying to do tax planning for this year to take advantage. Some plans you get until the tax due date even plus extensions. So sometimes, you know, you can go all the way till October 15th of next year and still be able to set up the plan. But in many cases, you need the plan set up by December 31st.  if you’re contributing to an IRA though, a traditional IRA or Roth IRA, only certain circumstances that allowable, but you have all the way till April 15th to make that contribution. Okay? So that makes you have time still to make some limited changes in early 2026. The other thing that I would add to this is that that is relevant. I just always want to make sure we’re talking about this. If you are if you have a high level of income and you’ve been contributing to a traditional IRA because you thought, well, why not? I know I can’t get a tax deduction for putting the money in, but why not? I can put more money in an IRA, right? Please do not do that. Why do not do I not want you to do that? Because when you put money into a traditional IRA and do not get a tax deduction, you’re in the worst of all tax situations, no tax deduction for funding income tax on every dollar of growth. You could have put it into a brokerage account, just a taxable brokerage account, and be subject only to capital gains taxes someday when you sell the investments. If you’re going to be turning over the holdings all the time, maybe it’s a different situation. But I’d invite you to consider why you are turning over the holdings all the time. Other than that, if I can get money out of a situation where it’s going to grow and be subject to income taxes and put it into a situation where it’s going to grow and only be subject to capital gains taxes, that that’s a better approach. You might also want to consider doing what’s called a backdoor Roth IRA, which now we’re really going into, you know, at least tax 301 here.  but if you’re not eligible to contribute to a Roth because you make too much and you put your money into a traditional IRA and you’re going to be in too  high a tax bracket to get a tax I mean you’re covered by qualified plan so you can’t get a tax deduction, you can immediately move that money over into a Roth IRA  because that’s a non-deductible contribution which is always allowed to be rolled over to a Roth. The only thing you need to be careful of is do you have a traditional IRA elsewhere? Because if you do and there’s tax-deductible monies in some IAS and non- tax-deductible monies elsewhere, big mess. So, enough said there guys. That’s the time I have for the presentation today. I really appreciate you tuning in, listening. As I said before, if you have questions that I did not get to today and you didn’t put them in the chat yet with your name, please put them in the survey that you get after this. We want to make sure that you get your questions answered. You came here today with some things in mind. Oh, I hope he covers this.  please make sure to ask and we’ll get an answer back to you. Appreciate your time and I wish you best of luck with tax preparation. Take care.

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