Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives, securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated. A registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus Program.
Nate Kreinbrink:
Good morning, and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate Kreinbrink. I do have Andy Ferguson. It is July 1st, and normally, the first of every month is the live show with David Nelson, but schedule’s a little different this week. And so we are taking this week. David will be on live next week for the 30-minute live show.
Andy Fergurson:
Well, it makes sense. It’s America’s birthday, so we got to talk about how America’s going to pay for all that, right?
Nate Kreinbrink:
That is true.
Andy Fergurson:
So we got to get the taxes figured out and make sure America has enough money to pay for their birthday and give the people what they want.
Nate Kreinbrink:
That is exactly it. And it’s weird that you say that because it does seem strange to say that this is July 1st, and that July 4th is-
Andy Fergurson:
It does feel weird.
Nate Kreinbrink:
… there. It’s a fun time, summertime. You look at, oh, July 4th weekend celebration, family get-togethers, all that stuff. But it also is kind of the tail end of summer almost.
Andy Fergurson:
Well, and it means-
Nate Kreinbrink:
It’s starting that downslide.
Andy Fergurson:
Yeah, it means the year’s half over.
Nate Kreinbrink:
Yeah. Days are getting shorter.
Andy Fergurson:
Yeah. Yeah, we’re past the solstice. So yeah, the days are getting shorter. But I mean, it has absolutely felt like summer-
Nate Kreinbrink:
Summer’s here. Summer’s here-
Andy Fergurson:
… for the last five days or so. I mean, it is hot.
Nate Kreinbrink:
… for those couple weeks there of pretty pleasant, mild temperatures.
Andy Fergurson:
I much prefer the Canadian summers we’ve been having up to this point and-
Nate Kreinbrink:
It’s warm.
Andy Fergurson:
… to the 95 degrees, 100 degrees.
Nate Kreinbrink:
It is warm. So stay cool. Get in the shade. Get in the pool.
Andy Fergurson:
Yeah. It makes the pools-
Nate Kreinbrink:
Drink plenty of fluids-
Andy Fergurson:
… worth their weight now.
Nate Kreinbrink:
… all that fun stuff, but again, enjoy the week in this part of the summer. But as you did say, I mean, taxes.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Taxes are always there, always topics to talk about, all this different kind of things. And again, with getting gone today and the list that you put together there, I think it’s an important thing with what you have there at the top of the list is just looking at some of those new changes and some of those-
Andy Fergurson:
Sure.
Nate Kreinbrink:
… modifications for 2026. Because again, it is halfway, but we do still then have half the year left to be able to make those changes-
Andy Fergurson:
Yeah. There’s things we should plan for. Yeah.
Nate Kreinbrink:
… to any things we want to look at to make it have impact.
Andy Fergurson:
Yeah. It’s been said that there’s only a couple things that are certain in this life: death and taxes. And I would add that the tax law’s going to change, and this year’s no exception. I feel like I’ve been doing this for a long time. In the last, I don’t know, five, 10, probably the last 15 years, I feel like the law has changed every year.
Nate Kreinbrink:
Right.
Andy Fergurson:
And it used to be that the code was pretty standard, and now the code is moving like crazy. And so there’s definitely things worth planning for. New in 2026, there’s increases to all of the standards. So there’s increases to the brackets, there’s increases to deductions, there’s increases to retirement contributions, but there’s another new law that comes into play with retirement contributions.
And that is for high earners, if you’re making a catch-up contribution, so if you’re 50 plus and you’re putting more into your 401(k) because you’ve reached that age limitation or that age exception where you’re allowed to make that extra contribution, if you made more than $150,000, which that number would be your Fed FICA number, so the part that is subject to Medicare tax, if that number was over $150,000… It’s box two on your W-2 if you’re looking. I’m sorry, not box two, box three on your W2. If you’re looking at that and it’s over $150,000, your catch-up contribution has to be contributed to a Roth 401(k).
Used to be in 2025, you could make all your catch-up contributions and your original contribution all to your traditional and get that tax benefit. But in 2026, the high earners are going to have to pay the tax first and put that money into a Roth. You can still put it in. It’s just you’re not going to get the tax advantage-
Nate Kreinbrink:
But you don’t-
Andy Fergurson:
… on the catch-up contribution.
Nate Kreinbrink:
Right. And I think that’s an important thing to look at. And again, it does change. And again, looking at it again, putting money into a Roth again is not a bad thing.
Andy Fergurson:
No.
Nate Kreinbrink:
It’s just, again, those high earners wanted the deduction to offset some income for that year. They’re just going to have to not have that get it into the tax world and go from that route.
And I think you hit it on the head there with those changes to contribution limits. If you were just putting in a certain percent to max out what 2025’s contribution was, whether it was through an employer plan or an individual IRA or a Roth account, and you haven’t adjusted that monthly amount to adjust for that additional amount that you’re able to put in, you’re going to leave some money on the table if you’re wanting to do that.
So for those, for IRAs and Roth accounts, it was 7,000. It is now 7,500. For those that are 50 and older, it was 8,000. Now it is 8,600 that you can put in a year for IRAs or Roth accounts. So looking at those.
Andy Fergurson:
Yeah. Those IRA contributions are not impacted by that income limitation.
Nate Kreinbrink:
Right.
Andy Fergurson:
I mean, they still have income limitations, but-
Nate Kreinbrink:
And you have to have wages and certain… Some of those things are household, but something to keep in mind with it. And again, as you go through that, again, we do still have time to make those adjustments so you can do that.
Talking specifically IRA and Roth contributions, it is important to remember that you do have up until the tax deadline, which is April 15th-ish, to make those contributions. Employer plans, obviously end of the year. So again, looking at those. Couple other things that you have listed there.
Andy Fergurson:
Right. There’s some other planning opportunities there too. So another planning opportunity is charitable contributions. So when the Tax Cuts and Jobs Act was enacted back in 2017, most people stopped itemizing because the standard deduction went up so high that there was no benefit to itemizing. And so a lot of people stopped tracking the things that you could itemize. They stopped tracking their charitable contributions. They stopped bringing their mortgage interest because they knew it just didn’t matter anymore.
Nate Kreinbrink:
Right.
Andy Fergurson:
For a little while, it still mattered in Iowa, but in Illinois it stopped in 2017 because they weren’t getting that benefit on the federal form, so they weren’t going to get it on the Illinois form. Well, with the OBBB or the OB3 bill, there’s an increase or an opportunity to take a charitable deduction in 2026. It’s ours in 2026. There’s an above the line charitable deduction for individuals. You can take $1,000 without itemizing as a charitable deduction or 2,000 if you’re married and filing joint.
So that’s a big deal because people have stopped bringing that. They’re still giving to their church or to the Boy Scouts or to the animal shelter or whatever, but they’re not reporting that anymore because for the last seven years, eight years they’ve been trained to not report that. Their preparer’s been saying, “Stop worrying about this. It doesn’t matter.” Well, it’s going to matter in 2026. So if you’re somebody who is in that situation, if you live in Illinois or if you are somebody who makes contributions but didn’t report them because you weren’t itemizing, it’s worth taking it back in this year, making sure you get that extra $2,000 deduction.
Nate Kreinbrink:
Right. And again, it’s all those important things. And again, you always say if you’ve got a question or in doubt, include the paperwork and let your tax preparer filter it out and say, “No, you don’t need that.” Don’t make that decision. Let them be the one to tell you that.
Andy Fergurson:
Yeah. Absolutely.
Nate Kreinbrink:
So again, and in looking at some of those other things, one thing that does continue to remain in the headlines and I think people still have a lot of questions on are Trump Accounts.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
And again, we’re not going to get specific, because I think we could probably spend a whole show going through the details and intricacies and how the money is treated, who can put money in, when they can put money in, what it looks like-
Andy Fergurson:
What are the advantages? What are the disadvantages? Yeah.
Nate Kreinbrink:
… for the beneficiary, what it looks like for them now, when they turn 18, when they turn all that. But again, Trump Accounts are a tool that are now at our disposal to be able to use if you qualify.
Andy Fergurson:
Yep. They’re going to open this week. So we’re going to learn a lot more as we go through this week, but if that’s something you’re interested in, the best thing to do is go research it. Go to trumpaccounts.gov, see what you need to do, start looking it up and seeing if it’s going to be something that’s beneficial to you and your family. But yeah, you’re not going to get a lot of coaching on that until it’s a little bit older.
Nate Kreinbrink:
Right. And again, as you go through that… And I think too, it’s looking at… And you mentioned changes. Last year was no different to that, especially with the unveiling of that OBA-
Andy Fergurson:
OB3, we call it.
Nate Kreinbrink:
… OB3 Act, their new tax bill, basically, that came out in July. And a lot of those changes obviously had an impact already on 2025 tax return.
Andy Fergurson:
Sure.
Nate Kreinbrink:
But a lot of those do continue for this year. They’re not permanent, but they are still in effect for 2026.
Andy Fergurson:
Yeah. So you want to think about overtime. You want to think about tips. Those are going to continue to be discounted wages. There’s an enhanced senior deduction that’s in there. Another thing that happened with the OB3 is the end of the environmental credits. So the environmental credits that you could get for windows, doors, air conditioners, furnaces, water heaters, boilers, all that stuff, siding, air systems, all of those things, that ended in 2025.
And you have to be careful because you may have dealers that are selling those products that may still be saying that there’s benefit to that. And there are benefits, but not to individual consumers usually. Not to somebody who’s filing a 1040 return. There are business benefits, but not usually to individual taxpayers.
Another thing that came out of OB3 was the paper checks. You got to make sure that you’ve got an account that you can deposit money into that they’re not sending out paper checks as well. And I would say what goes along with that is creating an individual login to the IRS. Go ahead and create that login. It makes things a lot easier when you decide to share stuff with your tax preparer. They can go on and gain access to that login if you grant them permission, and that’ll make things easier for you.
Nate Kreinbrink:
All great stuff. And again, got questions, give us a call. But again, taxes are extremely important with anything that you do. So it’s important that you have a basic idea and let the experts guide you.
Andy Fergurson:
Sounds good.
Nate Kreinbrink:
I think you said changes always are happening. It’s impossible for the average preparer or average individual to keep track of them. So again, make sure you are contacting them.
Did want to mention real quick before we run out of time that every month NelsonCorp is featuring a new charity of the month. For the month of July, the charity will be the Big Brothers Big Sisters Over the Edge for Kids’ Sake event. Again, this is Nate and Andy bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC. Investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.