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, Inc. A broker dealer, member of FINRA SIPC. Investment advisor representative Cambridge Investment Research Advisors, Inc. 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. This is Nate Kreinbrink. I have Andy Ferguson joining me again today. Third Wednesday, it’s officially the tax discussion.
Andy Fergurson:
Yeah, two weeks in a row.
Nate Kreinbrink:
I know.
Andy Fergurson:
Got to give people what they want, Nate.
Nate Kreinbrink:
That is kind of a reality. And as much as people don’t want to realize that, taxes are extremely important to them.
Andy Fergurson:
Taxes are important.
Nate Kreinbrink:
But no, it is hard to believe that we are already third Wednesday of the month. And it seems like forever ago, last Wednesday when we were on.
Andy Fergurson:
Yeah, that means there’s only two and a half months until we’re really doing taxes. Until you’re getting W-2s and stuff.
Nate Kreinbrink:
Time to do Christmas shopping.
Andy Fergurson:
It is. It’s time. I guess we should start.
Nate Kreinbrink:
No, it is. It’s a fun time. I think everybody enjoyed the nice weather this past weekend. A nice little reminder and taste of what, some nice spring, pleasant.
Andy Fergurson:
But I feel like I’m ready for winter. Let’s do it. Basketball starts on Friday, girls basketball starts on Friday. That’s really exciting.
Nate Kreinbrink:
Yep.
Andy Fergurson:
So let’s get the winter—
Nate Kreinbrink:
It is that time of the year.
Andy Fergurson:
… sports going and let’s do the holidays and Christmas and turn the year over and—
Nate Kreinbrink:
Let’s roll.
Andy Fergurson:
Let’s just do it. Let’s plug through another tax season.
Nate Kreinbrink:
Well, that’s great. That is great that you have that excitement because it has going to be probably a little bit of change. And we kind of talked about some of the things last week as far as the One Big Beautiful Bill Act as they refer. You kind of slimmed that down to what OB3?
Andy Fergurson:
OB3 is much better than saying all those other words.
Nate Kreinbrink:
Much easier to say. Much easier to say. And last week we started hitting on some of the key points as far as the taxes on overtime and what it does. And more importantly, what it may not cover, what people think it does. The no taxes on tips, kind of that same thing along with it.
We started getting into the third part and I think that’s where the biggest misconception is going to be for a lot of people. And again, it may not affect them, but what they think they’re getting and why they’re getting it isn’t necessarily the reason for that. And that is the senior tax deduction or the Social Security no tax.
Andy Fergurson:
Yeah, AKA no tax on Social Security. It’s interesting, this year is, I think since 2017, probably the most changes we’ve had in a tax code year. And so there’s just a lot of things. And I think what’s different about this year is like you mentioned, there’s a lot of misunderstanding about how things are going to work because of the way that these tax changes are being construed in the media.
The perfect example is no tax on Social Security. That is not at all what’s happening. It’s a senior deduction. It has nothing to do with your Social Security. If you are over 65 and your adjusted gross income is less than 150,000 for married, 75 for single, you’re going to get a $6,000 extra senior deduction. That’s all.
It doesn’t matter if you have Social Security, you could be 67 and not on Social Security. You’re going to get the deduction. You could be 62 and on Social Security and you’re not going to get the deduction. So it’s a senior deduction. It’s age related. That’s all that it is, and it’s going to be $6,000. It’s prorated or it phases out if you go above the income limitations.
Also, another thing with all of these new changes to the tax law, if anything has an income limitation and you file separately, married filing separately, you will not get the benefit. Those income limitations trigger that married filing separate taxpayers do not get it. Because they don’t want a doctor who makes $600,000 a year to file separately from his wife who’s a hairdresser.
Nate Kreinbrink:
And take your.
Andy Fergurson:
And her get the deduction because her median or her adjusted gross income in her household is too high.
Nate Kreinbrink:
Well, and I think that’s important because I know obviously I don’t think married filing separately is extremely common, but there are some instances where it is used. And now you’ve got to take all that into consideration to say, “Okay, yes, we doing it because of this reason.” But now all of a sudden there’s this reason maybe not to, and take that all into consideration.
Andy Fergurson:
It’s an election you can make every single year. So you can file separately in ’24 and jointly in ’25 and separately in ’26. So you can make that choice each year. Just know that if you choose married filing separately in 2025, you’re going to lose the senior tax deduction.
You’re going to lose the no tax on overtime deduction. You’re going to lose the no tax on tips deduction. All of those deductions that are income related, you’ll lose the benefit of if you file separately.
Nate Kreinbrink:
And I think when you start looking at that new tax bill, I mean obviously those are your three key points that I think were kind of thrown out in the media. In campaign time, election time up until the first of the year, and obviously up until this point.
But there’s a lot more that’s into that thing. I mean, you start looking at the child tax credits and car loan interest deduction. We can go on and on and on where some of these may apply to it and maybe just hit a few of the key points on some of those area.
Andy Fergurson:
Sure. Yeah, the child tax credit, it changes in 2025. So if you remember in 2017, before 2017, the child tax credit was $1,000 per kid under the age of 17. Well, with the tax cuts in Jobs Act that moved up to 2,000. During COVID, there were some stimulus related to it. I mean, sometimes the child tax credit was even up to 3,000 depending on the age of the child, and so there were some things going on there.
It was set to expire. It was set to go back to 1,000 for 2026, but the OB3 Bill made that child tax credit at 2,000 permanent. Actually, it increased it to $2,200 for 2025. And it will be indexed for inflation going forward. And so that’s a good benefit.
The SALT cap limitation, so that’s the state and local tax limitation for those that itemize, from 2017 until 2024 was limited to $10,000. That number’s been moved up to $40,000 for those that qualify income wise.
The car loan interest deduction is an interesting one. Just be advised that there is a lot of restriction around that one, a lot of limitations in qualifications. They have to be personal loans. It can’t be a business loan. It has to be a qualified personal vehicle.
Final production has to be in the United States. And to prove that you’re going to have to have a VIN number. You can’t have a lease, you can’t have a sale to a related party. It has to be purchased in 2025. And then the interest is what’s going to be deductible. There’s an income limitation on that one as well.
And so there’s a lot going on with that one, but if you bought a new vehicle in 2025 that was assembled in the United States, it’s worth asking your preparer about it because you might get a little bit of a deduction from that.
The other thing I think that’s big that’s kind of slipping under the radar a little bit is that there will be no checks issued by the IRS.
Nate Kreinbrink:
Yeah, I remember you saying that.
Andy Fergurson:
No checks in 2026 for your 2025 tax returns. So how are you going to get your money? You need to think about that. You’re going to have to have an avenue for the government to get your money to you if you’re getting a refund. And you’re going to have to think about how you’re going to pay them if you’re somebody who normally pays by check.
Now, there are a lot of options. There’s a lot of things you can do. The easiest way to do it is to ACH it right into a bank account, but there’s a lot of people that are uncomfortable putting their banking information into their tax return. And there’s other options for that.
There’s ways to go to a retailer. You can get a voucher from your tax preparer, take that voucher to like CVS or Walgreens and have them. You give them cash or a check and then they will assign it to that voucher and send it to the federal government. There’s a lot of limitations that go with that, but there are ways to do it, so just be advised of that.
What’s going to happen in our practice this year is everybody’s going to come in and we’re going to say, “We can’t do checks anymore.”
Nate Kreinbrink:
That’s the change.
Andy Fergurson:
And they’re going to be mad at us because they’re going to be like, “Well, I’ve always done a check. I’ve done a check for 55 years. What do you mean I can’t do checks?” And we’re going to be like, “Call your congressman because it’s not our law.”
We just have to find a different way to pay or to be paid by the federal government because the IRS changed that this year. Costs a lot of money for the IRS to process checks inbound and outbound, and so one of the savings that they determined inside the IRS was let’s eliminate this check process.
Nate Kreinbrink:
Well, and I think when you look at the check too, I mean it’s easier to track as well when you’re… and that goes both ways. I mean, how many times have you said, “Well, we’ve sent this check into the IRS. They say they haven’t got it. They sent me this nice little letter saying that I’m past due.”
Andy Fergurson:
Well, that happened with you one time, right?
Nate Kreinbrink:
I know it said that that was in there. I’m like, “Hey, we sent this out like three months ago.”
Andy Fergurson:
Yeah.
Nate Kreinbrink:
Then all of a sudden randomly it just, they magically found it.
Andy Fergurson:
Yeah, after we paid online, then they found the check. So yeah, it is a better system. We already do ACH transactions for so many things. I mean, you already pay your water bill, your electric bill, your Netflix, your cable, your Disney Plus subscription. All of those things are already done via ACH or credit card.
And those things aren’t important or as important as your taxes, and so we already do it. We just have always relied on the government to allow us to do whatever we want in that regard. Sometimes we use the check to maybe float us a couple more days. We know that it’s going to take seven days to get there in the mail. And then it’s going to take a couple days for them to cash it and pull it out of our account.
So we can write a check knowing that we’ve got about 10 days before they’re going to pull that money out. It just changes and we already do it. We just have to get used to doing it with the government and it’s going to be better. It’s just going to be something that takes getting used to.
And my request of everyone out there is don’t be mad at the people that are asking for your banking information. It’s not their law. They didn’t do it. They’re just following the rules. And so don’t take it out on the people that are asking because they can’t do anything about it.
Nate Kreinbrink:
Well, and I think that’s important. Again, it’s not like you at these tax meetings, you guys are just sitting around.
Andy Fergurson:
What can we do to make people’s lives more difficult?
Nate Kreinbrink:
What can we do to make things more difficult? You are implementing what is already passed down to you. And again, this year seems to be a lot of changes. Again, it even goes more to again, doing your own taxes versus having someone that is an expert in it that knows some of these new changes, how they apply. Because again, if you’re doing your own, you may be missing out on some things that you didn’t even know about.
Andy Fergurson:
Never a better time to have somebody help you because it’s really moving this year more than any year that I remember, so get some help.
Nate Kreinbrink:
All good stuff. Before we run out of time here, I want to mention that every Friday, NelsonCorp Wealth Management’s team is wearing jeans for charity. Money raised in the month of November will be donated to the Dolly Parton Imaginary Library of Clinton County.
As always, Andy, appreciate you joining me.
Andy Fergurson:
You bet.
Nate Kreinbrink:
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 the 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, Inc. A broker-dealer, member of FINRA SIPC. Investment advisor representative Cambridge Investment Research Advisors, Inc. 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.