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 representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member, 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 joining me this morning. We are into October.
Andy Fergurson:
Full on into October.
Nate Kreinbrink:
Full on into October. Playoff baseball is going on.
Andy Fergurson:
It’s awesome.
Nate Kreinbrink:
Everything is just moving right along. Halloween decorations are up.
Andy Fergurson:
Yeah. The days are nice and warm, but the evenings and mornings are crisp and cool.
Nate Kreinbrink:
Yes. Do you know, was it Monday night, I actually had to shut my windows at night because it was…
Andy Fergurson:
Really?
Nate Kreinbrink:
It was chilly. It was chilly. I’m not complaining.
Andy Fergurson:
Have you had to wear a jacket, yet?
Nate Kreinbrink:
To bed?
Andy Fergurson:
No, to outside.
Nate Kreinbrink:
Yes, I have. Well, a hooded sweatshirt.
Andy Fergurson:
Yeah, a hoodie or a jacket on a Friday night football game. Yeah, I’ve been there, too, but that’s about as far as it’s had to go.
Nate Kreinbrink:
Yeah. I liked it. It feels good. Definitely feels fall-ish, I guess you would say.
Andy Fergurson:
Yeah.
Nate Kreinbrink:
So like I said, Halloween decorations, all that fun stuff is here.
Andy Fergurson:
It’s a great time of year. It’s the end of a good long year.
Nate Kreinbrink:
And the rain has stopped.
Andy Fergurson:
The rain has stopped. The sun shines every day, but it doesn’t feel hot. It doesn’t feel sweaty and gross. So I love the fall time. The only thing I don’t like about it is, it’s the end of the year, and what comes when the calendar turns over is tax season.
Nate Kreinbrink:
Well, that is on the horizon.
Andy Fergurson:
I love Christmas and the holidays. I love getting ready for that stuff, but they’re always a little bittersweet because I’m sitting there going, “Oh.”
Nate Kreinbrink:
I know what’s ahead.
Andy Fergurson:
You know what happens in two weeks or six weeks.
Nate Kreinbrink:
It is. Before we get to that point, though, the middle of October, October 15th is another important deadline in the tax season.
Andy Fergurson:
It’s the deadline.
Nate Kreinbrink:
It is the final finale.
Andy Fergurson:
It’s the last line in the sand.
Nate Kreinbrink:
Yes.
Andy Fergurson:
It’s the final countdown, the final deadline. If you were somebody who didn’t get your tax return prepared during the regular tax preparation season before April 15th, you likely called a preparer and said, “Give me an extension.” And so the preparer created an extension for you. That’s a real easy process and that gave you an additional six months. Well, six months from 4/15 is 10/15, and that is next week. Next Thursday is the final deadline. And so it’s time. If you’ve been waiting, let’s get that stuff in. Let’s get your documents together, get them in. You are now running into a situation where you may be handing your stuff to your preparer and them saying, “I don’t know if it’s going to get done in time.” That’s where I’m at. When people are starting to hand me stuff today, I’m saying, “I’ll do everything I can, but there’s not that many moons left before we hit the deadline.”
Nate Kreinbrink:
Right.
Andy Fergurson:
And so any minute you wait now is going to cost you.
So I know you probably have plans to go apple picking or something this weekend, but really you need to get your tax stuff done or you’re going to be late. And if you’re late, that’s okay if they owe you money.
Nate Kreinbrink:
Right.
Andy Fergurson:
If you owe them money, it was due six months ago. And so you’re going to get interest on what you have to pay. And if you owe money and you don’t file before the 15th, you’re going to get a failure to file on time penalty on top of that. So it’s time, you’ve had 10 months since the year ended to do this, it’s time to get it going or you’re going to face the consequences of the penalty.
Nate Kreinbrink:
Right. And again, important that you’ve known this date is coming, get them in, get them done and clear up 2025 because it’s almost time to start –
Andy Fergurson:
We got to start 2027. Let’s get 2025 wrapped up.
Nate Kreinbrink:
Let’s do that. And I think with taxes, I think again, people think taxes, they think, okay, what bracket am I in? The 12%, the 22% and everything with that.
Andy Fergurson:
Sure.
Nate Kreinbrink:
Which, again, is obviously where taxes fall, but it’s important that when you look at your income-
Andy Fergurson:
Yes.
Nate Kreinbrink:
That with some of these new credits, new deductions, new all of this stuff, it’s not a blanket. Everybody gets it.
Andy Fergurson:
Sure.
Nate Kreinbrink:
A lot of them have these income thresholds that allow you to qualify for these.
Andy Fergurson:
Right.
Nate Kreinbrink:
If your income is above a certain threshold, you do not qualify. Some of them is you just don’t qualify. Some of them are a phase out as far as you don’t get the full credit with that.
Andy Fergurson:
Right.
Nate Kreinbrink:
But again, when we start doing tax planning, end of the year tax planning, Roth conversion, all this stuff, again, sometimes we think we’re doing the right thing, but it jeopardizes something else.
Andy Fergurson:
Sure.
Nate Kreinbrink:
So when you do that, that planning, again, when you look at some of these credits, especially a few of these three that you just have on here, it’s important that you’re looking at the big picture because you don’t want to jeopardize something else.
Andy Fergurson:
Well, first of all, a lot of people don’t realize there are credits that have limitations on them. Common credits like the education credits that you get for having a kid in college, those have an income limitation, an upper threshold where your family, you and your spouse or you can only make so much money and then you don’t get that credit anymore. The advanced premium tax credit, that’s the credit for insurance. Everybody knows about that income limitation, but it’s important to understand that it’s there. We’ll talk a little bit more about the savers match here in a minute.
But couple things to know. One, that there are limitations, whether or not it’s a phase out or a cliff, like we said. And then the other thing that I think is important to know that I don’t know that people really realize, and that is that you can control your income. There are things that you can do if you are right on the edge of one of these limits that reduce your income. If the limit is $175,000 in a household and your household is at $177,000, well, $2,000 isn’t a lot of money to make up. Maybe you put that $2,000 into your IRA or into your 401. Well, now your income that’s getting counted towards that number just dropped.
Maybe you put money into an HSA, maybe you delay a bonus. If a bonus is offered to you and your company says, “Hey, we’re going to give you this bonus and we’re going to give it to you on 12/30,” well, maybe you say to them, “Hey, can you write my check on 1/5?” Because that would change your income. So there’s things that you can do to enact those credits, especially if you’re right there on the edge. Credits that you realize on your tax return, the education credits aren’t nearly as big a deal because if you don’t manipulate your income, you then don’t get the credit. But the advanced premium tax credit that has to do with your marketplace health insurance, that’s a big one because they give you that credit in advance. So then if you don’t qualify, well, that means you got to pay it back.
Nate Kreinbrink:
Right.
Andy Fergurson:
And I’ve seen people before they changed the law in 20, I want to say it was 2020, 2022, they changed the law. There were people before that who were paying back $14,000, $10,000. Well, not many people have refunds that are going to cover that big payback. And if they do, they’re generally expecting that big refund.
Nate Kreinbrink:
Right.
Andy Fergurson:
So if you can take $2,000 and put it in an IRA or put it in an HSA and bring yourself back below that threshold and not have to pay back $14,000, that’s a great move. So it’s just important to know that they’re there and be aware of them.
And that leads me to another thing that we got this week. Mike brought to me a letter that one of his clients got. So the IRS started sending out a notice. This notice was CP321J, and it’s a reference to the savers match. So what has existed in the past is called the savers credit. That credit was something that you got if you were below a certain income number and you put money into a 401k, into an IRA, into some kind of retirement plan, the government would give you a credit on your tax return called the savers credit. Well, they changed the law effective 2026 to where that credit is not going to be a credit. It’s what they’re calling a savers match. And so if you qualify as somebody who would have gotten the savers credit, now what the government is going to do, instead of giving you a credit on your tax return, they’re going to give you money to put into your 401k, into your retirement account. And that is called the savers match.
And so there are some people who have qualified for the credit in the past and they will just change to the match, not that big a deal. But there are other people who now, maybe they could qualify, but they’re people who wouldn’t have tried to get any kind of credit. Maybe you’re in retirement and you have just a little bit of income and you work a part-time job. Well, you may be able to put some money into a 401k or an IRA and then the government’s going to give you $1,000. Well, if they’re going to give you $1,000, why not take that free money? You can take it right back out if you’re above retirement age. And so there’s just some strategy, some planning there that comes with the savers match, replacing the savers credit. But it’s new. It’s new for 2026, so it’s something you need to know about.
I’ll add one more thing that’s new for 2026, and that is an above the line deduction for some charitable contributions. I didn’t write it on our list, so Nate’s giving me kind of a face. But it’s something that in 2026, you can get an above the line deduction for charitable contributions. What that means is you don’t have to itemize to get that credit. So we have people who maybe have stopped reporting their charitable contributions because they don’t matter. For the last five years, if you lived in Illinois and you weren’t itemizing, it didn’t matter. Why would you report your charitable contributions?
Nate Kreinbrink:
Right.
Andy Fergurson:
Or if you lived in Iowa and you weren’t taking qualified charitable distribution or something like that, you weren’t going to itemize, why report it? It’s not going to matter. You’re getting this $33,000 deduction if you’re married and so you knew you weren’t going to itemize and so you just stopped collecting those receipts. Well, now you can still get the $33,000 deduction and a couple hundred dollars of deduction above the line if you did make charitable contributions. So that’s something to remember and bring back with your taxes.
Nate Kreinbrink:
All great stuff. And I think it just goes into the whole thing of talk with somebody.
Andy Fergurson:
Talk to somebody who knows something.
Nate Kreinbrink:
Again, the tax law of these codes, these changes, these new laws, these new addendums, these changes and everything, to try to keep up with that on your own is a losing battle. And I think, again, it just proves the importance of Andy, of Mike and their team and what they do. This time of the year is their tax planning time, the time you like before that new year. But again, all good stuff. Give them a call. They’d be happy to sit down with you.
Did want to mention real quick before we run out of time that every month, NelsonCorp Wealth Management is featuring a new charity of the month. For the month of October, we are focusing on the Clinton Pereira Earthquake Fund.
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 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.