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Who Benefits From The Big Beautiful Bill?
The new tax bill just passed, but will it actually help you? Let’s look at who stands to benefit, strategic moves to consider now while the rules are fresh, and answer a few true or false questions about the law.
Important Links: Website: http://www.yourplanningpros.com
Call: 844-707-7381
----more----
Transcript:
Marc:
This week on Plan With the Tax Man, let's revisit the Big Beautiful Bill conversation. But this time let's look at who it helps and maybe who it doesn't help as we digest more of the Big Beautiful Bill.
Welcome in to Plan With the Tax Man with Tony Mauro and myself as we talk investing, finance, and retirement. What's going on, my friend? How you doing?
Tony Mauro:
I've been doing well. How about you?
Marc:
Hanging in there. We are firmly into August already. Man, the year is just like, "Shoo," just flying by. So I hope everybody's doing well. We're on the back half of the year and we wanted to just readdress a little bit more the Big Beautiful Bill conversation. We talked two weeks ago, Tony, about some of the nuance, some of the numbers, things of that nature, but let's talk about who's benefiting and maybe who isn't, just depending on where you're at. And we'll just kind of refresh some of the rules in the conversation as we're moving along. So in your mind as a planner, as someone who helps people with their business, with their personal, not only taxes, but also financial strategies, things of that nature, who do you see benefiting from this passing law?
Tony Mauro:
Well, I think there's a little bit for almost everyone in varying degrees. So I hate to say that there's no real losers, I don't think. Some people might benefit more than others, but I think that anybody could take some of this, especially with the tax rates and use it to their advantage for a while. It doesn't matter what your income is, it matters of how much that you can do to save for some things. So while I think it's a good attempt to maybe provide some tax relief all up and down the board, yeah, I mean it depends on who you listen to. High income earners are the winners because the greater tax cuts for businesses and the lower income households are losing way more than they're getting. We don't want to get into all that, but we want to at least hopefully explain a few things about this of how you can win on this.
Marc:
And we talked about that a couple of weeks ago. I mean, I think retirees and pre-retirees, certainly with the expanded standard of deduction, see benefit 65 plus, right? So that's a big piece. Some above the line items we talked about for charitable people, that's definitely beneficial. I think married couples that are, I guess middle/upper I guess maybe might be the ones losing out. I think married couples between basically $250,000 of income coming into the house and down. There's quite a few benefits for those folks, right? 250 and up, I think you're not going to see some of that.
Tony Mauro:
Not going to see some of that, especially if you're one of those people and you're both W2 and you don't have businesses or rentals or some things like that. And it depends on some of where you live, but there is some things in there that you might be able to take advantage of. Depending on what state you're living in with the whole SALT cap thing, you might be able to itemize where before you could not. But yeah, I think you're right with the things above 10 or 200, some of that stuff's going to phase out and you might feel like, "Well, I didn't get much out of this," but nevertheless, the tax rates are still relatively low. You still can convert Roth IRAs and do some things for retirement and things that will help you.
Marc:
Clients with no business or rental exposures. They're going to miss that. A little bit, like you said, some of the lower states with the SALT, but I feel like there's a lot of strategy in here for people. So if you're being proactive, which we hope that you are, what strategic moves should savers be looking at?
Tony Mauro:
Well, I think the big one would be, I'm a big Roth guy if you can do it, because way back Congress made a deal, what I call, with the devil, because they allowed these Roths, even though I think it kills them in the end because they can't get any tax on it. But they did set some limits in, but Roth conversions are big because they still allow you to convert from a tax deferred to a Roth, and you can even still do a backdoor Roth. It doesn't matter even what tax bracket you're in. And so even high income owners can start getting that money from the IOU to Uncle Sam to tax-free later on. So I think that's a huge one no matter what bracket you're in, that's the big one. Higher income earners and wealthier people, they did raise the estate and gifting strategies, but you're talking really high net worth up there, so that's not going to affect most of our clients.
Marc:
Right. At least they went to an even number, what was it, 13? It was like $13 million 999 before or whatever. Now they made it $15 million, so it's like-
Tony Mauro:
$15 million.
Marc:
Yeah, thanks for making it simple.
Tony Mauro:
And if you think about that, and if you double that, if you're for joint, you've got $30 million roughly before you have to start paying some of those taxes. I can remember in my lifetime when that exemption was like a million dollars and boy, if today it was that low, everybody would be getting snagged with that one.
Marc:
Yeah, I mean that's a good thing, right? Because I mean just the home values right now would send most people over. Even I think there was talk about before this even went through of them removing that $13 million down to back down there like six or seven or somewhere in that neighborhood even that would've been easy to hit for a lot of people with some of the housing prices.
Tony Mauro:
Especially in these total estates.
Marc:
Yeah, so I think again, charitable deduction, charitable contributions being effective there is certainly going to benefit a lot of people. And when it comes to the estate side, you definitely want to make sure you're still talking with your strategist and hopefully an attorney and you're putting those pieces together anyway, because a lot of people just don't even bother. They hear that number and they go, "Oh, well, I'm never going to touch that, so I don't need an estate plan." It's like, well, no, everybody needs an estate plan. It's just a matter of the estate tax conversation.
Tony Mauro:
Yeah, and the complexity of it. I believe everybody needs an estate plan and some of the basics. Obviously if you get up there to those numbers, then it's more complex and you really do have to do some planning to avoid those nasty taxes, but it's possible to do it.
Marc:
Yeah. Well, what else might trip people up on the new landscape, Tony?
Tony Mauro:
Some things would be implementation windows. Check with your advisor. I mean, we're sending out newsletters, so hopefully our clients are reading those about some of these weird start dates, so you don't do something and miss it and be mad that you don't get that particular deduction. There's that. And then I think too, I think you should check with your advisor to see overall, just you're just your tax advisor and/or your tax and or planning advisor, is, "What can I do? How can this help me?" So you don't go out and do something that you shouldn't, so you don't make a mistake.
And I'll give you an example. The car interest deduction, it's basically for lower to middle income people. It does phase out. It would be a mistake to go out and buy a car that doesn't qualify for that. And so that would really make you mad if you went out and bought a new car. Maybe you got yourself into a loan and with the hope of getting the interest deduction, you don't get it.
The other one is too though, with that one, you have to be careful, and maybe this would be more of a planning situation, is don't go out and buy a new car, maybe just for a deduction if you don't need it. Now, that's going against probably what Congress's intent is, but from a planning standpoint, as an advisor, we want you to stay out of debt as much as possible. But if you're in the market for a new car and need it, do it and maybe you can get a tax deduction that lowers the overall cost a little bit. But again, I think the big takeaway there is really check with your advisor before you implement some things. Let's put it this way, before spending money on things.
Marc:
Yeah, very true. All right, well let's wrap up the program here, Tony, with just a quick true or false on some of the Big Beautiful Bill myths out there. True or false? Social security is no longer taxed.
Tony Mauro:
That is false.
Marc:
Okay.
Tony Mauro:
They're still subject to the income tax depending on your total income, so that's not true. People are getting that confused with the extra deduction or-
Marc:
Yeah, the senior deduction.
Tony Mauro:
Yeah, the senior deduction. Yeah.
Marc:
Well that's my next one, so that's false. Okay. True or false? The new law means tax cuts for everybody.
Tony Mauro:
Yeah, not really because some of it, like the $6,000, I mean really is only for 65 plus and that does phase out if your income is too high. And then the SALT deduction really is going to help mostly people in the higher tax states.
Marc:
Yeah, for sure. True or false? The tax brackets are permanent now, so I don't need to worry.
Tony Mauro:
That's definitely false. You know nothing is permanent in Washington and it only means they're not set to expire. That doesn't mean the next Congress or president couldn't come in and rewrite everything, so absolutely not.
Marc:
Yeah. Okay. The $15 million estate tax exemption means estate tax or estate planning won't really matter to me because I don't make that much or I don't have that much. Right?
Tony Mauro:
And that's definitely false because every state has their own rules. Everybody always fixates on that big federal one. In Iowa, the rules are very different here. And so you are going to need a state tax plan even if you have a net worth say of a million bucks or more, especially depending on who you're going to give it to.
Marc:
There you go.
Tony Mauro:
Definitely check with your advisor.
Marc:
Great point. All right folks, well hopefully the last couple of episodes we're talking about the One Big Beautiful Bill hopefully we helped you with some clarity. I know Tony sent some other things out with newsletters and different things as well. So as always, before you take any action with something you hear from our show or any other podcast or anything you see or read online, see how it relates to your specific situation with your qualified professional because every situation is going to be different. Obviously we're all affected by taxation, we're all affected by social security, we're all affected by healthcare, things of that nature. But how it rolls into and plays in your specific life and strategy is different from person to person.
So make sure you're sitting down with someone like Tony who is a CPA, who's also a CFP and an EA of 30 plus years helping people get two and three retirements. So got all the credentials, got all the stuff there, so make sure you're reaching out to Tony and his team at Tax Doctor Inc. You can find them online at yourplanningpros.com, that's yourplanningpros.com and you can also subscribe to the podcast on Apple or Spotify or whatever app you like using so you can catch new episodes when they come out of plan with the tax man. Tony, thanks for breaking it down, my friend.
Tony Mauro:
Okay, we'll see you next time.
Marc:
I always appreciate you. I always learn something new and we'll see you a little bit later here on Plan With the Tax Man with Tony Mauro.
Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.
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By Tony Mauro
5
11 ratings
The new tax bill just passed, but will it actually help you? Let’s look at who stands to benefit, strategic moves to consider now while the rules are fresh, and answer a few true or false questions about the law.
Important Links: Website: http://www.yourplanningpros.com
Call: 844-707-7381
----more----
Transcript:
Marc:
This week on Plan With the Tax Man, let's revisit the Big Beautiful Bill conversation. But this time let's look at who it helps and maybe who it doesn't help as we digest more of the Big Beautiful Bill.
Welcome in to Plan With the Tax Man with Tony Mauro and myself as we talk investing, finance, and retirement. What's going on, my friend? How you doing?
Tony Mauro:
I've been doing well. How about you?
Marc:
Hanging in there. We are firmly into August already. Man, the year is just like, "Shoo," just flying by. So I hope everybody's doing well. We're on the back half of the year and we wanted to just readdress a little bit more the Big Beautiful Bill conversation. We talked two weeks ago, Tony, about some of the nuance, some of the numbers, things of that nature, but let's talk about who's benefiting and maybe who isn't, just depending on where you're at. And we'll just kind of refresh some of the rules in the conversation as we're moving along. So in your mind as a planner, as someone who helps people with their business, with their personal, not only taxes, but also financial strategies, things of that nature, who do you see benefiting from this passing law?
Tony Mauro:
Well, I think there's a little bit for almost everyone in varying degrees. So I hate to say that there's no real losers, I don't think. Some people might benefit more than others, but I think that anybody could take some of this, especially with the tax rates and use it to their advantage for a while. It doesn't matter what your income is, it matters of how much that you can do to save for some things. So while I think it's a good attempt to maybe provide some tax relief all up and down the board, yeah, I mean it depends on who you listen to. High income earners are the winners because the greater tax cuts for businesses and the lower income households are losing way more than they're getting. We don't want to get into all that, but we want to at least hopefully explain a few things about this of how you can win on this.
Marc:
And we talked about that a couple of weeks ago. I mean, I think retirees and pre-retirees, certainly with the expanded standard of deduction, see benefit 65 plus, right? So that's a big piece. Some above the line items we talked about for charitable people, that's definitely beneficial. I think married couples that are, I guess middle/upper I guess maybe might be the ones losing out. I think married couples between basically $250,000 of income coming into the house and down. There's quite a few benefits for those folks, right? 250 and up, I think you're not going to see some of that.
Tony Mauro:
Not going to see some of that, especially if you're one of those people and you're both W2 and you don't have businesses or rentals or some things like that. And it depends on some of where you live, but there is some things in there that you might be able to take advantage of. Depending on what state you're living in with the whole SALT cap thing, you might be able to itemize where before you could not. But yeah, I think you're right with the things above 10 or 200, some of that stuff's going to phase out and you might feel like, "Well, I didn't get much out of this," but nevertheless, the tax rates are still relatively low. You still can convert Roth IRAs and do some things for retirement and things that will help you.
Marc:
Clients with no business or rental exposures. They're going to miss that. A little bit, like you said, some of the lower states with the SALT, but I feel like there's a lot of strategy in here for people. So if you're being proactive, which we hope that you are, what strategic moves should savers be looking at?
Tony Mauro:
Well, I think the big one would be, I'm a big Roth guy if you can do it, because way back Congress made a deal, what I call, with the devil, because they allowed these Roths, even though I think it kills them in the end because they can't get any tax on it. But they did set some limits in, but Roth conversions are big because they still allow you to convert from a tax deferred to a Roth, and you can even still do a backdoor Roth. It doesn't matter even what tax bracket you're in. And so even high income owners can start getting that money from the IOU to Uncle Sam to tax-free later on. So I think that's a huge one no matter what bracket you're in, that's the big one. Higher income earners and wealthier people, they did raise the estate and gifting strategies, but you're talking really high net worth up there, so that's not going to affect most of our clients.
Marc:
Right. At least they went to an even number, what was it, 13? It was like $13 million 999 before or whatever. Now they made it $15 million, so it's like-
Tony Mauro:
$15 million.
Marc:
Yeah, thanks for making it simple.
Tony Mauro:
And if you think about that, and if you double that, if you're for joint, you've got $30 million roughly before you have to start paying some of those taxes. I can remember in my lifetime when that exemption was like a million dollars and boy, if today it was that low, everybody would be getting snagged with that one.
Marc:
Yeah, I mean that's a good thing, right? Because I mean just the home values right now would send most people over. Even I think there was talk about before this even went through of them removing that $13 million down to back down there like six or seven or somewhere in that neighborhood even that would've been easy to hit for a lot of people with some of the housing prices.
Tony Mauro:
Especially in these total estates.
Marc:
Yeah, so I think again, charitable deduction, charitable contributions being effective there is certainly going to benefit a lot of people. And when it comes to the estate side, you definitely want to make sure you're still talking with your strategist and hopefully an attorney and you're putting those pieces together anyway, because a lot of people just don't even bother. They hear that number and they go, "Oh, well, I'm never going to touch that, so I don't need an estate plan." It's like, well, no, everybody needs an estate plan. It's just a matter of the estate tax conversation.
Tony Mauro:
Yeah, and the complexity of it. I believe everybody needs an estate plan and some of the basics. Obviously if you get up there to those numbers, then it's more complex and you really do have to do some planning to avoid those nasty taxes, but it's possible to do it.
Marc:
Yeah. Well, what else might trip people up on the new landscape, Tony?
Tony Mauro:
Some things would be implementation windows. Check with your advisor. I mean, we're sending out newsletters, so hopefully our clients are reading those about some of these weird start dates, so you don't do something and miss it and be mad that you don't get that particular deduction. There's that. And then I think too, I think you should check with your advisor to see overall, just you're just your tax advisor and/or your tax and or planning advisor, is, "What can I do? How can this help me?" So you don't go out and do something that you shouldn't, so you don't make a mistake.
And I'll give you an example. The car interest deduction, it's basically for lower to middle income people. It does phase out. It would be a mistake to go out and buy a car that doesn't qualify for that. And so that would really make you mad if you went out and bought a new car. Maybe you got yourself into a loan and with the hope of getting the interest deduction, you don't get it.
The other one is too though, with that one, you have to be careful, and maybe this would be more of a planning situation, is don't go out and buy a new car, maybe just for a deduction if you don't need it. Now, that's going against probably what Congress's intent is, but from a planning standpoint, as an advisor, we want you to stay out of debt as much as possible. But if you're in the market for a new car and need it, do it and maybe you can get a tax deduction that lowers the overall cost a little bit. But again, I think the big takeaway there is really check with your advisor before you implement some things. Let's put it this way, before spending money on things.
Marc:
Yeah, very true. All right, well let's wrap up the program here, Tony, with just a quick true or false on some of the Big Beautiful Bill myths out there. True or false? Social security is no longer taxed.
Tony Mauro:
That is false.
Marc:
Okay.
Tony Mauro:
They're still subject to the income tax depending on your total income, so that's not true. People are getting that confused with the extra deduction or-
Marc:
Yeah, the senior deduction.
Tony Mauro:
Yeah, the senior deduction. Yeah.
Marc:
Well that's my next one, so that's false. Okay. True or false? The new law means tax cuts for everybody.
Tony Mauro:
Yeah, not really because some of it, like the $6,000, I mean really is only for 65 plus and that does phase out if your income is too high. And then the SALT deduction really is going to help mostly people in the higher tax states.
Marc:
Yeah, for sure. True or false? The tax brackets are permanent now, so I don't need to worry.
Tony Mauro:
That's definitely false. You know nothing is permanent in Washington and it only means they're not set to expire. That doesn't mean the next Congress or president couldn't come in and rewrite everything, so absolutely not.
Marc:
Yeah. Okay. The $15 million estate tax exemption means estate tax or estate planning won't really matter to me because I don't make that much or I don't have that much. Right?
Tony Mauro:
And that's definitely false because every state has their own rules. Everybody always fixates on that big federal one. In Iowa, the rules are very different here. And so you are going to need a state tax plan even if you have a net worth say of a million bucks or more, especially depending on who you're going to give it to.
Marc:
There you go.
Tony Mauro:
Definitely check with your advisor.
Marc:
Great point. All right folks, well hopefully the last couple of episodes we're talking about the One Big Beautiful Bill hopefully we helped you with some clarity. I know Tony sent some other things out with newsletters and different things as well. So as always, before you take any action with something you hear from our show or any other podcast or anything you see or read online, see how it relates to your specific situation with your qualified professional because every situation is going to be different. Obviously we're all affected by taxation, we're all affected by social security, we're all affected by healthcare, things of that nature. But how it rolls into and plays in your specific life and strategy is different from person to person.
So make sure you're sitting down with someone like Tony who is a CPA, who's also a CFP and an EA of 30 plus years helping people get two and three retirements. So got all the credentials, got all the stuff there, so make sure you're reaching out to Tony and his team at Tax Doctor Inc. You can find them online at yourplanningpros.com, that's yourplanningpros.com and you can also subscribe to the podcast on Apple or Spotify or whatever app you like using so you can catch new episodes when they come out of plan with the tax man. Tony, thanks for breaking it down, my friend.
Tony Mauro:
Okay, we'll see you next time.
Marc:
I always appreciate you. I always learn something new and we'll see you a little bit later here on Plan With the Tax Man with Tony Mauro.
Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.