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In this episode, Dr. Friday is wrapping up 2025 with critical updates on the “One Big Beautiful Bill” (OBBBA) and what the changing tax landscape means for your wallet. With the holiday season in full swing, Dr. Friday takes a break from her beehives to break down the new 2025 tax brackets, the major increase in the SALT deduction, and the newly established “Trump Fund” for children. Whether you are looking for last-minute year-end moves or planning for retirement distributions, this episode is packed with essential financial strategies.
Episode Summary Points
- Year-End Deadlines: While it is late in the game for 2025, there is still a small window for Roth conversions or maximizing 401(k) contributions before the final paycheck of the year.
- Historical Tax Perspective: A look back at tax rates from 1913 to present, noting that despite current complaints, we are historically in a lower tax period compared to the 92% rates of the 1940s.
- 2025 Tax Brackets: A breakdown of the new brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) and the elimination of the marriage penalty for couples earning under $600,000.
- Mortgage Interest: Clarification on the $750,000 mortgage cap (post-2017) and confirmation that interest on second homes is deductible if the combined loan value is within limits.
- New SALT Cap (OBBBA): The State and Local Tax (SALT) deduction cap has increased from $10,000 to $40,000 for 2025, bringing “bunching” strategies back into play.
- Medical Deductions: Tips on deducting medical expenses (over 7.5% of AGI), including essential assisted living costs.
- The Trump Fund: Details on the new government-seeded investment accounts ($1,000) for children born after Jan 1, 2025, and contribution rules for families.
- Social Security Taxation: Advice for retirees on the “Provisional Tax” calculation—if your combined income exceeds $25,000 (single) or $32,000 (married), your benefits are taxable.
- Charitable Giving: The benefits of using Qualified Charitable Distributions (QCDs) for those over age 70½ to give directly from IRAs tax-free.
Episode FAQ
Q: Did the limit for State and Local Tax (SALT) deductions change for 2025?A: Yes. Under the new legislation (OBBBA), the SALT cap has increased from $10,000 to $40,000. This allows taxpayers to deduct significantly more for property taxes and sales tax, making itemizing deductions beneficial for more people.
Q: Do I need to have taxes withheld from my Social Security checks?A: It is highly recommended if you have other sources of income (like a pension or investment interest). If your combined income (Adjusted Gross Income + 50% of Social Security) exceeds $25,000 for individuals, up to 85% of your Social Security benefits becomes taxable.
Q: What is the “Trump Fund” mentioned in the show?A: This is a new program for children born on or after January 1, 2025. The government opens a $1,000 investment account for the child. Parents and grandparents can contribute up to $5,000 annually until the child turns 18. It functions similarly to an investment fund with penalties for early withdrawal.
Q: Can I deduct the mortgage interest on a second home?A: Yes, provided the combined mortgage debt of your primary and secondary homes does not exceed $750,000 (for loans originated after Dec 16, 2017).
Q: What is a QCD and who should use it?A: A Qualified Charitable Distribution (QCD) allows individuals aged 70½ or older to donate directly from their IRA to a qualified charity. This money is not counted as taxable income, making it a more tax-efficient way to give than writing a personal check.
Transcript
No, no, no.
She’s not a medical doctor, but she can sure cure your tax problems or your
financial woes.
financial woes.
She’s the how-to girl.
It’s the Doctor Friday show.
Question for Dr. Friday, call her now.
737-WWTN.
That’s 737-9986.
So here’s your host, financial counselor, and tax consultant, Dr.
Friday.
G’day, I’m Dr. Dr.
Friday and the doctor is in the house on this absolutely beautiful Saturday.
Friday and the doctor is in the house on this absolutely beautiful Saturday.
I was actually able to go out to my beehives and make sure they were all
happy.
happy.
Didn’t want to open them with
It’s too cold outside, but it is a pretty day.
So everybody is out flying around and hopefully you guys are out doing your
last minute Christmas shopping.
last minute Christmas shopping.
Um, it’s probably almost too late
to think about any kind of conversions or anything like that.
In my opinion, I doubt you’re gonna have a lot of financial planners that will
be putting in a lot of extra time into uh dealing with, you know
be putting in a lot of extra time into uh dealing with, you know
That kind of stuff.
They’re pretty much probably full up and ready to close out the year at the
thing, but the you still have time.
thing, but the you still have time.
Theoretically, um a Roth conversion or
Contributing if you haven’t received your last paycheck, you could maximize
your 401k.
your 401k.
Um, those kind of things would be a way of helping to reduce your current
income situation.
income situation.
But seriously, it’s the 20th and not a lot of activity probably happening in
the next few days.
the next few days.
I came across this with one of my
One of my good friends, Hank Parrot, he had this uh saying by Albert Einstein.
I thought it was kind of a good one.
And why not?
Since I know most of you guys are out there probably shopping.
Preparing my tax return is too difficult
For a mathematician, it takes a philosopher.
The hardest thing to understand in the world is income tax.
That was what Albert Einstein said.
And think about back in the day, he was doing taxes.
It really wasn’t as complicated as it is now.
I mean, now it’s ten times the size of the King James Bible.
So I thought that um
Little information would be good for you.
Top income rates throughout history.
We all think that we’re paying a lot in taxes, and I’m sure some people feel
that way.
that way.
And taxes has changed who they’re taxing, right?
So back in 1913, when the tax code was about 6%, that was actually only on the
top earners, right?
top earners, right?
I mean, you had to be making more than, you know.
$10,000.
And back in 1913, that would have been making like $200,000 today.
Um, and that’s my personal estimate.
I’m sure that’s not the exact conversion
But then if you look at like by by 1916, you’ll see that the tax rate went up
to 80%.
to 80%.
80%.
Do you think those people felt like they are paying too much in taxes?
That’s when they started finding loopholes.
They find try to find some way to save.
And then by 2025, it was back down to about 25%.
Then we start kicking our way up the highest in the last.
hundred plus years was about ninety-two percent tax.
And that was right around nineteen forty-three.
That’s what they were paying in tax.
And then it kind of works its way down.
And we’re not actually, of course, the lowest was back in 1913, but we’re
right around the lowest.
right around the lowest.
But the the lower period, there was some low periods back in the 1980s.
where we were pretty close to what we are, maybe a little bit less, but mostly
we are at the lower period of our lifetimes of the tax cut.
we are at the lower period of our lifetimes of the tax cut.
So if you think you’re paying too much today in taxes, you must be prepared
because it used to be when when
because it used to be when when
when I was working and still am, but when people used to always say, you save,
save, save now, because when you hit retirement, you’ll be at a lower tax
bracket.
save, save now, because when you hit retirement, you’ll be at a lower tax
bracket.
But the question is, for some people, depending on what their work history
was, they may may or may not be, but basically most of us right now are at a
lower bracket than we most likely will be
was, they may may or may not be, but basically most of us right now are at a
lower bracket than we most likely will be
Especially if you look at the spending of our government, most likely will be
in our lifetime.
in our lifetime.
So the the the likeliness of taxes going down further
I think is fairly rare.
Will it stay the same?
I hope.
That would be great, at least for the next 20, 30 years.
I’d like that.
But, you know, no one really knows what’s going to happen.
So we do taxes based on what the current tax laws are.
And then we have to change those.
So the new tax brackets for 2025, 2000, 10%, 12%, 22, 24, 32, 35, 37.
Those are the brackets
And you can see there’s a big jump between 12 and 22.
And not only, and they’ve done a fairly good job.
of making there be no marriage penalty.
So if you’re single, your your 22 ends at 103 and a married couple 206
No penalty.
The penalty actually comes into play when you’re in the 35% going into the
37%.
37%.
At that point, if you are both high income earners.
Um, you know, there is a lot of penalty because you lose a huge amount of
money uh being married at that point.
money uh being married at that point.
But up until you get past the 32 or a couple making more than about six
hundred thousand dollars.
hundred thousand dollars.
You don’t really have much of a marriage penalty at this point.
Not too sure why we have any marriage penalty.
It doesn’t really make a lot of sense.
But you know what?
No one really asked us.
So all we can do again is dealing with the tax picture.
All right.
So then we’ve got mortgage interest.
Here’s some good things about the OBBBA, the new one, the deduction for
mortgage interest.
mortgage interest.
Of course, that stays if you have a home for $750,000.
You purchase it after December 17th, that’s the mortgage you can have.
So if you have a home today you purchased last year and the mortgage is a
million dollars, you will not get 100% of your mortgage interest.
million dollars, you will not get 100% of your mortgage interest.
You will have to take a percentage based on how much the mortgage is and based
on what you’re allowed, up to 750.
on what you’re allowed, up to 750.
If you had a pre-existing to the 2017, then you had a million-dollar cap.
So it’s important for that information to be provided to whoever’s doing your
taxes, right?
taxes, right?
They should ask you that information.
Now, most of the time on the 1098, it will say the origination date.
So we don’t always have to ask, but we need to know it.
This is something that I’m not too sure if people know interest on a loan for
a second home is still allowed.
a second home is still allowed.
So I have a lot of people that do have second homes.
Maybe they have a home here.
Home in Florida.
I have one that has one in California and his second home is in Utah because
that’s where the two families are.
that’s where the two families are.
And they don’t rent them.
They don’t do anything.
It’s a
true traditional second home a mortgage on both as long as those mortgage
interest up to uh value of the home was seven hundred and fifty thousand
interest up to uh value of the home was seven hundred and fifty thousand
You will only be able to deduct the interest on the first $750 of the combined
value of loans on your first and second home
value of loans on your first and second home
So again, that $750,000 is the prior or is the priority number.
So if you’ve got a first on your home, your your main home and it’s
400,000 and you have a second with a home of 350, we’ll be able to take all
the mortgage interest.
the mortgage interest.
If your first home is already at 750 and you have a second home, we will not
be able to
be able to
take any more of that mortgage interest.
But you know, a lot of times people can can do that and make it work.
The new state and local tax deduction, we call it SALT tax.
state and local tax deduction.
And that’s where we take off our property taxes, the sales tax, that’s the two
main ones, and then your primary home and if you have different properties,
you can add additional properties.
main ones, and then your primary home and if you have different properties,
you can add additional properties.
We have it up now, now it’s jumped up to 40,000, right?
For the last couple of years, we were locked in at $10,000.
very hard to um really do um where where we would bunch.
We did bunching.
So every other year, like every even year, I made sure I doubled up on my
property taxes
property taxes
I had any big purchases I tried to do in the even years and and did that so
that way I could maximize my property taxes and then take my mortgage
interest, etc.
that way I could maximize my property taxes and then take my mortgage
interest, etc.
etc.
Right
Um you don’t have that uh as concern now because the ten thousand we we
weren’t able to do it.
weren’t able to do it.
I mean with my property tax and my standard sales tax
I was already basically hitting that number and many of my clients were.
So what you do have is now the ability to go back to bunching
Right?
Because again, we’re going to talk about how much money you have to have to
meet those standard deductions, but you know, if
meet those standard deductions, but you know, if
If you’re single and you’ve got more than 15,000, great.
Uh if you’re over the age of 65, it’s like 17,000.
If you’re single and if you’re married, it’s like 31.
5, plus if you’re over the age of 65, you get an additional 3,200.
plus another 12 based on your income.
We’re going to talk about that new one on the OBBB or the one big beautiful
bill.
bill.
Talk a little bit about how that um 6,000 per person over the age of 65.
Remember, this show is live, so if you want to join us, 615
737-9986-615-737-9986 is the phone number here.
So we’ve talked about bunching, we’ve talked about the sales tax.
The only other thing that really hits the itemization.
Uh there’s two things.
The next thing would be medical expense.
This one is a a very difficult because first thing you have to do is you gotta
figure out what your adjusted gross income is.
figure out what your adjusted gross income is.
Then you have to take off the top 700 7.
5%.
So, you know, if you have $100,000, 7.
5%, $7,500 would be not deductible.
So if you had $8,000 in medical, you’d only get $500 of that applied to your
itemization.
itemization.
So if that’s the case on this
Then, you know, and it does cover everything.
It’s surgeries, you know, petro for or or miles for yourself, um, qualified
appliances, glasses, all that stuff, right?
appliances, glasses, all that stuff, right?
You you can add it all together
Um, the ones that I find that mostly, unless you have high medical and fairly
low income, then you can sometimes and I mean there are times when I I mean
low income, then you can sometimes and I mean there are times when I I mean
I always hope that you have low medical because that means your health is
good.
good.
Cause sometimes I do have people that spend twenty, thirty, forty thousand
dollars a year, but they’ve usually went through something horrific like
cancer or they’re fighting something at a lot of out of pocket cost.
dollars a year, but they’ve usually went through something horrific like
cancer or they’re fighting something at a lot of out of pocket cost.
But the other is if you are a person that’s taking care of or helping maybe
your parents and they’re in assisted living.
your parents and they’re in assisted living.
Keep in mind assisted living normally a portion, if not all, depending on the
situation
situation
um could be considered a medical deduction, right?
Because they have to stay in these facilities.
Someone has to tell them or give them their
prescription, someone has to help them with their hygiene.
Someone has to help them maybe even get up in and out of bed or or showering
and bathing.
and bathing.
These are essentials.
If they can do all that themselves, then no, that’s not essential.
They may be living in an assisted living just because it’s easier, but it may
not be essential.
not be essential.
But most of the people we deal with, it’s really essential that they’re in
there.
there.
And then
Now you really you know you might want to consider where the money’s coming
from because if you’re spending $70,000, $80,000 for um assisted living or or
dementia care or whatever
from because if you’re spending $70,000, $80,000 for um assisted living or or
dementia care or whatever
Um, you know, now we we are going to have a huge medical deduction that you
want to maximize.
want to maximize.
And maybe at that point, instead of using money that’s been saved, you might
want to consider taking IRA distributions if they have some or something.
want to consider taking IRA distributions if they have some or something.
All right, we’re gonna get ready to take our first break.
We get back, we can have you on the phones at 615-737-9986.
We’re gonna continue talking about some of the changes that’s happening for
the 2025 taxes.
the 2025 taxes.
We’ll be right back with the Dr. Friday show.
Common at the last Alrighty, we are back here for the video talking about
time.
time.
Many of you have listened and
And and followed me for a number of years.
Obviously it’s been what 14, 15 years now.
Uh but you know, just the last eight years we had what the Tax Cuts and Jobs
Act that happened what 2017
Act that happened what 2017
Then we had Inflation Reduction Act of 2022, and now we have the one big
beautiful bill or the OBBBA in 2025.
beautiful bill or the OBBBA in 2025.
And this is just what’s happened, you know, in just in the last eight years.
We’ve had a number and it within those, you know, like the one big beautiful
bill took and made several of the TCGAs, the the tax act, um
bill took and made several of the TCGAs, the the tax act, um
bills permanents, right?
They they made them through and then some of ’em were actually made permanent
through the other uh through the tax act.
through the other uh through the tax act.
So
All of these are ones that are working.
Now I do want to say that I was talking about the new salt tax, uh, the state
and local income tax, which we had the $10,000 limit on, and in 2025 that goes
up to $40.
and local income tax, which we had the $10,000 limit on, and in 2025 that goes
up to $40.
That has not necessarily been like a permanent thing, right?
We know it’s going to 40.
It’s also going to have an income phase out.
So
We have to be careful.
The way that a lot of these credits are coming to us are going to be
income-based.
income-based.
subjected to income limitations.
Most of these new temporary phases.
So the main ones are, of course, is tips.
Qualified tips, qualified overtime, the $10,000 loan up to $10,000.
You have an additional $6,000 for seniors over the age.
These are all
subjected to income limitations.
So if you have um an upper income situation and some of these
sound great because I was just doing someone’s 2025 already.
Yes.
Well we were estimating to give them an idea of what their estimates should
be.
be.
So we make sure we don’t underestimate this year.
Um, and we were going through the numbers and we were thinking we were going
to have a wonderful benefit of an additional six thousand dollar deduction
because this person was over the age of sixty-five.
to have a wonderful benefit of an additional six thousand dollar deduction
because this person was over the age of sixty-five.
But due to their income, that benefit did not show up.
And it took us a while because we’re all new at some of these and we haven’t
really done
really done
you know, hundreds of tax returns yet.
So we don’t have all of the exact details on that.
But that limitation um was
Pretty um, it seems like a limiting 75,000, but it basically phases, starts
phasing out, and then it phases all the way out at like 175 for a single, and
then it’s like 150 and it phases totally out by like 250.
phasing out, and then it phases all the way out at like 175 for a single, and
then it’s like 150 and it phases totally out by like 250.
Um
It’s just one of those things where it it sounds so great, but when you’re
really working on the the information that’s being given to you.
really working on the the information that’s being given to you.
And this person, the the problem was
um or not the problem, but the situation was this person had a large stock
that they went ahead and sold to take care of, paying things off and, you
know, making themselves more comfortable in
that they went ahead and sold to take care of, paying things off and, you
know, making themselves more comfortable in
um retirement.
And at the time didn’t really know.
She did this early in the year.
She didn’t know anything about this six thousand dollar deduction.
And she could have, maybe she would have.
I don’t know.
uh moved it down and maybe took a portion this year and a portion next year,
um, it was on the table.
um, it was on the table.
But for us, it really wasn’t going to save tax dollars, right?
So
We didn’t know.
And that’s always the hard sense.
So basically the deduction is reduced six cents for every dollar over your
modified adjusted to gross income over the initial threshold.
modified adjusted to gross income over the initial threshold.
So if you are
eighty thousand dollars, um you’re gonna take six cents out of every dollar
that’s above the $75,000, so $5,000, and you’re gonna reduce your $6,000 by
that
that’s above the $75,000, so $5,000, and you’re gonna reduce your $6,000 by
that
It uh seems fairly straightforward, but you know, a lot of times people,
especially as we get closer to retirement, and I deal with a lot of financial
planners.
especially as we get closer to retirement, and I deal with a lot of financial
planners.
There seems to be a point where we’re really just trying to get the houses
paid off, making sure we have the cash flow, reduce the overhead cost, and
some of that sometimes can trigger these things.
paid off, making sure we have the cash flow, reduce the overhead cost, and
some of that sometimes can trigger these things.
So, you know, I’m just saying that you may hear a lot about these different
deductions.
deductions.
But sometimes they’re not going to apply to you.
It’s really that simple.
They’re just not going to um take in the effect.
I mean, most of the energy credits
uh for like clean vehicles and ever all those you had to uh purchase before
September 30th.
September 30th.
Uh corporate law did get extended and uh I had an interesting conversation
with a financial guy um yesterday, uh Friday.
with a financial guy um yesterday, uh Friday.
And um he had an interesting, he was under the he’s a young guy, very young,
um, and he just had the idea that a corporation should be paying more in tax
instead of building up their
um, and he just had the idea that a corporation should be paying more in tax
instead of building up their
finances and that would help reduce the uh overall cash flow that the
government has.
government has.
And you know
I totally disagree with that, to be quite honest.
I feel that a corporation’s tax is flowed down to the people that are the
consumers
consumers
And the profits that mi corporations make show up in the stock portfolio,
which my portfolio, if I’m invested with them and I’m invested with
which my portfolio, if I’m invested with them and I’m invested with
Thousands of stocks in my 401k, or in my case, a SEP, then my CEP improves
when those businesses do good.
when those businesses do good.
So in essence, I’m getting a portion of that
Growth when I invest into these kind of companies.
And so my opinion, them paying more in taxes doesn’t help.
And also
you know, I find that a large number of these companies also have a very large
charitable fund that, you know, they get a tax deduction for.
charitable fund that, you know, they get a tax deduction for.
It doesn’t, you know, I mean there’s an advantage to them for it.
But it still doesn’t stop the fact that that also helps billions of dollars
into the f the the charitable markets to help people, you know, feed children
and everything else.
into the f the the charitable markets to help people, you know, feed children
and everything else.
So
Everyone’s got their own opinion.
My opinion is that.
There is the new Trump fund.
I do want to bring this up because
If you have a child that was born as of January 1st, 2025, and I think it goes
through December of 28.
through December of 28.
They will put in the a in account.
You have to file this with your tax return.
So your tax person needs to know this.
But basically it comes down to is they’ll if you have a child and that was
born
born
The first of this year or anytime after the first of this year, um, there’s a
$1,000 account that the government will set up.
$1,000 account that the government will set up.
And I do believe I read something about a grant of $250,000
given by Dell Corporation for the first, I don’t know, 200 million or
something like that.
something like that.
So if you if you’re on top of it, you may qualify for both.
And then
Grandparents, aunts, uncles, or parents can put up to $5,000 into these
accounts up until the age of 18.
accounts up until the age of 18.
Um the the the cool thing about this is is that normally we don’t have a lot
of vehicles where we can put money into these counts.
of vehicles where we can put money into these counts.
for a minor child that’s not working.
Sure, as soon as your child goes to work, we can help put money into Roth
IRAs, whatever their W-2s are.
IRAs, whatever their W-2s are.
w uh you know, Roth IRA could theoretically be gifted to them and that money
could go into a Roth um and that would start.
could go into a Roth um and that would start.
But that’s usually fifteen, sixteen years old.
I don’t know what age kids start working nowadays, but in that ballpark.
Um, and then only grandparents or parents can really help and maybe the kids
would actually contribute some.
would actually contribute some.
But again, there’s not a lot and you’d hope to be able, but this would be the
first
first
Let’s say fifteen years then and then they go to get a job and then maybe they
can help fund the money.
can help fund the money.
I think it is great to teach everyone.
I mean it’s
It’s hard when you’re just making a few dollars on every paycheck and your
petros is sp is is the entire paycheck.
petros is sp is is the entire paycheck.
Uh but you do, you know, if possible, teaching them that portion of every
check should go to I had a
check should go to I had a
uh financial another a different financial guy and he was telling me he works
so the rule of thumb that ten percent for savings, ten percent for church
so the rule of thumb that ten percent for savings, ten percent for church
and um and 80% or whatever for for lifestyle, something like that.
I seem like it was like 70%.
I’m missing 10% on something.
Uh, but that was his his whole mathematics.
So you should be living off basically 70% of your paycheck, not 100.
And that’s true.
We all know that, right?
We should never be living off 100% of our paychecks.
You owe me it’s always savings.
So it’s 10% uh retirement, 10% church, and 10% savings.
That way, you know.
you lose your job or your boss is a butthead and you need to change your jobs.
You
Um you’re not sitting there trying to figure out how you’re going to pay your
rent or putting up with somebody because you don’t have the extra money to be
able to
rent or putting up with somebody because you don’t have the extra money to be
able to
do what you need to do to move up in the chain.
So, you know, it’s and it’s I’m not going to tell you it’s not easy for
someone to tell you this versus living it because
someone to tell you this versus living it because
um a lot of things happen, your car breaks down.
But that’s where the savings come in, right?
I mean, you do have the ability because if you don’t have savings, guess what?
You’re getting into a credit card most likely.
And then the credit card, you’re gonna pay twice as much as what you paid if
you had cash.
you had cash.
because you have to pay them money and you don’t pay it off fast enough, it’s
gonna have interest in penalties and everything going there.
gonna have interest in penalties and everything going there.
So I’m just saying it’s it’s not as simple, but ideally
um these these accounts.
And you need to tell, I mean, again, that tax person should know that.
But some of you guys do your own tax returns when you get ready to
um do them.
And if you do, make sure you’re looking out for that because, you know, you
want to I’m I’m gonna assume there’s going to be a question um, you know,
about the the Trump fund and what it has and everything.
want to I’m I’m gonna assume there’s going to be a question um, you know,
about the the Trump fund and what it has and everything.
But
uh you you are going to want to make sure that you qualify because $1,000 is a
thousand dollars.
thousand dollars.
Now you can’t really take it out early and it’s very important that you um
you know, do what you have to do.
And you can look it up yourself.
It’s called the Trump account.
And no one should be shocked that we actually have something called the Trump
account.
account.
But it is an investment fund.
The money is invested for you.
You take it out early.
If you take it out anytime before you full retirement, basically, there is a
penalty.
penalty.
Um, it’s just like an IRA in many ways, but
I do think it’s important, I mean again, even if you never fund any of it,
it’s a thousand dollars that this child would have and who knows what it would
be worth.
it’s a thousand dollars that this child would have and who knows what it would
be worth.
assuming that the market holds or whatever, um keeping it moving forward.
But it is one of those things.
You can go to trumpaccounts.
gov also if you want to know more about that.
Again, I don’t have children, but anytime someone’s going to give away some
free money, I want to make sure my listeners know that it’s available.
free money, I want to make sure my listeners know that it’s available.
And then it’s another thing.
I mean, because you have the 529 plan.
As a parent or as grandparents, I am somewhat I’ve been researching them
because I had a friend that actually got involved and I thought back back when
they first started
because I had a friend that actually got involved and I thought back back when
they first started
There was some pretty bad features to it, right?
You couldn’t pay for your your rent, you couldn’t pay for almost anything.
It just basically could go towards um college uh tuition.
at at the beginning.
So now it goes for everything, right?
Tuition, fees, books, supplies, equipment like computers, room, board for
students enrolled at least half the time.
students enrolled at least half the time.
Tuition for elementary.
and secondary public, private, or religious schools up to the federal limit of
$10,000 annually per beneficiary, increasing to $20,000 in 2026.
$10,000 annually per beneficiary, increasing to $20,000 in 2026.
So, you know, um those are those are huge.
And that’s a great way again, great way for grandma and grandpa, aunts and
uncles to help
uncles to help
Do something with that.
All right, we’re going to take a second break.
If you want to join the show, you can.
615-737-9986.
We’ll be right back with the Dr. Friday show.
Alrighty, we are back here live in studio and you can join us live 615-737-
9986 and we have Ross on the line and Ross tell me what I can do for you
I’ll be starting collecting social security next year and I’m gonna be signing
up for it
up for it
And I was wondering, do I need to withhold like uh withhold is you know as far
on taxes?
on taxes?
‘Cause I’ll be I will I be taxed on that?
‘Cause I I understand there’s no tax on social security.
Are they doing away with that or
No.
I’m glad you asked, Ross, because it seems to be somewhat of a
miscommunication throughout the uh internet or whatever.
miscommunication throughout the uh internet or whatever.
Basically what they’re giving is if your income is within a limitation
you will qualify for a six thousand dollar deduction, which will reduce your
income tax based on your income bracket.
income tax based on your income bracket.
So yes.
I mean, are you only receiving Social Security?
I missed part of that, Ross, and I’m sorry.
Is it only Social Security or do you have a job too?
No, no, no, I I’m retired now.
I mean I I receive a pension and plu well with pension and interest, you know,
I I’ll probably earn about maybe thirty five thousand
I I’ll probably earn about maybe thirty five thousand
And uh course I’ll be collecting social security starting and I said, Well
should I withhold taxes on that too or cause it again?
should I withhold taxes on that too or cause it again?
Do you withhold anything on your pension right now
Yes, I do, yes.
I c currently hold like I don’t know fifteen, twenty percent in that range,
but uh right, and you usually get a fairly decent refund every year.
but uh right, and you usually get a fairly decent refund every year.
Yeah, yeah, uh roughly yeah, just a little bit.
I usually break even or maybe owe a little about a hundred dollars, so it’s
pretty close.
pretty close.
Yeah, so I will say yes, because
If you’re making $35,000 before Social Security, they do what’s called the
provisional tax code, which basically take half of your Social Security.
provisional tax code, which basically take half of your Social Security.
and add it to your other income.
If it’s over twenty five thousand, you’re gonna pay tax on Social Security.
Well yours is gonna be over twenty five because you’re already over twenty
five before we even add social
five before we even add social
security so I would suggest at least having 10% coming out.
I don’t know if they do percentages or how they do it, but um I would suggest
yes, have some withholding coming out of your social security.
yes, have some withholding coming out of your social security.
Okay, that’s what I’m talking about.
Otherwise, but if you don’t have enough taken out, I I believe you’re
penalized, aren’t you?
penalized, aren’t you?
Well there’s a there is always a penalty in the first year you wouldn’t be,
but after that they would require you to pay quarterly or estimated payments
and that’s a real pain.
but after that they would require you to pay quarterly or estimated payments
and that’s a real pain.
as far as I’m concerned.
Okay.
Okay.
I got you there.
Okay.
All right.
Well I appreciate the information and have a Merry Christmas.
Thank you.
Merry Christmas, sir.
Thank you.
Um, and that was a great question because I will tell you and I let let me go
over that one more time because um for some of you you may have just tuned in
and some of you may have no idea.
over that one more time because um for some of you you may have just tuned in
and some of you may have no idea.
You may have just been listening to the radio and you’re like, oh wow, who’s
this person talking about tactics?
this person talking about tactics?
right before Christmas.
What a fun person that person is.
Well I am Dr.
Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes
and representation.
Friday, an enrolled agent licensed by the Internal Revenue Service to do taxes
and representation.
That’s all I do.
I do taxes or I represent those that are either having IRS audits or haven’t
filed for 10 years or five years or two years or they
filed for 10 years or five years or two years or they
have balanced dues, but maybe they don’t qualify for a fresh start or an
offering compromise.
offering compromise.
Maybe they have to do a partial payment plan or a payment plan.
Um, you know, it and it’s not as crazy.
Um
I have one that’s just closing right now.
The gentleman owes close to $300,000 and he’s going to settle for a little
over $100.
over $100.
So obviously it’s not always
You know, you hear on the radio so often and people call all the time, Oh, I I
can only, you know, I p I owe four hundred thousand dollars, but can we settle
it for like twenty
can only, you know, I p I owe four hundred thousand dollars, but can we settle
it for like twenty
Um, and you know, first it’s based on your assets, based, then it’s based on
your income.
your income.
And it there is a mathematical way of figuring out what the IRS would expect.
uh you to pay.
And if you can settle, that’s great.
And this gentleman was very happy to get this
off his back.
He knew, I mean, we pretty much came within I think like they came back
counter countered us like six, seven thousand dollar difference.
counter countered us like six, seven thousand dollar difference.
Um and he was
uh very happy to be able to just get this done.
And that’s you know, but even after that, he has to stay current for the next
five years.
five years.
they will keep his refund for the first year.
Usually after that they don’t.
But these are the different things you have to deal with and you want to make
sure that you are uh ready to be in compliance because sometimes people
sure that you are uh ready to be in compliance because sometimes people
Um, what want and I’ve had more than one case.
I’ve gone all the way, we’ve made the deal, and two years later or three years
later, I find out that they haven’t filed taxes or they haven’t paid and they
want to set up a payment plan.
later, I find out that they haven’t filed taxes or they haven’t paid and they
want to set up a payment plan.
Nope, you cannot do that.
You have to be paying your quarterlies.
you have to stay on top of it.
Um and some people are just not good at that.
Other people are really good at it.
So um if you if you have problems with the IRS or you need help or you’re just
trying to figure out where to start, working on right now a guy that has to
file for
trying to figure out where to start, working on right now a guy that has to
file for
2014 forward because of uh IRS already filing certain tax returns.
So these are all the kinds of things we we do, and we have no problem in
helping you.
helping you.
All right, so let’s go back to some of the changes that are happening in taxes
or things that people might need to know.
or things that people might need to know.
This next one is not really a change, it’s capital gains.
We all have heard about capital gains forever, but
There is the 0% capital gains, which I feel doesn’t get as much love as it
should.
should.
Sometimes people basically have no real income.
And maybe they’re sitting on some stocks, and maybe it would be a good idea to
sell some of them.
sell some of them.
So
If you’re only on social security making 20 or 30 grand, um likeliness is you
have some wiggle room to potentially
have some wiggle room to potentially
Cash out $10,000, $20,000, $30,000 in in stock.
You know, I mean, and again, you need to have an expert calculate it, figure
out what it’s gonna be and where you’re at, but that is the important part.
out what it’s gonna be and where you’re at, but that is the important part.
And then you have the 10%.
I’m sorry, the zero, and then you have the fifteen percent.
Now the 15% truly only goes for 200 for a single person and 250 for a married
Then we have the investment tax that kicks in and it’s based on capital gains.
So I don’t know why most people don’t talk about this fact because I have so
many people come in and say, hey, I’m in the 15% tax bracket.
many people come in and say, hey, I’m in the 15% tax bracket.
I made less than $500,000.
Well, no, because the last 250 of that that you had really was taxed at 18.
8 or an additional 3.
8 is in there
Oh no one tell me about the and that’s a bit of a shock when you’ve got a
couple hundred grand of of stock or capital gains going through.
couple hundred grand of of stock or capital gains going through.
So it’s always important to make sure that you’re minimizing your tax.
And we always love capital gains.
Don’t get me wrong.
Capital gains are a good thing to do
But it is important to make sure that you know where it’s coming from and what
it’s going to do and you know just the whole reaction to it.
it’s going to do and you know just the whole reaction to it.
So again, we were talking a little bit about um
Going back and let’s talk a little bit about the standard deduction, right?
We have a standard and we itemize.
Harder and harder to itemize
15,750 for a single person right now, 2025.
23625.
31,500.
These are the amounts for everyone that is under the age of 65.
If you’re a single person over the age of 65, you go from 15,750 to 17,750.
You have to have a decent amount of charitable contributions, a decent
mortgage or property tax thereof, something to kick you over that dollar
amount.
mortgage or property tax thereof, something to kick you over that dollar
amount.
Head of household was 23,625.
Again, if you’re over age 65, you would also get the $2,000, which would be
$25,625.
$25,625.
Again, you have to have it.
But the married couples, you’re at you’re already at $3150, $31,500.
And then
Because you’re married, they they don’t give you the full $2,000 a person,
they give you $1,600, which brings you up to $34,700
they give you $1,600, which brings you up to $34,700
Then if you’re over the age of 65 and your income is within those limits we
talked about for the Social Security deduction credit that they’re giving.
talked about for the Social Security deduction credit that they’re giving.
I don’t want to call it a credit because a credit is a dollar for dollar.
This is a deduction.
Um then, you know, theoretically that’s what 46.
7?
46.
7 is what you basically are going to be getting.
That could give you a little wiggle room in there.
So, I mean, and think, you know, itemizing means you have to spend more than
that.
that.
So that’s when we get back into that conversation.
Like some of my people sometimes we do bunching
Um and again when I use the word bunching, all I’m talking about is paying
your property taxes.
your property taxes.
Um, because you can pay property tax right now you could pay your 2025 proper
2026 property tax, but it’s not due.
2026 property tax, but it’s not due.
until February, right?
So you could pay the one in February, one in December, and then you get to
count them both in that same year because they were paid and we do taxes on
the cash basis.
count them both in that same year because they were paid and we do taxes on
the cash basis.
Same thing with charity.
You can maximize some of your charitable deductions and even big purchases.
Sales tax in this state is great, but we pay a lot, right?
9.
75 in most areas
And then you want to turn around and add on top of that, maybe you purchased a
car or maybe you refurnished the whole house.
car or maybe you refurnished the whole house.
I was just talking to a guy that brought a brand new house and he didn’t
take any of his finances.
So he repay so he was going to go back and just do some.
So we have the opportunity on the tax return that says actual or or
calculation.
calculation.
And if you have your actual sales tax that you paid throughout the year.
That is a deduction you can use or or just adjustments like I was talking
about, brought a new boat, car, motorcycle, and paid the sales tax.
about, brought a new boat, car, motorcycle, and paid the sales tax.
Those would be things that you could also add in with the normal calculation
based on your income.
based on your income.
Um it really just depends.
If you’re you’re like me and you you like to spend money a little bit too much
Your your sales tax will probably calculate better if you tracked it versus if
you’re uh fairly frugal and you know you don’t go out and spend too much money
outside of the normal things.
you’re uh fairly frugal and you know you don’t go out and spend too much money
outside of the normal things.
But just keep in mind groceries we pay
Sales tax, um, restaurants, food, clothes, um, even most of the gifts and
things you buy, a lot of them have sales tax involved.
things you buy, a lot of them have sales tax involved.
So
Just putting that out there because it is a way to help reduce your taxes.
But I do find that most people do better if they do the bunching.
And it looks like you might be able to do that, at least for 2025.
So right now might be a good year for you to go back and take a look at your
sales tax.
sales tax.
before you do your taxes because this year you might be able to exceed because
we’ve got that 40,000 instead of 10, so you can actually show up with you know
a $4,000 or $5,000 sales tax number
we’ve got that 40,000 instead of 10, so you can actually show up with you know
a $4,000 or $5,000 sales tax number
and not have to worry about kicking over the ten thousand dollars and then we
just lost the difference.
just lost the difference.
It didn’t help us much.
And of course for all of you that might live in another state
California, Alabama, Mississippi, Kentucky, all of you guys have a state
income tax.
income tax.
Therefore, the state income tax will kick in it, which is great.
My one brother lives in California and he’s usually leaving
you know, ten twelve thousand dollars under the salt tax.
So um anyone in a state would would benefit from that.
All right, we’ll come back.
We’ve got one more
uh session and when we get back you can also call us 615-737-9986.
We’ll be right back with the Dr. Friday show.
Alrighty, we are back here live in studio.
This will be the last bit for today.
And so if you have been waiting and you’re curious to have a
Question answered, you can at 615-737-9986.
So we’ve been talking about some changes.
We’ve been talking about different things that are going to be happening here.
We’ve got tax season that’ll be opening up very soon.
uh for the 2025 taxes open up in 26.
So the Secured Act of 2.
0 major changes increase the age for the RMDs.
That was probably one of the big things, right?
Age 73 beginning as of January 1st, 2023, and then it’s increasing age 75.
So at some point in my life, I will be 75 to do the RMDs.
Um, but people have, and they reduce the penalties.
So sometimes
People don’t even realize they should be taking these because personally I
think the fiduciary people drop the ball.
think the fiduciary people drop the ball.
Um, I mean, you you receive a fee for managing a 401k or an IRA or whatever
Least you could do is notify the person that they have a common uh penalty or
they need to be taking these distributions.
they need to be taking these distributions.
And so they did go from 50% down to 25%, which is better than nothing.
Index the $1,000 age 50 IRA catch-up provision was
uh going to go with inflation since 2024.
So that extra $1,000 that you can put if you’re in it if you have an IRA and
you have $7,000, you’re over the age of $50, you can put in $8,000.
you have $7,000, you’re over the age of $50, you can put in $8,000.
And double the age catch-up limits for participants in deferred plans like
401ks, 403Bs, they have um ability to double up age 60 through 63.
401ks, 403Bs, they have um ability to double up age 60 through 63.
These are important numbers because
Uh let’s be honest, a lot of times people have a really difficult time, um,
especially when you’re first starting out and you you have your house, your
family, your kids.
especially when you’re first starting out and you you have your house, your
family, your kids.
And then, you know, kids are getting ready to go to college and all these
different things.
different things.
And the one thing you don’t really think about is how much you’re putting into
retirement because sometimes you just have to have the money in the house
retirement because sometimes you just have to have the money in the house
So now hopefully the kids get to age and then you can spend a lot more time
doubling up and doing what you want.
doubling up and doing what you want.
But now it this is something that could still possibly be done before the end
of the year.
of the year.
um would be if you are 70 and a half and have money in IRAs, you can take an
RMD, a required minimum distribution, not a mandated one, but you can do one
for a qualified charitable deduction.
RMD, a required minimum distribution, not a mandated one, but you can do one
for a qualified charitable deduction.
And what’s beautiful about that, most of people are sometimes trying to um,
well, for one, if you’re giving money to a charity out of your pocket or out
of the bank account, you’ve already paid tax on it.
well, for one, if you’re giving money to a charity out of your pocket or out
of the bank account, you’ve already paid tax on it.
And maybe you’ll be able to itemize it, maybe not.
But this is a direct deduction.
So this is only good for people over the age of 70 and a half and that people
that have money in IRAs or 401ks, 403Bs, a deferred account.
that have money in IRAs or 401ks, 403Bs, a deferred account.
Then you can go and have a fiduciary individual write a check to your church,
to your charity, to feed the children, whatever it is you want to do.
to your charity, to feed the children, whatever it is you want to do.
And they that whatever that checks for, they’ll come to you on a 1099R, but it
will not be taxable, not a dollar of it.
will not be taxable, not a dollar of it.
So it’s a much cleaner way for you to give money
to a charity than it is giving it through your bank, paying it through your
credit cards, doing any kind of auto draft.
credit cards, doing any kind of auto draft.
Anything like that, we’ve already paid tax, right?
Because if it’s in my bank account, I either will owe taxes at the end of the
year or I have paid taxes already on that money.
year or I have paid taxes already on that money.
So
It is so much smarter.
And again, this is just reiterating, this is only for people that are over the
age of 70 and a half and have deferred programs.
age of 70 and a half and have deferred programs.
But
If that’s a large number of people, a lot of people have IRAs and things like
that.
that.
So if you are one of those people, um, and if you can’t do it in time for
2025,
2025,
Think about maybe they, you know, doing something like that starting in 26.
Instead of writing checks to your your church, instead of giving money to your
big charities, and I’m not talking about the $25 to the Girl Scouts and all of
that.
big charities, and I’m not talking about the $25 to the Girl Scouts and all of
that.
I doubt your fiduciary individual is gonna love that.
But I’m talking about the the church that you give two or three thousand
dollars to.
dollars to.
I’m talking about any of those kind of, you know, cancer foundations, towers,
any of those um
any of those um
That but a lot of my clients are very big givers.
And if you’re not giving at that age through that forum, then you’re leaving
money on the table and you’re allowing Uncle Sam to take the money out.
money on the table and you’re allowing Uncle Sam to take the money out.
of the money before you give it to a retirement uh to a nonprofit.
And that just doesn’t make any sense.
I mean it’s kind of like leaving your IRA to a trust
And yet you want to give a third of all your assets or ten percent of your
assets to um a charity.
assets to um a charity.
I mean, again
You need to go right from your IRA or 401k directly to the charity.
That way there’s no distribution, no tax before the charity gets their money.
Charity’s not paying tax.
That’s why they’re a nonprofit.
I mean, it has to be a legitimate 501c3, but you don’t have to worry about it.
And it gives you the tax deduction.
And if you’ve got a good financial planner, a good tax person, they should be
talking about these strategies.
talking about these strategies.
What I’m talking about doesn’t work for just one person.
It’s not going to be a one-size-fit-all.
But you know what?
That’s not the way taxes or financial planning or money works.
You know, one guy can go out to work and he ends up, you know, being the owner
of the business.
of the business.
The next guy ends up never changing the same job he started at his entire
life.
life.
Why?
Because things happen.
Life’s different.
Everyone’s life is different.
Things you you can’t just look at one size fits all.
So when you’re dealing with finances or you’re dealing with financial person
or attorneys
or attorneys
or um anything like that, you’re gonna find that you need to find the ones
that match because next couple weeks um you’re gonna have recorded shows
coming out.
that match because next couple weeks um you’re gonna have recorded shows
coming out.
And uh you’re gonna have one that’s gonna have a great financial planner, Hank
Perrott.
Perrott.
We’re also gonna have a security company because
I have realized going through to so many of these security seminars that at
least to the best of anyone’s ability, especially a small business.
least to the best of anyone’s ability, especially a small business.
We need to take the bull by the horn, right?
We need to to at least have somebody because I’ll be honest, I’m not a
computer person.
computer person.
I mean, I know how to turn on, do my work, and do what I need to do.
But I couldn’t tell you how all of it works.
And I certainly can’t tell you how AI is going to interact with everything.
And am I opening up some sort of back door because my thermostat in the office
um is on my internet.
These are the kinds of things these guys do.
And so you’re gonna have a whole um day of of listening to that.
And then of course you guys just heard Russ Cook last week.
And um he’s a a wonderful estate attorney and I mean I’ve known him for 30
years as well.
years as well.
Russ Cook, uh Russ and Telman Associates, but
Again, these are the kinds of people you need to have as a team.
If I were to have any New Year’s resolution for any of my listeners or my
clients.
clients.
Um, you know, it’s to get yourself a team.
We’re not gonna all live forever.
It’s not gonna happen.
And the best way for us to leave things in good condition for the next
generation
generation
would be to make sure that we have a good attorney.
If something comes up, they know who to contact, a good financial planner so
that they know the money is being handled, a good tax person, so that they’re
not paying taxes on things they shouldn’t be.
that they know the money is being handled, a good tax person, so that they’re
not paying taxes on things they shouldn’t be.
or cashing things out thinking everything should be cashed out and then I’ll
distribute, but maybe that’s not the best idea.
distribute, but maybe that’s not the best idea.
I had a case where the girl just went in, the she she was the executor, so she
would went in and cashed out all the stocks, cashed out everything.
would went in and cashed out all the stocks, cashed out everything.
um which created a huge tax, even though some of it was a step up in basis,
there was still a lot of money in IRAs that could have been deferred and
spread over ten years to each custodial
there was still a lot of money in IRAs that could have been deferred and
spread over ten years to each custodial
or each uh beneficiary, there are ways, even five years through the trust if
that’s what you want.
that’s what you want.
Don’t just cash everything and say I just want the money because that’s the
the wrong idea.
the wrong idea.
Because
Only the only person that wins in those kind of conversations is the IRS.
Same thing with divorce.
I have couples that come in and they’re smart, right?
They’re like, okay, here’s the situation, here’s what we have
How can we, you know, how can we make this work where we’re not paying more
money in taxes?
money in taxes?
Because there are ways, especially if there’s children and things.
And then you have the ones that just
Don’t care and they, you know, hey, I don’t want my ex-wife to have anything,
or I don’t want my ex-husband to get anything, so I’ll just do this.
or I don’t want my ex-husband to get anything, so I’ll just do this.
And only person that wins in that is the IRS, right?
So it’s fine if you want the IRS to get richer, but let’s be honest, the IRS
does not manage money.
does not manage money.
Or it’s i it’s not even the IRS.
I mean the IRS collects, but it’s the government that spends the money, not
the IRS.
the IRS.
Um they’re really uh um a big collection company and management.
Anyhow, I hope you guys all have a wonderful Christmas.
Again, this will be my last show for the year, so I want to make sure that you
guys enjoy.
guys enjoy.
If you are an existing client and you have not yet
got on the calendar for the 2025 taxes or 2026 tax season, please call our
office the first of the week and we will make sure we sent you.
office the first of the week and we will make sure we sent you.
And a lot of you guys are probably getting
Some emails from our office.
We’re trying to make sure again, we’re going through a lot of uh security
different things, so lockboxes and different things.
different things, so lockboxes and different things.
We’re just trying to make sure all of your information is as safe.
as it can be and making sure that we’re doing everything we can, uh, you know,
as much as we can with the information um provided.
as much as we can with the information um provided.
So
If you um are wanting to have a tax person, again, call our office and we’ll
do our best to get you on the schedule.
do our best to get you on the schedule.
And um I hope that you guys, when you’re
out there enjoying Christmas, think about those that are maybe not as uh
fortunate and you know share a little of the uh
fortunate and you know share a little of the uh
Good times with everybody else.
If you want to reach our office, 615-367-0819-615-0
367-0819.
Check us out on the web also.
It’s drfriday.
com, drfriday.
com.
Or you can email.
Sometimes that’s the easiest way to get me.
Friday at drfriday.
com.
Again, Friday at drfriday.
com.
Cop you later.