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Kick off the 2025 filing season with Dr. Friday as she walks through the additional senior deduction and how the new tips and overtime deduction works at year end. She stresses documentation, correct W-2 reporting, and the importance of keeping business and personal records separate. Callers ask about overtime calculations, hobby vs business income, filing status after a spouse’s death, car loan interest rules, and selling inherited property.
Summary Points
- The extra $6,000 senior deduction ($12,000 married filing jointly) applies with income limits and requires joint filing if married.
- Tips and overtime deductions are claimed when filing 2025 returns; W-2 withholding does not change and employers must provide totals.
- Tip deductions are limited to tip-based occupations and net income; Form 4137 and W-2 reporting matter for compliance.
- Employers and employees should keep signed records to avoid audits and mismatched tip reports.
- Caller Q&A covers overtime premium calculations, hobby vs business rules for flipping/egg sales, head-of-household status for widows, vehicle loan interest requirements, and step-up basis for inherited homes.
Episode FAQ
Q: Do tips or overtime reduce tax automatically on my paycheck?
A: No. The deduction is applied at filing time, and you need employer-provided totals to support it.
Q: Who qualifies for the senior additional deduction?
A: Taxpayers age 65+ with required SSN and income limits; married couples must file jointly to qualify.
Q: How do I keep a side gig from being treated as a hobby?
A: Separate business and personal payments, show a profit motive, and keep records; repeated losses can make it a hobby with limited write-offs.
Transcript
have some questions today it’s a beautiful saturday uh it’s a little nippy outside to be quite honest the 17th and we’re getting ready to go into a full-blown tax season we’re gonna cover a little bit of the questions that keep coming in i know the last couple weeks We’ve had um some different shows on, but let’s get into the 2025 tax season. We file in 26.
Some people refer to it as the 26th tax season, but We are filing the year of 2025. If you want to join the show, you can. 615-737-9986. 615-737-9986. So we’re going to do a quick run through of some of the changes and that people keep calling and requesting more information on.
Let’s talk about first What they refer to as the senior or anyone over the age of 65. You have an additional $6,000 deduction. This is only going to be for the years that you filed 25 through 28 at this time.
In addition to your standard deduction. So whatever your standard deduction is or itemized deduction, whatever that is, you will have an additional $6,000 deduction. If you’re married, $12,000 deduction.
This does have a income limitation. So if you are single, that income limitation is going to to be um 75,000 it will work its way up from there and married couples it will be 150,000.
The good news in that conversation basically is there’s no penalty for being married. And we have talked about that over and over. You must be a U. S. citizen. You have to include your social security number. and filing jointly if married. So if you’re married filing separately and you’re over the age of 65, you will not qualify for this deduction. So again, if you’ve got questions, you can join the show.
615-737-9986. 615-737-9986. And that way we can deal with your situation. So again, one more time, really quick, standard deduction, which the standard deduction basically for what single person. is going to be 14,000. Then you’re going to add another 2,000 if you’re single. So $16,6 plus you’ll get that $6,000 deduction. And if you’re married filing jointly, the standard deduction is $29.
2 plus you’ll get sixteen hundred dollars each. So That’s going to be $32,400 plus $12,000 on top of it. And this applies to both itemizers and non-itemizers. So standard deduction or itemizing.
Either way makes it no difference. You’re still going to qualify. You just have to be over the age of 65. Okay. This next one, I think I’ve probably taken 20 or 30 phone calls in the last 15.
20 days. This has to do with tips. There seems to be a slight misconception because people People were thinking that they were not going to be paying any tax on tips on or from their wages.
Let’s clarify, this is a tax End of the year tax deduction or um you’re going to get the money based on what happens at the end of the year because again, it is income-based. So your W-2, your employer is not going to change. anything from what you had been filing before. Effective starting in 2025, but if you’re an employer and you’re listening There has been several different things coming down the line, but bottom line is you don’t necessarily have to put this on they’re giving us a window.
So you don’t have to have it on the W-2, but you do have to provide. the information to the employees of what their um tips and this would also apply to overtime. We’ll talk a little bit about that because again, a huge miss
But on the tips that are being reported, because in box one, three, and five on the W-2, their tips could be in there. Now sometimes if they’re waiters or waitresses, some of those tips could also be on line seven, which you hadn’t already. already paid tax on this will be a huge relief for those individuals. This will be a maximum annual deduction of $25,000, um, which I think pretty much in Tennessee a lot of the waiters and waitress.
I think that will be a nice kick in there. Self-employed individuals deduction cannot exceed net income. So If you’re in, I don’t know, this let’s say you’re a hairdresser or a nail specialist or something and you get tips and you’re reporting these because you’re self-employed and you do have to be in a specific business
They’re not going to say, hey, you’re an accountant and you’re living off tips. That would be very wed, right? It’s not not normal. That would not be on the typical situation. They’re not going to allow someone like myself to report tips and deduct it.
It needs to be in a profession kind of known for tips. So that’s one of the things they’re going to ask for. Um You have to have a specific trade. It needs to fall under the 199A. An employee of an employer must have that, including social security number filing, joint, so married filing separately.
This is not going to qualify. You can be single, head of household, or married finally jointly. Married finally separately will not happen. Employers and other payers must report certain cash tips and the occupation of the tips to the IRS or SSA information.
Treasury and IRS will provide penalty relief for the year of 2025. We’re scrambling here as well and we use ADP, uh, but they’re changing. I mean, really a lot of this is coming in new to them.
So what happened in 2025 isn’t going backwards So again, effective 2025 through 28, same thing as we talked about with the seniors, qualified tips received through an occupation that receives customarily and regularly tips through December 31st of 2020. 2024.
I mean honor before December 31st, 20, and reported on W-2 or 1099. So if you have people that are being 1099 And this is going to be a little bit unusual. It’ll be interesting to see.
I I have not yet done a 1099 and reported tips on a 1099. because normally a 1099 is used for I provide a service, you send me back the money, you 1099 me because of it. So it is something that has to be other statements furnished to an individual like a 4137 that are individually directly reporting their tips.
So I’m gonna put a little clause out here. I think sometimes the IRS and the government gets pretty darn smart, even though I know a lot of people don’t like it But if you are an individual and you have not been reporting all of your tips, and I will tell you, long time ago, many, many Decades um ago.
But anyways, I was a waitress and I reported what I had to report. There was a lot more cash back in those days. Nowadays it’s a little bit harder because almost all bills are paid with uh credit cards and tips show up on those credit cards. But I think the IRS is looking for industries that may be underreporting tips. The reason this is so important is that an employer is responsible for paying a matching social security and Medicare, right?
Uh what comes out of your check is sometimes some of you that actually receive large amounts of of tips may know at the end of the year you almost always end up owing money because enough did not come out. So just make sure the form again is a 4137.
It is currently what they’re going to be used. This is a brand new form that’s out there. Social Security, Medicare tips, and unreported tip income. And then they’re going to need the name, the employer’s name, the cash amount that you’re saying.
So this is going to cause some pretty interesting audits in my personal opinion. I think the IRS is going to be looking at that to see exactly how that’s going to tie into what they know.
But again, employers you need to be reporting because if your employees start reporting that you did not report all of their tips, there’s going to be um at least a state department of labor, possibly a federal department of labor leading. May it not be this first year, might not be the second year, but keep in mind this is running from 25 through 28 and they have two years to audit.
So just putting that out there so you have that information. Making sure you know what’s going on and how that’s going to affect you because, well, it is going to affect your business possibly.
So I would start now making sure that all the employees that I had was reporting to you any tips, make sure they’re signing off on that. Make sure there is a paper trail so you can then justify what you put down on their wages and on their W-2s or W-2s.
And again, every week or every uh day, I know some people, whatever they have at the end of the day, have the employees report what said tips if it’s An employee then turns around and reports different numbers to the IRS, that is going to cause one of two things, the employee or the employer, or both to probably fall into an audit. This is going to be a big area.
I don’t think it’s going to happen until 27. Probably it’s going to give some time. They’ve got to process all of this make Making sure it’s there. But if you are a person that makes a lot of money and tips and it does not reflect properly on your W-2 and you’re gonna say, oh well, I can go in here and I can file the 41
37 and I can put all that money in there. They’re going to wonder why it wasn’t reported properly. They’re going to bring that up to not just you, but the employer or or both. So um
As an employer, you can protect yourself by having the employees sign off on tips reported that way, at least for the purpose of the employer you could do that if an employee um I would again I would just be careful I’m making sure that I’m not reporting numbers that maybe you’re inflating your income because you can now show that you made $25,000 in tips, which could be more than your wages in some cases, and then then that is probably if it’s not matching the W-2, I would be prepared that you need to justify that number. you need to show where it was deposited or used and processed. And the problem is if it’s on credit cards, that’s easy to do. But if it’s cash every day, I think you’re going to have a hard time really tracking that properly and making sure that information.
I mean that’s really the biggest thing. We just want to make sure that whatever we have going on, that we can document it. There may be some employers that are not even reporting tips.
And the people have said, oh, that’s great. I go home. I don’t have to pay any tax on this. Um and that’s what I think they’re trying to, that it’s a huge fraud area. So I think that’s what the government is looking for.
And a lot of times when people think that they can get more money back because they can show a higher income. I think that is tempting for those individuals. All right, we’re going to get ready to take our first break.
If you want to join the show, you can. It’s 615-737-998. That’s 615-737-9986. Go take your calls when we get back, or if you want to, you can also email Friday at drfriday. com, and I’m more than willing to to put that on the air as well. We’ll be right back with the Dr. Friday show. Hey Mike, can you hear me? Yeah I can Good. Yeah, I got you on speaker. Ah, much better there. Thank you.
Well what it is is I was just asking about the overtime. I heard you I just heard you talking about the tips. And I thought, I wonder if she’s already talked about how the overtime is supposed to work for last year, this year and all of that.
Thank you so much. Because that was actually the next thing I was gonna walk into anyways because that it seems to be the the more confusing situation than most, right? Because a lot of people thought they weren’t gonna have have to pay any overtime tax um or how it was going to come. They thought their paycheck was going to change. And again, it’s not going to change, Mike. Everything that we talk about, these are all going to be stuff that’s going to actually go in effect.
Really, you’ll see the refunds come. um when you file your taxes this year. Then you’ll get your refund for 25 and et cetera into 26. But the biggest thing people don’t seem to understand is that the overtime is really just time and a half, right? Or the halftime. That’s what you’re going to get credit up to twelve thousand five hundred single or twenty-five thousand jointly filing, assuming both people have um the overtime on their wages and there is income limitations.
Do you get overtime? Oh yeah. Okay. So hopefully hopefully assuming that you are uh making less than 150 single or 300 jointly, you should see some extra money on your um refund this year.
Okay, so th but they’re only gonna credit the half, not the time and a half. Exactly. Thanks for yes, that is exactly right. So if you’re making fifteen dollars an hour, um then they’re only gonna credit that extra or maybe make ten dollars an hour and you get fifteen for overtime, you’re only gonna get that five dollars, not all fifteen, for your overtime.
Wow. There’s always a catch, ain’t it? There’s always a catch. But the way you have to really look at it is how many years have you been working? Have you ever got any extra time? No.
So Yeah, but if I’m working time and I I work forty hours, so if I work ten hours overtime, that whole ten hours is Overtime, not just the half. Well, but they’re only giving you the extra I mean they’re basically saying all straight time, no matter if it’s overtime, double time.
I got people that make triple time sometimes But that’s straight time, whatever that is. Go ahead, Mike. Yeah, some people do, but I mean most of us only get time and well, I only got time and a half when I actually did that but I mean Yeah, I used to work for a place, but anyway, they used to do that too, but depends on the company and all that stuff.
But anyway. Okay, I was just wondering because I thought I mean the way it sounds, you know, no tips, no, no, no tax on overtime. Tips or no I know. Yep, you’re right. No tax on tips, no tax on overtime.
That’s exactly the way it’s worded. on the basic big bold letters of the one big beautiful bill. Then you start reading and they’re like, wait, only portion is the half portion of the time and a half. specifically says or in tips and then of course they caveat that with how much money and it has to be reported on a W-2 and or a 1099 again Anyone working for a 1099, you should be, you shouldn’t be getting overtime or straight time. All of that should be billed as if you’re a subcontractor.
But um I think the IRS is looking for loopholes. Well, I mean the good news is this, Mike, no matter what, assuming your income fits in, you’re going to get a bigger refund this year than you’ve had before.
That’s the positive I’m looking at in this whole thing because you know, the 35 years I’ve worked, or you know, whatever, I never got anything for tips and or overtime. So I think it’s a unique approach, but it is to a lot of people.
And thanks for asking the question Yeah, it does. Yeah, I’m glad I called. I appreciate it. No problem. Thanks, Mike. All right, take care. All right. You two. Let’s go ahead and hit uh Jennifer, I guess, next
Yes, hello. Hello, sweetheart. What can I do for ya? So I have a question. I do a lot of flipping on um on stuff that I just pick up and I flip it for extra m or double the money or whatever.
So some people pay me by Venmo. And I’ve got Then on then though I have like my family reimbursing me for stuff, maybe loans or whatever. And then I have like a small homestead where I sell my eggs and I get money from that. Some some customers pay me on Venmo. How am I gonna report um what’s an actual clip, what uh my eggs, the eggs that I sell and all the feeds that I put into that.
So it’s actually a losing business on that that behalf. And then deciphering it out what’s what’s family, what’s not um any kind of business related item. Well, I will tell you what the IRS will tell you is that Venmo has two pie sides.
One is for purple Personal family and friends. One is for business. You probably have everybody reporting to you under family and friends, even if they’re buying eggs or doing a flip, because you have one
Venmo account. You don’t have one for your business because there’s a fee if you turn it on for business, right? Um and there’s no fee if you use it between family members. So I would hate to tell you this, but the best way to do that would be having some basic accounting.
So when you’re done at the end of the the month or at the end of the year, you can say, okay, I sold 400 worth of eggs, I had chicken feed, I had vet bills, I had whatever, whatever it takes to raise chickens. I had to buy new chickens, whatever.
And you have the cost. So the 400 would be the income, the cost, and this would be potentially falling on a a schedule F because it’s a farming situation, not uh a business situation.
And then the other flip would be a schedule C in which a Assuming that you’re not doing it as a hobby, that you’re actually intending to make a profit, then you again would have how much money? Not just Venmo, but this would be cash, all the money.
And I know, I know you know this, but I’m just kind of saying this for everyone listening jennifer as well but all the money you make the IRS basically says we have to report it all doesn’t make a difference if it comes to us on a form if it’s all cash if it’s a Supporting your lifestyle theoretically, if you’re ever audited, they’re going to say, well, how did you afford this if you didn’t make any money?
Um, so but on the flips, you’re gonna do the same thing. I made $1,000 in flips, but my purchase was $700, and then I had to. By the rehab, materials, blah blah blah, repairs, blah blah and maybe you broke even.
Most people will say after two years, if you have a business like Flips, um And you’re not making a profit, then you’re really doing it more of a hobby. I will let you know that, Jennifer.
That’s what the IRS would say. Two out of five years If you’re not making a profit. Oh, they’ve had a hobby. And if it’s a hobby, the downside to that is they don’t allow you to write off your expenses.
So we don’t really want a hobby because we want to be able to claim our income and expenses and in your case possibly a home office um whatever you know to to bring it down but uh and you know so the answer to your initial question would be You need to be tracking because if ever audited, they’re gonna say, well, how much money did you make? And you’re at the say, Well, I I sold 500 eggs.
I have no idea. I’m throwing a number out there, you know, and whatever that is. And I sold some chickens and I, you know, whatever. And same thing with the flips. The flips are probably in some ways trackable because you’re probably using um.
Facebook or some of those places to buy the original and there is a way of them tracking all of that. Um but it also for your purpose you need to make sure you keeping receipts on everything you purchase because we’ve had a number of audits in the past number of years where people would go out and and just buy things at garage sales and things like that but they didn’t keep a receipt
You need to carry a little receipt book with you, Jen, and you need to write down the address and the garage sale that you went to and then how much you paid for it and maybe even just take a picture of the two things so you have proof of what you you know what you did so that way you have a paper trail because I’m sure there’s a lot of cash going especially for garage sales right most people don’t want you to write a check or anything. They want they want the cash. So you need to make sure you’re protecting yourself more than anything else in that conversation. Because you know they’re not I mean the odds of being audited are very low, but th you know if you’re if you are doing more than what five thousand dollars now, I think a ten ninety
Venmo is funny because again, if it’s all done under your personal um then I don’t believe they’re 1099 because you’ve said that this is not a business situation. This is um I’m sorry.
So the threshold of six hundred dollars for reporting is no longer instead it’s twenty thousand or two hundred transactions is the current threshold for a Okay, well I don’t think I’ve made twenty thousand, but I definitely have done over two hundred. Right.
So if you’ve done over two hundred, you may see a 1099 Because even if it’s less than 20,000, they’re basically saying anyone that does 200 transactions throughout the year is basically running something other than friends and family. family.
Okay. Okay. Thank you. Sorry girl. No problem. Thanks for calling though. Great question. All right. Let’s see if we can get Lisa on and off before the break so she doesn’t have to wait for it.
Hey Lise, what can I do for you? Hey I have a question about my filing status for 25. I was widowed in twenty four And I still have two uh children even though they’re both adults that live at home.
One is disabled so he’s gonna be there, you know, forever because I’m his caregiver. So would I be head of household for twenty five? Definitely be head of household, yes. But at least with the I mean depending on the second child, with the disabled child, you will stay head of household because I’m a
Assuming that child’s only probably receiving Social Security benefits. If if they’re receiving that, maybe some well we we are both receiving survivor benefits off of my husband Right.
And that will that’s perfect. And then if the other child is what seventeen or or under, they may be receiving something. I think they get too old, they don’t get the benefit. Yeah, no, he’s not getting he’s just graduated from college so he’s not getting anything but you know he’s still living at home currently.
Uh so that one the head of household may come into play because he may have earned more than twelve thousand dollars. Yeah. No. The adult child going to college. Maybe not. Then if he hasn’t, then he can be your dependent as well as obviously the child that is
Disabled. Both would be. Okay. All right, good. And but so head of household is my best option. Oh yes, definitely. Yeah. Okay. All right. I just wanted to make sure. No problem, sweetheart.
Thank you. All right. We’re going to take a quick break here and we get back. You guys can join the show at 615-737-9986. 615-737-9986. We’ll be right back. Alrighty, we are back here live in studio.
If you want to join the show, you can. So we have covered no tax on tips, no tax on overtime, and kind of the exclusion that come with those. It always sounds great until we get into the details.
Now let’s talk on no tax on car loan interest. A lot of phone calls on this one as well. So let’s talk effective 2025 through 28. All of these are pretty much the same time period originated a car loan after jan uh december 31st 2024 so if you purchased a new car in 25
You should be good, but let’s talk about the exclusions. Individuals may deduct interest paid on loans used to purchase a vehicle for personal use. This is not something that’s going to happen.
Or if you tried to or if you purchased a lease vehicle, that isn’t going to qualify. Phase out for individuals that are making over $100,000 and for joint filers that make $200,000.
The origination has to be after December 31st, 2024, was used to purchase an original a vehicle originally used by the taxpayer, was secured by a lien on the vehicle, and was for personal use non-business. vehicles.
If the qualified vehicle loan is later refinance, interest paid on the refinance amount is generally eligible for the same deduction. Uh qualified vehicles, a car, minivan, van, SUV, pickup truck, or motorcycle that has a gross weight rated in less than 14,000 pounds, which is Pretty much all cause, even my big old uh truck is is under fourteen thousand.
Underwent ve uh final vehicle assembly in the United States. That is a key thing Went to the final assembly, had to be here in the United States. Vehicle label on the dealer. When you come in to get your taxes, you need to make sure you have the vehicle ID number or VIN number.
And there has to be a National Highway Safety Certificate with a decoder available for both itemized and non-itemized deductions. You must have the FIN number and the year you claim the deduction.
Lenders of other receptions and interest may be filed. So again A lot of times when we’re doing taxes, we’re not usually asking for your interest paid on a vehicle because, well, let’s be honest, we haven’t been able to deduct interest other than mortgage interest goodness for 20 plus years.
So very important that you if you purchase the car in 2025, the car was assembled here in the United States. You can have the FIN number and therefore you can go forward and see what you have on that one.
And then the last one that’s going to deal with pretty much a straight across the the table is the health savings account expansion Telehealth is now available that removes the care service now is available for higher deductible plans. People can still contribute to the HSA even after telehealth before meeting the deduction.
The rule is permanent for plans. that started on or after January 1st, 2025. Expanded bronze and catastrophe plans starting in January 1st, 2020. Um I would definitely say that the Treasury and the IRS invite a public comment. might be something if this at all applies to you or maybe you sell health savings accounts March 6th of 2026 they’re going to have a big forum and you’ll be able to participate in that to find out. I am a huge advocate for health savings accounts.
Just think that they’re very good, especially for the self-employed and also for many of us that don’t really um do much when it comes to medical. I’m I’m blessed, so I don’t have a lot of out of pocket and when I’ve had a few things it has been easy to deal with because I’ve already had a big chunk of money sitting in my my health savings account and my program that I have, my normal health insurance, I think, is very limited.
I mean I have people that you know I’ll pay four or five hundred dollars a month. Mine is less than two hundred a month, but I do have the higher deduction. on that. So I just want to make sure that we understand where that’s going and where we’re going to go with that.
So um again, so if you have a hill savings, no tax on car loan interest. No tax on overtime, no tax on tips. Let’s clarify. We all know that that word no tax on has caveats, that there is going to be some exception to that. that and to make sure you understand what that is. You know what? Let’s hit uh Steve real quick while you’re at it, uh RJ, if you don’t mind. Thank you. Hey Steve, what can I do for you?
Hey Dr. Friday, I always enjoy your show and I learn a lot. But I got a got a quick question for you. Okay, uh I I had a brother and uh him and I inherited a house from my mother in 2017.
She passed or she passed away in two thousand seventeen. Okay. Then my brother passed away this year. We were tenants in common with right of survivorship. So I inherited that house and actually sold the house exactly one month after he passed away
Uh if I understand the law correctly, I have zero uh oh or I inherited I have zero gain because I inherited it at the Whatever the new basis was. Both of you guys gotta step up in basis because neither of you own that house until she passed, right?
In seventeen. Okay. And then in twenty twenty five, since you owned half and he owned half You inherited his half, but you only get a step up on his half. You don’t get a full step up because you were now an owner of 50% of that home before he passed away.
So you will only get a step up in basis on the step up on what you just inherited, which would be his fifty. So you need to know what the house was worth. Hopefully you already know that at the time mom passed.
Let’s just use an example of $200,000 because it’s easy math. That was $100 on you. a hundred on him and let’s say now in twenty twenty five the house was worth three hundred thousand dollars so his share then became one fifty so you would get an additional step up, you know, 150 and 100, so your value would have been $250,000 because you inherit his at the full value of his share of the step up. Okay, I do understand that. Now let me ask you this question then.
This house it was in marginal condition w when we inherited it in twenty seventeen. He continued he never got married. He always lived with my parents And so he continued to live in the house.
Well, the house further declined in you know, in its condition. I and but I do know there was there was a whole lot of, you know, property value increase uh e from two thousand seventeen till today.
Uh on a standard property, but it definitely decl I mean it just needed a roof, it needed a central heat and air system I mean, is that gonna be something that uh Well I mean it really comes down to is what was the value of the house and then what did you sell it for? Because what you’re sounding like you may have gotten out of it without having to you I mean theoretically you could have invested money, not saying that would have been a good idea at all to improve the property.
You may have to do some improvements just to um clean it up or whatever after he passed away. But anything you have to put in the house, that would be a deduction on top of, right?
Because you had to improve the property. Uh and then I guess the the biggest question comes down to is what did you sell it for? And this is something you can call my office for. We don’t have to put it all on the radio necessarily
But whatever you sold it for, the question’s gonna be, because I’m assuming you didn’t get top value for that property. I’m just assuming that because You know, it sounds like it’s didn’t y yeah, did not because it was in such poor condition, I just auctioned it off right.
So but it was probably a lot more than what mom left it to you at. But uh the question is what was the difference which Between mom and w 17 and 25. Because like you said, okay in Tennessee, 20 and 21, we all saw unfortunately
Unfortunately, our property taxes go up quite a bit because of the value that all the property apparently just overnight became worth a lot more. We have to thank all those Californians that love us here um for some of that.
But you know, but we need, you know, honestly, we need to sit down or you’re tax person, you need to kind of sit down if you’re doing it yourself, whatever Get the the starting number, what you inherited at, and then find out what and the person that sold it might be able to give you some comps of what that house would have been worth Had you put it on the market, um, you know, what other houses in that area were selling for?
Because that’s what we, you know, a rough appraisal. And then the fact is you may have sold it for undermarket Because theoretically you wanted out. You knew it was going to be costing you more to maintain and to probably take care of than it would have been to hold out, do some things and just
You know, it’s just never easy. But that’s my two cents. But you need to get all those numbers. And a lot of times a real estate agent, especially if you paid an auction house, they can give you some estimated comps of what it would have been worth in what was the market selling those homes for.
Right. In 2017. Right. And then again in 25. Because, you know, we need both those numbers to give you a decent idea of what your real basis is in that house. Okay. Even though the what what I even though what I receive for it at auction doesn’t determine okay, well that’s what it was worth since you had a
Ready, willing, and I will buy at all. Not really, because an auction means that you took the highest bid that was available that day. Had you been willing to possibly put it on the market or do something, you know, they call that a flash sale in essence.
You may have put a minimum out there saying, hey, I’m not going to sell it for less than this, but you did not probably take the highest that could have been available had you been willing to play the market. Okay.
Auction doesn’t necessarily mean it was the highest price. Okay. Well, uh not not exactly the answer. I was looking I know, I’m sorry. So sorry. All right. That’s the way it goes. Uh I know.
All right. Thank you very much. Have a good one. No problem. You too. All right. We’re going to take a quick break here. When we get back, if Eddie can hold on the line, that would be awesome.
If you guys want to join the show, we’ll have a one more break after this. 615-737-9986. 615-737-9986. We’re going to take a quick break here and for any of you that have no idea who you’re actually listening to I am Dr.
Friday an enrolled agent licensed by the Internal Revenue Service. I do not work for them. I am licensed by them to do representation and taxation So if you need help with those converts, that’s who I am.
All right, we’ll be right back. And Eddie, I’ll get right to you. We are back here in studio. This is the last part of the show. So let’s hit Eddie and see if I can help it. Hey Derek Friday.
Hey buddy, what can I do for you, sweetie? All right, about three. You had a commercial on your ads about TBI, something to do with real estate. Or TIB or not ringing a bell yet. I mean I’ve been listening to my own ads, uh prepping the new things.
It was about the real estate though, that they had new tax law changes. Oh, on real estate For Tennessee? I mean like for Go ahead, keep talking, Eddie. We’ll get it in. Okay. All right.
Well, I’ll go on to the next thing. Life insurance, is that taxable to the receiver? 99% of the time, no. Sometimes there are some annuities that have life insurance tied to them, I have found, and some of that can somehow circle back around, but normal typical life insurance when someone passes away becomes tax free to the person receiving it. Okay, cool. And what about property sold at an estate sale? Uh property sold in an estate sale, meaning that someone passed away and there’s an estate sale?
Just making sure I’m correcting that. Okay. So yes, in most cases, property um kind of like when I was talking to Steve, when someone dies, everything gets a step up in basis. your property, your car, your furniture, all of that, right?
So when you sell it pretty much immediately after the passing, that’s basically considered considered a wash unless there was something found like a collectible or you know and didn’t get appraised or something like that that may have a actual auctional a a higher value than some of those you would still get a step up in basis, but sometimes people will hold on to them and then they’ll actually sell them later and make a profit.
Yeah, which one’s better, selling immediately or taking the profit? Well I’m I mean to me I I would always take money. Sorry. You know, because taxes on most things if if you let’s just say the tax on that is 20%, you’re still going to put $80 more profit than doing a fast or a faster sale just to get it out.
But sometimes you don’t have control. Estates are often because there’s many people inheriting that sometimes they don’t let you pick and choose what’s going to come. But if you’re like the only person inheriting, then you have a lot more control in saying, hey, wait, this person’s got gold this person’s got antiques you would be better to sell those to those particular collecting higher market areas and it could take you a year or two which means it could I mean like gold could go up or down you may even Leave it in a safe for the next generation in some cases. Yeah.
All right. Well so much. Have a good one. Hey, thanks for holding through. I appreciate it, Eddie. Thanks. All right, guys. We are going to wind up a little bit of the show. Let’s talk about one or two more things.
The big thing I haven’t heard a lot about is the Trump account under the the Working Families Tax Act that came out kind of part of the OBBB, but it’s a different one that came. Parents Guardian and others can establish Trump accounts for eligible children.
Trump accounts cannot be funded before July 4th, 2026. We can hang up on Eddie if you want. The federal government will make a one-time $1,000 contribution for each child account. And authorized contributions for individuals and employers are up to $5,000 per a year.
So wait, the government’s gonna put a account in your child’s name for $1,000. And then every year you and or your grandparents’ parents or your employer could put $5,000 in. An employer can contribute.
$2,500 per year towards an employee’s Trump account without it counting as taxable income. Think about this. Wait a second. I’m an employer. I want to really help bonus out some money to my employees.
But if I put it on their paycheck, you’re going to get a ton of money having to come out for taxes. But wait, you have a newborn baby and you’re you’ve got a Trump account set up and you’re like, wait, let’s put that $2,500 over here and let it grow.
Sooner or later you need an account for your child to go to school, whatever, and that money can be. Funds will be invested through certain mutual funds trades. You’re not going to have any control over this money, but think of it as a 401k or an IRA you really have very little. Generally money cannot be withdrawn before the child turns 18. After that point the account is treated like a traditional IRA or similar, which means there would be penalties if anything comes out before the age of 59. and a half. The eligibility, the child, I do believe needs to be born in 2020. five so it it’s for newborn children it’s not for just every child um let’s see if it tells us when the account has to be established because I think I I heard a seminar where some
Someone said that the child had to be a newborn child. It wasn’t like for every child under the age of 17 or something. And there is some additional maxes coming out. I want to say it was Microsoft or Elon Musk.
Somebody was matching. some of these contributions for the first 150,000 or million or whatever. Okay, they count before January 1st calendar year for child that turn. Okay, count generally cannot be coming out. So we will get more detail on exactly how that’s going to happen. It’s not going to happen quite yet because it’s uh they’re not going to allow us to do much with that until after uh July, which will be after tax season. You also have a beginning in December 31st, 24, up $5,000 the inflation for adoption credits. So that’s going to hit inflation instead of doing all the other good things.
There are so many changes, but I think most of those are going to be what you needed Keep in mind that a lot of the clean vehicle credits and the home energy credits, most of those expired on December 31st, 2020. 25.
So um if you did do anything in 25, you want to make sure that information is also put into your little packet so that way when you go do your taxes, do it yourself or have someone else help you with those taxes that you have them in the right place and you’re doing the right thing and you’re not sweating it because you’re like, oh My gosh, I forgot this.
I forgot that. You know, again, it is a little bit of a crazy um year. We’re gonna have a lot of different things. And I know many of you are looking at your paycheck thinking it was going to go up because of the tips and or uh overtime and again none of that is going to change on your paycheck the only place you’re going to see any additional refund or additional money is going to be from the IRS when you file your taxes. It’s going to be a larger refund. at the end of the year. And you know, of course, for some of you, this might be a perfect time to think about if you haven’t filed taxes in a number of years and you happen to be a person that works with tips or overtime, um, it may be a way of helping reduce your tax bills because your refunds will go back to any back tax anyways. And so it might be a good time to think about do I want to go ahead and address back tax issues so that way let the IRS kind of give you these extra funds and then use that money to pay them.
It’s not really coming out of your pocket because you’ve already lived the whole year with the paychecks that you have. All right, so let’s go through the numbers. If you are a current tax client of mine, again, if you do not have a tax appointment, please call our office on Monday, 615-367.
0819-615-367-0819. That way we can make sure that you have an appointment or if you just uh also you’ve probably received a lot of things from the lockbox. If you don’t know what that is or you you’re a client and you need your lockbox, again, feel free to contact us on Monday, 615-367-0819.
There is a calendar on the website. If you need to set up an appointment, if you’re new, we usually try to at least get an intake so we make sure we’re a good match for you. But We still have some appointments, so we’ll do our best to get you in.
And then obviously if you’re if you’re working with back tax issues or those kind of things things. I will tell you the IRS closed down in in November and they will reopen tax day on January the 27th.
And that’s when we can start e-filing. actually doing uh completing tax returns. Not that we’re not doing them, but um that being said, it seems like we’re not getting a lot of information on like 2848. I don’t know if anyone else is having this issue. We seem to be having a very slow fulfillment of that form. And I’m not too sure why, but it does seem like it’s happening.
So, um, but we, you know, if you need help dealing with IRS, dealing with collections or audits, that’s what we do all the time and we’ll be more than glad to help you out. If you would like, you can also email Friday at drfriday. com. That’s Friday F R I D A Y at D-R-F-R-I-D-A-Y dot com or just check me on the web, drfriday. com. Pretty easy. D-R-F-R-I-D-A-Y. First name is Friday. That’s why we keep carrying that over there.
And if you um you know need help doing your taxes, if you have someone that needs help and you don’t know where they can start, trust me with the doing this 30 plus years. We can help you help them get organized, make sure they know what they need and get everything going.
It’s not as stressful. I do my best at least to keep it less stressful than necessary. A lot of people will stress over taxes. I totally get it, but we can work together and make it a little less stressful for you.
I hope you guys are enjoying this Saturday. It’s a little nippy outside, but you know, it’s January 17th and You know, we expect it to be a little bit nippy. And for all my bee lovers out there, hopefully your hives are thriving. Um, and uh we are going to be here again next Saturday and hope you guys enjoyed the show. Cop you later