Al Smith of Golden Eagle Financial invites you on a comprehensive journey through the U.S. tax landscape as it will stand in 2025. This episode is a treasure trove of practical information crafted to aid both young professionals and seasoned retirees. Learn about pivotal tax reforms and tools available to minimize your liability, ensuring your hard-earned money stretches well into your golden years. Understanding fiscal policies is no small feat, but with Al’s expertise, complex legislation becomes clearer. Al highlights significant tax laws, offering strategies for converting traditional IRAs to Roth, a move that could yield considerable tax benefits
00:00:22 Introduction and Retirement Planning Overview
Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith.
SPEAKER 02 :
Welcome to another program of Retirement Unpacked. I want to thank you for tuning in. I have really good information for you this afternoon. And before I dive into that, I would like to let you know how you’re able to reach me. If you’re driving, you can contact KLZ at they’ll put you in touch with me through telephone or email they have good ways of doing that if you’re excuse me not driving you can contact my office at three zero three seven four four one one two eight and sometimes it goes to voicemail but I answer my voicemails very promptly Okay, I’ve talked about this before, but I don’t think anyone who’s listening can believe that they’ve learned too much about taxes on listening to Retirement Unpacked. So I have some of the tax changes from 2025 that you may or may not be familiar aware of, but I’d certainly like you to be aware of those. I know we’ve already completed our taxes. That was last month. But it’s good to know about some of these things because throughout the year, is when you’ll be making choices. You’ll be getting your checks from the company. If you work for a company, you have a W-2. If you’re self-employed, you’ll understand some of those things. So I think it’s really important to know about those. One of the forms that has changed, there’s something called the 1099-K. Now, you may be familiar with the 1099, the basic form. That’s when you work for a company and you’re not an employee. You’re like a contractor. You get a 1099 that declares how much income you’ve made from that particular business. But with all of the online forms, And purveyors such as PayPal, Venmo, and Square, and so forth, there are special rules. So if you are a business who does business through PayPal, Venmo, or Square, you need to pay attention to this because the 1099-K rule, uh requirements about minimums and things of that nature before a 1099k is sent out has changed so i would say you need to check into that and i’m not going into all the details but i will point out in later years after 2026 anyone who uses one of those platforms and has income greater than six hundred dollars then you will get a 1099k Brokers need to report proceeds from digital asset sales that occur in 2025. Digital assets, of course, are Bitcoin and the nature of that business is the government wants their share of the profits people make. And there’s a form called a 1099 I’m assuming that stands for digital assets. Now that’s a form that’s going to be sent out in 2026. And since digital currency is a mechanism where some people have made significant amounts of money, the government wants their share of that income that you’ve made. Now, there have been some really considerable natural disasters in the past couple of years. And one of the things that has changed is if you were affected by one of these disasters from 2021 to 2024, you can deduct personal disaster losses even if you don’t itemize deductions. Now, the standard deduction for couples went up to $30,000 per year. And that may even go up higher than that. So the important thing is this permits people to write off these uninsured losses for these disasters, even if your itemized deductions for the disaster, if they don’t exceed that standard deduction. So that’s really something important to know for anyone that you know that falls into that category if you have friends in, you know, North Carolina or Florida or wherever you’ve had any of those disasters in the past. So capital gains have the zero rate goes all the way up to $96,000. So that means if you have a capital gain, but your income is below $96,000, you don’t have to pay any tax on that. capital gain and that’s for married couples it’s 48 350 for singles and 64 750 for head of households and then it jumps to a 15 percent rate uh all the way to uh 533 000 for single filers after which it goes up to uh 20 percent And again, I mentioned the standard deduction goes all the way to $30,000. And if you are or if one spouse is 65 years or older, you can add $1,600 to that standard deduction of $30,000. Singles can take a $15,000 standard deduction. It’s up as high as $17,000 if you are age 65 or older. Some other things that are really important, some minimum payouts for IRAs and inherited IRAs. there is a 10-year clean-out rule that applies to IRAs if you inherit them after 2019. So in other words, let’s say if your mother or father has an IRA and he or she passes on and you inherit that, you have to empty that out within 10 years after death. Now, spouses and minor children or they’re chronically disabled, that does not apply. So be informed about the rules if you inherit an IRA because it’s really important that that IRA be cleaned out within a 10-year period. Now, if it’s a Roth IRA, It even needs to be cleaned out more quickly, like over five years. But the nice thing about Roth IRA is the owner of that Roth IRA, he’s not subject to those required minimum distributions. So that account can grow quite nicely while the original owner is living. Some other things, the IRA qualified charitable distribution cap, what that means is the most you can pay out from your IRA to a charitable institution as part of your required minimum distribution is $108,000 for this year. And you only need to be age 70 1⁄2 or older in order to qualify for that. That’s called a QCD, and I’ve talked on my show about these. This is one of the ways you can get a charitable deduction even if you… are using the standard deductions and for couples that’s thirty thousand dollars and that means if you give ten thousand dollars to your church if that comes directly from your ira and goes to the church or to the non-profit of your choosing As long as that is up to or less than your required minimum distribution, you don’t have to declare that as income, even if it doesn’t exceed the standard deduction. So there are some real important things that we need to pay attention to. And that’s just one of them. The limits you can put into a retirement plan have also changed. For example, the maximum 401k contribution is up to $23,500, but if you are between 60 and 63, you can add $11,250 more and that’s $7,500 for folks born before 1976. Now the cap on most simple IRAs rises to $16,500 plus an additional $3,500 for people who are over age 50. Now, there are certain ceilings on Roth IRA payments. Those have gone out if someone’s adjusted gross income is above $236,000. That’s grown to $246,000 for couples and $150,000 for singles. And basically what that means is in order to contribute to a Roth, You are not permitted to unless your income falls below that amount that I was talking about. Quite a few other things have also changed. For example, the annual cap. On deductible payments to health savings accounts, it rises in 2025 to $4,300 for account owners with a self-only coverage and $8,550 for people who have family coverage. Now, for individuals before 1971, they can put in an additional $1,000. and the eligibility for hsa is restricted you must have a high deductible health plan in order to qualify for that and in 2025 that means it has to be 1650 or 3300 for family coverage so those are some things to think about with regard to health savings accounts social security the annual wage base in 2025 has gone to $176,000. That’s a $7,500 increase. The Social Security tax rate on employers and employees remains at 6.2%. Both of them pay the 1.4% Medicare tax on all compensation. Now that has no cap. So if someone makes a half million dollars a year, they’ll be paying that Medicare tax on that entire amount. Medicare surtax on wages and self-employment income over $200,000 for singles and $250,000 for couples. The surtax doesn’t hit employers, only individuals whose income we just described there. Mileage rate for businesses is 70 cents per mile in 2025. Now, the mileage allowance for medical travel and military moves is 21 cents a mile, and the charitable giving rate fixed by law remains at 40%. 14 cents per mile. So a lot of things to be thinking about with respect to these 2025 tax changes. Now, most of those tax changes are part of the bill that was passed some time back which is called the tax cuts and jobs act of 2017 which is the law that we’re under right now with regard to taxation and after the break i will talk about the tax law which has not yet been passed but it’s going to be part of what President Trump describes as the big, beautiful bill. There are some nice enhancements to the tax code in that bill. We’ll talk about it right after the break.
SPEAKER 01 :
Golden Eagle Financial will help ensure that your nest egg will last. Advances in medical science have helped Americans live longer, which is wonderful. But where retirement advisors used to plan for about 15 years of income, today retirees live much longer. That means you’re going to need more money for more years of living an amazing retirement. Sure, there are programs to bridge that gap, like Medicare and Social Security, but that’s not the fulfilling retirement that you’ve always dreamed of. Al Smith and Golden Eagle Financial use financial strategies with guaranteed lifetime income to stretch your principal to last longer so you can do more of the things you want to do in retirement. like vacations with your kids, helping others, or giving to your favorite charities. People like you who are well-prepared will have a more fulfilling, stress-free retirement. It’s easy to get started. Just go to klzradio.com and click on the advertiser’s link to schedule a free consultation. Investment advisory services offered through Brookstone Capital Investment LLC, a registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
SPEAKER 02 :
Welcome back to Retirement Unpacked. We were just talking about some of the changes in 2025, and I know I had an earlier show about this, but I don’t think any of us can sit back and think, gee, I know too much about the tax code. Unless you’re a CPA or someone who really works with this every single day, these are a lot of things that most of us don’t know about, so having additional information is often necessary. Very, very helpful. Now the tax law that we’re in right now as far as federal taxes is called the Tax Cuts and Job Act of 2017. And that’s where President Trump lowered taxes and the previous rates in just about every bracket were slightly higher. And once he implemented that, the thresholds of taxation increased just a little bit each year. So we’re in a pretty favorable circumstance right now. And the big beautiful bill, as he’s been calling it, what that would do, it would prevent us from reverting back to what the tax rates were before 2017. Now, if this big, beautiful bill were not passed, 62% of taxpayers would be paying more. So the previous tax rates were higher than what they were in 2017 when the rates were cut. And if this big, beautiful bill were not passed and those tax cuts were not made permanent, as I said, 62% of the people would be paying more. Well, let’s see what that looks like. Well, the standard deduction, which right now is $30,000, it would be made permanent. That’s part of this big, beautiful bill also. So that means for couples, it’s $30,000. They would add to that $2,000 for people filing jointly and $1,000 for those who are filing singly. the child tax credit would be increased up to $2,500. Now those of you listening, I know most of you know the difference between a deduction and a credit, but essentially a tax credit is the alternative to paying a tax. So if you have a child tax credit of $2,500, then that’s $2,500 you can deduct directly from the tax that you might owe. So if someone has four children and this big beautiful bill were passed, then he could subtract $10,000 or she from the tax that is owed. So a credit goes directly against the tax that owed. And a deduction, of course, what that does, that reduces the amount of taxable income. So a credit is always more attractive because that goes directly against the tax that you owe. One of the changes that’s coming in what’s called the Big Beautiful Bill is a repeal of some of these green tax subsidies. Those are the subsidies that people are getting who purchased electric vehicles. And there may be some language in there. I haven’t read the entire bill, but there may be language in there also for solar heating of homes and some other green tax subsidies are out there. But the most common ones with which we are familiar are are those that affect electric vehicles. So in the new bill, those are going to be repealed. Now, I know many of you have been paying attention. It’s hard not to hear about it. Some of the things that President Trump has talked about. One of the things that he talked about is that CHIP income will be not taxed, which means it will be deductible. And that’s going to be very attractive for people in industries where they rely on tips. Now, there is an exception to that. That’s for people who are highly compensated. Something else that’s very attractive, even if you do not itemize deductions, you will be able to deduct interest paid on an auto loan if the automobile is manufactured in the United States. Now, that doesn’t mean it has to be a Ford or a Chevy or a Jeep. It could be a BMW or it could be a Mercedes because it could be a Toyota because all three of those vehicles have manufacturing plants in the United States. So in order to have your… auto loan interest deducted. The only requirement is that it be manufactured in the United States. Excuse me. It doesn’t have to be necessarily an American vehicle. Now, you may have also heard that overtime is not going to be taxed. Well, it’s not quite as attractive as that. Overtime pay, there will be 20% of it will be able to be deducted up to a maximum of $20,000 for those who file jointly and $10,000 for those who file singly. Now, this is a deduction that people can take even if their deductions don’t exceed the standard deduction. So in other words, as an example, if a couple has a standard deduction of $30,000, and maybe one of them made uh ten thousand dollars in overtime pay they would be able to deduct uh twenty percent of that uh when they file their taxes so again uh and that’s half of that for singles uh ten thousand dollars And that is part of a different bill. It’s called the Overtime Wages Tax Relief Act. And it’s not quite as attractive as no tax on overtime pay, but it will be much more attractive than what they do now. And one of the reasons or the impetus behind this is many people who work for hourly wages and difficult jobs, they work overtime so they can bring more money in and sometimes that will put them into a higher tax bracket. So rather than putting hard workers into a higher tax bracket, this will make part of that overtime income tax deductible. And again, that’s part of the Overtime Wages Tax Relief Act. Interestingly, there is one state in the union that does not require state income taxes to be paid on overtime. And that state is Alabama. I found that to be quite, quite interesting. Now, what do these things mean for us? Or what kinds of things can we do to minimize taxes as we’re moving toward retirement or into retirement? And I’m not going to too much beat a dead horse into the ground, but I often talk about converting traditional IRA to Roth. And the reason I think this is a good idea is because as long as someone doesn’t have a very short life expectancy, as long as that’s not the case, then people have the opportunity of paying tax on the seed rather than the harvest. For example, if someone who is 78 years old chooses to convert $200,000 of an IRA to Roth, let’s say their average tax might be 20%. That leaves this individual, this man or this woman, $160,000 after tax. Well, after 20 years, If it grows at 8%, which the stock market average over 50 years is about 9%, so it doesn’t take the most savvy investor high skill to make 8%, that $160,000 in 20 years at age 78 would grow to $745,000. Now, how much do you have to pay in RMDs on that? Zero, because Roth IRAs do not have RMDs. You can take that money out on your schedule, not the IRS’s table. And if you decide not to take anything out, that just continues to grow and grow tax-free. For example, at age 78, we said it’s $745,000. What about age 83? by age 83 it’s grown to one million ninety five thousand dollars by age 85 it has grown to 1.2 million dollars and on that 1.2 million only 40 000 was paid in taxes many years earlier If you’d like to have a conversation about paying less in tax as you make the transition to retirement, call my office at 303-744-1128 and we can arrange for a conversation. God bless you. Thank you for listening. Let’s continue to pray for our leaders and the folks in the Middle East. Bye now.
SPEAKER 03 :
Thank you for listening to Retirement Unpacked with your host, Al Smith of Golden Eagle Financial.
