1 00:00:08,600 --> 00:00:10,840 S1: New tax law is on the horizon and they could 2 00:00:10,840 --> 00:00:14,239 S1: change the way you give. Hi, I'm Rob West. The 3 00:00:14,240 --> 00:00:18,120 S1: new one, Big Beautiful Bill act, introduces shifts that could 4 00:00:18,120 --> 00:00:21,240 S1: influence your charitable strategy both now and in the years 5 00:00:21,239 --> 00:00:23,880 S1: to come. Today, Bruce McKee is here to help us 6 00:00:23,880 --> 00:00:27,720 S1: understand what's changing and how to respond wisely. Then it's 7 00:00:27,760 --> 00:00:32,280 S1: on to your calls at 800 525 7000. That's 800 8 00:00:32,280 --> 00:00:37,400 S1: 525 7000. This is faith and finance. Live. Biblical wisdom 9 00:00:37,400 --> 00:00:43,120 S1: for your financial decisions. Well, our guest today is my 10 00:00:43,120 --> 00:00:46,760 S1: friend Bruce McKee, attorney and senior vice president of Complex 11 00:00:46,760 --> 00:00:50,680 S1: gifts at the National Christian Foundation. A valued underwriter of 12 00:00:50,680 --> 00:00:52,960 S1: this program. Bruce, great to have you with us. 13 00:00:53,120 --> 00:00:54,920 S2: Thanks, Rob. It's wonderful to be here. 14 00:00:55,240 --> 00:00:59,370 S1: Bruce. This new law, the one big, beautiful Bill act 15 00:00:59,450 --> 00:01:03,330 S1: sounds cheerful by name, but it carries some serious implications 16 00:01:03,330 --> 00:01:05,610 S1: for givers. So why don't we start with just a 17 00:01:05,610 --> 00:01:08,050 S1: quick overview of what it actually does? 18 00:01:08,370 --> 00:01:11,170 S2: Sure. Well, beauty is in the eye of the beholder 19 00:01:11,170 --> 00:01:14,130 S2: for sure. And that applies to this bill as well, 20 00:01:14,130 --> 00:01:18,330 S2: which I'll refer to just as the Oba. Okay. It 21 00:01:18,370 --> 00:01:20,289 S2: had a whole lot of provisions in it, many of 22 00:01:20,290 --> 00:01:24,850 S2: them even beyond just tax. And depending on your perspective, 23 00:01:25,010 --> 00:01:28,010 S2: whether it's tax provisions or not, some of those provisions 24 00:01:28,010 --> 00:01:31,490 S2: looked beautiful and some didn't. But but I'd say the 25 00:01:31,490 --> 00:01:34,570 S2: biggest thing it did was to make permanent many provisions 26 00:01:34,569 --> 00:01:38,569 S2: that were scheduled to sunset at the end of 2025 27 00:01:38,770 --> 00:01:43,130 S2: under the last tax act, that 2017 Tax Cuts and 28 00:01:43,130 --> 00:01:47,530 S2: Jobs Act. So a couple of those, uh, are keeping 29 00:01:47,530 --> 00:01:52,410 S2: the increased standard deduction and estate tax exclusions, uh, both 30 00:01:52,410 --> 00:01:56,170 S2: of which can affect giving strategies. Uh, and then the 31 00:01:56,170 --> 00:01:59,850 S2: Oba also introduced introduce new deduction floors for charitable gifts 32 00:02:00,090 --> 00:02:04,090 S2: and a new limit for itemized deductions. And then it 33 00:02:04,130 --> 00:02:07,850 S2: extended certain deductions and also set some new rules for 34 00:02:07,850 --> 00:02:09,889 S2: university endowment taxes. 35 00:02:10,169 --> 00:02:12,610 S1: Interesting. Well, there's a lot there. Let's begin with the 36 00:02:12,650 --> 00:02:15,970 S1: update to the standard deduction. Because this is what affects 37 00:02:16,090 --> 00:02:20,290 S1: probably 90% of taxpayers. So what changed. And what could 38 00:02:20,290 --> 00:02:22,450 S1: it mean for charitable givers specifically. 39 00:02:22,850 --> 00:02:26,210 S2: Sure. This is a provision that was subject to that sunset. 40 00:02:26,370 --> 00:02:29,410 S2: So it was going to drop back down to a 41 00:02:29,410 --> 00:02:31,690 S2: lower amount at the end of this year. But the 42 00:02:31,690 --> 00:02:34,810 S2: Oba made it permanent and even actually boosted it for 43 00:02:34,850 --> 00:02:39,250 S2: even this year's taxes. So for this tax year 2025 44 00:02:39,610 --> 00:02:42,690 S2: for filing, the individuals will do. By this coming April, 45 00:02:42,930 --> 00:02:48,889 S2: the standard deduction increases to $15,750 for individuals and then 46 00:02:48,889 --> 00:02:54,730 S2: 31,500 for joint filers. So the result of this higher 47 00:02:54,730 --> 00:02:58,140 S2: standard deduction, continuing on at that higher level and even 48 00:02:58,139 --> 00:03:02,019 S2: a little boosted. Uh, fewer taxpayers will just itemize. We 49 00:03:02,060 --> 00:03:05,860 S2: saw this after that 2017 bill. It really pushed the 50 00:03:05,860 --> 00:03:11,220 S2: percentage of taxpayers itemizing, uh, down very significantly. So what 51 00:03:11,220 --> 00:03:14,139 S2: that means then, of course, is that fewer people are itemizing, 52 00:03:14,139 --> 00:03:18,020 S2: so fewer people can deduct charitable gifts since those are 53 00:03:18,020 --> 00:03:21,700 S2: itemized deductions. Yeah. Um, and of course, people make their 54 00:03:21,700 --> 00:03:25,220 S2: charitable gifts not just for a tax deduction. Sure, but 55 00:03:25,540 --> 00:03:28,620 S2: the deduction is what Congress has included to create greater 56 00:03:28,620 --> 00:03:31,579 S2: incentives for giving. It means that you can give more 57 00:03:32,100 --> 00:03:35,860 S2: than you would otherwise be able to. So givers who 58 00:03:35,900 --> 00:03:40,820 S2: use the standard deduction after that 2017 act this came 59 00:03:40,820 --> 00:03:43,540 S2: out and this will continue. They may want to use 60 00:03:43,540 --> 00:03:47,260 S2: a strategy that we call bunching, which is grouping multiple 61 00:03:47,260 --> 00:03:51,340 S2: years of gifts into one year in order to push 62 00:03:51,340 --> 00:03:55,830 S2: you up above, beyond, Beyond that standard deduction. So that 63 00:03:55,830 --> 00:03:59,910 S2: you itemize deductions in that year but then not the others. 64 00:04:00,310 --> 00:04:02,750 S2: And if you if you do that for us at 65 00:04:02,750 --> 00:04:06,710 S2: NCF especially this can be paired with opening a giving fund. Yeah. 66 00:04:06,750 --> 00:04:09,870 S2: To ultimately manage those gifts so that you can make 67 00:04:09,870 --> 00:04:15,030 S2: your grants out to various charities over those intervening years. 68 00:04:15,070 --> 00:04:17,990 S1: Yeah. Boy, I can't underscore that enough, folks. Open your 69 00:04:18,029 --> 00:04:22,630 S1: giving fund when you head to faith. It's like a 70 00:04:22,630 --> 00:04:26,870 S1: charitable checking account, a fabulous tool for giving and using 71 00:04:26,870 --> 00:04:31,830 S1: this bunching strategy. Also for giving appreciated assets. Uh, we 72 00:04:31,870 --> 00:04:35,470 S1: can't underscore that enough, Bruce. Just the wisdom and the 73 00:04:35,470 --> 00:04:38,589 S1: effectiveness of this tool called a donor advised fund. So 74 00:04:38,589 --> 00:04:39,830 S1: many uses. Right? 75 00:04:39,870 --> 00:04:44,830 S2: Yes. Oh, absolutely. It's it really is a powerful tool. Um, 76 00:04:44,830 --> 00:04:47,630 S2: and a lot of people are continuing to see how 77 00:04:47,630 --> 00:04:48,710 S2: powerful it is. 78 00:04:48,750 --> 00:04:50,750 S1: Yeah. And when you put those funds in there, I mean, 79 00:04:50,790 --> 00:04:52,750 S1: of course, the big idea is to get it out 80 00:04:52,750 --> 00:04:56,150 S1: into kingdom advancing causes. But while it's there, especially if 81 00:04:56,150 --> 00:04:58,950 S1: you use a bunching strategy, you can even invest it 82 00:04:58,950 --> 00:05:01,190 S1: and the returns go right back into the account, and 83 00:05:01,190 --> 00:05:04,510 S1: then you can grant them out to those ministries, your 84 00:05:04,510 --> 00:05:08,029 S1: church or charities that you select. Bruce McKee is here today, 85 00:05:08,029 --> 00:05:11,550 S1: Bruce's attorney and senior vice president of complex gifts at 86 00:05:11,550 --> 00:05:15,510 S1: the National Christian Foundation. We're talking about the one big, 87 00:05:15,510 --> 00:05:18,630 S1: beautiful bill and what it means for you and your giving. 88 00:05:18,630 --> 00:05:21,070 S1: Much more to come just around the corner. Stick around. 89 00:05:35,150 --> 00:05:38,270 S1: Tax laws may change, but the call to give faithfully 90 00:05:38,270 --> 00:05:41,989 S1: never does. We want you to plan wisely, act intentionally, 91 00:05:41,990 --> 00:05:45,630 S1: and trust God to multiply every gift for his kingdom. 92 00:05:45,830 --> 00:05:49,710 S1: You know, the one big, beautiful bill is now in place. 93 00:05:49,839 --> 00:05:52,400 S1: It's the law. We want to help you understand what 94 00:05:52,400 --> 00:05:56,000 S1: that means for your taxes and specifically your giving. To 95 00:05:56,000 --> 00:05:59,320 S1: help us do that today is Bruce McKee. Bruce's attorney 96 00:05:59,360 --> 00:06:02,840 S1: and senior vice president of complex gifts at the National 97 00:06:02,839 --> 00:06:06,599 S1: Christian Foundation. A valued underwriter of this program. If you'd 98 00:06:06,600 --> 00:06:09,840 S1: like to learn more or open your giving fund today, 99 00:06:09,839 --> 00:06:12,599 S1: that's a donor advised fund, which we've said is a 100 00:06:12,600 --> 00:06:21,440 S1: powerful giving tool. Just go to faith. That's faith. Bruce, 101 00:06:21,440 --> 00:06:23,600 S1: before the break, we were talking about some of the changes, 102 00:06:23,600 --> 00:06:27,479 S1: starting with the update to the standard deduction. Now I understand, 103 00:06:27,480 --> 00:06:30,040 S1: and you mentioned this, that the the one big beautiful 104 00:06:30,080 --> 00:06:34,520 S1: Bill act, the law introduces new floors for charitable giving. 105 00:06:34,520 --> 00:06:37,720 S1: So what exactly are those and when do they take effect. 106 00:06:38,279 --> 00:06:41,720 S2: Yeah. Let me start by defining a term here. Defining 107 00:06:41,720 --> 00:06:45,200 S2: adjusted gross income okay. And without without getting into all 108 00:06:45,200 --> 00:06:48,090 S2: the details of it, adjusted gross income or what we 109 00:06:48,089 --> 00:06:51,810 S2: call AGI. Is all of your income reduced by all 110 00:06:51,850 --> 00:06:55,810 S2: of your above the line deductions? Things like student loan interest, 111 00:06:55,850 --> 00:07:00,810 S2: retirement contributions, or health savings account contributions made during the year. 112 00:07:00,810 --> 00:07:04,330 S2: So this includes your wages. It includes investments. It includes 113 00:07:04,330 --> 00:07:08,810 S2: business income, all of that less a few of these deductions. 114 00:07:08,810 --> 00:07:14,370 S2: But then after that your itemized deductions come out later. 115 00:07:14,370 --> 00:07:18,690 S2: And those are where charitable deductions happen. So this is 116 00:07:18,690 --> 00:07:23,050 S2: the new floor that they've introduced. Beginning with charitable gifts 117 00:07:23,050 --> 00:07:28,370 S2: made in 2026. Only the amount of gifts above a 118 00:07:28,410 --> 00:07:33,330 S2: half a percent, 0.5% of your adjusted gross income, your 119 00:07:33,370 --> 00:07:38,690 S2: AGI for individuals is deductible. So if your AGI for 120 00:07:38,690 --> 00:07:41,210 S2: a given year just to use a round number, if 121 00:07:41,210 --> 00:07:45,010 S2: your AGI is 200,000, that would mean that the floor 122 00:07:45,010 --> 00:07:49,050 S2: applies to the first $1,000 of your charitable giving. So 123 00:07:49,050 --> 00:07:53,930 S2: whether you gave 20,000 or 40,000 of charitable giving that year, 124 00:07:53,930 --> 00:08:00,370 S2: you would lose 1000 of that amount from a deductibility standpoint. Okay. 125 00:08:00,410 --> 00:08:04,570 S2: So for corporations that give in addition to right, we've 126 00:08:04,570 --> 00:08:08,530 S2: got two floors really one for individuals, the other for corporations. 127 00:08:08,810 --> 00:08:13,050 S2: And that floor is 1% of their taxable income. So 128 00:08:13,090 --> 00:08:15,410 S2: it just means that that slice for either of those 129 00:08:15,450 --> 00:08:18,370 S2: the half a percent slice for individuals or the 1% 130 00:08:18,370 --> 00:08:23,210 S2: slice for corporations is just no longer deductible. Okay. So 131 00:08:23,810 --> 00:08:28,730 S2: since it starts in 2026, although it's not a massive percentage, 132 00:08:28,730 --> 00:08:32,689 S2: it's really quite small. But if you are thinking about giving, 133 00:08:32,730 --> 00:08:36,730 S2: especially if your AGI is going to be large next year, right. 134 00:08:36,770 --> 00:08:39,050 S2: We'd really encourage you to make those gifts before the 135 00:08:39,050 --> 00:08:41,970 S2: end of this year, before the end of 2025. Since 136 00:08:41,970 --> 00:08:44,860 S2: the floor doesn't apply at all to gifts made this 137 00:08:44,860 --> 00:08:48,020 S2: year and then in future years, we'd strongly recommend that 138 00:08:48,020 --> 00:08:51,540 S2: you meet with your financial advisor, who may suggest looking 139 00:08:51,580 --> 00:08:55,980 S2: ahead to see what years might be higher AGI years, 140 00:08:55,980 --> 00:08:58,660 S2: whether you have the sale of a business or something 141 00:08:58,660 --> 00:09:01,740 S2: like that, so that you can then get your gifts 142 00:09:01,740 --> 00:09:06,300 S2: in earlier years to minimize the effect of that floor. 143 00:09:06,940 --> 00:09:11,980 S2: So interestingly, since the Tax Cuts and Jobs Act, we've 144 00:09:11,980 --> 00:09:17,940 S2: had bunching for the item Non-itemizers. But now even itemizing 145 00:09:17,940 --> 00:09:22,980 S2: donors may benefit from sort of strategic bunching in alternate years, 146 00:09:22,980 --> 00:09:25,540 S2: depending on what their AGI is going to be. 147 00:09:25,580 --> 00:09:28,860 S1: Yeah, bunching again is if you have the capacity to 148 00:09:28,900 --> 00:09:32,460 S1: do all of your giving in one year, let's say 149 00:09:32,460 --> 00:09:34,819 S1: into a donor advised fund, you do that and then 150 00:09:34,820 --> 00:09:36,980 S1: you give it out over time, or grant it out 151 00:09:36,980 --> 00:09:41,140 S1: over time and maximize the tax benefits available to you. 152 00:09:41,179 --> 00:09:45,230 S1: All right. For those high capacity givers. Bruce, what about 153 00:09:45,230 --> 00:09:48,989 S1: deduction limits where they're really wanting to give a maximum 154 00:09:48,990 --> 00:09:51,310 S1: amount of their income away. Are we seeing changes there 155 00:09:51,309 --> 00:09:51,830 S1: as well? 156 00:09:52,230 --> 00:09:55,510 S2: Yeah, we sure are. Um, one I'll say, thankfully, the 157 00:09:55,510 --> 00:10:00,309 S2: Oba made the 60% of AGI limit for cash gifts 158 00:10:00,350 --> 00:10:03,510 S2: now permanent. Rather than letting that one sunset back to 159 00:10:03,550 --> 00:10:07,670 S2: the 50% total limit that existed before. So. So that's 160 00:10:07,670 --> 00:10:09,950 S2: a good thing. But there's a new limit that was 161 00:10:09,950 --> 00:10:14,069 S2: introduced as well. And this is on itemized deductions. Generally 162 00:10:14,070 --> 00:10:17,590 S2: this isn't just on charitable gifts but that aggregate of 163 00:10:17,590 --> 00:10:20,829 S2: all of your itemized deductions, including things like state and 164 00:10:20,830 --> 00:10:24,710 S2: local taxes and mortgage interest deductions. Uh, so a quick 165 00:10:24,710 --> 00:10:28,429 S2: explanation here of what's going on. The highest tax bracket 166 00:10:28,429 --> 00:10:32,110 S2: is the 37% bracket that would have that would have 167 00:10:32,150 --> 00:10:35,870 S2: sunsetted before and and put us back into a higher bracket. 168 00:10:35,870 --> 00:10:39,630 S2: But that was made permanent. So that's the highest permanent bracket. 169 00:10:39,630 --> 00:10:42,630 S2: So any income over a certain amount every year that 170 00:10:42,630 --> 00:10:49,150 S2: amount changes is in that 37% bracket. Itemized deductions then 171 00:10:49,150 --> 00:10:53,470 S2: offset that highest bracket income first. So it means that 172 00:10:53,470 --> 00:10:58,270 S2: those deductions are worth $0.37 for every dollar, since that 173 00:10:58,270 --> 00:11:00,950 S2: would have otherwise been the tax cost. Yeah. This new 174 00:11:00,950 --> 00:11:06,470 S2: limit on itemized deductions, what I call the 237 haircut, uh, 175 00:11:06,470 --> 00:11:11,030 S2: reduces the reduces that effect so that those deductions in 176 00:11:11,070 --> 00:11:15,949 S2: that highest bracket of income are now worth only $0.35 177 00:11:16,110 --> 00:11:19,709 S2: for every dollar. Again, like the floors, it's not a 178 00:11:19,710 --> 00:11:23,709 S2: huge amount, but it results in a slightly higher tax bill. 179 00:11:23,910 --> 00:11:27,270 S2: And like the floors, this haircut also goes into effect 180 00:11:27,270 --> 00:11:31,590 S2: for tax year 2026. So that's just one more reason 181 00:11:31,590 --> 00:11:33,870 S2: to give this year. If you're trying to decide between 182 00:11:33,870 --> 00:11:36,710 S2: a gift this year or next, and in the future, 183 00:11:36,710 --> 00:11:40,719 S2: it will require some additional planning between givers and their advisors, 184 00:11:41,000 --> 00:11:42,800 S2: especially for high income donors. 185 00:11:42,840 --> 00:11:46,200 S1: Yeah, that makes a lot of sense. Great reason to 186 00:11:46,280 --> 00:11:49,439 S1: really make sure you're thoughtful about your giving here before 187 00:11:49,440 --> 00:11:53,280 S1: we close the books on 2025. Now, you also mentioned, 188 00:11:53,280 --> 00:11:56,480 S1: Bruce that the law touches estate and gift taxes. This 189 00:11:56,480 --> 00:11:59,520 S1: is always a really important question for folks. So what 190 00:11:59,520 --> 00:12:00,679 S1: are the key changes there? 191 00:12:01,000 --> 00:12:04,160 S2: Yeah, the estate and gift tax exemption is the amount 192 00:12:04,160 --> 00:12:07,640 S2: of an individual's estate that can be transferred to their 193 00:12:07,640 --> 00:12:12,120 S2: heirs tax free. That exemption amount rises under the Oba 194 00:12:12,120 --> 00:12:16,400 S2: to 15 million for individuals and 30 million for married couples, 195 00:12:16,440 --> 00:12:21,280 S2: again primarily making permanent what had been scheduled to sunset 196 00:12:21,280 --> 00:12:24,760 S2: back to about half that amount as of 2026. Under 197 00:12:24,760 --> 00:12:28,640 S2: that Tax Cuts and Jobs Act. So now long term 198 00:12:28,679 --> 00:12:32,880 S2: estate planning can really proceed with more confidence due to 199 00:12:32,920 --> 00:12:36,560 S2: these permanent thresholds. But there I will make one note 200 00:12:36,690 --> 00:12:39,810 S2: as well on permanence. Write the laws, of course, can 201 00:12:39,809 --> 00:12:43,210 S2: be changed, but the old law that had been passed 202 00:12:43,210 --> 00:12:48,170 S2: in 2017 had those sunsets built in. Yeah, we call 203 00:12:48,170 --> 00:12:52,570 S2: these permanent now because it requires an affirmative vote to 204 00:12:52,610 --> 00:12:56,770 S2: change these amounts rather than simply allowing them to expire. 205 00:12:56,970 --> 00:13:00,170 S2: Back to the earlier levels. And we found that when 206 00:13:00,170 --> 00:13:04,010 S2: individuals settle their estate planning, it often helps them focus 207 00:13:04,010 --> 00:13:06,809 S2: where their hearts are called by God to give, which 208 00:13:06,809 --> 00:13:10,210 S2: then often encourages them to, in the words of Ron Blue, 209 00:13:10,250 --> 00:13:13,650 S2: start giving while they're living, so they're knowing where it's going, right? 210 00:13:14,450 --> 00:13:18,770 S2: And within that, estate planning, charitable trusts and family foundations 211 00:13:18,770 --> 00:13:21,730 S2: can also benefit from this greater predictability. 212 00:13:21,730 --> 00:13:24,050 S1: That's really helpful. Just about a minute left, Bruce, for 213 00:13:24,050 --> 00:13:27,490 S1: listeners who don't itemize their deductions, the above the line 214 00:13:27,490 --> 00:13:32,089 S1: charitable deduction is returning. How does that work this time around? 215 00:13:32,130 --> 00:13:36,729 S2: Yeah, this time it'll be $1,000 for an individual, $2,000 216 00:13:36,730 --> 00:13:40,690 S2: for couples, for non-itemizers for their cash gifts to churches 217 00:13:40,690 --> 00:13:43,730 S2: and public charities, which is a great thing to bring 218 00:13:43,730 --> 00:13:46,970 S2: those folks in for more incentive for giving. 219 00:13:47,210 --> 00:13:49,370 S1: Yeah, boy, that was so helpful. We covered a lot 220 00:13:49,370 --> 00:13:51,890 S1: of ground today. Bruce. Really appreciate your time. 221 00:13:51,890 --> 00:13:54,210 S2: Thank you. Rob. We at NCF are always happy to 222 00:13:54,210 --> 00:13:54,730 S2: join you. 223 00:13:54,890 --> 00:13:58,170 S1: Well we love our partnership. That's Bruce McKee, attorney, senior 224 00:13:58,210 --> 00:14:02,250 S1: vice president of complex gifts at the National Christian Foundation. Folks, 225 00:14:02,250 --> 00:14:04,930 S1: let me encourage you. If you're planning your year end 226 00:14:04,929 --> 00:14:08,450 S1: giving a giving fund with NCF can help you maximize 227 00:14:08,450 --> 00:14:12,770 S1: your generosity and steward God's provision wisely. Open one today. 228 00:14:12,770 --> 00:14:18,530 S1: It'll only take three minutes. Go to faith. Com that's faith. 229 00:14:22,170 --> 00:14:24,210 S1: We'll be right back with much more. Stay with us. 230 00:14:31,970 --> 00:14:34,900 S3: The opinions offered during this program represent the personal or 231 00:14:34,900 --> 00:14:38,940 S3: professional opinions of the participants, given for informational purposes only. 232 00:14:39,100 --> 00:14:42,340 S3: Any information provided is not intended to replace advice from 233 00:14:42,340 --> 00:14:46,100 S3: a financial, medical, legal, or other professional who understands your 234 00:14:46,100 --> 00:14:47,580 S3: specific situation. 235 00:14:55,220 --> 00:14:57,100 S1: So thankful to have you with us today on Faith 236 00:14:57,100 --> 00:14:59,700 S1: and finance. Live. I'm Rob West. Well looking forward to 237 00:14:59,740 --> 00:15:02,900 S1: taking your calls and questions. The calls have started coming in, 238 00:15:03,220 --> 00:15:05,300 S1: but we've got room for you. That number to call 239 00:15:05,300 --> 00:15:11,820 S1: 800 525 7000. Again, that's 800 525 7000 at the moment. 240 00:15:11,820 --> 00:15:13,580 S1: We've got some room for you. We'd love to hear 241 00:15:13,580 --> 00:15:16,060 S1: from you today. We'll dive into those questions here in 242 00:15:16,060 --> 00:15:18,580 S1: just a moment. But first, in the news today, the 243 00:15:18,580 --> 00:15:22,300 S1: IRS has released new guidance on how workers can claim 244 00:15:22,500 --> 00:15:27,700 S1: recently enacted federal deductions for tips and overtime pay. Beginning 245 00:15:27,700 --> 00:15:31,590 S1: this year and running through 2028, eligible employees may deduct 246 00:15:31,590 --> 00:15:36,390 S1: up to $25,000 in qualified tips, with the benefit phasing 247 00:15:36,390 --> 00:15:41,030 S1: out for individuals earning more than 150,000, or married couples 248 00:15:41,030 --> 00:15:44,910 S1: earning more than 300,000. A separate deduction allows workers to 249 00:15:44,950 --> 00:15:51,550 S1: claim up to 12,500 of eligible overtime pay, or 25,000 250 00:15:51,590 --> 00:15:55,110 S1: for joint filers with the same income limits. Now, experts 251 00:15:55,150 --> 00:15:59,350 S1: warn that workers may still face confusion at tax time. 252 00:15:59,470 --> 00:16:03,590 S1: Employers are encouraged but not required, to report these earnings 253 00:16:03,590 --> 00:16:08,990 S1: on information returns in 2025, which could make filing more complicated. 254 00:16:09,350 --> 00:16:14,670 S1: About 6 million workers report tipped wages annually and many 255 00:16:14,670 --> 00:16:19,990 S1: more receive overtime pay. The IRS also issued temporary transition relief, 256 00:16:20,310 --> 00:16:24,590 S1: allowing certain service industry workers to claim the tip deduction 257 00:16:24,590 --> 00:16:29,110 S1: in 2025, though this eligibility may change in future years. 258 00:16:29,230 --> 00:16:33,470 S1: For now, taxpayers are encouraged to track income carefully and 259 00:16:33,470 --> 00:16:36,990 S1: stay alert for updates. With the rules still developing, clear 260 00:16:36,990 --> 00:16:43,950 S1: records and early preparation will help ensure a smoother filing season. 261 00:16:43,950 --> 00:16:47,630 S1: So if you fall in that category, overtime pay or tips, 262 00:16:47,950 --> 00:16:50,830 S1: that's helpful information for you. All right. We're ready to 263 00:16:50,870 --> 00:16:54,390 S1: dive into these questions today. We're going to begin in Indianapolis. 264 00:16:54,430 --> 00:16:55,350 S1: Alan go ahead. 265 00:16:55,390 --> 00:16:58,230 S4: Hi, Rob. I appreciate your ministry. You're doing a great thing. 266 00:16:58,430 --> 00:16:59,270 S1: Well thank you, sir. 267 00:17:00,190 --> 00:17:02,990 S4: Oh you're welcome. Yeah. So, um, I have a 401 268 00:17:02,990 --> 00:17:08,190 S4: K through my employer. It's a Roth. I have $403,000, 269 00:17:08,390 --> 00:17:11,109 S4: and it's just in a target date portfolio. And that's 270 00:17:11,109 --> 00:17:14,710 S4: what it's been in since I opened it. Um, I'm 59. 271 00:17:14,750 --> 00:17:17,470 S4: I'm looking to retire in about five and a half years. 272 00:17:17,790 --> 00:17:22,710 S4: I keep getting emails from Vanguard, um, to consider using 273 00:17:22,710 --> 00:17:27,150 S4: a human advisor. Um, they're saying it would be about 274 00:17:27,240 --> 00:17:33,400 S4: $30 for every $10,000, so 0.30%. And I just don't 275 00:17:33,400 --> 00:17:34,840 S4: know if I should do it or not if it's 276 00:17:34,880 --> 00:17:39,600 S4: worth the cost of doing that. We do have other investments. 277 00:17:39,600 --> 00:17:41,240 S4: I don't know if it would be helpful to know 278 00:17:41,240 --> 00:17:44,239 S4: that information before you answer my question, but that's my 279 00:17:44,240 --> 00:17:45,320 S4: question today. Rob. 280 00:17:45,520 --> 00:17:47,760 S1: Well, it's a good one, Alan, I appreciate you asking. Yeah. 281 00:17:47,800 --> 00:17:49,800 S1: Tell me a little bit about the other investments that 282 00:17:49,800 --> 00:17:52,400 S1: you have and how you're selecting them. 283 00:17:53,280 --> 00:17:57,360 S4: Okay. Um, we have a Roth through Schwab, which we 284 00:17:57,400 --> 00:18:03,000 S4: contribute $200 a month to, and it's got about 76,000 285 00:18:03,040 --> 00:18:07,760 S4: in it. Um, my wife retired. She's really conservative. So 286 00:18:07,800 --> 00:18:12,560 S4: we opened an annuity, a fixed indexed annuity, um, about 287 00:18:12,560 --> 00:18:16,359 S4: seven years ago, and it has about 280,000 in it. 288 00:18:16,680 --> 00:18:21,119 S4: And then we have, um, my wife got an inheritance 289 00:18:21,400 --> 00:18:23,560 S4: and again, we put it in a money market. It's 290 00:18:23,560 --> 00:18:28,370 S4: got 34,000. In it we have an emergency fund with 291 00:18:28,369 --> 00:18:31,649 S4: 30 in it, and we have one other annuity, a 292 00:18:31,650 --> 00:18:34,130 S4: small one with about 50,000 in it. 293 00:18:34,410 --> 00:18:37,330 S1: Okay, excellent. Well, listen, you guys are doing great and 294 00:18:37,330 --> 00:18:40,010 S1: I can understand, you know, you have different kind of 295 00:18:40,050 --> 00:18:42,330 S1: risk profiles, if you will. And the good thing is 296 00:18:42,330 --> 00:18:44,489 S1: you can have a variety of investments that when you 297 00:18:44,490 --> 00:18:47,850 S1: put it all together, you know, is appropriate for each 298 00:18:47,850 --> 00:18:51,369 S1: of your ages and risk tolerance and then jointly for 299 00:18:51,369 --> 00:18:54,170 S1: your goals and objectives. As you think about the fourth 300 00:18:54,170 --> 00:18:56,650 S1: quarter of life and what God might have for you, 301 00:18:56,690 --> 00:19:00,330 S1: you know, the the need potentially to transition away from 302 00:19:00,330 --> 00:19:03,570 S1: paid work to whatever God has as you stay productive 303 00:19:03,570 --> 00:19:07,050 S1: in service to our Lord, but using your time, talent, 304 00:19:07,050 --> 00:19:09,810 S1: and treasure for his glory that may or may not 305 00:19:09,810 --> 00:19:13,570 S1: involve pay. And so the ability to convert these assets, 306 00:19:13,570 --> 00:19:16,090 S1: which you know, you've accumulated quite a nest egg here, 307 00:19:16,090 --> 00:19:18,290 S1: which is great to be able to convert these to 308 00:19:18,330 --> 00:19:20,730 S1: income is going to be really important. I don't think 309 00:19:20,730 --> 00:19:23,530 S1: there's anything wrong with having that guaranteed fixed annuity as 310 00:19:23,650 --> 00:19:26,850 S1: a part of this. I mean, I'm seeing here, you know, 311 00:19:26,890 --> 00:19:31,090 S1: as much as, uh, you know, 800,000 plus somewhere between 312 00:19:31,090 --> 00:19:34,010 S1: 8 and 900,000 all in and, you know, with a 313 00:19:34,010 --> 00:19:37,889 S1: guaranteed fixed annuity is 280 of that. And then you've got, uh, 314 00:19:37,890 --> 00:19:42,570 S1: you know, the 134 invested really conservatively as well. Um, 315 00:19:42,570 --> 00:19:46,410 S1: you know, I like the idea of you using an advisor, uh, 316 00:19:46,410 --> 00:19:50,050 S1: for this nest egg, even if it didn't include, you know, 317 00:19:50,090 --> 00:19:52,850 S1: some of this. I mean, maybe the the inheritance you 318 00:19:52,850 --> 00:19:55,450 S1: still keep, you know, in a, in a fairly conservative, 319 00:19:55,490 --> 00:19:59,130 S1: even somewhat liquid posture, if that, you know, gives your 320 00:19:59,130 --> 00:20:02,490 S1: wife more peace of mind. Uh, the annuity is certainly 321 00:20:02,690 --> 00:20:06,130 S1: in a fixed environment, but you'll be able to access, uh, 322 00:20:06,130 --> 00:20:09,290 S1: I imagine a portion of that every year. But taking 323 00:20:09,290 --> 00:20:13,209 S1: the roughly 500,000 between the 401 K and the Roth 324 00:20:13,609 --> 00:20:16,169 S1: and having an advisor manage those, I think makes a 325 00:20:16,170 --> 00:20:19,889 S1: lot of sense. I probably wouldn't pay the 30 basis points. 326 00:20:19,890 --> 00:20:21,979 S1: Just so you have a human that you can call 327 00:20:21,980 --> 00:20:24,860 S1: in a call center. I'd rather you spend if you're 328 00:20:24,859 --> 00:20:28,700 S1: going to use an advisor. Um, you know, more like 1%, 329 00:20:28,740 --> 00:20:31,500 S1: even though, you know, that's 4000 a year on a 330 00:20:31,500 --> 00:20:36,100 S1: $400,000 portfolio. The idea would be that you've got somebody that, 331 00:20:36,100 --> 00:20:38,500 S1: as you move beyond the target date fund and think 332 00:20:38,500 --> 00:20:42,820 S1: about generating more income, protecting what you have, but also 333 00:20:42,820 --> 00:20:46,020 S1: maximizing that yield. Maybe in the fixed income portion, it's 334 00:20:46,060 --> 00:20:50,859 S1: a mix of bonds and some treasuries, maybe even some CDs. And, uh, 335 00:20:50,900 --> 00:20:52,140 S1: you know, maybe you have a little bit of gold 336 00:20:52,140 --> 00:20:55,060 S1: in there. And then for a smaller portion of the portfolio, 337 00:20:55,060 --> 00:20:58,939 S1: still keeping some stock exposure so you can outpace inflation. 338 00:20:58,980 --> 00:21:01,180 S1: I mean, that's the kind of thing that an advisor 339 00:21:01,180 --> 00:21:05,900 S1: would do alongside probably some comprehensive planning, making sure you 340 00:21:05,940 --> 00:21:09,060 S1: have your estate in order, making sure you're mitigating taxes 341 00:21:09,260 --> 00:21:11,780 S1: once you have required minimums, that you do that in 342 00:21:11,780 --> 00:21:15,060 S1: a tax efficient way, and somebody who understands your values 343 00:21:15,060 --> 00:21:17,940 S1: and can guide you in the most effective ways to 344 00:21:17,980 --> 00:21:20,750 S1: give as well. So that would be the way that 345 00:21:20,750 --> 00:21:22,990 S1: I would go. And I would reach out to a 346 00:21:22,990 --> 00:21:27,149 S1: certified Kingdom advisor, maybe interview 2 or 3 in Indianapolis. 347 00:21:27,190 --> 00:21:30,470 S1: You could go to find a. Com to find who's 348 00:21:30,470 --> 00:21:32,670 S1: in your area. There's some great ones there in Indy, 349 00:21:32,830 --> 00:21:34,590 S1: but let's do this. I want to get your thoughts 350 00:21:34,590 --> 00:21:36,150 S1: on that and just see if you have any follow 351 00:21:36,190 --> 00:21:38,430 S1: up questions. So if you don't mind, Alan, I'm going 352 00:21:38,430 --> 00:21:40,470 S1: to ask you to stay there through the break. I'll 353 00:21:40,470 --> 00:21:43,390 S1: come right back to you and we'll pick up this conversation, 354 00:21:43,390 --> 00:21:46,150 S1: and then we'll head to Iowa, talk to Renee and 355 00:21:46,150 --> 00:21:49,470 S1: out to Washington State. John's waiting patiently there as well. 356 00:21:49,470 --> 00:21:51,830 S1: This is faith and finance live. We'll be right back. 357 00:21:59,750 --> 00:22:01,310 S1: Great to have you with us today on Faith and 358 00:22:01,310 --> 00:22:03,710 S1: Finance live. I'm Rob West. Before the break we were 359 00:22:03,710 --> 00:22:07,990 S1: talking to Alan in Indianapolis. He's got multiple accounts. He's 360 00:22:07,990 --> 00:22:11,110 S1: got a 401 K through his employer. He's been in 361 00:22:11,109 --> 00:22:15,189 S1: a target date fund, about 400,000. He's wondering if he 362 00:22:15,190 --> 00:22:18,230 S1: should move that over to an advisor, either a low 363 00:22:18,230 --> 00:22:22,590 S1: cost advisor at Vanguard that would be just available, I suspect, 364 00:22:22,590 --> 00:22:26,710 S1: for phone calls or some other situation. He's also got 365 00:22:26,710 --> 00:22:31,070 S1: several other accounts. Uh, he's planning to retire in five 366 00:22:31,070 --> 00:22:34,110 S1: and a half years. And, um, you know, is is 367 00:22:34,109 --> 00:22:36,550 S1: just wondering the best option here. Uh, you know, you 368 00:22:36,590 --> 00:22:39,030 S1: can't al and roll this out to an IRA and 369 00:22:39,030 --> 00:22:42,710 S1: have a full discretionary account until you separate from your employer. 370 00:22:42,910 --> 00:22:45,910 S1: So I would say, you know, if that target date 371 00:22:45,910 --> 00:22:48,629 S1: has been doing well, I'd probably just leave it there 372 00:22:48,630 --> 00:22:50,710 S1: for now. I don't think you get a lot of 373 00:22:50,710 --> 00:22:54,070 S1: benefit out of the the 30 basis points for the advisor, 374 00:22:54,270 --> 00:22:57,149 S1: and then just be ready to move over to an 375 00:22:57,190 --> 00:23:00,870 S1: advisor that can take full discretion at retirement. And if 376 00:23:00,869 --> 00:23:03,950 S1: you need some financial planning now, you know, I'd reach 377 00:23:03,950 --> 00:23:07,430 S1: out to an advisor to establish a relationship with. But 378 00:23:07,430 --> 00:23:09,550 S1: apart from that, you know, I don't think there's any 379 00:23:09,550 --> 00:23:11,629 S1: issue with staying with this target date fund. But give 380 00:23:11,670 --> 00:23:12,870 S1: me your thoughts on all that. 381 00:23:14,109 --> 00:23:19,240 S4: Okay. Well, um, that that sounds good to me. Honestly. Um, 382 00:23:19,960 --> 00:23:24,639 S4: I would definitely, you know, maybe six months before I retire, 383 00:23:24,680 --> 00:23:32,640 S4: start interviewing, um, some advisors, but it's been doing really well. And, uh, 384 00:23:32,640 --> 00:23:37,280 S4: you know, I realize that, um, to get professional advice, 385 00:23:37,520 --> 00:23:39,920 S4: you know, I'm a novice. I'm going to need help. 386 00:23:39,920 --> 00:23:42,480 S4: So I wasn't sure if I should go ahead and 387 00:23:42,480 --> 00:23:45,920 S4: pay that fee through Vanguard. Um, for the next five 388 00:23:45,920 --> 00:23:48,600 S4: and a half years until I retire. But, um, if 389 00:23:48,640 --> 00:23:51,800 S4: you suggest, I realize, Rob, ultimately, it's mine and my 390 00:23:51,800 --> 00:23:55,760 S4: wife's decision. But if you suggest that we just ride 391 00:23:55,760 --> 00:23:58,840 S4: the target date, that that definitely, uh, will be a 392 00:23:58,840 --> 00:24:00,360 S4: factor in our decision making. 393 00:24:00,520 --> 00:24:02,359 S1: Yeah. I mean, I don't like I don't have any 394 00:24:02,359 --> 00:24:04,120 S1: problem with that at all. I mean, especially it's been 395 00:24:04,119 --> 00:24:06,920 S1: doing well, those are going to, you know, that's going 396 00:24:06,960 --> 00:24:10,280 S1: to continue to get more conservative. Um, you know, you 397 00:24:10,280 --> 00:24:12,480 S1: may want to look and just see kind of what 398 00:24:12,480 --> 00:24:16,800 S1: the mix is of that target date fund. Uh, you know, 399 00:24:16,840 --> 00:24:18,600 S1: because what is your age right now? 400 00:24:20,040 --> 00:24:22,720 S4: I'm 59. I'll be 60 in April. And I looked 401 00:24:22,760 --> 00:24:27,080 S4: on Sunday, and it's like 60% stock and 40% bonds 402 00:24:27,080 --> 00:24:27,480 S4: right now. 403 00:24:27,520 --> 00:24:30,240 S1: Okay. Yeah. So that's a little more aggressive than you 404 00:24:30,240 --> 00:24:32,160 S1: would typically be, which I don't have any problem with 405 00:24:32,160 --> 00:24:33,959 S1: just given the assets you have. And you all are 406 00:24:33,960 --> 00:24:38,160 S1: living modestly. I mean normally we'd say at 60 you'd 407 00:24:38,200 --> 00:24:42,000 S1: be 5050. Um, but I think being a little bit 408 00:24:42,000 --> 00:24:44,440 S1: more aggressive than that is not a problem for me. 409 00:24:44,440 --> 00:24:47,680 S1: It's certainly not, you know, out of balance whatsoever. I mean, 410 00:24:47,680 --> 00:24:50,640 S1: if you wanted to pull back to a different target 411 00:24:50,640 --> 00:24:54,080 S1: date fund, that is a little, you know, sooner and 412 00:24:54,080 --> 00:24:57,560 S1: where it gets more like 5050. Um, you know, I 413 00:24:57,560 --> 00:25:00,280 S1: think that would be fine, especially given how the market's 414 00:25:00,280 --> 00:25:02,600 S1: done and the fact that a lot of economists think 415 00:25:02,600 --> 00:25:04,520 S1: we're headed into a period where we're not going to 416 00:25:04,520 --> 00:25:07,880 S1: see these kinds of returns. Um, but again, if even 417 00:25:07,880 --> 00:25:09,720 S1: if you stayed right there, I wouldn't have any problem 418 00:25:09,720 --> 00:25:12,450 S1: with it. I'm just not sure with the kind of 419 00:25:12,490 --> 00:25:16,490 S1: relationship you're describing here, uh, at Vanguard for the 30 420 00:25:16,530 --> 00:25:18,369 S1: basis points, I'm not sure you're going to get a 421 00:25:18,369 --> 00:25:20,570 S1: whole lot out of that. That's worth the expense. 422 00:25:21,730 --> 00:25:24,650 S4: Right. Okay. All right. Rob. Well, I appreciate your advice 423 00:25:24,650 --> 00:25:27,250 S4: and your time. It helps us greatly. 424 00:25:27,490 --> 00:25:29,290 S1: Anytime, Alan. Hey, stay on the line. I'm going to 425 00:25:29,290 --> 00:25:31,889 S1: send you a copy of our latest edition of Faithful Steward, 426 00:25:31,890 --> 00:25:34,410 S1: our magazine. Just as a thanks for calling in today. 427 00:25:34,410 --> 00:25:36,369 S1: I think you'll enjoy it. God bless you, sir. Uh, 428 00:25:36,369 --> 00:25:38,850 S1: let's go to Iowa. Hi, Renee. How can I help? 429 00:25:38,890 --> 00:25:41,290 S5: Hi, Rob. Thank you for taking my call. I really 430 00:25:41,290 --> 00:25:42,810 S5: appreciate your program. 431 00:25:42,850 --> 00:25:43,850 S1: Of course. Thank you. 432 00:25:44,330 --> 00:25:48,530 S5: Um, I'm, uh, 54 and still working. I still have about. 433 00:25:48,570 --> 00:25:51,450 S5: I'm still planning on working another 8 or 9 years. 434 00:25:51,650 --> 00:25:56,409 S5: My husband is 62 and he's retired. He's taking he 435 00:25:56,410 --> 00:26:01,690 S5: gets Social Security and he has two 401 s, um, 436 00:26:02,170 --> 00:26:06,450 S5: that are like 40,000 apiece. Um, so we were just 437 00:26:06,450 --> 00:26:09,890 S5: considering wondering if it would be a good idea to 438 00:26:09,930 --> 00:26:14,780 S5: cash those two in and then pay off our mortgage. 439 00:26:14,780 --> 00:26:18,899 S5: And we have a car payment. Our mortgage is 40, 440 00:26:18,940 --> 00:26:24,500 S5: our balance about 40,000. Um, and then his, our truck, um, 441 00:26:24,540 --> 00:26:26,300 S5: we owe about 10,000 on that. 442 00:26:26,820 --> 00:26:29,820 S1: Okay. Yeah. And what is the interest rate on that? 443 00:26:30,020 --> 00:26:32,740 S5: Uh, the interest rate on the mortgage is 3%, and 444 00:26:32,740 --> 00:26:34,980 S5: the truck is like, um, maybe nine. 445 00:26:35,380 --> 00:26:38,580 S1: Okay. Yeah. Uh, yeah. You know, I mean, I think 446 00:26:38,619 --> 00:26:41,260 S1: I appreciate what you're trying to do here. At the 447 00:26:41,260 --> 00:26:44,899 S1: same time, you know, the cashing out that 401 K 448 00:26:44,940 --> 00:26:48,300 S1: is going to trigger trigger taxes. So, you know, there's 449 00:26:48,300 --> 00:26:51,980 S1: no 10% penalty at, uh, at 62 if we're talking 450 00:26:51,980 --> 00:26:56,580 S1: about his account. But the entire withdrawal uh, would be 451 00:26:56,580 --> 00:26:59,859 S1: taxable in one year. So that could push a portion 452 00:26:59,859 --> 00:27:02,900 S1: of that into a higher tax bracket. Um, you know, 453 00:27:02,940 --> 00:27:06,940 S1: that 3% mortgage is what you might consider cheap debt. 454 00:27:06,980 --> 00:27:09,580 S1: I mean, you know, that's a fabulous interest rate that 455 00:27:09,580 --> 00:27:11,939 S1: a lot of people would love to have today doesn't 456 00:27:11,940 --> 00:27:14,780 S1: mean you shouldn't pursue being debt free, even though it's, quote, 457 00:27:14,820 --> 00:27:17,260 S1: cheap debt. I still like the idea of you getting 458 00:27:17,460 --> 00:27:21,060 S1: out of debt completely, but from a financial standpoint, and 459 00:27:21,060 --> 00:27:24,180 S1: that's all it is. There's more to finances than just the, 460 00:27:24,220 --> 00:27:27,020 S1: you know, the numbers. But from a financial standpoint, it's 461 00:27:27,020 --> 00:27:29,699 S1: almost always better to keep the mortgage and leave the 462 00:27:29,700 --> 00:27:33,340 S1: 401 K alone. You know, paying off that 3% mortgage 463 00:27:33,340 --> 00:27:38,180 S1: is not a high return move. Any diversified retirement portfolio 464 00:27:38,420 --> 00:27:41,900 S1: is likely to earn more than a 3% long term return, 465 00:27:42,300 --> 00:27:45,500 S1: especially if you're going to need those funds for retirement 466 00:27:45,500 --> 00:27:49,500 S1: income down the road. Um, liquidity matters at your age. 467 00:27:49,500 --> 00:27:51,820 S1: So once you put not saying you're old at all, 468 00:27:51,820 --> 00:27:54,980 S1: I'm just saying as we age, liquidity gets more and 469 00:27:54,980 --> 00:27:58,619 S1: more important. So once you put retirement money into the house, 470 00:27:58,619 --> 00:28:02,340 S1: it becomes illiquid unless you get something like a reverse mortgage. 471 00:28:02,340 --> 00:28:06,220 S1: So if something goes wrong, you know, medical home repair car, 472 00:28:06,420 --> 00:28:10,550 S1: you can't get that money back without debt. Uh, and 473 00:28:10,550 --> 00:28:12,990 S1: the payment is manageable. It sounds like. So I think 474 00:28:12,990 --> 00:28:15,669 S1: bottom line is just, you know, to be able to 475 00:28:15,710 --> 00:28:19,070 S1: continue to keep that growing on a tax deferred basis, 476 00:28:19,109 --> 00:28:23,430 S1: which is a significant value, um, you know, without the 477 00:28:23,430 --> 00:28:27,350 S1: taxes being a drag on the investments, keeping that, you know, 478 00:28:27,390 --> 00:28:29,830 S1: compounding for the future so you can convert it to 479 00:28:29,830 --> 00:28:32,630 S1: an income stream. And just given that you're not telling 480 00:28:32,630 --> 00:28:35,630 S1: me your budget's tight and the interest rate is so low, 481 00:28:36,030 --> 00:28:39,350 S1: I'd probably just, you know, continue to pay this off monthly. Now, 482 00:28:39,630 --> 00:28:42,150 S1: what would kind of trump all of that, if you will, 483 00:28:42,190 --> 00:28:45,310 S1: is if you said, Rob, we really feel a conviction 484 00:28:45,310 --> 00:28:47,950 S1: from the Lord to be debt free immediately. And I'd say, great, 485 00:28:47,950 --> 00:28:50,590 S1: go ahead and don't look back. But apart from that, 486 00:28:50,750 --> 00:28:52,390 S1: I'd probably let this ride. 487 00:28:52,870 --> 00:28:55,590 S5: Okay. All right. I was just wondering what you thought 488 00:28:55,590 --> 00:28:56,350 S5: about it. 489 00:28:56,630 --> 00:28:58,710 S1: Excellent. Well, I appreciate you checking in. If I can 490 00:28:58,710 --> 00:29:01,550 S1: help with anything else along the way. Don't hesitate to call. 491 00:29:01,590 --> 00:29:05,640 S1: Lord bless you. 800 525 7000 is the number to call. 492 00:29:05,680 --> 00:29:07,960 S1: Let's go out to Washington state. John. Go ahead. 493 00:29:08,960 --> 00:29:10,440 S6: Yes, sir. How are you doing? 494 00:29:10,640 --> 00:29:11,840 S1: I'm doing great. Thank you. 495 00:29:13,000 --> 00:29:18,000 S6: Hey, um, as I shared, uh, we are looking at 496 00:29:18,000 --> 00:29:21,560 S6: possibly selling a piece of property that we've had probably 497 00:29:21,560 --> 00:29:27,600 S6: for around 6 or 7 years. Uh, purchase price was 220,000. Uh, 498 00:29:27,600 --> 00:29:32,720 S6: we owe nothing. Uh, selling price. Asking price will be 499 00:29:32,760 --> 00:29:39,480 S6: probably around 400, 440,000 based on, uh, comparable properties. 500 00:29:41,720 --> 00:29:46,760 S1: Yeah. Okay. And so what what's the main thing you're 501 00:29:46,800 --> 00:29:47,760 S1: wondering about? 502 00:29:49,120 --> 00:29:54,280 S6: Main thing that I'm wondering about is I'm on Social Security. Okay. Um, 503 00:29:54,320 --> 00:30:01,680 S6: approximately 36,000 annual. Their, um, retirement accounts drawing approximately 21,000 504 00:30:01,720 --> 00:30:06,400 S6: out of that annually, and my wife is working at 505 00:30:06,960 --> 00:30:15,680 S6: a self-employed approximately 16,000 annual. So a total gross around 73,000. Uh, 506 00:30:15,720 --> 00:30:18,800 S6: so not certain how this is going to affect things 507 00:30:18,800 --> 00:30:24,400 S6: the next year as far as taxes and, uh, my 508 00:30:24,400 --> 00:30:25,240 S6: Social Security. 509 00:30:25,720 --> 00:30:29,000 S1: Got it. Okay. Yeah, that's really helpful background information, John. 510 00:30:29,000 --> 00:30:30,480 S1: So here's what we're going to do. I'm going to 511 00:30:30,480 --> 00:30:32,520 S1: take my final break. As soon as I come back 512 00:30:32,520 --> 00:30:35,880 S1: I've got all these details. We'll talk about you being 513 00:30:35,880 --> 00:30:40,440 S1: prepared for, uh, something called Irma. Uh, income related monthly 514 00:30:40,440 --> 00:30:44,320 S1: adjustment amount. Uh, also, perhaps more taxable income on Social 515 00:30:44,320 --> 00:30:53,160 S1: Security and capital gains. Stay right there. We'll be right back. Hey, 516 00:30:53,200 --> 00:30:55,600 S1: I'm so glad you're joining us today on Faith and finance. 517 00:30:55,600 --> 00:30:58,400 S1: Live here on a Tuesday afternoon. Maybe you have a 518 00:30:58,400 --> 00:31:01,450 S1: financial question you've been wrestling with. Well, now's is a 519 00:31:01,490 --> 00:31:03,810 S1: great time to call. I've got some lines open and 520 00:31:03,810 --> 00:31:05,410 S1: here in our final segment we're going to get to 521 00:31:05,410 --> 00:31:08,250 S1: a few more phone calls. So, uh, beyond those holding, 522 00:31:08,250 --> 00:31:09,890 S1: if you have a question, go ahead and call right 523 00:31:09,890 --> 00:31:14,130 S1: now 800 525 7000. We'll try to get you on quickly. 524 00:31:14,170 --> 00:31:19,290 S1: 800 525 7000. With any financial questions? Uh, before the break, 525 00:31:19,290 --> 00:31:21,890 S1: we were talking to John in Washington state. Uh, he 526 00:31:21,890 --> 00:31:24,530 S1: bought a piece of property. It's not a personal residence. 527 00:31:24,530 --> 00:31:28,210 S1: 6 or 7 years ago for about 220,000. They paid 528 00:31:28,210 --> 00:31:30,810 S1: it off. They're thinking of selling it. They think based 529 00:31:30,810 --> 00:31:33,890 S1: on the comps in the area, it's worth about 400,000. 530 00:31:34,050 --> 00:31:38,170 S1: He's 70 retired, collecting Social Security. Just wondering how this 531 00:31:38,170 --> 00:31:42,610 S1: might affect affect his taxes and Social Security. Uh, John, yes, 532 00:31:42,690 --> 00:31:44,410 S1: I'm glad you're thinking about this, because you're not going 533 00:31:44,410 --> 00:31:48,050 S1: to want to let this catch you by surprise. Um, so, 534 00:31:48,090 --> 00:31:50,010 S1: you know, a few things. This is going to affect 535 00:31:50,010 --> 00:31:53,850 S1: first capital gains because it's not your primary residence. You 536 00:31:53,850 --> 00:31:56,450 S1: don't get the home sale exclusion. So if you sold 537 00:31:56,450 --> 00:32:00,300 S1: it for 400 cost basis was 220, You'll have roughly 538 00:32:00,300 --> 00:32:04,820 S1: 180,000 and a taxable long term capital gain. It's your 539 00:32:04,820 --> 00:32:07,980 S1: income level. I think you mentioned about 73,000 in combined 540 00:32:07,980 --> 00:32:12,100 S1: income plus the capital gain that gets added to it. 541 00:32:12,100 --> 00:32:14,980 S1: That's going to put you probably in the 15% long 542 00:32:15,020 --> 00:32:18,660 S1: term capital gain rate. So just by way of estimate 543 00:32:18,660 --> 00:32:22,620 S1: that could be 27,000 in capital gains. So that'd be 544 00:32:22,620 --> 00:32:25,140 S1: the first thing you want to be ready for. Um, 545 00:32:25,420 --> 00:32:28,700 S1: you could also see your income jump or you will 546 00:32:28,740 --> 00:32:31,300 S1: because of the gain, the IRS will count that toward 547 00:32:31,300 --> 00:32:35,260 S1: your combined income. And that will cause 85% of your 548 00:32:35,260 --> 00:32:39,500 S1: Social Security to become taxable. It doesn't reduce the benefit. 549 00:32:39,740 --> 00:32:42,739 S1: It just means more taxes. So, you know, let's say 550 00:32:42,740 --> 00:32:45,860 S1: I'm just estimating here. Let's say you receive 2000 a month, 551 00:32:45,860 --> 00:32:51,100 S1: 24,000 a year. Um, if now 85% is taxable, that 552 00:32:51,100 --> 00:32:55,060 S1: means 20,400 would be added to your taxable income. In 553 00:32:55,060 --> 00:32:59,020 S1: my example, if you're at the marginal tax rate of 12%. 554 00:32:59,060 --> 00:33:03,260 S1: That'd be, you know, a $2,500 in additional tax if 555 00:33:03,260 --> 00:33:07,739 S1: you're at the 22% marginal rate, could be 4400. So 556 00:33:07,740 --> 00:33:10,300 S1: that's the second thing. The third thing to be aware 557 00:33:10,300 --> 00:33:13,020 S1: of would be any trigger to Irma, which is a 558 00:33:13,020 --> 00:33:16,940 S1: higher Medicare premium. They look at your modified adjusted gross 559 00:33:16,940 --> 00:33:20,580 S1: income from two years ago. So this wouldn't be immediate. 560 00:33:20,780 --> 00:33:24,580 S1: But adding to that 180,000 of gain to your usual 561 00:33:24,620 --> 00:33:30,180 S1: 73,000 will push you, you know, above that Irma threshold. Now, 562 00:33:30,180 --> 00:33:33,900 S1: that's two years after the sale where your Medicare Part 563 00:33:33,940 --> 00:33:37,420 S1: B and D will increase for one year due to 564 00:33:37,460 --> 00:33:41,420 S1: that spike in income. How much will that be? Um, 565 00:33:41,620 --> 00:33:44,340 S1: you know, it could be, uh, it could be a 566 00:33:44,340 --> 00:33:48,900 S1: couple of hundred dollars more, 230 to $360 more per 567 00:33:48,900 --> 00:33:52,130 S1: month for that year on part D and somewhere between 568 00:33:52,130 --> 00:33:55,950 S1: 25 and 50, I would guess. Um, so that could 569 00:33:55,950 --> 00:33:58,830 S1: be between 5 and 10,000 for the year and extra 570 00:33:59,030 --> 00:34:01,670 S1: Medicare costs that you need to be aware of. So 571 00:34:01,790 --> 00:34:03,750 S1: those would be the main issues. I know that's not 572 00:34:03,750 --> 00:34:06,510 S1: great news, but better to be ready for it, you know. 573 00:34:07,430 --> 00:34:08,150 S6: Yes, sir. 574 00:34:09,830 --> 00:34:10,990 S1: Is that all make sense? 575 00:34:13,030 --> 00:34:17,390 S6: Yes, I think uh, other than, um, I'll have to 576 00:34:17,430 --> 00:34:22,750 S6: research the, uh, Irma that you were talking about and, uh, 577 00:34:23,590 --> 00:34:26,390 S6: become more educated in that fact. Yeah. 578 00:34:26,630 --> 00:34:30,750 S1: Yeah. Irma is basically they look at your income to 579 00:34:30,790 --> 00:34:34,430 S1: determine if you go over a certain threshold, they add 580 00:34:34,430 --> 00:34:39,150 S1: additional premium to your Medicare Part B and D. And 581 00:34:39,150 --> 00:34:41,950 S1: so anytime someone has a spike in income and a 582 00:34:41,950 --> 00:34:44,629 S1: capital gain would be included in that, it's just going 583 00:34:44,670 --> 00:34:46,629 S1: to push you above that threshold, and it's just going 584 00:34:46,670 --> 00:34:51,150 S1: to make those premiums more expensive. And and so it's 585 00:34:51,150 --> 00:34:53,509 S1: only temporary. And then the next year when they do 586 00:34:53,640 --> 00:34:56,600 S1: the look back, they'll see your income drop back down 587 00:34:56,600 --> 00:34:59,160 S1: to its normal level and they would drop your premium. 588 00:34:59,160 --> 00:35:01,839 S1: But for that, that one year, a couple of years 589 00:35:01,840 --> 00:35:04,120 S1: from the sale, you are going to have that spike. 590 00:35:04,120 --> 00:35:05,840 S1: So you just need to be ready for it. 591 00:35:06,800 --> 00:35:08,560 S6: Okay. So it's just one year. 592 00:35:08,920 --> 00:35:12,759 S1: That's right. Yeah. But it's based on your modified AGI 593 00:35:12,800 --> 00:35:16,000 S1: two years prior. And then they set the premium for 594 00:35:16,000 --> 00:35:17,920 S1: the year. And then they'll take a look at it 595 00:35:17,920 --> 00:35:20,160 S1: the following year and see that. Wait a minute. The 596 00:35:20,160 --> 00:35:22,759 S1: end comes back down and is an obvious reason for it. 597 00:35:22,800 --> 00:35:25,440 S1: It's because it was only up due to that sale. 598 00:35:26,920 --> 00:35:28,600 S6: Well, thank God it's only one year. 599 00:35:29,239 --> 00:35:32,760 S1: Yes, sir. Hey, thanks for your call, John. We appreciate 600 00:35:32,760 --> 00:35:34,000 S1: you being on the program, sir. 601 00:35:34,320 --> 00:35:37,360 S6: Yes, sir. Thank you for your your faithfulness. 602 00:35:37,800 --> 00:35:40,000 S1: Well, I appreciate that. It's a it's a joy and 603 00:35:40,000 --> 00:35:43,000 S1: a pleasure. Lord bless you. Uh, let's go to Florida. Hi, Dee. 604 00:35:43,040 --> 00:35:43,560 S1: Go ahead. 605 00:35:43,600 --> 00:35:47,080 S7: Hi. Thank you. I really love your show. Thank you. 606 00:35:47,120 --> 00:35:53,080 S7: I thank you. No. Thank you. I have, um, been 607 00:35:53,400 --> 00:35:57,799 S7: helping friends, and it's sort of turned into a side business, 608 00:35:57,800 --> 00:36:02,960 S7: which wasn't anticipated per se, but I've had cash payments 609 00:36:02,960 --> 00:36:07,960 S7: made throughout the summer months, and, um, I have a 610 00:36:07,960 --> 00:36:10,640 S7: full time job as well. I'm just not sure from 611 00:36:10,680 --> 00:36:14,960 S7: a tax perspective how I have to treat that. If 612 00:36:14,960 --> 00:36:20,080 S7: there's a special schedule or how you know how much 613 00:36:20,080 --> 00:36:24,960 S7: is considered just friends or income after, you know, a 614 00:36:24,960 --> 00:36:30,480 S7: certain threshold. Um, beyond that, I also was just given 615 00:36:30,480 --> 00:36:33,719 S7: my performance review, and I believe I'm getting a raise. 616 00:36:34,239 --> 00:36:36,759 S7: I have not been able to do very well with 617 00:36:36,760 --> 00:36:41,600 S7: my retirement. Um, you know, adding to it, um, in 618 00:36:41,640 --> 00:36:44,480 S7: many cases I've had to detract from it. So I'd 619 00:36:44,480 --> 00:36:48,080 S7: like to be strategic about perhaps where I put that 620 00:36:48,080 --> 00:36:50,650 S7: increase and wondered what you think. 621 00:36:51,050 --> 00:36:54,210 S1: Yeah. Well, it's a great question and I appreciate it. 622 00:36:54,210 --> 00:36:56,410 S1: So first part let's deal with that. So even if 623 00:36:56,410 --> 00:36:58,850 S1: the payments come from friends, if you did work for 624 00:36:58,850 --> 00:37:03,050 S1: them and could be anything from, you know, babysitting to, 625 00:37:03,170 --> 00:37:05,890 S1: you know, anything else crafts, whatever it is, the IRS 626 00:37:05,890 --> 00:37:08,850 S1: still treats it as taxable income. And it doesn't matter 627 00:37:08,850 --> 00:37:11,810 S1: who paid or whether it was cash, Venmo or a 628 00:37:11,930 --> 00:37:13,930 S1: gift card. If you were paid for work, it counts 629 00:37:13,930 --> 00:37:18,410 S1: as income. Um, and so it'd be self-employment income. So 630 00:37:18,610 --> 00:37:20,370 S1: what you would need to do with that is you 631 00:37:20,370 --> 00:37:23,050 S1: add up all the cash you earned for the year, 632 00:37:23,090 --> 00:37:27,089 S1: that becomes your side business income. You subtract any legitimate 633 00:37:27,090 --> 00:37:30,810 S1: expenses related to that work supplies or mileage or tools 634 00:37:30,810 --> 00:37:35,649 S1: or materials. Whatever's left is called your net self-employment income. 635 00:37:35,850 --> 00:37:40,330 S1: And you'll owe income tax and self-employment tax, which is, 636 00:37:40,370 --> 00:37:42,489 S1: you know, normally when you get wages, half of your 637 00:37:42,489 --> 00:37:47,170 S1: Social Security and Medicare is covered by your employer. When 638 00:37:47,170 --> 00:37:51,500 S1: you're self-employed, you got to cover both sides. So it's 15.3%. 639 00:37:51,860 --> 00:37:54,980 S1: So you just need to make sure you keep a 640 00:37:54,980 --> 00:37:58,020 S1: list of what you earned and any expenses, and then 641 00:37:58,020 --> 00:38:02,940 S1: plan for that side income, side job income to be 642 00:38:02,940 --> 00:38:07,300 S1: taxed at, you know, roughly 20 to 25% total depending 643 00:38:07,300 --> 00:38:10,580 S1: on your bracket. And then, you know, you'll you'll have 644 00:38:10,580 --> 00:38:14,340 S1: to file that self-employment income. Does that make sense? 645 00:38:15,180 --> 00:38:18,300 S7: It does make sense. Will I be able to do 646 00:38:19,060 --> 00:38:23,859 S7: both on the same, you know, form, um, or is 647 00:38:23,860 --> 00:38:29,020 S7: there a separate schedule like to call myself self-employed? In part. 648 00:38:29,900 --> 00:38:32,259 S1: Yeah. No, you'll you'll be able to handle all of 649 00:38:32,300 --> 00:38:35,259 S1: that in one return. A tax return can handle both 650 00:38:35,260 --> 00:38:39,020 S1: the W-2 wages and the self-employment income. So your W-2 651 00:38:39,100 --> 00:38:42,580 S1: job goes on the 1040 the lines for wages. Your 652 00:38:42,580 --> 00:38:47,259 S1: self-employment income gets reported on a schedule C, as in Charlie, 653 00:38:47,420 --> 00:38:51,540 S1: and then any self-employment tax you owe is on schedule SE, 654 00:38:52,180 --> 00:38:54,540 S1: and then that's going to flow back to the 1040. 655 00:38:54,580 --> 00:38:57,339 S1: So everything will be there. Same form. It all gets 656 00:38:57,340 --> 00:38:58,339 S1: filed together. 657 00:38:58,380 --> 00:38:59,780 S7: Perfect. Thank you for that. 658 00:39:00,020 --> 00:39:02,940 S1: Yep. And then tell me again that second part of 659 00:39:02,940 --> 00:39:03,620 S1: the question. 660 00:39:04,380 --> 00:39:07,979 S7: Yeah. Just thoughts of where I can make up some 661 00:39:07,980 --> 00:39:11,500 S7: ground with a little raise that I'm getting. Um, in 662 00:39:11,540 --> 00:39:13,740 S7: the New year for retirement. 663 00:39:14,260 --> 00:39:16,900 S1: Okay. Got it. Yeah. So do you have a retirement 664 00:39:16,900 --> 00:39:18,940 S1: plan at work? Your current employer? 665 00:39:19,700 --> 00:39:23,700 S7: We do. We're limited as to the percentage that we 666 00:39:23,700 --> 00:39:24,980 S7: can contribute. 667 00:39:25,219 --> 00:39:27,419 S1: Okay. Are you maxing that out currently? 668 00:39:27,820 --> 00:39:31,300 S7: Uh, yes. On one. And then you just made me remember. 669 00:39:31,300 --> 00:39:34,459 S7: I think there's a deferred plan that I could put 670 00:39:34,460 --> 00:39:35,420 S7: the funds to. 671 00:39:35,860 --> 00:39:38,700 S1: Okay. Yeah. You're going to want to get more information 672 00:39:38,700 --> 00:39:41,620 S1: on that, because anything we can do to get you, 673 00:39:41,900 --> 00:39:46,590 S1: you know, uh, into your retirement account is great. Um, 674 00:39:46,590 --> 00:39:49,310 S1: and so if you've got a deferred compensation plan, if 675 00:39:49,310 --> 00:39:53,110 S1: your employer offers what's called a 457 B, uh, or 676 00:39:53,150 --> 00:39:56,830 S1: other deferred comp plan, that's the next best place to save. 677 00:39:56,830 --> 00:39:59,549 S1: So it's going to let you save beyond your 401 678 00:39:59,590 --> 00:40:03,030 S1: K limits or whatever you have. It's going to reduce 679 00:40:03,030 --> 00:40:07,870 S1: your taxable income, and there's no penalties for withdrawal after 680 00:40:07,870 --> 00:40:11,989 S1: separation from service in a 457 plan. So it's a 681 00:40:11,989 --> 00:40:15,390 S1: great tool for catching up if you, you know, have more. 682 00:40:15,390 --> 00:40:18,029 S1: Beyond that, you could open a Roth IRA which would 683 00:40:18,030 --> 00:40:21,190 S1: have tax free growth. But if you're, um, you know, 684 00:40:21,230 --> 00:40:23,990 S1: you'd have to meet the income requirements for that. But 685 00:40:23,989 --> 00:40:26,270 S1: I'd say either of those options could be great. 686 00:40:26,630 --> 00:40:29,950 S7: Wonderful. I appreciate your time today. Thank you so much. 687 00:40:30,110 --> 00:40:32,549 S1: Absolutely. Thanks for listening to the program, D and for 688 00:40:32,550 --> 00:40:35,550 S1: your kind remarks. Lord bless you. We appreciate it. Uh 689 00:40:35,750 --> 00:40:40,989 S1: 800 525 7000. Uh, you know, Mary and Victor, unfortunately, 690 00:40:40,989 --> 00:40:43,400 S1: I am out of time today, so I would love 691 00:40:43,719 --> 00:40:47,160 S1: to get you all scheduled to be first up tomorrow. Uh, Mary, 692 00:40:47,160 --> 00:40:49,680 S1: I would love to tackle that. Uh, 529 for your 693 00:40:49,680 --> 00:40:53,480 S1: great grandchild. And Victor, as a question about some credit 694 00:40:53,480 --> 00:40:57,440 S1: card debt and, uh, perhaps a hardship situation. So, uh, 695 00:40:57,440 --> 00:40:59,439 S1: let's see Mary and Victor, if we can get get 696 00:40:59,440 --> 00:41:02,480 S1: you scheduled to be, uh, on the program tomorrow. Uh, 697 00:41:02,480 --> 00:41:05,520 S1: first two callers. Thanks for, uh, for calling today, folks. 698 00:41:05,520 --> 00:41:08,160 S1: I've got two requests for you before we wrap up today. 699 00:41:08,160 --> 00:41:11,400 S1: One is, if you are a client of a certified 700 00:41:11,400 --> 00:41:14,400 S1: Kingdom advisor, I could use your help in a nationwide 701 00:41:14,520 --> 00:41:18,399 S1: survey we're conducting with a research partner. Um, if you'll 702 00:41:18,400 --> 00:41:22,360 S1: just head to Faith B-complex, it's going to take ten minutes, 703 00:41:22,640 --> 00:41:25,960 S1: but it'll be a big favor to me. I need, uh, 704 00:41:26,080 --> 00:41:31,239 S1: according to our latest data, about 175 more surveys completed. Again, 705 00:41:31,520 --> 00:41:36,200 S1: this is for clients of certified Kingdom advisors. This national 706 00:41:36,200 --> 00:41:40,040 S1: study is going to help us better understand the outcomes 707 00:41:40,040 --> 00:41:43,920 S1: of working with a certified Kingdom advisor versus not working 708 00:41:43,920 --> 00:41:46,440 S1: with a certified Kingdom advisor. We're getting some early data. 709 00:41:46,440 --> 00:41:50,400 S1: It's really exciting about how they're helping God's people give 710 00:41:50,400 --> 00:41:53,359 S1: more and invest in a way according to their values, 711 00:41:53,360 --> 00:41:56,439 S1: and think about preparing the next generation. But we need 712 00:41:56,440 --> 00:41:59,719 S1: a full lineup of surveys in order to make this 713 00:41:59,719 --> 00:42:02,719 S1: statistically valid. So if you're a client of a k 714 00:42:02,760 --> 00:42:07,520 S1: faith complications. Now as we head toward year end, we're 715 00:42:07,560 --> 00:42:11,320 S1: getting close to December 31st, but we're not yet there 716 00:42:11,520 --> 00:42:14,319 S1: in meeting our listener support goal. So if you love 717 00:42:14,320 --> 00:42:18,400 S1: the program, you listen regularly and you'd consider being a 718 00:42:18,400 --> 00:42:21,560 S1: part of our funding team. Here's why. It's a great time. 719 00:42:21,760 --> 00:42:24,719 S1: Every gift is doubled between now and December 31st, and 720 00:42:24,719 --> 00:42:27,279 S1: every gift will ensure you get my new devotional. Go 721 00:42:27,280 --> 00:42:32,000 S1: to Faith. Com. Big thanks to Josh Taylor, Omar and Lisa. 722 00:42:32,040 --> 00:42:34,839 S1: Faith and finance lives a partnership between Moody Radio and 723 00:42:34,840 --> 00:42:36,920 S1: Faith by. We'll see you tomorrow. Bye bye.