Speaker 1: Welcome to how to Money. I'm Joel and I am
Speaker 1: Matt's and today we're discussing tax, tips, credits and deductions.
Speaker 1: Ay Jeel, I wanted to share with you it's speaking
Speaker 1: of the year still sort of. It's January accurate, and
Speaker 1: we kicked it off this year man with some new
Speaker 1: internet service I'm talking about. Did you save some money
Speaker 1: by switching? Dude? Yeah, So I had been totally slack
Speaker 1: and we had been with Exfinity for close to a
Speaker 1: year now at a non promotional rate because you know,
Speaker 1: the promotional rate expired and we've been busy with life
Speaker 1: and dude, I didn't get to that for a whole year.
Speaker 1: That is like the complete opposite of me. So it
Speaker 1: was all my radar. But finally I was I was like,
Speaker 1: I can't keep paying seventy bucks for crappy internet, which
Speaker 1: is what I was doing. Dude, We're paying seventy bucks
Speaker 1: a month for thirty megabits per second and a t
Speaker 1: T had this deal going around and it was forty
Speaker 1: bucks for three d megabits per second. That's a little
Speaker 1: bit faster. It's way more than a little bit faster,
Speaker 1: and a good bit cheaper. Dude, it is amazing and
Speaker 1: what's crazy? And this is a little throwback to the
Speaker 1: episode eighteen where we had talked about the art of
Speaker 1: asking for a discount. But man, I contacted Comcast or
Speaker 1: Exfinity whatever twice to see if I could negotiate, and
Speaker 1: I was willing to walk away, and they wouldn't budge
Speaker 1: at all. Isn't that crazy? You had to do what
Speaker 1: you had to do, man, you gotta move on. Well,
Speaker 1: So the first time I was just expecting them to
Speaker 1: cave a little bit because I thought, okay, fifteen twenty
Speaker 1: megabits per second, it's fine. If I can just get
Speaker 1: the rate lowered down to forty, that's the easiest, and
Speaker 1: I don't I don't have to worry about it. I
Speaker 1: just didn't want my life disrupted. But they were like, no, sorry.
Speaker 1: So then I had to call up a T and
Speaker 1: T and actually get it scheduled and take advantage of
Speaker 1: that deal. And then I call it a Comcast back
Speaker 1: again and again try to get them down and they
Speaker 1: weren't budging. Man, I could not believe it. Word otherwise
Speaker 1: to anybody out there who hasn't shopped their their Internet bill,
Speaker 1: is really honestly like it can be a pain and
Speaker 1: your current provider can't say no, but pit them against
Speaker 1: each other. And also consider using Twitter, because Twitter can
Speaker 1: be a great place to find the customer support person
Speaker 1: who can actually make a difference. Sometimes if you just
Speaker 1: call the regular one eight hundred number, you're getting told
Speaker 1: no constantly. And I think Twitter is just a good
Speaker 1: place for you to go to potentially get some actual
Speaker 1: customer service and someone that can actually give you a
Speaker 1: lower rate. Well, that's true, I didn't do that next time. Well,
Speaker 1: the thing is, dude, I was just fed up with it,
Speaker 1: you know, and so I was like, forget this. I
Speaker 1: feel like twitters for the birds. Gonna call them up, literally, asked, Yeah, asked.
Speaker 1: I asked for the customer retention department. They transferred me over,
Speaker 1: And honestly, I'm just happier now that I'm giving my
Speaker 1: money to a t and t um and dude and
Speaker 1: the dude that came up, and then they'll do something
Speaker 1: to to make you mad and you'll switch back, exactly.
Speaker 1: It's like the circle of life. It never ends, the
Speaker 1: circle of Internet providers. Well, and the guy that came
Speaker 1: out and actually did the install was so incredibly awesome. Man,
Speaker 1: he stood there and talked through it with me and
Speaker 1: explained to me how like the dual band networks were. Okay,
Speaker 1: so here's a little internet primary for everybody. The five
Speaker 1: giga hurst band is faster, like that's a three megabits
Speaker 1: per second band, but it's doesn't have as far of
Speaker 1: a reach. That's how it was explained to me at least.
Speaker 1: So if you're hard wired in, if you're hard wired in,
Speaker 1: or if you're near you're wireless router, it's awesome. However,
Speaker 1: beyond a certain range, it switches to the old school
Speaker 1: two point four, which is the slower Internet that's typically
Speaker 1: like the thirty megabits per second coverage, right, And so
Speaker 1: if you're on the other side of your house, that's
Speaker 1: probably the network that you're getting, right, And it's the
Speaker 1: same network, and it just automatically switches on your modem. Yeah,
Speaker 1: and there. Now you've just got three intern sixty dollars
Speaker 1: extra in your pocket every year. There's so many more
Speaker 1: things that you can either spend that on or you
Speaker 1: can save that money. Yeah, man, that's awesome because actually
Speaker 1: to get something a better service in your life and
Speaker 1: to save money, that's that's awesome. That's to win win, Yeah,
Speaker 1: where I could even take my wife on a fancy
Speaker 1: little trip. There we go like I just did with Emily.
Speaker 1: But so we run at a hotel for a couple
Speaker 1: of nights and just had a great time just connecting.
Speaker 1: And with young kids, it can be hard to get
Speaker 1: that connection time with your wife, and so we had
Speaker 1: a great little trip together. And I wanted to run
Speaker 1: by Matt a frugal verse cheap question for you, because oh,
Speaker 1: let's hear it, we did an episode about are you
Speaker 1: frugal or are you cheap? And kind of how to
Speaker 1: make that decision, and we come up against those decisions
Speaker 1: in our lives all the time. And so we got
Speaker 1: a great deal at this hotel. They had a cyber
Speaker 1: Monday sale that that was still lingering that we took
Speaker 1: advantage of, and we gotta get wait wait was it
Speaker 1: a crappy motel? No, it was a nice place. We
Speaker 1: really enjoyed. Actually yeah, but there was a music venue
Speaker 1: on the property and they had a show the night
Speaker 1: that we checked in, and if you were staying there,
Speaker 1: you could go see the show for free. So we decided,
Speaker 1: being people that like free things and we typically like
Speaker 1: a decent music show to go check this band out.
Speaker 1: Uh it was so it was so guzy, didn't turn
Speaker 1: out so well. Well, it was really funny walking in
Speaker 1: there because we were a good thirty years younger than
Speaker 1: pretty much anybody else in there. Thirty years younger. But
Speaker 1: you're in Athens, Georgia. This is a college town. Yeah,
Speaker 1: oh that's a bad sign. It was. It was a
Speaker 1: bunch of upper fifties early sixties people hanging out lists,
Speaker 1: so obviously it wasn't our genre of music. And and
Speaker 1: there was this one guy that came walking up the
Speaker 1: stairs and with like a hand carved cane that was
Speaker 1: pretty impressive. It caught everyone's attention. I promise you it
Speaker 1: was really cool cane and I hope to have one
Speaker 1: similar to it when I'm older. So the the concert,
Speaker 1: we only stayed for like four songs because it just
Speaker 1: wasn't our style, and obviously it wasn't supposed to be,
Speaker 1: I don't think. But yeah, so we left. Are we
Speaker 1: frugal or cheap for trying to take advantage of the
Speaker 1: free concert but then leaving early? I don't know. That's
Speaker 1: totally a frul. I mean, I guess you can't call
Speaker 1: it a win, but did it cost you any more money?
Speaker 1: It's like, no, right, it maybe cost you a little
Speaker 1: bit of time where you kind of were standing around
Speaker 1: and kind of checking out the scene, but it's not
Speaker 1: like it costs you money, right, And it didn't cost
Speaker 1: you money more money down the road. And it was
Speaker 1: Emily up for it as well. When you guys were
Speaker 1: we're talking about it, was she as for it as
Speaker 1: you were. Yeah, I mean, okay, totally up for checking
Speaker 1: it out. And it was fun for for a little while,
Speaker 1: and then we just realized for us, and I don't
Speaker 1: mind being out of place. I don't mind like rocking
Speaker 1: out with a bunch of sixty year old if we're
Speaker 1: both into the same music. But it just honestly turned
Speaker 1: out it wasn't work. It wasn't our style style of tunes,
Speaker 1: and so we decided to mosey on down the road. Yeah. Well,
Speaker 1: I mean, for me, those are the biggest things that
Speaker 1: I try to keep in mind, right when it comes
Speaker 1: to if you're being frugal or cheap, is this going
Speaker 1: to actually cost me more down the road because I'm
Speaker 1: being too cheap now? Or am I imposing my cheapness
Speaker 1: your frugality on someone else? Forcing my wife. So if
Speaker 1: she was just like Joel, I do not want to
Speaker 1: go to the stupid concert, and I'm like, it's free,
Speaker 1: we're going, then that may have been you being cheap
Speaker 1: and that we had a problem. Yeah, that would have
Speaker 1: been a fail. But as it is, you know, you've
Speaker 1: got to take advantage of those free things. And we
Speaker 1: talked about that on a recent episode, how to take
Speaker 1: advantage of free things, taking advantage of free stuff, and
Speaker 1: I'm glad to hear you guys were had an open
Speaker 1: mind when we're up for it. It had two effects
Speaker 1: on me. One, I hope that when I'm sixty, I'm
Speaker 1: still going to rock and roll concerts. And two, it
Speaker 1: made me wonder if my kids are going to think
Speaker 1: that my music, the music I listened to is super
Speaker 1: lame when I'm that age, because I was like, oh,
Speaker 1: it's not really my style. I don't really like it.
Speaker 1: But are my kids gonna say the same thing about
Speaker 1: the bands I listened to now? Probably and they'll be wrong?
Speaker 1: Yeah's right because we have excellent taste in music, and
Speaker 1: we also have matt excellent taste in beer. And so
Speaker 1: let's tell everyone the beer we're drinking today during the
Speaker 1: show is Morgan Territory Brewing Dark Reckoning Imperial Porter. This
Speaker 1: beer was donated to the show by Brent's out in California.
Speaker 1: He sent us a bunch of beers and this is
Speaker 1: the only one that are having on the show because
Speaker 1: we already enjoyed the other ones. They were delicious, So
Speaker 1: thanks so much, man, We appreciate it, our buddy. We
Speaker 1: already poured the beer. It's a dark black color. Let's
Speaker 1: take a sip, and let's give one word to describe
Speaker 1: the beer that we're drinking. Cheers, all right, I'm gonna
Speaker 1: give you my word first. The word that immediately came
Speaker 1: to my mind. This is a porter. And lots of
Speaker 1: times porters aren't quite as big and and robust as
Speaker 1: a stout. So my word robust. Yeah, that's a good word.
Speaker 1: That's a good beer as well. My word is gonna
Speaker 1: be thick. And as always, we're going to talk more
Speaker 1: about the beer at the end of the show, and
Speaker 1: we'll talk about our one word description at that point. Yeah,
Speaker 1: but for now, Matt, let's get to the topic at hand.
Speaker 1: We're talking tax tips, credits and deductions, and we did
Speaker 1: an episode last week on adjustments that you can make
Speaker 1: to your adjusted gross income to cut your tax bill.
Speaker 1: And we mentioned last week too, we're not tax pros, right,
Speaker 1: So so if you want specific tax advice for your situation,
Speaker 1: it's a really good idea to find an accountant or
Speaker 1: a c p A in your area that can help
Speaker 1: you where you are exactly. But Matt and I have
Speaker 1: you know, we've we've wanted to to give some lessons
Speaker 1: from what we've learned and kind of some of the
Speaker 1: specifics based on the new tax cuts in Jobs Act
Speaker 1: that win to affect last year and how that new
Speaker 1: issue law is going to affect your tax situation. That's right, man.
Speaker 1: And again, so the last episode we talked about those
Speaker 1: above the line deductions, which weren't actually deductions, right. There
Speaker 1: are things that you can do to modify your adjusted
Speaker 1: gross income regardless if you take the standard deduction or
Speaker 1: if you itemize your deduction. And so this week we're
Speaker 1: gonna help you think through whether or not you should
Speaker 1: take the standard deduction or if you should take the
Speaker 1: itemized deduction. Yeah, and that's gonna be a question for
Speaker 1: a lot of folks, especially if you're doing your own taxes.
Speaker 1: You used to be the thirty percent of Americans would
Speaker 1: itemize our deductions. But it's assumed at this point, based
Speaker 1: on the way people have filed their taxes in the past,
Speaker 1: that this new tax law is actually going to cause
Speaker 1: a lot fewer people to end up itemizing their deductions.
Speaker 1: They're gonna be taking typically the standard deduction. So for
Speaker 1: a lot of folks that's likely going to be the case.
Speaker 1: Americans are going to take this much bigger standard deduction.
Speaker 1: But that's not true for everyone. And like you said, Joe,
Speaker 1: the Tax Cuts and Jobs Act, right that was signed
Speaker 1: into law, and what that did is that it basically
Speaker 1: doubled the standard deduction for singles if you're filing jointly,
Speaker 1: as well as for a head of household. So if
Speaker 1: you're filing individually, that bumped that up to twelve thousand,
Speaker 1: and if you're married filing jointly, it bumped that up
Speaker 1: to twenty four thousand. It makes sense that a lot
Speaker 1: of people are going to buy default. They're gonna think, oh,
Speaker 1: I'm just gonna take the standard deduction. That's not gonna
Speaker 1: make sense for me to itemize my taxes. Maybe I've
Speaker 1: never idomized my taxes. I'm definitely not gonna do it
Speaker 1: this year, but like we said, it's not going to
Speaker 1: be the case for everyone though, And you know, we'll
Speaker 1: cover who should consider itemizing deductions right after the break.
Speaker 1: You know what's funny is that we're actually doing a
Speaker 1: second episode on taxes. If you would have told me
Speaker 1: that we're gonna do this, even like a few weeks ago,
Speaker 1: I would have said, no, that sounds totally boring that
Speaker 1: we would spend two full episodes on taxes. But taxes
Speaker 1: are so important, man, there, there's so much of our
Speaker 1: money goes towards taxes, goes towards our government, and it's
Speaker 1: worth covering. It's worth covering in detail to help us
Speaker 1: consider whether or not we should itomize our taxes or not,
Speaker 1: and to talk through the other implications. Yeah, and Matt,
Speaker 1: I think, yeah, taxes when you think about it, generally,
Speaker 1: apart from a cool podcast like this there, it's a
Speaker 1: boring subject. But that's our job. That's what we're into
Speaker 1: is trying to make the potentially boring subject interesting, relevant
Speaker 1: and fun. And speaking of relevance, man, taxes are so
Speaker 1: relevant to every single one of us, and there are
Speaker 1: got to pay them right death and taxes super certain
Speaker 1: and we talked about that in last week's episode, that
Speaker 1: that there are pretty much a certainty, but there are
Speaker 1: so many ways that you can, if you're smart and thoughtful,
Speaker 1: lower your income you're adjusted gross income in order to
Speaker 1: pay fewer taxes. And so that's kind of part of
Speaker 1: the gist of the show as well. It's like, hey,
Speaker 1: how can you take advantage of the existing structure, the
Speaker 1: existing tax structure in this country to maximize you know,
Speaker 1: credits and deductions in order to make sure that you're
Speaker 1: not paying more than you need to be. And so
Speaker 1: now we're gonna talk about who should consider itemizing their taxes.
Speaker 1: The standard deduction is the default. You've always got that,
Speaker 1: but if you want to break it down even more,
Speaker 1: you can itemize, except if you're married, you have to
Speaker 1: do whatever your spouse does. That one instance where you
Speaker 1: don't have a choice. So if you have a spouse
Speaker 1: and they are filing individually, well you're gonna have to
Speaker 1: file individually as well. First off, if you own a
Speaker 1: home with a mortgage, especially if you have rental properties,
Speaker 1: you could easily exceed the standard deduction. And so you know,
Speaker 1: with mortgage interests and with real estate property taxes. That alone,
Speaker 1: right there could get you halfway to that standard deduction.
Speaker 1: That's the first thing that you're gonna want to consider
Speaker 1: this time of year. You've got your t that your
Speaker 1: banks or your mortgage holders are mailing out. Hopefully by
Speaker 1: now you've got yours. But that is the form that
Speaker 1: you're gonna want to look at. That tells you what
Speaker 1: your mortgage interest is as as well as what your
Speaker 1: property taxes as well. Also, you're able to itemize interest
Speaker 1: that you paid on a home equity line of credit
Speaker 1: or a construction loan, but only if you can prove
Speaker 1: that you increased value to your residents. So that is
Speaker 1: a change in this tax law. Before the Tax Cuts
Speaker 1: and Jobs Act was written into law, you could write
Speaker 1: off the interest paid on a home equity line of credit.
Speaker 1: But now you have to be able to prove that
Speaker 1: you didn't just use your home equity line to take
Speaker 1: a vacation and buy some new clothes. You have to
Speaker 1: actually have improved the physical residents that you live in.
Speaker 1: That's one caveat in this new tax law. Yeah, or
Speaker 1: even if you use that loan for something more noble, right,
Speaker 1: like to put your kid through you know, like a
Speaker 1: nice college or something like that. It's kind of a bummer.
Speaker 1: But yeah, fact is they want to see that you've
Speaker 1: taken that loan out specifically for the increase to your residence.
Speaker 1: Something else to mention that happened as well with the
Speaker 1: Tax Cuts and Jobs Act. Doesn't that just roll off
Speaker 1: the tongue, Joel, It's so easy to say. But there's
Speaker 1: a new ten thousand dollar cap on property tax due
Speaker 1: to the new federal law. So if you get that
Speaker 1: to ninety eight and it has your mortgage interests and
Speaker 1: buy a chance your property taxes are more than ten
Speaker 1: thousand dollars, well it doesn't matter because there's a cap
Speaker 1: at ten thousand. And the other thing too, man, is
Speaker 1: that that's the total between your state, local and property
Speaker 1: taxes collectively. And so that's sort of a downside to
Speaker 1: the new law is that you'll be able to itemize
Speaker 1: less of that. It's called salt rights, state and local
Speaker 1: tax Yeah, that's something to be aware of when you're
Speaker 1: doing the quick math here to to figure out if
Speaker 1: you should automize your deductions and so, in particular for
Speaker 1: real estate investors, it's likely that you have loans associated
Speaker 1: with your properties and potentially a line of credit or
Speaker 1: something like that as well. And in addition to that
Speaker 1: interest that you're paying, you can also deduct depreciation, operating expenses,
Speaker 1: and repairs. So real estate investors really do, honestly have
Speaker 1: it have it good. They've had it good for a
Speaker 1: long time under the tax code, and that continues to
Speaker 1: be the case. So if you own a home with
Speaker 1: a mortgage, consider atomizing your taxes. Also, if you have
Speaker 1: paid some huge medical bills, and consider itemizing your taxes.
Speaker 1: The only downside to this, though, is that you can
Speaker 1: only deduct your medical bills once they've exceeded seven and
Speaker 1: a half percent of your adjusted gross income foren For example,
Speaker 1: if you had an adjusted gross income of fifty thousand,
Speaker 1: that means the first three thousand, seven hundred fifty ours
Speaker 1: that you've paid towards medical bills effectively don't count. And
Speaker 1: so once you get past that threshold, anything that you
Speaker 1: pay beyond fifty you can deduct every single dollar of that.
Speaker 1: But before you go through all your doctor's bills and
Speaker 1: prescription receipts, you know, do the quick math, make sure
Speaker 1: it's worth it, yeah, Matt. And also you can deduct
Speaker 1: your health insurance premiums, but only if they were paid
Speaker 1: with after tax money. So it's really important for people
Speaker 1: to consider if they did have a more expensive health
Speaker 1: care policy, even if they got it through the exchange.
Speaker 1: That could be one quick check mark in the column
Speaker 1: of it being much more likely that it's better for
Speaker 1: you to itemize as opposed to taking the new standard deduction.
Speaker 1: And another huge potential deduction is charitable giving. Just keep
Speaker 1: in mind that this has to be to an actual
Speaker 1: five oh one c three, not just some organization or
Speaker 1: political party or an individual that you decide to give
Speaker 1: money to. That does not count to me, giving you
Speaker 1: like all that money last week, that doesn't count. I
Speaker 1: think that falls under the category of one time annual gift,
Speaker 1: which I believe it is that fourteen thousand. That's true
Speaker 1: where it used to be. But yeah, so keep that
Speaker 1: in mind. You can do either cash contributions or even
Speaker 1: non cash contributions like cars, you know, different things like that.
Speaker 1: Have you ever donated something big like a car or
Speaker 1: a boat? It's a goodwill. No no boats, no boats,
Speaker 1: no cars either. And actually, just on that note, if
Speaker 1: someone is thinking about donating a car for tax purposes,
Speaker 1: the I R. S is really cracked down on recent
Speaker 1: in recent years on on car contributions, and so it's
Speaker 1: actually would in all likelihood be better for you to
Speaker 1: sell the car, take the money from that, and then
Speaker 1: donate that money to a charity of your choice as
Speaker 1: opposed to donating the car. And actually many times it's
Speaker 1: better for the charity as well, because a car that's
Speaker 1: not working on whatever that there's so many logistics involved
Speaker 1: in that, like what do we do with this? Yeah,
Speaker 1: I don't want this old Nissan. But the the i
Speaker 1: RS is really cracked down on what they're allowing you
Speaker 1: to write off when it comes to a car donation.
Speaker 1: And so those are the three biggest things to consider
Speaker 1: if you have a mortgage on a house, big old
Speaker 1: medical bills, and charitable giving. Quickly do the math on
Speaker 1: those three categories, and if you exceeded your threshold, you
Speaker 1: know on what you would receive with a standard deduction.
Speaker 1: You want to seriously consider itemizing your taxes because chances
Speaker 1: are you're gonna be able to find some additional deductions
Speaker 1: that we're not mentioning here. There's there's lots more. These
Speaker 1: are the three that you should consider when you're kind
Speaker 1: of weighing the options as to whether you should take
Speaker 1: the standard deduction or if you should itemize your taxes. Yeah,
Speaker 1: do the quick general back of the envelope math to
Speaker 1: see if you're anywhere close, and then if you are,
Speaker 1: if you are close to that either twelve thousand or
Speaker 1: twenty four thousand dollar number, whether you're filing single or
Speaker 1: or filing as a married couple, if you find yourself
Speaker 1: in that ballpark, that's when you're gonna want to do
Speaker 1: the specific math in order to make sure that you
Speaker 1: are filing taxes the best way for you. Honestly, to
Speaker 1: a lot of folks, that sounds like a lot of work.
Speaker 1: They're like, well, how am I supposed to do quick
Speaker 1: math and figure out these things? And Man, what I
Speaker 1: would say to that is, this is a huge argument
Speaker 1: for tracking your spending because at the end of the year,
Speaker 1: if you've been tracking your spending, you can quickly see
Speaker 1: how much you've paid towards your insurance premiums as well
Speaker 1: as to your medical payments. When it comes to your
Speaker 1: house or your mortgage, you'll receive it to ninety eight,
Speaker 1: so you'll easily be able to see what your interest
Speaker 1: payments were and you'll also see what your s grow
Speaker 1: paid towards your property taxes. And then the same thing
Speaker 1: with the charitable giving. If you have been tracking your spending,
Speaker 1: you should be able to easily add up at the
Speaker 1: end of the year and see how much you've given
Speaker 1: away and those three or four numbers. I guess the
Speaker 1: mortgage has two numbers. You can add those together and yeah,
Speaker 1: and quickly see how close you are to that standard deduction. Yeah, Matt,
Speaker 1: and I think one important tip that actually really changed
Speaker 1: for people the way that their behavior is, especially the
Speaker 1: way that they consider their charitable giving, is if you're
Speaker 1: anywhere close to that threshold but you're not over it,
Speaker 1: consider bunching your deductions and itemizing that year. And then
Speaker 1: the next year you have fewer itemized deductions, and so
Speaker 1: you just take the standard deduction. And the way that
Speaker 1: most people are going to be able to accomplish that,
Speaker 1: because you can't usually change the amount of interest you're
Speaker 1: paying on your mortgage, right, is to bunch your charitable giving.
Speaker 1: And so let's say you're at roughly turs in deductions
Speaker 1: as a married couple, will consider taking the standard deduction
Speaker 1: this year and giving less to charity in nineteen and
Speaker 1: in give two years worth at the same time and itemized.
Speaker 1: So that's one way that people are approaching this new
Speaker 1: tax law is kind of by bunching their giving. And
Speaker 1: you and I were huge fans of generosity. We think
Speaker 1: it's really important. It's really important for us psychologically as
Speaker 1: we think about our money. And we did an episode
Speaker 1: on that back in the day, and so you know,
Speaker 1: we're not encouraging people not to give or not generously,
Speaker 1: but we are saying it might make sense. And I
Speaker 1: did this right when the tax law was signed. I
Speaker 1: gave an extra lump sum of what I knew I
Speaker 1: was going to give that following year, uh to to
Speaker 1: to a nonprofit organization. I gave it in one fell
Speaker 1: swoop that December because I just wasn't sure whether I
Speaker 1: was gonna be able to itemize or take the standard
Speaker 1: deduction the following year, and I just wanted to make
Speaker 1: sure that I got it in there before that tax
Speaker 1: law changed. Yeah, And so another example of that, Joel,
Speaker 1: is that you know, say, you know that you are
Speaker 1: going to itemize this tax twenty nineteen, so you're gonna
Speaker 1: give like you normally would in twenty nineteen, but then
Speaker 1: you're gonna give your why twenty contributions to charitable giving,
Speaker 1: say in December, right right before the year ends, And
Speaker 1: so that way it impacts the organization less as well,
Speaker 1: because it's you know, closer to the end of the year,
Speaker 1: is closer tow but it still falls on the nineteen
Speaker 1: tax year, um. And so yeah, bunching it's great. It's
Speaker 1: great for a charitable giving. Another way that you can
Speaker 1: consider bunching as well as with medical expenses. If you
Speaker 1: have some flexibility when it comes to an expensive procedure,
Speaker 1: say dental work, or maybe you have like a partially
Speaker 1: torn a c L or something like that, Well, we
Speaker 1: know you would never get them to work done. So
Speaker 1: I'm just gonna live with that partially torn a c
Speaker 1: L for the rest of my life and jacked up too.
Speaker 1: But you know a lot of times some of those
Speaker 1: procedures and surgeries you can put off. I know guys
Speaker 1: that play sports and they've got a jacked up shoulder
Speaker 1: and they're living with that for a couple of years.
Speaker 1: So there's some flexibility when it comes to when am
Speaker 1: I actually gonna have this procedure finally done? And so
Speaker 1: if you know that there's gonna be a specific year
Speaker 1: that you probably are going to have some more medical expenses,
Speaker 1: that you might have some more charitable living well. Like
Speaker 1: like we said, bunch all that that that one year, right,
Speaker 1: So let's say so it's nine. Now, let's say, okay,
Speaker 1: let's try to put off that procedure, that medical procedure.
Speaker 1: If you can last until man, make twenty the year
Speaker 1: that you get all the work done, you get your
Speaker 1: teeth fixed, you do the medical procedures, that's when you
Speaker 1: double up on your charitable giving. I mean, it sounds
Speaker 1: funny to talk about this, right, that we would be
Speaker 1: strategic about our giving and that we would be strategic
Speaker 1: about our medical expenses. But these are all things to consider.
Speaker 1: And if it honestly, if it doesn't really hurt, literally,
Speaker 1: if it doesn't hurt that much for you to to
Speaker 1: to put off, consider doing that. Because you might one
Speaker 1: year take the standard deduction, get that twenty four thousand
Speaker 1: as a married couple or twelve thousand, say as an individual.
Speaker 1: But then the next year you might be able to
Speaker 1: blow that standard deduction out of the water and drastically
Speaker 1: decrease your adjusted gross income, which effectively reduces how much
Speaker 1: taxes you're gonna pay. Yeah, So bunching is just a
Speaker 1: great way to consider your taxes and and just start
Speaker 1: thinking to planning ahead, planning for the future. Am I
Speaker 1: gonna get that surgery? How much do I want to
Speaker 1: give this year? How much do I want to give
Speaker 1: over the next three years? And then how am I
Speaker 1: going to spread it out? Did all this talk about
Speaker 1: bunching makes me think of honey bunches of Votes? Did
Speaker 1: you ever eat that? Now? It's pourable right now? That
Speaker 1: was like my all time favorite cereal in college? That's
Speaker 1: your all time favorite cereal? Yes? Did you live in
Speaker 1: deprived childhood? Now? I would I would much rather take
Speaker 1: honey bunch of Votes over cinnamon toastcrunch because as a child,
Speaker 1: that's what I grew up eating. Are you kidding me this?
Speaker 1: I feel like I need to walk away from this
Speaker 1: podcast episode right now? What do you eat as a kid? Well, okay,
Speaker 1: so we weren't able to have the terrible cereals often,
Speaker 1: but I love me some cocoa puffs, I love me
Speaker 1: some tricks obviously, cinnamon toast crunch, yeah, that's that's all
Speaker 1: sugar though, and occasionally cookie crisp. Okay, yeah, wait, we
Speaker 1: did the cookie Crisp. They had the good commercials, cool Crisp.
Speaker 1: I still remember that giant but honey bunch of votes. Man,
Speaker 1: I rock that so hard. In college, you would have
Speaker 1: your favorite cereal would be a healthy one. It's not healthy.
Speaker 1: It's super sugary. It has the flip favor of like oats,
Speaker 1: but it's sweet. Oh, it's kind of like beer. Honestly,
Speaker 1: it's kind of like ODI and kind of grainy and
Speaker 1: multi good stuff. I'll take that under consideration. All right,
Speaker 1: So after the break, Matt, let's get to my favorite
Speaker 1: part of this episode. The tax credits. And tax credits
Speaker 1: can make a major impact on the final amount that
Speaker 1: you pay every year to the federal government. So we'll
Speaker 1: get to that right after this, all right, Joel, like
Speaker 1: you mentioned, let's dive now into tax credits. So far
Speaker 1: this episode, we've been talking about itemizing, We've been talking
Speaker 1: about actual deductions. Now we're gonna talk about tax credits.
Speaker 1: These are credits that you can take regardless if you
Speaker 1: itemize your taxes or if you take the standard deduction.
Speaker 1: And so the biggest difference between a tax deduction though
Speaker 1: versus a tax credit, is that deductions reduced the income
Speaker 1: that you pay taxes on, which you know, then reduces
Speaker 1: the amount of taxes that you owe, while credits themselves
Speaker 1: directly reduced the amount of taxes you owe. And so
Speaker 1: this is a literal dollar for dollar reduction on your
Speaker 1: tax bill, which has a much larger impact. Yeah, And
Speaker 1: tax credits change over time. Right. They They are often
Speaker 1: incentives at the federal government or your local and state
Speaker 1: government put into place to incentivize certain behavior. So, for instance,
Speaker 1: there was the there was an eight thousand dollar tax
Speaker 1: credit to people that bought a home back in two
Speaker 1: thousand and nine. And there's an electric vehicle tax credit
Speaker 1: for people to buy e v s, but that just
Speaker 1: got reduced recently. Right. There are tax credits for people
Speaker 1: to buy solar panels. They're all sorts of tax credits,
Speaker 1: and they change over time, and sometimes the amount that
Speaker 1: they pay out gets reduced over time based on how
Speaker 1: many people will have qualified for that tax credit. Will
Speaker 1: go through some of the most common ones that kind
Speaker 1: of have hung around through the years and help you
Speaker 1: kind of understand them and get an idea as to
Speaker 1: whether or not you might qualify. Ye man, and real quick,
Speaker 1: I wanted to mention. How So, tax credits they can
Speaker 1: either be nonrefundable or refundable, right, and so if they're
Speaker 1: only nonrefundable, that means they only will decrease the amount
Speaker 1: of the tax that you owe. Versus refundable tax credits,
Speaker 1: they actually add to the amount that you get back.
Speaker 1: And so an example of that one is the earned
Speaker 1: Income tax Credit, and this is a tax credit that
Speaker 1: you can take advantage of if you have a job,
Speaker 1: but maybe you are only earning a you know, a
Speaker 1: low to mid income salary. An example of this though,
Speaker 1: is that say you're single and you've got one kid,
Speaker 1: and then as if you make less than forty dollars,
Speaker 1: you can get up to thirty dollars in credits. And
Speaker 1: again this is a refundable tax credit. So say you
Speaker 1: owe actually zero dollars on your tax bill and you
Speaker 1: qualify for this specific version of this credit, that means
Speaker 1: you're gonna get a check for thirty four hundred dollars,
Speaker 1: which is huge. It's I mean, it's free money. It's
Speaker 1: it's amazing. Another example is the Lifetime Learning Credit, and
Speaker 1: this is available to pretty much anybody that's going to
Speaker 1: like higher education, and you can get credit for of
Speaker 1: the first ten thousand dollars that you spend on higher education.
Speaker 1: So in that example, you get two thousand dollars credited.
Speaker 1: And keep in mind this is to your final tax bill,
Speaker 1: and so it doesn't reduce your adjusted gross income down
Speaker 1: two thousand dollars. This has an impact on the amount
Speaker 1: that you oh in the end, which is so much better. Yeah.
Speaker 1: So if you owe three thousand dollars and you qualify
Speaker 1: for this lifetime learning tax credit and you max that out, boom,
Speaker 1: your tax bill just went from three thousand dollars down
Speaker 1: to one Like that is huge. That is huge. Yeah,
Speaker 1: and let's cover my favorite tax credit map, the retirement
Speaker 1: Savers tax credit. I figured that was gonna be your favorite.
Speaker 1: So again, often these tax credits are mostly created for
Speaker 1: low to low to middle income folks, and the retirement
Speaker 1: Savers tax credit, depending on the amount of dependence that
Speaker 1: you have, is also typically targeted towards those folks as well.
Speaker 1: And you can earn a tax credit based on ten
Speaker 1: to fifty percent of the amount that you contributed towards
Speaker 1: your retirement accounts at the end of the year from
Speaker 1: the federal government. And so I think even a family
Speaker 1: of four with a moderate income can qualify for this
Speaker 1: savers tax credit and can potentially essentially get free money
Speaker 1: from the government to incentivize their retirement savings, which is
Speaker 1: super cool. Yeah, man, like get that tim percent bonus
Speaker 1: on your on your taxes, right, and so yeah, some
Speaker 1: specific numbers for that, right. So let's pretend you're married,
Speaker 1: and if you have an adjusted gross income less than
Speaker 1: thirty eight thousand dollars, which isn't a ton in that instance,
Speaker 1: you can get a tax credit of fifty percent of
Speaker 1: your contributions fifty percent, which is huge, right, So you
Speaker 1: contribute five thousand dollars, you're getting a tax credits at
Speaker 1: the end of the year, and it's there to to
Speaker 1: modify behavior, like you mentioned, Joel, to incentivize and it's
Speaker 1: there to help folks out. Yeah, And so there are
Speaker 1: lots of other tax credits. We can't go into all
Speaker 1: of them, but there's one four people that adopt. There
Speaker 1: are other tax credits for people pursuing education. And there
Speaker 1: are also a lot of different tax credits for people
Speaker 1: pursuing home energy efficiency. And I believe twenty nineteen is
Speaker 1: the last year to get the full tax credit for
Speaker 1: putting solar panels on your home. Every year from here
Speaker 1: on out, the tax credit for solar panels is going
Speaker 1: to down, And like I said, that's kind of the
Speaker 1: way some of these tax credits work. The retirement savers
Speaker 1: tax credit has been around for a little while, but
Speaker 1: many of them shift over time, and it's best to
Speaker 1: kind of stay up to speed on what tax credits
Speaker 1: are currently in existence. We just covered kind of some
Speaker 1: of the highlights here. Yeah, man, that's right. Yeah, they're
Speaker 1: the highlights. Uh. And there are ones that you want
Speaker 1: to consider because they can apply to a lot uh
Speaker 1: of folks, potentially a lot of our listeners right now.
Speaker 1: All right, Matt, So let's quickly get to where people
Speaker 1: should file their taxes because that becomes a question for
Speaker 1: a lot of people. And like we said last weekend
Speaker 1: a little bit this week, we're more than okay with
Speaker 1: you finding an accountant or cp A that does tax
Speaker 1: to help you with your taxes, because it can be crucial,
Speaker 1: right and potentially save you more than you're paying that
Speaker 1: individual because of their expertise. But if you feel especially
Speaker 1: if you have a basic return, something that's easy and
Speaker 1: you feel comfortable doing it yourself, we would say i
Speaker 1: r S Free File is a great place to go.
Speaker 1: We'll put the link to the free file website in
Speaker 1: the show notes and free File. Essentially, the i r
Speaker 1: S compiles a list of companies that will give you
Speaker 1: access to file your federal return for free, although it
Speaker 1: is based partially on your income. And another great resource
Speaker 1: is Credit Karma Tax and now we love credit Karma
Speaker 1: for following your credit score and kind of keeping up
Speaker 1: speed on that. But Credit Carma recently a few years
Speaker 1: ago came out with Credit Carm Attacks and that's a
Speaker 1: free tax filing resource for people of all incomes, which
Speaker 1: I love. And another option too is that this is
Speaker 1: the first year that we are getting the simplified tax
Speaker 1: filing set up right, the new ten forty is this
Speaker 1: postcard size sheet front and back, and that's supposed to
Speaker 1: simplify the tax filing process make it much easier for
Speaker 1: a lot of folks. So consider that. I mean, the
Speaker 1: idea is literally you can get that card at either
Speaker 1: a local post office or library by the way, dude,
Speaker 1: libraries for the win yet again, right always, But you
Speaker 1: take that card and you can fill it out front
Speaker 1: and back and then your boom, You're done, right, like,
Speaker 1: that's amazing, and so this is the first year that
Speaker 1: they've implemented this new in forty So consider that, and
Speaker 1: especially if you're in the n of folks that are
Speaker 1: in all likelihood gonna take the standard deduction and your
Speaker 1: taxes are pretty simple, then really considered hopping over to
Speaker 1: your library, grabbing that form and sending it in. It
Speaker 1: should be just really simple and not taking much time.
Speaker 1: Not only time, right, but it can save you some
Speaker 1: money if you're looking to actually have your your taxes
Speaker 1: filed professionally. Hopefully we're able to sort of simplify that
Speaker 1: the tax filing process, right and how you go to
Speaker 1: go and think about it. And you know, once you
Speaker 1: kind of understand some of the larger concepts in the
Speaker 1: different ways that you can reduce the amount that you
Speaker 1: are going to pay towards taxes, then it just it
Speaker 1: kind of makes it easier, kind of makes it easier
Speaker 1: for me to wrap my head around it, and it
Speaker 1: makes it easier to plan ahead to make sure that
Speaker 1: over the next few years you're kind of optimizing. And again,
Speaker 1: like we said in last week's episode, you don't want
Speaker 1: taxes to kind of be the tail waggoning the dog.
Speaker 1: But you do want to take that into consideration because
Speaker 1: tax taxes are one of the biggest expenses in your life.
Speaker 1: And anyway that you can reduce those taxes at whether
Speaker 1: that means bunching or taking advantage of tax credits that
Speaker 1: you didn't know existed, that those are things that you
Speaker 1: should take advantage of. That's right, man, most deaf. And
Speaker 1: let's talk about the beer. What do you think? So? Yeah,
Speaker 1: we're drinking Dark Reckoning by Morgan Territory Brewing and this
Speaker 1: was an Imperial Porter. Yeah, donated by Brents from out
Speaker 1: in California. Brent, thank you so much for this beer. Man,
Speaker 1: it is fantastic. And dude, this is like an award
Speaker 1: winning beer as well. To be honest, man, this is
Speaker 1: one of the best porters I've had. It's really really good.
Speaker 1: The word I used to describe it was robust, and
Speaker 1: it is. It's just full flavored. It's a big beer,
Speaker 1: and oftentimes porters can be a little thin. Yeah, and
Speaker 1: this one had this really nice, beautiful mouth feel. I
Speaker 1: really enjoyed this one. Mouth Field is correct. Yeah, I
Speaker 1: said thick because not because it's a thick beer, because
Speaker 1: porters are thinner than stouts, but it had a thick flavor.
Speaker 1: This kind of goes back to the one time where
Speaker 1: I said, jacket has my word, but it kind of
Speaker 1: I felt like my tongue was wrapped up in flavor, which,
Speaker 1: by the way, most awkward episode moment yet, I think,
Speaker 1: not awkward. You're making an awkward jowl. But there's just
Speaker 1: some flavor in this, and a lot of times you
Speaker 1: don't get a lot of flavor out of a porter. Uh.
Speaker 1: And so if you like a drinkable, flavorful, dark beer,
Speaker 1: porters man, they are for you. And this porter in
Speaker 1: particular is a Baltic style porter and nice and toasted
Speaker 1: chocolate e get some smoky notes there as well. This
Speaker 1: is fantastic. This is a great beer to have here
Speaker 1: in uh in cold January. All right, Matt, let's tackle
Speaker 1: our final thoughts. And there's three main things that you
Speaker 1: really need to consider as we finished this episode on
Speaker 1: tax tips, credits and deductions, and particularly if you are
Speaker 1: a homeowner, if you have a mortgage, and especially if
Speaker 1: it's a recently taken out mortgage and you're paying higher
Speaker 1: amounts of interest, or if you're a real estate investor
Speaker 1: with multiple mortgages, you are more than likely going to
Speaker 1: be better off itemizing as opposed to taking the standard deduction.
Speaker 1: That's a really important thing for you to consider before
Speaker 1: you make that choice, that's right, man. And something else
Speaker 1: to consider is if you've paid some very large medical bills,
Speaker 1: not only direct bills to a doctor or a hospital,
Speaker 1: but your insurance premiums as well. The third piece of
Speaker 1: the puzzle is charitable giving, and the more that you've
Speaker 1: given to charity, the more likely it is that you'll
Speaker 1: be itemizing your deductions as opposed to taking the standard deduction.
Speaker 1: And remember, it's kind of a pie. It's all three
Speaker 1: of these things fitting together. And however they get you
Speaker 1: over that dollar mark as a married couple, or twelve
Speaker 1: thousand dollars as a single individual, or eighteen thousand dollars
Speaker 1: as a head of household. Don't leave those folks out too. Yes, uh,
Speaker 1: that will get you to the point where you want
Speaker 1: to itemize as opposed to taking the new standard deduction,
Speaker 1: and a quick back of the envelope math session will
Speaker 1: help you at least realize whether it's worth considering or not.
Speaker 1: And if you're really close to that threshold we mentioned
Speaker 1: bunching man, consider that as a tactic, right, as a
Speaker 1: strategy that you can employ to maybe hold off one
Speaker 1: year and go ahead and take advantage of the standard deduction.
Speaker 1: And then the next year, when you know that you're
Speaker 1: going to have maybe some big charitable giving, some big
Speaker 1: medical expenses, that can be the year that you decide
Speaker 1: to itemize your deductions. That's when you're gonna want to
Speaker 1: bunch all those expenses. And say, Matt and I covered
Speaker 1: some tax credits that you need to be aware of,
Speaker 1: and will put links to the I R S page
Speaker 1: for some of those tax credits in the show notes.
Speaker 1: It's just really important to consider them. Some simple modifications
Speaker 1: to your behavior can mean big money back on your taxes. Yeah, man,
Speaker 1: And keep in mind that these tax credits have a
Speaker 1: dollar for dollar effects on your tax bill. This doesn't
Speaker 1: just lower your adjusted gross income, but it actually reduces
Speaker 1: your tax bill by that amount, which makes them so
Speaker 1: much more valuable. Yeah. I know, taxes can be confusing.
Speaker 1: I mean I get confused by the tax code, the
Speaker 1: ever changing tax credits, the new tax law. I mean,
Speaker 1: there's so many things to consider. But hopefully we gave
Speaker 1: you enough of an overview to help you understand a
Speaker 1: little bit more about how the tax system is structured,
Speaker 1: how you can take advantage of the way it is
Speaker 1: currently constructed, so you get to keep more of the
Speaker 1: money that you make. That's our goal. Yeah, man, that's right,
Speaker 1: and so I think that is going to be it
Speaker 1: for today. Be sure to check out our website, how
Speaker 1: Some Money dot com. We'll have our show notes up
Speaker 1: there for you. Yeah. And if you you like this podcast,
Speaker 1: if you found it helpful, if you found this episode helpful,
Speaker 1: share it with a friend, or please leave a review
Speaker 1: on Apple Podcasts or wherever you listen to your podcast.
Speaker 1: Matt and I would really appreciate it. It It helps get
Speaker 1: the word out to potential listeners. Until next time, Buddy,
Speaker 1: best friends out, Best friends out due to the Tax
Speaker 1: Cuts Jobs Act. Say that three times fast,