In this episode of the Secure Your Retirement Podcast, Radon and Murs discuss the latest developments around the One Big Beautiful Bill Act and how it may impact your ability to claim a SALT deduction in 2025. From understanding the SALT cap to weighing the benefits of standard vs itemized deduction, they break down what these tax changes could mean for your retirement planning strategy. Taxes are complex, but this conversation aims to simplify what you need to know so you can plan for retirement with confidence.

Listen in to learn about how state and local taxes, the property tax deduction, and the mortgage interest deduction might shift under new legislation. You’ll also hear strategies that combine charitable giving strategy, donor advised funds, HSA contributions, and 401k contributions to optimize your plan. Whether you’re exploring high income tax strategies or building your personal retirement checklist, this episode helps you position yourself to retire comfortably and secure your retirement.

In this episode, find out:

·     What the One Big Beautiful Bill Act could mean for the SALT deduction 2025.

·     The differences between standard vs itemized deduction in today’s environment.

·     How the SALT cap impacts state and local taxes, and why it matters for retirees.

·     Ways to leverage a charitable giving strategy or donor advised fund for tax efficiency.

·     How retirement tax planning integrates with 401k contributions, HSA contributions, and other tools to help you plan for retirement.

Tweetable Quotes:

·     “When it comes to taxes, the goal isn’t just to reduce today’s bill—it’s to create a strategy that works for your entire retirement.” – Radon Stancil

·     “Understanding the SALT cap and knowing when to use itemized deductions versus the standard deduction can make a huge difference in your long-term retirement planning.” – Murs Tariq

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Welcome everyone to Secure Your Retirement. We are always excited to have Taylor

Wolverton on with us and she is our in -house tax guru and specialist.

So first of all, before we get into anything else, Taylor, thank you very much for

coming back on and chatting with us. You’re welcome. We had Taylor on our TV show

that comes out on Monday mornings at 11 and she’s one of the most popular episodes.

We get more people come to us and say, “Man, we really like that episode with

Taylor than any other episode.”

Today, what we wanted to have you come on and talk to us about, we’ve been talking

a little bit about the new what’s called Big Beautiful Bill Act that came out this

year. And there’s some little tweaks here and there that affect our clients. And

right now, as we are sitting here, we are going through a big part of what we do

in this time of year, which is all of our tax strategy meetings. And Taylor, you

head those meetings up and get everybody ready and all that kind of stuff. And so

one of the things that we’ve asked you to do is as you are seeing things that

could affect our clients and listeners to bring those to us because we will do an

episode on the podcast because if it affects a number of people, then it’s probably

going to be affecting a lot of people. And so today, we’re going to talk about

this wonderful world of itemization. So, thank you very much for coming on and talk

about that. So, I don’t know, Murs, you want to kick us off here with the… Yeah.

Yeah. I was in a meeting today and the person said it quite frankly of, I don’t

know what I don’t know. And I think that’s something we hear all the time of, uh,

you know, I was a specialist in my field, whatever my career was, and I just, I

don’t know what I don’t know when it comes to taxation or financial planning. So,

uh, that’s why we’ve created this whole tax strategy program and Taylor heads, all

that up. So, Taylor, I think to start off, um, let’s go with the assumption that

people don’t know what itemization truly is and let’s explain that before we can

explain what the changes to itemization are. Yeah, okay so everyone who files a tax

return is at least eligible for the standard deduction. That’s a set dollar amount

every single year. The standard deduction is the amount of income. First amount of

income you do not have to pay tax on. This year if you’re a joint filer, the

standard deduction is $31,500. If you’re a single filer, it’s $15,750.

The standard deduction does increase if you’re over the age of 65, so it might be

a little bit different depending on your age as well. But in comparison to that,

if you have certain expenses that add up to more than the standard deduction,

that is when you itemize. So, you either take the standard deduction, or you itemize

depending on which one is higher in your situation. So hey, I’m going to kind of

interject here just for somebody because sometimes if I’ve always done the standard

deduction, I don’t even think about it, right? So just as a conceptual, so there’s

things that I can write off that reduces my income. One of those might be, for

example, the interest on my mortgage, or it could be medical expenses to some

degree. Or if I donated money, I get to have some deductions on those things. So

what you’re saying is, if all of those things didn’t add up to at least my

standard deduction, well then, it’s better to take the standard deduction. But if I

have a bunch of expenses that could deduct off of my income, more than that

standard deduction. Now that pops me over into, hey, I now need to itemize to get

the credit for all those extra things. Am I right? – Yep, that’s exactly how

it goes. So yeah, medical expenses, there are some limitations on that, but medical

expenses can be included in itemized deductions, and then you have state taxes that

you’re paying to North Carolina. You have property taxes that you’re paying on your

home and then also like your car property taxing’s like that. And then charitable

donations are included as well, mortgage interest, those are like the main ones that

most people would use for itemizing, yes. – Yeah, and I think that’s important

distinction, Radon, that you brought up is most people, you know, if you go back,

I don’t know when the law changed 10, 15 years ago is when most were itemizing and

able to take advantage of that, and then we had tax law change. And now most, I

don’t know what the number is. I’m making this up for everyone, but probably 75 %

or more people will take the standard deduction today and don’t even think about

itemization. But some of that’s changing a little bit, and there’s itemization things

that we got to understand better, right, Taylor? So where do you want to start in

this super easy place to understand of itemization? Yeah,

let’s talk about what the law was previously and how the new one big, beautiful bill

act is going to change itemizing. So previously, as of 2024 and before that,

there’s what’s called the salt cap when it comes to itemizing. Salt is an acronym

that stands for state and local taxes. So, for the taxes that you’re paying to your

state, your property taxes that those expenses were capped previously at $1,000.

So, if you paid $10,000 to North Carolina for your state taxes and then you had $5

,000 for property taxes, total between those is $15 ,000, you’re limited to only

deduct $1 ,000 towards your itemized deductions. So that’s where we were previously

$10,000 salt cap, we would say. Now the new law has increased the salt cap from

$10,000 to up to $40,000. So, a pretty significant increase when it comes to,

again, the state and property taxes essentially are included in that salt cap.

– So just a quick interjection. – Yeah. – That would make this a little bit easier

potentially to get into itemization, right? Yes. More dollars that we could

potentially take deductions on that pushes our total up potentially. Exactly, yes.

Yeah, and the salt cap to be clear as well, the $40,000 that’s the same whether

you’re filing single or whether you’re filing jointly. So that’s one thing that

actually, does not change based on your filing status. It is $40,000 for everyone.

So, I do have a few examples of real clients that their situation for itemizing is

going to change this year that I want to walk through and show what it looked like

before the law changed versus what it looks like now after the law changing. And

what that means in terms of like a reduction in dollar amount that they’re paying

in taxes this year now. – Okay, so can I share my screen? – Yep, I got you there.

– For people watching. – Yep, I got you. – So, the first example that I want to walk

through, this is a person who is filing single.

So just to walk through a couple items of income that they have wages this year,

they are not yet retired, and then they also have some investment income in the

form of interest, dividend, some capital gains. – Hey, by the way, just can

you go back really quick, Taylor, just for those that are just listening and walking

right now, or driving is that we’re showing wages here of 300,000. That’s why Taylor

said they’re not retired yet. So, they got income of 300,000. They got taxable

interest of 500. And then I guess some total dividends of around $12,000. Yes.

And what I would say while we’re in this mode of talking to listeners, if you

can’t see the screen and you’re listening today, I would listen, but this is one

that I think you would want to go back and watch the YouTube or go on Spotify and

watch the video of. The main reason is you get a little bit of insight into what

Taylor’s looking at when she’s running tax strategy meetings and the software behind

it. Because it’s very cool. There’s a lot of numbers, but also it makes it nice

and simple to understand. Sorry, go ahead, Taylor. Yeah. Okay. Then we also have

some capital gains. Again, this is another source of investment income, around $5,000. So total income for this person in this situation is going to be $317,500 for

2025.

So, this column that we’re looking at on the left side of this is previous tax law.

So, I’m going to expand this, and we can look at more details of what expenses

they’re using to itemize. So, state taxes that they’re going to pay to North Carolina

this year, around $12,000. Property taxes that they’re paying on their primary home

is $5,000. And then they have some other property tax like probably on a car,

around $300.

So that total for state tax property tax is $17,300.

And like we said, previous tax law, that was capped that’s $10,000. That was the

most that you could put towards the total for itemizing.

And then this person also has some charitable donations of around $38,000 for the

year. So previous tax law, the charitable donations of $38,000 plus the $10,000 cap

on the other expenses would mean they would still be able to itemize. This is

greater than their standard but they were itemizing at a total of about $48,000.

And now on the right side of this other column that we’re looking at is a change

in the tax law, where now that $10,000 cap that we had previously is removed and

now the cap is up to $40,000. So now they’re going to use the entire $17,300

towards itemizing and again, adding that same $38,000 in charitable donations brings

their total itemized deductions now to $55,300.

So, there’s no change in the expenses themselves, it’s just a change in the law that

is increasing that amount. So, the increase in the salt cap,

that’s another $7,300 in itemized deductions. This person this year is going to be

in the 35% bracket and by adding itemized deductions increasing your deductions means

decreasing your taxable income. It’s essentially removing another $7,300 of income

that otherwise would have been taxed at the marginal rate of 35%. So, if we just

take 35 % of that $7,300 we’ll see just from the change in tax law,

this person’s federal tax this year is going to be reduced by $2,555.

So that’s what they can expect in terms of when they file their tax return or

reduction in taxes. I don’t have the details in here to look at, but we would have

a conversation about what does that mean for their withholdings? Or should they just

expect a higher refund maybe this year, things like that so that they have an

understanding of what it is going to mean when they file the actual tax return

itself as well. So, from what I’m seeing and hearing is that there isn’t anything

different that’s being done. It’s really understanding the new tax law, but the last

statement you made there I think is rather important is that if you, there’s a

difference between tax planning and tax filing, we look at tax planning and tax

planning, if we understand kind of what our projection for taxation is, and it lets

us kind of think through other strategies and everything like that. And it could be

as simple as understanding your withholdings and not overpaying when you think you

have to pay more, but you get more of a deduction this year because of the salt

change. So, you know, for people that are concerned about cash flow or overpaying or

underpaying, you know, I think it’s really important to understand this tweak even

though it’s not magic, but it is tax law change Right.

All right. So, I think you’re you going to run us through another scenario

Taylor? Yes, second example that I want to look at now this person So the first

example they were filing single now the second example they are filing joint

This year So For the joint filers, their total income this year is going to be

around $376,000. They’re also not yet retired,

so, a lot of that is wages.

Same thing on this left side, we’re comparing previous tax law to the right, where

now the salt cap

or not previously but they have state and local taxes combined to $24,000.

Previously that was capped at $10,000. Now it’s capped at up to $4 ,000. So that’s

another $14,000 in deductions that they can now use. They also have mortgage

interests in this example and they have charitable donations as well. So previous to

the change in the tax law their total itemized deductions was going to be $37 ,000.

Now, with the increase in the salt cap, the new tax law, they’re going to be able

to itemize $51,000.

And they are in the 24 % bracket.

So, I’ll do the same calculation again,

where now, like you set their increase in the salt cap is allowing them $14,000

more in itemized deductions. That’s essentially removing $14,000 of income from being

taxed at their marginal rate of 24%. So, in this example, it would save these filers

$3,360 in federal tax to be able to itemize.

I mean, their ability to itemize does not change. It’s just the amount itself that

is changing this year. So– – And I think you have a third example too. – I do,

yeah. The last example that I want to talk about, like I said, there are some

limitations on the salt cap itself. So once your total income exceeds $500,000,

that’s the same limit for also both file or both single and joint filers.

once your income exceeds $500,000, that $40,000 salt cap starts to be reduced up

until your income is $600,000, at which case you’re capped back at the $10 ,000

limit again. So, if your income is somewhere between $5,000 to $60 ,000,

you won’t receive the full $40 ,000 cap, you’ll be somewhere in between $1,000 to

$40,000 cap.

So, in this last example, I want to look at that exact scenario where their income

does exceed $500 ,000. These are joint filers again.

So, their total income this year, these people are also still working, they’re not

retired, but their total income this year, we’re expecting around $540,000. So, they

are inside that $500 to $600 ,000 phase -out range for the salt cap.

Their state taxes that they’re paying to North Carolina is around $20,000. They have

around $15 ,000 in real estate tax and then another $1,000 in other property taxes.

So, their total state and local taxes this year is $36,000.

Previous tax law would have capped them at $1 ,000. New tax law caps them at up

to $40,000. But again, because they are in that phase out range, their cap is

going to be $28,000. So, it’s important to understand there are still limitations if

your income exceeds a certain threshold.

And then they also have mortgage interest and charitable donations.

So previous tax law, they would have itemized a total of $63,000. This year,

although they are not getting the $40,000 cap, they are limited to lower than that,

they are still going to be itemizing higher than where they would have been to

previous tax law. So, the total we have with the update in the law is $81,000.

So, this is where I think having good tax planning in place for the higher income

earner makes a lot of sense because maybe they’re a self -employed and they’re not

funding any type of retirement plan to bring their taxation down a little bit or

maybe there’s things that can be done, maybe the way that they were drawing their

money could be in a better place to kind of get them to where they are getting

that full $40,000 salt benefit versus being phased out and not fully realizing why

or how it even works. Because, you know, in taxation world, I think everyone wants

to be in a place where they’re paying as little as possible, but you’ve got to

understand the deductions and all these different things that we can do inside of

the code itself. Yes, that’s exactly the opportunity. The phase out itself,

if you are going to be in that range with higher income is based on the total

income that’s reported on your tax return. Your total income does not include your

401k or HSA contributions. So yeah, if you’re expecting your income to be in that

range or above that range and you’re not maxing out your 401k pre -tax or you’re

not maxing out your HSA if that’s available to you, then that’s definitely a

strategy that we would probably be recommending reducing your total income that

shows up on your tax return and hopefully increase the amount that you are eligible

to use towards admires deductions. Yes. So, I think what I see on this too,

let’s just go back to the first two examples in particular. I mean, that one too,

if we can get them below the 500 ,000, is that because of this new part of it

where I could go up to $40,000, I now might look for other opportunities that I

might not have done before. So, for example, let’s say that I am charitable inclined,

I now get a lot more; I get a lot better deductibility on that charity because I’m

already itemizing. So, let’s say I got to my thing, and I said, well, normally I

give away $5,000 $10,000 a year. How could I benefit now this year while I’m in

this particular scenario? What could I do and what how would you reckon? What would

you recommend to somebody who maybe let’s just put somebody giving away $10,000 a

year to a particular charity. That’s what they do every single year What could they

do now if they got themselves into this itemized scenario? Yeah, that’s another

opportunity I don’t have an example of that, but it could be possible that someone

who was previously only taking the standard deduction now with the change in the law

could be itemizing, and if they have charitable donations as part of that,

then what we could do this year is combine multiple years of charitable donations

into one. So, if they’re giving $10,000 in 2025 and expecting to give $10,000 in

2026, we could potentially look at donating a total of $20,000 in 2025 into an

account where that can be distributed at the same frequency, the same pace as they

would be planning to otherwise throughout 2026. But now we can get the $20,000

deduction in 2025 to report as part of the itemized deductions in 2025 and reduce

tax this year. – Yeah, absolutely. Now, I think you’ve got a note I want to just

bring it up. Is this change at all in 2026 or are there any additional tweaks that

we have to think about? – Yes, yes. So, first thing to be aware of this salt cap

increased to $40 ,000. This is supposed to last right now through 2025 through the

year 2029 and starting in 2026. So next year,

total itemized deductions are also going to have some limitations if you are inside

of the 37 % bracket. So those with higher income earners at that 37 % bracket,

it’s not the most straightforward calculation, so I won’t get into the details, but

it is important to know, yes, there are other changes for those itemizing in the 37

% bracket coming 2026. – Well, I tell you, Taylor, appreciate as it opens up our

eyes. I mean, we don’t do the tax work like you do every day. I mean, we’re part

of things and we’re, we’re talking to clients. So, you laying this out so nicely, we

know that when we’re a part of those meetings that the clients love it. And I

think all of our listeners are going to love it too. And if you’re listening to

this and you’re going, oh my goodness, this just sounds like a lot, a couple of

resources. Number one, Merse has already mentioned it. You can watch this video on

Spotify or YouTube. We also have a blog written on this as well, so you can go

read about it. And then if you ever do have questions and you’re thinking, man, I

would love to be able to have my questions answered, you can always reach out to

us, just go to our website, POMwealth.net, go to the Contact Us page, and we’ll get

you the help that you are looking for. Thank you very much, Taylor, we appreciate it. Everyone have a great week, we’ll talk to you again next Monday