Welcome to Something More with Chris Boyd. Chris Boyd is a certified financial planner practitioner and senior vice president and financial advisor at Wealth Enhancement Group, one of the nation's largest registered investment advisors. We call it Something More because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter.
Here he is, your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay Christopher Boyd. Thank you for joining us for another Something More with Chris Boyd. I'm Chris Boyd, certified financial planner practitioner. I'm here with Jeff Perry, JD. He is also an advisory representative with Wealth Enhancement Group and our team is the AMR team. And glad to be with you.
Today, we wanted to talk about the one big, beautiful bill, OBB, it's a law now. So yeah, OBB, how many B's is that? Three. Lots to unpack in this, but it has passed through the legislative process is now law. And Jeff, let me ask you to begin with one of the things I wanted to investigate is, does all this take effect for the 2025 tax year? It does. Sometimes they go retroactive, but it's, yeah, and sometimes they start, you know, at a future date or, you know, that kind of thing.
So that's, well, given the timing in the year kind of makes sense, it's we're roughly halfway. So that is so that changes for a lot of things. I assume that they wouldn't because this, although the bill is effective when he signs it, it's actually for the October 1st budget. So I kind of thought it was going to be effective and, and, and the tax cut and jobs act expires on 1231. So I guess I thought it would have made sense to start it effective then.
But for all the, for all the good things, I guess people get it this year as well. Well, let's highlight, we can, I don't know where you want to begin, but that's our mission for this episode is to give you an overview of the kind of things covered in the one big beautiful bill act. And you know, in the coming weeks, we're going to, I think, want to talk about this in more depth, put together perhaps a webinar for clientele.
And when, when we do that, we'll make it known so that our listeners can enjoy the benefit from that too. To get started though, Jeff, where should we begin? This wasn't an easy bill to pass. No, and politically it's a significant achievement for president Trump and the Republican leadership. I mean, this was, this is the signature legislation that the president talked about in the campaign and you know, the early part of his first hundred days.
And you know, he hasn't achieved everything certainly that he wanted to, he's still struggling with tariffs and you know, there's still two wars kind of going on. One definitely and one probably, but so he hasn't, you know, he can't take a victory lap across the entire spectrum, but on this piece of legislation, it's a victory for him. And it was not without angst. It was not without the dealing, you know, the close call in the Senate, right. He did the vice president to be the tiebreaker.
Well, we needed to buy the Senator from Alaska and give her all her Alaskan type exemptions and you know, this and that and have the vice president step in.
So it was not a sure thing for a while, but you know, at the end of the day and you know, if you're looking at a, just from this, from a Trump-ish perspective, he had to do this now because as you get closer to the next election, although he's not up for reelection obviously, but House members, Senate members who are up for reelection, they get more sensitive to their particular vote.
Yeah. I mean, if this was next year, you got the midterm elections looming and it becomes harder because then it's more top of mind and whatever the voting, it becomes the election issue. Whereas now there's a year away or so before you've got the, what's top of mind, who knows what it'll be a year from now. Right. You know, and then if you're dealing with it after the midterm election, it might have a totally different composition of the Congress. Well, that's very possible.
I mean, as you mentioned, the vice president had to step into the, for the Senate and the House is just, as you saw how close that was with just a three vote difference, I think.
So yes, this could now, or maybe never, and he, you know, I don't think we're going to talk about kind of the big items in there that the president's agenda got, you know, he'd get more money for immigration, he'd get more money for border control, he'd get more money for the military and the Golden Dome idea or get that rolling. So he got some of the big agenda items funded and then there's a lot of, you know, depending on your perspective.
You and I were talking about before the show, the whole notion of the debt ceiling. Right. So that's a negative to me. And I think most conservatives, I'm not going to say the word Republican anymore. I'm still a Republican, so don't, that's not breaking news. But the Republican Party in control now, I don't particularly agree with much of their fiscal stances, many of their fiscal stances. So this adds $5 trillion to the deficit over the next 10 years.
And this particular budget bill is 500 to 600 billion more than it was last year. So this is not a fiscally, in my opinion, fiscally conservative bill. There's good things in it, you know, good things that I like. But overall, they didn't, the president and his team, they did not achieve the level of cuts that I think the American people expected. As an investor, I look at the issue of the debt ceiling off the table as something that provides greater continuity.
There's less angst or anxiety for will the government make good on its obligations. So it pushes that off. I don't dispute your point that we have a problem long term that we've got this growing debt. This bill, this act will probably exacerbate that problem with the likelihood that we're going to have increasing debts beyond what we do last year, $1.8 trillion deficit, something along those lines. This doesn't improve on that in any way. It continues those problems.
You can maybe hope some tariff impact will help to mute some of that. But we're talking a fraction of that deficit that the tariffs may help to offset, not sufficient to offset the overspending. And then this extends that challenge. There's varying numbers. I think I've seen from $3 to $5 trillion over the next 10 years of additional spending coming out of this debt. But ultimately, this isn't the sole issue.
The problem existed before this bill, and the problem isn't getting any better because of this bill. It's still a problem. We'll have to come back to address at some point in time. Well, if the Trump administration is serious about that, like actually dealing with it, there is a process to deal with it outside of the budget. It's called a reconciliation where they can go line item by line item. It's tedious work, and it's not getting things, which most congressmen are trying to do, right?
They're trying to get things for their district or for their special interest or things that they perceive as good for their districts and the American people, but it's reducing the spending. So they could go through that process. It's hard, especially with a very slim majority, because when you're eliminating things from line items, you're making someone unhappy.
And I joked about the senator from Alaska, but a significant number of legislators, that's how they perceive their job is- Protect their pork, so to speak. Right, and there's a hundreds of years debate about what are you supposed to do? Are you supposed to do what's good for your district or good for the country? Hopefully somewhere those two things can be reconciled, but it's a tough process. But there is a process, so we'll see.
But the bill passed in 870 pages of lots of stuff, and much of it is - Think everybody got to read it before they voted on it? I think they had the opportunity to read it. I don't know if they read it. I guess the headline news is that, for us anyway, and for most of our clients and listeners, is the tax cuts of the tax cut and job DAG are permanently- Extended. Extended. The tax rates are the same. So- So that's a good thing, just to review.
With the Tax Cut and Jobs Act, the signature legislation of the original Trump administration, the first Trump administration, in that legislative effort, the tax rates got lower, but the brackets, how much income you have before you go into the next rate, got higher. So for most people, tax rates went down. In addition to that, the standard deduction was dramatically increased from the way it worked before, and we went from an environment where most people- Well, it wasn't uncommon.
It was very common for people to do itemized deductions, whereas under the Tax Cut and Jobs Act, and now furthered with the One Big Beautiful Bill, most people will choose to use a standard deduction as the way to deal with this, rather than itemized deductions, because they'll actually probably see a better result when it comes to their tax- Yeah, I'm one of those people. We went from itemized to standard deduction.
Do you recall what the numbers were for the standard deduction for either an individual or a couple? It's up to, I think it's $31,500 now for joint, and half of that for a standard deduction for an individual for 2025. Nice. That's a pretty substantial starting point before you'd have to have any tax burden.
Another thing that may change the itemized part of it, meaning some people may now go back to itemized, is in the first President Trump tax bill, there was something called SALT, which reduced the amount of state and local taxes, usually property taxes is the big one for people, that they were able to deduct. If you limit that to 10, and your standard deduction is 30 round numbers, you got to get a lot of other deductions to get back to even.
Republicans from blue states with typically high property taxes fought hard and successfully to not eliminate the SALT cap, but to put it at $40,000. If you have an individual who has deductions, and especially SALT deductions, that are significant, they get above that $30,000, they may go just with property taxes. You get a couple of homes in blue states that have high property taxes, and many of these folks have more than one home, they'll be back in the itemization team pretty quickly.
Now you said $30,000, I'd seen somewhere about $40,000 temporarily. No, it's $40,000. If I said $30,000, I misspoke. So that's a lot. Much bigger than the $10,000 that it had been, right? That's right. The House originally put the $40,000 in, the Senate took it out. But had to pass it with it. And so that was part of the horse trading, so to speak. Yeah. I think there was also something about the child tax credit. Do you know what those details were? But that went up as well.
Yeah, it went from $1,200 to $2 ,200, a significant credit. So it's a credit, not a deduction. I always like to point that out because it's actually like cash. Not everyone understands the difference, but a credit is an actual removal of tax. It offsets tax, whereas a deduction offsets income. So essentially, if you said, oh, I had a $10,000 deduction, but I had $50 ,000 of income. Oh, it's like I had $40,000 of income, right? Right. And then what's that tax?
Yeah, you have to take the deduction times your tax rate. Whereas if you said, oh, I have this much tax and the credit offsets tax, it's more powerful is the bottom line. We like credits more than deductions generally. Yeah, yeah, it's preferable. And so there was some criticism by the left about that this bill would just help the wealthy. There's many examples in here that showed that that's not accurate at all. And this child tax credit is one of them.
Another one is the exemption of tips from income. Yeah, the president campaigned on this idea of tips and overtime. I have to say, when he was campaigning, I said, no way to the TV. I did not see that coming either. I honestly agree with you, Jeff. I thought it was a lot of rhetoric. And I've pictured my high school campaigns for people running for office. We're going to have longer recess. We're going to have- Free pizza every day. Pizza every day, candy machines in the cafeteria.
You know what I mean? It was kind of one of those. But I actually got it through. Now, I don't know if that is permanent or I think some of that- It is not. Both the tips, the exclusion on the first $25,000 of tip income, and that does have a limit of $150,000 of income. So if you're a high earner and you happen to get tips, probably not. But if you happen to be in that category, it starts to be eliminated at $150 ,000. So the first $25,000 of tips is not included in taxable income.
And three years, it ends in 2028. And the same is for the no tax on overtime. And that is limited to $12,500. And it's also started to be eliminated at $150,000. So those are things that, just to put it out there, that benefit the not rich, generally. Generally. I would say that's true, yeah. Another thing in that category is the $6 ,000 deduction for seniors 65 and older. And that's affected- Yeah. So let's talk about that for a second.
The president campaigned on the idea of having social security not subject to tax, essentially. And that was something that proved difficult to actually implement. So this was sort of their alternative way to offer something close to that, essentially. Wasn't that the gist of it? I think so. I think that's right. And so how does this work? It's phased out by the more you make, right? So if there's an element of...
Certain people will get this $6,000 deduction to help offset taxes on their social security. That's right. But if you make over certain amounts, you might lose that, essentially. And that's why I put it in this category of things not for the rich, right? Yeah. Yeah. I don't have in front of me anything about where those details are right now. Do you have that? Or is that something- I don't have the income limit. Yeah, we'll get into the granular stuff in a future seminar webinar that we'll do.
We'll be able to detail that. Before we shift into... I don't know where we're going next, whether we're going to 529s and those things. But two other things that impact people of modest income is car loan interest now. If you take a loan on a new car that is assembled in the United States. I guess we're not ready to say made in the United States. Yeah. Okay. Assembled in the United States. A new car, not a used car. That's correct.
So it's designed to encourage people to buy American assembled cars. Because, hey, we have a lot of Toyotas made in the United States. It's assembled in the United States. Anyway, car loan interest, which used to be deductible a while ago, is now deductible, again, up to $10,000, meaning $10,000 of interest payments. Well, with interest rates rising, that could be helpful, right? It's an incentive to buy a new car assembled in the United States and take a loan.
I mean, most people have to take a loan. Most people of modest means do take loans for cars. Yeah. So again, to your point, more likely to help some of those people who are not the rich. That's right. But this definitely does have some features that do help people with wealth. For sure. People of means. We could talk about the estate tax threshold being maybe changed. Not really changed, but just extended, I guess, made permanent. Slightly higher, but not hugely different, right?
It went up to $15 million, I believe. $15 million. It was pretty darn close. $13. I think it was $13. The piece that I liked when I was reviewing that section, what I liked about it, and I always like about this because it prevents or it eliminates the need to adjust it later. It's adjusted for inflation. Yeah. Thank goodness. Right. It takes that issue out of the way. Yep. All right.
So in any case, you want to sound like you want to talk about some other stuff, like 529 plans or some other things. What was it you wanted to focus on? Well, I always like talking about college education and saving for kids. So I thought of you when I read this section. For 529s, you can now use the money to become a certified financial planner. There you go. And CPA, right? And CPA, yep. Oh, and I think other post-secondary certifications broadly.
The summary that I read had those two as examples. But there's lots of times you're done with the college and you don't really- You have some money left over, huh? Right. And maybe you don't need another degree, but a certain certification like a CFP or a CPA. I mean, they're endless in different professions. I'm not going to try to- Very good. Yeah, so that makes it a little more helpful. Is it only for the obtaining of those designations?
Or was it for like if I have CE costs, can I use it for- I think it's to obtain the credentials. To obtain the credentials. Yeah, I don't think you can keep your CEs going for the next 30 years. Okay, oh well. And the Trump account, which I thought when I saw that, I said, no way. And actually, I'm against this. I'm philosophically against just giving. We started off the segment by talking about how much debt we had. So let's give every child born $1,000.
I mean, it's like saying in your household, we got big credit card bills. We're late on our car payment, but we're going to a wedding. Let's give them $1,000. You know, it's just, it's great. I mean- It's nice, but it may be not the most responsible. Would you elaborate on what a Trump account is? So it's a tax preferred, they're calling it savings for children, with an initial $1,000 federal subsidy for every child born in these three years again. 25, 26, well, 25 through 28.
I guess that's four years. So does it require something of the family to create the account, to add money for it to be also provided by the government? Not add money, no. The $1,000 is a gift, and it has to be, and this is left to promulgate regulations and policies by the treasury. It's not specific in the bill, but there will be approved institutions. You know, the commentary is it will probably be- Like a 529 plan or something. Right, it will be banks, brokerage, mutual funds.
And it has to be in, the bill says the diversified index fund of equities. So $1,000 initially, the parents can put in up to $5,000 each year. The $1,000 is the one time- Annually. And this money is tax deferred while it's in there. What happens when I take the money out? And is there a limit as to when I can take that money out? So second question first, I tried to find out, but the details, I wasn't able to find out.
So, you know, many, we know this- I'm sure it's intended to be for long -term, you know, maybe, you know, college or something like that, but long-term use. I don't know the answer to that. But if it is available soon, we know, sadly, that many people will take it out as soon as it's available. Sure, sure. Taken out, we just know that. Anything that's given to you, you tend to not treat it with the same value. And, you know, people who need the money, need the money. Yeah, yeah.
Yeah, so there's all types of commentary, you know, and we like to do this too. If you leave that $1,000 there for 60 years, you know, it'd be $340,000 at typical stock market performance. And so the idea is for college or for, you know, the beginning of a retirement account someday. So let's see, let's see the regulations and how it all works. But for some, it will be a wonderful gift. And for some, it'll be a temporary three -day cruise to the Bahamas, I guess. Yeah, yeah.
All right, well, here's the AI quick copilot response. At age 18, up to half the account's value can be withdrawn for approved purposes, such as higher education, job training, starting small business or purchase of a first home. Withdrawals for non-qualified expenses will be taxed as ordinary income and may incur penalties. At age 25, the full balance can be accessed for qualified purposes. Non-qualified withdrawals will be taxed as ordinary income and may incur penalties.
At age 31, the account terminates and all funds will be fully accessible for any purpose taxed as capital gains. Okay, well, it's a preferred tax. That's why they use the word preferred, I guess, preferred tax treatment, because typically capital gains are less than income taxes. Yeah, so that's funny. If you wait till the end, it's capital gains. I got to say a real side note, a tangent. You are becoming Mr. AI.
I'm enjoying the use of copilot in our work environment, chat GPT, and maybe outside. I've got to catch up. And when I was looking for the answer, I was just looking the normal way, Googling, and I should have just asked copilot. There you go. Although, side note, copilot is not copilot, but some of the AI is having issues. I don't know. Well, it's not always accurate to your point.
Yeah, I don't know if you saw the story from this week, but X had a major meltdown on their AI, where it started making anti-Semitic comments. Oh, geez. And it did it all night. Well, I don't know about you, but I tend to be very polite to my AI, just in case when they take over the world, they might say, well, that guy was always polite. Please and thank you. Are you assuming AI is going to write your obituary someday? What's the Terminator kind of thing? Yeah. All right.
Back to the one big, beautiful bill. These are just a few of the things, but maybe we should run over some other big, broad categories. There were some impact on Medicaid benefits. That was widely talked about. The mandate for work or volunteer or education. 80 hours a month, not 80 hours a week. 80 hours a month, six-month redetermination. So, those are a couple of things. SNAP, the food stamps program, was previously called food stamps.
Some reductions there, state cost sharing increases, I guess. Is that something? And it forces the states to work on the fraud issue. If a state has more than a 6 % fraud rate, the amount that they have to contribute goes up. Except Alaska, by the way. Except Alaska. That was part of the deal. All right. What about energy? There were some changes in some of the incentives that had been previously legislated when it comes to things like solar and the like.
For the most part, the way I read it is they're evaporating right before your eyes. The Clean Vehicle Credit, which was a significant reason that people purchased electric vehicles, is now expiring. They moved up the date. It expires September 30th now. And also the credits, if you will, for people doing home improvements and doing all those things. More efficient considerations, not as helpful as it was. They were expiring in 2032, I think, and now they're expiring at the end of the year.
Is that the kind of thing? I wonder if there'll be a surge and stuff before all that gets expired fully. That's a good point. I would expect that it would be. Yeah. And I'm curious, has that also been an issue when it comes to automobiles? I think some of the incentives that were there for electric vehicles got affected by this as well. Yeah. They moved up the date September 30th of this year. September 30th of this year. Two months.
On another topic, though, defense, border, ICE funding, they all had some impact. You touched on some of this, I think, already. But that was something like $150 billion added for defense-related expenses. And the border, a big topic for the Trump administration. More money to finish the wall. More money for those purposes to secure the border. And for personnel, right? Absolutely, yeah. Yeah. What else? I have a topic of...
It looks like we hit on some of these things, the debt we talked about a little bit. I think for businesses, there's a tremendous benefit of being able to depreciate. Oh, depreciate right away. Right. Write it off. I mean, it's not even really like depreciation. Yeah, it's 100%, wasn't it? It is 100%, which is very encouraging for people to buy a new dump truck or whatever it is. I saw a special on CNBC on this topic, but it was solely focused on jets.
Because you could buy, according to the story, which is accurate, I think, you could buy a $10 million jet this year, where you would have to depreciate it previously over like 20 years. I don't know if I could, but one might. Someone could. Someone could, yeah. Someone could. I'm just kind of happy. So there is things in this bill. That might be for the wealthy. There are things in this bill.
And the accelerated depreciation or the instant depreciation of capital expenses related to your business is certainly a big benefit for companies who are making those purchases. I think the big point, ultimately, is that there's a lot in this. We're going to be doing more review of the details so that we can share with our clientele and our listeners some of the strategies that will come out of this. Some of the decision-making that might be altered.
The way we think about planning some tax strategy. Naturally, these are important developments. When you have a major piece of tax legislation, it can cause you to have to step back and reassess some of your plans as it relates to your financial planning. It can create opportunities to maybe accelerate some of the things you might have as plans. And it can cause you to maybe just sort of think twice about, you know, what should I be doing? What shouldn't I be doing?
How do I implement some of the benefits around these tax changes? And certainly something we'll be talking more about as the details become more elaborated upon. We can then assess and help guide our clientele with, how does this play into strategy? For sure. Every time the federal government passes a new or changes to the tax bill, it just makes the profession of CPAs more secure. That's right. So much for a simplified tax code. Yeah, it never seems to really get fully simplified.
That being said, you know, I think there are some things that, you know, when it comes to income under a certain level with, you get a bigger standard deduction, you got certain things that can be really advantageous, right? So it's good to see some aspects of this. I think from a simplicity point of view, will really be pleasantly received, you know, that kind of thing.
The higher tax brackets, the lower rates, the standard deduction are all things that were good benefits out of the original tax cut and jobs act. And it's nice to see that extended. I think that's a virtue for most filers.
For me, the biggest benefit is it's encouraging and incentivizing people to work, whether it be, you know, the tax rates is a big part of that, or whether it be, if you're on government subsidized healthcare, you have to do something productive with your life, or whether it be, if you want to work overtime, you know, the thing with working overtime is, oh, half of it goes to taxes. Now, not so much.
And, you know, it gives our servers and other people who have, generate money from their tips, gives them a break and encourages them to work and maybe drive some more people into the profession. So I think it's got a lot of good policy in it. I just hope the debt part of it doesn't crush us in the end. Yeah, that's a good point.
I think that's something that, you know, as a reality, I think you commented or maybe Brian in a prior episode said, you know, permanent for now until future legislation. I think that's the reality, the way we've got to think about this. This is permanent, but the trajectory with the debt is going to likely create future tax legislation again, that will, you know, try to address that issue that will likely continue to be in need of attention over time.
And let us not forget Social Security, Medicare, which reforms and funding for those programs who are struggling and have a timeframe. Yeah, less than 10 years on those. Not addressed at all. Not addressed at all in this piece of legislation, which is fine. But perhaps that will be on the president's agenda in the near future, hopefully. I would expect that it will be a topic of political discourse for the next five years. You know, like, what do we got? It's something like eight years.
Nine years, eight or nine years. Yeah. So, you know, we've got two presidential cycles. We've got lots of congressional. We're going to be talking about this a lot over the next 10 years to get these things done. I hope you're wrong. I hope we have some political courage and find a way to solve the problem before it's a crisis, but to be determined. What do you think's likely? My thoughts or your wish? Many of my wishes don't turn into reality. Yeah, we'll see. Yeah, we'll see.
We can both hope for your optimism, you know. I'll try to make it. All right. Thank you for listening. If we can be a resource to you and thinking about your strategy and your financial planning, particularly when it comes to integrating not only the portfolio and the financial plan, but, you know, how tax issues impact the economy. You let us be a resource. Reach out to us. And until next time, everybody keeps striving for something more.
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