TRANSCRIPT
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#65 - How the New Tax Law Could Impact Your Retirement
Eric Blake: What does the new tax law mean for your retirement? Today we're unpacking the most important changes from the One Big Beautiful Bill Act that could impact your retirement.
Eric Blake: Welcome to another episode of the Simply Retirement Podcast, where we want to empower and educate women to live your retirement on your terms. I'm your host, Eric Blake, practicing retirement planner with over 25 years of experience, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.
This week we're talking about the big Beautiful Bill Act, or the one big beautiful bill act. I gotta get all that in there, the newest tax law, and again, most importantly, how it impacts your retirement. Joining me again on this episode is Wendy McConnell. Wendy, how are you?
Wendy McConnell: Good. I thought you were referring to me as the, you wouldn't be the man you are without me.
And then you were like you.
Eric Blake: That is absolutely true. You're part of you. Hey, I've got so many great women in my life, and you're one of 'em. So don't sell yourself short.
Wendy McConnell: Gee sharks. Thanks so much. So
Eric Blake: I thought about this and I, I don't know if this, I, maybe I'm the only one that thinks this will be funny, but, so I was I had my first root canal on Monday ever, my first root canal.
And I'm sitting there thinking about, okay, this is probably what Wendy thinks about this is what Wendy thinks when I'm talking about taxes, is this is gotta be like sitting through a root canal.
Wendy McConnell: No, it's not that bad.
Eric Blake: And what was funny is that, so the dentist I compare myself to the dentist in this scenario.
He's and this has been going on for a while. So it's finally time that I got this done. And he was talking about, it was how much of budget was bleeding? And he is he starts making jokes like maybe what I would make about taxes. He's making jokes about What about we had to keep sucking out.
Otherwise you would've bled out. Bled out. I'm like, oh
Wendy McConnell: my, that's
Eric Blake: not a joke.
Wendy McConnell: Yeah, that's not funny.
Eric Blake: That is not a good joke. So
Wendy McConnell: a dentist with a sense of humor, that's rare though. Yeah,
Eric Blake: but it was a dry the way he said it too, so I don't know how funny he was trying to, he was trying to be funny, but I'm like.
I'm laying here with my mouth open and you've got all these tools going in and out. I'm like that. Don't use the bleed out, just come up with something else.
Wendy McConnell: All right. All right. I'm glad you made it through that.
Eric Blake: I did. And much again, much better on the other side. So again, you gotta fight through it, fight through the tax issues, and learn about what's going on.
And then on the other side, you, hopefully you're coming out better. So that's what we're gonna do today. So in about
Wendy McConnell: 25 minutes, we're gonna be on the other side, right?
Eric Blake: Hopefully. Hopefully. So we're gonna, we're gonna, I'm gonna get through this relatively quickly. I'm gonna get through the key provisions that impact retirement planning primarily, and then talk about some planning strategies that you wanna be aware of.
And as always, just wanna make sure when we're talking about taxes tax planning, be sure to consult your tax advisor, your financial advisor, to understand how these provisions apply to your specific situation. Sound good? Awesome. Let's hop into this. So first thing I wanna do is just set the stage.
So with this new bill, basically what it's doing is, depending on how you wanna describe it, it's either modifying, extending, replacing the tax cuts and Jobs Act. So one of the things to think about what that, so the Tax Cuts and Jobs Act was signed in 2017. When into effect in 2018 and it was set to expire, basically come to an end at the end of this year, at the end of 2025, in which case the current tax rates, the deductions, all these different provisions we've had in place for the last several years would've ended and we would've reverted back to what we had in 2016.
So that means higher tax rates we had in 2016. So I just, 22% tax bracket would've gone to the 25 the 12 would've gone to the 15, and so on and so forth. But this new law is going to preserve and expand, in many cases, some of these different tax benefits for retirees. And that's really what I wanna break down is how these are gonna impact you, what to be aware of.
Again, you may not need to know all this, but you need to know the, ask the right questions, and that's what we're hoping to accomplish today. Okay. The other thing to be aware of is a number of these provisions are temporary. So the Tax Goods and Jobs Act was set to completely expire at the end of this year.
There are provisions in the new tax code that have been called, we'll call it quote unquote, permanent for our purposes, but there are very, some very important provisions that are gonna be temporary that will expire at some point here in the next few years. We're gonna point those out as well and talk about, again, planning opportunities where you can take advantage of some of these different new benefits.
Wendy McConnell: So things are going to stay the same change and it's very confusing. So you're gonna help weed through it.
Eric Blake: We're hopefully,
Wendy McConnell: we're
Eric Blake: gonna clarify. We make it at least as clear as mud if anything else, right? So let's talk about the tax rates, right? So that's the first thing because I think it is important to understand this.
So there, there's. Basically seven tax rates when you're talking about filing single or filing jointly, there's the 10, the 12, the 22, the 24, the 32, the 35, and the highest tax bracket being 37. So those are what changed with the Tax Cuts and Jobs Act. And again, they were temporary. They were going to sunset at the end of this year.
They were gonna go become higher. So again, this new tax law basically locks those in. They are now quote unquote permanent. As permanent as a tax law can actually be, which means in the next four years they could change again. Okay? So it is important to be, when to say permanent is always in, quotes.
So you gotta be aware of that. But for now, these are have been made permanent. So these are gonna be in place for a while at least. What that does is it gives us at least some level of predictability, some stability that helps support better planning for retirement income. So when you're thinking about, Roth conversions and you're thinking about social security decisions, any income source that is connected to ordinary income tax rates, at least we know okay, for the next few years, quote unquote permanent.
These tax rates are gonna be in place for at least for a while. So at least we can look over the next handful of years and say, okay, here's what we're looking at. Here's the where we, our decision points within these different tax brackets. Does that make sense?
Wendy McConnell: Yeah.
Eric Blake: To some extent.
Wendy McConnell: Yeah. Okay.
Eric Blake: So tax, so the tax rates we've had for the LA since 2018 are staying the same.
There's not gonna be a change. They're not going higher. That's the bottom line. So
Wendy McConnell: that's not changing anytime soon.
Eric Blake: That is not changing anytime soon. They are, quote unquote, permanent.
Wendy McConnell: Permanent. Okay. Gotcha.
Eric Blake: The next one is gonna be the big one, right? So this is what's called, it's a $6,000 bonus deduction for individuals 65 and over, and that's gonna be a key 65 and over.
Now it is a $6,000 deduction per qualifying individual. So if we're talking about a married couple, that could be 12,000 total. If both are 65 and over.
Wendy McConnell: Okay,
Eric Blake: now this is actually gonna be retroactive to 2025. So if you're 20 by the end of this year, by December 31st, if you are going to be 65-year-old, 65 years old, you're gonna be eligible for this deduction.
Now, here's a couple of the other key things to be aware of. This is above the standard deduction, or if you happen to itemize, you're gonna get this deduction on top of all that. Okay. So that's an additional, truly an additional amount, a truly additional deduction above your itemized deductions or your standard deduction if, depending on which of those applied to you.
So if you had enough interest on your mortgage or you had property taxes charitable donations, different things like that, if all that added up to be more than the standard deductions so that you could itemize, this is gonna be above that. Okay. That's important to keep in mind. So this is a. This is basically, we'll go back and can try to keep the political aspects of this outta the out of the equation as best we can.
But this is basically the response to social security taxation. This was the basically a provision that was helped to create less taxation on social security. That's really what this came down to. Okay. And I'll touch on social security a little bit more in detail here in just a bit.
Wendy McConnell: Okay. So what is the standard deduction?
Eric Blake: So great question, and because the standard deduction has actually changed, it's actually gone up a little bit from what it was supposed to be prior to the new tax law. So for a married couple married filing jointly, the basic standard deduction is 31,500. Okay? If you're over 65, currently, if you're over 65 and you're taking the standard deduction, you get an additional $1,600 each, so potentially additional $3,200.
Again, that age 65 is critical. For a single filer, the standard deduction is 15,750.
Wendy McConnell: You're losing me here. Okay. You said that it was a 6,000 to dollars, $6,000 deduction. Forget about the
Eric Blake: 6,000 for
Wendy McConnell: just a month. Oh, okay. So let's do this. Alright,
Eric Blake: so that's a bonus deduction. Think of that as a, just a bonus deduction.
So we
Wendy McConnell: haven't even gotten to that yet.
Eric Blake: Not even gotten to that yet. So the standard deduction, so this is across the board. Anybody married, couple, doesn't matter how old you are, $31,500 if you're a married couple, filing jointly, right? It doesn't matter of age. Then we have the single standard deduction is 15,750.
Again, it doesn't matter how old you are, okay? Okay. Now for our audience, I want to point out that these 65 plus an additional standard deduction that you've been getting, this has been available prior to the new tax law. This is part of the Tax Cuts and Jobs Act Over 65, you get an additional $1,600 per individual, $3,200 for a couple.
Okay, that's a married, again married filing jointly for a single filer. In addition to the 15,750, you get an additional $2,000. Okay? Standard deduction. So again, these are all standard deduction items. Not getting, we'll get, we'll come back to the bonus deduction here in a minute. Those are standard.
That's the standard deduction. So if you don't have enough property taxes, you don't have enough state income taxes, you don't have enough interest on your mortgage. You're not, you don't have enough charitable donuts. So all those things added up potentially. If it's more than those numbers I just gave you, then you might be able to itemize your tax, your deductions.
Okay? Most of over 90% of Americans don't itemize because they don't have enough of all those items because of the standard deduction is so high. So now with the new tax law above those items, whether you itemize, you take the standard deduction. Now if you're 65 and older, you get this additional $6,000 bonus deduction.
Okay? So again, married couple. If both of the, in both couples are over 65 by December 31st, or 65 or older, by the end of December 31st, an additional 6,000 each $12,000 total.
Wendy McConnell: In addition to say the 31 500 and then the additional, I forget how much, 3,200
Eric Blake: for a couple, if both couple, if both individuals in the, if both couples are over 65, an additional standard deduction of $3,200 total for that couple.
Wendy McConnell: I was just under the impression that the standard deduction meant that you deduct that from the income. If I made $90,000, then I take the standard income and it's 61 or, whatever. And then that's the amount that I pay taxes on. That's not how it works.
Eric Blake: Okay. Yeah, no it is. I think I understand.
Maybe I misinterpreted your question.
Wendy McConnell: Okay.
Eric Blake: So basically when you think about the tax, think about what your tax return looks like. You've got gross income.
You've got what are called above the line deduction. So if you happen to be working, you might be able to make an IRA contribution as an example.
So if you make, let's use a hundred, let's use round numbers, a hundred thousand dollars. My, I made an IRA contribution of $8,000 because I'm over 50. That then gets subtracted from your gross incomes and that makes my adjusted gross income, my A GI 92,000. Then I subtract my deductions from that.
And again, we're just keeping this very basic. So I subtract whatever my deduction amount is. So if I'm taking the standard deduction and I'm a married couple. I'm, let's say I'm 60 years old, the standard deduction is 31,500. So I take my 92,000 after my IRA contribution, and then I subtract my standard deduction to get my taxable income.
Wendy McConnell: Got it. Yep. Absolutely. So this is, the extra $12,000, it's significant.
Eric Blake: It is significant. Exactly. So that's when we say, okay, let's add that to the formula and say, okay, if we take 90, a hundred thousand dollars, we make our IRA contribution. That gets us to 92. We subtract our standard deduction, our basic standard deduction at 31,500.
If I'm over 65, if I'm taking the standard deduction, I get the additional $3,200 as a standard deduction, and on top of that I get $6,000 per individual, or 12,000 total for a couple. So that could be a, again, as you said, it's a very significant impact there. For sure. And again, the big thing to keep in mind is this is not a permanent change, so it is retroactive to 2025.
But it's only gonna be in place until 20, the end of 2028. Okay. And then it just goes away. Then it just goes away. Okay. But this is why it presents such an important planning opportunity, especially for couples and for individuals across the board. It presents an opportunity to say, okay, if I'm gonna be in a lower, potentially a lower tax bracket, I'm gonna have lower taxable income.
Should I be thinking about some of these other planning strategies, tax planning strategies, whether that's again, Roth conversions, things along those lines. So those are come a couple of the key points. So again, must be 65 by December 31st, including 2025. If you're 65 by December 31st, 2025, you're gonna be eligible for this deduction.
Now here's the tricky part. It is phased out based on your adjusted gross income. Okay. Okay. So let's try to explain this as best we can. I thought we went through the
Wendy McConnell: tricky part, but Okay. He gets, so let's use
Eric Blake: our example that we came up with. So we said a hundred thousand dollars income make using an $8,000 IRA contribution.
'cause I'm still working. Maybe I've got some self-employment income, whatever it might be. The phase out range for this deduction for a single filer is between 75,000 and 175,000.
Wendy McConnell: Oh, okay. Gotcha.
Eric Blake: So I have to be less than 75,000 in income to qualify for the full deduction. Okay, for a married couple.
Married, finally jointly, the income range is 150,000 to 250,000, so I have to have adjusted gross income less than 150,000 to get that full deduction. For both spouses. For the 6,000 each? Yes. Okay. Yes. Gotcha. If you're above that bottom number, so for a single filer, if you're above 75,000, you can still get part of it, but it's gonna get start getting reduced.
So the $6,000 is gonna get reduced until you, if you're at 175,000 zero. So you lose the deduction altogether if you're total, if you're adjusted gross income, it's 175,000 or more. Okay? For a married couple, if you're more than 150, it's you're less than 150,000. You get the full deduction for both couples or for both spouses.
If you're above 150,000, it starts to get reduced. You still get a part of the reduction, but it's gonna start getting to reduced until you have 250,000, in which case it's eliminated altogether. Make sense. So use it back to our example. Let's say we got a hundred thousand dollars in income. We'll do a joint married, finally jointly first a hundred thousand dollars i $8,000 IRA contribution gets us to 92,000.
That means I'm below the one 50, right? So both spouses are eligible for the full $6,000 deduction, $12,000 total. Now let's talk about that single individual. 75,000 is that lower limit? So if I have $92,000 in adjusted gross income and that lower income is 75, I'm starting to lose part of that $6,000.
Wendy McConnell: Okay.
Eric Blake: Not all of it. Not all of it until I hit 175. So I'm still gonna get part of it. Most likely, the majority of it, but it is gonna be less than $6,000. So this, again, this is where the planning and doing tax projections really becomes critical when we're talking about the impact of these changes going forward for the next four years.
Wendy McConnell: I got it.
Eric Blake: Got it. Next. I'm ready. All right. And again, part of the, I wanted to point that out because our example actually ends up tying to something I wanna talk about here in a little bit, and that's the widow's penalty and how that potentially plays into this this equation as well. When you lose a spouse, what are some of the potential tax implications?
All right, so let's talk about social security now. So actually, one of the campaign promises that Trump had was ideally a zero tax on social security, but based on actually the way the laws were written, that wasn't really possible. So this is basically, the compromise was this additional $6,000 deduction for age 65 plus.
Okay? So the way the math actually worked and what you're seeing in a lot of in the news is that the law basically results in somewhere around 88 90% of beneficiaries of social security beneficiaries, recipients not paying tax on their social security. So somewhere between 88, 90% of Social Security recipients won't be paying tax on social security.
Okay? That's not everybody. So you wanna be aware of that. And that's one of the things that I think there was a, an email, basically a a press release that went out from the Social Security administration saying, Hey, we applaud the decision. The tax law is in place and X number of people won't be paying.
So tax on Social Security that got interpreted as social security's now tax free, which was not the case, right? But that did create a lot of confusion, a lot of frustration, of course, as well as you might expect. But it's, again, it's a key to remember that it is basically your, the taxation on social security hasn't really changed, and I'll refer our audience to our episode 54.
We actually talked about how social security gets taxed because the provisions, all that, the provisional income thresholds, all those things we talked about on episode and that episode have not changed. It's just that now we have this additional bonus deduction that might help. So just want to clear up the confusion on social Security specifically.
Around how that impacts. So again, less people will pay, will be paying tax on social security, but it's as a result of that bonus age 65 deduction, not because social security is now tax free.
Wendy McConnell: I understand.
Eric Blake: So then talking about I talked about just a second ago, the widow's penalty. So I think that's one of the things that you want to think about and it's not so much that.
That wi widows are gonna get been impacted more than anybody else necessarily. But if you think about just the example that we gave, so just stepping back and saying, okay what is the widow's penalty? Basically, it is a spouse passes away. The surviving spouse may lose a social security benefit, but especially if you have larger IRA balances larger.
If your total income may not change, even though you might lose one social security benefit, your income may not change a whole lot. But if your income doesn't change a whole lot and you now you're a single filer, you can see how you might end up in a higher tax bracket. So basically very similar income.
One less spouse could push you in a higher tax bracket very easily. Okay. And especially with, we're talking about this deduction that I talked about, you just that small difference in a 70 a $90,000 income between a married finally jointly being eligible, both the spouses being eligible for that deduction.
Versus a single filer at $90,000 losing part of that deduction. Okay. So that's really where, if you're looking over the next few years, you real, especially if you are married and anybody needs to be looking at this, but if you're married and you have concerns about, okay, what would happen if one of the spouses passes away?
What are things we could be doing proactively with these new LA tax laws to reduce the impact of that future widow penalty?
Wendy McConnell: Makes sense.
Eric Blake: So we start talking about things like, again, Roth conversions. If you're gonna be, have lower taxable income, should we be thinking about Roth conversions? How should it impact our social security decision?
So if you're talking about Social security recipients and 88 to 90% of them not paying tax on those social security as a result of the deduction you don't get the deduction until you're over 65. Does that change your decision around filing early? Should that, should you reconsider filing at 62 or 63 or 64?
Or should you think about how would I prioritize my income sources if I do retire? Which sources should I be taking from first? And does it make sense to now delay social security even further? Number one, to take advantage of this new tax benefit, but also to grow the survivor benefit for the surviving spouse.
So this may give you a little bit more flexibility to do some of this planning that really could be impactful down the road. Okay. Alright. Another pretty impactful provision. It's not gonna impact everybody, but we just talked about the difference between the standard deduction and the itemized deduction.
One of the thing that has also changed is what's called the salt cap, the state and local tax deduction amount, right? So for the last several years, part of the Tax Cuts and Jobs Act is that it was capped at $10,000. So thinking about your state income taxes, your property taxes, those types of things primarily.
If you had $15,000 between property taxes and state income taxes, if you had $15,000 that you paid in both of those categories, you could only deduct up to 10,000.
Wendy McConnell: Okay.
Eric Blake: That's changed. Now it's gonna be 40,000. So if you're in a state that has high property taxes, like we're here in Texas, or it has high state income taxes like in California or New York, or both, there's a few states out there that have high that both, this is going to be a pretty significant tax benefit here potentially.
Again, you have, it has to, you have to be itemizing your deduct deductions. But even just yesterday, we had a conversation with a client where we were reviewing, she had that $10,000 on her tax return. And so we said let's look at what your total property tax total stating income tax was. Because of assuming it's a higher than that, you're gonna actually get the benefit from that.
So if she continues itemizing, which she will. Probably it's, in her case it wasn't a whole lot, but it's about a thousand dollars extra in property taxes that she wasn't able to deduct last year. That this year she'll be able to
Wendy McConnell: Yeah, every little bit helps.
Eric Blake: Absolutely. So it makes a pretty significant difference because she gives a good amount to her church.
So she, she ties every every couple of weeks. So she talk about adding all this stuff up and say, okay, an extra thousand dollars add, if you're in the 24% tax bracket, that's, a couple hundred bucks, right? So again, it all adds up. So that's another, and again, that's also one that's going to be.
Temporary. So that applies from 2025 to 2029, and then it goes back to the $10,000 cap. So something to be aware of. So again, thinking proactively over these next few years, what can I do to have a pretty significant impact on my tax situation, really for the rest of my life.
Wendy McConnell: Yep. Do all that we can.
Eric Blake: Do all that we can.
So now I'm gonna touch on a couple few more planning topics and then we'll move into some strategies. Charitable giving. Again, a lot of people do give to charity. There's been some different changes there. Starting in 2026, if you don't itemize your taxes, meaning you didn't get a tax benefit for any charitable donations you might've been making, you now will get a thousand dollars deduction if for a single file and a $2,000 deduction for a joint file.
So this is very similar to what they did during the COVID time, where if you didn't itemize. They were encouraging people to still make charitable donations in those circumstances. So even if you get, take the standard deduction, you get an additional a thousand dollars for single filer and $2,000 for joint if you're giving enough of course, to qualify for that.
Now the other one for itemizes related to charitable giving, there's now what? A floor. Very similar to the medical deduction. So if you have you have to have above 0.5% of your a GI. So using the easy a hundred thousand dollars number we were using before, so you have to have at least $500 in charitable donations before you get to include that in your deductions.
So just a couple of small items there. The estate tax exemption, again, this really only applies to really high net worth couples and individuals. That is now the, where it was potentially gonna get cut in half. So this year it's around 14 million or so. It was potentially gonna get cut to about 7 million.
In 2026, that exemption amount has now been made permanent and will also continue to increase. So next year it's gonna be like $15 million and 30 million for a couple.
Wendy McConnell: Whew, thank goodness I was really worried about there, that there, out there,
Eric Blake: there are people out there who have to worry about that.
We've got a couple of people, couple clients we have to deal with on that, but very nice for the most part. Impacts very few people, but if you think it does, again, talk to your estate planning attorney, talk to your financial advisor, your tax advisor, all that fun stuff. Last one I'll touch on is the auto loan interest deduction.
So this is something very new where you, if you purchase a car made here in the United States you could potentially get a deduction, an additional tax deduction on the interest for that auto loan. So again, something to keep in mind if you happen to be in that in that particular situation. So those are really the key provisions from a tax planning standpoint.
So I wanna talk about some strategies that you may want to think about again over these next few years. While we've really got some opportunities here. I think one of the things I would stress is that, we talk about with our clients every year, the advantage we have over Uncle Sam is that we can look many years in advance.
We can look over the next five and 10 years and think about what are the strategies we're gonna be able to utilize versus Uncle Sam basically just looking one year at a time. So all local Sam cares about is 2025, and then next year, 2026, we wanna start looking at 20 25, 20 26, 20 27, and so on. And seeing, okay, what are these things we're gonna be able to implement over these next few years as we have these new tax planning opportunities in order to reduce our lifetime tax liability?
So that's really where these strategies are gonna come into place. So the first one is, again, if you have not yet filed for Social Security, you might wanna reevaluate your filing strategy. If you're gonna become eligible here in the next few years, think about whether I should delay a little bit longer.
Am I gonna be able to take advantage of that new tax deduction, the $6,000 age 65 deduction? How would that change my decision around social security? Whether I'm gonna file a 62 or 65 or try to delay farther till full retirement age if that happens to be 67 or even as long as 70. So Reeva reevaluate.
Your social security filing strategy is gonna be really important right now. Things like Roth conversions looking over the next few years. So thinking about Roth conversions. So think about what this is. Basically strategically, it's we're gonna decide, we're gonna choose to take money out of our pre-tax accounts and convert those to our tax free buckets, our Roth accounts, based on taking advantage of maybe being in a lower tax bracket.
Especially with, again this new standard, this new $6,000 bonus deduction,
Wendy McConnell: right?
Eric Blake: Again, you gotta be careful about it. As we talked about, there are income thresholds that if you push yourself too high, you might actually lose some of those deductions. So that's where those doing those tax projections really becomes important.
We talked about charitable giving earlier. Also thinking about ways that you can strategically give to charities that have a tax benefit. So there's something called a qualified charitable distribution where you can take required amounts. If you have to take required distributions from your retirement accounts, you can actually have those sent directly to a charity and avoid paying taxes on those dollars yourself.
So again, if you happen to find yourself in saying, Hey I'm a little bit above that threshold. For getting that $6,000 deduction. What if I say, Hey, maybe I'm gonna just send part of my required distribution to a charity and bring my income back down below that threshold.
Wendy McConnell: Oh yeah. And then it's good for both.
Yeah,
Eric Blake: exactly. And it's always wanted, you don't, we don't wanna give to charities simply for tax benefits, but if you get it
Wendy McConnell: right,
Eric Blake: we don't wanna lose it either. Again, it's always. You always talk about, we don't wanna give Uncle Sam a tip. We will pay our fair share. We just don't wanna give Uncle Sam a tip, right?
Wendy McConnell: Yeah,
Eric Blake: exactly. So again, definitely consider qualified charitable distributions bunching what we call tax deduction bunching. So paying, maybe paying your property tax now that we've got this higher salt cap. Does it make sense again, like it used to a few years ago of paying multiple years of property taxes in the same year.
So maybe I think about paying 2025 and 2026 in the same year. In order to take advantage of that higher itemized deduction amount. So think about some of these strategies to take advantage of these higher limits that are available now. Let's see, tax harvesting. So there's something called if you've ever heard of it, it's called tax loss harvesting.
So if I've got a loss in a particular investment that I have, I can sell that at a lot, that asset at a loss, and be able to take, reduce my taxable income in the current year by up to $3,000. If it's more than $3,000, I can carry it forward. So it's a loss carry forward. Now with some of these new changes, you might actually think about what are called tax gain harvesting, or maybe I've been sitting on a particular investment that has a pretty sizable gain.
But now if I got this 12,000 new $12,000 deduction, maybe that gives me a little bit more room to take advantage of that, to say, Hey, maybe I need to diversify my portfolio, but I've been hesitant to do it because I've got, it's gonna be, cause some tax implications. So evaluating some of those additional opportunities as well.
Again, being at a lower tax bracket, could this present some opportunities to diversify my portfolio a little bit better or use some of that money that has some gains in there?
Wendy McConnell: Yeah.
Eric Blake: Okay. And again, big one is just evaluating your income planning strategies through 2028. While we have these deductions available again, if we there are advantage over Uncle Sam, like I said, is to be able to look farther in advance and say the next three to five years, what are my opportunities?
Doing tax projection. Do a tax projection for this year, do it for the next year after that, and so on, and see where am I, where do I think I'm gonna be and where can I adjust income? Can I shift income to different years? All those types of strategies really could become impactful during this time period.
So planning is mo Importante very important. Yes. Yeah. And again, and that's really, again you really need to do, again, I would always encourage you to working with a financial advisor, work with your tax professional to look at what these impacts could be on you. Because again, you only get certain opportunities.
These types of opportunities only come around so often. So you gotta think about how you're gonna take advantage of those.
Wendy McConnell: Okay.
Eric Blake: Anything else you, anything else that you think I can clarify or any other questions that you have before we wrap things up?
Wendy McConnell: No, I, I please, I could ask questions for days, that, I think I got an overall understanding of how the benefits of this bill is.
It's going to impact.
Eric Blake: I think it ultimately it does, if you use the right strategy, it can have a positive impact. If you don't, if you kinda get caught off guard, it can have some significant negative impacts as well. Again, going back to planning. Yeah, absolutely. All right. Whitney, thank you so much for joining me in this conversation.
Thank you to our audience for tuning in. If you're not sure how this new tax law is going to affect your timer plan, this is the perfect time to take some action to again, talk to your tax advisor, talk to your financial advisor to get some clarity on your specific situation. If you don't have a financial advisor who includes tax planning as part of what they do for you, or if you're just looking for a second opinion, you can visit Get my Simply retirement roadmap.com to learn more about our process for helping you make an educated and informed decision about our firm.
That is it for today's episode. As a reminder for all the links and resources mentioned today, visit TheSimplyRetirementPodcast.com. Please don't forget to follow and share our show. Until next time, please remember, retirement is not the end of the road. It's the start of a new journey.
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