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Dan Slagle  00:00

Didn't this bill get passed on the Fourth of July? Yes, it was signed into law on the Fourth of July. I remember when it came out, because we, you know, with the newborn, we're not going out and seeing fireworks. I remember when it came out, it was like breaking news. And I looked over on the couch, and I was like, What are you doing? You're like, I am trying to digest this 890 page bill that was just passed, and that's how I knew you were different.

Natalie Slagle  00:31

Welcome to Money Dates, the podcast that makes money conversations with your partner feel a little less taboo. I'm Natalie Slagle, a certified financial planner, and I'm joined by my husband and business partner, Dan Slagle, also a Certified Financial Planner. Say Hi, Dan, hello. In each episode, we'll share honest stories and practical tips to help you and your partner feel more connected and confident on your financial journey. So grab your drink, get comfortable and join us for our money. Dates. Welcome back, Dan.

Dan Slagle  01:04

You know, I'm happy to be here. Natalie, happy Thursday. At the time of this recording, I just have to say, I really like your shirt blouse. What's the proper term for

Natalie Slagle  01:13

it? I love that. You don't know, and I don't want you to know it's like a crop top. Maybe it's a crop top, not really, no, it's just like a tank shirt thing. I was thinking, I'm like, is this plaid? Or I'm calling it picnic table.

Dan Slagle  01:30

Oh, yeah, when I look at that and you said, is it plaid? It's plaid. Then when you said, picnic table, it's 100% picnic table.

Natalie Slagle  01:39

Yes. Now it also is very I would say I like dressed up for the episode in the sense that, like, I wanted my shirt to match the topic, which is, Congress just passed, just passed this huge bill, and so I'm patriotic today.

Dan Slagle  01:59

You are. You're wearing red and white. Look at me. I'm wearing blue. We gosh, we didn't even know it, but we are. We are fully embracing. We're still in the month of July, right? So we're fully embracing the Fourth of July. We didn't dress up on the Fourth of July, so why not do it? A few weeks later, our

Natalie Slagle  02:19

daughter did. It. Was subtle, but it was dressing up. Okay, so today we're going to get a little bit more technical. And I know, I know I was like, I was having kind of some thoughts about this, but we actually had a couple clients ask, like, Hey, are you going to have a podcast on this huge legislation that just got passed. And I was like, no, no, that's not what this podcast is about. And I'm like, Okay, give the people what they want, and maybe, maybe by showing a little bit of our technical side, people who aren't our clients can get a glimpse of how we go about talking about these things. Because this bill, I mean, we've already sent a lot of communication to our clients and to our followers about, kind of breaking down all the different things. Literally, everyone in the US is impacted by this bill, everyone, there's no escaping it. Well, I'm sure there's ways. There's always ways, but it's a big deal, so we're going to break it down. We're, you know, I'm not going to get too technical, right? Because this is a podcast. If you want to get very, very technical, that's when you set up meetings with us. But I think it's important for us to just kind of break down some of the big things. We can't break all almost 900 pages worth of everything, but we're going to break down the things that we think our audience would be would benefit from having a conversation about so that's what we're talking about. Dan, let's

Dan Slagle  03:46

do it. Let's dive in. Going back to the Fourth of July. Didn't this bill get passed on the Fourth of July? Yes, it was signed into law on the Fourth of July. I remember when it came out, because we, you know, with the newborn, we're not going out and seeing fireworks. I remember when it came out, it came out, it was like breaking news. And I looked over on the couch, and I was like, What are you doing? You're like, I am trying to digest this 890 page bill that was just passed. And that's how I knew you were different. In a

Natalie Slagle  04:19

yes, this was like, after the working hours, our baby was in bed, and I was like, I want to read this, because everyone was trying to digest it. And I'm like, Well, this site is saying one thing, and this site is saying something different, and it's not so I'm just going to go to congress.gov, I don't remember what the website it's something

Dan Slagle  04:36

and mean, meanwhile, my mom and and your mom and I were sitting on the couch, like waiting to start squid game, and you were reading this bill, and we were just like, it's the last season of squid game. Let's go,

Natalie Slagle  04:53

well, it's not, it's the latest. It's not the last season. Well, I don't think it's been confirmed. Yeah, oh, well, then what was the last well, okay, no spoilers. Anyways, okay, let's dive in. So to me, one thing that's not talked about a lot that I think warrants a conversation, even though it will feel like and this is what I try to explain to clients, like nothing really is changing from what's happening, but marginal tax rates. So we have seven different brackets. I don't have them all in front of me, but we have seven different ones, the brackets that we're in today, and then the so there's like, the 10% the 12% blah, blah, blah, blah, blah, the brackets that we're in today, they're staying the same. And that is a huge impact. That actually has a lot of impact, too, on the revenue that the US federal government collects, because they were set to expire. The tax rates were set to expire, which means we were going to have higher tax brackets and the bands, so income from 100 to 200,000 again, I'm making that number up, but the bands were going to be less favorable from a how much tax am I paying perspective? So because of the tax cut and Jobs Act that Trump put into place when during his first term, all of these tax rates and brackets were set to expire. So that that was a plan. And Dan, you and I, for our clients, like we have been planning on that expiring. Therefore, starting in 2026 everyone was going to have to fork over more money, and that impacted our clients retirement projections, right? And so now we know, now we know that that it is not expiring. People are not paying more in taxes, at least from this specific thing. And so tax rates are going to stay the same. So I think people aren't talking about it, because it's like, well, what's there to talk about? It's like, you know, it's just like, staying the same, relatively speaking. But to me, I'm like, Well, if you're a planner, like we are, you were not expecting it to stay the same, and therefore, like that has an impact.

Dan Slagle  06:59

Yeah, absolutely. I think the technical term that we've seen, especially leading up to 2025, 2026 is the tax cut jobs act, sunsetting. Yes, isn't that, and you're using expired, expiration, expired, like, why don't? Why can't we just say end? Why does that do sunset? Because

Natalie Slagle  07:21

that's not fun. Dan, our world isn't the most exciting, so we have to use fun things like sunsets. But this bill is not called the sunrise of the continued. So

Dan Slagle  07:34

sunset is like, very American, like I pictured, like the Marlboro it's trouble. I have trouble saying that Marlboro Man like riding his horse off into the sunset, and you just get this beautiful picture of what's going on. Sorry. Anyways, go back to the

Natalie Slagle  07:48

bill, like tax brackets and tax rates. So to me, this, like a lot of people are saying, like, oh, there's this new bill is adding $5 trillion to the US debt situation, which this podcast is not going to dive into US debt, because I know a lot of people have questions and talks about Dan, you're like, No, we're not talking about that today. But this is a big reason why. This is a big reason why that debt is getting added to it's because the revenue that was before the new bill that we were like, we were going to get if they did let the tax cut and Jobs Act expire, you know, we were expecting to get we, as in the US government, they were expecting to get more revenue through ordinary income, through taxes this way. And now that it's been set to what it has been, it hasn't been reset to higher tax brackets, higher tax rates, that's a loss in revenue for the US government. So that is a huge reason why the 5 trillion added to the US status is in place. Is because these tax rates and brackets are going to continue at, I would say, historically lower rates. To me, this is kind of a wake up call of, Wow, we weren't this close. You know, a different administration could have let that expire, or sunset, or whatever we want to use. And so, you know, the hard thing with financial planning is we can't predict the future. But I'm starting to lean a little bit more towards Roth contributions, Roth conversions, because the tax rates we're in today are still historically low. At some point, my guess is that that's going to change. And so obviously, when you listen to this podcast, we are not giving any specific recommendations to anyone. We're just having conversation about it, but like, I'm looking at Roth contributions now, and I'm looking at people, you know, that 24% tax bracket, and I'm like, Hmm, maybe we should be a little bit more favorable towards those Roth contributions conversions, or whatever it may be. Another thoughts? Anything to add? Dan,

Dan Slagle  09:58

no, I. Think you you hit everything squarely. I mean, if we can get more money in to Ross now, most of our listeners are in their 30s and 40s, like it's way more advantageous going forward, wouldn't you say,

Natalie Slagle  10:13

right? And I mean, depending on the tax bracket that you're in today versus the tax bracket that you're in the future. And so it is likely people in their 30s and 40s, it is maybe more likely than not, by the time you take the money out, you're going to be in a higher tax bracket. And that's just from like a specific household. You'll probably be making more, right? Or your balances will be more but then also, now we can look at it through the lens of, well, what is Congress deciding today? What will they decide in the future? And to me, just looking at it from a congress, congressional perspective, I think at some point, again, I don't have a crystal ball, but I think at some point, like, taxes are going to need to be raised, or spending is going to be cut. It's it's no different than what we do with our with our clients, like we got to balance the budget here, folks, the US government has got to balance the budget. We either got to make more money through taxes or we got to spend less on all the expenditures.

Dan Slagle  11:09

I was just going to say the same thing. I think we should move on from marginal tax rates, and we should talk about some deductions now.

Natalie Slagle  11:16

Yes, yes. So I'm going to hit on this real quick, and I'm going to throw your your dad under the bus. Dan,

Dan Slagle  11:23

okay, mighty folks, okay, I think your dad, I don't think he listens. Actually, go ahead. Well, this

Natalie Slagle  11:28

will be a test. So dance, Dad, if you're listening, you have to tell us you heard this, because I'm throwing you under the bus right now. When this bill came out, we had a bunch of family in town. We already know we my mom was in town, your dad was in town, and your dad said to me, they're not going to tax Social Security anymore. And I was like, Oh, really, I haven't come across that yet. And your dad was wrong. This is me throwing him under the bus. Who were wrong, but he was wrong in the sense that he was misguided. It was not his fault. So there was this big post from Social Security, and the verbiage of it was extremely misleading, in which people thought that it they were interpreting it as, oh, there's not gonna be taxes on Social Security. That's not what's happening. The deductions for seniors have gone up. There's a difference here. So there's a lot of deductions now for seniors, man, people 65 plus, as long as your income is within thresholds, you can get up. A married couple can get up to $46,700 in deductions. That's a lot.

Dan Slagle  12:36

Wow. And I thought like the senior citizen discount at McDonald's, or like your dad getting the national park pass. Was it was a deal that sounds amazing, up to 46,000

Natalie Slagle  12:48

Yes. So this for a married couple filing jointly. So you have the deduction that you and I would qualify for, just the standard deduction of $31,500 then for anyone 65 plus blind or disabled, you get an additional $1,600 per person, right? So times that by two. And then the new and temporary deduction is $6,000 per person. So that's an extra 12 grand. So altogether, that adds up to 46,700, now, because that's such a big deduction, and a lot of people, a lot of seniors, who are taking Social Security, their total income on their tax return could be less than the 46,700 total in Social Security payments. If that's their only income, maybe it's 35,000 so because of the deductions, all of your income, which could only be Social Security, isn't taxable. But it's not that social security isn't taxable, it's just the deductions are higher. So that's the confusion. Talk to us if, if you want to learn more about it. But I think we have clients who this applies to our clients, parents, this applies to so I just wanted to clear the air on that. And

Dan Slagle  14:03

thank you. I think you make a good point as well. It's just like sometimes the things we hear from our parents, or the advice that we get, or the guidance, like we do need to do a little digging into it right. Sometimes we need to take it with a grain of salt. Sometimes it can be correct, other times it may be misleading. And I think we've all experienced that,

Natalie Slagle  14:23

yes, absolutely expect, like, my mom was telling me about this article her friend read, and I don't even it also had to do with social security, but it was so wrong. It's like, oh man, our like, like, the boomer generation and up. Can I just feel for them, because there's a lot of misguidance up there. Okay, that's just kind of the standard deduction, and then that's the deductions for seniors. A big change in deductions happening is the increase in the state and local tax did. Deduction, or otherwise known as the salt deduction. My sister always used to say, I say salt funny. Do I say salt? Funny?

Speaker 1  15:07

Say it again one more time. Salt, salt, no, salt. I don't think so. She

Natalie Slagle  15:12

used to say it like, I would say salt. She kept, like, making fun of me. I remember this conversation to my sister. If you remember this, she's gonna be like, yep, yep. You used to say it funny. Maybe I don't say it funny anymore. Okay. Anyways, so the state and local tax deduction, this is huge. I got to do this because Trump signed this bill, right? I got to make a Trump reference. So this is increasing from $10,000 to $40,000 This is really huge for those folks living in high state, high income state tax. What am I trying to say, Dan, the states with high income taxes? Yes, yes, that's what I'm trying to say. You're trying to say, Let's list those. Minnesota, Oregon, New York, California, Massachusetts, New Jersey. I think there's a few others, but those are kind of like the top states that tend to have higher state income taxes. So if you live in one of those states, this change specifically could take you from taking the standard deduction to itemizing deductions, and that's important to realize, because now you have to start paying attention to those itemized deductions again, right? And so,

Dan Slagle  16:26

which, like, a lot of people don't, right, like, just to call that out, especially like our generation, it's never, it hasn't really been a thing. And, like, I think you should go through some of those deductions. Like, maybe people should start keeping track of in case they do, it's more advantageous to itemize their deductions

Natalie Slagle  16:46

exactly, and so you're going to have to start paying attention. I mean, a lot of these things will come on forms, but your property taxes, you know, your w2 will show your state and local income taxes, your charitable deductions. This is the big one, because so many of our clients, they'll just like a friend, is raising money for some sort of organization. Great. I'll send you 100 bucks to support that. Those like one off contributions. You should start paying attention to that, because it's likely the demographic that we're talking to here. You're going to switch to itemizing deductions, and charitable deductions is going to be a part of this. Now there's change to the charitable deduction. We'll talk about that in a second. But the other change that is happening is the private mortgage insurance. So PMI private mortgage insurance, you pay that if your loan to value ratio is above 80% on your home. So let's say you bought your home and you only put 10% down. The bank is going to charge you, charge you an extra premium because you don't have 80% down, right? That premium is now deductible on your itemized deductions. So that that's what PMI is. The other thing that kind of has to do with this, that this is just kind of a comment, is we have kept the ability to deduct the first 750,000 of mortgage. They say indebtedness, but it's really just in normal terms, like the first 750,000 of mortgage, like, of your loan value, you can deduct that interest. Okay, so the reason why I want to flag this is this was put into place, like kind of during covid times this number, and what's happened since then is interest rates have skyrocketed. We've seen prices of homes increase, and so this is kind of one of those things where we miss the opportunity to kind of elevate this, to kind of match it to the environment we're in today, because, like a lot of our clients, are buying homes that are worth $800,000 or more having significant interest payments, and that now isn't really matching with the environment that we're in today. So that was kind of like, Oh, I wish they would have taken a second to increase that, but maybe the next revamp. Okay, so we kind of went through the kind of housing, state and local income taxes, any questions or thoughts, Dan, that you want to add? Well, you know, we talked a lot about salt and other other deduction. Do I say salt? Funny, no, I don't think so. Okay, all right, just checking, but there's been changes, like in the amounts for itemized deductions and standard deductions as well. Is that correct? Yes, yes, exactly. So that has gone up and the like for a married couple filing jointly, that is up to $31,500 and I believe I don't have this in my notes in front of me, I believe that that is indexed for inflation, which is nice, because some of these things like. The child tax credit that has also increased this year, and that's going to be indexed for inflation. It used to not be. It's been like $2,000 for a really long time. And so some of these things, it's like it wasn't indexed for inflation. Now it is. That's really great. And so having, you know, whatever we can to have it indexed for inflation, like yes, the answer is always yes to that. Okay, a couple other call outs, just with the itemized deductions. I brought this up for a split second, but there's a floor now on your charitable contribution. So again, the reason why we need to capture every single dollar, or have kind of proof and deduct every single charitable contribution is there's now a floor, so point 5% so half a percent floor, it's, sorry, it's a half a percent of your AGI. So to give an example, your AGI is 350,000 your floor, half a percent of that would be $1,750 if you make a cash donation of $2,000 you can now only deduct the difference. So you did a total of 2000 but there's this floor of 1750 so now you can only deduct $250 of that. So there's some planning opportunities here on like how to how to take advantage of this. This does not take effect until 2026 so if you've been kind of feeling like I want to give a lot of money away, 2025 could be the year to do it, because there's no floor. So you'll be able to deduct if you're able to itemize, so that there's kind of some planning opportunities there. The last thing on the itemized deductions, and then I need to take a breather, because, wow, it takes a lot to get through this. It's a lot is there's now a limit, so itemized deductions are reduced by 237 which I'll explain that in a second, but that's just how the rule is for taxpayers in the 37% tax bracket. So if you're married and you make over, essentially, over $751,000 your itemized deductions now have a reduction and a limit. There was no limit previously, so that this one's kind of a bummer, but that's how that is. Okay. What about if you're not itemizing? What? What happens? Then, ready? Dan,

Dan Slagle  22:20

tell us. Tell us, Yeah, seriously, you are just spitting fire right now. Just keep going.

Natalie Slagle  22:26

Okay, so if you're not itemizing, here are some things to be deductions that will be applicable to your situation. So charitable deductions, when you are not itemizing, you could actually still take a deduction for so let's say Dan, you and I decide or not decide it is not advantageous for us to take the itemized deduction. Well, if we still donate to charity, we can deduct up to $2,000 for a married couple, $1,000 for single that's pretty cool to me. This is a huge win for charities, because it just, I think people are more incentivized if you can truly say, Hey, you're going to get a deduction for this. So this is not subject to any floor. So if you're itemizing your deductions, you're subject to that half percent floor. If you're not itemizing deductions, there's no floor. It's just like, oh, I took the standard, and I can do this. So again, planning opportunities here, because maybe some years it makes sense to take the standard do more of your charitable deductions that. Like, I don't know, you know, my brain, I'm just like, like, all these cool things. And there's also a lot of different rules around what kind of charities you donate for, what kind of assets you're donating. Is it cash? Is it stock? Is it property? Things like that, not going to get into it. But like, a really cool like, to me, this is a huge win for the nonprofits out there, for the charities that more people are going to legitimately be able to deduct their contribution. So I'm, I'm a huge fan of

Dan Slagle  24:06

that. That's amazing. Yeah, very cool. I honestly like, I feel like I'm back in my tax class that I took in college right now. I feel like we should talk about some other things that that are maybe a little more exciting than deductions. What do you think about that? Sure I actually hold on, I take that back. There's a new opportunity for deductions for new car loan interest, which I think can apply to a lot of listeners. So I believe the rule now is up to $10,000 of interest can be deducted on new cars that are assembled in the United States, right? Yes, yep, so makes battles assembled in the US. Okay? And we'll, we'll link to our blog that we wrote, and we should have said this earlier on, we'll link to a blog that we. Wrote that. Natalie wrote, I shouldn't take credit for that, that you wrote in on our website, most recently, about all of these changes. So we'll, we'll link to that within that blog, we have a list of different makes and models assembled in the US. So the deduction applies to interest on new loans taken after December 31 of 2024 Yes, and I do believe there are certain phase outs of the deduction based on your modified adjusted gross income. We don't have to get into the details, but I think that's something that people should be aware of, especially if they're thinking about purchasing a new vehicle going forward.

Natalie Slagle  25:39

And what's fun, I think like a fun? Well, my definition of fun is different for other for others, I get that, but if you have an existing loan, so Dan, I was looking into this for us, because we have a loan on our car, and if you have an existing loan, and it's refinanced in 2025 or later, the interest on the refinance loan will qualify, as long as you're not increasing the balance of the loan. So that's awesome. I'm like, Oh, my goodness, we could benefit from this. But of course, you need to check if your vehicle qualifies. Now I remember when we purchased Toyota rav4 they were talking about how it just got off the boat from Japan. So I'm like, Oh, I'm still gonna look into this. If it just got off the boat from Japan, I don't know. So in our blog, and we can link to this in the show notes too, you can check if your VIN qualifies. And did you know this Stan, that the first letter or the first number of your VIN can tell you where it was assembled.

Dan Slagle  26:41

I didn't know that that's kind of like the dollar bill, right? Like, isn't that a thing like it? Like the numbers on it actually match up to the Federal Reserve that printed the money. I did not know that that is a fact. I might be making that up, but I feel like I saw that on, like, what, like a show back in the day, like Mythbusters. I don't know what myth they would be busting, but something like that.

Natalie Slagle  27:01

So, Dan, what letter Do you think Arvin starts with? Oh, this Oh pop quiz? Well, it's not a quiz because you never looked

Dan Slagle  27:12

I don't want to give our Vin away to everyone, because I feel like I'm just going to rattle off letters that I feel like I remember, I'm going to guess V

Natalie Slagle  27:20

No, it is my T, no, okay, think about this. Let me m, let me give you stop guessing. J, J, J for, what's J stand for? Where's our car from? Japan? Yes. Oh, so Toyota.

Dan Slagle  27:40

Sorry. I thought you were like, trying to link Jay to our daughter, who's also named Jay. I thought that that's what was going on. I missed the point where you had said the first letter might indicate where it's actually from, or

Natalie Slagle  27:52

Yes. So okay, if you have a Toyota, it is very likely that your VIN starts with A J if it was interesting in Japan. So ours was assembled in Japan.

Dan Slagle  28:02

I want to check everyone's been out now, like, that's very interesting to me.

Natalie Slagle  28:07

Yeah, no, go to the website. It's cool. It like, tells you all these things about, like, the first letter or number will tell you where these things are. Anyways, very cool. Okay, so there's the qualified tips, deduction, the overtime pay deduction, the overtime pay is is important for the medical community, because those are the people in our world, our client base that does tend to have overtime, or people who work in the medical profession. So pay attention to that. There's a phase out for it, for 300,000 for married filing jointly. So some of our clients, like they do have overtime, but because of their income, they they'll be above this threshold. So there's cool,

Dan Slagle  28:44

very cool. But we were done with deductions. But, I mean, these are really important. I wanted to be done with deductions, like five minutes ago. Let's, let's talk about some tax credits like, those are more exciting, aren't

Natalie Slagle  28:55

they? Let's do it. Do you want me to go? Or do you want to start?

Dan Slagle  28:59

I'll just go. I think the most notable change to a tax credit that applies to us and our likely our listeners, is the increase to the child tax credit. Would you agree? Heck yes, let's Yeah. So we go from a whopping we go from 2000 to a whopping $2,200 but like you said, adjusted for inflation,

Natalie Slagle  29:20

adjusted for inflation. And if you don't know, I'm sure a lot of people, because they're not in this world, they might not fully embrace the difference between a deduction and a credit. And a credit is so much more advantageous, because it literally like dollar for dollar makes your situation better. A deduction just deducts your taxable income, and so a $200 credit is so much better than a $200 deduction. So even though it's only up $200 it is on the credit side that is really nice. So yay. Increasing

Dan Slagle  29:57

other news for credits, unfortunately, things like. Zack or I should be unbiased when I say this. The EV tax credit is set to expire, not sunset, expire after September 30 of this year, and then the residential clean energy credit will also expire with respect to no expenses or expenditures made after the end of this year. So I think those are the big credits that we hit on Correct? Am I missing? Yes, there's a lot.

Natalie Slagle  30:26

Well, this is really important for those who are in the private marketplace for health insurance. Premium tax credits for health insurance under the ACA Affordable Care Act were not extended past December, 31 2025 therefore, without further action from Congress, if you're getting some sort of credit for your health insurance premium, that is set to go away, and that's that is going to have a significant impact on our self employed folks. So continue to pay attention to that?

Dan Slagle  31:01

Yeah, let's get into the last two topics that we have. And I think this, this podcast might run a little longer than normal, just because there was 890 some pages of this bill that we have to consolidate into one episode. The last two things, edgy accounts for children, new changes to the 529 plan. Do you want to talk about those? Yes,

Natalie Slagle  31:22

so they've kind of expanded the definition on what you can use a 529, plan for. Like, the big thing is cost for tutoring outside of the home. And it's funny because they they specifically say it can't be a family member. And I'm like, but what happens if your family member is a professional tutor, or just very smart my tutor that I had, I'm married to. So you know what? I didn't you were, you were my tutor. Yeah, you were my tutor for the series seven exam. I was, that's right, so I could not have, if this was, if that was happening today, I could not pay you from my pretend 529 plan. That's okay. And then the other thing is educational therapy costs for students with disabilities, including occupational, behavioral, physical and speech language therapies. That is an approved 529 plan, distribution a qualifying expense. So that's exciting.

Dan Slagle  32:19

I think the the other really exciting change, I believe, is, like the new category of qualified expenses for, like, more post secondary like credentials. So like fees for continuing education necessary to maintain a credential, exam, costs for a credential So, like Natalie and I are certified financial planners, CFPs, like we have to pay, see dues, continuing education, pay costs. There are fees associated with it. If we had 529, we could technically use those dollars for things like what I just explained, is that correct?

Natalie Slagle  33:01

Yes, well, that I saw something that there's, there's still some clarification with it, but I think that's gonna end up being the case, which then it's like, well, are all these employers gonna, like, be opening 529 for their employees? I don't know. I don't know what I mean, like, I don't know what that means, but it just feels like the 529 plan is trying to encompass a lot all things that have to do with increasing your education or your ongoing education, things like that. The other big, big call out here, which this impacts quite a few of our clients, is that the K through 12 expenses because some of our clients, they're not only saving for college, but they're saving for K through 12, if they want to send their kid to a private school, something like that. It used to be you could only take out $10,000 per year. That has not inflated. I do not understand why, but they just doubled it. So now, the beginning of 2026 you can take out $20,000 per year for K through 12 expenses. So this is really, really impactful for those who have super funded their 529 plans and are sending their kids to private college. So that's pretty neat.

Dan Slagle  34:10

Interesting, very cool, very cool. Well, lastly, let's round out and talk about the infamous Trump account and the impact that has on families.

Natalie Slagle  34:19

Yes, so the Trump account is interesting. I have many, many thoughts on this. It's a little bit more complex than I can probably even get into in this podcast. But essentially, there's different rules with the Trump account, depending on if your child is is in the year before they turn 18, or they're in the year in which they turn 18. Where do I even start with this account? Well,

Dan Slagle  34:52

let's just, let's talk about, like, I'll try to hit on the basics, and then you can just like, like, hit the buzzer, if I'm just, like, saying things wrong or, yeah. Yeah, you give me

Natalie Slagle  35:00

this, like, taboo, you know, where I'm like, behind your ear with a little like,

Dan Slagle  35:04

Oh, so much pressure. So much pressure. Right now. Okay, so the the Trump account, from my understanding, is going to be an account that you can open up for us. Citizen born in, I believe, 2025 so this year, 2026 or 2027 as of, right now. Yeah, it's essentially an account that the US government will credit $1,000 into, right on behalf of that that child or that citizen that

Natalie Slagle  35:33

was born, yep, in those three years, 2025, six or seven,

Dan Slagle  35:36

okay, in those three years. So we missed the cut off personally by like, six months, it sounds like, dang, okay, well, you can so with the account and again, just because this bill is just passed at the beginning of this month, there's a lot more things that need to be worked out that we're trying to stay on top of. But essentially, my understanding is up to $5,000 in contributions would be allowed, but those contributions are non deductible,

Natalie Slagle  36:03

exactly, which is similar to a 529 plan. You put money into a 529 plan and you don't get any deduction for it. So it's the same with this account.

Dan Slagle  36:12

Okay, got it? Okay, so we'll hit on distributions in the future, because knowing that the contributions are non deductible. We needed to understand what's the taxation potentially at the end, right, when you withdraw money? Exactly. Yeah. Okay, so we'll table that for right now. There can be additional contributions from other entities, like governments, charities, employers, that is excluded from income. Yes, I say it as a question, but like, I'm quite like, you're the expert in the podcast room right now, and I'm explaining what I know,

Natalie Slagle  36:46

what I think, yes, so let's say you and I open a Trump account for our child. We can put in $5,000 I'm a little like, I haven't seen any specifics. If it's like, if you're a single parent versus married filing joint but let's just say the total amount is 5000 I think that's what it is. So $5,000 so in addition, you could have your employer contribute to the account as well. And I don't have in my notes how much they can contribute as

Dan Slagle  37:17

well. Got it very cool. And then the money that goes into the account can be invested the investments. I believe there are some parameters in place where you have to invest in, like a US equity fund. The fund itself has to be low cost. I believe last thing I read has to be around, like point 1% from a cost standpoint, which is effectively pretty low. So the money in the account, you can invest it and it can grow. Prior to 18, I don't believe distributions are allowed.

Natalie Slagle  37:46

Correct? No. Distributions allowed. Okay, got

Dan Slagle  37:51

it. Let's talk about rules after the beneficiary turns 18. Do you want to hit on those?

Natalie Slagle  37:57

Yes. So once the beneficiary turns 18, distributions are allowed, but they're subject to early withdrawal penalties before 59 and a half. So essentially, when the child turns 18, it kind of starts to act like an IRA, yeah. And so what's interesting about this, and it's the same with like our our IRAs is that you are subject to early withdrawal penalties if you take a distribution before 59 and a half. But there are exceptions, right? So education, first time home purchase, so all of a sudden this account, it's kind of like a retirement account, but you can still use it for education expenses or for that first time, home purchase and the withdrawal. So the direct contributions will be tax free, right? Because we already paid taxes on our, you know, $5,000 per year contribution. So we already paid taxes on it. So the direct contributions are tax free, but growth so, you know, we put in $5,000 it turned into 7000 if we took it all out, the $5,000 would be tax free, the $2,000 would be taxable, and then that taxable, it would be where, like, the early withdrawal penalties apply, and things like that. So, like, a big question mark that people have, are we going to be able to roll these into Roth IRAs, like, could we roll the entire balance and pay taxes on the growth? And if the child's 18, maybe the child is paying taxes, you know, because they'd be at such a low tax rate. This account just was just created. So some of these rules actually haven't even been ironed out yet,

Dan Slagle  39:49

yeah, like, it from like, a the standpoint of, like, the earnings or growth being taxable. Like, I think there's still clarity that needs to happen with like, I mean, obviously they just started. Right? So we're talking about potentially, not until if a kid's born in 2025, like 75 years from now, that was easy math in the year 3000 like there, right? No, 2100 Wow. That's important. It's gonna

Natalie Slagle  40:16

be the year 3000 to leave you when you set it. And I was like, I've never thought about the year 3000 but no,

Dan Slagle  40:26

either I was the year 3000 I feel like I got that from my scene, a Hitchhiker's Guide to the Galaxy that was on my mantle the other day. Okay, anyways, anyway, in the in the year 2100 to be clear, like as of right now, the required minimum distribution age is around 75 like, there are some rules in place where it could be it ranges. But like 75 going forward, that could change, obviously, 75 years from now, whatever the rule may be, but you're going to be forced to take money out right in the form of a required minimum distribution, potentially, and if you were to pass away the beneficiary of that money, like, there's a 10 year rule in place where the account has to be depleted, right? So I think, like, those items still need to be worked out on this Trump account. Obviously, the incentive is there to receive the $1,000 to make contributions into this type of account. But there's just so much gray area right now that we just don't know if this is ultimately a good avenue to

Natalie Slagle  41:32

potentially explore, right? And it's like I did hear that most custodians, you're going to be able to open it so we custody our clients assets at Schwab. So we're going to be able to open these Trump accounts at Schwab. I think it'll be weird, because usually it's like, Natalie Slagle IRA, but it'll be Natalie Slagle Trump account. Like, oh, that's, that's just weird,

Dan Slagle  41:52

um, forcing everyone's last name to become Trump,

Natalie Slagle  41:56

yeah. Like, I know I have a lot of feelings about that, but okay, in general, like, I cannot give advice. Remember, this is not advice to you listeners. This is just conversation. So I'm gonna get, like, if I gave advice to myself right now, and I was like, okay, literally, I am giving advice to myself right now, so I want to save for our daughter's education. We are already doing that. We already have a 529 plan. We have a whole episode about saving for kids. You should listen to it if you haven't already. And with this Trump account, am I going to transition my savings efforts for my daughter's education to the Trump account? I will not be doing that because I can contribute more to the 529 plan, I get better tax incentive by doing to the 529 plan, and I can roll over unused balance up to 35,000 to a Roth IRA. So to me for Dan and I for the purposes of education savings, I really still believe that we should be doing the 529 plan. This is advice, and this is guidance in my head to Natalie and Dan, because I know our whole financial situation. This is not advice to you, listener, unless you're a client, then you should just schedule a meeting with us and we'll talk about your thing. So we are disappointed in Congress that they made this new account with these funky rules when they could have made the accounts we already have better. So that's just my opinion on the matter. When I think about this whole bill in particular, it is very political. So a lot of these things have expirations on the last year that Trump is in office, so on his campaign trail, he made these promises, like no tax on tips, no tax on overtime, those things. And when he's no longer in office, and I don't like things like that, because to me, it's like I'm putting things in the tax plan that better my political career, rather than what is best for Americans, just Americans in general, which I know it's really hard to do the best for everyone who has very different situations. But you know, there's some things I like about this bill, and some things that I think Congress could have done us all a lot better by that's my opinion. If you were looking for it,

Dan Slagle  44:23

your opinion matters. Natalie, for sure. Well, I think we this is a lot to digest. I think the there's a lot to still digest as more comes out, more news, more information comes out. So we'll do our best to keep you as as listeners, updated on the new bill again, be sure to check out our blog in the show notes that very nicely recaps everything we just talked about. So yes, if it was a lot for you to digest through listening or maybe watching, put some text behind it. Check out the show notes.

Natalie Slagle  44:55

Awesome. All right, thanks, Dan for having this conversation with me. You.

Dan Slagle  45:00

Thanks, bye, bye, bye.

Dan Slagle  45:05

Hey. If you've enjoyed this episode and are looking for personalized financial guidance, schedule a free complimentary consultation using the link in the description below, Natalie and Dan Slagle are the founding partners of Fyooz Financial Planning, a registered investment advisor. The information provided in this podcast is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any securities. Investing involves risk, including the potential loss of principal. Advisory services are offered to clients or prospective clients where Fyooz Financial Planning and its representatives are properly licensed or exempt from licensure. For more information, including our disclosures, please visit our website@www.fusefinancial.com applause.

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