Season 3 Kickoff: New Studio, New Energy, Big Beautiful Conversations | Millennial Money Matters

Description

We’re back—and bigger than ever! Season 3 launches with a fresh perspective, a brand-new studio, and a renewed commitment to bringing you the conversations that matter most.

In this premiere episode, we dive into the “Big Beautiful Bill.” What is it? Why should you care? And most importantly—what does it mean for you, your wallet, and your future? We break it down in real talk, cutting through the noise so you know exactly what’s at stake.

New season. New us. Let’s get into it.

Reach out to Kelly Turner at kturner@totalmortgage.com and Derek Mazzarella at dmazzarella@mygfpartner.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
All right, welcome to the first episode of season three of Millennial Money Matters with Kelly Turner and Derek Mazzarella. And we are in a new podcast studio.
Speaker #1
New studio. Look at us moving on up in the world.
Speaker #0
We are fancy. We are not in a dark blue room anymore. Yeah,
Speaker #1
we have a couch and a nice chair and some accoutrement here. Right.
Speaker #0
So new year, new us.
Speaker #1
New us.
Speaker #0
Yeah.
Speaker #1
New bills to talk about.
Speaker #0
New bills. So we are coming in hot. today. We were thinking of what to talk about and Derek told me that we had to talk about this.
Speaker #1
Well, it's so big.
Speaker #0
And beautiful. Beautiful. So what are we talking about today, Derek?
Speaker #1
We're talking about the one big, beautiful bill.
Speaker #0
The OBB, you know me.
Speaker #1
Yep, yep. This thousand page tax bill.
Speaker #0
Yeah. I had to do a lot of Googling.
Speaker #1
Well, luckily for you, I've been in the basement eating coffee grounds and chugging Mountain Dew trying to get ready for this. So I am ready to roll.
Speaker #0
Okay, I'm glad that one of us did. I wanted to chat GPT and asked it a lot of questions, and it was confused as well.
Speaker #1
All right, why don't we start with, what were your questions? Where do you think we should start?
Speaker #0
Okay, why did we pass the big beautiful bill? And I know this could be like a six-hour long episode.
Speaker #1
Yeah, we're going to keep it a half an hour if we can. So, well, the real big reason was there is the Tax Cuts and Jobs Act during Trump's first presidency, which was set to expire. right so we had we kind of had a ticking clock on a lot of these things and if it didn't expire um a couple of big provisions in there like the standard deduction which everyone has been enjoying where you just get deduct a good amount of money from your taxes without having to itemize anything it's very clean and easy that that would uh be cut in half um the tax brackets would kind of go reset so basically the higher end of the tax bracket would go up to 37.5 again or 39 um and a few other things provisions like that would would fall away so they kind of had this clock where like It's not a democratic problem anymore. It's actually my problem again. So I've got to take care of this bill.
Speaker #0
Yeah,
Speaker #1
what are we going to do here? Yeah. So that was the kind of the genesis of the bill. And, you know, every president usually has their kind of big mandate, like big thing they want to get accomplished. You know, some people it's been healthcare, some people it's been taxes.
Speaker #0
This one is all encompassing of everything.
Speaker #1
Yeah. Well, there's healthcare in here and there's taxes in here.
Speaker #0
There's like a little bit of it. That was so as I was doing my research, I was not eating coffee grounds and drinking Mountain Dew. I was sitting at my desk drinking my Starbies. It was interesting because you can see all my notes here, guys. There's a lot of notes. It does encompass a lot of stuff.
Speaker #1
Yeah. Farming stuff's in there. Taxes are in there.
Speaker #0
Yeah. Now, what it doesn't really encompass is me in the housing industry. There's not a lot for us in it. So we didn't get housing despite the challenges in the housing market. Didn't really get a lot of relief through this bill. That's not where this bill was aimed. No,
Speaker #1
not really. It was mainly at, I'd say the big agenda item here was let's keep the original tax cuts status quo. I think that was kind of like the big overarching, what are we really doing with the bill? We want to just keep that as is.
Speaker #0
So taxes should look more similar to how they have. It's not like a big, you're not really helping, you're not really changing things. It's just keeping them the same.
Speaker #1
For the most part, yeah. If you have one big takeaway, it's that for most things... the taxes are just going to be a continuation of the tax cuts.
Speaker #0
Right. Well, that doesn't sound so bad.
Speaker #1
No, no, it's not bad at all.
Speaker #0
That makes me...
Speaker #1
No, I mean, your taxes aren't going up, which is nice.
Speaker #0
Take that. I'll take that. All right. So we have a continuation of some stuff that had happened a few years ago, but then there's also some additions to this. There's some new things.
Speaker #1
Yeah. Some of the things that are staying the same, basically. Let's just quickly go through that. The tax brackets, those are going to be the same. Those aren't changing. the standard deduction is actually going to go up a little bit.
Speaker #0
So that's better.
Speaker #1
That's better. Yep. So you have more money. Basically, what a deduction is, is the higher the deduction, the more money you can deduct off your taxes. And a deduction doesn't mean, hey, if I deduct $5,000, my income is down $5,000. Well, no, actually, it doesn't mean you're saving $5,000 with taxes. It means your income goes down by $5,000. So if you make $100,000, your deduction is $5,000. The government looks like you make $95,000. So I hope that was clear. That was clear. even though it took a while to get there.
Speaker #0
You know, we're out of practice.
Speaker #1
I know,
Speaker #0
yeah. We're out of practice. We haven't recorded in, I don't know, two months. And it's the summer, guys. You're going to be listening to this in September, but we are recording this in August.
Speaker #1
I've got vacation this week coming up. Yeah,
Speaker #0
it's like vacay time. Yep.
Speaker #1
So yeah, that's kind of the main real change. And I think it's probably important to get into... All right, what's the... tax brackets versus effective tax rate, because that's kind of important to go through a little bit here.
Speaker #0
Can we just have a quick point of clarification? So people always talk about tax brackets. And I think even as a tax paying adult, like I know that like richer people are in higher tax brackets. But like, could you just give me like a quick synopsis on like, what does that mean?
Speaker #1
Yeah, so every dollar you make of income, you're actually not taxed to the same percentage. So it's a tiered system. So your first, you know, 20,000, 50,000 is taxable in one rate, then the next. bracket is a tax at another rate. So you're kind of taxed along the way over time. But if let's say you're in the 24% bracket, any dollar you make after that in that band is taxed at 24%. While your effective tax rate may actually be something like 13 or 14 is what you actually pay on your like total sum of earnings. So it takes into account what you're taking for deductions, you have any tax credits, what are you making, what are you reading each band. So it's really not like oh hey my bonuses are taxed more no that's not how it works ever all the income is kind of pooled into one and it's like kind of sifted through each of these brackets and our bracket something that you're paying tax like is that from the taxes getting taken out of your pay stub weekly or is that like the taxes that you're paying at the end of the year or is it a combination of both it's a combination of both um you want to kind of align your deductions that you're getting throughout the year with your tax bracket or kind of figure out actually really what your effective tax rate is because if your effective tax rate says like we're i'm at a 15 effective rate that means 15 of all your taxes is basically 15 of your income is what you're gonna pay in taxes so that's that's what you should plan for right all right fair fair um so we've we've started to dabble in this but like how does this bill impact individuals there's a lot of stuff in there but like as
Speaker #0
an individual person that's what i care about i'm a millennial right and i care about i care about me care about me what's in it for me right oh how does this impact individuals okay So tax brackets are staying as is.
Speaker #1
That's one. um standard deduction is going up um so basically the the single rate was 13 850 you can deduct this year um it's all the stuff most of the stuff is actually retroactive to 2025 so you'll be able to do this this year um the rate is going up to 15 750 for in a single person married finally jointly it's up to 31 500 so you get to deduct 31 500 if you're married from your taxes right off the rip without having to do anything that's nice yeah um they have a new wrinkle so this is one of the new things um so this is temporary but if you're a senior if you're over 65 years old you can deduct up to six thousand dollars additional just for fun yeah well you know he kind of there was that promise of hey we're not going to tax social security and they kind of worded in their letter like hey you're not going to pay tax on social security it's like no hold on um you get a six thousand dollar deduction um of your social security well all of your income So if you don't make any Social Security and you're 65, you're not collecting yet, you can still deduct $6,000. But you have to make between $75,000 and $150,000 because then it starts to phase out at certain levels. So you got to talk to an accountant about it. But basically, it doesn't mean everyone gets to deduct $6,000. So if you're making $2 million, you're phased out. Yeah,
Speaker #0
you don't get that.
Speaker #1
But if you're making under $75,000, you can deduct the entire thing,
Speaker #0
entire $6,000. Okay. So positive,
Speaker #1
great. Positive, but it's also temporary. It's only going to be around for a few years. So it's just a short term. thing and that's that's you'll kind of see that the episode there's a lot of short-term stuff that's going to feel really nice for a little bit but then it's going to go away okay yeah all right yeah um the other thing is for us with kids so think about for me um the child tax credit goes up from 2000 to 2200 so bank that's extra 200 um for me that's 600 because i got three kids yep yeah yeah right per child that's basically one month of karate you get extra There you go.
Speaker #0
I'll take it. I'll take it.
Speaker #1
Yep. So. Some of the new write-offs. So this is kind of like the, what are they campaigning on? What is actually happening? The no tax on tips.
Speaker #0
Yeah, that was a big one.
Speaker #1
Big one. I don't understand that personally. It's like, why is a tip dollar earnings not as taxable as my income or your income or someone doing something else?
Speaker #0
I don't really know either. Because if you were to ask me about income, I think it's probably twofold. But in my opinion, I would relate tips to commission. Yeah. Right? It's the same thing. I'm taxing my commission. a tipped employee. Now, I had this argument with somebody who worked in the service industry, and they said, well, we don't really get paid hourly. And I was like, yo, neither do I. I just make the commission. So I do think that's a little bit confusing. I don't know if it, I don't really know what the genesis of it is, but the people in the service industry, which like I would be excited if you told me my commission wasn't.
Speaker #1
Yeah, I'd be real pumped. Yeah. Well, you can maybe just tip me on, maybe I'll get client tips. Right. That way, right.
Speaker #0
Tips instead of commission.
Speaker #1
Yeah, yeah. No, it's just a tip.
Speaker #0
Just give me a little. Okay.
Speaker #1
No, but it's, I think they have language in there that says like, Hey, if it's outside of your normal, if you normally get tipped and yeah, it's going to continue. So there's no scamming like that. Like, you know, my Barbara, I'm not going to pay a dollar for the haircut and then $30 and a tip.
Speaker #0
Is there, did that happen?
Speaker #1
It did happen. It's temporary. You can deduct up to $25,000. But if you're single and you make more than $150,000, it starts to get phased out. Okay. So it's just generally for the lower middle income folks. Okay. So, well, I also don't think millionaires are getting tips.
Speaker #0
Probably not.
Speaker #1
Probably not. Probably not. We'll find out. The overtime thing is happening too. So up to $12,500 of mandatory overtime.
Speaker #0
Mandatory. So your employer is going to have to deck you out. If it's mandatory overtime or voluntary overtime.
Speaker #1
Correct.
Speaker #0
Correct. And that, again, like, that is a layer of work for your employer, too. And it's also, what are they going to say to you? Like, this is not mandatory or this is mandatory. Like, sometimes you just have overtime and part of the deal.
Speaker #1
Yeah. Once again, I don't know the mechanics of that one. You do get a car loan interest deduction up to $10,000.
Speaker #0
Oh.
Speaker #1
Oh, hey. Not too shabby. But if you make more than $100,000, it's phased out. All right. Yep. You do the qualified business income. So this is probably something you and I can benefit from. That's actually going to be permanent, right? All right. It's phased in now. And basically, you get to do 20% deduction for your business earnings income. So if you own a small business or you get things passed through your income, so you're basically not a C-corp, you're going to get a nice 20% deduction.
Speaker #0
All right. That's nice.
Speaker #1
That's a win. Yeah, they were talking about that going away. So that's not too bad.
Speaker #0
What is the SALT deduction?
Speaker #1
Could you new dates and local income taxes? This has been a, this was like the one thing that really held up mostly the Republican side.
Speaker #0
Do you see my face that I made for you?
Speaker #1
What was that about?
Speaker #0
Well, first off, all of the names on this bill are ridiculous that we've got. Like, again, I'm not going to, can I say this in the podcast? Right. Is what I saw, like the OBB, all I thought about was, um, what was that musician in the nineties?
Speaker #1
You down with OPP or whatever? Yeah.
Speaker #0
Yeah. Um, and then you got like the salt like it's got a lot of like ridiculous acronyms which like is the government in general the government loves ridiculous acronyms yeah um but when i saw the salt deduction i was like i don't even you can see me my no i like had to google what that was i was like i don't even know what that is but people are excited or into that that's like a big one with a lot of discussion around yeah well that's where um certain states really
Speaker #1
push that like New Jersey, New York, California. because they have higher state taxes. Okay. Right. So that goes to your state and local taxes. So your homeowner's tax, your property taxes, vehicle taxes, all that stuff can be included in here. So previously it was $10,000 was the cap. So basically the standard deduction was well above that. So most people weren't even taking deductions for their house at all. And they used to, if they itemized before that was kind of a nice win for them. And about 42% of households actually have more than $10,000 in that SALT tax area. This is pushing up to $40,000. And it doesn't matter if you're single or you're married or filing jointly, you get $40,000 to deduct there on state and local taxes.
Speaker #0
Okay. So that's a win for a lot of people.
Speaker #1
Yeah. I mean, basically, only about 1.6% of the population has more than $40,000. And you know what this does cover, which may help you a little bit, is vacation homes.
Speaker #0
Oh, hey.
Speaker #1
You got a vacation home, you can add both of them up together, put your hands together, and now you get some cell deductions.
Speaker #0
And now you get some cell deductions. Now. This is only temporary though, this all deduction.
Speaker #1
Yeah, of course it is. Yeah.
Speaker #0
So 2029, you got to revisit this. Goes away.
Speaker #1
Also, if you have rental properties, I get a lot of questions like that. Does not count. But if it's like, hey, I have a vacation home. I go there half the year, let's say. I can deduct, use half the property tax deduct. So it's personal use basis.
Speaker #0
Okay. So you got to say, I use this personally a lot.
Speaker #1
Yes. If you have 17 multifamily properties, like... you're out of luck you're not getting that deduction but it's like you got the beach house and you go a weekend and you rent it out a weekend and you go a weekend and you rent another yeah yeah and this is this is you have to itemize to get it so you can't get the standard deduction plus this so right now if you're married filing jointly the standard action is 31 500 it'll give you an extra 8 500 to deduct plus any other let's say you got the car loan now now you got the other stuff so you can stack deductions a little easier now with this bill if you know how to do your taxes yeah or hire someone that does know how to do this which i would recommend that especially now
Speaker #0
Yeah. Because this stuff is more complicated. The free TurboTax may not be doing it anymore. Yeah.
Speaker #1
This is where it's probably going to make more sense or be more valuable to hire someone, I would say, because there are a little more nuances. At least this first year, maybe figure it out. Like, okay, what can I get for deductions? What don't I get? Because, you know, you get some of those other funky ones. There's like a $1,000 charitable giving one you get now. Not bad. So actually, you get that if you itemize or don't itemize. So it's kind of nice. So you don't have to do that. So that should help charities a little bit, which is nice.
Speaker #0
so But many of these do not last forever. And I think that's like a piece that we just have to be clear about for people that you're going to get changes. They may feel good temporarily. And I think like even when we say things do last forever, nothing lasts forever in the government. Yeah,
Speaker #1
this is government permanence, right? Yeah. It's big time.
Speaker #0
And there's no actual permanent, like we've had permanent things that have been removed in the last couple of years. Like there's not.
Speaker #1
Yeah, next set of Congress can come in two years from now and just totally say, no, we're doing all this bill away, or we're going to change this, or we're going to raise taxes. I mean, they can do whatever they want. Whatever they want.
Speaker #0
Yeah. What about these Trump accounts?
Speaker #1
Trump accounts? Okay, so babies are going to get, once again, temporary.
Speaker #0
Temporary?
Speaker #1
$1,000 when they're born. And then you can put in up to $5,000 a year into the account. You do not get a deduction for putting in there, like, you know, your 401k or whatever. So your employer can actually match it too, but it still goes into the $5,000 cap. So if your employer puts in $2,000, you're capped at $3,000.
Speaker #0
And what kind of account is this? Is this a $529?
Speaker #1
No, it's kind of like an IRA, but for kids, because it grows tax deferred, you don't get the tax reduction up front. And then you can't take it out until they're 18, but you can use it for up to $10,000 for a first time home. You could use it for college expenses and pay no taxes on the money that comes out. So it's kind of like a hybrid 529 thing. It's kind of like a little bit of an alternative. The kids don't go to college. It's not really designed just for college. So that's a little bit of a nice feature. But overall, there's not like a huge tax savings for the adult or the parent or grandparent to put money in here. So it's just kind of another avenue because you have things like 529s. You also have UTMA accounts that are fairly tax efficient that can be used for other things. So it's another tool in the toolbox, basically.
Speaker #0
Okay. But this is like a new type of account.
Speaker #1
Yeah, but it's going to phase out once again. $1,000 is going to phase out.
Speaker #0
Some people are going to get it.
Speaker #1
Yeah, so if you're going to have a baby, get it on now.
Speaker #0
It's not going to help me.
Speaker #1
Not really. Not as much.
Speaker #0
Not going to help me. All right. How are businesses impacted? Because we've talked a lot about individuals now, right? Yeah. Individuals do have some benefits. But there is a lot of kind of, I want to say, this is the more controversial parts of the bill, that there are a lot of... business implications, some to small businesses, but also a lot to larger businesses.
Speaker #1
Yeah. I mean, writ large is really going to help businesses in general, but the big one is the qualified business deduction that almost most small businesses are going to get, which is nice. But then a lot of them is just kind of more nuanced stuff like accelerated depreciation, right? So you used to be able to say, hey, I bought this big tractor for my business, cost $200,000. You said to deduct it over time. You can deduct all of that now in one year. Oh, okay. So there's a lot of things like that in the bill that are going to help these larger businesses or even smaller businesses, you know, put money in right away and deduct it this year versus having to wait and do it over time.
Speaker #0
Now, I think some of the chatter about this bill is that it's like the Jeff Bezos, Elon Musk bill, right? That like it's to help those huge businesses. But it appears to me that that's not all the case.
Speaker #1
No, not all. I mean, if you really look at like who it's impacting the most, though, I mean, the things that were set to expire were the higher. tax brackets, like those were set to go up. Those are staying flat now. So that's benefiting the top one or 5% depending on, you know, where you're looking at the calculations. So a lot of this stuff is designed to help the higher end of the spectrum. Like I mentioned the SALT tax, like 1.6% of the population has, you know, $40,000 of interest and stuff like that they're paying. So a lot of this is going to be geared towards them, but there are definitely some things that will help out the lower income folks. However, it does seem like those are pretty much temporary.
Speaker #0
Those are all the temporary ones. Yeah.
Speaker #1
Yeah. For the most part. So So that's the one big challenge with this bill is there's a lot to parse through. You know, I'm sure there's some tax nerd that's gone through it more than I have that's going to say, hey, look, we could use this, this and this for businesses to really cut down on taxes.
Speaker #0
Now, what would you say? I did a little research on, you know, as we came into this about like there are obviously some positives. Yeah. There's also some negatives that people are less into. And the biggest one is it is going to add, ready for this number, guys, $3.4 trillion to the national debt.
Speaker #1
Yeah, there's a lot of rhetoric out there. It says the tax cuts pay for themselves. That does not happen. That's not how that works. There were some stats that came out last year. I think they analyzed the first tax bill. About 18% of it paid for itself. So you might expect something like that to happen again because the thought process is, hey, there's less taxes. I'm going to spend more money, blah, blah, blah. Then there's more sales tax, more revenue. Cycle goes on and on. It's not enough to cover the amount of...
Speaker #0
3.4 trillion.
Speaker #1
Yeah, it's just too much. I think even I was looking at the... Like just the tips thing is going to cost like $300 plus million of revenue per year.
Speaker #0
Yeah, because that's it's and people don't always get that's like the flip side to these things is, OK, you're not going to tax tips, but that money went to the government.
Speaker #1
Right, right. And I think that you have to look at it kind of what are some potential unintended consequences? Because any any bill, I don't care like where you are, is going to have these unintended consequences. And then maybe, you know, we've kind of seen a little bit with the the rating agencies with the government debt. you may see like, hey, we're getting more income, more debt coming out. So we're probably going to have a worse credit rating. And that could potentially impact long-term credit, which is what mortgages are based on.
Speaker #0
Correct. Craig, yeah. And that seems to be some of the rhetoric around housing with this bill is there was some proposals to have more housing stuff in the bill that just didn't really... parse out, which is how these bills kind of work. People all try to stuff what they want in there. Some of it they get, some of it they don't. But housing was a little bit overlooked in this bill. So we didn't really have a lot of direct impact other than for current homeowners that, again, may have some interest deductions and things like that. But there was not necessarily things to incentivize homeownership. As a matter of fact, there was actually some removals of some housing assistance that was in place prior that has been removed. We don't really necessarily know how that's all going to play out yet. What are the worries for housing? One of the worries is that some of this may increase inflation. So we've been working very hard over the last few years to slowly but surely knock inflation down because inflation is directly, or not directly, but it ends up directly tied to interest rates. The higher inflation is, the higher interest rates are. And so we finally are feeling like a little bit of relief in interest rates. And I say that in rates are in the sixes now. Yeah. We crossed eight for a little while.
Speaker #1
Yeah. I mean, sixes were kind of historically like 30-year average, right?
Speaker #0
We like fives. So mid fives. Fives, okay. And mid fives are generally like, as far as housing is concerned, sort of the marker for like a very stable economy. Fives are really where we want to be. So we're still a little bit higher than that, but we're getting closer. And there has been some great programs for first-time homebuyers. There's a lot of these new state bond programs. Connecticut has one. We've talked about the Time to Own program. Mass has Mass Dreams. Rhode Island has Rhode Island Housing. So these have been kind of great. There was no new additions to this stuff in this bill. But the concern with inflation going up is that rates will go back up again. And we are in a housing affordability crisis. And so, yes, we do want some tax savings so people have a little bit more money in their pocket. Is it going to be enough to make homeownership affordable?
Speaker #1
Probably not. Probably not.
Speaker #0
Probably not. Probably not. Probably not. So, you know, I think we, I think in the housing side, we wish that we got a little bit more.
Speaker #1
Yeah. I mean, something you might want to see is like, hey, let's maybe get some tax credits for our home builders or, hey, like we're going to build affordable units or even attainable housing, you know, multifamily, some kind of thing like that to spur more growth of housing. Because the big problem right now is inventory.
Speaker #0
100%. Not only inventory, but like, and I tell people this all the time in a town like we live in is that, you know, 30 or 40 years ago, developments were going in. That was the big developing time. And a lot of these developments were small capes. They were small ranches. They were maybe small colonials. They were first time home buyer houses. When is the last time you saw a brand new development go in that was not either a condo or... really luxury housing everything's luxury the word's lost on me anymore with housing yeah well and that's you know i had this conversation with somebody the other day about what is a mansion what is the definition of a mansion when we were kids you can like conjure up in your head when you were in a kid in the 90s what a mansion looked yeah there's like the two houses in town yeah you're like that is a mansion i don't i don't even know what that is anymore i don't know a four-bedroom colonial in glastonbury's mansion now yeah you know so you know i think that housing affordability with with these smaller developments is going away. And I think one of the really unfortunate, unintended consequences of this economy that we're in is people who were living in that more affordable housing are renovating their houses and making them less affordable. So we see that a lot in our town and other surrounding towns where like you had the $350,000 cape that was affordable. The person now feels like they can't move who owns it. They've now dumped $100,000 into it. They've put an edition on. They've redone the kitchen, and now it's a $400,000, $500,000, $600,000 house. And it's taken out of the affordable housing supply. So this isn't necessarily going to help that.
Speaker #1
No, it's not addressing that at all. I guess the other thing that's kind of maybe pitiful is the EV tax credits are going away. They're putting a lot more pressure on Medicaid because they have to pay for the bills somehow. They can't just kind of willy-nilly do everything. So people are losing a lot of the EV tax credits for cars, even just being renovations. renovations on your house. That's kind of a big thing for a lot of folks is like, hey, I want to get a new washer dryer or get new energy efficient windows. They're going to be hurt by that stuff.
Speaker #0
Yeah. Solar. There was some great, great solar credits for solar. That's going away. Yeah. The EV tax credit was a big one. So I drive a hybrid minivan. For those of you who don't know, I drive a rocking minivan.
Speaker #1
There's flames on the side of it.
Speaker #0
It's so cool. It's got TV screens. It's like a rolling living room. But we were not originally in the market for an EV. We only got it. because when we were buying it, we did the math and the EV tax credits made it cheaper than a regular one. You're like, okay, so I can get better mileage and get these bomb tax credits. Cool. But now my car is seven years old now, almost eight years old in November. What is my incentive to buy an EV next time? It's not going to be there. It's not going to be there. And are we going to see that going forward?
Speaker #1
Yeah. So I think that could potentially hurt that industry in a big way. especially with you know that's one of the largest job creators is the uh the evening industry so uh we'll see we'll see so the one big
Speaker #0
Beautiful bill is interesting.
Speaker #1
It's interesting. There's a lot there. It's big, as the name says. It's actually apt for that part of it. Yeah, I think this is just, there's a lot in here. And I don't expect you guys to just listen to Spock as being an expert. I'm still not an expert. I'm working through it. I mean, he announced it on July 4th. Like, thank God. Yeah, great. So I have no time to look at this. And I immediately went on vacations. I feel like I'm getting caught up still.
Speaker #0
Eating your coffee grounds. Yeah.
Speaker #1
Yeah. In the basement. Just trying to get caught up. But, you know, this is something where, you know. talk to your planners, talk to your accountant, really kind of figure out, okay, what can I take out of this? Because a lot of stuff is a sprint. A lot of these things are short term. So you got to really figure out, okay, what can I take advantage of the next few years? There's some planning things here. Like if you're a retiree and you're 65, you're listening to this, you've got an extra $6,000. Maybe you do more Roth conversions for the next couple of years to make up that difference and be a little more tax efficient now. So there's some things you can really kind of think about how to strategize from a planning standpoint that you can leverage this bill for.
Speaker #0
Yeah. And I think again, If you have complicated taxes in any way and you've been self-filing for a while, it may behoove you to have a consultation with a CPA or tax preparer, maybe have them review your taxes. Even if you're going to file them on your own, there are tax preparers that will do that. You fill them all out. They just review. Because again, it is adding some layers of potentially beneficial complication, but complication. Absolutely. Absolutely. Talk to your, I feel like this is the end result of every episode. You need to talk to your trusted professionals. Will it be your financial advisor, your tax preparer, your accountant, one of those, because you just don't, this is so big. You don't want to go into it blindly. Yeah.
Speaker #1
You're gonna miss something for sure.
Speaker #0
And you want to, you want to save your monies. Yeah.
Speaker #1
All right. Well, that's it for us, right?
Speaker #0
All right. So thanks for tuning into the first episode of season three and we've got some exciting stuff in store. Yeah.
Speaker #1
Yeah. We had a good lineup this year, I think. So it's going to be fun.
Speaker #0
Awesome. All right. See you next time. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

About Millennial Money Matters

Welcome to "Millennial Money Matters," your essential guide to navigating the world of finance as a millennial. Hosted by Kelly Turner, a mortgage loan officer, and Derek Mazzarella, a financial advisor, this podcast offers straightforward, practical advice on managing your money.

Kelly and Derek tackle topics like budgeting, student loans, real estate, and investing, breaking down complex financial concepts into easy-to-understand tips. Each episode delivers actionable insights and real-life stories to help you make smart financial decisions and secure your future.

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Description

We’re back—and bigger than ever! Season 3 launches with a fresh perspective, a brand-new studio, and a renewed commitment to bringing you the conversations that matter most.

New season. New us. Let’s get into it.

Reach out to Kelly Turner at kturner@totalmortgage.com and Derek Mazzarella at dmazzarella@mygfpartner.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
All right, welcome to the first episode of season three of Millennial Money Matters with Kelly Turner and Derek Mazzarella. And we are in a new podcast studio.
Speaker #1
New studio. Look at us moving on up in the world.
Speaker #0
We are fancy. We are not in a dark blue room anymore. Yeah,
Speaker #1
we have a couch and a nice chair and some accoutrement here. Right.
Speaker #0
So new year, new us.
Speaker #1
New us.
Speaker #0
Yeah.
Speaker #1
New bills to talk about.
Speaker #0
New bills. So we are coming in hot. today. We were thinking of what to talk about and Derek told me that we had to talk about this.
Speaker #1
Well, it's so big.
Speaker #0
And beautiful. Beautiful. So what are we talking about today, Derek?
Speaker #1
We're talking about the one big, beautiful bill.
Speaker #0
The OBB, you know me.
Speaker #1
Yep, yep. This thousand page tax bill.
Speaker #0
Yeah. I had to do a lot of Googling.
Speaker #1
Well, luckily for you, I've been in the basement eating coffee grounds and chugging Mountain Dew trying to get ready for this. So I am ready to roll.
Speaker #0
Okay, I'm glad that one of us did. I wanted to chat GPT and asked it a lot of questions, and it was confused as well.
Speaker #1
All right, why don't we start with, what were your questions? Where do you think we should start?
Speaker #0
Okay, why did we pass the big beautiful bill? And I know this could be like a six-hour long episode.
Speaker #1
Yeah, we're going to keep it a half an hour if we can. So, well, the real big reason was there is the Tax Cuts and Jobs Act during Trump's first presidency, which was set to expire. right so we had we kind of had a ticking clock on a lot of these things and if it didn't expire um a couple of big provisions in there like the standard deduction which everyone has been enjoying where you just get deduct a good amount of money from your taxes without having to itemize anything it's very clean and easy that that would uh be cut in half um the tax brackets would kind of go reset so basically the higher end of the tax bracket would go up to 37.5 again or 39 um and a few other things provisions like that would would fall away so they kind of had this clock where like It's not a democratic problem anymore. It's actually my problem again. So I've got to take care of this bill.
Speaker #0
Yeah,
Speaker #1
what are we going to do here? Yeah. So that was the kind of the genesis of the bill. And, you know, every president usually has their kind of big mandate, like big thing they want to get accomplished. You know, some people it's been healthcare, some people it's been taxes.
Speaker #0
This one is all encompassing of everything.
Speaker #1
Yeah. Well, there's healthcare in here and there's taxes in here.
Speaker #0
There's like a little bit of it. That was so as I was doing my research, I was not eating coffee grounds and drinking Mountain Dew. I was sitting at my desk drinking my Starbies. It was interesting because you can see all my notes here, guys. There's a lot of notes. It does encompass a lot of stuff.
Speaker #1
Yeah. Farming stuff's in there. Taxes are in there.
Speaker #0
Yeah. Now, what it doesn't really encompass is me in the housing industry. There's not a lot for us in it. So we didn't get housing despite the challenges in the housing market. Didn't really get a lot of relief through this bill. That's not where this bill was aimed. No,
Speaker #1
not really. It was mainly at, I'd say the big agenda item here was let's keep the original tax cuts status quo. I think that was kind of like the big overarching, what are we really doing with the bill? We want to just keep that as is.
Speaker #0
So taxes should look more similar to how they have. It's not like a big, you're not really helping, you're not really changing things. It's just keeping them the same.
Speaker #1
For the most part, yeah. If you have one big takeaway, it's that for most things... the taxes are just going to be a continuation of the tax cuts.
Speaker #0
Right. Well, that doesn't sound so bad.
Speaker #1
No, no, it's not bad at all.
Speaker #0
That makes me...
Speaker #1
No, I mean, your taxes aren't going up, which is nice.
Speaker #0
Take that. I'll take that. All right. So we have a continuation of some stuff that had happened a few years ago, but then there's also some additions to this. There's some new things.
Speaker #1
Yeah. Some of the things that are staying the same, basically. Let's just quickly go through that. The tax brackets, those are going to be the same. Those aren't changing. the standard deduction is actually going to go up a little bit.
Speaker #0
So that's better.
Speaker #1
That's better. Yep. So you have more money. Basically, what a deduction is, is the higher the deduction, the more money you can deduct off your taxes. And a deduction doesn't mean, hey, if I deduct $5,000, my income is down $5,000. Well, no, actually, it doesn't mean you're saving $5,000 with taxes. It means your income goes down by $5,000. So if you make $100,000, your deduction is $5,000. The government looks like you make $95,000. So I hope that was clear. That was clear. even though it took a while to get there.
Speaker #0
You know, we're out of practice.
Speaker #1
I know,
Speaker #0
yeah. We're out of practice. We haven't recorded in, I don't know, two months. And it's the summer, guys. You're going to be listening to this in September, but we are recording this in August.
Speaker #1
I've got vacation this week coming up. Yeah,
Speaker #0
it's like vacay time. Yep.
Speaker #1
So yeah, that's kind of the main real change. And I think it's probably important to get into... All right, what's the... tax brackets versus effective tax rate, because that's kind of important to go through a little bit here.
Speaker #0
Can we just have a quick point of clarification? So people always talk about tax brackets. And I think even as a tax paying adult, like I know that like richer people are in higher tax brackets. But like, could you just give me like a quick synopsis on like, what does that mean?
Speaker #1
Yeah, so every dollar you make of income, you're actually not taxed to the same percentage. So it's a tiered system. So your first, you know, 20,000, 50,000 is taxable in one rate, then the next. bracket is a tax at another rate. So you're kind of taxed along the way over time. But if let's say you're in the 24% bracket, any dollar you make after that in that band is taxed at 24%. While your effective tax rate may actually be something like 13 or 14 is what you actually pay on your like total sum of earnings. So it takes into account what you're taking for deductions, you have any tax credits, what are you making, what are you reading each band. So it's really not like oh hey my bonuses are taxed more no that's not how it works ever all the income is kind of pooled into one and it's like kind of sifted through each of these brackets and our bracket something that you're paying tax like is that from the taxes getting taken out of your pay stub weekly or is that like the taxes that you're paying at the end of the year or is it a combination of both it's a combination of both um you want to kind of align your deductions that you're getting throughout the year with your tax bracket or kind of figure out actually really what your effective tax rate is because if your effective tax rate says like we're i'm at a 15 effective rate that means 15 of all your taxes is basically 15 of your income is what you're gonna pay in taxes so that's that's what you should plan for right all right fair fair um so we've we've started to dabble in this but like how does this bill impact individuals there's a lot of stuff in there but like as
Speaker #0
an individual person that's what i care about i'm a millennial right and i care about i care about me care about me what's in it for me right oh how does this impact individuals okay So tax brackets are staying as is.
Speaker #1
That's one. um standard deduction is going up um so basically the the single rate was 13 850 you can deduct this year um it's all the stuff most of the stuff is actually retroactive to 2025 so you'll be able to do this this year um the rate is going up to 15 750 for in a single person married finally jointly it's up to 31 500 so you get to deduct 31 500 if you're married from your taxes right off the rip without having to do anything that's nice yeah um they have a new wrinkle so this is one of the new things um so this is temporary but if you're a senior if you're over 65 years old you can deduct up to six thousand dollars additional just for fun yeah well you know he kind of there was that promise of hey we're not going to tax social security and they kind of worded in their letter like hey you're not going to pay tax on social security it's like no hold on um you get a six thousand dollar deduction um of your social security well all of your income So if you don't make any Social Security and you're 65, you're not collecting yet, you can still deduct $6,000. But you have to make between $75,000 and $150,000 because then it starts to phase out at certain levels. So you got to talk to an accountant about it. But basically, it doesn't mean everyone gets to deduct $6,000. So if you're making $2 million, you're phased out. Yeah,
Speaker #0
you don't get that.
Speaker #1
But if you're making under $75,000, you can deduct the entire thing,
Speaker #0
entire $6,000. Okay. So positive,
Speaker #1
great. Positive, but it's also temporary. It's only going to be around for a few years. So it's just a short term. thing and that's that's you'll kind of see that the episode there's a lot of short-term stuff that's going to feel really nice for a little bit but then it's going to go away okay yeah all right yeah um the other thing is for us with kids so think about for me um the child tax credit goes up from 2000 to 2200 so bank that's extra 200 um for me that's 600 because i got three kids yep yeah yeah right per child that's basically one month of karate you get extra There you go.
Speaker #0
I'll take it. I'll take it.
Speaker #1
Yep. So. Some of the new write-offs. So this is kind of like the, what are they campaigning on? What is actually happening? The no tax on tips.
Speaker #0
Yeah, that was a big one.
Speaker #1
Big one. I don't understand that personally. It's like, why is a tip dollar earnings not as taxable as my income or your income or someone doing something else?
Speaker #0
I don't really know either. Because if you were to ask me about income, I think it's probably twofold. But in my opinion, I would relate tips to commission. Yeah. Right? It's the same thing. I'm taxing my commission. a tipped employee. Now, I had this argument with somebody who worked in the service industry, and they said, well, we don't really get paid hourly. And I was like, yo, neither do I. I just make the commission. So I do think that's a little bit confusing. I don't know if it, I don't really know what the genesis of it is, but the people in the service industry, which like I would be excited if you told me my commission wasn't.
Speaker #1
Yeah, I'd be real pumped. Yeah. Well, you can maybe just tip me on, maybe I'll get client tips. Right. That way, right.
Speaker #0
Tips instead of commission.
Speaker #1
Yeah, yeah. No, it's just a tip.
Speaker #0
Just give me a little. Okay.
Speaker #1
No, but it's, I think they have language in there that says like, Hey, if it's outside of your normal, if you normally get tipped and yeah, it's going to continue. So there's no scamming like that. Like, you know, my Barbara, I'm not going to pay a dollar for the haircut and then $30 and a tip.
Speaker #0
Is there, did that happen?
Speaker #1
It did happen. It's temporary. You can deduct up to $25,000. But if you're single and you make more than $150,000, it starts to get phased out. Okay. So it's just generally for the lower middle income folks. Okay. So, well, I also don't think millionaires are getting tips.
Speaker #0
Probably not.
Speaker #1
Probably not. Probably not. We'll find out. The overtime thing is happening too. So up to $12,500 of mandatory overtime.
Speaker #0
Mandatory. So your employer is going to have to deck you out. If it's mandatory overtime or voluntary overtime.
Speaker #1
Correct.
Speaker #0
Correct. And that, again, like, that is a layer of work for your employer, too. And it's also, what are they going to say to you? Like, this is not mandatory or this is mandatory. Like, sometimes you just have overtime and part of the deal.
Speaker #1
Yeah. Once again, I don't know the mechanics of that one. You do get a car loan interest deduction up to $10,000.
Speaker #0
Oh.
Speaker #1
Oh, hey. Not too shabby. But if you make more than $100,000, it's phased out. All right. Yep. You do the qualified business income. So this is probably something you and I can benefit from. That's actually going to be permanent, right? All right. It's phased in now. And basically, you get to do 20% deduction for your business earnings income. So if you own a small business or you get things passed through your income, so you're basically not a C-corp, you're going to get a nice 20% deduction.
Speaker #0
All right. That's nice.
Speaker #1
That's a win. Yeah, they were talking about that going away. So that's not too bad.
Speaker #0
What is the SALT deduction?
Speaker #1
Could you new dates and local income taxes? This has been a, this was like the one thing that really held up mostly the Republican side.
Speaker #0
Do you see my face that I made for you?
Speaker #1
What was that about?
Speaker #0
Well, first off, all of the names on this bill are ridiculous that we've got. Like, again, I'm not going to, can I say this in the podcast? Right. Is what I saw, like the OBB, all I thought about was, um, what was that musician in the nineties?
Speaker #1
You down with OPP or whatever? Yeah.
Speaker #0
Yeah. Um, and then you got like the salt like it's got a lot of like ridiculous acronyms which like is the government in general the government loves ridiculous acronyms yeah um but when i saw the salt deduction i was like i don't even you can see me my no i like had to google what that was i was like i don't even know what that is but people are excited or into that that's like a big one with a lot of discussion around yeah well that's where um certain states really
Speaker #1
push that like New Jersey, New York, California. because they have higher state taxes. Okay. Right. So that goes to your state and local taxes. So your homeowner's tax, your property taxes, vehicle taxes, all that stuff can be included in here. So previously it was $10,000 was the cap. So basically the standard deduction was well above that. So most people weren't even taking deductions for their house at all. And they used to, if they itemized before that was kind of a nice win for them. And about 42% of households actually have more than $10,000 in that SALT tax area. This is pushing up to $40,000. And it doesn't matter if you're single or you're married or filing jointly, you get $40,000 to deduct there on state and local taxes.
Speaker #0
Okay. So that's a win for a lot of people.
Speaker #1
Yeah. I mean, basically, only about 1.6% of the population has more than $40,000. And you know what this does cover, which may help you a little bit, is vacation homes.
Speaker #0
Oh, hey.
Speaker #1
You got a vacation home, you can add both of them up together, put your hands together, and now you get some cell deductions.
Speaker #0
And now you get some cell deductions. Now. This is only temporary though, this all deduction.
Speaker #1
Yeah, of course it is. Yeah.
Speaker #0
So 2029, you got to revisit this. Goes away.
Speaker #1
Also, if you have rental properties, I get a lot of questions like that. Does not count. But if it's like, hey, I have a vacation home. I go there half the year, let's say. I can deduct, use half the property tax deduct. So it's personal use basis.
Speaker #0
Okay. So you got to say, I use this personally a lot.
Speaker #1
Yes. If you have 17 multifamily properties, like... you're out of luck you're not getting that deduction but it's like you got the beach house and you go a weekend and you rent it out a weekend and you go a weekend and you rent another yeah yeah and this is this is you have to itemize to get it so you can't get the standard deduction plus this so right now if you're married filing jointly the standard action is 31 500 it'll give you an extra 8 500 to deduct plus any other let's say you got the car loan now now you got the other stuff so you can stack deductions a little easier now with this bill if you know how to do your taxes yeah or hire someone that does know how to do this which i would recommend that especially now
Speaker #0
Yeah. Because this stuff is more complicated. The free TurboTax may not be doing it anymore. Yeah.
Speaker #1
This is where it's probably going to make more sense or be more valuable to hire someone, I would say, because there are a little more nuances. At least this first year, maybe figure it out. Like, okay, what can I get for deductions? What don't I get? Because, you know, you get some of those other funky ones. There's like a $1,000 charitable giving one you get now. Not bad. So actually, you get that if you itemize or don't itemize. So it's kind of nice. So you don't have to do that. So that should help charities a little bit, which is nice.
Speaker #0
so But many of these do not last forever. And I think that's like a piece that we just have to be clear about for people that you're going to get changes. They may feel good temporarily. And I think like even when we say things do last forever, nothing lasts forever in the government. Yeah,
Speaker #1
this is government permanence, right? Yeah. It's big time.
Speaker #0
And there's no actual permanent, like we've had permanent things that have been removed in the last couple of years. Like there's not.
Speaker #1
Yeah, next set of Congress can come in two years from now and just totally say, no, we're doing all this bill away, or we're going to change this, or we're going to raise taxes. I mean, they can do whatever they want. Whatever they want.
Speaker #0
Yeah. What about these Trump accounts?
Speaker #1
Trump accounts? Okay, so babies are going to get, once again, temporary.
Speaker #0
Temporary?
Speaker #1
$1,000 when they're born. And then you can put in up to $5,000 a year into the account. You do not get a deduction for putting in there, like, you know, your 401k or whatever. So your employer can actually match it too, but it still goes into the $5,000 cap. So if your employer puts in $2,000, you're capped at $3,000.
Speaker #0
And what kind of account is this? Is this a $529?
Speaker #1
No, it's kind of like an IRA, but for kids, because it grows tax deferred, you don't get the tax reduction up front. And then you can't take it out until they're 18, but you can use it for up to $10,000 for a first time home. You could use it for college expenses and pay no taxes on the money that comes out. So it's kind of like a hybrid 529 thing. It's kind of like a little bit of an alternative. The kids don't go to college. It's not really designed just for college. So that's a little bit of a nice feature. But overall, there's not like a huge tax savings for the adult or the parent or grandparent to put money in here. So it's just kind of another avenue because you have things like 529s. You also have UTMA accounts that are fairly tax efficient that can be used for other things. So it's another tool in the toolbox, basically.
Speaker #0
Okay. But this is like a new type of account.
Speaker #1
Yeah, but it's going to phase out once again. $1,000 is going to phase out.
Speaker #0
Some people are going to get it.
Speaker #1
Yeah, so if you're going to have a baby, get it on now.
Speaker #0
It's not going to help me.
Speaker #1
Not really. Not as much.
Speaker #0
Not going to help me. All right. How are businesses impacted? Because we've talked a lot about individuals now, right? Yeah. Individuals do have some benefits. But there is a lot of kind of, I want to say, this is the more controversial parts of the bill, that there are a lot of... business implications, some to small businesses, but also a lot to larger businesses.
Speaker #1
Yeah. I mean, writ large is really going to help businesses in general, but the big one is the qualified business deduction that almost most small businesses are going to get, which is nice. But then a lot of them is just kind of more nuanced stuff like accelerated depreciation, right? So you used to be able to say, hey, I bought this big tractor for my business, cost $200,000. You said to deduct it over time. You can deduct all of that now in one year. Oh, okay. So there's a lot of things like that in the bill that are going to help these larger businesses or even smaller businesses, you know, put money in right away and deduct it this year versus having to wait and do it over time.
Speaker #0
Now, I think some of the chatter about this bill is that it's like the Jeff Bezos, Elon Musk bill, right? That like it's to help those huge businesses. But it appears to me that that's not all the case.
Speaker #1
No, not all. I mean, if you really look at like who it's impacting the most, though, I mean, the things that were set to expire were the higher. tax brackets, like those were set to go up. Those are staying flat now. So that's benefiting the top one or 5% depending on, you know, where you're looking at the calculations. So a lot of this stuff is designed to help the higher end of the spectrum. Like I mentioned the SALT tax, like 1.6% of the population has, you know, $40,000 of interest and stuff like that they're paying. So a lot of this is going to be geared towards them, but there are definitely some things that will help out the lower income folks. However, it does seem like those are pretty much temporary.
Speaker #0
Those are all the temporary ones. Yeah.
Speaker #1
Yeah. For the most part. So So that's the one big challenge with this bill is there's a lot to parse through. You know, I'm sure there's some tax nerd that's gone through it more than I have that's going to say, hey, look, we could use this, this and this for businesses to really cut down on taxes.
Speaker #0
Now, what would you say? I did a little research on, you know, as we came into this about like there are obviously some positives. Yeah. There's also some negatives that people are less into. And the biggest one is it is going to add, ready for this number, guys, $3.4 trillion to the national debt.
Speaker #1
Yeah, there's a lot of rhetoric out there. It says the tax cuts pay for themselves. That does not happen. That's not how that works. There were some stats that came out last year. I think they analyzed the first tax bill. About 18% of it paid for itself. So you might expect something like that to happen again because the thought process is, hey, there's less taxes. I'm going to spend more money, blah, blah, blah. Then there's more sales tax, more revenue. Cycle goes on and on. It's not enough to cover the amount of...
Speaker #0
3.4 trillion.
Speaker #1
Yeah, it's just too much. I think even I was looking at the... Like just the tips thing is going to cost like $300 plus million of revenue per year.
Speaker #0
Yeah, because that's it's and people don't always get that's like the flip side to these things is, OK, you're not going to tax tips, but that money went to the government.
Speaker #1
Right, right. And I think that you have to look at it kind of what are some potential unintended consequences? Because any any bill, I don't care like where you are, is going to have these unintended consequences. And then maybe, you know, we've kind of seen a little bit with the the rating agencies with the government debt. you may see like, hey, we're getting more income, more debt coming out. So we're probably going to have a worse credit rating. And that could potentially impact long-term credit, which is what mortgages are based on.
Speaker #0
Correct. Craig, yeah. And that seems to be some of the rhetoric around housing with this bill is there was some proposals to have more housing stuff in the bill that just didn't really... parse out, which is how these bills kind of work. People all try to stuff what they want in there. Some of it they get, some of it they don't. But housing was a little bit overlooked in this bill. So we didn't really have a lot of direct impact other than for current homeowners that, again, may have some interest deductions and things like that. But there was not necessarily things to incentivize homeownership. As a matter of fact, there was actually some removals of some housing assistance that was in place prior that has been removed. We don't really necessarily know how that's all going to play out yet. What are the worries for housing? One of the worries is that some of this may increase inflation. So we've been working very hard over the last few years to slowly but surely knock inflation down because inflation is directly, or not directly, but it ends up directly tied to interest rates. The higher inflation is, the higher interest rates are. And so we finally are feeling like a little bit of relief in interest rates. And I say that in rates are in the sixes now. Yeah. We crossed eight for a little while.
Speaker #1
Yeah. I mean, sixes were kind of historically like 30-year average, right?
Speaker #0
We like fives. So mid fives. Fives, okay. And mid fives are generally like, as far as housing is concerned, sort of the marker for like a very stable economy. Fives are really where we want to be. So we're still a little bit higher than that, but we're getting closer. And there has been some great programs for first-time homebuyers. There's a lot of these new state bond programs. Connecticut has one. We've talked about the Time to Own program. Mass has Mass Dreams. Rhode Island has Rhode Island Housing. So these have been kind of great. There was no new additions to this stuff in this bill. But the concern with inflation going up is that rates will go back up again. And we are in a housing affordability crisis. And so, yes, we do want some tax savings so people have a little bit more money in their pocket. Is it going to be enough to make homeownership affordable?
Speaker #1
Probably not. Probably not.
Speaker #0
Probably not. Probably not. Probably not. So, you know, I think we, I think in the housing side, we wish that we got a little bit more.
Speaker #1
Yeah. I mean, something you might want to see is like, hey, let's maybe get some tax credits for our home builders or, hey, like we're going to build affordable units or even attainable housing, you know, multifamily, some kind of thing like that to spur more growth of housing. Because the big problem right now is inventory.
Speaker #0
100%. Not only inventory, but like, and I tell people this all the time in a town like we live in is that, you know, 30 or 40 years ago, developments were going in. That was the big developing time. And a lot of these developments were small capes. They were small ranches. They were maybe small colonials. They were first time home buyer houses. When is the last time you saw a brand new development go in that was not either a condo or... really luxury housing everything's luxury the word's lost on me anymore with housing yeah well and that's you know i had this conversation with somebody the other day about what is a mansion what is the definition of a mansion when we were kids you can like conjure up in your head when you were in a kid in the 90s what a mansion looked yeah there's like the two houses in town yeah you're like that is a mansion i don't i don't even know what that is anymore i don't know a four-bedroom colonial in glastonbury's mansion now yeah you know so you know i think that housing affordability with with these smaller developments is going away. And I think one of the really unfortunate, unintended consequences of this economy that we're in is people who were living in that more affordable housing are renovating their houses and making them less affordable. So we see that a lot in our town and other surrounding towns where like you had the $350,000 cape that was affordable. The person now feels like they can't move who owns it. They've now dumped $100,000 into it. They've put an edition on. They've redone the kitchen, and now it's a $400,000, $500,000, $600,000 house. And it's taken out of the affordable housing supply. So this isn't necessarily going to help that.
Speaker #1
No, it's not addressing that at all. I guess the other thing that's kind of maybe pitiful is the EV tax credits are going away. They're putting a lot more pressure on Medicaid because they have to pay for the bills somehow. They can't just kind of willy-nilly do everything. So people are losing a lot of the EV tax credits for cars, even just being renovations. renovations on your house. That's kind of a big thing for a lot of folks is like, hey, I want to get a new washer dryer or get new energy efficient windows. They're going to be hurt by that stuff.
Speaker #0
Yeah. Solar. There was some great, great solar credits for solar. That's going away. Yeah. The EV tax credit was a big one. So I drive a hybrid minivan. For those of you who don't know, I drive a rocking minivan.
Speaker #1
There's flames on the side of it.
Speaker #0
It's so cool. It's got TV screens. It's like a rolling living room. But we were not originally in the market for an EV. We only got it. because when we were buying it, we did the math and the EV tax credits made it cheaper than a regular one. You're like, okay, so I can get better mileage and get these bomb tax credits. Cool. But now my car is seven years old now, almost eight years old in November. What is my incentive to buy an EV next time? It's not going to be there. It's not going to be there. And are we going to see that going forward?
Speaker #1
Yeah. So I think that could potentially hurt that industry in a big way. especially with you know that's one of the largest job creators is the uh the evening industry so uh we'll see we'll see so the one big
Speaker #0
Beautiful bill is interesting.
Speaker #1
It's interesting. There's a lot there. It's big, as the name says. It's actually apt for that part of it. Yeah, I think this is just, there's a lot in here. And I don't expect you guys to just listen to Spock as being an expert. I'm still not an expert. I'm working through it. I mean, he announced it on July 4th. Like, thank God. Yeah, great. So I have no time to look at this. And I immediately went on vacations. I feel like I'm getting caught up still.
Speaker #0
Eating your coffee grounds. Yeah.
Speaker #1
Yeah. In the basement. Just trying to get caught up. But, you know, this is something where, you know. talk to your planners, talk to your accountant, really kind of figure out, okay, what can I take out of this? Because a lot of stuff is a sprint. A lot of these things are short term. So you got to really figure out, okay, what can I take advantage of the next few years? There's some planning things here. Like if you're a retiree and you're 65, you're listening to this, you've got an extra $6,000. Maybe you do more Roth conversions for the next couple of years to make up that difference and be a little more tax efficient now. So there's some things you can really kind of think about how to strategize from a planning standpoint that you can leverage this bill for.
Speaker #0
Yeah. And I think again, If you have complicated taxes in any way and you've been self-filing for a while, it may behoove you to have a consultation with a CPA or tax preparer, maybe have them review your taxes. Even if you're going to file them on your own, there are tax preparers that will do that. You fill them all out. They just review. Because again, it is adding some layers of potentially beneficial complication, but complication. Absolutely. Absolutely. Talk to your, I feel like this is the end result of every episode. You need to talk to your trusted professionals. Will it be your financial advisor, your tax preparer, your accountant, one of those, because you just don't, this is so big. You don't want to go into it blindly. Yeah.
Speaker #1
You're gonna miss something for sure.
Speaker #0
And you want to, you want to save your monies. Yeah.
Speaker #1
All right. Well, that's it for us, right?
Speaker #0
All right. So thanks for tuning into the first episode of season three and we've got some exciting stuff in store. Yeah.
Speaker #1
Yeah. We had a good lineup this year, I think. So it's going to be fun.
Speaker #0
Awesome. All right. See you next time. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

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We’re back—and bigger than ever! Season 3 launches with a fresh perspective, a brand-new studio, and a renewed commitment to bringing you the conversations that matter most.

New season. New us. Let’s get into it.

Reach out to Kelly Turner at kturner@totalmortgage.com and Derek Mazzarella at dmazzarella@mygfpartner.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
All right, welcome to the first episode of season three of Millennial Money Matters with Kelly Turner and Derek Mazzarella. And we are in a new podcast studio.
Speaker #1
New studio. Look at us moving on up in the world.
Speaker #0
We are fancy. We are not in a dark blue room anymore. Yeah,
Speaker #1
we have a couch and a nice chair and some accoutrement here. Right.
Speaker #0
So new year, new us.
Speaker #1
New us.
Speaker #0
Yeah.
Speaker #1
New bills to talk about.
Speaker #0
New bills. So we are coming in hot. today. We were thinking of what to talk about and Derek told me that we had to talk about this.
Speaker #1
Well, it's so big.
Speaker #0
And beautiful. Beautiful. So what are we talking about today, Derek?
Speaker #1
We're talking about the one big, beautiful bill.
Speaker #0
The OBB, you know me.
Speaker #1
Yep, yep. This thousand page tax bill.
Speaker #0
Yeah. I had to do a lot of Googling.
Speaker #1
Well, luckily for you, I've been in the basement eating coffee grounds and chugging Mountain Dew trying to get ready for this. So I am ready to roll.
Speaker #0
Okay, I'm glad that one of us did. I wanted to chat GPT and asked it a lot of questions, and it was confused as well.
Speaker #1
All right, why don't we start with, what were your questions? Where do you think we should start?
Speaker #0
Okay, why did we pass the big beautiful bill? And I know this could be like a six-hour long episode.
Speaker #1
Yeah, we're going to keep it a half an hour if we can. So, well, the real big reason was there is the Tax Cuts and Jobs Act during Trump's first presidency, which was set to expire. right so we had we kind of had a ticking clock on a lot of these things and if it didn't expire um a couple of big provisions in there like the standard deduction which everyone has been enjoying where you just get deduct a good amount of money from your taxes without having to itemize anything it's very clean and easy that that would uh be cut in half um the tax brackets would kind of go reset so basically the higher end of the tax bracket would go up to 37.5 again or 39 um and a few other things provisions like that would would fall away so they kind of had this clock where like It's not a democratic problem anymore. It's actually my problem again. So I've got to take care of this bill.
Speaker #0
Yeah,
Speaker #1
what are we going to do here? Yeah. So that was the kind of the genesis of the bill. And, you know, every president usually has their kind of big mandate, like big thing they want to get accomplished. You know, some people it's been healthcare, some people it's been taxes.
Speaker #0
This one is all encompassing of everything.
Speaker #1
Yeah. Well, there's healthcare in here and there's taxes in here.
Speaker #0
There's like a little bit of it. That was so as I was doing my research, I was not eating coffee grounds and drinking Mountain Dew. I was sitting at my desk drinking my Starbies. It was interesting because you can see all my notes here, guys. There's a lot of notes. It does encompass a lot of stuff.
Speaker #1
Yeah. Farming stuff's in there. Taxes are in there.
Speaker #0
Yeah. Now, what it doesn't really encompass is me in the housing industry. There's not a lot for us in it. So we didn't get housing despite the challenges in the housing market. Didn't really get a lot of relief through this bill. That's not where this bill was aimed. No,
Speaker #1
not really. It was mainly at, I'd say the big agenda item here was let's keep the original tax cuts status quo. I think that was kind of like the big overarching, what are we really doing with the bill? We want to just keep that as is.
Speaker #0
So taxes should look more similar to how they have. It's not like a big, you're not really helping, you're not really changing things. It's just keeping them the same.
Speaker #1
For the most part, yeah. If you have one big takeaway, it's that for most things... the taxes are just going to be a continuation of the tax cuts.
Speaker #0
Right. Well, that doesn't sound so bad.
Speaker #1
No, no, it's not bad at all.
Speaker #0
That makes me...
Speaker #1
No, I mean, your taxes aren't going up, which is nice.
Speaker #0
Take that. I'll take that. All right. So we have a continuation of some stuff that had happened a few years ago, but then there's also some additions to this. There's some new things.
Speaker #1
Yeah. Some of the things that are staying the same, basically. Let's just quickly go through that. The tax brackets, those are going to be the same. Those aren't changing. the standard deduction is actually going to go up a little bit.
Speaker #0
So that's better.
Speaker #1
That's better. Yep. So you have more money. Basically, what a deduction is, is the higher the deduction, the more money you can deduct off your taxes. And a deduction doesn't mean, hey, if I deduct $5,000, my income is down $5,000. Well, no, actually, it doesn't mean you're saving $5,000 with taxes. It means your income goes down by $5,000. So if you make $100,000, your deduction is $5,000. The government looks like you make $95,000. So I hope that was clear. That was clear. even though it took a while to get there.
Speaker #0
You know, we're out of practice.
Speaker #1
I know,
Speaker #0
yeah. We're out of practice. We haven't recorded in, I don't know, two months. And it's the summer, guys. You're going to be listening to this in September, but we are recording this in August.
Speaker #1
I've got vacation this week coming up. Yeah,
Speaker #0
it's like vacay time. Yep.
Speaker #1
So yeah, that's kind of the main real change. And I think it's probably important to get into... All right, what's the... tax brackets versus effective tax rate, because that's kind of important to go through a little bit here.
Speaker #0
Can we just have a quick point of clarification? So people always talk about tax brackets. And I think even as a tax paying adult, like I know that like richer people are in higher tax brackets. But like, could you just give me like a quick synopsis on like, what does that mean?
Speaker #1
Yeah, so every dollar you make of income, you're actually not taxed to the same percentage. So it's a tiered system. So your first, you know, 20,000, 50,000 is taxable in one rate, then the next. bracket is a tax at another rate. So you're kind of taxed along the way over time. But if let's say you're in the 24% bracket, any dollar you make after that in that band is taxed at 24%. While your effective tax rate may actually be something like 13 or 14 is what you actually pay on your like total sum of earnings. So it takes into account what you're taking for deductions, you have any tax credits, what are you making, what are you reading each band. So it's really not like oh hey my bonuses are taxed more no that's not how it works ever all the income is kind of pooled into one and it's like kind of sifted through each of these brackets and our bracket something that you're paying tax like is that from the taxes getting taken out of your pay stub weekly or is that like the taxes that you're paying at the end of the year or is it a combination of both it's a combination of both um you want to kind of align your deductions that you're getting throughout the year with your tax bracket or kind of figure out actually really what your effective tax rate is because if your effective tax rate says like we're i'm at a 15 effective rate that means 15 of all your taxes is basically 15 of your income is what you're gonna pay in taxes so that's that's what you should plan for right all right fair fair um so we've we've started to dabble in this but like how does this bill impact individuals there's a lot of stuff in there but like as
Speaker #0
an individual person that's what i care about i'm a millennial right and i care about i care about me care about me what's in it for me right oh how does this impact individuals okay So tax brackets are staying as is.
Speaker #1
That's one. um standard deduction is going up um so basically the the single rate was 13 850 you can deduct this year um it's all the stuff most of the stuff is actually retroactive to 2025 so you'll be able to do this this year um the rate is going up to 15 750 for in a single person married finally jointly it's up to 31 500 so you get to deduct 31 500 if you're married from your taxes right off the rip without having to do anything that's nice yeah um they have a new wrinkle so this is one of the new things um so this is temporary but if you're a senior if you're over 65 years old you can deduct up to six thousand dollars additional just for fun yeah well you know he kind of there was that promise of hey we're not going to tax social security and they kind of worded in their letter like hey you're not going to pay tax on social security it's like no hold on um you get a six thousand dollar deduction um of your social security well all of your income So if you don't make any Social Security and you're 65, you're not collecting yet, you can still deduct $6,000. But you have to make between $75,000 and $150,000 because then it starts to phase out at certain levels. So you got to talk to an accountant about it. But basically, it doesn't mean everyone gets to deduct $6,000. So if you're making $2 million, you're phased out. Yeah,
Speaker #0
you don't get that.
Speaker #1
But if you're making under $75,000, you can deduct the entire thing,
Speaker #0
entire $6,000. Okay. So positive,
Speaker #1
great. Positive, but it's also temporary. It's only going to be around for a few years. So it's just a short term. thing and that's that's you'll kind of see that the episode there's a lot of short-term stuff that's going to feel really nice for a little bit but then it's going to go away okay yeah all right yeah um the other thing is for us with kids so think about for me um the child tax credit goes up from 2000 to 2200 so bank that's extra 200 um for me that's 600 because i got three kids yep yeah yeah right per child that's basically one month of karate you get extra There you go.
Speaker #0
I'll take it. I'll take it.
Speaker #1
Yep. So. Some of the new write-offs. So this is kind of like the, what are they campaigning on? What is actually happening? The no tax on tips.
Speaker #0
Yeah, that was a big one.
Speaker #1
Big one. I don't understand that personally. It's like, why is a tip dollar earnings not as taxable as my income or your income or someone doing something else?
Speaker #0
I don't really know either. Because if you were to ask me about income, I think it's probably twofold. But in my opinion, I would relate tips to commission. Yeah. Right? It's the same thing. I'm taxing my commission. a tipped employee. Now, I had this argument with somebody who worked in the service industry, and they said, well, we don't really get paid hourly. And I was like, yo, neither do I. I just make the commission. So I do think that's a little bit confusing. I don't know if it, I don't really know what the genesis of it is, but the people in the service industry, which like I would be excited if you told me my commission wasn't.
Speaker #1
Yeah, I'd be real pumped. Yeah. Well, you can maybe just tip me on, maybe I'll get client tips. Right. That way, right.
Speaker #0
Tips instead of commission.
Speaker #1
Yeah, yeah. No, it's just a tip.
Speaker #0
Just give me a little. Okay.
Speaker #1
No, but it's, I think they have language in there that says like, Hey, if it's outside of your normal, if you normally get tipped and yeah, it's going to continue. So there's no scamming like that. Like, you know, my Barbara, I'm not going to pay a dollar for the haircut and then $30 and a tip.
Speaker #0
Is there, did that happen?
Speaker #1
It did happen. It's temporary. You can deduct up to $25,000. But if you're single and you make more than $150,000, it starts to get phased out. Okay. So it's just generally for the lower middle income folks. Okay. So, well, I also don't think millionaires are getting tips.
Speaker #0
Probably not.
Speaker #1
Probably not. Probably not. We'll find out. The overtime thing is happening too. So up to $12,500 of mandatory overtime.
Speaker #0
Mandatory. So your employer is going to have to deck you out. If it's mandatory overtime or voluntary overtime.
Speaker #1
Correct.
Speaker #0
Correct. And that, again, like, that is a layer of work for your employer, too. And it's also, what are they going to say to you? Like, this is not mandatory or this is mandatory. Like, sometimes you just have overtime and part of the deal.
Speaker #1
Yeah. Once again, I don't know the mechanics of that one. You do get a car loan interest deduction up to $10,000.
Speaker #0
Oh.
Speaker #1
Oh, hey. Not too shabby. But if you make more than $100,000, it's phased out. All right. Yep. You do the qualified business income. So this is probably something you and I can benefit from. That's actually going to be permanent, right? All right. It's phased in now. And basically, you get to do 20% deduction for your business earnings income. So if you own a small business or you get things passed through your income, so you're basically not a C-corp, you're going to get a nice 20% deduction.
Speaker #0
All right. That's nice.
Speaker #1
That's a win. Yeah, they were talking about that going away. So that's not too bad.
Speaker #0
What is the SALT deduction?
Speaker #1
Could you new dates and local income taxes? This has been a, this was like the one thing that really held up mostly the Republican side.
Speaker #0
Do you see my face that I made for you?
Speaker #1
What was that about?
Speaker #0
Well, first off, all of the names on this bill are ridiculous that we've got. Like, again, I'm not going to, can I say this in the podcast? Right. Is what I saw, like the OBB, all I thought about was, um, what was that musician in the nineties?
Speaker #1
You down with OPP or whatever? Yeah.
Speaker #0
Yeah. Um, and then you got like the salt like it's got a lot of like ridiculous acronyms which like is the government in general the government loves ridiculous acronyms yeah um but when i saw the salt deduction i was like i don't even you can see me my no i like had to google what that was i was like i don't even know what that is but people are excited or into that that's like a big one with a lot of discussion around yeah well that's where um certain states really
Speaker #1
push that like New Jersey, New York, California. because they have higher state taxes. Okay. Right. So that goes to your state and local taxes. So your homeowner's tax, your property taxes, vehicle taxes, all that stuff can be included in here. So previously it was $10,000 was the cap. So basically the standard deduction was well above that. So most people weren't even taking deductions for their house at all. And they used to, if they itemized before that was kind of a nice win for them. And about 42% of households actually have more than $10,000 in that SALT tax area. This is pushing up to $40,000. And it doesn't matter if you're single or you're married or filing jointly, you get $40,000 to deduct there on state and local taxes.
Speaker #0
Okay. So that's a win for a lot of people.
Speaker #1
Yeah. I mean, basically, only about 1.6% of the population has more than $40,000. And you know what this does cover, which may help you a little bit, is vacation homes.
Speaker #0
Oh, hey.
Speaker #1
You got a vacation home, you can add both of them up together, put your hands together, and now you get some cell deductions.
Speaker #0
And now you get some cell deductions. Now. This is only temporary though, this all deduction.
Speaker #1
Yeah, of course it is. Yeah.
Speaker #0
So 2029, you got to revisit this. Goes away.
Speaker #1
Also, if you have rental properties, I get a lot of questions like that. Does not count. But if it's like, hey, I have a vacation home. I go there half the year, let's say. I can deduct, use half the property tax deduct. So it's personal use basis.
Speaker #0
Okay. So you got to say, I use this personally a lot.
Speaker #1
Yes. If you have 17 multifamily properties, like... you're out of luck you're not getting that deduction but it's like you got the beach house and you go a weekend and you rent it out a weekend and you go a weekend and you rent another yeah yeah and this is this is you have to itemize to get it so you can't get the standard deduction plus this so right now if you're married filing jointly the standard action is 31 500 it'll give you an extra 8 500 to deduct plus any other let's say you got the car loan now now you got the other stuff so you can stack deductions a little easier now with this bill if you know how to do your taxes yeah or hire someone that does know how to do this which i would recommend that especially now
Speaker #0
Yeah. Because this stuff is more complicated. The free TurboTax may not be doing it anymore. Yeah.
Speaker #1
This is where it's probably going to make more sense or be more valuable to hire someone, I would say, because there are a little more nuances. At least this first year, maybe figure it out. Like, okay, what can I get for deductions? What don't I get? Because, you know, you get some of those other funky ones. There's like a $1,000 charitable giving one you get now. Not bad. So actually, you get that if you itemize or don't itemize. So it's kind of nice. So you don't have to do that. So that should help charities a little bit, which is nice.
Speaker #0
so But many of these do not last forever. And I think that's like a piece that we just have to be clear about for people that you're going to get changes. They may feel good temporarily. And I think like even when we say things do last forever, nothing lasts forever in the government. Yeah,
Speaker #1
this is government permanence, right? Yeah. It's big time.
Speaker #0
And there's no actual permanent, like we've had permanent things that have been removed in the last couple of years. Like there's not.
Speaker #1
Yeah, next set of Congress can come in two years from now and just totally say, no, we're doing all this bill away, or we're going to change this, or we're going to raise taxes. I mean, they can do whatever they want. Whatever they want.
Speaker #0
Yeah. What about these Trump accounts?
Speaker #1
Trump accounts? Okay, so babies are going to get, once again, temporary.
Speaker #0
Temporary?
Speaker #1
$1,000 when they're born. And then you can put in up to $5,000 a year into the account. You do not get a deduction for putting in there, like, you know, your 401k or whatever. So your employer can actually match it too, but it still goes into the $5,000 cap. So if your employer puts in $2,000, you're capped at $3,000.
Speaker #0
And what kind of account is this? Is this a $529?
Speaker #1
No, it's kind of like an IRA, but for kids, because it grows tax deferred, you don't get the tax reduction up front. And then you can't take it out until they're 18, but you can use it for up to $10,000 for a first time home. You could use it for college expenses and pay no taxes on the money that comes out. So it's kind of like a hybrid 529 thing. It's kind of like a little bit of an alternative. The kids don't go to college. It's not really designed just for college. So that's a little bit of a nice feature. But overall, there's not like a huge tax savings for the adult or the parent or grandparent to put money in here. So it's just kind of another avenue because you have things like 529s. You also have UTMA accounts that are fairly tax efficient that can be used for other things. So it's another tool in the toolbox, basically.
Speaker #0
Okay. But this is like a new type of account.
Speaker #1
Yeah, but it's going to phase out once again. $1,000 is going to phase out.
Speaker #0
Some people are going to get it.
Speaker #1
Yeah, so if you're going to have a baby, get it on now.
Speaker #0
It's not going to help me.
Speaker #1
Not really. Not as much.
Speaker #0
Not going to help me. All right. How are businesses impacted? Because we've talked a lot about individuals now, right? Yeah. Individuals do have some benefits. But there is a lot of kind of, I want to say, this is the more controversial parts of the bill, that there are a lot of... business implications, some to small businesses, but also a lot to larger businesses.
Speaker #1
Yeah. I mean, writ large is really going to help businesses in general, but the big one is the qualified business deduction that almost most small businesses are going to get, which is nice. But then a lot of them is just kind of more nuanced stuff like accelerated depreciation, right? So you used to be able to say, hey, I bought this big tractor for my business, cost $200,000. You said to deduct it over time. You can deduct all of that now in one year. Oh, okay. So there's a lot of things like that in the bill that are going to help these larger businesses or even smaller businesses, you know, put money in right away and deduct it this year versus having to wait and do it over time.
Speaker #0
Now, I think some of the chatter about this bill is that it's like the Jeff Bezos, Elon Musk bill, right? That like it's to help those huge businesses. But it appears to me that that's not all the case.
Speaker #1
No, not all. I mean, if you really look at like who it's impacting the most, though, I mean, the things that were set to expire were the higher. tax brackets, like those were set to go up. Those are staying flat now. So that's benefiting the top one or 5% depending on, you know, where you're looking at the calculations. So a lot of this stuff is designed to help the higher end of the spectrum. Like I mentioned the SALT tax, like 1.6% of the population has, you know, $40,000 of interest and stuff like that they're paying. So a lot of this is going to be geared towards them, but there are definitely some things that will help out the lower income folks. However, it does seem like those are pretty much temporary.
Speaker #0
Those are all the temporary ones. Yeah.
Speaker #1
Yeah. For the most part. So So that's the one big challenge with this bill is there's a lot to parse through. You know, I'm sure there's some tax nerd that's gone through it more than I have that's going to say, hey, look, we could use this, this and this for businesses to really cut down on taxes.
Speaker #0
Now, what would you say? I did a little research on, you know, as we came into this about like there are obviously some positives. Yeah. There's also some negatives that people are less into. And the biggest one is it is going to add, ready for this number, guys, $3.4 trillion to the national debt.
Speaker #1
Yeah, there's a lot of rhetoric out there. It says the tax cuts pay for themselves. That does not happen. That's not how that works. There were some stats that came out last year. I think they analyzed the first tax bill. About 18% of it paid for itself. So you might expect something like that to happen again because the thought process is, hey, there's less taxes. I'm going to spend more money, blah, blah, blah. Then there's more sales tax, more revenue. Cycle goes on and on. It's not enough to cover the amount of...
Speaker #0
3.4 trillion.
Speaker #1
Yeah, it's just too much. I think even I was looking at the... Like just the tips thing is going to cost like $300 plus million of revenue per year.
Speaker #0
Yeah, because that's it's and people don't always get that's like the flip side to these things is, OK, you're not going to tax tips, but that money went to the government.
Speaker #1
Right, right. And I think that you have to look at it kind of what are some potential unintended consequences? Because any any bill, I don't care like where you are, is going to have these unintended consequences. And then maybe, you know, we've kind of seen a little bit with the the rating agencies with the government debt. you may see like, hey, we're getting more income, more debt coming out. So we're probably going to have a worse credit rating. And that could potentially impact long-term credit, which is what mortgages are based on.
Speaker #0
Correct. Craig, yeah. And that seems to be some of the rhetoric around housing with this bill is there was some proposals to have more housing stuff in the bill that just didn't really... parse out, which is how these bills kind of work. People all try to stuff what they want in there. Some of it they get, some of it they don't. But housing was a little bit overlooked in this bill. So we didn't really have a lot of direct impact other than for current homeowners that, again, may have some interest deductions and things like that. But there was not necessarily things to incentivize homeownership. As a matter of fact, there was actually some removals of some housing assistance that was in place prior that has been removed. We don't really necessarily know how that's all going to play out yet. What are the worries for housing? One of the worries is that some of this may increase inflation. So we've been working very hard over the last few years to slowly but surely knock inflation down because inflation is directly, or not directly, but it ends up directly tied to interest rates. The higher inflation is, the higher interest rates are. And so we finally are feeling like a little bit of relief in interest rates. And I say that in rates are in the sixes now. Yeah. We crossed eight for a little while.
Speaker #1
Yeah. I mean, sixes were kind of historically like 30-year average, right?
Speaker #0
We like fives. So mid fives. Fives, okay. And mid fives are generally like, as far as housing is concerned, sort of the marker for like a very stable economy. Fives are really where we want to be. So we're still a little bit higher than that, but we're getting closer. And there has been some great programs for first-time homebuyers. There's a lot of these new state bond programs. Connecticut has one. We've talked about the Time to Own program. Mass has Mass Dreams. Rhode Island has Rhode Island Housing. So these have been kind of great. There was no new additions to this stuff in this bill. But the concern with inflation going up is that rates will go back up again. And we are in a housing affordability crisis. And so, yes, we do want some tax savings so people have a little bit more money in their pocket. Is it going to be enough to make homeownership affordable?
Speaker #1
Probably not. Probably not.
Speaker #0
Probably not. Probably not. Probably not. So, you know, I think we, I think in the housing side, we wish that we got a little bit more.
Speaker #1
Yeah. I mean, something you might want to see is like, hey, let's maybe get some tax credits for our home builders or, hey, like we're going to build affordable units or even attainable housing, you know, multifamily, some kind of thing like that to spur more growth of housing. Because the big problem right now is inventory.
Speaker #0
100%. Not only inventory, but like, and I tell people this all the time in a town like we live in is that, you know, 30 or 40 years ago, developments were going in. That was the big developing time. And a lot of these developments were small capes. They were small ranches. They were maybe small colonials. They were first time home buyer houses. When is the last time you saw a brand new development go in that was not either a condo or... really luxury housing everything's luxury the word's lost on me anymore with housing yeah well and that's you know i had this conversation with somebody the other day about what is a mansion what is the definition of a mansion when we were kids you can like conjure up in your head when you were in a kid in the 90s what a mansion looked yeah there's like the two houses in town yeah you're like that is a mansion i don't i don't even know what that is anymore i don't know a four-bedroom colonial in glastonbury's mansion now yeah you know so you know i think that housing affordability with with these smaller developments is going away. And I think one of the really unfortunate, unintended consequences of this economy that we're in is people who were living in that more affordable housing are renovating their houses and making them less affordable. So we see that a lot in our town and other surrounding towns where like you had the $350,000 cape that was affordable. The person now feels like they can't move who owns it. They've now dumped $100,000 into it. They've put an edition on. They've redone the kitchen, and now it's a $400,000, $500,000, $600,000 house. And it's taken out of the affordable housing supply. So this isn't necessarily going to help that.
Speaker #1
No, it's not addressing that at all. I guess the other thing that's kind of maybe pitiful is the EV tax credits are going away. They're putting a lot more pressure on Medicaid because they have to pay for the bills somehow. They can't just kind of willy-nilly do everything. So people are losing a lot of the EV tax credits for cars, even just being renovations. renovations on your house. That's kind of a big thing for a lot of folks is like, hey, I want to get a new washer dryer or get new energy efficient windows. They're going to be hurt by that stuff.
Speaker #0
Yeah. Solar. There was some great, great solar credits for solar. That's going away. Yeah. The EV tax credit was a big one. So I drive a hybrid minivan. For those of you who don't know, I drive a rocking minivan.
Speaker #1
There's flames on the side of it.
Speaker #0
It's so cool. It's got TV screens. It's like a rolling living room. But we were not originally in the market for an EV. We only got it. because when we were buying it, we did the math and the EV tax credits made it cheaper than a regular one. You're like, okay, so I can get better mileage and get these bomb tax credits. Cool. But now my car is seven years old now, almost eight years old in November. What is my incentive to buy an EV next time? It's not going to be there. It's not going to be there. And are we going to see that going forward?
Speaker #1
Yeah. So I think that could potentially hurt that industry in a big way. especially with you know that's one of the largest job creators is the uh the evening industry so uh we'll see we'll see so the one big
Speaker #0
Beautiful bill is interesting.
Speaker #1
It's interesting. There's a lot there. It's big, as the name says. It's actually apt for that part of it. Yeah, I think this is just, there's a lot in here. And I don't expect you guys to just listen to Spock as being an expert. I'm still not an expert. I'm working through it. I mean, he announced it on July 4th. Like, thank God. Yeah, great. So I have no time to look at this. And I immediately went on vacations. I feel like I'm getting caught up still.
Speaker #0
Eating your coffee grounds. Yeah.
Speaker #1
Yeah. In the basement. Just trying to get caught up. But, you know, this is something where, you know. talk to your planners, talk to your accountant, really kind of figure out, okay, what can I take out of this? Because a lot of stuff is a sprint. A lot of these things are short term. So you got to really figure out, okay, what can I take advantage of the next few years? There's some planning things here. Like if you're a retiree and you're 65, you're listening to this, you've got an extra $6,000. Maybe you do more Roth conversions for the next couple of years to make up that difference and be a little more tax efficient now. So there's some things you can really kind of think about how to strategize from a planning standpoint that you can leverage this bill for.
Speaker #0
Yeah. And I think again, If you have complicated taxes in any way and you've been self-filing for a while, it may behoove you to have a consultation with a CPA or tax preparer, maybe have them review your taxes. Even if you're going to file them on your own, there are tax preparers that will do that. You fill them all out. They just review. Because again, it is adding some layers of potentially beneficial complication, but complication. Absolutely. Absolutely. Talk to your, I feel like this is the end result of every episode. You need to talk to your trusted professionals. Will it be your financial advisor, your tax preparer, your accountant, one of those, because you just don't, this is so big. You don't want to go into it blindly. Yeah.
Speaker #1
You're gonna miss something for sure.
Speaker #0
And you want to, you want to save your monies. Yeah.
Speaker #1
All right. Well, that's it for us, right?
Speaker #0
All right. So thanks for tuning into the first episode of season three and we've got some exciting stuff in store. Yeah.
Speaker #1
Yeah. We had a good lineup this year, I think. So it's going to be fun.
Speaker #0
Awesome. All right. See you next time. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Description

We’re back—and bigger than ever! Season 3 launches with a fresh perspective, a brand-new studio, and a renewed commitment to bringing you the conversations that matter most.

New season. New us. Let’s get into it.

Reach out to Kelly Turner at kturner@totalmortgage.com and Derek Mazzarella at dmazzarella@mygfpartner.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
All right, welcome to the first episode of season three of Millennial Money Matters with Kelly Turner and Derek Mazzarella. And we are in a new podcast studio.
Speaker #1
New studio. Look at us moving on up in the world.
Speaker #0
We are fancy. We are not in a dark blue room anymore. Yeah,
Speaker #1
we have a couch and a nice chair and some accoutrement here. Right.
Speaker #0
So new year, new us.
Speaker #1
New us.
Speaker #0
Yeah.
Speaker #1
New bills to talk about.
Speaker #0
New bills. So we are coming in hot. today. We were thinking of what to talk about and Derek told me that we had to talk about this.
Speaker #1
Well, it's so big.
Speaker #0
And beautiful. Beautiful. So what are we talking about today, Derek?
Speaker #1
We're talking about the one big, beautiful bill.
Speaker #0
The OBB, you know me.
Speaker #1
Yep, yep. This thousand page tax bill.
Speaker #0
Yeah. I had to do a lot of Googling.
Speaker #1
Well, luckily for you, I've been in the basement eating coffee grounds and chugging Mountain Dew trying to get ready for this. So I am ready to roll.
Speaker #0
Okay, I'm glad that one of us did. I wanted to chat GPT and asked it a lot of questions, and it was confused as well.
Speaker #1
All right, why don't we start with, what were your questions? Where do you think we should start?
Speaker #0
Okay, why did we pass the big beautiful bill? And I know this could be like a six-hour long episode.
Speaker #1
Yeah, we're going to keep it a half an hour if we can. So, well, the real big reason was there is the Tax Cuts and Jobs Act during Trump's first presidency, which was set to expire. right so we had we kind of had a ticking clock on a lot of these things and if it didn't expire um a couple of big provisions in there like the standard deduction which everyone has been enjoying where you just get deduct a good amount of money from your taxes without having to itemize anything it's very clean and easy that that would uh be cut in half um the tax brackets would kind of go reset so basically the higher end of the tax bracket would go up to 37.5 again or 39 um and a few other things provisions like that would would fall away so they kind of had this clock where like It's not a democratic problem anymore. It's actually my problem again. So I've got to take care of this bill.
Speaker #0
Yeah,
Speaker #1
what are we going to do here? Yeah. So that was the kind of the genesis of the bill. And, you know, every president usually has their kind of big mandate, like big thing they want to get accomplished. You know, some people it's been healthcare, some people it's been taxes.
Speaker #0
This one is all encompassing of everything.
Speaker #1
Yeah. Well, there's healthcare in here and there's taxes in here.
Speaker #0
There's like a little bit of it. That was so as I was doing my research, I was not eating coffee grounds and drinking Mountain Dew. I was sitting at my desk drinking my Starbies. It was interesting because you can see all my notes here, guys. There's a lot of notes. It does encompass a lot of stuff.
Speaker #1
Yeah. Farming stuff's in there. Taxes are in there.
Speaker #0
Yeah. Now, what it doesn't really encompass is me in the housing industry. There's not a lot for us in it. So we didn't get housing despite the challenges in the housing market. Didn't really get a lot of relief through this bill. That's not where this bill was aimed. No,
Speaker #1
not really. It was mainly at, I'd say the big agenda item here was let's keep the original tax cuts status quo. I think that was kind of like the big overarching, what are we really doing with the bill? We want to just keep that as is.
Speaker #0
So taxes should look more similar to how they have. It's not like a big, you're not really helping, you're not really changing things. It's just keeping them the same.
Speaker #1
For the most part, yeah. If you have one big takeaway, it's that for most things... the taxes are just going to be a continuation of the tax cuts.
Speaker #0
Right. Well, that doesn't sound so bad.
Speaker #1
No, no, it's not bad at all.
Speaker #0
That makes me...
Speaker #1
No, I mean, your taxes aren't going up, which is nice.
Speaker #0
Take that. I'll take that. All right. So we have a continuation of some stuff that had happened a few years ago, but then there's also some additions to this. There's some new things.
Speaker #1
Yeah. Some of the things that are staying the same, basically. Let's just quickly go through that. The tax brackets, those are going to be the same. Those aren't changing. the standard deduction is actually going to go up a little bit.
Speaker #0
So that's better.
Speaker #1
That's better. Yep. So you have more money. Basically, what a deduction is, is the higher the deduction, the more money you can deduct off your taxes. And a deduction doesn't mean, hey, if I deduct $5,000, my income is down $5,000. Well, no, actually, it doesn't mean you're saving $5,000 with taxes. It means your income goes down by $5,000. So if you make $100,000, your deduction is $5,000. The government looks like you make $95,000. So I hope that was clear. That was clear. even though it took a while to get there.
Speaker #0
You know, we're out of practice.
Speaker #1
I know,
Speaker #0
yeah. We're out of practice. We haven't recorded in, I don't know, two months. And it's the summer, guys. You're going to be listening to this in September, but we are recording this in August.
Speaker #1
I've got vacation this week coming up. Yeah,
Speaker #0
it's like vacay time. Yep.
Speaker #1
So yeah, that's kind of the main real change. And I think it's probably important to get into... All right, what's the... tax brackets versus effective tax rate, because that's kind of important to go through a little bit here.
Speaker #0
Can we just have a quick point of clarification? So people always talk about tax brackets. And I think even as a tax paying adult, like I know that like richer people are in higher tax brackets. But like, could you just give me like a quick synopsis on like, what does that mean?
Speaker #1
Yeah, so every dollar you make of income, you're actually not taxed to the same percentage. So it's a tiered system. So your first, you know, 20,000, 50,000 is taxable in one rate, then the next. bracket is a tax at another rate. So you're kind of taxed along the way over time. But if let's say you're in the 24% bracket, any dollar you make after that in that band is taxed at 24%. While your effective tax rate may actually be something like 13 or 14 is what you actually pay on your like total sum of earnings. So it takes into account what you're taking for deductions, you have any tax credits, what are you making, what are you reading each band. So it's really not like oh hey my bonuses are taxed more no that's not how it works ever all the income is kind of pooled into one and it's like kind of sifted through each of these brackets and our bracket something that you're paying tax like is that from the taxes getting taken out of your pay stub weekly or is that like the taxes that you're paying at the end of the year or is it a combination of both it's a combination of both um you want to kind of align your deductions that you're getting throughout the year with your tax bracket or kind of figure out actually really what your effective tax rate is because if your effective tax rate says like we're i'm at a 15 effective rate that means 15 of all your taxes is basically 15 of your income is what you're gonna pay in taxes so that's that's what you should plan for right all right fair fair um so we've we've started to dabble in this but like how does this bill impact individuals there's a lot of stuff in there but like as
Speaker #0
an individual person that's what i care about i'm a millennial right and i care about i care about me care about me what's in it for me right oh how does this impact individuals okay So tax brackets are staying as is.
Speaker #1
That's one. um standard deduction is going up um so basically the the single rate was 13 850 you can deduct this year um it's all the stuff most of the stuff is actually retroactive to 2025 so you'll be able to do this this year um the rate is going up to 15 750 for in a single person married finally jointly it's up to 31 500 so you get to deduct 31 500 if you're married from your taxes right off the rip without having to do anything that's nice yeah um they have a new wrinkle so this is one of the new things um so this is temporary but if you're a senior if you're over 65 years old you can deduct up to six thousand dollars additional just for fun yeah well you know he kind of there was that promise of hey we're not going to tax social security and they kind of worded in their letter like hey you're not going to pay tax on social security it's like no hold on um you get a six thousand dollar deduction um of your social security well all of your income So if you don't make any Social Security and you're 65, you're not collecting yet, you can still deduct $6,000. But you have to make between $75,000 and $150,000 because then it starts to phase out at certain levels. So you got to talk to an accountant about it. But basically, it doesn't mean everyone gets to deduct $6,000. So if you're making $2 million, you're phased out. Yeah,
Speaker #0
you don't get that.
Speaker #1
But if you're making under $75,000, you can deduct the entire thing,
Speaker #0
entire $6,000. Okay. So positive,
Speaker #1
great. Positive, but it's also temporary. It's only going to be around for a few years. So it's just a short term. thing and that's that's you'll kind of see that the episode there's a lot of short-term stuff that's going to feel really nice for a little bit but then it's going to go away okay yeah all right yeah um the other thing is for us with kids so think about for me um the child tax credit goes up from 2000 to 2200 so bank that's extra 200 um for me that's 600 because i got three kids yep yeah yeah right per child that's basically one month of karate you get extra There you go.
Speaker #0
I'll take it. I'll take it.
Speaker #1
Yep. So. Some of the new write-offs. So this is kind of like the, what are they campaigning on? What is actually happening? The no tax on tips.
Speaker #0
Yeah, that was a big one.
Speaker #1
Big one. I don't understand that personally. It's like, why is a tip dollar earnings not as taxable as my income or your income or someone doing something else?
Speaker #0
I don't really know either. Because if you were to ask me about income, I think it's probably twofold. But in my opinion, I would relate tips to commission. Yeah. Right? It's the same thing. I'm taxing my commission. a tipped employee. Now, I had this argument with somebody who worked in the service industry, and they said, well, we don't really get paid hourly. And I was like, yo, neither do I. I just make the commission. So I do think that's a little bit confusing. I don't know if it, I don't really know what the genesis of it is, but the people in the service industry, which like I would be excited if you told me my commission wasn't.
Speaker #1
Yeah, I'd be real pumped. Yeah. Well, you can maybe just tip me on, maybe I'll get client tips. Right. That way, right.
Speaker #0
Tips instead of commission.
Speaker #1
Yeah, yeah. No, it's just a tip.
Speaker #0
Just give me a little. Okay.
Speaker #1
No, but it's, I think they have language in there that says like, Hey, if it's outside of your normal, if you normally get tipped and yeah, it's going to continue. So there's no scamming like that. Like, you know, my Barbara, I'm not going to pay a dollar for the haircut and then $30 and a tip.
Speaker #0
Is there, did that happen?
Speaker #1
It did happen. It's temporary. You can deduct up to $25,000. But if you're single and you make more than $150,000, it starts to get phased out. Okay. So it's just generally for the lower middle income folks. Okay. So, well, I also don't think millionaires are getting tips.
Speaker #0
Probably not.
Speaker #1
Probably not. Probably not. We'll find out. The overtime thing is happening too. So up to $12,500 of mandatory overtime.
Speaker #0
Mandatory. So your employer is going to have to deck you out. If it's mandatory overtime or voluntary overtime.
Speaker #1
Correct.
Speaker #0
Correct. And that, again, like, that is a layer of work for your employer, too. And it's also, what are they going to say to you? Like, this is not mandatory or this is mandatory. Like, sometimes you just have overtime and part of the deal.
Speaker #1
Yeah. Once again, I don't know the mechanics of that one. You do get a car loan interest deduction up to $10,000.
Speaker #0
Oh.
Speaker #1
Oh, hey. Not too shabby. But if you make more than $100,000, it's phased out. All right. Yep. You do the qualified business income. So this is probably something you and I can benefit from. That's actually going to be permanent, right? All right. It's phased in now. And basically, you get to do 20% deduction for your business earnings income. So if you own a small business or you get things passed through your income, so you're basically not a C-corp, you're going to get a nice 20% deduction.
Speaker #0
All right. That's nice.
Speaker #1
That's a win. Yeah, they were talking about that going away. So that's not too bad.
Speaker #0
What is the SALT deduction?
Speaker #1
Could you new dates and local income taxes? This has been a, this was like the one thing that really held up mostly the Republican side.
Speaker #0
Do you see my face that I made for you?
Speaker #1
What was that about?
Speaker #0
Well, first off, all of the names on this bill are ridiculous that we've got. Like, again, I'm not going to, can I say this in the podcast? Right. Is what I saw, like the OBB, all I thought about was, um, what was that musician in the nineties?
Speaker #1
You down with OPP or whatever? Yeah.
Speaker #0
Yeah. Um, and then you got like the salt like it's got a lot of like ridiculous acronyms which like is the government in general the government loves ridiculous acronyms yeah um but when i saw the salt deduction i was like i don't even you can see me my no i like had to google what that was i was like i don't even know what that is but people are excited or into that that's like a big one with a lot of discussion around yeah well that's where um certain states really
Speaker #1
push that like New Jersey, New York, California. because they have higher state taxes. Okay. Right. So that goes to your state and local taxes. So your homeowner's tax, your property taxes, vehicle taxes, all that stuff can be included in here. So previously it was $10,000 was the cap. So basically the standard deduction was well above that. So most people weren't even taking deductions for their house at all. And they used to, if they itemized before that was kind of a nice win for them. And about 42% of households actually have more than $10,000 in that SALT tax area. This is pushing up to $40,000. And it doesn't matter if you're single or you're married or filing jointly, you get $40,000 to deduct there on state and local taxes.
Speaker #0
Okay. So that's a win for a lot of people.
Speaker #1
Yeah. I mean, basically, only about 1.6% of the population has more than $40,000. And you know what this does cover, which may help you a little bit, is vacation homes.
Speaker #0
Oh, hey.
Speaker #1
You got a vacation home, you can add both of them up together, put your hands together, and now you get some cell deductions.
Speaker #0
And now you get some cell deductions. Now. This is only temporary though, this all deduction.
Speaker #1
Yeah, of course it is. Yeah.
Speaker #0
So 2029, you got to revisit this. Goes away.
Speaker #1
Also, if you have rental properties, I get a lot of questions like that. Does not count. But if it's like, hey, I have a vacation home. I go there half the year, let's say. I can deduct, use half the property tax deduct. So it's personal use basis.
Speaker #0
Okay. So you got to say, I use this personally a lot.
Speaker #1
Yes. If you have 17 multifamily properties, like... you're out of luck you're not getting that deduction but it's like you got the beach house and you go a weekend and you rent it out a weekend and you go a weekend and you rent another yeah yeah and this is this is you have to itemize to get it so you can't get the standard deduction plus this so right now if you're married filing jointly the standard action is 31 500 it'll give you an extra 8 500 to deduct plus any other let's say you got the car loan now now you got the other stuff so you can stack deductions a little easier now with this bill if you know how to do your taxes yeah or hire someone that does know how to do this which i would recommend that especially now
Speaker #0
Yeah. Because this stuff is more complicated. The free TurboTax may not be doing it anymore. Yeah.
Speaker #1
This is where it's probably going to make more sense or be more valuable to hire someone, I would say, because there are a little more nuances. At least this first year, maybe figure it out. Like, okay, what can I get for deductions? What don't I get? Because, you know, you get some of those other funky ones. There's like a $1,000 charitable giving one you get now. Not bad. So actually, you get that if you itemize or don't itemize. So it's kind of nice. So you don't have to do that. So that should help charities a little bit, which is nice.
Speaker #0
so But many of these do not last forever. And I think that's like a piece that we just have to be clear about for people that you're going to get changes. They may feel good temporarily. And I think like even when we say things do last forever, nothing lasts forever in the government. Yeah,
Speaker #1
this is government permanence, right? Yeah. It's big time.
Speaker #0
And there's no actual permanent, like we've had permanent things that have been removed in the last couple of years. Like there's not.
Speaker #1
Yeah, next set of Congress can come in two years from now and just totally say, no, we're doing all this bill away, or we're going to change this, or we're going to raise taxes. I mean, they can do whatever they want. Whatever they want.
Speaker #0
Yeah. What about these Trump accounts?
Speaker #1
Trump accounts? Okay, so babies are going to get, once again, temporary.
Speaker #0
Temporary?
Speaker #1
$1,000 when they're born. And then you can put in up to $5,000 a year into the account. You do not get a deduction for putting in there, like, you know, your 401k or whatever. So your employer can actually match it too, but it still goes into the $5,000 cap. So if your employer puts in $2,000, you're capped at $3,000.
Speaker #0
And what kind of account is this? Is this a $529?
Speaker #1
No, it's kind of like an IRA, but for kids, because it grows tax deferred, you don't get the tax reduction up front. And then you can't take it out until they're 18, but you can use it for up to $10,000 for a first time home. You could use it for college expenses and pay no taxes on the money that comes out. So it's kind of like a hybrid 529 thing. It's kind of like a little bit of an alternative. The kids don't go to college. It's not really designed just for college. So that's a little bit of a nice feature. But overall, there's not like a huge tax savings for the adult or the parent or grandparent to put money in here. So it's just kind of another avenue because you have things like 529s. You also have UTMA accounts that are fairly tax efficient that can be used for other things. So it's another tool in the toolbox, basically.
Speaker #0
Okay. But this is like a new type of account.
Speaker #1
Yeah, but it's going to phase out once again. $1,000 is going to phase out.
Speaker #0
Some people are going to get it.
Speaker #1
Yeah, so if you're going to have a baby, get it on now.
Speaker #0
It's not going to help me.
Speaker #1
Not really. Not as much.
Speaker #0
Not going to help me. All right. How are businesses impacted? Because we've talked a lot about individuals now, right? Yeah. Individuals do have some benefits. But there is a lot of kind of, I want to say, this is the more controversial parts of the bill, that there are a lot of... business implications, some to small businesses, but also a lot to larger businesses.
Speaker #1
Yeah. I mean, writ large is really going to help businesses in general, but the big one is the qualified business deduction that almost most small businesses are going to get, which is nice. But then a lot of them is just kind of more nuanced stuff like accelerated depreciation, right? So you used to be able to say, hey, I bought this big tractor for my business, cost $200,000. You said to deduct it over time. You can deduct all of that now in one year. Oh, okay. So there's a lot of things like that in the bill that are going to help these larger businesses or even smaller businesses, you know, put money in right away and deduct it this year versus having to wait and do it over time.
Speaker #0
Now, I think some of the chatter about this bill is that it's like the Jeff Bezos, Elon Musk bill, right? That like it's to help those huge businesses. But it appears to me that that's not all the case.
Speaker #1
No, not all. I mean, if you really look at like who it's impacting the most, though, I mean, the things that were set to expire were the higher. tax brackets, like those were set to go up. Those are staying flat now. So that's benefiting the top one or 5% depending on, you know, where you're looking at the calculations. So a lot of this stuff is designed to help the higher end of the spectrum. Like I mentioned the SALT tax, like 1.6% of the population has, you know, $40,000 of interest and stuff like that they're paying. So a lot of this is going to be geared towards them, but there are definitely some things that will help out the lower income folks. However, it does seem like those are pretty much temporary.
Speaker #0
Those are all the temporary ones. Yeah.
Speaker #1
Yeah. For the most part. So So that's the one big challenge with this bill is there's a lot to parse through. You know, I'm sure there's some tax nerd that's gone through it more than I have that's going to say, hey, look, we could use this, this and this for businesses to really cut down on taxes.
Speaker #0
Now, what would you say? I did a little research on, you know, as we came into this about like there are obviously some positives. Yeah. There's also some negatives that people are less into. And the biggest one is it is going to add, ready for this number, guys, $3.4 trillion to the national debt.
Speaker #1
Yeah, there's a lot of rhetoric out there. It says the tax cuts pay for themselves. That does not happen. That's not how that works. There were some stats that came out last year. I think they analyzed the first tax bill. About 18% of it paid for itself. So you might expect something like that to happen again because the thought process is, hey, there's less taxes. I'm going to spend more money, blah, blah, blah. Then there's more sales tax, more revenue. Cycle goes on and on. It's not enough to cover the amount of...
Speaker #0
3.4 trillion.
Speaker #1
Yeah, it's just too much. I think even I was looking at the... Like just the tips thing is going to cost like $300 plus million of revenue per year.
Speaker #0
Yeah, because that's it's and people don't always get that's like the flip side to these things is, OK, you're not going to tax tips, but that money went to the government.
Speaker #1
Right, right. And I think that you have to look at it kind of what are some potential unintended consequences? Because any any bill, I don't care like where you are, is going to have these unintended consequences. And then maybe, you know, we've kind of seen a little bit with the the rating agencies with the government debt. you may see like, hey, we're getting more income, more debt coming out. So we're probably going to have a worse credit rating. And that could potentially impact long-term credit, which is what mortgages are based on.
Speaker #0
Correct. Craig, yeah. And that seems to be some of the rhetoric around housing with this bill is there was some proposals to have more housing stuff in the bill that just didn't really... parse out, which is how these bills kind of work. People all try to stuff what they want in there. Some of it they get, some of it they don't. But housing was a little bit overlooked in this bill. So we didn't really have a lot of direct impact other than for current homeowners that, again, may have some interest deductions and things like that. But there was not necessarily things to incentivize homeownership. As a matter of fact, there was actually some removals of some housing assistance that was in place prior that has been removed. We don't really necessarily know how that's all going to play out yet. What are the worries for housing? One of the worries is that some of this may increase inflation. So we've been working very hard over the last few years to slowly but surely knock inflation down because inflation is directly, or not directly, but it ends up directly tied to interest rates. The higher inflation is, the higher interest rates are. And so we finally are feeling like a little bit of relief in interest rates. And I say that in rates are in the sixes now. Yeah. We crossed eight for a little while.
Speaker #1
Yeah. I mean, sixes were kind of historically like 30-year average, right?
Speaker #0
We like fives. So mid fives. Fives, okay. And mid fives are generally like, as far as housing is concerned, sort of the marker for like a very stable economy. Fives are really where we want to be. So we're still a little bit higher than that, but we're getting closer. And there has been some great programs for first-time homebuyers. There's a lot of these new state bond programs. Connecticut has one. We've talked about the Time to Own program. Mass has Mass Dreams. Rhode Island has Rhode Island Housing. So these have been kind of great. There was no new additions to this stuff in this bill. But the concern with inflation going up is that rates will go back up again. And we are in a housing affordability crisis. And so, yes, we do want some tax savings so people have a little bit more money in their pocket. Is it going to be enough to make homeownership affordable?
Speaker #1
Probably not. Probably not.
Speaker #0
Probably not. Probably not. Probably not. So, you know, I think we, I think in the housing side, we wish that we got a little bit more.
Speaker #1
Yeah. I mean, something you might want to see is like, hey, let's maybe get some tax credits for our home builders or, hey, like we're going to build affordable units or even attainable housing, you know, multifamily, some kind of thing like that to spur more growth of housing. Because the big problem right now is inventory.
Speaker #0
100%. Not only inventory, but like, and I tell people this all the time in a town like we live in is that, you know, 30 or 40 years ago, developments were going in. That was the big developing time. And a lot of these developments were small capes. They were small ranches. They were maybe small colonials. They were first time home buyer houses. When is the last time you saw a brand new development go in that was not either a condo or... really luxury housing everything's luxury the word's lost on me anymore with housing yeah well and that's you know i had this conversation with somebody the other day about what is a mansion what is the definition of a mansion when we were kids you can like conjure up in your head when you were in a kid in the 90s what a mansion looked yeah there's like the two houses in town yeah you're like that is a mansion i don't i don't even know what that is anymore i don't know a four-bedroom colonial in glastonbury's mansion now yeah you know so you know i think that housing affordability with with these smaller developments is going away. And I think one of the really unfortunate, unintended consequences of this economy that we're in is people who were living in that more affordable housing are renovating their houses and making them less affordable. So we see that a lot in our town and other surrounding towns where like you had the $350,000 cape that was affordable. The person now feels like they can't move who owns it. They've now dumped $100,000 into it. They've put an edition on. They've redone the kitchen, and now it's a $400,000, $500,000, $600,000 house. And it's taken out of the affordable housing supply. So this isn't necessarily going to help that.
Speaker #1
No, it's not addressing that at all. I guess the other thing that's kind of maybe pitiful is the EV tax credits are going away. They're putting a lot more pressure on Medicaid because they have to pay for the bills somehow. They can't just kind of willy-nilly do everything. So people are losing a lot of the EV tax credits for cars, even just being renovations. renovations on your house. That's kind of a big thing for a lot of folks is like, hey, I want to get a new washer dryer or get new energy efficient windows. They're going to be hurt by that stuff.
Speaker #0
Yeah. Solar. There was some great, great solar credits for solar. That's going away. Yeah. The EV tax credit was a big one. So I drive a hybrid minivan. For those of you who don't know, I drive a rocking minivan.
Speaker #1
There's flames on the side of it.
Speaker #0
It's so cool. It's got TV screens. It's like a rolling living room. But we were not originally in the market for an EV. We only got it. because when we were buying it, we did the math and the EV tax credits made it cheaper than a regular one. You're like, okay, so I can get better mileage and get these bomb tax credits. Cool. But now my car is seven years old now, almost eight years old in November. What is my incentive to buy an EV next time? It's not going to be there. It's not going to be there. And are we going to see that going forward?
Speaker #1
Yeah. So I think that could potentially hurt that industry in a big way. especially with you know that's one of the largest job creators is the uh the evening industry so uh we'll see we'll see so the one big
Speaker #0
Beautiful bill is interesting.
Speaker #1
It's interesting. There's a lot there. It's big, as the name says. It's actually apt for that part of it. Yeah, I think this is just, there's a lot in here. And I don't expect you guys to just listen to Spock as being an expert. I'm still not an expert. I'm working through it. I mean, he announced it on July 4th. Like, thank God. Yeah, great. So I have no time to look at this. And I immediately went on vacations. I feel like I'm getting caught up still.
Speaker #0
Eating your coffee grounds. Yeah.
Speaker #1
Yeah. In the basement. Just trying to get caught up. But, you know, this is something where, you know. talk to your planners, talk to your accountant, really kind of figure out, okay, what can I take out of this? Because a lot of stuff is a sprint. A lot of these things are short term. So you got to really figure out, okay, what can I take advantage of the next few years? There's some planning things here. Like if you're a retiree and you're 65, you're listening to this, you've got an extra $6,000. Maybe you do more Roth conversions for the next couple of years to make up that difference and be a little more tax efficient now. So there's some things you can really kind of think about how to strategize from a planning standpoint that you can leverage this bill for.
Speaker #0
Yeah. And I think again, If you have complicated taxes in any way and you've been self-filing for a while, it may behoove you to have a consultation with a CPA or tax preparer, maybe have them review your taxes. Even if you're going to file them on your own, there are tax preparers that will do that. You fill them all out. They just review. Because again, it is adding some layers of potentially beneficial complication, but complication. Absolutely. Absolutely. Talk to your, I feel like this is the end result of every episode. You need to talk to your trusted professionals. Will it be your financial advisor, your tax preparer, your accountant, one of those, because you just don't, this is so big. You don't want to go into it blindly. Yeah.
Speaker #1
You're gonna miss something for sure.
Speaker #0
And you want to, you want to save your monies. Yeah.
Speaker #1
All right. Well, that's it for us, right?
Speaker #0
All right. So thanks for tuning into the first episode of season three and we've got some exciting stuff in store. Yeah.
Speaker #1
Yeah. We had a good lineup this year, I think. So it's going to be fun.
Speaker #0
Awesome. All right. See you next time. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

About Millennial Money Matters

Join Kelly and Derek each week for honest and fun discussions about the financial issues that matter to you. Subscribe to "Millennial Money Matters" and take control of your financial journey today.

Hosted on Ausha. See ausha.co/privacy-policy for more information.

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