Episode Transcript
[00:00:00] Speaker A: Well, millions of taxpayers are going to see some pretty big changes when they file their 2025 taxes come next year. Child tax credit increasing.
Seniors may qualify for more deductions. Some other updates there, like the changes for tips and overtime, all the things. And here to clear away the cobwebs, hopefully clean things up for us some so we can understand what's going on, is Mark Steber. He's chief tax officer at Jackson Hewitt. Hey, Mark. How are you, sir?
[00:00:26] Speaker B: Great, Matt. Very exciting time to be talking about this important topic.
[00:00:30] Speaker A: Yeah, it is a very important topic. Now I do usually speak to you. I'm very used to speaking to you in the run up to April 15.
But why is now a good time for us to be talking taxes?
[00:00:42] Speaker B: Well, that's because taxes no longer are just a one day event or a tax day event.
Not if you really want to get the best result on your tax return, the least stress and quite frankly the biggest refund or the lowest balance due. There's still enough time to make changes that can impact your 20 tax return over two months or four or five more payroll cycles or distribution from your retirement plan cycle, whatever you want to call it. Because once you hit January 1st, there's not much anyone can do to impact 2025. You'll just be doing the oh, I wish I had. Right now you still have plenty of time to review last year's tax return. If any mistakes are made, you can amend it. But more importantly, you can take some action based on your life, your life changes or any of the recent super tax law changes that have happened. And you can start that today with a little bit of time not to get in a hur and have the result that you like, the result that you expect and again, get what you want out of your single largest financial transaction, namely your tax return, which you'll have to do every year in perpetuity forever.
[00:01:43] Speaker A: Yeah. Now talk about some of those changes because there are several changes to the tax code for the year 2025.
Talk about some of the big ones that people will need to keep in mind.
[00:01:55] Speaker B: Yeah, there's no shortage and probably beyond the scope of this segment, but I'll simply say some of the highlight ones that have generated both interest and confusion. You know, if you were watching over the last half a year on July 4, they passed the big beautiful bill in there were a variety of new and frankly, new for the first time ever tax breaks. You mentioned the one for seniors. If you're a senior, 65 or older or married couple, there's a brand new deduction of $6,000 per person. Now it's confusing because there's already a senior tax deduct for those that take the standard deduction. This is not that. This is a new new additional deduction for seniors. Make sure you watch out for that whether you receive Social Security or not and any of the other things that you might have heard on the Internet. If you're over 65, you qualify for the new new deduction in addition to the others. Now there's a new deduction or new tax credit, child tax credit, $2,200. Now that one's been around a while, but it was super sized and the refundable amount also larger. There's a new deduction on TIPS, 25,000 DOL tax deduction if you're an income earner that gets tips. There's a new one on overtime, a $12,500 deduction if you've got overtime. And then there's a new deduction for interest on an American manufactured or assembled, I should say more importantly assembled automobile that you borrow money. A new $10,000 deduction. Now again, there's other stuff in there, new standard deduction amount, a new state and local deduction amount that can help you if you're an itemizer and many, many more changes, not even mentioning life changes or so there's a lot to watch. The dollars have never been bigger or more important and the rules have never been more confusing, quite honestly. But there's a lot to watch, suffice to say, and a lot to watch out for. But the complexity is really the price tag for fairness and there's a lot of good stuff coming on 2025 tax returns.
[00:03:47] Speaker A: Yeah, it's, it's, you know, just when we thought it couldn't get any more confusing, they, they make it more confusing. And, and one of the, I think kind of questions that just came to my mind anyway was okay, if I am someone who earns tips, you mentioned that $25,000 deduct that. How is that going to be documented for the IRS to say, okay, you're not just trying to pull one over on us here and say you got all these tips, you actually are proving it to us.
[00:04:14] Speaker B: Yeah, that's a great question. And one that's fraught with confusion and a lot of frankly misinformation out there, similar to the overtime one. And quite honestly, as I called out that senior deduction, a lot of bad information out there on that one as well. But I think it goes to the important point that is timeless, which is it's really important to keep good records for your tax year and your tax return. You don't have to have an exhaustive approach, but you should keep good records, whether it's on your overtime, your tips, your side gig, full or part time, your investment, if you've got crypto or stocks in your basis, and other things that go on in your Life. And so 2025 is a complicated year. It's what we refer to as a transitional year. As I mentioned, this law was passed in July. It's not in place for the duration of time. So the IRS is quickly putting out new rules and new requirements. In particular, they just list a host of occupations that qualify for the tips. You know, things like beverage and food service workers, entertainment workers, hospitality workers, and the list goes on and on that says if you're one of those people, you probably get this, even though it's not absolutely restricted to those people. But then the second part is, well, how do you know how much. Well, your own records are a good starter set. And most employers are supposed to provide that next year, you know, after this year, it'll be on the W2 with a box and so forth. But what I would tell your listeners right now is keep your own good books and records, much like anything, whether it be deductions or credits or other things you put on your tax return. So that should somebody come asking the IRS or state, you have that. And it's always a good idea on anything, but especially on some of these new ones where it's not completely handled by the employer or the payer at this time, your records should tie to their records and there should be a reporting requirement coming out. More guidance on that coming. But you're always in your best interest to keep good records, tips, overtime, all the rest is a starter set this year alone.
[00:06:08] Speaker A: Yeah, definitely. And one more quick thing here with the senior deduction, I know that's kind of been. Or this new, new senior deduction, I guess that's kind of been billed as, you know, no tax on Social Security. But that's not exactly what it is.
Kind of maybe clean up just a little bit of that confusion as well.
[00:06:26] Speaker B: Yeah, taxes are a lot like making sausage. You don't really want to see what's in there. In some cases. Some of these tax rules are kind of that way. When it was originally promised by the current administration. They promised several things run up to the election. You know, no taxes on tip, no taxes on overtime, no taxes on Social Security. Once the tax Writers got into business. They sound that that's a much more complicated thing to do. You know, who's Social Security, how much Social Security, what are the earnings means based testing? They finally just said, hey, let's just say make it easy. $6,000 per person whether you're getting Social Security or not, provided you're 65 or older at December 31st. So it's kind of a shortcut way that kind of back ended into that political promise. And so the easiest way to understand it is, you know, they put this new deduction in, not casual seniors. They already kind of had one. If they were taking that standard deduction, this one is new and it was kind of meant to offset that. But you don't have to receive Social Security to qualify. But that was the original intention, you know, shortcut around the barn to get in. We're just going to give you a $6,000 deduction if you are a senior, whether you've applied for Social Security or not. And that's critical. I've seen a lot of misinformation that says you have to be receiving Social Security or eligible for Social Security. That's not true. In its final form this rule says 65 or older. @ midnight bang, you get the thousand dollar deduction for each person that meets that qualification. Now there is an earnings threshold and a phase out for high income earners. But know this, if you're 65, you get this deduction on your tax return if you otherwise qualify, whether you get Social Security or not. But that was the original, you know, intent back in the day when it was originally teed up by the administration.
[00:08:02] Speaker A: Well, very good. Well Mark, just about time to wrap things up here. But anything else that you wanted to mention, sir, that we haven't talked about that comes to mind?
[00:08:08] Speaker B: Yeah. Two final points. Retirees have some of the most complicated returns on the earth. Much different than my family's generation. Twenty years ago, you no longer just pension and Social Security. Now you have continuation of work, you have different types of retirement income, you have different types of benefits and deductions. Lot to watch out for. Don't shortcut it, just do it fast and dirty with some janky pro at the end of the day. Find somebody you trust, keep a relationship year round, keep a relationship on your life changes. The second one's more important. Watch out for uncredible tax pros that creep into the system looking to take advantage of people with fake promises or fake schemes. Use somebody, you know, use somebody convenient that you trust on your largest financial transaction, watch out for bad guys, watch out for misinformation and know that your tax return is your largest single financial transaction. A lot of money on the table there, but it also has some of the most valuable information, your name, your social, your family's information, bank accounts. Trust that with somebody you trust and you'll get a better stress free, higher refund, lower balance, due experience. If you pay a little bit of attention and you focus on it year round, starting here in October, and you pay attention to it, it's a better way to go. I promise you.
[00:09:17] Speaker A: You very good. Well, Mark Steber, chief tax officer with Jackson Hewitt, thanks so much, sir. Always great to talk to you.
[00:09:22] Speaker B: Thank you, Matt. Have a great day. We'll talk towards April.
[00:09:24] Speaker A: All right. Let's talk then.
