August 10, 2025 • 31 mins
For the final installment of Suze’s deep dive on the new “Big Beautiful Bill” she focuses on how you can save more money with things like the child tax credit, auto loans, and small business deductions. Plus, learn exactly how no income taxes on tips and over-time will work as well as a new program to help set your child up, financially, for the future.
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Episode Transcript
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Suze (00:07):
August 10, 2025. Welcome everybody to the Women and Money podcast,
and everybody smart enough to listen. Suze O here today
is Suze School, and yes, this is the third part,
our very last part of what I want all of
you to know about the big beautiful bill. Now listen
(00:29):
to me. There are many parts of this bill that
I hate. I hate so much I can't even tell you.
But that's not what I'm gonna focus on, because there's
not a lot we can do about those things at
this moment in time. What I am focusing on.
For these three parts are the things you can take
(00:50):
advantage of that can save you money to help you
make more out of the money that you make. So
just know that. So don't be out there and go
writing all this negative stuff about, well, why isn't Suze
talking about the health benefits that are going away or
this and that? I get it, everybody, but you first
have to be able to take advantage of the things
(01:12):
that you can take advantage of
and not waste money, so just get off of it.
And really, really listen to the first one, the second one,
and this one when it comes to the things you
need to know, cause all of these things that I'm
talking about from the big beautiful bill will save you
(01:35):
money in many instances. So are you ready to take
out your Susy notebook, and by the way, yes, Miss
Travis is back. She wanted to do this Suze School
with me, and I said you cannot.
You cannot. I have one more part to get through,
and then I'm not touching it again for a long time, OK?
(01:56):
Did you all like staple coins? Did you learn anything?
All right, no problem.
Now listen to me, everybody. The things that I'm about
to go through, believe it or not, the very last
one may be the most important to many of you,
so just make sure that you listen to this podcast
(02:18):
all the way through.
All right, everybody, let's start. The very first thing that
I want you to know, and I think that is
really great, by the way, is the child tax credit,
and really it is a lifeline for so many parents.
I can't even tell you so if you happen to
(02:39):
be raising kids under age 17, I need you to
listen up, OK.
Right now, the child tax credit gives you up to
$2,200 per child. Notice I said right now, and that's
because it is in effect right now, and guess what?
(02:59):
Even if you owe no tax, because there are many
of you that don't owe any income tax at all,
$1,700 of that $2,200 and that's per child, by the way,
is refundable, meaning the IRS will send you a check.
Now I don't know, but for many women that I
(03:23):
know who are single mothers, they have three kids. They
were in an abusive relationship. They live for this. But
the problem is they don't have any income tax write-offs.
They're da da da da. This is really, like I said,
a lifeline. Now what you have to know, but really
it's not going to affect those of you who are
(03:44):
reliant on it.
Is that this credit starts to phase out once your
modified adjusted gross income hits $200,000 if you're single or
head of household $400,000 if you're married or jointly. Now
there is a catch. You must have a child who qualifies,
and that means they are a US citizen.
(04:07):
And I live with you more than half the year
and is your dependent, so I am asking you to
think about this and do not leave money on the table.
That was number one. Number two:
Auto interest loans are now deductible for the car you
(04:27):
actually drive. This isn't for business. This is for the
car you actually drive, and in many circumstances I have
to tell you, this one is fabulous. You can now
deduct up to $10,000 per year in interest on a
personal auto loan as long as there's always a catch,
(04:48):
isn't there?
The car is assembled in the United States. The loan
is in your name and this car cannot be leased
or a business vehicle. This again, everybody is for your
personal car, but you all know I don't want you
to lease a car no matter what anyway that's besides
(05:10):
the point, and it's good through 2028. So if you're
buying a car and financing it, please make sure you qualify.
Just ask, does this car qualify or not. Number three:
This will not be for all of you, but it's
a big one for many of you. Bonus depreciation, and
(05:32):
this really is for small business owners. If you are
self-employed or you own a small business, I'm telling you
this is your moment because you can now write off 100%
of the cost of qualified business property in the year
you buy it.
(05:53):
As long as it's January 19, 2025 or later, which
is when you acquired it, so you just need to
know that, all right? So think computers, think office equipment,
even a car by the way you use for work because.
This bonus depreciation, listen to me, does not expire in 2028.
(06:17):
Oh no, this one is now permanent. That means make
more money of your money. That is more money in
your pocket faster. But remember, personal assets don't qualify. This is
for business. The next one, number four is what's known
as a QBI deduction, qualified business income deduction. So.
(06:42):
again, this one is a game changer for many of you.
Let's just say you earn money through a pass through
business like a sole proprietorship, an LLC, an S-Corp, or
even a partnership. You may be able to deduct up
to 20% of your qualified business income.
(07:03):
If you think that's not a lot, that's a lot.
Now the full deduction is available if your income is,
let's just say if you're a single, up to $197,300
of adjusted gross income, and it goes away, it phases
down once you make over $247,300.
(07:28):
If you're married finally and jointly, as long as your
modified adjusted gross income is below $394,600 full 20% deduction,
all right, everybody.
And it phases out once you are making $494,600. So
(07:50):
if you're above those limits, again, the deduction might phase
out based on your business type and how much you
pay yourself in wages. But I just have to tell
you this is huge for freelancers, for gig workers, for consultants,
for small businesses, and guess what, this one,
also is extended through 2028 just that simple, you know,
(08:17):
it dawns on me as I just have done all
these for you, why do they allow you to do
these things?
Number one, it saves you more money, right? What do
you do with the money that you save? Most of you,
if you're smart, you save it.
You invest it, you take advantage of what's happening in
the markets, but many of you will do what? You
(08:39):
will go on vacation, you will spend it, you'll buy this,
you'll buy that. You'll spend it, and when you do
what do you do, you stimulate the economy.
Don't you find it a little funny that many of
these expire in 2028?
You do know what happens in 2028, don't you? Yes,
(09:00):
you do. We have a new president, so just something
to think of. That's why I think they're doing all
these things, cause it really helps the economy look better.
But if you're smart, you'll forget about the economy and
you'll think about your own bottom line. All right, next one,
(09:21):
and I have forgotten the number we're on, but just
doesn't matter. All right.
Tax free tips. Uh-huh. Now listen, a lot of you
are like, no, you should have to pay taxes on
your tips whether you should or you shouldn't.
You all need to be a little bit compassionate because
there are many people out there, many that really they
(09:46):
work for tips, whether they're hairdressers or waiters or whatever
it may be. They are able to sustain their family
because of tips, however, many of them haven't claimed tips.
Because they didn't want to have to pay taxes on it,
because if they did, they wouldn't have enough money to survive,
(10:07):
but I was always sad about that because if you
didn't claim your tips, guess what else? Your Social Security
later on isn't as much, so it catches up to you.
So if you rely on tips for your income, I
want you to listen up right now. This really is
one of the biggest tax breaks you're gonna ever see.
(10:28):
But listen closely. I need you to keep really immaculate
records and report every penny of tips, and you need
to know the income limits. All right, again, starting this
year right here and right now, individuals can exclude up
to 25,000 in tips from now this is important when
(10:53):
I'm about to say, from federal income tax every year.
Not state income tax, federal income tax.
And any tips over 25,000 in a single year are
going to be taxable as normal now again.
(11:14):
I just said it. This is only true for federal
income taxes, not state unless.
You live in Illinois, Massachusetts, New York, New Jersey, North Carolina, Oregon,
and Pennsylvania because they all have bills currently under consideration
(11:34):
to make it so you don't have to pay taxes
on the state level. So keep checking because if your
state passes a bill, then guess what, it is going
to be tax free for both federal and state, however.
Remember there are nine US states currently that have no
personal income tax at all, so tip income is not
(11:57):
taxed on the state level in those states, and you
already know what states they are. Now again, the annual
limit is $25,000 per tax return per year, and that
is the maximum that is tax free. Notice I said
per tax return, not per person.
(12:18):
So if you're single, you file one tax return, there's
a $25,000 exemption. But if you're married filing jointly, you
also file one tax return, you still only get $25,000
of an exemption, not $50,000. And by the way, if
you are married finally and separately, oh, you are so
(12:39):
out of luck you don't get an exemption at all.
So all of you, you really need to think why
you file married finally and separately. You really do. You
don't get to do a Roth. You don't get to
do a lot of things. Now listen, most of you
will get this 25,000 exemption, but you need to know
that some of you work for tips, believe it or not,
(13:01):
and you do make a lot of money. However,
The single filers, the $25,000 starts to phase out once
you are over $150,000 of modified adjusted gross income, or
$300,000 if in fact you're married finally and jointly and
the phase out gradually meaning it's no longer there is
(13:25):
once you are making over 175,000 as a
single 350 married filing jointly then it's over. But let
me just give you an idea of how it works, OK,
because listen, you may be married filing and jointly, and
maybe your spouse makes a whole lot more money than
you do. However, you're working for tips and what you're
(13:47):
working for really gets your family to get by. All right.
$25,000 deduction remember, but it is reduced by $100 for
every $1,000 over the limit.
Right, so that's what you need to know. That's how
it works. Now one thing you all do have to
(14:09):
remember is that even though it's federally and possibly state
tax free, that doesn't mean that they're not going to
take out FICA, which Medicare taxes. They will still apply
to all tip income, even the tax free portion.
However, I have to just tell you, because you might
(14:30):
be worried about this, this does not affect eligibility, however,
for the earned income tax credit or other credits. So
what's your takeaway here, everybody, because this really is a gift.
But remember, gifts, in my opinion, come with responsibility. Usually
it's like writing a thank you letter.
(14:50):
Not an email to whoever gave you the gift, but
that's besides the point. Number one, I want you to
track your tips. I want you to report everything honestly.
I want you to file your taxes carefully, and I
want you to watch your income levels because what good
is a $25,000 break?
If you blow it by not filing again, this is
(15:13):
only good through what is that magic year? What is
the magic year that things change? Possibly 2028. Next topic
is over time. Now truthfully,
a lot of you really ask to work overtime. You
need to work overtime, so this really could seriously lower
(15:38):
your tax bill if and only if you qualify. So first,
let's get it straight. What is overtime? Overtime is not
just working hard, it's not working weekends, it's not getting
a bonus or holiday pay. No overtime means this.
(15:58):
You are a W-2 employee. Got that, who works more
than 40 hours in a single work week and your
employer pays you time and a half. That's 1.5 times
your regular hourly wage for those extra hours. So if
you normally earn $20 an hour and you work 45
(16:22):
hours in one week.
Those extra five hours must be paid at $30 an hour.
That's real legal overtime, and only that qualifies for this deduction. Self-employed,
guess what? You can't do this now for the tax
(16:43):
years 2025 through what? What's that magic deadline 2028? You
may be able to deduct your overtime pay.
From your federal income tax up to a limit, right?
So again, if you are single, you can deduct up
to $12,500 for overtime pay each year. If you are
(17:05):
married filing and jointly, the deduction is up to $25,000.
This means if you make, let's just say $10,000 in
true overtime this year and you qualify.
You probably won't have to pay federal income tax on
that $10,000. Now if you are single, your MAGI has
(17:32):
to be under $150,000. Married filing and jointly under $300,000.
And again it phases down till you hit 170,000 for singles,
340,000 MAGI if you're married filing jointly, then you don't qualify.
(17:53):
And again, should I just reiterate, if you're married filing
and separately, oh, you just don't qualify. Remember the deduction
is temporary.
And just like tips, it's only good for four years,
you know this money's available to you. The question becomes
how do you claim it? How do you get that deduction?
(18:16):
All right, you claim the deduction on your federal tax
return using Schedule 1 as an adjustment to income.
So you're going to subtract your eligible overtime, whether it's
12,500 or 25,000 depending on your filing status from your
taxable income, but I need you to keep your pay stubs,
(18:39):
your time sheets, and your W-2s to prove how much
overtime you worked and how much you were paying.
Your employer may even report your overtime separately on future
W-2s to help you and the IRS track it, but
just in case you have to be responsible, so keep
(19:00):
your pay stubs, your time sheets, your W-2s, all of it.
Do you understand?
Now the overtime deduction only applies to federal income tax.
It does not mean again that you don't pay Social
Security tax, known as FICA or Medicare tax on the
(19:20):
amount of overtime reported. So yes, your full overtime pay
is still subject to payroll taxes even if you deduct
the overtime from year 1040, the IRS still considers it
wages for the purpose of Social Security and Medicare contributions,
(19:42):
so your employer still has to withhold FICA from those earnings,
and guess what? So do you. I don't want you
to confuse what helps you on your tax return with
what affects your paycheck. These deductions don't increase your take
home pay during this year.
You will see the benefit when you file your tax
(20:04):
return now when you see that benefit.
Can you just take that money that it saved you
and fund your Roth IRA, fund a retirement account, pay
down your credit card debt, do something with it that
makes sense. Now, last but not least.
(20:25):
And this is the one I have to tell you,
I saved the best for last. And you're gonna say really, Suze...
You think this one's one of the best, and it
is for many people. Are you ready? It is the
new Trump accounts.
All right, get up off the floor, right? So if
(20:48):
you have a kid, a grandkid, a nephew, a friend, anyone,
I don't care who it is, who is 18 years
of age or younger.
There are two parts of this program that you need
to understand, and I have to tell you, in my opinion,
I think this is a great program. Sure there are
(21:11):
downfalls to it and things like that, and could it
have been better? Absolutely, but it is what it is,
and wishing it were something different doesn't help you, you
need to understand what it is. So again,
children born between January 1st, 2025 and December 31st, 2028
(21:34):
who are US citizens with a Social Security number. Got that?
Will receive and did you hear that will receive an
automatic one time deposit of $1,000 from the treasury. Now
(21:55):
the treasury intends to begin July 2026, so.
What you need to get it doesn't matter when your
kids are born 2025, 2026. The Treasury is going to
put that $1,000 in a Treasury account, so you have
(22:16):
to stay tuned on to how they are actually going
to do that. But that is what they are going
to do. However, besides the $1,000 from the Treasury.
You can contribute up to $5,000 per year into the
Trump account for each child again as long as they
(22:38):
are under 18 years of age. Now that's important to
know because listen.
Children who are born before 2025, you may be saying, oh,
are you telling me my kid doesn't matter? I had
a kid last year, so I can't get any of this.
(22:58):
The kid doesn't qualify for the government contribution of $1,000 however.
They do qualify to allow you to contribute up to
$5,000 per year into a Trump account, and this, this
sum this yearly $5,000 or whatever you want to put
in can come from parents, friends, grandparents. It just doesn't matter.
(23:25):
Now remember your kid has to have a Social Security
number and be a US citizen. All right, let's say
you can muster up $5,000 a year. You can say,
you know what, everybody, rather than giving my kids gifts
and never give $500 here, $100 whatever it may be.
But let's say you were able to contribute $5,000 a
(23:48):
year for 18 years because once the kid is 18.
You can no longer put any money in this account.
That's $90,000.
Over 18 years, even if your kid is just currently
14 years of age, you can still sack away a
(24:08):
nice sum of money. So the question is should you
or shouldn't you, and it obviously depends on your situation,
but let me just educate you just a little bit
more about all the details and really why I like it.
The first detail that I like, believe it or not,
(24:31):
is no one, not you or your kid, because this
will be in your kid's name, can take a penny
out before your kid turns 18. Too often you put
money away. It's for your kid, and all of a
sudden you end up taking it, using it for something else.
No one can take a penny out before your kid
(24:53):
turns 18. Second
detail...
After 18 till they reach 59 and a half because
this isn't like a retirement account where it has RMDs,
they could leave this money in there for as long
as they want. They never have to take out a penny.
Then it goes down to their kids, whatever it may be.
(25:16):
But now listen to me.
They can leave it in there, but until they reach
59 and a half they are allowed to take penalty free withdrawals, meaning
no 10% penalty for three things qualified education expenses.
(25:38):
Up to 10,000 towards a first time home purchase.
And seed funds for starting a small business.
I don't know. I think that's kind of great. If
they take out any money before the age of 59 and a half
for anything but those three things.
(26:00):
Like I just mentioned, they will owe a 10% penalty
on it. Obviously once they turn 59 and a half,
no longer is there a 10% penalty and the third
most important detail.
Any and all money withdrawn no matter what it is
(26:21):
for the growth part of that money is taxed as
ordinary income. Your contributions are not taxed, so any money
that you withdraw doesn't matter.
After the age of 18, all withdrawals are all part growth.
(26:42):
And return of money, which is how they are taxed.
Let me just give you an example, all right? Let's
just say your kid is 18.
And your child's Trump account is now worth $170,000 because
one thing that you should know this money will be
invested in indexed funds or ETFs or whatever they're going
(27:06):
to do, but the money during those years that it's
in there is going to be invested.
So let's say over 18 years the average annual rate
of those funds, let's just say we're 7% in annual
average rate, all right, so you put in $90,000 the
(27:27):
account grows by 80, you now have $170,000 in there.
What you would do is divide the 80,000, the growth
of your money by the $170,000 in this case that's
in there, and that is 47%. Now let's just suppose
(27:49):
they withdrew $20,000 for college expenses, so there's no 10% penalty.
47% of that $20,000 is only $9400. That is the
amount your kid would owe taxes on in their tax bracket.
The remaining part of that $20,000 is $10,600 that is
(28:14):
returned to you tax free. Now don't freak out here
because I can hear you now. Well, how will I know?
How much is going to be growth? Who's going to
keep track for me?
The financial institution.
The bank or broker managing the account is going to
track the basis for you. For example, the total contributions,
(28:37):
and they will report the taxable portion of each withdrawal
on the IRS form 1099R. So you and your child
will use this form just that simple to file taxes
reporting the taxable income portion. So the next question is.
(28:57):
Well, what's better, a 529 or this because remember a
529 plan. You can take the money out tax free
for education, but not all of your kids go to school,
and then what do you do? You end up owing
the 10% penalty on the growth and everything like that.
If you are focused specifically on education, then exploring a
(29:21):
529 plan is likely smarter.
Especially because they offer tax-free distributions and for qualified expenses
they may also offer state tax benefits. When would a
Trump account be better? A Trump account might be better
if your kid doesn't want to go to school, whatever,
(29:42):
but here's the real bottom line.
There's nothing preventing you from doing both. You may also
want to do a Trump account and a Roth IRA separately,
cause let's say your kid starts working as a teen
or in college, then a custodial Roth might be the
way to go as well.
But you could do all of them a 529, a
(30:06):
Trump account, a Roth account, all of those things are important.
So that everybody brings us to the end of this
three part series on the advantages that are within the
big beautiful bill. So until Thursday...
(30:28):
I don't have a clue what we're going to do
except I do know it's ask KT and Suzie anything.
So everybody tune in and remember, make your money, make
more money. All right, bye bye.
August 10, 2025. Welcome everybody to the Women and Money podcast,
and everybody smart enough to listen. Suze O here today
is Suze School, and yes, this is the third part,
our very last part of what I want all of
you to know about the big beautiful bill. Now listen
(00:29):
to me. There are many parts of this bill that
I hate. I hate so much I can't even tell you.
But that's not what I'm gonna focus on, because there's
not a lot we can do about those things at
this moment in time. What I am focusing on.
For these three parts are the things you can take
(00:50):
advantage of that can save you money to help you
make more out of the money that you make. So
just know that. So don't be out there and go
writing all this negative stuff about, well, why isn't Suze
talking about the health benefits that are going away or
this and that? I get it, everybody, but you first
have to be able to take advantage of the things
(01:12):
that you can take advantage of
and not waste money, so just get off of it.
And really, really listen to the first one, the second one,
and this one when it comes to the things you
need to know, cause all of these things that I'm
talking about from the big beautiful bill will save you
(01:35):
money in many instances. So are you ready to take
out your Susy notebook, and by the way, yes, Miss
Travis is back. She wanted to do this Suze School
with me, and I said you cannot.
You cannot. I have one more part to get through,
and then I'm not touching it again for a long time, OK?
(01:56):
Did you all like staple coins? Did you learn anything?
All right, no problem.
Now listen to me, everybody. The things that I'm about
to go through, believe it or not, the very last
one may be the most important to many of you,
so just make sure that you listen to this podcast
(02:18):
all the way through.
All right, everybody, let's start. The very first thing that
I want you to know, and I think that is
really great, by the way, is the child tax credit,
and really it is a lifeline for so many parents.
I can't even tell you so if you happen to
(02:39):
be raising kids under age 17, I need you to
listen up, OK.
Right now, the child tax credit gives you up to
$2,200 per child. Notice I said right now, and that's
because it is in effect right now, and guess what?
(02:59):
Even if you owe no tax, because there are many
of you that don't owe any income tax at all,
$1,700 of that $2,200 and that's per child, by the way,
is refundable, meaning the IRS will send you a check.
Now I don't know, but for many women that I
(03:23):
know who are single mothers, they have three kids. They
were in an abusive relationship. They live for this. But
the problem is they don't have any income tax write-offs.
They're da da da da. This is really, like I said,
a lifeline. Now what you have to know, but really
it's not going to affect those of you who are
(03:44):
reliant on it.
Is that this credit starts to phase out once your
modified adjusted gross income hits $200,000 if you're single or
head of household $400,000 if you're married or jointly. Now
there is a catch. You must have a child who qualifies,
and that means they are a US citizen.
(04:07):
And I live with you more than half the year
and is your dependent, so I am asking you to
think about this and do not leave money on the table.
That was number one. Number two:
Auto interest loans are now deductible for the car you
(04:27):
actually drive. This isn't for business. This is for the
car you actually drive, and in many circumstances I have
to tell you, this one is fabulous. You can now
deduct up to $10,000 per year in interest on a
personal auto loan as long as there's always a catch,
(04:48):
isn't there?
The car is assembled in the United States. The loan
is in your name and this car cannot be leased
or a business vehicle. This again, everybody is for your
personal car, but you all know I don't want you
to lease a car no matter what anyway that's besides
(05:10):
the point, and it's good through 2028. So if you're
buying a car and financing it, please make sure you qualify.
Just ask, does this car qualify or not. Number three:
This will not be for all of you, but it's
a big one for many of you. Bonus depreciation, and
(05:32):
this really is for small business owners. If you are
self-employed or you own a small business, I'm telling you
this is your moment because you can now write off 100%
of the cost of qualified business property in the year
you buy it.
(05:53):
As long as it's January 19, 2025 or later, which
is when you acquired it, so you just need to
know that, all right? So think computers, think office equipment,
even a car by the way you use for work because.
This bonus depreciation, listen to me, does not expire in 2028.
(06:17):
Oh no, this one is now permanent. That means make
more money of your money. That is more money in
your pocket faster. But remember, personal assets don't qualify. This is
for business. The next one, number four is what's known
as a QBI deduction, qualified business income deduction. So.
(06:42):
again, this one is a game changer for many of you.
Let's just say you earn money through a pass through
business like a sole proprietorship, an LLC, an S-Corp, or
even a partnership. You may be able to deduct up
to 20% of your qualified business income.
(07:03):
If you think that's not a lot, that's a lot.
Now the full deduction is available if your income is,
let's just say if you're a single, up to $197,300
of adjusted gross income, and it goes away, it phases
down once you make over $247,300.
(07:28):
If you're married finally and jointly, as long as your
modified adjusted gross income is below $394,600 full 20% deduction,
all right, everybody.
And it phases out once you are making $494,600. So
(07:50):
if you're above those limits, again, the deduction might phase
out based on your business type and how much you
pay yourself in wages. But I just have to tell
you this is huge for freelancers, for gig workers, for consultants,
for small businesses, and guess what, this one,
also is extended through 2028 just that simple, you know,
(08:17):
it dawns on me as I just have done all
these for you, why do they allow you to do
these things?
Number one, it saves you more money, right? What do
you do with the money that you save? Most of you,
if you're smart, you save it.
You invest it, you take advantage of what's happening in
the markets, but many of you will do what? You
(08:39):
will go on vacation, you will spend it, you'll buy this,
you'll buy that. You'll spend it, and when you do
what do you do, you stimulate the economy.
Don't you find it a little funny that many of
these expire in 2028?
You do know what happens in 2028, don't you? Yes,
(09:00):
you do. We have a new president, so just something
to think of. That's why I think they're doing all
these things, cause it really helps the economy look better.
But if you're smart, you'll forget about the economy and
you'll think about your own bottom line. All right, next one,
(09:21):
and I have forgotten the number we're on, but just
doesn't matter. All right.
Tax free tips. Uh-huh. Now listen, a lot of you
are like, no, you should have to pay taxes on
your tips whether you should or you shouldn't.
You all need to be a little bit compassionate because
there are many people out there, many that really they
(09:46):
work for tips, whether they're hairdressers or waiters or whatever
it may be. They are able to sustain their family
because of tips, however, many of them haven't claimed tips.
Because they didn't want to have to pay taxes on it,
because if they did, they wouldn't have enough money to survive,
(10:07):
but I was always sad about that because if you
didn't claim your tips, guess what else? Your Social Security
later on isn't as much, so it catches up to you.
So if you rely on tips for your income, I
want you to listen up right now. This really is
one of the biggest tax breaks you're gonna ever see.
(10:28):
But listen closely. I need you to keep really immaculate
records and report every penny of tips, and you need
to know the income limits. All right, again, starting this
year right here and right now, individuals can exclude up
to 25,000 in tips from now this is important when
(10:53):
I'm about to say, from federal income tax every year.
Not state income tax, federal income tax.
And any tips over 25,000 in a single year are
going to be taxable as normal now again.
(11:14):
I just said it. This is only true for federal
income taxes, not state unless.
You live in Illinois, Massachusetts, New York, New Jersey, North Carolina, Oregon,
and Pennsylvania because they all have bills currently under consideration
(11:34):
to make it so you don't have to pay taxes
on the state level. So keep checking because if your
state passes a bill, then guess what, it is going
to be tax free for both federal and state, however.
Remember there are nine US states currently that have no
personal income tax at all, so tip income is not
(11:57):
taxed on the state level in those states, and you
already know what states they are. Now again, the annual
limit is $25,000 per tax return per year, and that
is the maximum that is tax free. Notice I said
per tax return, not per person.
(12:18):
So if you're single, you file one tax return, there's
a $25,000 exemption. But if you're married filing jointly, you
also file one tax return, you still only get $25,000
of an exemption, not $50,000. And by the way, if
you are married finally and separately, oh, you are so
(12:39):
out of luck you don't get an exemption at all.
So all of you, you really need to think why
you file married finally and separately. You really do. You
don't get to do a Roth. You don't get to
do a lot of things. Now listen, most of you
will get this 25,000 exemption, but you need to know
that some of you work for tips, believe it or not,
(13:01):
and you do make a lot of money. However,
The single filers, the $25,000 starts to phase out once
you are over $150,000 of modified adjusted gross income, or
$300,000 if in fact you're married finally and jointly and
the phase out gradually meaning it's no longer there is
(13:25):
once you are making over 175,000 as a
single 350 married filing jointly then it's over. But let
me just give you an idea of how it works, OK,
because listen, you may be married filing and jointly, and
maybe your spouse makes a whole lot more money than
you do. However, you're working for tips and what you're
(13:47):
working for really gets your family to get by. All right.
$25,000 deduction remember, but it is reduced by $100 for
every $1,000 over the limit.
Right, so that's what you need to know. That's how
it works. Now one thing you all do have to
(14:09):
remember is that even though it's federally and possibly state
tax free, that doesn't mean that they're not going to
take out FICA, which Medicare taxes. They will still apply
to all tip income, even the tax free portion.
However, I have to just tell you, because you might
(14:30):
be worried about this, this does not affect eligibility, however,
for the earned income tax credit or other credits. So
what's your takeaway here, everybody, because this really is a gift.
But remember, gifts, in my opinion, come with responsibility. Usually
it's like writing a thank you letter.
(14:50):
Not an email to whoever gave you the gift, but
that's besides the point. Number one, I want you to
track your tips. I want you to report everything honestly.
I want you to file your taxes carefully, and I
want you to watch your income levels because what good
is a $25,000 break?
If you blow it by not filing again, this is
(15:13):
only good through what is that magic year? What is
the magic year that things change? Possibly 2028. Next topic
is over time. Now truthfully,
a lot of you really ask to work overtime. You
need to work overtime, so this really could seriously lower
(15:38):
your tax bill if and only if you qualify. So first,
let's get it straight. What is overtime? Overtime is not
just working hard, it's not working weekends, it's not getting
a bonus or holiday pay. No overtime means this.
(15:58):
You are a W-2 employee. Got that, who works more
than 40 hours in a single work week and your
employer pays you time and a half. That's 1.5 times
your regular hourly wage for those extra hours. So if
you normally earn $20 an hour and you work 45
(16:22):
hours in one week.
Those extra five hours must be paid at $30 an hour.
That's real legal overtime, and only that qualifies for this deduction. Self-employed,
guess what? You can't do this now for the tax
(16:43):
years 2025 through what? What's that magic deadline 2028? You
may be able to deduct your overtime pay.
From your federal income tax up to a limit, right?
So again, if you are single, you can deduct up
to $12,500 for overtime pay each year. If you are
(17:05):
married filing and jointly, the deduction is up to $25,000.
This means if you make, let's just say $10,000 in
true overtime this year and you qualify.
You probably won't have to pay federal income tax on
that $10,000. Now if you are single, your MAGI has
(17:32):
to be under $150,000. Married filing and jointly under $300,000.
And again it phases down till you hit 170,000 for singles,
340,000 MAGI if you're married filing jointly, then you don't qualify.
(17:53):
And again, should I just reiterate, if you're married filing
and separately, oh, you just don't qualify. Remember the deduction
is temporary.
And just like tips, it's only good for four years,
you know this money's available to you. The question becomes
how do you claim it? How do you get that deduction?
(18:16):
All right, you claim the deduction on your federal tax
return using Schedule 1 as an adjustment to income.
So you're going to subtract your eligible overtime, whether it's
12,500 or 25,000 depending on your filing status from your
taxable income, but I need you to keep your pay stubs,
(18:39):
your time sheets, and your W-2s to prove how much
overtime you worked and how much you were paying.
Your employer may even report your overtime separately on future
W-2s to help you and the IRS track it, but
just in case you have to be responsible, so keep
(19:00):
your pay stubs, your time sheets, your W-2s, all of it.
Do you understand?
Now the overtime deduction only applies to federal income tax.
It does not mean again that you don't pay Social
Security tax, known as FICA or Medicare tax on the
(19:20):
amount of overtime reported. So yes, your full overtime pay
is still subject to payroll taxes even if you deduct
the overtime from year 1040, the IRS still considers it
wages for the purpose of Social Security and Medicare contributions,
(19:42):
so your employer still has to withhold FICA from those earnings,
and guess what? So do you. I don't want you
to confuse what helps you on your tax return with
what affects your paycheck. These deductions don't increase your take
home pay during this year.
You will see the benefit when you file your tax
(20:04):
return now when you see that benefit.
Can you just take that money that it saved you
and fund your Roth IRA, fund a retirement account, pay
down your credit card debt, do something with it that
makes sense. Now, last but not least.
(20:25):
And this is the one I have to tell you,
I saved the best for last. And you're gonna say really, Suze...
You think this one's one of the best, and it
is for many people. Are you ready? It is the
new Trump accounts.
All right, get up off the floor, right? So if
(20:48):
you have a kid, a grandkid, a nephew, a friend, anyone,
I don't care who it is, who is 18 years
of age or younger.
There are two parts of this program that you need
to understand, and I have to tell you, in my opinion,
I think this is a great program. Sure there are
(21:11):
downfalls to it and things like that, and could it
have been better? Absolutely, but it is what it is,
and wishing it were something different doesn't help you, you
need to understand what it is. So again,
children born between January 1st, 2025 and December 31st, 2028
(21:34):
who are US citizens with a Social Security number. Got that?
Will receive and did you hear that will receive an
automatic one time deposit of $1,000 from the treasury. Now
(21:55):
the treasury intends to begin July 2026, so.
What you need to get it doesn't matter when your
kids are born 2025, 2026. The Treasury is going to
put that $1,000 in a Treasury account, so you have
(22:16):
to stay tuned on to how they are actually going
to do that. But that is what they are going
to do. However, besides the $1,000 from the Treasury.
You can contribute up to $5,000 per year into the
Trump account for each child again as long as they
(22:38):
are under 18 years of age. Now that's important to
know because listen.
Children who are born before 2025, you may be saying, oh,
are you telling me my kid doesn't matter? I had
a kid last year, so I can't get any of this.
(22:58):
The kid doesn't qualify for the government contribution of $1,000 however.
They do qualify to allow you to contribute up to
$5,000 per year into a Trump account, and this, this
sum this yearly $5,000 or whatever you want to put
in can come from parents, friends, grandparents. It just doesn't matter.
(23:25):
Now remember your kid has to have a Social Security
number and be a US citizen. All right, let's say
you can muster up $5,000 a year. You can say,
you know what, everybody, rather than giving my kids gifts
and never give $500 here, $100 whatever it may be.
But let's say you were able to contribute $5,000 a
(23:48):
year for 18 years because once the kid is 18.
You can no longer put any money in this account.
That's $90,000.
Over 18 years, even if your kid is just currently
14 years of age, you can still sack away a
(24:08):
nice sum of money. So the question is should you
or shouldn't you, and it obviously depends on your situation,
but let me just educate you just a little bit
more about all the details and really why I like it.
The first detail that I like, believe it or not,
(24:31):
is no one, not you or your kid, because this
will be in your kid's name, can take a penny
out before your kid turns 18. Too often you put
money away. It's for your kid, and all of a
sudden you end up taking it, using it for something else.
No one can take a penny out before your kid
(24:53):
turns 18. Second
detail...
After 18 till they reach 59 and a half because
this isn't like a retirement account where it has RMDs,
they could leave this money in there for as long
as they want. They never have to take out a penny.
Then it goes down to their kids, whatever it may be.
(25:16):
But now listen to me.
They can leave it in there, but until they reach
59 and a half they are allowed to take penalty free withdrawals, meaning
no 10% penalty for three things qualified education expenses.
(25:38):
Up to 10,000 towards a first time home purchase.
And seed funds for starting a small business.
I don't know. I think that's kind of great. If
they take out any money before the age of 59 and a half
for anything but those three things.
(26:00):
Like I just mentioned, they will owe a 10% penalty
on it. Obviously once they turn 59 and a half,
no longer is there a 10% penalty and the third
most important detail.
Any and all money withdrawn no matter what it is
(26:21):
for the growth part of that money is taxed as
ordinary income. Your contributions are not taxed, so any money
that you withdraw doesn't matter.
After the age of 18, all withdrawals are all part growth.
(26:42):
And return of money, which is how they are taxed.
Let me just give you an example, all right? Let's
just say your kid is 18.
And your child's Trump account is now worth $170,000 because
one thing that you should know this money will be
invested in indexed funds or ETFs or whatever they're going
(27:06):
to do, but the money during those years that it's
in there is going to be invested.
So let's say over 18 years the average annual rate
of those funds, let's just say we're 7% in annual
average rate, all right, so you put in $90,000 the
(27:27):
account grows by 80, you now have $170,000 in there.
What you would do is divide the 80,000, the growth
of your money by the $170,000 in this case that's
in there, and that is 47%. Now let's just suppose
(27:49):
they withdrew $20,000 for college expenses, so there's no 10% penalty.
47% of that $20,000 is only $9400. That is the
amount your kid would owe taxes on in their tax bracket.
The remaining part of that $20,000 is $10,600 that is
(28:14):
returned to you tax free. Now don't freak out here
because I can hear you now. Well, how will I know?
How much is going to be growth? Who's going to
keep track for me?
The financial institution.
The bank or broker managing the account is going to
track the basis for you. For example, the total contributions,
(28:37):
and they will report the taxable portion of each withdrawal
on the IRS form 1099R. So you and your child
will use this form just that simple to file taxes
reporting the taxable income portion. So the next question is.
(28:57):
Well, what's better, a 529 or this because remember a
529 plan. You can take the money out tax free
for education, but not all of your kids go to school,
and then what do you do? You end up owing
the 10% penalty on the growth and everything like that.
If you are focused specifically on education, then exploring a
(29:21):
529 plan is likely smarter.
Especially because they offer tax-free distributions and for qualified expenses
they may also offer state tax benefits. When would a
Trump account be better? A Trump account might be better
if your kid doesn't want to go to school, whatever,
(29:42):
but here's the real bottom line.
There's nothing preventing you from doing both. You may also
want to do a Trump account and a Roth IRA separately,
cause let's say your kid starts working as a teen
or in college, then a custodial Roth might be the
way to go as well.
But you could do all of them a 529, a
(30:06):
Trump account, a Roth account, all of those things are important.
So that everybody brings us to the end of this
three part series on the advantages that are within the
big beautiful bill. So until Thursday...
(30:28):
I don't have a clue what we're going to do
except I do know it's ask KT and Suzie anything.
So everybody tune in and remember, make your money, make
more money. All right, bye bye.
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