Dr. Friday Radio Show – August 2, 2025

She’s not a medical doctor, but she can cure your financial woes! On this episode, Dr. Friday dives into the most pressing tax topics for today. With the November 3rd extension deadline for 2024 taxes looming, she explains why it’s crucial to get those returns filed before you can effectively plan for the new year.

Then, she unpacks the massive changes coming in the 2025 tax year, including the highly anticipated tax credits for overtime and tips, and a new deduction for car loan interest. What do these changes really mean for your paycheck and your refund? Dr. Friday breaks down the rules, income limits, and what you need to do now to prepare. Plus, she answers listener questions on dealing with back taxes when selling property and the tax pitfalls of inheriting money.

Episode Summary

• 2024 Tax Deadline Reminder: For those on extension, the deadline to file your 2024 taxes is November 3rd. Dr. Friday stresses the importance of completing your 2024 return to know your financial standing (e.g., carryovers) before planning for 2025.
• Understanding the New 2025 Tax Credits: Big changes are coming, but they will affect your tax return, not your regular paycheck withholding.
  • No Tax on Overtime: This is a tax credit, not an exemption. It applies to the “time-and-a-half” portion of your overtime pay. It’s capped at $12,500 for single filers (income up to $150k) and $25,000 for married filers (income up to $300k).
  • No Tax on Tips: A similar credit structure applies to reported tip income, with the same income thresholds and credit limits. It will be crucial for this income to be properly documented and reported on your W-2.
• New Car Loan Interest Deduction: Starting in 2025, you may be able to deduct interest on a loan for a new qualified personal vehicle purchased after December 31, 2024. This deduction is available even if you don’t itemize.
• Retirement & Investment Payouts: A cautionary tale: when taking money from a retirement account, ensure enough is withheld for both the 10% penalty (if under 59 ½) and your ordinary income tax rate. Under-withholding can lead to a massive surprise tax bill.
• Inheritance Tax Traps: Inheriting an IRA or 401(k) can create a large, immediate tax liability if you cash it out. Dr. Friday advises rolling it into a beneficiary IRA and spreading distributions over the allowed 10-year period to manage the tax impact.
• Back Taxes and Asset Sales: If you’re in a deal with the IRS (like an Offer in Compromise) and sell a major asset like a condo, do not try to hide it. The IRS will likely find out via a 1099-S form and can revoke your deal for nondisclosure.

Episode FAQ

Q1: Is my overtime pay going to be completely tax-free in 2025?

A: Not exactly. It’s a tax credit, not a complete exemption from tax. You will still have taxes withheld from your paycheck as usual. When you file your 2025 return, you can claim a credit based on the “half” portion of your time-and-a-half overtime pay, up to a maximum credit of $12,500 for single filers and $25,000 for married couples, subject to income limitations.

Q2: My friend is selling a condo but owes the IRS back taxes. His banker said he could hide the money. Is that a good idea?

A: No, this is a very risky idea. The sale of real estate generates a Form 1099-S, which is reported to the IRS. If your friend has an agreement with the IRS (like an Offer in Compromise), a sudden influx of cash from an undisclosed asset can cause the IRS to review and even revoke the deal, demanding the full original amount owed. Transparency is key.

Q3: I inherited an IRA. Should I just cash it all out now?

A: Cashing out an inherited IRA in a lump sum is often not the smartest tax move. The entire amount becomes taxable income in that year, which can push you into a much higher tax bracket. As a non-spousal beneficiary, you generally have 10 years to empty the account. Spreading the withdrawals over several years can result in significantly lower taxes paid overall.

Transcription

Announcer 00:01-00:07 No, no, no, she’s not a medical doctor, but she can sure cure your tax problems or your financial woes. Announcer 00:07-00:08 She’s the how-to girl. Announcer 00:09-00:10 It’s the Dr. Friday Show. Announcer 00:14-00:19 If you have a question for Dr. Friday, call her now, 737-WWTN. Announcer 00:19-00:22 That’s 737-9986. Announcer 00:23-00:27 So here’s your host, financial counselor and tax consultant, Dr. Friday. Dr. Friday 00:29-00:35 All righty, the doctor is in the house on this wonderful Saturday. It’s a beau