How the Final One Big Beautiful Bill Act Impacts Optometrists - Taxes, Student Loans, and More! - The Optometry Money Podcast

Episode Transcript
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Evon (00:04):
Hey everybody.
Welcome back to the OptometryMoney Podcast War, helping ODs
all over the country make betterand better decisions around
their money, their careers, andtheir practices.
I am your host, Evon Mendrin,Certified Financial Planner(TM)
practitioner and owner ofOptometry Wealth Advisors, an
independent financial planningfirm just for optometrists

(00:25):
nationwide.
And thank you so much forlistening.
Really appreciate your time andyour attention today.
And on today's episode, we aregonna try to tackle the brand
new bill just signed into lawover the last week or so.
The One Big Beautiful Bill Act,and it's definitely big.
Over a hundred, over 870 pages.

(00:47):
So it definitely lives up tothat aspect of its name.
Is it beautiful?
Well, as we commonly hear,beauty is in the eye of the
beholder.
I think there's gonna be somethings in here that many people
will enjoy and others will notso much.
And so this is gonna be anambitious episode here.
I'm gonna talk through a lot ofthe tax changes or really tax
extensions that came out of thislaw, as well as the student loan

(01:11):
aspects of the bill.
And so you can kind of fastforward and pick and choose
exactly what you wanna hear andwhat's applicable to you.
But we're gonna try to get to itall.
And in the show notes, I'll linkto a newsletter I did as well
on, on the Tax Pro, on the taxprovisions.
And as soon as it's done, I'lllink to a newsletter on the
student loan provisions in caseyou like to read and see the

(01:32):
numbers directly.
And so with that in mind, let'sgo ahead and dive in here and
we'll start with the individualtax changes, as we, as we think
through this bill.
A lot of it really.
Extends what was set to expireat the end of this year.
if we think back to 2017, therewas this big tax law signed into

(01:53):
law under President Trump in hisfirst term, the Tax Cuts and
Jobs Act.
And since 2018 through 2025,there were a lot of the tax
provisions in that bill,especially the individual ones,
but also one of the importantbusiness ones that were set to
expire after this tax year.
And so.
with that we really weren't sureexactly which tax laws we were

(02:14):
gonna be working with in 2026and beyond.
And so this bill definitely addsa lot of clarity to our planning
now, by extending and makingquote unquote permanent A lot of
those, tax provisions, and whenI say permanent, from a tax
standpoint, that's really untila future Congress decides to
make changes.
So, with that in mind, let'sdive into first the individual

(02:37):
tax changes, and I'll try tosummarize as best as I can here
on a podcast format.
the first one is that lower taxbrackets were made permanent,
back in that 2017 law.
that law brought down the taxrates to the ones that we're
currently operating with 12%,22%, 24%, and so on.

(02:59):
And at the end of this year, itwas set to increase back to old
tax brackets.
We would see an increase in taxrates.
and so this law made permanentthese lower tax rates, into the
distant future.
And so there's no rush from atax planning perspective to add
income, additional income intothis year or to, deferred

(03:20):
deductions into future yearsjust because of this change in
tax brackets.
So that's great to see, again,planning with more certainty
there.
there is a, it also extended andmade permanent the higher
standard deduction and.
Again, going back to that billin 2017, it basically doubled
the standard deduction amount.

(03:40):
It got rid of another deductioncalled an exemption, but it's,
it essentially doubled thatstandard deduction amount and
that was expected to go back tothat smaller amount after this
year.
But this permanently increasesit and in fact gives an
additional bump for the 2025year tax year.
So for this year it gives alittle bit of a bump.
So for those married filingjointly, that standard deduction

(04:04):
amount's gonna be$31,500.
And if you are single file taxfiler,$15,750.
On that same note, the tax lawadded an additional senior tax
deduction.
So if you are 65 and older, orplanning to be over the next
three years, you get anadditional$6,000 per person

(04:25):
deduction.
And this is in addition to theextra standard deduction amount
you already get if you're 65 andolder.
It does start to phase out atcertain income levels, so when
your modified, adjusted to grossincome Gets to$150,000 if you
are married, filing joints or$75,000 if you are single.

(04:45):
once your income gets to thatpoint, it's reduced 6% by every
dollar over that threshold.
And so, if you're married,getting into age 65, that
$150,000 to$250,000 incomerange, is a, an important
planning point.
And it's important if you'rethinking about starting Social
security or, doing Roth IRAconversions.

(05:07):
So this phase out is reallyimportant.
The thing about this deductionis it's temporary, so it's only
effective for tax years, from2025 through 2028.
And why 2028?
Well, we can speculate, I thinka part of it's politics, right?
So the, the next president, thenext election is going to
include conversations around orthe next presidential candidates

(05:28):
are gonna have to deal withwhether they want Congress to
let these expire or whether theywanna continue these deductions.
So, part of that I'm sure ispolitics, but this is a
temporary deduction from 2025through 2028.
another provision is the cap onstate and local taxes.
And if we think about the taxreturn, each of us gets to pick

(05:50):
between a standard deductionamount, which we talked about
earlier, or itemizing yourdeductions, which is piling up a
specific list of personaldeductions, personal expenses,
and if that list of itemizedexpenses is higher than the
standard deduction amount, youget to take the higher of the
two.

(06:11):
And one of those specificitemized expenses or deductions
are state and local taxes.
So state income taxes, propertytaxes, things like that.
And since 2018 The state andlocal taxes that you could
deduct as an itemized deductionWere capped at$10,000 per year

(06:31):
with no inflation adjustment,which is a pretty tough cap if
you're in a high income taxstate like California or New
York, New Jersey, perhaps.
And so what's happening is thatthere is a temporary increase in
this cap.
this cap increases to$40,000 ofstate and local taxes that can
be deducted between, from 2025So this tax year through 2029,

(06:57):
and it's$20,000 if you'remarried, filing separately,
which you might be doing forstudent loan purposes And then
in 2030 it goes back to thatprevious$10,000 cap.
There are phase outs for this.
So once your modified adjustedgross income number gets above
$500,000, it starts to reduce30% for every dollar above that

(07:21):
threshold.
So basically once your incomegets to$600,000, you lose this
cap and it goes down to theoriginal$10,000 So this 500 to
$600,000 of adjusted grossincome is a pretty important
planning range.
it starts to make that extraincome above 500,000 quite

(07:42):
expensive once you factor in thelost salt deduction that you're
losing as you get through thatrange.
Plus additional things like QBIdeduction as that starts to
phase out.
So I think that planning rangeis gonna be pretty important,
especially in a really highstate tax states like California
and New York.
And the$40,000 cap does increase1% each year after 2026.

(08:06):
So there's a bump in 2026 andthen it increases for the next
few years at 1%.
and the adjusted gross incomethresholds.
The income thresholds alsoincrease since inflation.
But, that is welcome news to youif you live in one of those
states.
Something that we can planaround and something that
impacts this tax year.
there's also, in regards tocharitable contributions,

(08:27):
charitable donations, there isnow a permanent, charitable
deduction up to$2,000 if you aremarried, filing jointly or$1,000
for all other taxpayers.
And so, the reason this comes inis that charitable donations are
one of those itemizeddeductions.
And because the standarddeduction amount has been so

(08:49):
high since 2018, far fewertaxpayers, far fewer of us.
Actually have enough itemizeddeductions to benefit from
things like state and localtaxes and and property taxes and
mortgage interest, and here,especially your donations to
charity.
And, and because of that, we'vebeen using different strategies

(09:13):
like bunching donations intoevery other year or every third
year, to get that amount higherthan the standard deduction very
often through things like donoradvised funds, and so what's
changing now is that even if youdon't itemize, meaning even if
you take the standard deduction,they're still gonna allow you to
take a deduction for yourdonations to nonprofits and

(09:34):
charities.
Again, up to$2,000 if you aremarried, filing jointly or$1,000
for everyone else.
And we saw a version of thisduring COVID.
It was pretty small.
It was like$300 and$600, so itwas pretty small.
But, but this is an additionalpermanent, oppor, permanent
opportunity to benefit, from atax standpoint at least, for
those donations to charity.

(09:56):
If you are itemizing, it adds a,a little bit of a difference in
how that's treated.
So if you are itemizingdeductions and you are donating
to charity, the law adds a a0.5, so a half of a percent
floor.
Meaning that only, only thedonations above and beyond a

(10:17):
half a percent of your AGI areactually deductible as an
itemized deduction.
So for example, if your AGI, sothat's all of your income minus
those pre-tax deductions, ifyour AGI is$250,000 and you
donate$5,000 in that year, thefirst$1,250, so half a percent

(10:40):
of$250,000 is not deductible.
Only the amount that you donatedabove that$1,250 is deductible.
and you're able to carry overThat lost floor, that lost
deduction into the next five taxyears, specifically in the years
that you donate enough to getover that floor.

(11:01):
So if you're always under thathalf a percent floor, you're not
able to carry that forward.
So there's some differencesthere, but there's additional
opportunities for deductions ifyou don't itemize and if you do
itemize, there's a bit of afloor to get over in terms of
how much you donate, whichcontinues to make bunching
donations, a strategy toconsider.
And these changes go into effectin 2026 tax year.

(11:23):
So next year is when you shouldstart thinking, is when you'll
want to think about all thisfrom a tax plan, tax planning
standpoint, and make sure youkeep all of your receipts for
your donations moving forward.
included in the provisions were,enhancements to things related
to, children and childcareexpenses.
the first one is that there isan enhanced child tax credit

(11:44):
that's been made permanent.
right now the child tax creditis$2,000 per qualifying child
under the age of 17, and it hasnot been adjusted for inflation
over the years.
what was expected to happenafter this year is it would've
been reduced to the previouslower amount, however, it has
been kept at a higher amount andin fact has been increased.

(12:05):
So starting in this tax year,2025, that child tax credit will
be$2,200 per qualifying childand it will be in the future,
increase for inflation.
This is really welcome news.
There's really no reason whythis credit should not have been
increased for inflation.
so I, I'm happy to see this andit will also keep the current

(12:26):
income phase out limits as well,rather than go back to reduced
amounts, and that's, if you'remarried finally jointly at
$400,000.
Of, adjusted gross income and$200,000 if you were single or
married, filing separately.
So something that impacts thistax year positively.
In terms of the things that gointo effect next year are,

(12:47):
number one, an expansion to thedependent care credit.
So for, two working spouses thathave childcare expenses, there
is a credit available that youcan take up to a certain
percentage of those expenses andup to a, a certain limit.
And what's changing is that atthe lowest income levels,
submitting the maximum amountyou can get, the percentage of

(13:09):
qualifying expenses you can geta credit for, increases from 35%
to 50%.
Although, of course there areincome Phased out.
So you'll start to phase down toabout 20% of those qualifying,
qualifying expenses.
So that's on the dependent carecredit that goes into effect
next year.

(13:30):
there's also an increase in thedependent care FSA contribution
limits.
So if you have an dependent careFSA the annual limits will
increase from$5,000 to$7,500 peryear.
And of course, if you're marriedfiling separately, it cuts that
in half for each of you.
so that goes into effect in2026.

(13:53):
So that's something as you'regoing through the rest of this
year and you're going throughopen enrollment for the next
year, you wanna keep in mindthose increased limits, to$7,500
per year.
there's also some interestingadditional provisions here.
brand new.
One of them is a new car loaninterest deduction.
And, what this is, is thatinterest on personal car loans

(14:15):
are deductible up to$10,000 peryear, which is a pretty
expensive vehicle.
it's phased out as your modifiedadjusted gross income.
So as your income exceeds$200,000 for joint filers, or
$100,000 for all others.
So essentially, if you'remarried to filing jointly, once
your income is, at$250,000, youlose this deduction altogether.

(14:38):
And there are severallimitations to this.
One of'em is a lease Financingdoesn't count, so it has to be
a, a straight purchase.
It must be a new car, not justan old car New to you.
And the final assembly has tohappen within the United States.
And, and this is effective for,new cars purchased this tax

(14:59):
year, 2025 through 2028.
So this is a temporary deductionas well.
there's also a temporarydeduction for overtime income.
So if you are earning qualified,quote unquote qualified
overtime, you can deduct up to$25,000 of overtime, pay
annually if you're married,filing jointly.

(15:20):
if you are married to filingseparately, this is zero,
unfortunately, and then$12,500for everyone else.
And it starts to phase out onceyour income gets to about
$300,000 if you're filing joint.
cut that in half for everyoneelse.
and you'll see a similardeduction here for tips as well.
Unfortunately, optometristscannot turn all of their income

(15:42):
into tips.
but perhaps you can start to geta little bit more overtime.
I expect to see this separatedout, So this overtime pay
separated out on W2s and 1099for the tax year.
and this is temporary as well.
So this is for tax years 2025this year through 2028.
So this is gonna be temporary.
the estate tax and gift taxexemption amounts are made

(16:03):
permanent.
Since 2018, we saw a, a prettysubstantially increase in the
estate tax exemptions forindividuals and for married
couples.
They were expected to go back tothe old lower amounts.
those have been made permanent.
So for 2026, those will be$15million per person, or$30
million per married couple.

(16:25):
and will increase for inflationthereafter, which gives us a
little bit more certainty there.
It continues to make estateplanning less so about estate
taxes, at least federally, andmore so about just ensuring that
your assets and your affairs andyour minor children are taken
care of and handled according toyour wishes if, if something

(16:47):
happened to you and at death andincapacity and avoiding probate
in states where it makes senseto, providing flexibility as
much as possible in those estateplans and.
Income tax planning where itmakes sense.
And so estate taxes are, atleast from a federal standpoint,
become less and less of apriority.
One last thing on the individualside, is related to the ACA

(17:09):
health insurance premium taxcredits.
And this is not something thatthe bill specifically addressed.
It's more so that the bill wassilent on this.
Affordable Care Act.
Premium tax credits helped tosubsidize and lower the cost of
health insurance, especially forthose of you that are new to
practice ownership or enteringretirement.

(17:30):
Historically, there was a hardincome cliff, once your income,
again, this is modified adjustedgross income, but once your
income was over, was over 400%.
Of the federal poverty linelevel for your family size, you
lost all of the credit, even ifit was just by a dollar.

(17:51):
So this was a true hard cliff.
from 2021 through this year, thehard cliff was removed and
replaced with a more gradualphase out, which allowed you to
keep more and more of thatcredit, more and more of that
subsidy at higher income levels.
There wasn't a, a hard cliff.
This act was silent on thisissue.
It didn't do anything to extendit.

(18:12):
So unfortunately, next year,2026, that hard cliff continues.
It returns, and so this is gonnabe a really important planning
point.
If we're getting close to thathard cliff, if you're someone,
especially again in early inpractice ownership or getting
into retirement, that is anincome area that we wanna plan

(18:33):
really carefully around.
So wanted to just mention thatin there.
Now let's talk about businesstax changes.
And there's only a few of'em,but important ones.
the qualified business incomededuction was made permanent.
this 20% deduction was somethingI was expecting and hoping would
be made permanent.
This is something that wasplanned to disappear after this

(18:54):
year, but the reason it was putinto law in the first place was
because the corporate tax ratewas brought down to 21%.
And so to keep a bunch ofbusiness owners from changing
their entities to C corporationsjust to get that lower tax rate.
this 20% deduction of your,what's effectively your

(19:16):
operating business income, wasadded in there to create a bit
of parody between all thesedifferent entity types.
And so because that corporatetax rate was permanent, I was
expecting this to be, continuedas well.
And fortunately it was so in2026 and beyond, this will not
disappear, but it will stickaround.
And in fact, starting next year,the phase out ranges for taxable

(19:38):
income actually widen.
before you lose this deduction.
Because as a specified servicebusiness, which is what they
call us, optometrist andfinancial planners as well, once
our taxable income gets tocertain levels, before the
deduction, we lose thisdeduction Little by little the
amount of the deduction wequalify for goes down and down.

(20:02):
And then once we get to the topof that threshold, we lose the
deduction altogether.
And so in 2026 and beyond that,that phase out range will
expand, which will allow us tokeep more and more of that
deduction at higher incomelevels.
So we'll still lose it at somepoint, at some level of taxable

(20:22):
income, but at least there'smore room for you there.
We also see here the return of100% bonus depreciation.
So, bonus depreciation at 100%was made permanent.
Bonus depreciation is a cousin.
It's a close relative of thesection 179 deduction, which is
more commonly used.

(20:43):
It's more familiar as yourOptometry practice depreciates
equipment, And you want toaccelerate that depreciation
into the current tax year ratherthan the standard five or seven
year, depreciation schedule.
And so this is very similar tothat.
but each of those havedifferences in the types of
Property are the types of assetsthat qualify.

(21:06):
Bonus depreciation was somethingthat was introduced in 2017 As a
part of that Tax Cuts and JobsAct, you were allowed to
accelerate a hundred percent ofdepreciation for that
particular, those particulartypes of assets rather than,
again, depreciated over theregular schedules or five and
seven and 15 years, et cetera.
this percentage eventually beganto decrease 20% each year.

(21:30):
So, for example, in 2025, youwere only able to bonus or
accelerate that depreciation for40% of the cost rather than a
hundred percent.
now for any quote unquotequalified property you buy and
place in service afterinauguration day, January 19th,
2025 will qualify for 100% bonusdepre appreciation.

(21:55):
And, and again, this is apermanent provision moving
forward.
And, and so who, you know, whoreally is this important for?
I think this is mostparticularly useful for you if
you are, planning to purchase ordid purchase rental real estate
properties after January 19th,especially commercial real
estate connected to the practicethat you're working in.

(22:18):
Because with rental investmentproperties, you can consider
something called a costsegregation study, which is an
engineering study thatessentially looks at the
structure of the building andseparates out everything into
all of the different parts.
And separates out all of thestuff inside of the building
that that can be depreciated onshorter schedules than the usual

(22:41):
depreciation schedule.
And then what bonus depreciationallows you to do is you can
accelerate the depreciation forall of the stuff that qualifies
into the current tax year.
You would not be able to do thatwithout that cost segregation
study.
And so for those that it makessense, at the advice of your tax
and financial professionals,this is something that can be a

(23:03):
really strong, arrow in the taxplanning quiver.
and then lastly on the businessside, the, pass through entity
tax credits lives on.
And what that is, is that, as aresult of that$10,000 state and
local tax cap, states started tocreate their own workarounds.
Where, if you owned apartnership or an S corporation,

(23:24):
you can have that partnership ors corporation pay the state tax
on behalf of you the owner.
And that is a, that is adeductible business expense for
federal taxes.
And then on your state taxes.
You are able to get a credit tooffset that tax so you're not
double paying that state tax.
And so this is sort of aworkaround to get that, to get

(23:47):
those state taxes as a federaltax deduction.
each state sort of has its ownrules around how exactly that
worked.
in some of the drafts orproposed bills that had come
out, they were planning to getrid of that workaround, but, the
current bill is silent.
It does not remove that.
So that continues to live on.
So we've talked through theindividual, we've talked through

(24:08):
the business aspects.
Let's talk about some otherenhancements that came out of
the bill.
in terms of 529 plans, itenhanced the, types of expenses
that are qualified educationalexpenses for 529 plans.
it expanded the expensesconnected to elementary or
secondary school.
So if you are drawing out ofthose accounts after the

(24:29):
enactment of this bill movingforward, there's a longer list
of elementary or secondaryschool or religious school,
expenses, as well as, and thisis a good one for your
optometrists, credentialing andCE expenses.
So your expenses, yourcontinuing education expenses to
upkeep your, Optometry licenseare now it looks like qualified

(24:51):
educational expenses.
So this is really interesting assome states will also give you a
tax benefit, on the state taxside for contributing dollars
into a 5 29 plan.
And now if you can take thosedollars, withdraw them and use
them for ces, that's a prettynice benefit to have.
Now, we don't want to abuse itby trying to use 529 dollars for

(25:15):
family trips around CE time.
But, for those that are takingCEs moving forward, this is a,
an interesting planningopportunity to plan around.
there's another thing related toHSA accounts health savings
accounts is that bronze plansand catastrophic plans sold on
the ACA exchanges now qualify asHSA eligible plans.

(25:36):
And before, of course, the planhad to meet a certain, minimum
uh deductible and a certainmaximum out of pocket maximum to
be considered as a highdeductible plan that was
eligible for HSAs.
But for now all bronze plansthat are sold through an ACA
exchange are now eligible.

(25:57):
And this start, this is startingin 2026, so starting next year
and beyond, One last thing hereon the tax side is that there
are new, Trump savings accounts.
And, and so this bill creates anew type of account for minors

(26:17):
under 18 called Trump Accounts.
And these Trump accounts areessentially, traditional IRAs
for all intents and purposes forthe benefit of your child.
The rules are essentiallycontributions can only be made
before the year your child turns18.
there are no deductions forcontributions, so you're adding

(26:39):
after tax basis after taxdollars into the account.
Um, there's no earned incomerequirement like regular IRA
contributions.
the contributions are capped at$5,000 a year, and in the future
we'll have inflation adjustmentsas well.
the only investments that can bein these accounts while the
child is under 18 are mutualfunds or ETFs that track a US

(27:05):
based market cap index fund.
So the S&P 500 is specificallynamed, but other US broad market
indexes.
that have expenses of point 10of a percent or less.
So really low cost US broadmarket index, mutual funds or
ETFs.

(27:25):
It can't be opened until a yearafter the bill passes, so we
have quite some time beforethese are even a thing.
And the funds can only bewithdrawn once the child turns
18 and it essentially mirrorsthe rules of an IRA at that
point.
and again, your contributions asparents are after tax basis.
You wanna keep an eye on thosecontributions moving forward.

(27:48):
there is a provision that allowsbusinesses to contribute to
these plans, on behalf ofemployees up to$2,500 through a,
like a actual documented plan.
this is a deduction for thebusiness and it's not income to
that employee.
and I, I believe counts againstthat$5,000 maximum, but this is

(28:08):
potentially a new employeebenefit for your practice to
consider.
and there's also a pilot programthat will be funded with a
thousand dollars of seed money,from the government, for
children born in the years 2025through 2028.
So there's a bit of free moneyhere happening, some seed money
from the government, but, aninteresting, new investment

(28:28):
account for minors to considerand something I've been thinking
about.
Okay.
What are some of the differencesbetween this and just a
custodial Roth IRA in your kids'names?
why would you use one versus theother?
Well, number one, Trump accountsare not going to have an earned
income requirement.
whereas a custodial Roth IRA,your child has to actually have

(28:48):
earned income.
So that's, a difference there.
businesses, again, through adocumented plan, can also
contribute on behalf ofemployees.
So that's, that's an additionalbenefit there.
But again, custodial Roth IRAshave higher contribution limits,
so the regular IRA contributionlimits, and assuming the rules
are followed, those, thosedollars will grow tax free into

(29:12):
the future for that child'sretirement.
And so because of that, youknow, if the kid has earned
income, I'd probably consider,starting with the Roth IRA for
the kid.
But there's opportunitiespotentially to do both.
So something to consider there.
This is starting probably itseems like, 2026 tax year.
So that's sort of the bottomline with from the tax aspects.

(29:35):
We have basically a lot ofextensions with a little bit of
extra flavoring, a little bit ofenhancements there.
Let's talk about now the studentloan provisions.
the worst possible outcomes aswe saw in the proposed bills
were avoided.
because of a, what's essentiallya Senate lawmaking referee

(29:56):
called a Senate parliamentarian.
Essentially what had happened isthis parliamentarian, reviews
all of these laws and advisesthe Senate on whether certain
aspects of it can be a passedwith a much easier simple
majority, so 51 votes, orwhether there needs to be a 60
vote majority, which is muchmore difficult, especially with

(30:17):
the current makeup of, of theSenate.
and in these proposed drafts, alot of the very negative,
frankly, aspects of the studentloan changes for current
borrowers We're going to be madeeffective immediately.
And, and there was gonna be nograndfathering in for current
borrowers.
Well, that parliamentarian said,hold on.
Those provisions cannot bepassed with a, a simple

(30:37):
majority.
They're probably gonna need a60, 60 vote majority.
And so due to that person'sefforts, the Senate had listened
and so the final bill provisionsfor student loans, look like the
following.
For current borrowers, this billeliminates all ICR based
income-driven repayment plans.

(30:57):
So it will eliminate, startingin July 1st, 2026.
Income contingent repayment.
Pay As You Earn and SAVE.
Which are based on that originalICR law.
And those repayment plans afterJuly 1st, 2026 will be replaced
by two options, a modified IBRplan, both the new and the old

(31:22):
version.
and the RAP repayment assistanceplan.
So if you, if you took outfederal loans before July 1st,
2014, you would get the oldversion of IBR, which is 15% of
discretionary income.
If you were a new borrower, soif you took your, your first
federal loans after July 1st,2014, then you qualify for the

(31:43):
new IBR.
And that is, that is a 20 yearroute to forgiveness and a 10%
of discretionary incomecalculation, which is fantastic.
So you get to keep both old andnew IBR.
So you have a modified versionof IBR or the brand new
Repayment Assistance Plan.
And I talked a little bit aboutthis in a previous episode,
previewing some of these lawsthat were coming up.

(32:05):
and the way that this works isthat the loan calculations are
gonna be somewhere between 1%and 10% of your adjusted gross
income rather than discretionaryincome.
Maybe if you think about all ofthe current income-driven
repayment plans, the way thatthose payment plans work is that
it starts with your income bydefault it's adjusted gross
income.
It subtracts out an amountsbased on the poverty line amount

(32:29):
for your family size.
And that leaves you withsomething called discretionary
income.
And then you multiply thatdiscretionary income by either
15 or 10%.
and so you get, and so part ofyour income is shielded by your
family size.
With this new repaymentassistance plan, it's, it's a
percentage of your adjustedgross income.

(32:49):
So it's gonna be different,especially for those with much
larger family sizes.
And the way that it works isthat as your adjusted gross
income increases, the percentageof your AGI that it's used to
calculate your loan paymentsincreases 1% as well.
And basically, once you get to ahundred thousand dollars of
adjusted gross income, it's 10%,which is probably where most

(33:11):
optometrists are gonna land.
In contrast to the currentstudent loan options, this is a
30 year route to forgiveness.
So you're looking at this overmost of your career, essentially
as essentially a 10% tax on yourincome.
it waives unpaid interest, whichis similar to the what the SAVE
plan was trying to do.
It preserves married, filingseparately, which is great.

(33:31):
You can file taxes separatelyand exclude your spouse's income
from the loan calculation.
It's going to have a minimumpayment of$10 a month.
And in terms of family size,there is a$50 a month deduction
from your payment For eachdependent child you claim on
your tax return.
The catch here is that once youare on it, you can't move off of

(33:53):
it onto IBR.
It's a permanent enrollment.
There is no mechanism for you tochange off of it into IBR.
And so this is very much a oneand done.
Once you choose this, you aregoing in this direction.
Or the new version of thestandard repayment plan.
And for current borrowers,Again, Pay As You Earn and SAVE
will no longer be options as of7/1/2026, but you are able to

(34:18):
stay on your current repaymentplans at least until July 1st,
2028.
So whereas before this wasessentially gonna happen
immediately, there's sort of athree year gradual transition
into the new plan.
And so again, to sort ofsummarize the options for
current borrowers, if you'recurrently on old IBR, you can

(34:41):
stay on it.
Or in the future you can switchto the new RAP plan if you're
currently on Pay As You Earn,you can stay on it for now, but
at some point between now andJuly 1st, 2028, You need to
choose either IBR, the new orthe old one, depending on when
you took out your first federalloans or the RAP plan.
if you are in the SAVEforbearance, you can stay on the

(35:03):
SAVE forbearance.
up until again, July 1st, 2028,or really when the current court
cases wrap up.
And I think we forget thatthere's court cases going on,
but, essentially those courtcase court cases probably will
end up doing away with SAVE Soyou can stay on the forbearance
until then.
But, once that happens, or at,or before 2028, you need to make

(35:24):
a decision, again, between IBRor the RAP plan.
if you are on extended orgraduated or standard repayment
plan, you can remain on theseplans as long as you don't
consolidate or take new loansafter July of 2026.
So consolidating after July 1st,2026, essentially, removes you

(35:46):
from these current options.
So that's something you want tobe very careful about.
So I have some thoughts andreflections here for current
borrowers.
if you're going for PSLF thathasn't changed, you're still
going to get the benefit Overthe next three years or so from
the current IDR options.
And from there you're gonnachoose IBR or RAP.
So PSLF borrowers, that's gonnacontinue on as it is.

(36:08):
If your plan was going for 20 or25 year taxable forgiveness,
then this eliminates all 20 yearoptions for forgiveness.
Unless you are eligible for newIBR.
Again, if you took out yourfirst federal loan after July
1st, 2014, if that's you, youare probably in the small group

(36:30):
of borrowers that made out bestfrom this whole ordeal.
and I, I wish Pay As You Earnborrowers would've been folded
into that.
I just don't think it makes muchsense that, you know, if you
were eligible for Pay As YouEarn, but not IBR you lose that
20 year route to forgiveness.
But this is the hand we're dealtwith.
If you're eligible for new IBR,you are in a, in the same great

(36:52):
places as you were beforehand.
this is going to makeforgiveness more expensive.
Now it doesn't necessarily meanforgiveness is entirely off the
table taxable forgiveness, thatis.
I think the general math stillworks out to where if your loan
to income ratio, includingmarrying, filing separately,
like including these strategiesto file separately with tax

(37:14):
filing.
If your loan to income ratio istwo times your income or more, I
think forgiveness can very wellstill make sense.
if it's less than that, so undertwo to one ratio, then it's a
big fat, it depends area andjust every situation has to be
looked at a little bit morecarefully.

(37:34):
I think we're gonna see a lotless obvious cases where
forgiveness makes sense and it'sgonna be more about running the
math, looking at the differencesbetween just paying it off and
going for forgiveness.
And then deciding whether thatmakes sense for you based on
your own goals and prioritiesfor your cash flow.
And of course, this assumes thatthere are no further lawsuits

(37:56):
challenging this and that futurecongresses don't decide to make
changes after 2028, which couldvery well happen.
of course we don't want to, wedon't want to count on that, but
we've seen student loan policyswing quite a bit just over the
last five years alone.
And this has been a trade offwith forgiveness strategy.
This is something I I've alwayssaid when going for forgiveness

(38:17):
using IDR plans, you arechoosing what is projected to be
a mathematically better outcomeover the long term.
And the trade off you'reaccepting for that is a higher
amount of volatility withpolitics and changes to student
loan options.
You're just accepting moreuncertainty for what's,
projected to be a better mathoutcome.

(38:37):
And so you have to decide howcomfortable you are with that
trade off.
versus simply just paying downthe debt and knowing exactly
what to expect.
But even then, there aretrade-offs as more of your cash
flow is going to debt, paymentsversus whatever else it would've
been used for.
And so these are all abouttrade-offs, and we just have to
now look at our options betweennow and 2028 and, and see what

(38:58):
makes the most sense.
I think for most of you, youprobably will stay on the
current IDR plan, probablythrough the next three years, up
until at least 2028.
But we have to review the mathmore carefully now and just see
what makes the most sense.
this was, again, I, I was hopingin terms of these bills that
current borrowers would've beenmore favorably grandfathered
into the provisions you agreedon when you took out the loans,

(39:23):
but here we are.
this is the uncertainty we kindof knew was there all, all
along.
So that's for current borrowers,for future borrowers, so those
that are in or enteringOptometry school, there's a very
different path forward ahead foryou.
if you take out any new loans oreven consolidate your current
federal loans together afterJuly 1st, 2026, your only

(39:48):
options for repayment are gonnabe the RAP plan with its 30 year
time horizon to forgiveness or astandard repayment plan, which
is gonna be over 10 to 25 years,depending on your loan balance.
And this includes if you alreadyhave loans before then, and then
take out additional loans forlike your, your final year or so

(40:10):
after July 1st, 2026.
So your options are much, muchmore limited.
in addition, there are caps onborrowing, the law does away
with the Grad PLUS loan program,which was effectively a blank
check up to the cost of tuitionfor graduate school and
increases the Stafford loanlimits.

(40:30):
But, there are annual andaggregate loan limits for
graduate students.
For specifically professionalgraduate students like
optometrists.
Your loan limits are gonna be$50,000 per year and$200,000 in
aggregate.
And, and there's also anaggregate total loan balance as
well.
So understanding how expensiveOptometry school has gotten and

(40:52):
seeing the loan balances I'mseeing for recent graduates,
we're very likely going to seefuture optometrists have
potentially, I think, higherprivate student loan balances.
And your options are simplygonna be more limited.
And I wonder how this impactsthe cost of tuition at Optometry
schools.
I, I think it will force schoolsto reevaluate the pricing of

(41:14):
their programs.
I think a lot of the increasingin college costs over time
overall is, is due to sort ofthe blank check provided to
graduate students through theseloan programs.
And so, you know, these are allkind of intertwined together in
terms of the, the issue ofrising college costs.
So, I, I do wonder what graduateprograms are gonna do to
reevaluate the costs and eventhe timing of programs.

(41:37):
You know, will that lastsemester start before July 1st,
2026 so that those loan balancescan be included before then.
But simply said, for futureborrowers, if you are planning
to take new loans after July1st, 2026, even if you have
other loans before that.

(41:57):
You are going to be under thesenew rules, and you'll have to
think more carefully about thatdecision.
There's gonna be some reallyinteresting decisions to be had
in terms of, you know, if youare in your last year and you
already had three years underthe old student loan rules
before July of 2026.
Do you take that last year ofprivate loans rather than

(42:19):
federal loans?
I mean, there's, there's thesedecisions that I'm really not
ready to, to talk too much indetail.
But, you know, these are somethings that, that are gonna come
up in conversations and that youas borrowers, that you as
parents are gonna have to thinkabout.
But, these are the latestupdates in the forever going
saga of student loan planning.
And for current borrowers,again, you have the next roughly

(42:41):
three years to make a decision.
There's nothing you need to doat this point.
but before 2028, you'll have tomake a decision between IBR or
RAP, and you'll have to look atthat math a little bit more
carefully.
A couple other provisionsrelated to student loans that
are positive.
number one, the, tax free,discharge for death and
disability is made permanent.
So if you are disabled or passaway, those loans are discharged

(43:05):
tax free.
And then lastly, extends theability for businesses to make
up to a$5,250, payments towardemployee student loans Into 2026
and beyond, as well as adding aninflation adjustment.
And this is a lot, I, I knowthis is a lot from a tax
standpoint.
I know this is a lot from astudent loan standpoint, but
there are no decisions that needto be made right now.

(43:28):
We can all take a breath, we canrelax, we can enjoy summer, and
then slowly start to makedecisions moving forward.
And if you have any questions,if you want to talk about how
these provisions impact you, forme as a Planner, it's time to
review each client to see whatimpacts each client to project
out tax and student loanscenarios, work closely with the

(43:50):
tax professionals.
You know, it's just time toevaluate where that impact is.
If you want someone to help walkyou through these changes and
how it impacts your finances,reach out.
I'll throw a link in the shownotes to schedule a no pressure
introductory call.
We can talk about what's on yourmind financially, and how all
these changes impact you.
And I'll also throw into theshow notes, again, those
newsletter articles.

(44:11):
And I'll keep you informed hereon the podcast to keep you
informed on LinkedIn and socialmedia.
we'll keep you informed vianewsletter as well.
And with that, really appreciateyour time and energy and
listening today.
In a meaty, full episode here.
we will catch you on the nextepisode.
In the meantime, take care,

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How the Final One Big Beautiful Bill Act Impacts Optometrists - Taxes, Student Loans, and More!

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}How the Final One Big Beautiful Bill Act Impacts Optometrists - Taxes, Student Loans, and More!