May 30, 2025 • 26 mins
Questions? Thoughts? Send a Text to The Optometry Money Podcast!
In this special Friday episode, Evon returns to break down the recently passed proposed House bill - the “Big Beautiful Bill Act” - and what it could mean for optometrists.
While it's a long way from becoming actual law, it's helpful to know what exactly is one the table and what changes to expect related to tax planning and student loans.
This episode explores key tax extensions, how they impact private practice owners, and the major proposed overhaul to student loan repayment plans that could significantly affect current and future borrowers.
You’ll hear what’s in the bill, what’s likely to change, and what it all could mean for your tax planning and student loan strategy. From extended tax brackets and deductions to a major overhaul of income-driven repayment plans, Evon walks you through the key points in plain language.
He also shares what he's watching closely as this bill moves to the Senate, and why some of the proposed student loan changes may be concerning for current borrowers.
This is a must-listen if you want to stay ahead of what could impact your personal and business finances in the near future.
💡 Key Takeaway:
While many tax provisions bring minor relief or maintain the status quo, the student loan changes could severely alter the financial outlook for optometrists with student debt. If passed, this legislation could disrupt existing repayment strategies and diminish loan forgiveness prospects.
We'll keep an eye on it as it moves through Congress, and keep you up to date!
Resources Mentioned:
- The Optometry Money Podcast Ep 51: An Optometrist’s Guide to the Qualified Business Income Deduction
- Template Student Loan Letter For Senators
Questions?
Email Evon at podcast@optometrywealth.com.
Stay Connected:
- Click here to Subscribe to the Eyes On The Money Newsletter for weekly financial insights tailored specifically to optometrists.
- Have Questions? CLICK HERE to schedule a short introductory call
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evon (00:04):
Hey everybody.
Welcome back to the OptometryMoney Podcast where we're
helping ODs all over the countrymake better and better decisions
around their money, theircareers, and their practices.
I am your host, Evon Mendrin,Certified Financial Planner,
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm just for optometrists
(00:24):
nationwide.
And thank you so much forlistening.
Really appreciate your time andattention today, and I am
excited to be back.
On a special Friday edition ofthe podcast here.
as my wife and I had welcomedour third child into the world
and, and spending some time withour newborn who came a week
later than expected, itdefinitely threw off my content
(00:45):
calendar.
So I'm excited to be back withanother live episode because we
have a lot to, to keep an eye onhere.
As we see that recently, theHouse of Representatives just
passed something called the BigBeautiful Bill Act by the
slimmest of Margins, one Vote.
And yes, that's the real name,and as silly as it is, it is a
pretty big bill.
And it's coming with importantchanges or really extensions to
(01:07):
tax law and very importantstudent loan considerations to
keep an eye on.
So in today's episode, I'm gonnabreak down the tax and student
loan changes that could impactyou, pretty heavily as an
optometrist and or a practiceowner and it's important to say
this is not law.
This is a proposed bill.
It still has to make its waythrough the Senate.
(01:30):
And I am expecting, or reallyhoping for important changes
through the Senate.
And so we have a long way to gobefore this becomes law and we
know exactly what we're lookingat.
But I it, I think it's helpfulto get a feel for what's on the
table.
What, what are the stakes here?
What are the expected changesthat we need to keep an eye on,
and how might that changethrough the Senate?
(01:50):
And so with that in mind, let'sdive in first looking at the tax
considerations here and it'simportant to give a little bit
of background.
In 2017, president Trump in hisfirst term signed into law of
the Tax Cuts and Jobs Act, whichwas this big sweeping tax reform
bill.
It changed a lot about, personaltaxes, in regards to the tax
(02:10):
rates brought down tax rates.
It expanded the standarddeduction, but it also removed
something called a personalexemption.
It made changes to somethingcalled the alternative minimum
tax.
it just about doubled the estatetax exemption, so it impacted a
lot on the personal tax planningside, as well as on the business
side.
So it created a permanent 21%corporate tax rate as well as
(02:35):
for pass through businesses.
So those that are taxed as, Scorporations or partnerships or
sole proprietorships.
It created a 20%, what it calledqualified business income
deduction, the QBI deduction,and so, it had these big changes
from a tax planning standpoint,but in order for that law to be
passed a lot of those provisionshad to expire at some point.
(02:57):
And so.
A lot of those provisions,especially on the personal side,
as well as that QBI deductionwe're expected to expire at the
end of this year and things wereexpected to go back to.
Pre 2018 tax law.
So higher tax rates, lowerstandard deduction, but some,
but that personal exemptioncoming back, the state tax
(03:19):
exemption reverting back toinflation adjusted, but old
numbers.
So all of these individualprovisions were going back to
old law and the QBI deductionwas going away.
And so we as practitioners, sofinancial Advisors, tax
professionals that we work with.
We're all waiting to see whichtax laws, which rules are we
(03:40):
gonna be working with movingforward.
And so this law addresses a lotof that.
it's basically extending a lotof what we currently have with
some modifications andimprovements or, or adjustments
here.
So, for example, tax bracketsare extended permanently.
Quote unquote, permanentlymeaning until another congress
(04:01):
changes it.
But, there's no expirationwindow.
The current tax brackets, 10%,12%, 22, 24, 32, and so on will
continue on.
the standard deduction stayshigh.
If you recall, when you look atyour tax return, each taxpayer
gets the option of choosing oneof two deductions.
You take a standard deductionamount, which is something that.
(04:24):
Every family that are filing or,or tax filer that's filing like
you gets to take or you can pileup a certain list of personal
expenses and, and that's calleditemized deductions.
And if that itemized list.
Is higher than the standarddeduction than, than you can
take the higher of the two.
(04:44):
So the standard deductionremains high, which is 30,000
for those filing taxes jointly15,000 for, single tax filers
with temporary increases.
over these next four years, sobetween 2025 and 2028.
And the bumps are$1,000 If youare single, 1500 if you're
(05:05):
filing head of household or$2,000 if you are, married
filing joint, with adjustmentsfor inflation and.
You might be wondering why onlyfor these next four years?
Well, I, I wonder if part ofit's because for budgetary
reasons, they have to balancethe numbers in order to get a, a
bill like this passed.
But also if we think about it,what's happening in 2028?
(05:27):
Well, it's the next presidentialelection.
So, without a doubt, I thinkthere's some political
gamesmanship happening here.
But, we see a slight increasethere over the next four years.
And if you're 65 and older,there's also an an additional
bonus increase to that, whichphases out over certain income
levels.
So standard deduction continueson with a slight bump over the
(05:48):
next four years.
The child tax credit, which is atax credit per qualifying child.
Under age 17, continues toremain at its current level with
a slight increase over the nextfour years.
So this is something that wasexpected to be reduced down to
$1,000 per qualifying childafter this year.
(06:09):
It's currently$2,000 and thecurrent bill will continue that
same dollar amount, but willgive you a$500 increase over
these next four years.
So.
2025 through 2028, we see thatunder this bill it would be
$2,500 per qualifying child and2029 and beyond.
(06:30):
It's going to decrease back toits$2,000 level with increases
for inflation.
And it also keeps the phase outthresholds for the credit.
So that's$400,000 of adjustedgross income, AGI if you're
filing joints,$200,000 if you'refiling single, and you start to
phase out of the credit fromthere.
(06:50):
The QBI deduction.
going back to the business side,the QBI deduction is extended,
so that's gonna continue to liveon.
and it's slightly expanded underthis bill.
So currently it's a 20%deduction.
It's going to be expanded to23%.
And I'll throw a link in theshow notes to a more detailed,
(07:11):
podcast episode I didspecifically on this deduction
and it also slightly simplifiesand, and enhances The way that
the phase outs are calculatedfor Optometry practices.
And, the way that the, the waythat this deduction works is
that Optometry practices andhealthcare practices as a whole,
(07:31):
including financial planningfirms, we are considered
specified service trades orbusinesses.
And because of that, once ourtaxable income, before the
deduction gets to certainlevels, we start to phase out of
the deduction.
We lose little by little.
And then once we hit the higherend of those thresholds, we lose
(07:52):
it altogether.
And currently, for example, in2025, that phase out threshold
starts, at 394,600 of taxableincome before the deduction.
And it phases out over the nexta hundred thousand dollars of
taxable income.
And all other tax filers it's197,300.
(08:12):
And so there's this sort ofcomplicated calculation to see
what your deduction should bethrough this phase out range
before you phase out altogether.
Well, this proposed bill,provides a slightly simplified
way to calculate those phaseouts, and I think in a way
that's gonna allow more of thededuction as your taxable income
gets higher.
(08:33):
So we'll see what that lookslike as it goes through the
Senate.
But QBI lives on, which is whatI was.
Hoping for, and I think a lot ofus were expecting but it's great
to see that written in the billthere.
Another provisions related tothe state and local tax
deduction.
In those itemized deductionsthat I mentioned earlier, one of
those deductions Is state andlocal taxes.
(08:54):
You can use state and localtaxes as one of those
deductions.
However, that 2017 Law Tax Cutsand Jobs Act capped the amount
of state and local taxes youcould deduct at$10,000, which
especially impacts those of usthat live in high state tax
states like California, NewYork, and so on.
(09:16):
which lead, which led to a lotmore tax filers, taking that
standard deduction, not reallybenefiting from the state taxes
they were paying.
This proposed bill increasesthat cap from$10,000 to$30,000.
But there is a phase out forhigher earners, meaning that
eventually you start to phasedown to the regular, original
(09:37):
$10,000 cap.
Something to keep an eye onthere.
another part of this bill islikely going to eliminate the
use of a pass through entitytax, tax credit.
And what this is, is that as aresult of the state and local
tax cap that you can deduct,states start to implement their
own workarounds.
And if you own a partnership oran S corporation.
(10:00):
And the business itself paid thestate taxes on behalf of the
owners and the owners electedinto it based on whatever the
state rules were, it would, itwould show up as a business
expense on the profit and loss,which indirectly led to those
taxes being a federal taxdeduction for the owners.
And on the state tax returns,the state would provide a
corresponding tax credit forthose payments to offset the
(10:23):
state taxes that were due.
And so this was a workaroundthrough the business itself.
each state looks a little bitdifferently, and something that
we were expecting to be able touse at least through 2025.
And this bill appears to beputting an end to that.
some other things to keep an eyeon here are reforms to HSA
accounts and some adjustments to529 plans.
This version of the billessentially doubles the
(10:46):
contribution limits for HSAs.
So, for example, right now thelimit is$4,300 a year.
In 2025.
For an individual, if you arecovered by yourself on a high
deductible health plan, thatqualifies or$8,550 if you were
on a family plan.
And this bill would essentiallydouble that to$8,600 for an
(11:06):
individual and$17,100 if youwere on a family plan.
With inflation adjustments.
That being said, there areincome phase outs for this.
Eventually, if you get to acertain point of adjusted gross
income, you phase down to thoseoriginal limits.
But something to keep an eye onthere.
It also helps to sort ofeliminate some of these
eligibility traps, so to speak,that might keep you from being
(11:29):
eligible for using an HSA.
So for example, those that areage 65 and older.
I cannot qualify in use an HSAplan, but what this would allow
for is that those who are 65 andolder that are enrolled in
Medicare Part A, but not in partB, can continue to be eligible.
And that's for you if you'recontinuing to work and you have
(11:51):
healthcare coverage through workyou've opted not to enroll yet
in part B, this is somethingthat's gonna allow you
potentially to continue to beeligible to contribute to an
HSA.
similarly, there are someworkarounds.
If your spouse has a Healthcare,FSA, a flexible spending account
that they're, that they'recontributing to, but you don't,
it's gonna have some workaroundsthat allow you to continue to be
(12:14):
eligible for your own HSA.
So some enhancements there, samething for 529 plans, it expands
some of the abilities for you touse those funds.
So, for example, it would coverprofessional credentials and
continuing education.
So the CFP designation, forexample, continuing education,
things like that.
So it expands the use a littlebit for 529 plans, and it also
(12:36):
expands the list of K through 12expenses as well.
Some other quick ones here.
So, bonus depreciation, rightnow, the, the percentage of
bonus depreciation is proposedto come back to a hundred
percent.
If you're familiar with bonusdepreciation, it's a cousin of
the section 1 79 accelerateddepreciation.
(12:58):
When you buy certain types ofassets like equipment or real
estate, property you're able todepreciate the cost of those
things by default over a setschedule of time.
So five years, seven years, 15years, 27 and a half years, and
so on.
What bonus appreciation andSection 1 79 allows you to do is
(13:19):
it allows you certain types ofproperty, it allows you to
accelerate the depreciation intothe current tax year rather than
spread it out over a period oftime and.
Bonus depreciation has come downover the years on the percentage
of the cost you can accelerate.
(13:39):
as a result of tax Cuts and JobsAct, it was set to a hundred
percent, meaning you can, youcan bonus depreciate a hundred
percent of the cost of the, ofthe asset that you're working
with.
but that came down at a certainpoint, 20% every year.
So currently in 2025, it's only40% of the cost.
2026 would be 20%.
(14:00):
Depending on the year that youpurchased and place the asset or
property in service.
And what the new bill would dois it would return us to a
hundred percent bonusdepreciation, but only for
property acquired and placed inservice after January 19th,
2025, which interestingly isinauguration day, and before
(14:21):
January 1st, 2030.
So essentially through thesenext five years or so, we're
going to be back at a hundredpercent.
Which can be a big deal,especially if you are a real
estate investor.
You are using things like costsegregation studies to separate
out All of the components of theproperty into different types of
assets and with differentdepreciation schedules.
(14:43):
If this goes through, this issomething that can be pretty
useful for you from a taxplanning perspective.
The estate tax exemption iscontinuing on at its high level,
and in fact increases.
So it would be$15 million perindividual or$30 million per
(15:05):
married couple withcontinuations for inflation.
So that continuous on on, andthere is a host of other
interesting, tax provisionshere.
Like tax free tips and,deductions for for car loan
interest at certain levels ofincome if the vehicle was
assembled in the US So there'sother things in there, but,
those are some of the primarythings that we're looking at as
(15:27):
it relates to optometrists.
So that's the tax planning side.
Nothing major.
I mean, a lot of it justcontinues on what we are
currently experiencing withslight tweaks, slight
improvements maybe, depending onhow you're looking at it.
Now, let's talk about thestudent loan aspects of the
bill.
And this is where there aremajor reforms happening and not
(15:47):
all of them.
And just to be frank, not all ofthem positive for optometrists.
Let, let's dive into what we seehere.
So before I do, I, I think it'salso helpful to give a little
bit of, back, a little bit of abackground for student loans,
especially as it relates toincome, different repayment
plan, of when and how those arecreated.
So as you think about thehistory of federal student loans
(16:09):
Our government, congress andpresidents have done a really
good job of creating a reallycomplicated web of student loan
rules depending on when you wentto school and when you took out
student loans.
rather than.
Create new rules and clean upold rules, they have tended to
layer rules on top of each otherand student loan repayment
(16:30):
options on top of each other.
So for example, when we look atthe very first income-driven
repayment plan, if you remember,income-driven repayment plan,
IDR is sort of the umbrella termthat describes all of these
different types of plans.
And then there are, there aretechnically five different
plans.
And your eligibility for thosedepends on who the borrower is.
(16:52):
The very first one, ICR,income-contingent repayment, was
created by law, I believe, in1993.
And you were eligible for itstarting 1994.
then came IBR, income basedrepayment that was created again
by law in 2007.
First eligibility was 2009,there's an old version of that.
(17:15):
If you took out your loansbefore 2014 and there's a new
more favorable version of that,if you took out your first
Federal loans after July 1st,2014.
So ICR and IBR both created bylaws and then came three others
created by PresidentialAuthority executive action.
(17:36):
the first one was PayYou Earn.
This was created in 2011 byPresident Obama's executive
action.
And it was created based on theauthority that, that the
president was given by thatoriginal law that created ICR.
So President Obama was acting onauthority given to him by that
original law and created Pay AsYou Earn a more generous version
(17:59):
of that repayment plan.
then came Revised Pay As YouEarn in 2015 again by President
Obama based on the authorityfrom that same law.
And then finally, presidentBiden created the very extremely
generous SAVE plan, during theCOVID era.
Which was the most generous ofall, and also based on the same
authority given by that law.
(18:21):
So we have these sort of layersof repayment plans added on top
of each other over the years,some based on actual statute,
others based on the authoritygiven by that original ICR
statute.
And the authority that thepresident has is really the
question, of the court casesrelated to the SAVE repayment
(18:42):
plan.
the courts are now decidingwhether the President, president
Biden had the, actually had theauthority given by that law to
create such a generous plan.
That's essentially what'shappening here.
And so this current bill, thisbig one, big beautiful bill, is
going to overhaul substantiallythe current student loan system,
(19:02):
and it's gonna do that forcurrent borrowers and future
borrowers.
And it's going to introduce thisnew repayment plan called the
Repayment Assistance Plan RAP.
And what this plan does is it'sgoing to have.
and it's gonna calculate yourpayments based on a percentage
of your adjusted gross income, apercentage of AGI, and it's a
(19:24):
graduated level of percentages,so it's gonna be anywhere from
1% to 10% of your AGI, dependingon what your income is.
for optometrists, you're mostlikely looking at 10% of AGI.
So for example, if your adjustedgoes income is$200,000, your
payment's gonna be$20,000 peryear or roughly$1,600 per month.
(19:48):
And it would still allow you tofile taxes separately and
exclude your spouse's incomefrom the calculation.
It would have forgiveness, butover 30 years instead of 20
years or 25 years And it allowsa small$50 a month reduction in
payments per child and andpayments under this plan would
still qualify for PSLF.
(20:11):
and this repayment plan's likelyto be less favorable than the
others.
If you think about how theothers are calculated, it starts
with your income.
It subtracts out an amountsbased on the poverty line for
your family size.
And then it multiplies that by10% or 15% for the old IBR and
so the new plan basically justtakes very likely 10% of your
(20:33):
AGI just directly and so fromyour AGI directly and with
without subtracting that povertyline amount.
So it's very likely to lead tohigher payments and a longer
timeline towards forgivenessand.
And then it makes importantchanges to the options that you
(20:53):
have as a current borrower.
The SAVE plan and the Pay As YouEarn and ICR are all eliminated.
All of those, all of those, allof those repayment plans based
on the original law, those areall gone.
And it's gonna replace it withtwo options for current
borrowers.
You're either gonna choosebetween a modified IBR plan,
(21:15):
which is basically the old IBRplan, or this new RAP.
So these are gonna be youroptions, which is not favorable
for current borrowers.
I mean, for, for currentborrowers, especially if you
took out loans after 2007, haveeither Pay As You Earn or new
IBR.
If you took out your first loansafter 2014, which are more
(21:37):
favorable payment calculations,both half payment caps and a 20
year route to forgiveness.
So these are gonna be prettysubstantial changes for, for
current borrowers.
for future borrowers.
So for those that are not inprograms yet.
but are going to be starting totake out your first student
loans, in after mid 2026.
your only option's going to beRAP or the standard repayment
(21:59):
plan.
If this goes through as it is,it's gonna lead to some pretty
important decisions for anyonethat is going towards
forgiveness.
Especially if you're in thisrange where your student loan to
income ratio is somewhere aroundone and a half to one, that
route to forgiveness is gonna bemore expensive, and so for all
borrowers, you're, you'reessentially gonna have to look
(22:19):
at this with fresh eyes and seewhat makes the most sense.
when it comes to public serviceloan forgiveness, PSLF continues
to be tax free.
However, medical and dental,dental residencies are no longer
going to count if you areentering those residencies.
after mid 2026, which is not assubstantial as an impact maybe
for Optometry, a much moresubstantial impact for for
(22:41):
physicians coming outta medschool.
Student loans discharged ifyou're disabled or deceased,
will continue to be tax free.
However.
Student loan forgiveness after20 or 25 years becomes taxable
once again.
currently through 2025,forgiveness is tax free.
What we were wondering if acongress will extend that out
into the future.
(23:02):
but they took no action on that.
And so 2026 and beyond,forgiveness again becomes
taxable.
and so these are some of theprovisions I'm keeping an eye
on.
And again, this is not law, thisis still proposed bill.
I, I would imagine there are alot of changes that are gonna
happen as it goes throughCongress.
In terms of the tax planning,again, it just, it essentially
(23:22):
extends a lot of the taxprovisions now with adjustments
here and there.
but we'll keep an eye on that asthings go through on the student
loan side, it, it becomes moreserious.
I mean, these are major changesto current borrowers.
For you as a current borrower,you took out your loans.
With a promissory note, with acontract, with a government
(23:43):
under a certain set of rules.
And essentially what this isdoing is the government's
saying, we are not going tohonor this contract that we,
that we entered into with you.
we're gonna change that as wego.
I mean, this is something that aprivate borrower would never be
able to do.
Imagine your mortgage lendersuddenly increasing your
interest rate, you know, 10years in.
So I am hopeful that enoughsenators hear from their
(24:07):
constituents, that for currentborrowers at least, they
grandfather you into the currentroles that you're working in.
essentially they, on that, theyjust simply honor the contract
that you signed as you took outthese loans.
And I'm hopeful that's somethingthat we'll see changed.
in, in the show notes, I'veincluded a draft letter if you
(24:28):
want to, that you can take andedit and send to your senators
in your state.
This is not something I wrote,but this is something I got from
someone else, for, for me toshare.
So take that letter, send thatout to your senators.
And hopefully we'll be able tosee some adjustments here, but
the student loan side is, is amore serious set of changes that
we're, we're keeping an eye on.
(24:50):
That being said, we don't knowwhat will happen until it
happens, and most of the peoplethat I follow tend to expect
that these senates side of thiswill be, will be released
somewhere just before 4th ofJuly, early July.
So.
We'll keep an eye on that.
I'll be bringing you updates aswe go, both through this podcast
as well as my weekly eyes on theNew Eyes on the Money newsletter
(25:11):
so I'll throw a link in the shownotes for you to sign up for
that as well, if you wanna keepup to date on all this stuff.
But if you have questions,please let me know if you have
concerns about how all thisimpacts your current planning.
if you feel like you don't havea game plan at all, reach out to
me.
Would love to get a chance tohear what's on your mind and see
how we can help and be aresource for you.
With that, really appreciateyour time.
(25:32):
Have a great weekend and we willcatch you on the next episode.
In the meantime, take care.
Hey everybody.
Welcome back to the OptometryMoney Podcast where we're
helping ODs all over the countrymake better and better decisions
around their money, theircareers, and their practices.
I am your host, Evon Mendrin,Certified Financial Planner,
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm just for optometrists
(00:24):
nationwide.
And thank you so much forlistening.
Really appreciate your time andattention today, and I am
excited to be back.
On a special Friday edition ofthe podcast here.
as my wife and I had welcomedour third child into the world
and, and spending some time withour newborn who came a week
later than expected, itdefinitely threw off my content
(00:45):
calendar.
So I'm excited to be back withanother live episode because we
have a lot to, to keep an eye onhere.
As we see that recently, theHouse of Representatives just
passed something called the BigBeautiful Bill Act by the
slimmest of Margins, one Vote.
And yes, that's the real name,and as silly as it is, it is a
pretty big bill.
And it's coming with importantchanges or really extensions to
(01:07):
tax law and very importantstudent loan considerations to
keep an eye on.
So in today's episode, I'm gonnabreak down the tax and student
loan changes that could impactyou, pretty heavily as an
optometrist and or a practiceowner and it's important to say
this is not law.
This is a proposed bill.
It still has to make its waythrough the Senate.
(01:30):
And I am expecting, or reallyhoping for important changes
through the Senate.
And so we have a long way to gobefore this becomes law and we
know exactly what we're lookingat.
But I it, I think it's helpfulto get a feel for what's on the
table.
What, what are the stakes here?
What are the expected changesthat we need to keep an eye on,
and how might that changethrough the Senate?
(01:50):
And so with that in mind, let'sdive in first looking at the tax
considerations here and it'simportant to give a little bit
of background.
In 2017, president Trump in hisfirst term signed into law of
the Tax Cuts and Jobs Act, whichwas this big sweeping tax reform
bill.
It changed a lot about, personaltaxes, in regards to the tax
(02:10):
rates brought down tax rates.
It expanded the standarddeduction, but it also removed
something called a personalexemption.
It made changes to somethingcalled the alternative minimum
tax.
it just about doubled the estatetax exemption, so it impacted a
lot on the personal tax planningside, as well as on the business
side.
So it created a permanent 21%corporate tax rate as well as
(02:35):
for pass through businesses.
So those that are taxed as, Scorporations or partnerships or
sole proprietorships.
It created a 20%, what it calledqualified business income
deduction, the QBI deduction,and so, it had these big changes
from a tax planning standpoint,but in order for that law to be
passed a lot of those provisionshad to expire at some point.
(02:57):
And so.
A lot of those provisions,especially on the personal side,
as well as that QBI deductionwe're expected to expire at the
end of this year and things wereexpected to go back to.
Pre 2018 tax law.
So higher tax rates, lowerstandard deduction, but some,
but that personal exemptioncoming back, the state tax
(03:19):
exemption reverting back toinflation adjusted, but old
numbers.
So all of these individualprovisions were going back to
old law and the QBI deductionwas going away.
And so we as practitioners, sofinancial Advisors, tax
professionals that we work with.
We're all waiting to see whichtax laws, which rules are we
(03:40):
gonna be working with movingforward.
And so this law addresses a lotof that.
it's basically extending a lotof what we currently have with
some modifications andimprovements or, or adjustments
here.
So, for example, tax bracketsare extended permanently.
Quote unquote, permanentlymeaning until another congress
(04:01):
changes it.
But, there's no expirationwindow.
The current tax brackets, 10%,12%, 22, 24, 32, and so on will
continue on.
the standard deduction stayshigh.
If you recall, when you look atyour tax return, each taxpayer
gets the option of choosing oneof two deductions.
You take a standard deductionamount, which is something that.
(04:24):
Every family that are filing or,or tax filer that's filing like
you gets to take or you can pileup a certain list of personal
expenses and, and that's calleditemized deductions.
And if that itemized list.
Is higher than the standarddeduction than, than you can
take the higher of the two.
(04:44):
So the standard deductionremains high, which is 30,000
for those filing taxes jointly15,000 for, single tax filers
with temporary increases.
over these next four years, sobetween 2025 and 2028.
And the bumps are$1,000 If youare single, 1500 if you're
(05:05):
filing head of household or$2,000 if you are, married
filing joint, with adjustmentsfor inflation and.
You might be wondering why onlyfor these next four years?
Well, I, I wonder if part ofit's because for budgetary
reasons, they have to balancethe numbers in order to get a, a
bill like this passed.
But also if we think about it,what's happening in 2028?
(05:27):
Well, it's the next presidentialelection.
So, without a doubt, I thinkthere's some political
gamesmanship happening here.
But, we see a slight increasethere over the next four years.
And if you're 65 and older,there's also an an additional
bonus increase to that, whichphases out over certain income
levels.
So standard deduction continueson with a slight bump over the
(05:48):
next four years.
The child tax credit, which is atax credit per qualifying child.
Under age 17, continues toremain at its current level with
a slight increase over the nextfour years.
So this is something that wasexpected to be reduced down to
$1,000 per qualifying childafter this year.
(06:09):
It's currently$2,000 and thecurrent bill will continue that
same dollar amount, but willgive you a$500 increase over
these next four years.
So.
2025 through 2028, we see thatunder this bill it would be
$2,500 per qualifying child and2029 and beyond.
(06:30):
It's going to decrease back toits$2,000 level with increases
for inflation.
And it also keeps the phase outthresholds for the credit.
So that's$400,000 of adjustedgross income, AGI if you're
filing joints,$200,000 if you'refiling single, and you start to
phase out of the credit fromthere.
(06:50):
The QBI deduction.
going back to the business side,the QBI deduction is extended,
so that's gonna continue to liveon.
and it's slightly expanded underthis bill.
So currently it's a 20%deduction.
It's going to be expanded to23%.
And I'll throw a link in theshow notes to a more detailed,
(07:11):
podcast episode I didspecifically on this deduction
and it also slightly simplifiesand, and enhances The way that
the phase outs are calculatedfor Optometry practices.
And, the way that the, the waythat this deduction works is
that Optometry practices andhealthcare practices as a whole,
(07:31):
including financial planningfirms, we are considered
specified service trades orbusinesses.
And because of that, once ourtaxable income, before the
deduction gets to certainlevels, we start to phase out of
the deduction.
We lose little by little.
And then once we hit the higherend of those thresholds, we lose
(07:52):
it altogether.
And currently, for example, in2025, that phase out threshold
starts, at 394,600 of taxableincome before the deduction.
And it phases out over the nexta hundred thousand dollars of
taxable income.
And all other tax filers it's197,300.
(08:12):
And so there's this sort ofcomplicated calculation to see
what your deduction should bethrough this phase out range
before you phase out altogether.
Well, this proposed bill,provides a slightly simplified
way to calculate those phaseouts, and I think in a way
that's gonna allow more of thededuction as your taxable income
gets higher.
(08:33):
So we'll see what that lookslike as it goes through the
Senate.
But QBI lives on, which is whatI was.
Hoping for, and I think a lot ofus were expecting but it's great
to see that written in the billthere.
Another provisions related tothe state and local tax
deduction.
In those itemized deductionsthat I mentioned earlier, one of
those deductions Is state andlocal taxes.
(08:54):
You can use state and localtaxes as one of those
deductions.
However, that 2017 Law Tax Cutsand Jobs Act capped the amount
of state and local taxes youcould deduct at$10,000, which
especially impacts those of usthat live in high state tax
states like California, NewYork, and so on.
(09:16):
which lead, which led to a lotmore tax filers, taking that
standard deduction, not reallybenefiting from the state taxes
they were paying.
This proposed bill increasesthat cap from$10,000 to$30,000.
But there is a phase out forhigher earners, meaning that
eventually you start to phasedown to the regular, original
(09:37):
$10,000 cap.
Something to keep an eye onthere.
another part of this bill islikely going to eliminate the
use of a pass through entitytax, tax credit.
And what this is, is that as aresult of the state and local
tax cap that you can deduct,states start to implement their
own workarounds.
And if you own a partnership oran S corporation.
(10:00):
And the business itself paid thestate taxes on behalf of the
owners and the owners electedinto it based on whatever the
state rules were, it would, itwould show up as a business
expense on the profit and loss,which indirectly led to those
taxes being a federal taxdeduction for the owners.
And on the state tax returns,the state would provide a
corresponding tax credit forthose payments to offset the
(10:23):
state taxes that were due.
And so this was a workaroundthrough the business itself.
each state looks a little bitdifferently, and something that
we were expecting to be able touse at least through 2025.
And this bill appears to beputting an end to that.
some other things to keep an eyeon here are reforms to HSA
accounts and some adjustments to529 plans.
This version of the billessentially doubles the
(10:46):
contribution limits for HSAs.
So, for example, right now thelimit is$4,300 a year.
In 2025.
For an individual, if you arecovered by yourself on a high
deductible health plan, thatqualifies or$8,550 if you were
on a family plan.
And this bill would essentiallydouble that to$8,600 for an
(11:06):
individual and$17,100 if youwere on a family plan.
With inflation adjustments.
That being said, there areincome phase outs for this.
Eventually, if you get to acertain point of adjusted gross
income, you phase down to thoseoriginal limits.
But something to keep an eye onthere.
It also helps to sort ofeliminate some of these
eligibility traps, so to speak,that might keep you from being
(11:29):
eligible for using an HSA.
So for example, those that areage 65 and older.
I cannot qualify in use an HSAplan, but what this would allow
for is that those who are 65 andolder that are enrolled in
Medicare Part A, but not in partB, can continue to be eligible.
And that's for you if you'recontinuing to work and you have
(11:51):
healthcare coverage through workyou've opted not to enroll yet
in part B, this is somethingthat's gonna allow you
potentially to continue to beeligible to contribute to an
HSA.
similarly, there are someworkarounds.
If your spouse has a Healthcare,FSA, a flexible spending account
that they're, that they'recontributing to, but you don't,
it's gonna have some workaroundsthat allow you to continue to be
(12:14):
eligible for your own HSA.
So some enhancements there, samething for 529 plans, it expands
some of the abilities for you touse those funds.
So, for example, it would coverprofessional credentials and
continuing education.
So the CFP designation, forexample, continuing education,
things like that.
So it expands the use a littlebit for 529 plans, and it also
(12:36):
expands the list of K through 12expenses as well.
Some other quick ones here.
So, bonus depreciation, rightnow, the, the percentage of
bonus depreciation is proposedto come back to a hundred
percent.
If you're familiar with bonusdepreciation, it's a cousin of
the section 1 79 accelerateddepreciation.
(12:58):
When you buy certain types ofassets like equipment or real
estate, property you're able todepreciate the cost of those
things by default over a setschedule of time.
So five years, seven years, 15years, 27 and a half years, and
so on.
What bonus appreciation andSection 1 79 allows you to do is
(13:19):
it allows you certain types ofproperty, it allows you to
accelerate the depreciation intothe current tax year rather than
spread it out over a period oftime and.
Bonus depreciation has come downover the years on the percentage
of the cost you can accelerate.
(13:39):
as a result of tax Cuts and JobsAct, it was set to a hundred
percent, meaning you can, youcan bonus depreciate a hundred
percent of the cost of the, ofthe asset that you're working
with.
but that came down at a certainpoint, 20% every year.
So currently in 2025, it's only40% of the cost.
2026 would be 20%.
(14:00):
Depending on the year that youpurchased and place the asset or
property in service.
And what the new bill would dois it would return us to a
hundred percent bonusdepreciation, but only for
property acquired and placed inservice after January 19th,
2025, which interestingly isinauguration day, and before
(14:21):
January 1st, 2030.
So essentially through thesenext five years or so, we're
going to be back at a hundredpercent.
Which can be a big deal,especially if you are a real
estate investor.
You are using things like costsegregation studies to separate
out All of the components of theproperty into different types of
assets and with differentdepreciation schedules.
(14:43):
If this goes through, this issomething that can be pretty
useful for you from a taxplanning perspective.
The estate tax exemption iscontinuing on at its high level,
and in fact increases.
So it would be$15 million perindividual or$30 million per
(15:05):
married couple withcontinuations for inflation.
So that continuous on on, andthere is a host of other
interesting, tax provisionshere.
Like tax free tips and,deductions for for car loan
interest at certain levels ofincome if the vehicle was
assembled in the US So there'sother things in there, but,
those are some of the primarythings that we're looking at as
(15:27):
it relates to optometrists.
So that's the tax planning side.
Nothing major.
I mean, a lot of it justcontinues on what we are
currently experiencing withslight tweaks, slight
improvements maybe, depending onhow you're looking at it.
Now, let's talk about thestudent loan aspects of the
bill.
And this is where there aremajor reforms happening and not
(15:47):
all of them.
And just to be frank, not all ofthem positive for optometrists.
Let, let's dive into what we seehere.
So before I do, I, I think it'salso helpful to give a little
bit of, back, a little bit of abackground for student loans,
especially as it relates toincome, different repayment
plan, of when and how those arecreated.
So as you think about thehistory of federal student loans
(16:09):
Our government, congress andpresidents have done a really
good job of creating a reallycomplicated web of student loan
rules depending on when you wentto school and when you took out
student loans.
rather than.
Create new rules and clean upold rules, they have tended to
layer rules on top of each otherand student loan repayment
(16:30):
options on top of each other.
So for example, when we look atthe very first income-driven
repayment plan, if you remember,income-driven repayment plan,
IDR is sort of the umbrella termthat describes all of these
different types of plans.
And then there are, there aretechnically five different
plans.
And your eligibility for thosedepends on who the borrower is.
(16:52):
The very first one, ICR,income-contingent repayment, was
created by law, I believe, in1993.
And you were eligible for itstarting 1994.
then came IBR, income basedrepayment that was created again
by law in 2007.
First eligibility was 2009,there's an old version of that.
(17:15):
If you took out your loansbefore 2014 and there's a new
more favorable version of that,if you took out your first
Federal loans after July 1st,2014.
So ICR and IBR both created bylaws and then came three others
created by PresidentialAuthority executive action.
(17:36):
the first one was PayYou Earn.
This was created in 2011 byPresident Obama's executive
action.
And it was created based on theauthority that, that the
president was given by thatoriginal law that created ICR.
So President Obama was acting onauthority given to him by that
original law and created Pay AsYou Earn a more generous version
(17:59):
of that repayment plan.
then came Revised Pay As YouEarn in 2015 again by President
Obama based on the authorityfrom that same law.
And then finally, presidentBiden created the very extremely
generous SAVE plan, during theCOVID era.
Which was the most generous ofall, and also based on the same
authority given by that law.
(18:21):
So we have these sort of layersof repayment plans added on top
of each other over the years,some based on actual statute,
others based on the authoritygiven by that original ICR
statute.
And the authority that thepresident has is really the
question, of the court casesrelated to the SAVE repayment
(18:42):
plan.
the courts are now decidingwhether the President, president
Biden had the, actually had theauthority given by that law to
create such a generous plan.
That's essentially what'shappening here.
And so this current bill, thisbig one, big beautiful bill, is
going to overhaul substantiallythe current student loan system,
(19:02):
and it's gonna do that forcurrent borrowers and future
borrowers.
And it's going to introduce thisnew repayment plan called the
Repayment Assistance Plan RAP.
And what this plan does is it'sgoing to have.
and it's gonna calculate yourpayments based on a percentage
of your adjusted gross income, apercentage of AGI, and it's a
(19:24):
graduated level of percentages,so it's gonna be anywhere from
1% to 10% of your AGI, dependingon what your income is.
for optometrists, you're mostlikely looking at 10% of AGI.
So for example, if your adjustedgoes income is$200,000, your
payment's gonna be$20,000 peryear or roughly$1,600 per month.
(19:48):
And it would still allow you tofile taxes separately and
exclude your spouse's incomefrom the calculation.
It would have forgiveness, butover 30 years instead of 20
years or 25 years And it allowsa small$50 a month reduction in
payments per child and andpayments under this plan would
still qualify for PSLF.
(20:11):
and this repayment plan's likelyto be less favorable than the
others.
If you think about how theothers are calculated, it starts
with your income.
It subtracts out an amountsbased on the poverty line for
your family size.
And then it multiplies that by10% or 15% for the old IBR and
so the new plan basically justtakes very likely 10% of your
(20:33):
AGI just directly and so fromyour AGI directly and with
without subtracting that povertyline amount.
So it's very likely to lead tohigher payments and a longer
timeline towards forgivenessand.
And then it makes importantchanges to the options that you
(20:53):
have as a current borrower.
The SAVE plan and the Pay As YouEarn and ICR are all eliminated.
All of those, all of those, allof those repayment plans based
on the original law, those areall gone.
And it's gonna replace it withtwo options for current
borrowers.
You're either gonna choosebetween a modified IBR plan,
(21:15):
which is basically the old IBRplan, or this new RAP.
So these are gonna be youroptions, which is not favorable
for current borrowers.
I mean, for, for currentborrowers, especially if you
took out loans after 2007, haveeither Pay As You Earn or new
IBR.
If you took out your first loansafter 2014, which are more
(21:37):
favorable payment calculations,both half payment caps and a 20
year route to forgiveness.
So these are gonna be prettysubstantial changes for, for
current borrowers.
for future borrowers.
So for those that are not inprograms yet.
but are going to be starting totake out your first student
loans, in after mid 2026.
your only option's going to beRAP or the standard repayment
(21:59):
plan.
If this goes through as it is,it's gonna lead to some pretty
important decisions for anyonethat is going towards
forgiveness.
Especially if you're in thisrange where your student loan to
income ratio is somewhere aroundone and a half to one, that
route to forgiveness is gonna bemore expensive, and so for all
borrowers, you're, you'reessentially gonna have to look
(22:19):
at this with fresh eyes and seewhat makes the most sense.
when it comes to public serviceloan forgiveness, PSLF continues
to be tax free.
However, medical and dental,dental residencies are no longer
going to count if you areentering those residencies.
after mid 2026, which is not assubstantial as an impact maybe
for Optometry, a much moresubstantial impact for for
(22:41):
physicians coming outta medschool.
Student loans discharged ifyou're disabled or deceased,
will continue to be tax free.
However.
Student loan forgiveness after20 or 25 years becomes taxable
once again.
currently through 2025,forgiveness is tax free.
What we were wondering if acongress will extend that out
into the future.
(23:02):
but they took no action on that.
And so 2026 and beyond,forgiveness again becomes
taxable.
and so these are some of theprovisions I'm keeping an eye
on.
And again, this is not law, thisis still proposed bill.
I, I would imagine there are alot of changes that are gonna
happen as it goes throughCongress.
In terms of the tax planning,again, it just, it essentially
(23:22):
extends a lot of the taxprovisions now with adjustments
here and there.
but we'll keep an eye on that asthings go through on the student
loan side, it, it becomes moreserious.
I mean, these are major changesto current borrowers.
For you as a current borrower,you took out your loans.
With a promissory note, with acontract, with a government
(23:43):
under a certain set of rules.
And essentially what this isdoing is the government's
saying, we are not going tohonor this contract that we,
that we entered into with you.
we're gonna change that as wego.
I mean, this is something that aprivate borrower would never be
able to do.
Imagine your mortgage lendersuddenly increasing your
interest rate, you know, 10years in.
So I am hopeful that enoughsenators hear from their
(24:07):
constituents, that for currentborrowers at least, they
grandfather you into the currentroles that you're working in.
essentially they, on that, theyjust simply honor the contract
that you signed as you took outthese loans.
And I'm hopeful that's somethingthat we'll see changed.
in, in the show notes, I'veincluded a draft letter if you
(24:28):
want to, that you can take andedit and send to your senators
in your state.
This is not something I wrote,but this is something I got from
someone else, for, for me toshare.
So take that letter, send thatout to your senators.
And hopefully we'll be able tosee some adjustments here, but
the student loan side is, is amore serious set of changes that
we're, we're keeping an eye on.
(24:50):
That being said, we don't knowwhat will happen until it
happens, and most of the peoplethat I follow tend to expect
that these senates side of thiswill be, will be released
somewhere just before 4th ofJuly, early July.
So.
We'll keep an eye on that.
I'll be bringing you updates aswe go, both through this podcast
as well as my weekly eyes on theNew Eyes on the Money newsletter
(25:11):
so I'll throw a link in the shownotes for you to sign up for
that as well, if you wanna keepup to date on all this stuff.
But if you have questions,please let me know if you have
concerns about how all thisimpacts your current planning.
if you feel like you don't havea game plan at all, reach out to
me.
Would love to get a chance tohear what's on your mind and see
how we can help and be aresource for you.
With that, really appreciateyour time.
(25:32):
Have a great weekend and we willcatch you on the next episode.
In the meantime, take care.
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