Kersten Wealth Management Group - Money Sense 12-27-25

Episode Transcript

Speaker 1 (00:00):
Hello and Merry Christmas. Welcome to Money Cent. You're listening
to the advisors of Kirsten Wealth Management Group, Kevin Kirsten
and Brad Kirsten. Happy to be with you today as
we're wrapping up twenty twenty five. Brad, it looks to
be certainly finishing on a little bit of a high note.
We'll wait and see what the Santa Claus Rally brings.
That certainly this time of year something that a lot

(00:21):
of people start to talk about is interesting the last
last couple of it's been a spotty recently, but has
a really good historical track record, and it does start
does not start until Christmas Eve. People think the month
of December and Santa Claus, so it must have something
to do with the entire month of December. But if
you look at the way the market experts measure, the

(00:42):
so called Santa Claus rally does not start till Christmas Eve.
But looking at a chart of the recent history of
it here, and it might not just be Christmas Eve,
because the one I'm looking at right here starts on
some varying dates. So I think it has to do
with depending on the last five trading days in a
year or something like that. So like this year, the

(01:03):
last five trading days would include the twenty third just
by because of how the weekends fall, and so first
five sincerest five of the of the new year for
last five of the current year, that's not this one.
The first five days of the new year has its
own separate thing, which a new rally. Yeah, well no,

(01:25):
not necessarily. I think it has something to do with
the first five days indicating positive or negative for the
full year. But the Santa Claus rally only goes until
the first two trading days. I know we're getting in
the weeks year, but last two December twenty fourth of
last year through January third it was negative minus point five.

(01:46):
December twenty second of twenty twenty three through January third
negative and both years turned out to be significantly positive years,
as it's turning out this year, and last year twenty
twenty twenty two into the beginning of twenty three was
up point eight, so it's not perfect. Of course. Twenty

(02:06):
twenty one famously was the peak before the bear market
of twenty two, and that was a one point four
percent Santa Claus rally in the last five last few
trading days of the year into January, so it's interesting
to see it does have aus seventy eight percent success ratio,
so that's pretty good for that amount of time. And

(02:31):
the three indicators that folks like to look at is
the Santa Claus rally, the first five days and January,
and can you check all three of those boxes? January
though last three years was positive, last three years was
positive or positive market on the market January of twenty
two was minus five percent. Of course, twenty twenty two

(02:51):
was significantly negative, a twenty percent negative year on the
SMP five hundred, but twenty twenty one was minus one
point one. So this is not perfect, but it is
We're only looking at averages and are these indicators better
than average? And certainly when you check all three of
those boxes, the Santa Claus rally, the first five days
of the year, and January, it looks pretty good for

(03:13):
the full year. So we'll be taking a look at
that not only through the next couple of days here,
but also into January as well. And I'll give you
some kind of indication, you know, some significant years where
people would probably remember the downside. Brad. Of course, two
thousand and eight saw a six percent sell off in January,
and that obviously was then thirty eight That continued for

(03:37):
a whole another quarter before we find our bottom in
March of two thousand and nine. Let's look at two
thousand and two thousand and one and two thousand and two.
The year two thousand was minus five percent in January,
the year two thousand and one and was plus three
and a half. In year two thousand and two was
minus one point six. So all three of those years
were negative, and it was two out of three negative

(03:59):
in that at your time. How about any years where
we had a significant down January and finished positive. Of
course you had two thousand and three was down two
point seven and finished positive. Let's see what all these
have in common, Brad. You had two thousand and nine
down eight point six percent for the month of January

(04:20):
and finished positive. So that's another one to look at.
How about twenty eighteen that wasn't a positive? I seem
to remember our the rally or the sell off happening
right there. It was twenty and eighteen was plus seven
point nine and we had a negative year. So yeah,
that's a that's excuse me, excuse me. Hold on one second, yeah,
plus see yeah, eighteen, Yeah, I remember that being the

(04:40):
tail end of a pretty significant, significant rally. We had
that post election twenty sixteen, fifteen straight positive months and
it kind of ended with a little bit of a
parabolic move at the end of that and ended right
there in January. Really, I think it was February fourth
you started to the bubble really burst and had a
couple of different sell offs that if you look at
in the last twenty five years, which is what this

(05:01):
chart goes back to, one thing you will see is
can you have a negative January and finished the year positive? Yes,
But in the last twenty five twenty six years is
twenty six years if you look at it, most of
those negative Januaries that finished positive were coming off of
a negative year. But here we are coming off of
three huge positive years. So I think this year January

(05:23):
will be a I think a decent indicator because we're
coming off of three really good positive years. We have
yet to hit the fourth year in a row in
quite some time. In twenty twelve, thirteen, and fourteen we
were positive. Fifteen was negative, sixteen seventeen positive. Yeah, but

(05:44):
we did that was only two years. That was only
two years in a row. Then we had nineteen twenty,
nineteen twenty and twenty one and failed in twenty two.
So we have yet to get to that fourth year
in quite some time. Last time we got to the
fourth year positive nineteen ninety nine, so ninety six, ninety
excuse me, no, nine, nineteen ninety eight. It was five

(06:06):
years positive in the nineties. Nineteen ninety eight was the
last time we had four positive years in a row. So,
and so that's something to pay attention to. I shouldn't
say four four double digit positive years in a row.
Two thousand and three, four, five, and six were all positive,
but a couple of mild ones in there and single digit. Yeah,

(06:27):
so it'll be interesting to see. I was asking you
to dust off the chart, you know, the rewards of
long term investing, which we you know, often talk about,
and it was reading something that was talking about the
lessons of twenty and twenty five and what we can
take from it. And one of the one of the
ones that kind of goes to this rewards a long
term investing is if we have a positive year, it's

(06:49):
a really positive year. And what they were trying to
point out is when the market is up, it averages
a twenty percent game, So it's not that unusual to
have the kind of games we've seen this year. Wouldn't
be that unusual to even have a continued gain through
the end of the year and get over that twenty
and get over the trump. Yeah. So, and I was
pointing out to you, I have one of these charts

(07:09):
that goes that ended in two thousand and seven, and
it's the same number. It's nineteen point nine. Is the
average positive year today? Ten years ago, the average positive
year was nineteen point four, and back in two thousand
and seven, the average positive year was nineteen point seven.
So we're kind of coming up on exactly what the
average positive year is. But I think one of the

(07:31):
things that's gonna give people pause is that we're getting
to some milestones that seemed to be areas of the
of the market that make the market kind of move
sideways for a while. When the Dow crosses over some
certain thresholds, we kind of run into that threshold and
there's a little bit of pop the champagne, and then
we stall out. The Dow hit ten thousand for the

(07:54):
first time in nineteen ninety nine, we did move up
for about another year, but it had a lot of
trouble making any significant significant gains past that for a
long time. Same thing, and when we got to Dow
twenty five thousand, that happened in January of twenty and eighteen,
and then after that the market stalled out for the
rest of twenty eighteen. It kind of marked the peak

(08:16):
for twenty eighteen and took another couple of years before
we got back to twenty five thousand, But that wasn't
that long ago. We've doubled since then. So we're coming
up on Dow fifty thousand. We're only about three percent away.
Time we listen to this show, it might this show airs,
it might be even less than that, but that Dow
fifty thousand might be something that gives investors a little

(08:36):
bit of pause and say, can we move past this?
Dow fifty thousand seems so rich? But you have to
keep in mind it's just percentages and everything everyone's making more.
The price of the Dow is just that. It's it's
just a number, and the Dow will be at one
hundred thousand if we just get to long term averages
in probably something like seven to ten years. Again, and

(08:59):
that's all little take. In fact, Warren Buffett at the
turn of the century had a quote about Dow one million,
and over the next hundred years will eventually get to
Dow one million. So you can't let those milestones in
the Dow give you pause to being a long term investor.
Everything is just worth more and priced higher. I mean

(09:19):
every deal that you see. We're having a lot of
deal making happening right now, and it's hundreds of billions
for this, tens of billions for that. Everything's a billion now,
even people who are billionaires. There's many more billionaires that
they show on TV anymore, and they're talking about Elon
must being a trillionaire. So it is just a number,

(09:40):
especially when you have something like the Dow that doesn't
split like a like an average stock, it's sort of
an insignificant number. Well, it's the number that everybody knows.
I think the average investor could get pretty close to
the value of the Dow off the top of their head,
and they would can probably get very close to other
indexes like what is the current level of the NASDAK

(10:02):
or the S and P five hundred, and I think
it's an indicator of that I think will make people
feel a certain way when they hear the number. If
you hear Dow fifty thousand, there's a little bit of
wow factor. If you hear SMP seven thousand, that doesn't
mean anything to anyway. Yeah, right, right, Even though the
SMP this year and most years in the last two

(10:24):
decades has outperformed the Dow. Yeah, it doesn't give anybody
the warm and fuzzy, but the market at an all
time high is a bullish signal. There's no way around it. Yeah,
And you know some other stats you can look at
with the Dow jones. The Dow first hit one thousand
in nineteen sixty six, was actually still at one thousand
and nineteen eighty two sixteen years later, and then from
nineteen eighty two it went from one thousand to nineteen

(10:46):
ninety nine ten thousand, so it went up over tenfold.
This does not include the dividends either. So if you're
looking at that kind of period of time and you're
looking at a tenfold increase, what would you compare that
to that run in nineteen two, that starting point in
nineteen eighty two, Could you compare it to March of nine?
I think so yeah, it's nothing comparable to today. It was

(11:08):
not even comparable to the start of this run three years,
two months. I think the similarities would be in nineteen
eighty two we went through a sixteen year period where
the dow went nowhere. Yeah, okay, in March of nineteen
eighty March of two thousand and nine, we had gone
how long, basically sideways, and really that's the low point,

(11:29):
because certainly the low point of that cycle was not
nineteen eighty two, was actually nineteen seventy four, So that
was the low point, was nineteen seventy four. So if
you're going to go back to the recovery level, you'd
probably go to when the Dow Jones recovered its losses
in two thousand and thirteen, when it got a little
over ten thousand. So it's interesting is if you're going

(11:51):
to put the same level of return on it a
ten times, you had a sixteen year period from sixty
six to eighty two where the dow went nowhere. Yep,
you had a thirteen year period from two thousand to
twenty thirteen where the dow nowhere. And if you do
ten times, there's your dow one thou have a doubling
to go, and when would that what would the timeframe
be there? You'd be eighteen years, eighteen years from twenty

(12:14):
from March of twenty thirteen, Okay, so you'd be March
of twenty thirty one and you'd be looking at one
hundred thousand. And this is not a prediction. This is
if history, if history's repeating, it was the same timeframe
to go ten times on the dow as it did
eighty two to ninety nine. And yeah, so that and
it probably just gets you our normalized return from fifty

(12:34):
thousand to one hundred thousand from here. And you're saying
you have eight more years to do it. No, No,
seven more years, No, no, five years, seven eight night. Yeah, yeah,
we're going into twenty twenty six. So five years for
a doubling for a double, that's not unheard of. Oh
it's I'd be twelve percent, there'd be twelve percent average. Anyal, So, Brad,
we talked a lot about outlooks going into twenty twenty six.

(12:56):
We certainly did the LPL look. We looked at other
outlooks and five hundred levels. I want to ask you
a quick question for twenty twenty six and that is
the market is up if and give me your most
important things you're looking for into twenty twenty six. The
market is up if what who? I think I can

(13:19):
give you a little bit of what won't matter and
what will. The market is up if spending from not
the government, but spending from companies continues to go up,
and that has not slowed down and did not slow
down with the tariffs. It's been the biggest driver this year,
It'll be the biggest driver next year. And I think
we could see an increase in that spending, especially if
companies are figuring out tech companies are figuring out how

(13:40):
to monetize all of the AI boom. I think it
also helps that we're in an environment where you get
faster regulatory approval for things like a lot of the
AI inventions that are going to come about, autonomous humanoid robots, robotaxis.
If that all starts to make its way to the
economy faster, I don't think there's anything slow on us down.

(14:02):
I think the market is up if the Federal Reserve
delivers and cuts rates. I think that actually may be
the most important thing. Certainly. I think the market is
up if we get double digit earnings growth that's already
priced in, but these companies need to deliver on that
double digit earnings. The market might be down. If I'll

(14:24):
give you one. I think if Trump triples down, I
think he's already doubled down, so I would call it
triple down on tariffs. I think if he goes further
with it and continues the flexss the market, I think
the market's gonna get a little bit tired of that.
So I think that that could be an issue. Of course.
I think on the other side of the coin, with
the Federal Reserve, I think the market could be down

(14:45):
if the Fed screws it up, and that would involve
they not necessarily being slow to cut. I really don't
think that. If they're still cutting, but they're just cutting
by less than the market thinks, I think the market
will be okay. But I think that if there's some
kind of rays as a result of getting spooked by

(15:05):
some CPI, that could give us a negative year.

Speaker 2 (15:09):
Yeah.

Speaker 1 (15:10):
I don't see any way of that happening, because even
in the back half, the market will anticipate that Trump's
putting in somebody that's gonna cut. So I think, yeah,
that could be a worry at some point this year
if they don't cut in the early half of the year.
But I think it goes away quickly when we get
to the back half. Instead of doing an S and
P five hundred target, let's do what is most likely. Okay,
this is what not nearly enough strategist do, Brad. They

(15:32):
sit there and they'll say, well, we think it's going
to be a high single digit year, which they say
every year, and but look, let's look at what is
most likely. Okay, I'll give you that we've had three
positive years that have been right on the long term
average of a plus twenty percent, and so the most
likely would be one out of every four years should
be negative. The most common negative is a slight negative,

(15:53):
and so it depends what's the path to get there.
Do we get early gains in late gains and a
midyear selloff. Do we do we tick off the new
year with a down January or maybe a down first
quarter and eat away at those losses all the way
through the year. That's what we don't know is what
the path of that negative would be. Twenty one negative
years since nineteen thirty seven, and sixteen of them were

(16:15):
between zero and twelve percent. Yes, So if you have
a negative year, people think the most likely type of
negative year is a two thousand and eight style just catastrophe.
It is actually between zero and twelve percent. Yeah, yeah, nothing,
that would be the end of the world. I would now, Now,
how do zero or twelve happen? Now? Sometimes? Yeah, sometimes
you have you end up the year down twelve, but

(16:37):
at one point you got down twenty yeah, or the
opposite you fade a good gear like twenty eighteen. True.
You know, we had an early sell off that rallied
significantly throughout the whole year, and at the start of
the fourth quarter you gave it all up to finish
slightly negative. That's what really matters for next year. If
you think it's going to be a negative year or
a week year, do you miss out on big gains

(16:58):
early in the year, because that's what the market game
should be four it sells off. That's the secret sauce
for next year is the path of those returns. Hypothetically,
if it's a negative year, and let's say the SMP
is really creeping up on seven thousand, now, let's say
the SMP closes a year. For argument's sake, right, at
seven thousand, your average negative year would be twelve point five, okay.
Twelve point five would take the SMP down to sixty

(17:21):
one twenty five. Your average positive year is plus twenty okay,
So that would take the SMP, which no one's calling for,
Brad eighty four hundred, Yeah, eight thousand, four hundred. So
we're either going to be eight thoy four hundred on
the SMP or what'd you say, sixty five hundred, sixty
one twenty five, sixty one twenty five and nothing in between.

(17:41):
At some point you're going to be somewhere in the
middle of that. And just which which direction are we
head to? Anybody that's making this prediction is wasting your time.
I'll tell you exactly what the numbers tell you. We
have a seventy two percent chance that it'll be up
over eight thousand, and we have a twenty eight percent chance,
twenty eight percent chance that it'll be down in the

(18:02):
low six thousands. Yeah, and that's it. Yeah, And so
what does that tell you too over the long haul
when you get one of those down periods, if you
start to see the s and P five hundred and
low sixes start buying, Yeah, that's right, start buying without
yush and if we get a big rally eround the
year is what we're talking about. Yep, you need to
take risk off the table because the likelihood that you

(18:22):
have another big positive year is pretty low, and especially
if you start off with this continued AI boom rally,
you need to tap the brakes a little bit. So
we'll be following everything along on this show here at
Kirsten Wealth Management, and we'll be looking to see if
the Santa Claus rally prints, if the first five days
of January print, and if January so goes, January so

(18:44):
goes the year. So you mentioned what's important next year.
I think how the tax cuts affect things is really
going to be important, and how much how big people's
refunds are and how businesses continue their big spending because
of the tax cuts. Talk a little bit about that
and the rest of the show, how the Big Beautiful
Bill will affect twenty twenty six. Yeah, we're running a

(19:04):
little bit of a rerun for the rest of the show.
But we thought we got a lot of great feedback.
It was myself and Dennis Kirsten. We got a lot
of great feedback summarizing the one big beautiful bill tax
cut extension. So stay tuned and listen in because there's
a lot of good for information. Thanks for listening. Well,
we'll see after the break. Welcome back to the show.
You're listening to the advisors of Kirsten Wealth Management Group,

(19:25):
Kevin Kirsten and Dennis Kirsten, happy to be with you today.
As a reminder, we are professional financial advisors and our
offices are in Perrysburg. Give us a call throughout the
week if you want to set up a consultation to
review your financial plan. Whether you're just getting started, well
on your way to retirement, or already in retirement, we'd
be happy to sit down and review things with you
four one nine eight seven to two zero zero six seven,

(19:47):
or check us out online at Kirstenwealth dot com. You
can find information about our firm there, as well as
things like our weekly market commentary, which this week Dennis
focuses on Corporate America cleared a very high bar this
earning season, and we saw some pretty good numbers. I mean,
you take away all the noise that the stock market
gets with the Fed interest rates, Trump and his tariffs,

(20:12):
the bottom line is are companies making money, and if
companies are making money, their stock prices can go higher.
I mean that certainly is the bottom line there, s
and P five hundred. Earnings per share growth is tracking
over thirteen percent for this quarter. Ninety five percent of
companies have reported, and they've cruised passed the seven point

(20:32):
four percent consensus. Revenue grew pretty well. On top of
that eight point four percent. It typically strong two and
a half percent above expectations, so we said we had good,
good earnings upside surprises. We're seven percent. That matches the
ten year average, and and so eighty two percent of
companies beat on earnings. The five year average is only

(20:55):
seventy eight, so that's a little bit better than expected
as well. Revenue on average was seventy six percent beat
versus the five year average of seventy percent. Fastest earning
growth came from tech, financials, and utilities.

Speaker 2 (21:09):
You mentioned revenue growth I was over eight percent. I'm
not sure if you mentioned that I was reading, but
all the numbers they exceeded, and we've really had multiple
years in a row now were multiple quarters in a
row with very strong growth, where by double growth for
four or five corners in a row. As far as
earning growth, going back to gosh, let's see you here

(21:37):
twenty twenty five, primarily twelve point nine, twelve point one,
thirteen point five. They rescimanding seven point two from the
fourth corner here, and we'll see some of that made
me driven a little bit by the tariff shutdown, or
not the tariff, but the government government shut down, you

(21:58):
know that slowest things down a little bit. They're demanding
that will hurt a growth in the fourth order of
my about half maybe from three maybe one and a half.
So now that will hurt a little bit.

Speaker 1 (22:10):
Yeah, it's interesting. I mean, obviously, no surprise technology led
the way with earnings. Uh, financials maybe a little bit
of a surprise there. Uh they're the uh second fastest
earnings grower. And how about utilities, there's been utilities historically
has been the defense for the overall market, but now
utilities are kind of attached at the hip with the

(22:32):
AI build out and the the demand that we're going
to see on the on the grid here in the
coming years. So utilities interesting to see have become a
little bit more of a growth oriented sector as opposed
to value, which it has been historically.

Speaker 2 (22:46):
In our mackyard. There's one a few miles from here
in Paris, Paris, the Mena Face Natal Center.

Speaker 1 (22:55):
Yep. Uh. And I'm looking at the earnings growth per
share estimates going into twenty twenty six. Uh, this next quarter,
the fourth quarter only seven to seven point two percent
growth estimate, So that's nothing that that seems like a
reasonable bar to leap over. Yeah, but if once we

(23:15):
get into the first quarter of twenty six, so those
earnings will start in April of twenty sixth Anny boy,
I tell you what it's gonna be tough, tougher. Eleven
point seven, twelve point sevent. These are the percent earnings
growth estimates twelve point seven twelve point eight, and the
fourth quarter of twenty six the estimate is a sixteen

(23:36):
point five percent year on year, So the bars much
higher after this quarter. Uh, for earnings.

Speaker 2 (23:43):
Well, the I know we're in in the beautiful mill
here in a minute. But a lot of these tax
breaks will start to be seen by people in their
paychecks when the deductions for taxes won't be less and
their home pay won't be more. And the feeling is
that will be a stimulus. But people will they have

(24:04):
feeling like they have more money in their pot. Things
might be quote more affordable. That's some word they're throwing
out there a lot, the affordability problem, and then there's
a problem out there. But the lower probably sixty percent
of taxpayers or from a percentage point of view, and

(24:25):
benefit the most from this from the.

Speaker 1 (24:27):
Mill, that's right. So hopefully that stimulus, which we haven't
really seen from that one big beautiful snark tole first
of the year exactly. I mean, well, no, some of
it is retroactive, but some of the newer things, yeah,
don't mean if you were paying whatever rate you were paying, yeah,
was was locked in to January first, to twenty twenty five.

Speaker 2 (24:49):
But even when people knew their taxes early on, you
know a lot of that there will be more refunds.

Speaker 1 (24:55):
You're right, You're right, yeah, because it's retroactive. So for example,
if you got the age sixty five extra six thousand
dollars deduction and everything else remain the same, you're going
to get a refund because you did all your withholdings based.

Speaker 2 (25:08):
On or you're estimate from the following year won't be
less than that's right.

Speaker 1 (25:12):
So you know that goes to what are some of
the positives I mentioned some of the things that we're
concerned about next year. It's a midterm election year. Last
two midterm election years negative year for the stock market,
the last two three out of the last six negative markets.
A little pricey. We just went through earnings. Earnings are

(25:33):
going to be double digits next year. I mean, it's
pretty much baked in the cake. Even if we got
a little bit of a reduction, you're going to see
double digit earnings growth. We mentioned the fiscal side of
it with the One Big Beautiful Bill Act. So let's
get into that One Big Beautiful Bill Act, which we
talked a little bit on this show. But we're getting
to the end of the year and people are going
to start to do more planning, so let's let's get

(25:55):
a little bit more into it. One of the most
significant aspects is the permanent extension of the Trump individual
tax cuts that were due to expire at the end
of the year. These brackets will continue to be adjusted
with inflation over time. So not only are there extra
deductions and right off stenny in the bill, but the
brackets themselves stayed the same, but the income levels go

(26:16):
up a little bit and can and will continue to
do so with inflation. That's right.

Speaker 2 (26:21):
One of the other things in there is the salt deduction,
the state and local taxes, and.

Speaker 1 (26:29):
Uh, we'll just make sure where I see where you are. Okay,
sorry about that, all right, make sure we're on the
same page here. Yeah. So the state and local tax
deduction right off, get into that and what that means.
It really only applies to the people who itemize, which
is a much smaller number than it's ever been.

Speaker 2 (26:47):
Well, that's who. Yeah, house of the standard deduction, well
that was capped ten thousand dollars previously, previously, and that
the new number. There is not a minute thing. There
isout a four year thing on that one.

Speaker 1 (27:03):
You know, I don't have that here. But it goes
from ten thousand to forty thousand. Oh no, it is.
It is temporary twenty twenty five to twenty twenty nine. Okay, Yeah,
so it goes from ten thousand to forty thousand. Now
keep in mind, let's look at the standard deduction, okay,
because the itemizers would be the biggest ride offs would

(27:24):
be interest on your mortgage. The state and local tax
right off added up, and you can do up to
forty thousand now, but there is an income phase out
for that. But property property tax is part of that
state and local salt that's that's part of it. So
think about it.

Speaker 2 (27:42):
I don't think mortgage applies to that.

Speaker 1 (27:44):
That's but it's an itemized deduction. I'm referring to itemized deduction. Okay, okay.
So when you look at itemized deductions, there's a lot
of itemized deductions you could take, but in general, your
itemized deductions have to exceed your standard deduction to make
it worthwhile greatly.

Speaker 2 (27:59):
In Christ in the twenty seventeen.

Speaker 1 (28:02):
Correct so your standard deduction is thirty one thousand, five
hundred for a married couple fifteen thousand and seven to
fifty individually. In addition, Trump put in if you're over
sixty five, you get an extra twelve thousand dollars for
a married couple, so that that takes you up to
forty three thousand, five hundred, and then the old additional

(28:27):
write off for over sixty five state. So actually the
standard deduction for a married couple over age sixty five
going into next year, and this is retroactive to the
beginning of this year, is forty six thousand, seven hundred.

Speaker 2 (28:41):
Dollars, which means your itemize.

Speaker 1 (28:43):
Your itemize have to be greater than that. So your
mortgage interest, your state and local taxes, and property combined,
and you're charitable all have to add up to more
than forty six thousand, seven hundred, or it's a moot point.
You're going to be a standard.

Speaker 2 (28:58):
I don't know what there was or is, but I
believe before then I went into effect, about thirty percent
of class players were able to it and mize that
was at least a hunt and a half and it's
probably only about ten or fifteen percent now.

Speaker 1 (29:12):
Yeah, And even on that state and local tax right off,
going up, there's an income phase out, So if someone's
in the top bracket, chances are you're not getting that
forty thousand anyway. So for the vast majority of our listeners,
it's going to be a standard deduction.

Speaker 2 (29:28):
Uh.

Speaker 1 (29:28):
And you'll get a little bit of a bump if
you're over the age of sixty five. But by the way,
that over age sixty five right off, that also has
an income phase out, and it's a that's a pretty
low income phase out. Actually, it starts at one hundred
and fifty thousand on that phase out, so it's a
it's a much lower income phase out than say the
state and local tax. But the point is the tax

(29:50):
cuts were extended. In fact, they were added upon the
standard deduction went up, the tax rates went up. I
saw a study that was done for next year. The
average refund and this isn't going to everybody, but the
average refund is going to be approximately thirty five hundred dollars,
and that's stimulus right into the economy. Home equity interest
is capped at a seven hundred and fifty thousand dollars mortgage,

(30:11):
so that was in there as well.

Speaker 2 (30:13):
Home that's the same thing I think, isn't it. That's
what it was.

Speaker 1 (30:16):
Yeah, yeah, Home equity loan interest deduction is disallowed unless
the loan was used to improve the home. No clean
vehicle and energy credits for both individuals. And there's quite
a few things in here that are temporary. I mentioned
that six thousand dollars right off for over age sixty five.
That's only a four year right off. That was the compromise.

(30:38):
Trump's original goal was can we get Social Security be
tax free? That was one of his campaign promises. That
that was dead in the water. The compromise is, let's
give an extra rite off to people over the age
of sixty five. Some of the other temporary items are
no tax on tips for the next four years up
to twenty five thousand, no tax on overtime up to

(30:58):
twelve thousand, five hundred. And the car loan interest deduction
is also something that he wanted to encourage people to
buy US manufactured cars. That's for the next forty years.
But I mean to me, that's another one. So I
put that in the bucket, Nenny. With the fifty year mortgage.
How much of a dent is your car loan interest

(31:19):
really going to make in your tax situation?

Speaker 2 (31:21):
Well, for one thing, how many people blind and miles
in the first place?

Speaker 1 (31:26):
Exactly? You know? So and if you do, and let's
say you had a five percent car loan, okay, and
you bought a fifty thousand dollars car, which is an
expensive car though becoming more and more than norm Okay,
we're talking about two to three thousand dollars of a
write off and and and so I don't know, it's

(31:47):
not really understand. It was a campaign promise, so he
wanted it in there. But I don't think it's going
to move the needle on people buying US cars versus
non US cars. People are still going to buy the
cars they want to buy. So su permitive changes to
the charitable First of all, you can get one thousand
dollars for single filers, two thousand dollars for joint filers.

(32:10):
You don't have to itemize to get that charitable. So
if your charitable deductions are smaller and you you were
either looking at doing the qualified charitable distribution, if you're
over seventy and a half, you can do up to
two thousand dollars now for a married couple and still
take the standard deduction. Nice. Yeah, so there's a little

(32:32):
wiggle room there to do some charitable and get a
write off even if you take the standard deduction. So
I think that that's that's that's a good one. By
the way, speaking of the qualified charitable which is the
distribution from your IRA, if you're over seventy and a half,
seventy three, no, it's seventy and seven and a half.
You can do it at seventy and a half. I
don't know what good it does because you're not required

(32:53):
to take it with all, but you can do it
starting next year, so this one wasn't retroactive. Firms are
now required to put that on your ten ninety nine.
It used to be if you had a thirty thousand
dollars required distribution and you gave five thousand to charity,
you basically had to manually account for that on your

(33:16):
c when you do your taxes. There was nothing on
your ten ninety nine. They are now creating a code
for the qualified charitable, which I think is making going
to make people's lives a lot easier.

Speaker 2 (33:26):
That don't mean for the here's talk no.

Speaker 1 (33:28):
Twenty twenty six companies technology wise didn't have time and
I don't know if it's every company. I know. LPL,
who we were work with is not going to have
it on the ten ninety nine that come out in
two months, but it will be in future years accounted for.
So if you did a charitable in twenty twenty five,
and this is for any of our clients listening, to

(33:48):
still keep all those stubs in receipts and give it
to your tax person, but in future years it will
be accounted for on your ten ninetys.

Speaker 2 (33:55):
We having a lot of clients that use that YEP,
and so a way to reduce they're taxes on.

Speaker 1 (34:02):
The estate planning side. With the one big beautiful bill,
let's talk about wealth transfer on death. It's thirteen point
nine to nine million per person. So yeah, that was
set to decline to seven million. Yeah. So in terms
of avoiding a state tax, that's the amount of money
each individual can have nearly twenty eight million dollars fifteen.

(34:22):
The new bill is going to fifteen excuse me, yeah,
so thirty million. Yeah, and you have to have more
than thirty million, all right, if you do, we'll talk
about it right right. And that is now index for inflation,
which is nice to a state tax rates forty percent
above that level.

Speaker 2 (34:39):
So so by the way, for those listeners that are
in Ohio, one is the Ohio state tax, Kevin, The
answer is zero and ben that way for a lot
of years.

Speaker 1 (34:50):
So the last two items we have on so that
was some of the individual things. I think the big
ones are the extra sixty five deduction that people have.
I want to come back, Well, let me just do
that right now. There's a phase out there at around
one hundred and fifty thousand on that sixty five. So
if you're married filing jointly, that's a twelve thousand dollars
right off. So that's two or three thousand dollars for

(35:13):
a lot of people. And there's some ways I just
add up meeting with a client this week, how do
we get our income down in the coming years so
that we can get those deductions. Now there's a push
and pull here. We have people that are increasing income
and doing Wroth conversions, but now you have some people

(35:33):
on the other end, Well, can we decrease our income
so that we can qualify for more of these right off.

Speaker 2 (35:37):
Another thing is if you're over sixty five, you have
the part me in crease.

Speaker 1 (35:41):
If you're the certain level you have to pay. You
have to pay attention to those Medicare, Premium IRMA levels
as well. But if we're just talking about the sixty
five I had a meeting with somebody and we're going
to map it out for future years. Because he had
thirty thousand attackable interested the bank CDs money markets, and

(36:03):
then he also had a fair amount of capital gains.
So on the taxable interest easy switch switch to tax free,
do tax free municipal bonds get still a good level
of interest in those those certain those tax free unions
still pay a good level of interest, but you're switching
to tax free interest. By the way, side, note you
mentioned IRMA tax free interest adds to your irma income

(36:27):
for Medicare, but it takes it off for the purposes
of federal income tax. So that's one thing that person
can do. And then invest your after tax account, your
joint accounts, your trust accounts more in a more tax
efficient manner, whether you're buying individual stocks or ETFs, staying
away from mutual funds which split off capital gains, and

(36:47):
you can reduce your capital gains bill as well to
get that income level down. So two different things you
can do. If you have a lot of taxable interest,
you can bring it down so you qualify for more
of these tax write offs, or get your capital gains
down by investing in some indexes and individual stocks. So
we get back from the break, Let's go to the

(37:08):
other side of the stimulus, which is tax breaks for
businesses and incentive programs which might be that extra boost
the market and the economy needs next year. You're listening
to Money Scents. Kevin and Dennis Kirston will be right back.
Welcome back to the show. You're listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Dennis Kirsten.
We're talking about the extension of Trump's tax cut. It

(37:30):
was called the One Big Beautiful Bill Act OBBA if
you're googling it, but it's kind of an absurd name.
But nonetheless it was the extension of his tax cuts
from twenty sixteen, and there were some additions on there,
some of which are only short term four year write offs.
But we mentioned some of the things that at the
individual levels that you can do to take advantage of it.

(37:53):
And then as I mentioned, as we mentioned on previous shows,
still might make sense to look at that roth cut version.
If you're in the one of the lower brackets, especially
the twelve percent bracket, if there's any money, you can
get out of your IRA and convert to your WROTH
and stay in that twelve percent bracket. I had mentioned
someone who was way above the twelve percent bracket and
some strategies to get yourself down. But you actually, I said,

(38:16):
somebody just asked me this. They said, well, you know,
on the on the on the wroth IRA, or how
do I structure my withdrawals? You know, you don't want
to have no income either. In some cases you want
to have some income. In doing that, Wroth conversion if
you have wiggle room, especially in the twelve percent bracket,
can make sense. But let's move on to some of

(38:38):
the things that are more stimulative to the overall economy
at the business level, Denny, So, tax breaks for businesses
were added and some were made permanent. The qualified business
income deduction was made permanent, twenty percent deduction for pass
through income. In addition, the phase out amounts were increased.
The law also made permanent depreciation deductions for research and development.

(39:00):
I think that's a that's a big thing. If companies
can invest in their firms research through research and development
and get an additional tax right off that it certainly
incentivizes that behavior. Capital gains exclusions h for holders of
qualified small business stocks. Stock owners take advantage of this exclusion,
can take advantage of this exclusion. And there there's the

(39:23):
depreciation part of it. Am I am I missing this
here because I know that that was another big one
as well. Uh, the accelerated depreciation which is going to
allow and.

Speaker 2 (39:31):
Greatly expend these things right up front if they make
capital investment right down having to spread out there over
many years.

Speaker 1 (39:38):
And I mean you think about whether it's a more
service related business like ours, where you could go in
and say, you know, maybe we're going to overhaul the
computer system and you can get that upfront right off,
or maybe more capital intensive businesses that are going to
go out and buy data centers or big heavy machinery
and be able to appreciate and get an accelerated write

(40:02):
off that incentivizes investment into the economy.

Speaker 2 (40:05):
And it's important for them to understand and made permanent.
Now that's kind of a loose word in a way,
but a lot like this last bill had an expiration
day for the whole thing at the end of this year.
So right now it's permanent in the law. It's pretty
hard to change that. It's not saying that you know,
someone else's control then it wouldn't be changed, but a

(40:26):
lot harder.

Speaker 1 (40:27):
That's right. So they've also extended the Opportunity Zone program
for investments in designated areas of the country. This now
runs for another ten years with special rural area incentives
until twenty twenty three. This was created to incentivize investment
in rural areas thirty percent step up in tax basis

(40:48):
for investments in those opportunities the zones. We've seen some
areas get a lot of investment because of the tax
incentives that resulted. But I really think the big one
is the additional upfront depreciation expense that businesses can do
for major investments in their companies. I think that that's

(41:08):
a big that's a big thing that that companies can do,
and that's a stimulus that goes right into the economy.
So I mentioned we have some tax breaks for businesses
some ways that they can have additional write offs next year.
Then you take all of the additional righteofs that are
coming at the individual level, which will basically we have

(41:30):
stimulus checks going out next April and maybe even sooner
because we're going to see higher, higher levels of refunds stimulus.
I mean, if the average I think I saw the
average was thirty five hundred, did you see I don't
have it in front of the number I thought I
saw the average was thirty five hundred, And if you
have an average check going out to a taxpayer family

(41:53):
unit of thirty five hundred dollars, I mean, imagine if
we were just look what happened during COVID when we
sent checks out to people. I mean, this is really
their own money coming back. But it's still a stimulus
to the overall economy. So I think fiscally from the
tax point of view, and also at the business level,
we're getting some extra stimulus next year, which can certainly help.

(42:15):
We're getting a little stimulus from rate cuts. A big
thing that makes me worry. I know history is not perfect,
but that midterm election you're down.

Speaker 2 (42:24):
Well, Uh, party in power usually lose the seats. Well
in the in the House, the Republicans they have what
two majority right now, so it's pretty thin talking about
the affordabil any thing. I think the whole immigration thing
stopping things the mortar was good, but you know, in
this rounding everybody up, it's nice round up criminals and

(42:46):
this is not you know, from a public relations point
of view, not sure this is going over.

Speaker 1 (42:51):
Real well, and you're giving the Democrats ammunition for their
campaigns next next five so and you know.

Speaker 2 (43:00):
In an immigration policy, I mean we've recently come up
with people that we know family members or close friends.
Somebody we know on a close friend of ours, their
son married a Mexican you know, Dreamer basically came here,
which she was five years old, read who went from college,

(43:23):
works for Verizon frankly and you know, high level position,
supervisory position. She's still not a US citizen, even though
she's been trying. I don't understand that one.

Speaker 1 (43:33):
I don't understand why it takes that long. Yeah, I
agree with you. So we definitely need an immigration policy,
and we haven't had one period. And I think Trump
needs to get off the tariff train a little bit.
You know, we keep talking about how we're going to
finalize these deals, and I think companies have kind of
put in some stop gaps, but we need to settle

(43:53):
on something.

Speaker 2 (43:54):
Well, the problem is he may have a four year term,
but he doesn't necessarily have four years to govern.

Speaker 1 (44:00):
Exactly right, And I think the unfortunate not I don't
know if it's unfortunate or not. The thing about the
tariffs is he's putting a lot of these in and
this is going to be in the Supreme Court. He's
putting these tariffs in under executive order, which is great.
It allows him to move quickly, but it also shows
that they can be unwound very quickly by the next president.

Speaker 2 (44:20):
As well, yeah, I mean it's helping us in the
long term, but you know, we just operate a short
term thing here anymore. Midterms right around the corner.

Speaker 1 (44:31):
Yeah, and whoever the next president is can unwind anything
unless it goes through Congress. It's not permanent nothing, I
mean nothing even in Congress is permanent. But you get
a little bit more staying power on something that you
get through Congress, like the extension of the tax cuts.

Speaker 2 (44:47):
Well, there's a lot of good things going on out
there that do a better time of letting people know
that's true.

Speaker 1 (44:53):
And that's always the toughest thing in a midterm and
that's why you get that party in power that loses seats.
Let's take our last pause seeing the money sense. Kevin
and Dennis Kirsten will be right back. Welcome back to
the show. You're listening to the advisors of Kristen Wealth
Management Group, Kevin Kirsten and Dennis Kirsten. Danny, one of
the things that drives me nuts about are politicians is

(45:15):
the double standard by which they live by. I had
a client recently who worked for a major accounting firm,
and the number of hoops this client had to go
through in terms of what they could invest in. They
couldn't invest per SEC regulations in any company or firm
or fund or index for anyone they audited. Oh wow,

(45:40):
well there's only there's only a couple of firms, you know,
these major firms audit basically everybody. Yeah, and the hoops.
This client had to jump through in terms of what
they could invest in because there was a conflict of
interest in terms of who they audited, similar to and
I made a joke with him. I said, well, if
you just quit your job and join Congress, there's no

(46:00):
conflict of interest. You can buy whatever stock you want,
even though you regulate. So what's interesting is the regulators
that are regulating these these people who work at these
auditing firms, they're the regulators, and they can buy whatever
they want, but the people doing the auditing cannot. So
I found it interesting. And you had a story here
in terms of a double standard on somebody who's in Congress.

Speaker 2 (46:24):
Well, this is an article in the name Washington and
Lament by Myra and York. And when a government's five
million dollars mistakes to a COVIDNA scam and a house
member's indictment. Uh So, anyhow, I mean summed up this way.
All right, This is uh crame Representative Sheila Cheerfulness McCormick

(46:45):
of Florida and three own defendants. Okay, so summed up
in a simple question, women, who do if someone accidentally
deposited five million dollars into your bank account? Okay, wow,
that doesn't happen very often. We can point out the
mistake or would imit back?

Speaker 1 (47:04):
And the bottom line is this congressman, this Democrat woman woman,
she got a COVID stimulus check of some kind which
was two decimal places off exactly.

Speaker 2 (47:15):
It was supposed to be fifty five hundred and seventy
eight dollars, and they moved the decimal point, took places
to the right accidentally clerichole air and it ended up
being five million and seventy eight dollars. So they sat
on it for about a month thinking what we are
doing this money? Should we imit back? I can hear
the wheels turning. So finally about six weeks later, well

(47:39):
they opened up about they ended up long story short,
I don't have time to do the whole story here,
but they had about seven or eight or nine shell
accounts in family members and friends and so on, and
the money started being dispersed out. I want to explain

(47:59):
more when we have a future show. But you know
what this sounds like to me, a perfect description money laundering.

Speaker 1 (48:05):
Well, they're trying to cut the pie up and figure
out a way to shuffle it out to these shell corporations.
But the bottom line is, I mean, she got she
got a fake amount of money from the government, and
instead of pointing out the error, she tried to steal
the money. And back to my original point, if this
isn't a congressman, and there's a lot of fraud that
happened during COVID and people were arrested, good, and that's good.

(48:28):
But here's somebody that's trying to get away with something,
thinking that her status as someone in Congress nobody would
notice no and it'll allow her to get away with it.
And I'm really, frankly the double standard with our congress
people in terms of breaking the law and never having
any consequences, And this is just another example of that.

Speaker 2 (48:49):
It's uh, well, there's a paper trail a mile long
here to more or less prove this. Emails, text messages,
you name it.

Speaker 1 (48:56):
And it's what do they say rules for thee but
not for me.

Speaker 2 (48:59):
And if they were going to walk into a bank
with a mask on course during COVID, you would have
but Nolan five million dollars and walking out the door.
What're gonna happen to them?

Speaker 1 (49:10):
Yeah, it's your responsibility in that situation to point out
the error and if you go spend the money, you've
broken the law. Yeah right, Thanks for listening everyone, We'll
talk to you next week.

Speaker 3 (49:23):
You've been listening to Money since brought to you each
week by Kirsten Wealth Management Group. To contact Dennis Brad
or Kevin professionally, call four one nine eight seven to
two zero zero six seven or eight hundred eight seven
five seventeen eighty six. Their email address is Kirstenwealth at
LPO dot com and their website is Kirstenwealth dot com.

(49:44):
Opinions voiced in this show are for general information only
and are not intended to provide specific advice or recommendations
for any individual. To determine which investments may be appropriate
for you, consult with your financial advisor prior to investing.
Securities are offered through LPL Financial Member FI RUP s
I P C, M

Speaker 1 (50:04):
M HMM