Year-End Tax Strategies: Making the Most of the One Big Beautiful Bill

0:00 The end of 2025 is racing toward us, and we are facing year-end tax strategies. How to plan for year-end, especially in a year with the One Big Beautiful Bill Act. Lots to think about on this week's Something More with Chris Boyd. Welcome to Something More with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president and financial advisor at Wealth Enhancement Group, one of the nation's largest registered investment advisors. We call it Something More because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter. Here he is, your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country.

0:47 Here's your host, Jay Christopher Boyd. Welcome, everybody. Thanks for being with us for another episode of Something More with Chris Boyd. And you can find us not only on Spotify and Apple or wherever you like to listen to your podcasts, but also on YouTube and hope you follow us on all of these, one of these channels that you might enjoy keeping up with each show. Glad to have you guys with us. I'm joined today by Jeff Perry, as usual, and Russ Ball, all of us from the AMR team at Wealth Enhancement. And today we will be talking a little bit about year-end tax strategies. Before we do, it's crazy how fast we've jumped into the holiday season.

1:32 And have you begun? Have you finished your shopping or are you in the mode? I was playing Christmas music in the office this morning and feeling kind of- Yes, I was. Have you started shopping, Chris? I did a little, yeah. Yeah, me too. Not done, but- Good chunk. Yeah. I mean, honestly, Kristen does most of our shopping. She's so good, like plans ahead. I've done a couple of things here and there and been with her while she did some of that. I think you witnessed shopping. Yeah, I was participating, but I wasn't always the lead on that. I always do some good shopping on Black Friday or over that weekend.

2:15 Yeah, some good deals. Got a few ahead of time, but I'm still a few more to do. Yep. And Christmas music, Christmas movie. What's your favorite holiday movie? Jeff, give me that. Yeah, I'm old school on that. Is it Wonderful Life? I'm going to be stereotypical here. Who doesn't love George Bailey and his- Lisa was just saying, last night, I think it was, when are we going to watch it? Because it's- Yeah. Just kind of it's tradition too. You feel like the first half better than the second half, right? Well, it's all good. Whenever it goes to hell for them. Yeah, I know. Not literally, but- No.

2:57 And when my son and granddaughter here, all the way back to when my son was small, on Christmas day, we watch a Christmas story. Ah, nice. Yeah. The one with the lamp and the turkey and yeah. Yeah. Yeah. What's the present that he wants? He wants a BB gun. A BB gun, right. And he gets it. Literally and figuratively. They made a sequel to that one within the last few years. It wasn't very good. Okay. Yeah. A favorite holiday movie? You know what? We always watch the Santa Claus with Tim Allen.

3:39 That was the one we watched when we were kids. Picturing a home alone response from you, actually. Why? Just because it's a classic? Generationally, I thought maybe. I do love Home Alone, but for our house, it was always the Santa Claus. And we just thought it was hilarious. And we still watch it every couple of years or so. Just to, you know, get a Christmas spirit. Love it. Love it. There's so many good ones. Do you consider Die Hard a Christmas movie? Love Actually is one of those ones. I think this time of year- I'm not going to argue with people about it, but no. It's not the Christmas feel, but it definitely takes place in the Christmas season. Yeah. Well, anyway, I hope everyone is enjoying the holiday season. I think it's a time to- We get caught up in all the busy hustle bustle.

4:24 And I do think I enjoy all the music and movies and some of this. But it's ultimately about sort of- The thing I like about it is where you kind of have some time with family. You have some holiday gatherings. A time to step back and remember your values, your priorities. And of course, a season of giving to others. And we talked about that not long ago with the Giving Tuesday and all of the charitable giving theme. But that's another element of this is trying to be there for others who may need some assistance. So in any case, we're going to talk about tax planning today to jump right in.

5:05 And I- Tough transition. Huh? That's a tough transition. Yeah, I guess it's not as- But I just figured we'd talk just for a minute or two, get the fun holiday stuff going, right? Well, it isn't that tough in that the end of the year is really fast approaching. And today, this will be out on the 12th of December. That does not leave us a lot of time before year end. So if you're thinking about things you need to do before year end, one of those for some people is thinking about their charitable giving if they're trying to get some deductions. This year could be relevant for people who are in higher income tax brackets to entertain doing some- If they're doing some significant charitable giving, you might want to do that this year more than next year, because there will be more restrictions, more limitations on the benefits you derive from that charitable giving.

6:07 And of course, people generally give not because of their tax benefits, but it's nice to get the benefit if you can plan for it. Sure. So that's something to be mindful of. Where do you want to begin? I saw an interesting article I'll just mention in passing. In addition to something that we found from an email I received, there was a Barron's article this last weekend talking about the new tax law and how it can help seniors think in terms of their planning. So that's part of this. And maybe we can dive through a few of those items. But Jeff, do you have something you want to start with?

6:50 Generally speaking, even some of the economists are talking about people are going to- not all people, so don't be mad at me if this isn't you. Many people will be getting a bigger return or less tax impact if they just did the same thing that they did last year because of the one big, beautiful bill. And that especially applies to seniors and those people who work in the service industry. There's some nice advantages for people. And the idea, I guess, is when people get these refunds, it's stimulative to the economy. And therefore, the Fed even mentioned it in their comments this week when they dropped a quarter point, that the GDP, they expect a higher GDP than they had thought before.

7:38 And one of the reasons was stimulus because of the one big, beautiful bill. Yeah, yeah. So we'll see. I don't know if it's going to help me at all, but we'll see. That's what it ultimately comes down to, isn't it? Isn't it? Yeah. That's true, right? Everybody does, right? Well, I would say a couple of things. I'll hit on a couple of things from this Barron's article, and then we can tie in some of the other things that we had from this bigger article that had all kinds of great suggestions for thinking about year end. One of those things is, particularly if you're a retiree, maybe even before full, what is it called?

8:20 The RMD age, you know, 73 and older. You might want to draw some of your IRA funds out sooner than you might be required to, because you now have this window for a few years where you have clearly some beneficial tax treatment. When you think about some terms of the one big, beautiful bill are temporary and may not be extended. So you have some immediate opportunities to benefit and it might be attractive to you to plan where you fall in your, you know, fill your bracket, so to speak.

9:02 Or maybe even if you see how things forecast when you have RMDs, if that's going to push you into higher and higher brackets, maybe it's worth thinking about filling in some of that bracket sooner so it prevents you from going pushed into higher brackets later. So that's one possibility. That's something that, you know, you talk to clients about that and they almost default to no, because I don't want to pay taxes now. I don't have to pay taxes. I don't need the money. But it could be, you know, instead of saying no, listen, and because it could be very tactical to do this and you could save money over the long term.

9:44 Doesn't mean you have to spend the money. No, exactly. But if you can see that your tax rate is going to be higher why not choose to pay at a lower rate? You know, that's the bottom. That's really what it comes down to. You can opt to pay it cheaper. Right now taxes are on sale. Right. So you can get a little discount by paying some of these taxes sooner than later and be mindful of those brackets where you fall. And one more comment. It's magnified because they've extended the age of the RMDs. So, you know, we used to start, you know, at 60, 70, 72.

10:26 Seven and a half. Right. 72, then 73. And then maybe 75, right? Yeah, for some people it's going to be 75. All that delay. You think, oh, I'm saving money on taxes. Actually, you're going to pile it up. All at once. Yeah. That's why you might be in a higher tax bracket than you would have traditionally been. So I think that's the underlying point here. You can save money, save taxes, rather than waiting and piling it all up at 75 and after. If you're my age, for example, it might be prudent to take some now. So pay attention. Next thing is, we talked about this, I think, way too much. So I'm going to just skip over real quickly.

11:08 But qualified charitable distributions. If you're 70 and a half or older and you have distributions you have to take or would want to provide some money for charity, use your IRA money as a way to do that. It's money that's pre-tax. It goes to the charity without tax. And if you have an RMD, it can reduce what you have to take, which can help your income tax burdens as well. You don't get a deduction for that, but you do get the benefit of that money not having to be taken as an RMD or ultimately it's going tax-free to the charitable entity.

11:51 So that's kind of a win. Let's talk about this $6,000 senior deduction thing. Got any insights as to how this all works? Who gets this? This was that whole thing where they wanted to give Social Security tax-free, but couldn't quite figure out how to do it without changing the Social Security law, which wasn't going to be something that everyone was going to deal with at this time. So they came up with this alternative approach, right? Yeah. You know, they're still saying it too. Calling it Social Security? No tax on Social Security, no tax on TIPS, which isn't really true. But so 65 and above under certain income limits, you get a $6,000 credit.

12:37 So that's pretty cool. I mean, $6,000 per person deduction. Yeah. So that could be $12,000 for a couple. What are those limits? Anybody remember what it's like somewhere? And by the way, this is only temporary. This current part of the law is due to expire after 2028. So, you know, you get it for a few years, but at some point it goes away. Let's see, this says only for four years, a couple could realize over $300,000 in capital gains and get 0% federal tax.

13:22 That's amazing. Well, back to the $6,000, you're looking at a modified adjusted gross income. Yeah, yeah. And for a full deduction limit is a phase out. Full deduction limit is $150,000 for a couple married and single with 75 or less. And it basically goes up $100,000 for that phase out. So if you're between $150,000 and $250 ,000 or $75,000 and $175,000, it's a phase out. So you have to see where you fall. But those limits aren't too bad. A lot of people who are 65 and over, as far as having adjusted gross income of a couple $150,000 or a single person $75,000, that will capture a lot of people.

14:10 Yeah, that's a big deal. So that's pretty good. Now, one of the other big parts of the legislation that maybe we want to spend a few minutes on was that SALT deduction, state and local tax. So if you pay property taxes for one home, maybe even two homes, you have, instead of a cap at $10,000 being counted as a deduction, it can be as much as $40,000 now. And that is not a temporary part of the law, correct? That is going to stick around longer than the four years.

14:50 I think we're correct on that. All right. I want to say it does go down. Oh, is that right? That's temporary, too? I believe that is temporary. Oh, my goodness. Where's the permanent part of this? Yeah, it's 20, 30. The deduction is set to revert to a flat $10,000. Okay. So it goes back to what it had been, which is the $10,000. So definitely, we're in a window here where - These are among the things. You got the benefits, might as well take it. Right. The income limits are much higher. They're half a million dollars for the phase -out starts for a married couple. How does that work?

15:32 They're higher income thresholds? Yes, $500,000. And then up to $600,000 before it phases out to get back to the $10 ,000 number. Yep. All right, good. So that being said, these are two of the big ones. Just some regular ordinary housekeeping stuff is that tax loss harvesting, right? This time of year, as you're thinking about year-end, we tend to think of gains as good and losses as bad. And naturally, that's the reality. We don't want to lose money. But there are times when we can have a consolation prize and a tax loss.

16:15 If we have a holding that's gone down, if we realize that loss, we can use it to offset gains and prevent tax. And maybe replace one position that's gone down with another position that's very similar so that we're effectively staying invested until it comes back or whatever and makes its money. It can stay with that theme or whatever the goal is. But you can maybe get some tax benefit out of that. So realizing losses with the intention of offsetting gains can be really valuable. Russ, we had an interesting conversation yesterday with a client who came in and mentioned embedded capital gains that they realized capital gains that they're carrying forward in their tax return.

17:02 Maybe elaborate on what that means and how that helps. Yeah, it was actually capital losses, right? Sorry, did I say gains? That he had incurred, I think you said over a decade ago, where he had losses that he was just carrying and you'd carry losses indefinitely. So from the sale of securities that bankrupted or lost a lot of value and then you sold them, those losses carry forward indefinitely. So you can use those to offset gains in your portfolio and access liquidity in a tax neutral way. So it's important to note, if you're working with our team or a different financial advisor, it's important to note what those carry forward losses are so that it can be baked into the strategy for taxable accounts.

17:51 Yeah, I mean, people need to know. What's that, Jeff? It's a great point. And I think if you work with the same CPA every year, they're going to have this number loaded up and so they're going to find it. But I think if people do their own taxes, this one might be missed by people. You know, after a couple of years, they could forget. Well, gosh, yeah. I hope not. But then that's the kind of thing too that... Uncle Sam's not going to put it in there for you. No, maybe not. So it's one of those instances where it's important to remember and important to communicate to who you work with if you're having help with your portfolio so that they can be, instead of restricted by trying to mitigate tax implications, there might be opportunities they can reset without having to worry about those gains that might limit what they'd otherwise do.

18:47 There's also worth carrying... Oh, sorry. Can you share what we do for our clients? With regard to this? Yeah, we usually try to have a tax budget. And as a default, with what we think is reasonable, is we usually set a tax budget around 5% of the taxable portfolio value as how much we'd consider having in gains realized in a given year. And that means for most people, that might be about a 1% tax consequence relative to the size of their portfolio. But that can still be justified. Sometimes you'd say, well, just buy and hold, never sell.

19:27 But there are times when either that will get you out of balance where your allocation gets too concentrated in a particular name, too concentrated in a particular industry, maybe too much equities. And so you do need to trim and make some adjustments. And periodically, a thesis can change. Oh, I want to rebalance to change the weight of my allocations for a particular industry. Broadly, maybe the risks in the market look different or more attractive, less attractive at a given moment in time. And these things create turnover that can create some tax consequence. So on the one hand, we want to be deliberate and not excessive with these taxes.

20:12 But at the same time, we want to be proactive and managing. And so we try to find a balance and we set a budget. Different people have different willingness for that budget. So we tailor it to what someone asks for. But when we have that kind of flexibility, it can open up more freedom to say, ah, this position's really just too, it's grown so much, it's too large. We'd like to change it. But we don't want to be burdened by too much tax. Well, if we had some carry forward losses that we could make use of, all the better. So-called, right?

20:53 You know, I mean, rather have not losses. But if you have them, you'd rather use them. It's also important to know that if you have those losses, you do get to apply a little bit of that each year. $3,000 can be a deduction off your numbers each year. So even if you're not using it for offsetting capital gains, you have the benefit of some tax advantage. Taxable accounts, we're looking for those tax lost opportunities all the time. That's right. That's right. We do that ongoing, to your point. For clients, right. And a lot of times you hear about advisors talking about it at year end.

21:34 It's something people are most mindful about, very mindful, at the end of the year. But they also are not recognizing that oftentimes the opportunities for these happen throughout the year. And so we try to pay attention to that as we go when we're managing accounts. Some other things that are just general stuff that was in the Barron's topic that I thought was worth reminding you about is be aware of mutual funds tend to have capital gains distributions at the end of the year. So try to avoid buying into those because that's just a bad tax planning when it's a non-IRA account.

22:17 If it's in an IRA, it really doesn't matter, just the way the whole thing works. But when it's in a non-IRA, a joint account, a individual trust, whatever, then you get some unneeded tax drag that you could avoid. For people who have the ability to control when they receive income, this time of year is a good time of year to try to defer bonuses if you want to push them into a future year. You might also be in a position where you have the ability to bring forward expenses if you control your business. These are things to be thinking about.

23:00 When you have a retirement plan at work, have you maxed out your ability to at the minimum capture all of your employer's match at a maximum? Could you possibly do as much as is allowed into your plan and do that savings? Again, many plans these days allow you to do either tax-deferred savings or Roth-type savings. So you've got choices potentially there. If you have your own business, a little side gig, maybe you could do an individual retirement account of some kind, an individual 401k, a SEP, or simple IRA, whatever might be befitting your needs.

23:50 Think about your medical expenses. If you've had a lot of medical expenses this year, it might be worth trying to gather that up and tally some of that to plan for maybe you do that dental work plan. This year before the end of the year, or whatever, get those hearing aids or fill in the blank. Because if your medical expenses exceed 7.5 % of your adjusted gross income, they might be something you'd prefer to take a deduction on depending on the size and scale relative to the individual standard deduction. What else? Consider Roth conversions.

24:32 As we were talking about, bringing some of that income forward sometimes makes sense. It may be that you actually take the money and take it out of the retirement plan. Maybe instead you just do a Roth conversion. You keep it in the plan. It stays growing, in this case tax-free, but you pay whatever income tax you need to pay. Things in that instance you have to be mindful of or aware of is there's got to be some money to pay the tax. If you're all tax-deferred sources and you don't have much in your non-IRA bucket, you might have a challenge with that. Those are a couple of additional things.

25:12 What else do we have in this other article that we might want to hit on? There's a number of things. Maybe estate tax changes. Yeah, there's a big change in the estate tax. That was one of the headlines of the article. The new $15 million permanent exemption and $30 million for a couple. Of course, you still have Massachusetts where you guys are to have to deal with, but is that up to $2 million now? $2 million, you have without an estate tax, but over $2 million is potentially exposed to an estate tax. In the Sunshine State, where I happen to be, we don't have that problem.

25:53 We don't have those. That's why people retire to Florida. Well, it is one of the reasons. The Ethel Kennedy case was a famous one. Yeah, share a little more. Do you want to share a little more about that? The Ethel Kennedy case? Yeah. She became a legal resident of Florida and there was some news whether or not she was a resident of Florida and the tax difference between dying in Florida versus the tax difference of dying in Massachusetts was significant for her state.

26:35 Yeah, exactly. So you can understand why people want to do that. We have a client going through that right now, changing their residency. They have residences in both states and making that change. As we learned when we were talking to Marcia, there's some, Marcia Mantel, when we were talking about Medicare, there are some differences in how that works between states. Absolutely. So don't just do it because, but if you do spend more time in Florida and own a home here and they do make you go through some hoops to become a resident. It's not just, you can't just self-declare it.

27:15 You have to do some things. You have to file some paperwork. You have to get a driver's license. You have to register your car. You have to register to vote and so forth. There's a number of things and I think best practice and attorneys could be probably help you. Your estate planning attorney could probably help you navigate this, what the rules are. But I think you kind of have to track, so you can justify how often you were in the state or, and ultimately you want it to be less than six months and some days. I don't remember. Yeah, it's not, it's not a legal requirement, but that is a common suggestion to keep a calendar, you know, and so you could, if you had to defend yourself, it's basically where your intent is and, you know, where you do those important things.

28:01 But if your estate's big enough, they're probably going to challenge it. Yeah. And it's important to remember too, that people who have some wealth in Massachusetts, say a residence, it's not that you'll not have any Massachusetts estate tax exposure. It's that you'll be limited to the wealth that's in Massachusetts for that exposure. So, you know, if your home was worth more than $2 million, well, you still might have an estate tax in Massachusetts, but if your estate was worth 5 million, but your house was worth, you know, 1 million, well, you know, you'd be in a different situation where you might have some exposure, but it's more modest by comparison.

28:49 Certainly if you live in two states, make sure that someone who's really experienced in both states crafts here a state plan because there's requirements, although we have a uniform probate code, there's still state specific requirements. So you don't want to get it wrong by having the laws of one state that conflict with some laws of the other state. And that is the case for Massachusetts and Florida. Yeah. When we moved, we had to do some revisions because of specific Florida statutes to make sure we were in compliance. Yep. Even just how many witnesses and things like that can... Yeah, that too. It's a basic thing. I'll just put in a little plug. My brother Keats is an estate planning attorney, Boyd & Boyd, PC. Best in the business.

29:29 They are very familiar with the Florida residency and all that goes into that and how the impact on an estate plan can be affected. So in any case, if you need help, certainly there's lots of great people to reach out to. With that, we're going to wrap up this episode and thank you for being with us. Hopefully if you need any help when you're thinking about whether it's these kinds of issues at year end, whether it's the complicated continuity of planning across taxes, estate planning, portfolio management, financial planning of various considerations. Hopefully you have someone you're working with that does a great job with this, but if not, we would love to be part of your team.

30:13 So don't hesitate to reach out to us. Until next time, keep striving for something more. Thank you for listening to Something More with Chris Boyd. Call us for help, whether it's for financial planning or portfolio management, insurance concerns, or those quality of life issues that make the money matters matter. Whatever's on your mind, visit us at somethingmorewithchrisboyd .com or call us toll-free at 866 -771-8901. Or send us your questions to amr-info at wealthenhancement.com. You're listening to Something More with Chris Boyd Financial Talk Show, where wealth enhancement advisory services and Jay Christopher Boyd provide investment advice on an individual basis to clients only.

30:56 Proper advice depends on a complete analysis of all facts and circumstances. The information given on this program is general financial comments and cannot be relied upon as pertaining to your specific situation. Wealth Enhancement Group cannot guarantee that using the information from this show will generate profits or ensure freedom from loss. Listeners should consult their own financial advisors or conduct their own due diligence before making any financial decisions.