Examining the Big Beautiful Tax Bill & What it Means for Your Retirement with Alina Osokhovska – Ep 084

The “One Big Beautiful Bill Act” has just become law, bringing sweeping tax changes that will directly impact retirees and pre-retirees.  From changes to itemized deductions and charitable giving to updates on Social Security taxation and estate planning, the impact is far-reaching.

Today, Matthew Peck is joined by one of SHP Financial’s Certified Financial Planners™, Alina Osokhovska. As one of SHP’s top planning advisors, Alina brings a wealth of knowledge and expertise to the complexities of this new legislation. They’ll unpack how the bill alters standard deductions, reinstates the importance of itemizing, and introduces income-sensitive thresholds that could significantly affect your tax strategy.

In this conversation, you’ll walk away with a clearer understanding of what’s changing now and what’s coming in the years ahead. Whether it’s properly timing your Roth conversions, navigating the new SALT caps, or optimizing charitable contributions, this episode will help inform your decisions to maximize tax efficiency in retirement.

In this podcast interview, you’ll learn:

• Why itemized deductions are back on the table and how to know if they benefit you.
• How changes to the SALT deduction cap can impact high-income households.
• What the new rules mean for Social Security taxation.
• Why retirees over 65 may benefit from an additional tax deduction and how to qualify.
• How charitable giving rules are shifting, both for itemized and standard filers.
• Financial planning opportunities that exist today before parts of the bill phase out in 2029.

Inspiring Quotes

• “The itemized deduction is really back in play, and even more important, is that if you’re right around that $500,000 threshold, you really want to take as many actions as possible to get below that $500,000 AGI or MAGI so that you could take advantage of this full itemized deduction.” – Matthew Peck

• “It will be very beneficial for those individuals that are on the verge of surpassing that $500,000 threshold to max out their retirement contributions to reduce their income so they can utilize the full $40,000 deduction.” – Alina Osokhovska

Interview Resources

• Matt’s Markets on the Move
• One Big Beautiful Bill Act (OBBBA)
• Tax Cuts and Jobs Act

[INTERVIEW]

Matthew Peck: Welcome, everyone, to another edition of SHP Financial’s Retirement Roadmap Podcast. I’ll be your host today, Matthew Peck. Now, you may have heard that there was a big tax bill that was passed. I’m pretty sure it probably made its way through all the hot dogs and hamburgers and fireworks that was happening. I’m sure you probably saw headlines about it. I mean, I think, not only is it social media in this day and age that is having a multiplier effect on different news items, but certainly the president has a flair for the dramatic and is in our face no matter what happens, whether you like it or not. But at the same point as the trade deals wax and wane, and are they real, are they not real, and certain things, executive orders that can be removed once there’s a new executive, laws are more permanent.

Laws are on the books, and they’re passed by Congress and then eventually signed by the president. And now, ladies and gentlemen, we have a law. We have a law that’s dubiously named The One Big Beautiful Bill Act. That is a mouthful. I’m just going to call it OBBBA from this point forward. But it is going to impact you. It is going to impact your family, it is going to impact your tax planning, it is going to impact your income planning, eventually investments in certain areas, depending. And to break that all down, we wanted to invite back a recurring guest. She’s one of our top planning advisors. Her name is Alina Oso-hov. Osov-hoska.

Alina Osokhovska: You almost got it. Osokhovska.

Matthew Peck: Osokhovska. Yes. I got Thank you so much for bearing with me. That was I think I warned her as she came on, that was going to be the hardest part on today. But we want to bring Alina back on as one of our top planning advisors, CFP, to break down and unpack what the bill means to you individually and what it means to certain planning opportunities, whether it’s taxes and charity, or whether it’s Social Security. A lot of questions came there, and it was a massive bill, so we’re not going to have time, obviously, to talk about everything.

And I would also highlight that we have the economic impact or the market impact we did discuss in a separate podcast during Matt’s Markets on the Move. So, I certainly encourage you to check out that podcast for more the economic impact. But today is the personal impact. Today is the personal finance, and again, we couldn’t think of anyone better than Alina who would come in to discuss it. So, Alina, without much further ado, what would you like to talk about first? I mean, like, again, massive bill, a lot going on. I mean, I guess, what stood out to you as the most impactful piece of this legislation?

Alina Osokhovska: Yeah. Hi, everyone, first of all.

Matthew Peck: Yes, of course. I’m sorry. Welcome to the show. Welcome back, I should say. I have terrible manners.

Alina Osokhovska: No, you do have great manners. So, I think the major point of this bill was to extend the previous tax cuts introduced in 2017 in the Tax Cuts and Jobs Act bill, and those apply to tax brackets, right? So, the tax brackets that we are using right now are here to stay. They are permanent now. The enhanced standard deduction is here to stay. Next year will be, actually, this year it’s $15,750 per person, individual filer. And for a married couple, it is $31,500.

Matthew Peck: Well, can you pause there?

Alina Osokhovska: Sure.

Matthew Peck: Because I do want to talk a little bit about that standard deduction. I think there’s a lot of confusion there, especially in Massachusetts, because we’ll talk a little bit about the SALT, and some impacts there, but just basic difference between itemized deduction and standard deduction. Like, what was it before the original act? I think it was 2017. And what is it now? And what was the intention behind it? So, if you don’t mind just sort of explaining a little bit about how deductions work. Standard deduction versus itemized.

Alina Osokhovska: So, before 2017, more households used itemized deductions because for example, SALT, which is state and local taxes like your property tax, and those can be very high depending on your house, right? If it’s expensive, you pay higher tax and charitable contributions and so on. So, people used itemized deductions. With the introduction of the enhanced standard deduction, 90% of the US households now use standard deductions because also the 2017 Tax Cut Act basically put some restrictions on the itemized deductions, introducing caps. For example, SALT, state and local taxes, capped at $10,000, so for single filers and for those married filing jointly.

Also, the charitable contributions were kind of restricted by the AGI limits, how much you can deduct each year, and so on. So, it was more kind of like beneficial for households to use the standard deduction.

Matthew Peck: Okay. So, at the end of the day, they pushed more people towards the standard deduction. And if I understood you, every taxpayer would have an option. They’d say, “Okay, you can do standard deduction or an itemized deduction.” Right? And all of these deductions do is they take your total income. I know it’s MAGI and or modified adjusted gross, but just imagine, rather than getting in all that stuff, imagine that they take your total income deduction. So, imagine you’re in $100,000, deduction is, let’s say, $20,000, and now you pay taxes on $80,000. So, what they would do is they’d compare, “Okay, what’s your standard deduction versus your itemized deduction?” And itemized, as Alina was saying, it’s your state and local income tax or SALT. It’s your charitable, it’s your healthcare, or your medical expenses. Name some of the other things that fall under itemized.

Alina Osokhovska: Like, I’m thinking about medical expenses, then, yeah.

Matthew Peck: Oh, geez, I put you on the spot. Sorry about that.

Alina Osokhovska: You did put me on the spot.

Matthew Peck: But at the end of the day, what they do is that they would take a list of the two and they would say, “Okay. It’s better for you to use the standard deduction or the itemized deduction, depending on the client’s situation.” Then in 2017, they increased the standard deduction up pretty heavily, correct?

Alina Osokhovska: Correct.

Matthew Peck: Okay. And so, this, as you were saying, just extends that further, or the standard deduction now is going up to… What’s the standard deduction now going to go up to in 2026?

Alina Osokhovska: So, actually, 2025.

Matthew Peck: I’m sorry. 2025. Okay. Forgive me.

Alina Osokhovska: Yeah. $15,750 for single filers and $31,500 for a married couple filing jointly.

Matthew Peck: Okay. So, I’ll focus on that married couple. So, $31,500. So, in my example, a client would need to have these itemized deductions of more than $31,500 in order to use the itemized or you would use the 31.5 because that’s higher than those two. So, that’s now enhanced. And I thought you just mentioned that there’s going to be a, okay, and is that hedged for inflation, or how does that move?

Alina Osokhovska: Yes, it’s adjusted for inflation. So, every year it will be adjusted for inflation, so it’ll go up.

Matthew Peck: Okay, at that point. But you’d also mentioned that there’s going to be some now caps, or tell me about the whole SALT, because I do know that did hurt a lot of blue states or high tax states. So, on the itemized deduction, it was only capped at $10,000, but now it’s no longer. Now, they expanded that. So, now it’s almost like contradictory. Now, the itemized deduction might come back into play because of some of the changes to SALT.

Alina Osokhovska: That’s a really good question, but it has some restrictions as well. So, they introduced a temporary increased SALT deduction of $40,000. And it is applied to single filers, and the same $40,000 applied to married couples filing jointly. And if married couple files separately, then the deduction is $20,000. However, the income plays a role in how much you can actually deduct. If the household income exceeds $500,000, then a reduction of 30% will be applied. That goes beyond $500,000. So, that $40,000 deduction phases out when your adjusted gross income, which goes beyond $500,000.

For example, if we have a household with adjusted gross income of $550,000, so what we do, $50,000 is above $500,000 threshold. We apply 30% and that is a $15,000 reduction. So, $15,000 we subtract from $40,000, and that household can actually deduct $25,000 instead of $40,000. However, if the income gets, let’s say to a million, right, so then that reduction would be even more than the actual deduction, but the deduction cannot go below $10,000. So, if we have like high earners and they do make more than $500,000, their deduction cannot go below $10,000. So, it really depends. So, if let’s say their SALT tax is $50,000, but it depends on their income. If they make pretty good amount, then they might actually get the old amount, $10,000.

Matthew Peck: And then, okay, so this is interesting. But the state and local taxes, the first thing that popped into my mind was real estate taxes, but does it include income taxes too?

Alina Osokhovska: Yes.

Matthew Peck: Okay. So, it’s interesting because, as mentioned, that the initial tax act in 2017 was trying to push people more towards the standard deduction. But now with SALT, especially if you’re earning less than $500,000, if that cap is now 40 and you’re living in a high tax state, I mean, you might now be back to the itemized deduction land.

Alina Osokhovska: Exactly. So, that’s a great planning opportunity for those households. For example, they are on the verge of $500,000 income, and the threshold is on AGI, adjusted gross income, right? So, how do we arrive at AGI? We take the overall income, the gross income, and then we apply some deductions such as retirement contributions, alimony, if before 2020, HSA contributions, then self-employment tax. If an individual is self-employed and they pay for their insurance, that’s something they can deduct as well, and they are called above-the-line deductions. So, then we arrive to the AGI income, right? So, it will be very beneficial for those individuals that are on the verge to surpass that threshold, $500,000, to maximize/max out their retirement contributions to reduce that income so they can utilize the full $40,000 deduction.

Matthew Peck: Interesting.

Alina Osokhovska: Yeah.

Matthew Peck: Okay. So, really, if you’re listening, and this is effective now or 2026?

Alina Osokhovska: That’s a really good question. It’s effective now, 2025, and it will go away in 2029. So, 2029 will be the last year unless the Congress acts on it.

Matthew Peck: Okay. Interesting. So, for all of our listeners, especially in Massachusetts, where a majority of at least clients, hopefully, our listeners are all across the world. I know we’re constantly getting barraged by all of our fans in Europe, but if you hear, especially Massachusetts and/or other high-income tax and high real estate tax states, this really is going to be a big change. And especially if you’re right around, as Alina was saying, right around that $500,000 total amount of income, because the $40,000 back to this comparison of the itemized deduction versus the standard deduction, if the standard deduction, especially as a single individual, that’s interesting too. It’s the 40,000, whether you’re single or…

Alina Osokhovska: Yeah.

Matthew Peck: Wow. Okay.

Alina Osokhovska: So, it’s kind of like a marriage penalty.

Matthew Peck: Yeah, it does. So, let me unpack that, guys and gals. So, the standard deduction for individuals, single filers is $15,000, but if you’re married, it’s $31,000. So, whether you’re single, you’re comparing your 15 versus potentially up to $40,000 that you’re paying. And for married, it’s $31,000 versus $40,000, right? So, the point being is that here we are comparing these deductions. And the itemized deduction is really now back in play, and even more important, as Alina was mentioning about the idea that if you’re right around that $500,000 threshold, you really want to take as many actions as possible to get below that $500,000 AGI or MAGI so that you could take advantage of this full itemized deduction.

Alina Osokhovska: Correct. Yes.

Matthew Peck: Excellent. Okay, cool.

Alina Osokhovska: Also, because it will go away eventually, right? There is a planning opportunity to prepay your property tax. Let’s say if your SALT is not about like close to $40,000, so maybe you can prepay now so you can deduct that amount because later it will just disappear and it will be capped at 10,000 again.

Matthew Peck: Oh, and well, not to mention, but also annually, not just the fact that it eventually is going to get phased out, which we’ll see because these original tax cuts are supposed to get phased out.

Alina Osokhovska: Right. We never know.

Matthew Peck: Yeah, exactly. You never know. But also, the idea that some people will pay, you know, they’ll pay their Massachusetts taxes in April, or maybe if they’re paying quarterly so pay in January. If you want to pay those taxes in the tax year to get your full, you would also be doing that pretty actively between now and not even mention the phase out.

Alina Osokhovska: Exactly.

Matthew Peck: Okay, cool. Okay. All right. So, we’ve both confused and bored, but also I’m sure enlightened our clients enough when it comes to the SALT tax. But long story short, again, always be comparing your itemized and your standard deduction. But the itemized deduction is back in play and really explore that with your CPA and/or your planner to maximize your itemized deduction now that the SALT cap is up to $40,000, depending on income limits. Alright, switching gears a little bit to another section of the OBBBA, and that’s Social Security. So, President Trump mentioned that, “Hey, we’re going to make Social Security untaxable,” during his campaign and an eventual successful election.

But I also know that it ran into some of the reconciliation and some of the parliamentary issues that are there with how Congress now passes laws, which is a whole separate topic about how our system is relatively broken, and they only have one bite of the apple, which is the reconciliation process. But part of that legislative work is the fact that it can’t sort of impact and raise budgets too much, and honestly, it’s over my head. So, long story short, he couldn’t, or the Congress was unable to make to flatly say that Social Security’s not taxable. However, they did include in a provision that specifically targets Social Security. And, Alina, what is that?

Alina Osokhovska: Yeah. So, probably a lot of people saw like in social media or on the news that Social Security is not going to be taxable. So, I was curious about that. And it’s very misleading because what is in the bill has nothing to do with Social Security benefits, and I’ll explain why. What happened, the additional deductions for seniors that is in effect this year and will go away in 2029, so 2028 will be the last year, was introduced like non-taxable Social Security benefits. How it works? So, for those individuals who are 65 and older, they can now use an additional deduction of up to $6,000 per individual. But wait a minute. It wouldn’t be so easy.

Matthew Peck: Yeah, it was, right?

Alina Osokhovska: So, no, it can be so easy. So, if it phases out, when income for an individual tax filer is above $75,000, and for a married filing jointly $150,000. So, when the income goes above that threshold, this deduction gets reduced. For example, if we have a household with $85,000, the single filer, the $6,000 deduction now becomes $5,400. If we have someone with $95,000, now $6,000 goes down to $4,800, and so on. And when the single filer earns above like $175,000 or above, that deduction just disappears. Why I said it has nothing to do with Social Security benefits? Because it’s not linked to Social Security benefits.

So, for example, as you know, individuals can start claiming Social Security benefits as early as 62, right, at age 62. So, they can claim Social Security benefits, but they will not qualify for this deduction because they’re not 65 years old. Again, you can also delay claiming your Social Security benefits until age 70. So, if we have an individual who is 65, qualifying for this additional deduction, but they’re not claiming Social Security benefits, not going to do anything to those benefits. So, it has nothing to do with the Social Security benefits.

Matthew Peck: Interesting. So, again, to kind of repeat that and so I understand it, I mean, it’s just all about age. It’s all about age and income. Right. It’s all about age and income, folks. So, it’s like, it has nothing to do whether you’re on Social Security at 62 or whether you delayed Social Security until 70, zero impact whatsoever. It’s just about, okay, are you married? And are you over 65? And what’s your income? And then you get this additional deduction. But as we mentioned, folks, now we’re back to that itemized versus standard deduction. But let me ask, this gets added to both, right? So, you get a standard deduction.

Alina Osokhovska: Actually, that’s a really good question. I don’t know the answer to this question, but I will look it up.

Matthew Peck: That’s okay. No, this is only like a week old, or whatever, two weeks old at the basis of our recording. So, again, bear with us all as we interpret this. But yeah, so right now, it’s a deduction, right? Whether or not it gets added on top of your standard or whether it’s an itemized versus a standard, we’ll get back to you. But this is the whole idea is that, I mean, the crucial thing to repeat is that it has nothing to do with Social Security, has nothing to do with your age and your income. And if you are over 65 and if your income is less than $240,000 as a married filing jointly, or 165 as a single, there’ll be some type of tax benefit that will apply to you. So, again, age and income level, nothing to do with Social Security. But that is how they sort of got this work around in there. And we’ll find out more. We’ll put in the show notes about the send a deduction, whether it gets added in addition to or separately from it. So, we have the Social Security aspect. We have the SALT aspect.

Alina Osokhovska: Actually, if you don’t mind, I just want to add one more planning opportunity for…

Matthew Peck: Oh, please. Yes, please.

Alina Osokhovska: For Social Security or additional deduction for seniors. So, the threshold is based on the AGI, again, not the gross income, but AGI income. So, for those who make, let’s say a single filer, makes like a hundred thousand dollars, and they’re still working so they can contribute to retirement account or they can do apply some other above the line deductions, that’s a great opportunity to, let’s say, max out their retirement contribution to lower their adjusted gross income, so perhaps and potentially using the full additional deduction, $6,000, yeah.

Matthew Peck: Which is amazing too. Again, because if you can get below these numbers, you’re maximizing how much you’re able to write off. And deductions are, I mean, they’re not necessarily, I mean, I say the part two, all the language, like tax credits and things like that. But you want to maximize these deductions. I mean, think about that too because if you can get your taxable income, I mean, the whole goal is to get your taxable income as low as possible by maximizing these deductions, which in then turn are applied to now lower tax brackets. It’s a taxable income that gets applied to the tax brackets, so the lower we can get your AGI, which then increases these tax deductions you’re able to get, which then in turn lower your taxable income, the better.

And just a quick little sidebar, I mean, this is the type of active planning, right? This is the type of active planning that we’re proud to provide here at SHP Financial is knowing client situation that well and knowing the tax laws that well, that we’re applying all of these little quirks and tweaks to the system on your behalf as much as possible. And every once in a while, I’m like, oh, if a do-it-yourselfers, God bless him. I mean, I’m sure you’re probably picking stocks and all that fun stuff all day long. But I’m not sure if this is nearly as fun as picking stocks, right? So, having a good team behind you makes all the difference in the world.

Alina Osokhovska: Yeah, it’s fun for us.

Matthew Peck: Yeah, if you enjoy it, right? I mean that’s the thing. I always joke around about geeking out and being nerd and all this stuff. And yeah, I mean, honestly, it’s funny because you mentioned, we’re two fellow CFPs and so, both, we got our license or whatever that designation. And part of my drive to do that was just like I wanted to understand how all this stuff worked.

Alina Osokhovska: Exactly.

Matthew Peck: I wanted to know the rules so then I can…

Alina Osokhovska: Why? Why, right?

Matthew Peck: Yes. Yeah, why did they come up with all this stuff? Because they were written by humans. Humans came up with this. They had their own motivation. Clearly, most recent political, all the motivations that were there. They speak for themselves. And just understanding how the system is developed and why we have what we have right now.

Alina Osokhovska: And how to play efficiently by the rules, right?

Matthew Peck: Yes. Yeah, exactly. Know the rules, it can be the best at the game. No, absolutely. So, let’s talk about one last rule, right? Or I mean, as I mentioned, guys and gals, there’s plenty that we can talk about, I mean.

Alina Osokhovska: 800 pages. 800 pages.

Matthew Peck: Yeah, we’re not going to fit all into that podcast. Like, one of the…

Alina Osokhovska: Definitely not.

Matthew Peck: Yeah. Like, one of the silly ones that I loved was like, I’m sorry, did I say no tax on auto loan interest?

Alina Osokhovska: Yes. It also has some restrictions on, basically, like a fee is out depending on your income, and also, it does not apply for used cars or what it is, all-terrain vehicles. So, there are some restrictions, but if you’re buying brand new car, you can deduct up to, I believe, $10,000. But it is also, like if you make $100,000 as a single filer or $200,000 as a married taxpayer filing jointly, then the deduction is lower. So, yeah.

Matthew Peck: I mean, and I just point out, I mean, like, it just shows that there’s tons of bells and whistles and as you mentioned, close to 900 pages of things to go through. But I got a kick out of the no tax on auto loan interest for three years, then that gets phased out. There’s the whole tips thing, no taxes on tips, that’s there, but that’s going to get phased out.

Alina Osokhovska: But it’s up to $25,000, so…

Matthew Peck: Okay. All right, yes.

Alina Osokhovska: It’s kind of like you have one provision and then you have to read all the exceptions, so this and that, and yeah, so.

Matthew Peck: Yeah, it is not simple. I guarantee that much. And that’s what we try to do. We wanted to highlight the ones that we thought today were the most impactful on our clients, sort of like the 50 and above folks that are either approaching retirement or already retired. Certainly, the high income, when it comes to these deductions and making sure that we’re leveraging them as much as possible. I think that’s why I certainly wanted to understand the SALT provisions as much as possible. But also, speaking of the high net worth and tax planning is the charitable impact. So, what changes did we see in the bill when it came to charitable deductions and distributions and contributions and all that stuff?

Alina Osokhovska: It’s a great question. So, there are some changes, good, and like more challenges. So, let’s start with a good one. So, as you may know before, if you choose to use a standard deduction just because your itemized deductions are not as high compared to standard deduction, you couldn’t deduct your charitable contribution. It would just, like, that deduction would just go away. So, you would have to itemize your deduction in order to get that charitable deduction.

Matthew Peck: In other words, just to pause, so it’s like back to this idea of itemized versus standard. If you were giving a lot to charity, if it wasn’t enough, if it wasn’t higher than the standard deduction, then you weren’t getting any credit for tax credit. Obviously, you’re going to get some credit upstairs, if you know what I mean, but you weren’t getting tax credit. So, this now changed.

Alina Osokhovska: Exactly. Because before, let’s say, you would have a cap of $10,000 for SALT itemized deduction. So, if you didn’t have any other itemized deductions to use, you would have to contribute $30,000.

Matthew Peck: Like 21 or whatever it is, yeah.

Alina Osokhovska: Like $21,000 to charity just to kind of like exceed that standard deduction. So, that was quite high. So, this bill introduced an opportunity for those who want to give, like to deduct, even if you take a standard deduction, you can deduct up to $2,000 for married taxpayers filing jointly and $1,000 for single filers. So, not a huge deduction, but still something, so will be more beneficial to those who are in the high tax bracket. So, for example, if you are in the 35 tax bracket, every like $1,000 contribution, if you’re single filing like a single filer, would be $350 that you save. If you’re in 24th percent tax bracket, it’s $240, right? So, depending on your tax bracket. So, that is something here to stay. It’s not going to phase out depending on the income. It’s not going to disappear. It’s just here to stay. And I think it’s good, some just like benefit.

Matthew Peck: Right.

Alina Osokhovska: And it’s also good for those who are not 70 and a half and do not have pre-tax accounts to use QCDs, qualified charitable distributions, to directly donate to charities to get some tax break.

Matthew Peck: Okay. But I thought there was something else though about this permanent, like this floor.

Alina Osokhovska: Exactly.

Matthew Peck: Okay, so this is good.

Alina Osokhovska: That’s the second.

Matthew Peck: I see, okay. So, the first one, we’re back in standard deduction land, where let’s say, again, you gifted a certain amount, but not over the top, not over the top of the level. This at least gives you credit.

Alina Osokhovska: Right.

Matthew Peck: Then shifting over to the itemized world, there’s also changes in the itemized charitable tax credits or deductions.

Alina Osokhovska: Yes, exactly. So, what do we have here? So, now we have a permanent floor introduced by this bill. What does it mean? So, a floor is half a percent of your AGI income. So, for those taxpayers who want to donate to charities and they itemize their deduction, for example, if we have a household with a $500,000 of AGI, right, the lowest amount that they have to contribute in order to deduct that contribution to a qualified charity is $2,000 because a half percent of their AGI, $500,000. So, let’s say if they wanted to give a thousand dollars, it would just go away. They wouldn’t be able to deduct it. So, now, we have this floor introduced. It’s not too bad. It’s half a percent, but still something to be aware of, especially for those with higher AGI. So, higher your AGI, the higher floor is, right? The higher amount you have to contribute in order for that charitable contribution to be deductible.

Matthew Peck: Oh, I see, okay. So, now that makes more sense. So, that’s sort of, it’s like if you’re going to give, give more than 0.5% of your AGI.

Alina Osokhovska: Yeah, exactly.

Matthew Peck: Okay, in order to get the full tax benefit.

Alina Osokhovska: Yes.

Matthew Peck: Okay.

Alina Osokhovska: Exactly. So, it will be effective next year. So, those who want to contribute this year and for example, their contribution would be lower than the half a percent of their AGI, they can take advantage this year and just go ahead with it.

Matthew Peck: Okay. Now, are there planning opportunities around this one, either this, when it comes to itemized deduction side or non-itemized deduction, or what ideas do you have there?

Alina Osokhovska: So, we do have some time until 2030 for this increased SALT deduction to go away. So, it’s a great opportunity for individuals living in high-income states like Massachusetts to itemize their deductions and when they itemize their deductions. So, now, they can also deduct charitable contributions, right? Because if you take a standard deduction, it’s only up to $2,000 if you are married, filing jointly. But if you do want to donate more, let’s say, $5,000, right, and this year you don’t have to think about the floor, but you can donate $5,000 and you can then get the tax break.

Matthew Peck: But there, oh, actually, real quick, before I forgot, because I want to kind of just see if how we can kind of combine all these, or if there’s any ways of sort of combining.

Alina Osokhovska: Planning, yep.

Matthew Peck: Yeah. Planning wise. Oh, real quick. I think most people were aware, but just to make sure, the estate tax, the federal estate tax is also, what’s the impact on the federal estate tax?

Alina Osokhovska: Now, it’s permanent.

Matthew Peck: Now, it’s okay.

Alina Osokhovska: So, the 2017 Tax Cuts/Jobs Act increased the federal estate tax exemption to all-time high. And now, starting next year, it will be $15 million per individual and $30 million per a married couple. And also, this exemption is portable. What does it mean? So, if we have a couple, and one of the– let’s say we have Tom and Jane. Tom dies and he uses only 10 million of his exemption. The $5 million will pass to Jane. So, now, she has a total of $20 million that she can apply to her estate.

So what does it mean for planning? Most of the US households will not have to pay a federal tax on their state, but they still have to think about the state where they live in. For example, in Massachusetts, the exemption is only $2 million. It’s not increased for inflation, the federal is, so if the federal will be increasing for inflation every single year. The Massachusetts is not, and it’s only $2 million. So, we still have to apply some planning techniques. And also, Massachusetts state tax exemption is not portable. So, if one spouse dies and one spouse doesn’t use it fully, it just expires, like goes away.

Matthew Peck: Okay. Because I think, and the reason why I was saying that kind of quickly was more so that, I think, well, I mean, I always knew in my mind that the tax cut, the original one that they were making permanent with its most recent OBA extended obviously the estate tax, not just the income tax brackets, but the federal estate tax. So, as Alina was mentioning, it’s $15 million per person. So, it’s pretty much $30 million. That has let you off the hook. Great point. Still Massachusetts. And most states have in a state or death tax, so you got to follow your and still pay attention for planning wise. And sort of, not say wrap up, but I want to sort of wrap up with planning ideas. I mean, is there ways of sort of combining all of these into a grand strategy? I guess, yeah, what type of plan have you started to look at to say, hey, here is a good way of orchestrating something?

Alina Osokhovska: It’s a really great question. It all depends on the client’s age, income, goals. So, I can provide some examples. We can plan for Roth conversions, right? So, if a person can, but we have to be very careful because a Roth conversion adds to the taxable income that potentially can reduce that, increase SALT deduction. So, we have to be very careful when we, like lending for Roth conversion, or we can combine it with a charitable contribution to reduce taxes. But it’s just doing some tax planning, how to maximize that and minimize your tax liability and maximize your deductions and tax benefits now and in the long run, right? Because we also have to think, not just this year, oh, I’m going to save $500 this year if I don’t do Roth conversion. But with the Roth conversion, you’re going to save thousands of dollars over the course of years.

So, it’s really difficult to give one answer that are going to fit all of the households because everyone is different. So, what I can say, just work with your advisor on the best strategy for you, look at, there are so many different rules and things to consider nowadays. Definitely maximize your deductions to minimize the tax liability and maximize your overall tax efficiency.

Matthew Peck: No, absolutely. Thank you, Alina. I mean, I think that that’s a fun part, right? Because everyone’s situation is unique. It’s like, yes, it’s a tax law that is federal law that affects us all. However, it affects us all differently.

Alina Osokhovska: Exactly.

Matthew Peck: Depending on our income, depending on our age, depending on, are we married, are we single? Depending on where we live, in the SALT, in the state and local taxes, depending on how charitably inclined are we or not, I mean, I sometimes talk to clients that say, charity starts at home, and I’m like, hey, I have no problem with that. We want to help all your family as much as possible, right? So, I completely– but again, it shows the fact that with all of us are unique using, or how we apply is to make– or what we do and what we love to do is making sure, taking these rules and then taking your unique situation and then combining them into a strategy.

And no strategy is the same and nothing, yes, they sound similar in terms Roth conversions and itemized deductions, I mean, the vocabulary is going to be the same. The tools are similar. However, what we build and sort of, sometimes I talk in terms of like music, right? It’s like, you have this instrument and that instrument and violence and trumpets and clarinets and drums and all that stuff. But how they all come together is very, very unique, right?

So, here we have a new bill. Here we have new rules. Here we have the new law, the land. And how it applies to you and how it all works to you is why you work with advisors like SHP Financial and hopefully, other quality shops like us to make sure that you are not missing out, to make sure that mistakes are not being made because this is, as I said, the law of the land. This is concrete fact now. And if you are not having it applied on your behalf, then you are making a mistake, and then you might be paying more taxes than you need to. And so, I think that’s the reason why, again, you work with firms like us, you pick up the phone and you get involved and you take action as much as possible. So, thank you, Alina, for breaking it down a little bit.

Alina Osokhovska: It’s my pleasure. I didn’t mean to put you on the spot too, too much. I know it’s a fresh bill and fresh off the print presses, but certainly wanted to make sure that all my questions were answered, which I hope your questions as well. So, thanks so much for joining us. We’ll be back on another amazing topic, I’m sure soon, but enjoy the rest of your summer and be well.

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