Episode 9: Did The One Big Beautiful Bill ACTUALLY make Overtime, Tips, and Social Security TAX FREE?

In this episode of The Financial Huddle, Ryan, Ed, and Brian break down one of the most talked-about new pieces of legislation - The One Big Beautiful Bill. There's been a lot of noise about "tax-free" Social Security, overtime, and tips, but what's actually true?

The team cuts through the misinformation and explains exactly:

- What the new deductions mean for tips, overtime pay, and seniors.

- Why none of these are truly "tax-free" (and how the math really works)

- How long these changes last - and why they expire in 2028

- What this means for your retirement income and planning strategy

- How to use these temporary tax advantages to strengthen your long-term financial plan

They also hit on how these deductions affect standard and senior filings, the real impact on your federal taxes (not state or FICA), and why now's the time to talk with a qualified CPA before 2028 hits.

Stay tuned for Part 2, where we break down the "permanent" tax brackets, SALT caps, and more key changes hidden in the bill.

Listen now and get clarity - not noise - on how this legislation actually affects your wallet.

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Disclosure: Information contained in this podcast is for entertainment and informational purposes only, and should not be considered as financial advice. Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Keystone Financial Group and PCA are separate, non- affiliated entities. PCA does not provide tax or legal advice.

Transcript

Announcer: 0:00

The financial huddle does not provide tax, legal, financial, or other professional advice. Listeners are encouraged to consult with their own advisors in these areas. Alright, everybody, huddle up. This is the Financial Huddle.

Ryan Fleming: 0:12

Ready. Well, hello, everybody. Welcome back to the Huddle Nation here. Ryan Fleming, Ed B. Miller, Brian Manier. What's up? Hey guys. Welcome, everybody. Yeah. So whether you're uh driving down the road, listening to us or uh watching us on YouTube, uh glad that you're joining us today. We're gonna talk about something that's uh been in action for just a couple months here. It's the one big beautiful bill. OB3. Oh B3 kind of sounds like a Star Wars character.

Ed Beemiller: 0:39

Not the better business bureau. It's actually significant legislation that just passed.

Ryan Fleming: 0:44

That's right. And man, there's a lot to unpack uh in this bill. And uh we're gonna do a two-part series today. We're gonna do our best to talk about uh a few things centered around things like are your tips for free? Are your social security payments now tax-free? And um overtime, you know, what's the deal with that? So we're gonna do our best to unpack that a little bit uh and get into the weeds on this and uh tune back in for part two. We're gonna cover some more stuff. All tax-free, right? Apparently that's what it is. So I know there's a lot of noise out there, and I know that uh you know you talk to a lot of people, but this got me thinking, you know, we go to a lot of sports games. And, you know, Blue Jackets games, Buckeyes games. Go bucks. Yeah. So how do you guys feel? I this is like a moral dilemma. Uh you go, you buy a beer, it's 22 bucks nowadays. You're you're there, you drove there, you parked and paid 25 bucks, you buy the beer for $22, and the lady flips the screen around and says, Do you want a tip?

Brian Minier: 1:43

So not only do you want a tip, there's options.

Ed Beemiller: 1:48

Several. 18, 20, 25. They don't start at 5% either. If you look at those tips, I mean it may start at 15%. Right. It's unbelievable. It's pressure. Yeah, it's interesting because if I'm paying 20 bucks for a beer, my tip's included in that. All right. You know, I'm that $20 is for the whole ambiance, the setting, you know, the event, because I already paid, you know, blue jackets. I mean, you can pay $125, $150 for lower, lower bowl.

Brian Minier: 2:17

It's the ambiance of the plastic cup.

Ed Beemiller: 2:19

Yeah.

Ryan Fleming: 2:19

It's a social and moral dilemma, to say the least. But you know, whether or not you're a tipper or not a tipper in that situation, we're not here to judge that. Uh, and please don't judge us. But uh, you know, I just thought that was kind of interesting because it's everywhere. So it's a lot of pressure. Well, there is a lot of pressure.

Ed Beemiller: 2:34

And it even goes even further. I mean, you know, we we go out often and and and get something quick, a quick bite to eat for lunch, and you know, there's a subway, which we all know right across from our office. And you know, subway is definitely, you know, I wouldn't consider maybe you know high quality. You you go in there, it takes about hopefully two minutes, and and you get your sandwich, and then I give them my card and I look down, and once again, it's like everyone expects a tip nowadays, and the pressure is on you. And I'm like, all right, I got a six-inch sub and a bag of chips for five bucks, and you know, they they want to know if I want to tip 20%. You know, so there's definitely a certain thing. I I tip for service, right? And I'm not saying, you know, we're not cheap, tips, tips are not bad, but it's meant to reward above and beyond service.

Brian Minier: 3:20

There's a way around it if you don't want that pressure, take cash with you. Then they can't ask that question. That's true. That's right. They can't. That's right.

Ryan Fleming: 3:27

Okay, I we digress. So, anyways, so relative to this big beautiful bill and this idea of overtime, tips being tax-free, and social security, I get that a lot. And I know you you work specifically with a lot of social security people, um, a lot of families getting ready to take that, when to take it. So, maybe just what's the noise going on about this? I mean, it I I I get this a lot, I know you get it like every week.

Brian Minier: 3:50

Yeah, if I'm teaching a class on Social Security or somebody comes in and they just want to meet with me to talk about it, almost always it's I heard that Social Security is tax-free. Yeah. Is that true? Right? Yeah, and and there's a lot of noise. So we know that when President Trump campaigned last fall, what was the promise that he was gonna make? We're gonna take away tax on Social Security, we're gonna take away tax on tips, we're gonna tack take away taxes on overtime. And so a lot of people are thinking, oh, this one big beautiful bill, or the OB3, when it was passed, it accomplished all that. It's you know, obviously what we want to talk about. I mean, there's some quotes on that. Oh, there's some quotes. So if you look at this was a White House press release, and they claimed delivering no tax, and this is referring to the One Big Beautiful bill. And they're saying delivering no taxes on Social Security through the One Big Beautiful bill. Quote. There was actually an email from the Social Security Administration, and in that, I guess it's a controversial email now, was reported to have stated the new law eliminates federal income taxes on Social Security benefits for most beneficiaries.

Ryan Fleming: 4:56

Yeah, and you can see why that just raises so much noise and misinformation that's out there and it's prevalent, and you maybe our listeners are wondering that as well, too. That's why we wanted to talk about it. So, you know, let's clarify some things. Like what is what is really happening with tips over time and so on.

Ed Beemiller: 5:14

And this is a lot of you know why we started this podcast, if we go back and remember the whole financial literacy and bringing clarity to maybe not necessarily misinformation, but um, you know, in this case, statements and noise that's out there that just isn't factual, is isn't real.

Ryan Fleming: 5:32

And it's super current events. I mean, this is going on right now.

Ed Beemiller: 5:34

This is going on. A lot of people, you know, I met with uh a client just, you know, a a day or so ago who we were looking at retirement income and distribution planning, and then you know, I asked what their social security benefits were, and they're like, well, well, those are tax-free, so we don't have to worry about those. I said, No, they're not. They're like, oh yeah, the the big beautiful bill passed, and everything's tax-free now. Right. I'm like, no, it isn't. So you know, we we have a special time.

Ryan Fleming: 5:58

Hold on now. Yep. Just i this is important. It's stat time. You're the stat guy this week.

Ed Beemiller: 6:02

Today I yeah, I I get the privilege of being stat guy. So tune us up. Yeah. Specifically with you know the topics that we're covering today, which really is is is dealing with what, tips, overtime, and kind of social security. Well, it's not really social security, so that's the f the that's the first kind of misnomer out there. It's a senior benefit, which means 65 and older. The next thing across all these, it's a temporary benefit, meaning three years. You know, it it expires in 2008.

Ryan Fleming: 6:34

And 2028.

Ed Beemiller: 6:37

Yeah, 28 instead of 2008. You know, we we you know we're not going back to back to the future. You know. But when we're looking at TIP income, effectively all these things are increases to deductions. You know, it's it's not tax-free income. It just allows you, when you are filing your taxes, to increase your deductions, which obviously will offset earn income and taxable income. So as far as the tips is concerned, it's the maximum, the cap is $25,000 per year for qualified tips, and that is per individual, you know, it gets into a little more um complicated matters when you're talking about you know uh filing jointly, but the income phase out per individual is $150,000, joint is supposed to be $300,000. And when we look into overtime comp, very similar to to the tip, it's $25,000 is the cap. Uh income limits are the same. Phase out on individuals is $150,000, joint is the $300,000. Now when we go down to you know what we're referring to as Social Security taxable, it's actually uh senior benefit. And it has nothing to do with Social Security. You know, if you are 65 and older, basically you qualify for an additional six thousand dollar deduction singly, twelve thousand dollars filing jointly. So once again, all these things are really meant to lower your taxable income, hopefully put more money in your pocket. And not just these three topics, when we look at itemized deductions and we look at standard deductions. So not all of us, you know, wait tables or are in some service area where we're receiving tips, not all of us work overtime, and obviously not all of us are 65 and older. So if we even look at the standard deductions as part of the big beautiful bill, standard deductions have gone up also. You know, if you're looking at the individual standard deduction, it went from 15,000 to 15,750. Joint went from 30K up to 31,500. You know, so that benefits everyone. That that's the standard deduction. And adding on to this senior deduction that I talked about, $6,000, there's an additional $1,600 per year per individual for all seniors. That just happens normally. Yeah, it just happens. And then we also have head of household filings, not single, not joint. And that's another deduction that also is enjoying that that increase going from $22.5 to $23,625. So the facts are these are deductions. There's no such thing, and we've all heard this before, no such thing as a free lunch, right? You know, there is no free money from that standpoint. Now, it is it's it's it's better than nothing, meaning it's it's better than what existed before in our deductions. And at the end of the day, we want to tie this back to so I'm gonna ask you, Ryan, back to you. What does this mean for our clients?

Ryan Fleming: 9:46

What I'm hearing is well, a couple things. One is is if if you want more crystal clear clarification on this, and you're listening to this or watching this, this is where you need to get to you need to talk to a qualified CPA. Okay, I mean we're we're not CPAs, we're not uh attorneys and everything, but but to do the math right and understand what this truly, truly means for you, make sure you talk to a qualified CPA. You know, we have a few if you're looking for somebody we can maybe get you in touch with. But really, at the heart of this, Brian, what I'm hearing is this is going to put more money in our pocketbooks, um, more money in our bank accounts, and we need to be mindful of that as advisors to make sure that we're coaching our clients to, you know, make sure that that doesn't get absorbed into their lifestyle, which is so easy to do. Okay. And so I think the heart of the the bill was and these changes was to put more people in a position where they have more money at the end of the year through these mathematical deductions. Okay, and so if that's what's gonna happen, then uh then this provides a planning opportunity for so many people. So let me speak to that because this is where we need to come in and coach people uh along the way. They don't understand the math, they don't understand the the rigma role that's going on, but uh, but we we that's our job to do that.

Brian Minier: 10:59

So if people are gonna get more money, what I mean yeah, and to Ed's point, I mean, if if you don't get tips, if you don't get overtime, if you're not 65, you still have that opportunity to utilize the standard deduction. And that was made permanent. Now, before I get into you know how this can benefit people and what they should do, you do have to understand the rules of this. And as Ed mentioned, all three of these are going to expire in 2028. So you have a limited time to take advantage of these extra deductions if you fit into the scattering. Especially the senior deduction. Now, the the sixteen hundred per person, that one is not going to phase out and that one does not have an income limit, whereas the six thousand per person, that one doesn't. And that's why it gets confusing because the rules change depending on which one you're talking about. But with these extra deductions, hopefully what that means is it would essentially lower your taxes, which means you should have more money if you're not paying that in taxes. So, what do you do with that? Now, what is our natural tendency as humans to do? Spend it, spend what we got, spend what we got, right? Or spend even a little more than what we got sometimes. So if you're disciplined and you know what that standard deduction can do, well, now is an opportunity. Hey, maybe I need to make up some of the savings that I didn't have. Maybe it's I need to make up and save towards some of my retirement plans that I wasn't doing a good job before, and I can put some of that. Maybe it's an opportunity to give a little bit more, maybe it's an opportunity to be very active, take an active approach on some of the tax management strategies that we talk about when we work with our clients all the time. So the point is utilizing these extra deductions meaning more, hopefully more cash flow opportunity for you, and being able to utilize that to optimize your overall financial outlay.

Ryan Fleming: 12:43

One other thing I'd add to that too. So if if less people are or more people are paying less tax on their social security, that's a good thing because then that means they don't have to dip into their other assets. That's right. Which means that their money's going to last longer, right? So there's that byproduct as well, too.

Ed Beemiller: 12:59

Um Yeah, it well, one clarification thing too, just to make sure the these additional deductions only impact federal federal income. That's right. Does not impact FICA, doesn't impact you know state, you know, those types of things. So that's something that once again, this this is getting into the weeds where you know speaking to a s you know a certified public accountant, you know, the person that does your tax returns is important. We can give information, but we don't, you know, we are not licensed to do that stuff, and that's why we work with with those types of folks.

Ryan Fleming: 13:30

For sure. So I I really think that's that's really what we want to get into today. Um, you know, we we want to be concise with our communication, and like I said, we're gonna do a two-part series on this. Um again, if this is if this is information that has been on your heart and mind, come see us. You know, schedule a meeting to come see us. Um part two, what we're gonna do is we're gonna get into a little bit more about uh in the Big Beautiful bill. We're gonna talk about things like uh these permanent brackets. That was a big surprise. You know, we we thought that the brackets were gonna sunset, but uh the verbiage that they're using now is that these are permanent. I think they're gonna be a temporary permanent, but we'll talk about that as part of the permanent until they change. Yeah. Right? I only say air quotes permanent. We're gonna talk a lot about that in part two. Underneath the Big Beautiful bill, we're gonna talk about these increased standard deductions for everybody, kind of hit upon that a little bit more than what we did today. And we're gonna talk about the uh the salt, and we're gonna talk about the caps on the salt and the phase out on the on the salt tax. So um so tune in next time for that. Um this big beautiful bill, super relevant, super timely current events. Uh, and again, as always, everybody, uh thanks for tuning in. Uh come back and join us on Hubble Nation Part 2 next time. Take care. Take care, everybody.