Episode Transcript
[00:00:05] Speaker A: This is the Kasuf Podcast Network where your trusted advisors are at your fingertips or in your earbuds. At Kossuf, we are an accounting and advisory firm with a team of specialists in a variety of industries. Everything from cybersecurity to healthcare consulting to everything in between.
I'm Tara Errington and I'm your host. As an ex journalist turned marketing professional, I'm the non expert who will be chatting with our experts, giving you all the tips and tricks you need to help your business succeed.
Today's episode of the Kossuf Podcast Network is part two of our three part series on the One Big Beautiful Bill Act. So if you haven't listened to part one yet, please pause this episode and go back and have a listen.
Our episode is an excerpt from a recent workshop we held on the ACT led by director Joel Jones.
In part two, Joel will discuss charitable giving deductions and credits and new limits and new strategies related to the act. Let's take it away, Joel.
[00:01:09] Speaker B: The next thing I want to talk about is scholarship granting organizations. So this is interesting to me anyway, I keep forgetting this is not interesting to everyone. It's interesting to me is scholarship granting organizations are not new.
So in general terms, scholarship granting organizations kind of revolve, at least in Alabama, revolve around school choice type things, which is a little bit of a political hot button depending on people's perspectives.
And so in Alabama, anyway, the idea is if my, if I live in a, in a school zone that has been deemed to be a failing school, I can apply to send my child to a private school.
And if I do that, then effectively my tax dollars that would have gone to the public school are redirected to the private school is effectively what happened. It's administered through these scholarship granting organizations. And in Alabama there's a state tax credit that, that's used to, to make this program work.
And it's a, it's a process. The Alabama earmarks X number of dollars, millions of dollars for this program and then taxpayers go out and claim those credits throughout the course of the year. And once the, once that total amount of credits is gone, then that's the end of the program for that year. That's how it's administered in Alabama. There's never been to my knowledge anything at the federal level related to school choice or related to these scholarship granting organizations. Until now.
Until now. So the Big Beautiful Bill created a tax credit of up to $1700 for cash donations to organizations that grant scholarships for qualified elementary or secondary school expenses. Secondary Education expenses that can be carried forward. Now here's the thing is you, the credit has to be, the credit for federal has to be reduced by any amounts that are taken as credits at the state level.
Okay. So that means if you're doing an Alabama credit Alabama program and you're getting a credit in Alabama, you don't get the credit for federal. Okay.
I mean you could if you were. If I, if I remember correctly, which is dangerous.
The maximum amount you can do at the individual level in Alabama with the Alabama programs. $100,000.
I think that's right.
So you could give a scholarship granting organization donation in Alabama and get an Alabama tax credit for $100,000. If you did that, you would not get this seventeen hundred dollar credit for federal because you got the benefit in Alabama. But what you could give I think is 100,000 and plus 1700 you could do that, take your $100,000 credit in Alabama, take a seventeen hundred dollar credit in on your federal.
I think that's how that works.
And then any amount that you claim as a credit on your federal return, you don't get a charitable deduction for it. So it doesn't, you don't get double benefit.
This last bullet point is interesting and I have no idea how this is going to play out, but there is an exclusion from income for qualified elementary and secondary education scholarships from scholarship granting organizations.
I don't know what that, I mean, I know what it means, but I don't know how that's going to play out practically.
So I don't know if. Because right now scholarship granting organizations are in Alabama anyway. I think are used only for the administration of the Alabama system.
I don't know if there's now going to be scholarships available.
And I guess as I kind of play this out live in my head, which is dangerous is I guess you could if you weren't in Alabama, if you weren't in a failing school system, you could apply for a scholarship from an sgo.
If you were awarded the scholarship, you could then use that money for a private school. I don't know. That may be a way to do.
Could also be used to create interesting disparities in private school football. I don't know, it's just something to think about.
All right.
Another big, another big change in my mind is related to 529 plan.
So 529 plans are not new. Those have been with us for several years. 529 plans just mechanically speaking, put money in a 529 plan. It grows tax free.
And then it can be used for qualified higher education expenses for the, for the benefit of the beneficiaries of those plans. Okay, so you can put them in there, fund it for kids, grandkids, use it for college, things like that.
It was originally designed for college. Over the past five, six, seven years that has been expanded to include more and more things and now we have a further expansion of that now.
And so qualified higher education expenses now include what you see on the screen, which is curriculum, books, online educational materials, tuition for qualified tutoring or educational classes, national test fees, dual enrollment costs, and certain special education therapies. Okay, so that means I could. My child is in college, so I'm. I don't get the benefit of any of this other than her being in college now.
But when she was in high school, I could have used 529 funds to pay for her act or SAT. Couldn't do that. Couldn't that do that before now? I guess on the tutoring I probably maybe could have used it for like act, SAT prep, probably dual enrollment cost. That would have been handy considering that she was dual enrolled for a while.
So it's an expansion of that.
The other one that I think is really, really interesting is this qualified post secondary credentialing. Credential. I can't say that word. Credentialing. Is that right? Expenses. Thank you.
So he nodded and she shook her head. So this word, it can be used for that.
So that can be like in my mind as I was thinking about it is I think like as a tax practitioner I have to have continuing education credit. I think I could use that for my cpe, for my continuing education.
I saw some articles that said that could be used for like H VAC certifications.
So I think it's anything that requires ongoing education and certification.
529 plan money can still be used for that. I think my gut tells me, because the, the ACT had a pretty broad definitions around this thing. My gut tells me that the IRS is going to put out some guidance because people are going to naturally are going to want to use this for what they, for all of these expanded things.
I think, and I don't have this is just the idle ramblings of a bald guy. I think what's happened is we've ended up with all this money trapped in these 529 plans where the 529 planning has been better than the education expenses.
And they're sitting there tax free, growing. And so it's like, all right, we Got to figure out a way to get this stuff deployed. I think that's what a lot of this stuff is.
And then for tax years after December 31st of 2025, the distribution limitation has gone from 10,000 to 20,000. So that's a big deal. Again, I think it's attempts to get these, these funds out of these qualified plans in some fashion.
And then there is, there has been for several years the ability to roll 529 plan funds into these able accounts. Able accounts are accounts for folks that have special needs.
Is you can roll 529 plans into able accounts. You have been for several years been able to do that. But it was a temporary provision that's now been made permanent.
Okay, energy provisions.
So I said earlier about the Biden administration, generally speaking, was very energy focused. All of that for the most part has been removed.
And when I say removed, I mean removed. Like if you look at the, the big beautiful bill has on the front of it a table of contents and sections. And so it's got a six digit number, which is a section number and the title of the section, and there's a section I actually, because I'm nerdy like this, I took a screenshot of it and sent it to somebody because that section just says terminated, terminated, terminated, terminated, terminated, terminated, terminated. And it was energy, energy, energy, energy, energy, energy. Like that's literally what it said.
So that's what, that's what you've got. I broke this into two sections. There's one on the business side too.
So on the residential side, on the individual side, you've got the energy efficient home credit, home improvement credit. That's actually been around, I think that predated the Biden administration. That's been around for a long time.
That's energy efficient, H Vac, energy efficient windows, things like that.
To get that credit, you got to do it this year. And then that credit is gone.
Same thing with the residential clean energy credit, which is a similar credit. It is also going away in 2025.
New energy efficient home credit will only apply to homes acquired before June of 2026.
And then the one that I think will be really interesting to play out is the death of the clean vehicle credits. And when I say the clean vehicle credits, I'm talking about the $7,500 that we've all been looking at, you know, for the past several years. If I go buy, you know, a Tesla or some other electric vehicle, there's been a 7, 500 credit that's been out there for Several years.
That thing's going away at the end of September. Okay, so I have two thoughts about that. If you're in the market for an electric vehicle, and I don't know, I don't know the answer to either of these.
Well, I do know the answer to one of them is if you want the credit, you got to buy it before September 30th. And the credit as it currently sits in 2025 is A, is straight off the purchase price at the dealership.
There's limits around your eligibility related to that credit. Like it has to be a vehicle that costs less than $85,000, I think.
But the credit is available at the dealership. So if you want the credit, do it before September 30th.
So arguably that means now would be a good time to buy.
Another part of me thinks that maybe the best time to buy is after this because the credit is gone. I don't know.
What will be interesting to see is after September 30th, all the dealerships raise their prices by 700 bucks, but we'll see. So I don't know.
And then the other one is this previously owned clean Vehicle Energy credit is the first one. The $7,500 one is for new vehicles new to you or first time owner vehicles. The other credit was for used vehicles. That one has a little bit longer shelf life for some reason. Don't know why that one's going to expire at the end of the year.
So the takeaway on this is if you're in the market for an EV, if you want the credit September 30 for a new one, December 31 for a used one.
Another big one that's in this bill is the estate and gift tax exemption. Is the state and gift tax exemption prior to the Tax Cuts and Jobs act was, I think in the $6 million range. ISH Tax Cuts and Jobs act raised that number to 13. 14 million is what we've been dealing with for the past several years.
It is now absent this legislation.
That exemption was going to drop back to about $7 million in 2026, but it is now 15 million permanent, which is nice. Permanent is nice. Even if it's a removal of a deduction or an addition of a deduction. It makes it so much more pleasant to deal with.
So this is permanent. Applies to estates of taxpayers dying and gifts made after December 31st of 2025.
It's not that big a deal that it's 2026 and going forward because in 2025 we still have the Tax Cuts and Jobs act limit. So you're kind of in the same place. It's just like 14 million and change, and then it'll go to 15 million permanently in 2026.
Some other things that I just want to mention that are. That we thought were going to rise from the ashes of the tax world that have died permanently.
At least, at least, at least in the current legislation is miscellaneous itemized deductions. You know, prior to the Tax Cuts and Jobs act, there was, at the bottom of a Schedule A, there were certain itemized deductions that we could take if we had them. The biggest one, the two biggest ones being investment fees for taxpayers with a, with a portfolio and unreimbursed employee business expenses was another one. You also had tax prep fees, safe deposit box fees. Prior to the Tax Cuts and Jobs act, you could deduct those at the bottom of a Schedule a, subject to 2% limitations.
Tax cuts and Jobs act suspended that deduction.
It is now gone. So it is, it is permanently erased, at least until the next administration comes in and brings it back. But as of right now, it's permanently erased. Okay.
Same thing with qualified moving expenses is prior to the Tax Cuts and Jobs act, if you had moving expenses and you met certain criteria, you could deduct those moving expenses on your individual tax return.
Same thing with employer provided reimbursements is depending on the type of program, the employer could take your receipts, add up your receipts, give you a check, and that was not taxable to you, or the employer could give you a flat dollar amount, you accumulated your qualified moving expenses, and you took a deduction for it. Those were the two choices.
All that's gone permanently. It was, it was temporarily suspended. It is gone.
Except there was now a new addition for moving expenses for certain intelligence community members. So they get the deduction.
And there was also a deduction allowed for certain military personnel. That hasn't changed. Okay. So the only thing that's changed is the permanent elimination of moving expenses for those of us not in the intelligence community and not in the military.
And then same thing with casualty loss deductions is prior to the Tax Cuts and Jobs act, if you had a casualty loss that wasn't related to a federally declared disaster, there was a deduct, there was the ability to make, to get a deduction for that. So if I had like a fire at my house, there was an ability to take a casualty loss deduction on that. Tax Cuts and Jobs act suspended that, and that has been made permanent. So now the only way you get a casualty loss is a result is as a result of a federally declared disaster area, which has been the case since the Tax Cuts and Jobs Act. What is new though is a state declared disaster area. So there that is a new provision.
I don't know of a time that I've seen a state declared disaster area that wasn't also a federally declared disaster area, but it must occur or it wouldn't be in the legislation. So that's an expansion of that provision.
A couple of other things that I just want to mention at a high level is there was an exclusion in the Tax Cuts and Jobs act or no, it was one of the other provisions around gross income exclusions for student loans and private education loans discharged because of death or disability. That was a temporary provision. It's just it's been made permanent.
There was a temporary exclusion of employer provided student loan payments. That's been made permanent.
There is a new provision that I just mentioned in case it's anybody's applies to anybody that it's a pretty specific thing but the sale or exchange of qualified farmland property and I don't remember what that qualification was, but there's the ability to pay the tax on that over four equal installments, which thought was a pretty interesting thing.
And then there was a credit for able account contributions that's been increased to $2,100 that's been made permanent.
[00:17:44] Speaker A: Thank you for joining us for part two of our discussion on the One Big Beautiful Bill Act. As a reminder, this is part two of a three part discussion, so be sure to come back to the KASUF Podcast Network and tune in to part three. Thank you for tuning in to the Kossuf Podcast Network.
Resources for today's episode are linked in the episode notes. Thank you to our producer Russ Dorsey and for Kasuf for powering this podcast.
Be sure to stay up to date on new episodes and more information about today's episode by following Kasufco.
Until next time, thanks for tuning in.
