What to expect when it comes to your tax return this year

S1: Welcome in San Diego , it's Jade Hindman. On today's show , there were several changes to the tax code. We'll tell you how that could impact your return. This is KPBS Midday Edition. Connecting our communities through conversation. Federal officials say Americans are projected to receive larger tax refunds this season. That's after several changes to the tax code under what the white House calls the one big , beautiful bill. Now , how much you receive will depend on many factors , though , and joining me to share what those changes are and how they may affect your hard earned dollars is Mary Beth Joanne. She's a certified financial planner and founder of Alora Wealth. She also writes the Substack newsletter , Between Tables. Mary Beth , welcome.

S2: Thank you. Jade , thanks for having me.

S1: All right , so my first question. Uh , federal officials say Americans are projected to receive larger tax refunds. Um , from where you sit and what you know about the changes in the tax code.

S2: The majority of Americans were meant for higher taxes. Had the one big beautiful Bill act not been signed. And so what this bill was , it was signed in July 2025. And it was response to what ? In response to what would have been a massive tax increase this year , the 2017 Tax Cuts and Jobs Act was set to expire. And that's basically what would have meant higher taxes for over two thirds of Americans. So now this new law came into play and made some tax cuts permanent and added several new provisions , which is what is bringing about that declaration. Okay.

S1: Okay. Well , I mean , break it down for me because , you know , we got here because again , because of the one big beautiful bill lawmakers passed last year. Um , can you tell us why it spurred so much debate ? I mean , it seemed like this package really touches on all aspects of financial life.

S2: It really does. And these changes fall into two buckets. They are permanent extensions and there are temporary extensions. And so the permanent extensions basically tax rates are staying lower. So without this bill rates would have jumped. So for example , if you were in the 22% tax bracket , you would have gone to the 25%. If you were in the 24 , you would have jumped to 28%. So for middle class families , that does add up to a real savings. And then the second thing is that the standard deduction will stay higher. That's the automatic deduction that everybody gets. And so that's looking that's 16,000 for single filers and about 32,000 for married couple. That was about that was going to be cut close to in half. And so those are two things in addition to the estate plan estate tax which affects mainly wealthy families. You can now pass $15 million per , per person. Um , but the tax rates staying lower in the standard deduction staying higher. Those are big ones. The the thing that you mentioned in terms of some debate , there are temporary expansions that are through 2029 and these are big ones. These are new , but they will not last forever. But for Californians especially , the Salt deduction is a big one that's going to impact us. And Salt is what stands for the state and local taxes. That is the cap. It has been capped since 2017 at $10,000. It is now up to $40,000 through 2029. And so so how that works is you pay property taxes to the county , and then you pay income taxes to California. For someone in a low tax state , that might be fine with that $10,000 cap. But in California , where we have , you know , we have a top tax rate of 13.3% in this state and expensive homes. That 10,000 cap really hurt many Californians , especially San Diegans. And so now , if you own a home in San Diego , let's say you estimate you're paying $15,000 in property taxes and maybe another $20,000 in California income taxes. You can now deduct that full $35,000 instead of just $10,000. And that's.

S1: So while the federal government says this tax season is going to be the largest refund season , a bigger tax refund doesn't mean people are seeing more income. So what does a larger refund really mean ? Okay.

S2: A larger refund basically means that you overpaid your taxes throughout the year and you gave the government an interest free loan. So when we're really bumping this up in terms of everybody gets a bigger refund , just know that what you're really getting back is your own money. Um , so keep that in mind when , when we're talking about this , this larger refund aspect. Um , yes. So it's not free. Um , and most people will see that bigger refund because of the salt increase being retroactive to 2025. So that cap we just talked about actually is retroactive to last year , which means depending on what your W-4 withholdings were , if they were lined up for maybe expecting that $10,000 cap instead of the 40,000. Well , surprise. You get a little bit more of your money back now. Um , in addition , some of the other deductions we didn't hit on yet. There's also no federal tax on tips up to $25,000 for service workers. There's no federal tax on overtime , up to 12,500. There's an extra $6,000 deduction if you're 65 or older. So these are all , you know , going back for 2025 retroactively. So this will apply to taxes for for 2025 which basically is kind of a gift slash surprise to people if they didn't really plan for it. This this wasn't signed until July. So nobody went back likely and adjusted their W-4. And so going forward you will have that large refund. However , ideally you adjust going forward so you keep more of your money on a monthly basis. Hmm.

S1: Hmm. Got it. Well , you may have touched on this , but , you know , one of the more notable provisions is an increase to the standard deduction.

S2: The standard deduction. Oh , um. No , I don't have that in front of me right now. What ? The standard deduction.

S1: That's all right.

S2: Well , I mean.

S1: Well , tell me this. I mean , what are the updated ? Do you know what the updated standard deduction amounts.

S2: Oh , sorry. The standard deduction. Standard deduction. We did hit on that. That's 16,000 for the individual.

S3: Sorry I did hit on that 16th out.

S2: There's so many numbers. But these are the 16,000 for the individuals. I think it's 16,100 for single filers. And I think it's 32,200 for married couples.

S1: Ah okay.

S2: And and that's basically that's staying the same with the cost , you know , with a small inflation adjustment. But it was set to retroactive. It was set to cut in half going forward. So that's what's happening here is we're maintaining that permanent extension at that higher rate. Mhm.

S1: Mhm. Also the child tax credit is permanent now.

S2: So the child tax credit. Yes. That credit I think is up from 22 from 2000 to 2200 going forward. So it's a slight increase there as well. Okay.

S1: Okay. I mean do you see this being a big that being a big benefit to working families.

S2: I think it's , you know , every dollar accounts for the middle. For the middle class families. Right. For working families , every dollar counts , especially with what we're looking at food inflation and cost of living adjustments going forward , even though inflation is is reported to be dialing back , um , in terms of how it's being touted , I think everything with a dose of moderation , right. So I think if your refund is huge this year , consider adjusting your W-4 going forward so that you can keep more of your paycheck throughout the year. Um , if you do get a big refund , use it strategically in terms of , you know , topping off your emergency fund , paying off the high interest debt. Allocate some extra towards your retirement savings. You want to use it from that standpoint , I , I wouldn't look at this as everybody's going to be getting some huge financial windfall. Um , I think , you know , tapering , tampering , your , um , expectations and just looking at your own personal situation and thinking , okay , you know , the Salt deduction. If you own a home , you know , especially in San Diego , that's something that could impact you if you are in the service industry. Restaurant servers , bartenders , hospitality workers. No tax on tips. That's a little bit , you know , that's helpful as well. The health care workers , first responders , shift workers. That's where the no tax on overtime will help senior deduction obviously 65 plus. And if you have children the child tax credit comes in to pay. So there are there are a variety of groups that are being impacted in a beneficial way. I wouldn't expect thousands of dollars of a financial windfall. I would expect , you know , a moderate hundreds of dollars here and there. Right. And then again , if you are getting those thousands of dollars , look at your W-4 and make some adjustments. So that's coming into your monthly cash flow this year as opposed to going to the government. Yeah.

S1: Yeah. Yeah. Well I as we continue to , you know , search for every little nickel and dime here. Um , if you financed a new car last year , um , you could qualify for a deduction. What would make you.

S2:

S1: Okay. All right.

S2:

S1: Oh , okay. All right. That's a little something. Yeah.

S2: Um , yeah. So it's a little something here and there. That's where the , you know , adding up depending on. You know , I think for Californians , especially the salt , the salt cap is the big one. And that's what really hurt Californians in general across the board. Yeah.

S1: Yeah. Yeah. No doubt.

S2: Right. There's also obviously the , you know , brackets move up from just a small cost of living adjustment on an annual on an ongoing basis. But those big ones , the the tax no tax on tips up to 25,000. The federal tax no federal tax on overtime up to 12.5. The extra 6000 deduction and then the salt adjustment are the big things that will likely move the needle for you , um , or listeners , if you know , for their 2025 taxes this year. Okay.

S1: Okay. And any. And , um. Let's see. Are there any other.

S2: Um , you do want to you are able to file an extension. Right. So I always say file early if you're expecting a refund. And if you need more time , you can get an extension. But just because you have an extension to file does not necessarily mean you have an extension to pay. So if you owe money , the IRS does expect their payment. Um , but they do have payment plans. And so I caution anybody to who might owe a payment to not to avoid that , to file and get yourself on a payment plan. If it does seem like it might be an issue for you. Um , and then there are a lot of great resources in terms of getting your taxes filed as well , like the Vita volunteer income tax assistant. There's ARP tax aid that's just free for everyone. Um , and really , you know , there's a matter of either you can get assistance for free in some places , Depending on the complexity , you can go to a local kind of H&R block type thing. If you're such a situation is more complex and you have rental properties , you sold stock or you have a business , you do want to hire a professional. If you're not comfortable doing it on your own.

S1: You know , I mean , finances in general can be a stressful thing to manage , even a stressful like topic to bring up to your partner.

S4:

S2: And , you know , really treat it as , um , a , a project versus , you know , a , a project versus a sprint. Um , one of the things I like to say is you're likely already receiving some statements in the mail , so put them aside for January , the first two weeks of February. Put those statements aside , put them in a pile where , you know , you can come back to them. Then , you know , maybe the starting this month in February , you're going through and you're starting to organize. You want to make sure you have your W-2 1099 , any property tax statements , etc. so focus the first six weeks of the year on just giving yourself a breather. Getting some of those documents organized the next two weeks in February should be focused on. Do I have all the documents and what am I missing ? And you know , and then March can go into sitting down and either plugging everything in. Having your appointment with your accountant , making sure that you're filling out the forms that are necessary. So the biggest thing is just giving yourself some time when you when you have a scramble for taxes or you're trying to tackle it all in one weekend , that's usually pretty stressful because all you end up doing is having more of a to do list because you're inevitably missing something. So I just like to say , keep yourself a little break. Take some time. Um , yes. Do it early. If you could aim to be done by March 15th. I think that's great and gives everybody a breather , including accountants and CPAs. If you're hiring a professional , um , but don't try and tackle it in a weekend because that will likely lead to stress for yourself or for you if you're partnered up your marriage.

S1: Yeah , yeah. Well , good advice there. Don't procrastinate. All right. Yes.

S2: Don't procrastinate. Yeah.

S1: Yeah. I've been speaking with Mary Beth Sturgeon. She's a financial planner and founder of Alora Wealth , and her Substack is called Between Tables. Mary Beth , thank you so much for your advice.

S2: Thank you. Thanks for having me , I appreciate it.

S1: Up next , could we have a blue zone nearby ? Well , a look at a new partnership between San Marcos and the Blue Zone Project. KPBS midday is back after the break.