Announcer:
It is time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indispensable information are unmanaged and cannot be invested into directly. Registered representatives securities offered through Cambridge Investment Research. Inc., a broker-dealer, member of FINRA, SIPC. Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus brought to you each and every Wednesday morning right here on KROS. Well, this is Nate Kreinbrink. I have Andy Ferguson again. We had you on last week. Third Wednesday of every month we always talk taxes. Filling in again today.
Andy Fergurson:
Well, the people are clamoring for me, Nate. We’ve got to do what they want.
Nate Kreinbrink:
Taxes, taxes, taxes. You know what? It is the last show of 2023.
Andy Fergurson:
Last show of 2023.
Nate Kreinbrink:
It is the last Wednesday of 2023. This is the roundup show. We need the year in review or the top 10 big events of 2023 and all that.
Andy Fergurson:
Yeah. Next week 2023 will be a memory.
Nate Kreinbrink:
It will be a memory, and that’s a transition that it’s hard to believe that it’s here already. I know we talk all the time as far as how fast time goes, and all of a sudden we’re at summer’s over, back to school. Now it’s Halloween. Now it’s Thanksgiving. Now it’s Christmas. Boom, it’s done and you flip the calendar. Although, I am looking forward to the last day of the year. Did you know it is one, two, three, one, two, three? If you are writing the date, it is one, two, three, one, two, three. Just a tip.
Andy Fergurson:
Oh my goodness. Then every day after that, I will mess up the date for about a month.
Nate Kreinbrink:
Forgetting to put the new year.
Andy Fergurson:
Yeah. I’ll be writing 23 for at least the first month of the year.
Nate Kreinbrink:
Days are getting longer though, by what, seconds A day now, like you’re saying?
Andy Fergurson:
We’ve passed the solstice, yes.
Nate Kreinbrink:
So yes. Days are getting longer. We were getting into it. You know what? It was 50 some degrees Christmas day.
Andy Fergurson:
It’s practically tropical.
Nate Kreinbrink:
I don’t know if I’d go that far. End of the year planning, end of the year talks. Everything obviously on our side with the investment side. It’s been a strong finish to 2023. A lot of that has to do obviously with the Fed halting any rate hikes, and then indicating that they’re probably done raising rates. Now that optimism goes to the end of the year, end of the year rally, Santa Claus rally, just booming the economy. A couple of those things I think coming together contributed to some of that late rally, but again, it’s been a rebound year coming off of 2022, which I think was kind of a relief to people.
I know it was kind of a stressful time ending 2021, throughout all of 2022. When is this going to be over? The economy, inflation, interest rates. Kind of got beat over the head a little bit with all of that news and then to see markets rebounded and get to where they are, been a good end to 2023. I think most people, again, that we work with and then hopefully with their own accounts will like those year-end statements when they come in and see that trajectory, again, bouncing back from 2022. Obviously we’ll see how far that extends into 2024. You have the tail end of the year rally into the first part of the new year, and then it’s going to be eyes back on the Fed and what they’re going to do with interest rates and when and if they will start lowering, cutting rates and then how that will respond to the market. Again, some things to keep on the agenda that we’ll keep in mind on our end.
Andy Fergurson:
Right on.
Nate Kreinbrink:
Obviously from your side with taxes, a few years there’s been some fun end of the year changes that have just magically gotten… okay, here’s a change. Change this for next year already. I know you were talking on the way up here that, I guess, good that we can start transitioning to 2024, there’s really no major changes that are on the horizon that are going to go into effect because they’re closed, right?
Andy Fergurson:
Yeah. We were worried that they were going to try and pull something off, especially as they campaign heading into an election year. We thought that maybe somebody would try to pull a rabbit out of the hat and make a major change. We are fairly confident with three days left in the year that’s not going to happen, especially since the legislature went home. Yeah. We think the law is what it’s going to be for 2023, and really we’re past that point of planning, so we’re now really into time to react to what happens in 2023. It’s time to get ready. It’s time to get your checklist out, make sure you’re watching. You’re going to start seeing documents any day now that start coming in the mail. As soon as we close this weekend out, you’ll start seeing W2s, you’ll start seeing interest statements, mortgage interest statements, all those envelopes that come that say important tax document enclosed are going to start to come.
Pay attention to your emails. You may be getting emails from your work or your retirement providers that say, hey, we’re not sending you one in the mail this year. You’ve got to go to this place and print it off, so just pay attention to those things. Make sure that you’re grabbing all your documents and then make your appointments, because again, we are going to get into that time where everybody in the world is going to be trying to make the same appointment, so we’re going to try and fit all this work into 12 weeks time. Don’t be one of those people that waits until the end, because you won’t be the only person that waits until the end. There will be several, and those people run risks of not getting their stuff done in time because they’ve waited.
Nate Kreinbrink:
No, and again, you run into that and obviously end of the year planning stuff we’ve talked about, conversions, that type of stuff. Again, we’re to that point already where it’s best efforts and probably not going to happen for this year as far as getting pushed through, but again, as you transition to next year and some of the topics that get thrown around that they want to look at possibly changing in 2024 having go into effect, it’s always interesting to see some of the key topics that keep getting brought up that more than likely something will be amended, changed, tweaked a little bit or whatever. Then as you mentioned, some of the things that don’t get brought up, which gives you a little insight as to they’re not really on the people’s radar that they’re going to make any changes.
Andy Fergurson:
Yeah. We know for sure that the tax law, the 2017 Tax Cuts and Jobs Act or Tax…
Nate Kreinbrink:
Tax Cuts and Jobs Act.
Andy Fergurson:
Tax Cuts and Jobs Act, that one expires for sure in 2025, so we know that in 2026 there’s going to be at least a reversion or reverting back to the old tax law if something doesn’t get changed. The question would be what gets changed and what parts of the Tax Cuts and Jobs Act do they look to keep and what parts do they not look to keep? What’s interesting is when you hear the conversations come out of Washington and in the tax letter updates that I get, they talk about some things that one party may be pushing for this benefit to stay or to change. For example, the child tax credit isn’t a popular thing. If you remember in 2017, the child tax credit was $1,000 per kid. Right now it’s $2,000 per kid, so that’s a big swing. There are a lot of lawmakers that want to keep that credit or even expand it, but that’s an expensive proposition. That’s going to be the topic of conversation for the next couple of years.
What’s interesting though, like we were talking about, is the things that they’re not talking about extending. Nobody has mentioned anything about extending the brackets or the change in the tax rates. Now we have a 10, 12, 22, 24% brackets. Well, when we go back to 2017, those are going to be 12, 15, 25, 28% brackets, so those brackets are going to go back up for everybody, provided that they don’t get changed, and nobody is acting like they want to change them. The other one that’s huge I think is the idea of the standard deduction.
Nate Kreinbrink:
Right.
Andy Fergurson:
We’ve lived in this life for several years now where I can’t hardly even remember when we didn’t have a huge standard deduction. We’ll go back to a lower standard deduction, which means the personal exemptions will come back into play. Those of you who have just now figured out how to fill out your W4 for the higher standard deduction, eliminating exemptions, and instead of claiming zero, you’ve got to figure out how many jobs are in your house and what type of deductions you want to consider on that W4, well now in 2026, we’re going to have to go backwards and go back to the old way where we’re going to have to figure out how many people we’re claiming inside our household, what that exemption looks like versus what the deduction was like. There will definitely be some retraining that happens and there’s definitely going to be some excitement around those particular things, but like I said, the standard deduction and the tax rates, nobody’s talking about moving or carrying those things forward.
Nate Kreinbrink:
Well, and I think a lot of the planning and some of the joint meetings that you and I have ran together with clients, we’ve kind of projected that. Again, not having that extended, so that reversion back. Again, the increase in the tax brackets. Again, the 12 to the 15, 22 back up to 25, people are going to be looking at that as an increase in tax when in reality, it’s just a reversion back to what it was. Everybody liked the cuts when they went into effect, got a little bit more in their take home pay because there wasn’t as much taken out. Well, again, there’s the flip side to that now, and again, they’re going to get a little bit more taken out. Again, it’s just reverting back to doing that standard deduction. People itemizing is going to become a popular thing now again because a lot more people…
Andy Fergurson:
All this we say sitting two years away from that change and with a general election in between, so lots of things could change. If the parties in power change or the demographics in the Senate or the house change it’s entirely possible that all this could be just words because who knows what they’re going to do and what’s going to be important to whoever’s in charge. Yeah. Definitely it’s going to be exciting for the next couple of years to see what they do, but for this year, the good news is…
Nate Kreinbrink:
There’s not going to be much different.
Andy Fergurson:
There’s no excitement. It is what it is.
Nate Kreinbrink:
Well, I think you guys are due for just a couple kind of just…
Andy Fergurson:
Man, I feel like we are.
Nate Kreinbrink:
Let’s just run it back again because, again, you go back to 2020, all the things that got impacted with some of the stimulus money that came out and how that impacted and people not remembering if they got it or they didn’t get it and all that headaches and some of the changes to all that over a couple year span. You’re definitely due for a couple of…
Andy Fergurson:
Yeah, I’ll take a year without a ton of changes.
Nate Kreinbrink:
As Andy said, we’re transitioning to that time period and you’ll start getting that all together. Again, as he said, be sure to get that appointment scheduled early. Don’t wait until the last minute, and as he always says, if you’re questioning on whether or not he needs to see it or you need to bring it into your tax preparer, when in doubt, bring it.
Andy Fergurson:
That’s right. I can throw it away for you.
Nate Kreinbrink:
Let them throw it away for you and make that decision. Again, all great stuff. As the year’s coming to the end, we transition to the next one, get it off to a good start and make it the best year yet. Andy, I appreciate joining me every program this year. Continue that on. I know I’ve got you maybe for another time or two.
Andy Fergurson:
I think we can get one in January for sure.
Nate Kreinbrink:
Then I know, leave you alone.
Andy Fergurson:
Then it’s hit or miss.
Nate Kreinbrink:
Again, Nate Kreinbrink with NelsonCorp Wealth Management, Andy Ferguson, NelsonCorp Tax Solutions, bringing you this week’s Financial Focus, ending the year, wishing you all a very happy New Year. Thanks again for tuning in. Have a great rest of your week. End the year, enjoy it, and we will see you in 2024.
Andy Fergurson:
Sounds good.
Nate Kreinbrink:
See you guys.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer member FINRA, SIPC. Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.