Episode 15: Navigating the One Big Beautiful Bill Act: A Comprehensive Guide for 2026-2030
What do the latest tax law changes actually mean for your money, and are you making the most of the opportunities available right now?
The One Big Beautiful Bill Act was enacted and made effective in 2025, creating an unusually compressed window for planning that caught many professionals off guard. It touched nearly every corner of personal finance: standard deductions, SALT caps, estate tax exemptions, inherited IRAs, and charitable contribution rules, all in one sweeping bill.
In this episode, Aaron Hattenbach, founder of Rapport Financial, breaks down the key elements of the new legislation and how they show up in real financial decisions. He explains the most consequential provisions of the OBBBA and how each piece connects, so you can bring more questions to your financial planner and CPA before the next planning window closes.
Listen in to learn how to evaluate planning opportunities within this new structure, align tax strategies with your long-term goals, and make informed decisions that support both your current financial life and the legacy you want to build.
What You’ll Learn:
Why the OBBBA created a compressed planning window inside the 2025 tax year.
How the $40,000 SALT cap increase works and when it phases out.
When Roth conversions make sense and how to avoid a higher tax bracket.
How the Secure Act 2.0 inherited IRA rule affects legacy planning.
What the $30 million estate tax exemption means for families through 2030.
How donor-advised funds reduce taxes while growing your charitable giving power.
Why standard deduction filers now qualify for a $1,000-$2,000 charitable deduction.
How cash balance pension plans help small business owners lower taxable income.
Ideas Worth Sharing:
“With the passing of the OBBBA, there's certainty with tax planning… for the next four years. We can do a lot of tax planning for our clients.” - Aaron Hattenbach
"Each little decision matters, and that's why you don't want to make a decision in isolation because it will impact something else in your financial plan." - Aaron Hattenbach
"A hundred million people in the United States don't even have a basic will. It ends up putting an unnecessary burden on your spouse, on your children to interpret. Probate is very expensive and public." - Aaron Hattenbach
Resources:
DAFgiving360 (Schwab Charitable)
About Our Guest:
Aaron L. Hattenbach, CFP®, is the Founder and President of Rapport Financial, an independent registered investment advisory firm serving small business owners, physicians, and tech executives with equity-based compensation. With 15 years of experience in financial services and over $500 million in client assets managed, Aaron and the Rapport team specialize in coordinating investment strategy, retirement planning, and proactive tax planning alongside CPAs and estate planners. He holds a BA in Political Science and Business from Brandeis University, where he was an NCAA collegiate golfer, Academic All-American, and team captain.
Connect with Us:
If you're ready to stop avoiding your finances and start building the future you deserve, schedule a free call with me at pelicanfinancialplanning.com and let’s create your personalized financial plan together.
And if you want ongoing guidance, clarity, and confidence as you grow your wealth, subscribe to our newsletter for financial insights delivered right to your inbox.
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Read the Transcript:
Aaron Hattenbach: Let's just say you had $10,000 of highly appreciated stock, Nvidia stock. You could put the $10,000 of highly appreciated Nvidia stock into the donor-advised fund, and you get the full $10,000 market value charitable deduction for 2025. The money is growing. And then you don't have to gift all the money in one year. You could gift that money over a five, 10, 15-year period.
Welcome to The Wealth Development Studio. I'm your host, Genevieve George, Senior Financial Advisor and Founder of Pelican Financial Planning & Wealth. Our goal for this episode is to provide clarity about today's financial topic, inspire you to be brave with your questions, and gain confidence in your financial future. So take a deep breath, grab your favorite cup of coffee, and step into the studio. Your dose of financial empowerment begins now.
Genevieve George: Today's episode is a special one for me. I'm joined by someone who played a really important role in my professional journey. He was my business coach when I was launching my RIA and he is the founder of Rapport Financial. Aaron Hattenbach has spent years helping individuals, families, and business owners think strategically about their finances, especially when tax laws change.
And today we are breaking down one of the biggest pieces of recent legislation affecting your money, the One Big Beautiful Bill Act, also known as OBBBA. If you're wondering, will my taxes go up? Should I be doing Roth conversions? Did the SALT tax deduction change? What does this mean for my estate plan or charitable giving? Then this episode is for you.
The goal is simple. Let's help us understand what changed, who it impacts, and what conversations you should be having with your financial planner or CPA right now. So welcome, Aaron. I really just want to start with where you're seeing this come up in your conversations with your clients that you're working on, real clients. How is how is this impacting them?
Aaron Hattenbach: Yeah, so this was a massive piece of legislation, the largest since the 2017 Tax Cuts and Jobs Act. This was passed last year and was made effective in 2025, which I think has a lot of practitioners stumbling because typically when you enact a tax law, it's usually effective in the following tax year.
And so it created a lot of tax planning opportunities even in 2025.
Genevieve George: Yeah, so it was a really truncated period of time is what you're saying.
Aaron Hattenbach: How this is impacting, very, very short period of time.
Genevieve George: And it really impacted a lot of different areas of tax. So it's not just one piece, like, our tax brackets are doing this, or this deduction went away. It impacted a number of things.
Aaron Hattenbach: Yeah, it impacted a number of things: charitable giving, standard deductions versus itemizing deductions, the value of tax deferral in addition to, for my retirement planning clients and small business owners, cash balance pension plans, folks in high income tax, high property tax states, a lot of tax planning opportunities around that, that requires the coordination between their CPA and their financial planner, in order to take full advantage of these tax funding opportunities. I think the one word that resonates is with this tax bill came certainty, right?
So with the Tax Cuts and Jobs Act set to phase out or sunset at the end of 2025, there were a lot of tax planners, CPAs, estate planners doing planning, thinking that the Tax Cuts and Jobs Act's impact would go away and that we would revert to the previous—
Genevieve George: Right, that it would truly sunset and yeah.
Aaron Hattenbach: Yeah, that we revert back to the previous tax rates with the passing of the OBBBA. There's certainty with tax planning, at least what I'll say is for the next four years, right? Because we don't know what the next administration will do, but for the next four years, we can do a lot of tax planning for our clients.
Genevieve George: And assuming that it's not truncated again, I want to give it like four and a half years.
Aaron Hattenbach: Yeah, four and a half years. Yeah, it can take an additional six months to a year to enact new legislation. Those are things that we can't plan for, but what we can plan for right now is the tax year is 2026 to 2029, maybe 2020, 2030. And there are an enormous amount of different tax planning opportunities.
This bill was complicated in nature. Obviously, the negotiations went till the final hours and it's really important that people understand how this applies to their situation and that's why they work with professionals, right? To help them understand how each individual rule comes into play because there are complications with income phase-outs and so people get really excited when they hear senior standard deduction, another $6,000 per individual, but they don't think about the fact that these $6,000 senior standard deduction additions actually phase out based on income.
So it's really important before you share these new nuggets with clients or you hear something on The Today Show, from a financial expert that you speak with your tax professional and financial planner.
Genevieve George: Yeah, absolutely. And some of that certainty that you spoke about, one of the pieces was that we know what the tax brackets are, right? So you mentioned the Tax Cuts and Jobs Act. That lowered our brackets and we were able to plan for that, but then we thought they were going to revert back to 2017. And so they were locked in at least through this administration is what we're feeling there.
So that gives us the opportunity to plan under known rates where prior to the to the OBBBA, we were planning for what we thought was gonna be the, actually the old rates, but we got some certainty there.
Aaron Hattenbach: And what's interesting is a lot of my clients worked late into their 60s and some of them are still working into their 70s.
And so I'm not suggesting that they can't do Roth conversions, but what we're really focusing on is how can we convert without exposing them to the next tax bracket and running the calculations to see converting now be beneficial to them financially 10, 15, 20 years from now. It just opens up a conversation about goals.
And so if they have a large IRA account that they don't believe they will need, it brought up the whole Secure Act, the 10-year requirement to have your IRA required minimum distributions depleted. So to make the long story short, to make this as simple as possible, it used to be that when you inherited an IRA, you could stretch the required distributions over your lifetime.
With the Secure Act 2.0, which became effective, I think it was in 2021, when you inherit an IRA, non-spousal IRA, you have to deplete the total account within a 10-year period and you're required to take an annual distribution every year. And so if my client has children and the children have high incomes, but they themselves are in their retirement years, it's a good opportunity for them to consider converting at 22%, 24%. And then for their, not just spouses, but their children to inherit these assets tax free.
And so yes, there is still that 10 year requirement to withdraw all of the proceeds from a Roth IRA, but you're withdrawing those tax free and you're not having to take the required distribution from year 1 to year 10. And so you can let those assets grow compound tax free for 10 years.
And that's tremendously valuable. And I think that the planning software is out there are just catching up to the new legislation that has been put out there, and it's incredible tax planning opportunities for our clients that they may not be aware of.
Genevieve George: Yeah, and being able to have that predictability of like what you're saying is utilizing the bracket that they're in without pushing them into a higher tax bracket. You can do that planning more because we have some certainty around this changing. And then you can also plan out for your client that that might be still working. You could plan out, okay, well, we still know what that looks like a couple of years from now when you might stop working.
So do we do it now and play with bracket that we're in or do we wait until we're in a different bracket at a later date? So there's a lot of opportunities to do planning, particularly around those retirement accounts and conversions.
Aaron Hattenbach: Yeah, I mean, it's a case by case basis, right? You might have clients that have been working full time, making half a million dollars, and now they're working part time. They're making a quarter million or a couple hundred thousand dollars.
And they weren't aware of the Secure Act 2.0. They weren't aware of the fact that the tax rates are locked in at 10, 12, 22, 24, 32, 35, 37, are locked in for the foreseeable future, and that this opens up tax planning opportunities that they can take to plan for their future and also for the legacy that they want to make with their own respective families.
And so that's where I think working with somebody that understands the tax code, understands the new changes, the new legislation, and understands what the client wants to do long term.
Right? And so sometimes it's hard to ask them to pay the tax now, right? They don't necessarily want to, but it's showing them with the numbers and also listening and hearing what they want to accomplish with their money. In some cases, it’s, “I'd like to gift my children X amount of dollars when I'm no longer around so that they don't have to worry about college tuition for their children.”
They don't have to worry about, “Well, I'm not insurable for life insurance. And so what am I going to do if I'm the sole breadwinner and need to provide for my family in the event of my untimely passing?” So I think that each one of these little things just really adds up and I think adds tremendous value to the conversation. And it really touches on what their goals are.
So once we know what their goals are, we can look at the legislation and the changes and see if we can plan around their legacy and their future.
Genevieve George: Yeah, and really getting into the details on that too, because you could say, somebody could be listening and think, “Okay, well, I'm not RMD age yet. Like maybe that makes sense.” But without understanding what their full picture looks like, it might not be perfect, right? So we're really encouraging having that detailed conversation around what your goals are, but then what are the tax implications of those decisions so that you know what the long-term impact is of converting or not converting, right?
If you're in a lower income year, maybe it makes sense. If you're expecting higher taxes later for whatever reason, maybe that makes sense as well. But there are definitely windows where it's not a perfect fit as well. And so it makes sense to have a detailed conversation. And really, I like what you said, really developing that around their goals too, right?
Particularly if we're talking about legacy planning and those assets are more than likely not going to get used and be inherited by a non-spouse and the implications that come with that too.
So I love that. Now, one of the other things that changed, well, it didn't change, gave us some certainty is some of the decisions around whether you itemize or you take a standard deduction on your tax return and sort of in conjunction with that, how we are now treating the SALT deductions, so state and local tax deductions. So just as a reminder under the Tax Cuts and Jobs Act, that was limited at $10,000.
And so that really impacted a lot of people, I think, particularly people that have multiple homes or a higher valued home where their taxes were more than $10,000. It really limited what they were able to deduct during those years. So how has that changed? And is it a good thing or?
Aaron Hattenbach: Well, it depends on who you talk to. It's really interesting. This actually was what I don't know if you remember this, but the negotiations regarding the passing of this legislation went back and forth and back and forth.
And ultimately, I think it was the Republicans in California and New Jersey and New York in these higher income tax states wanted an increase to the SALT cap, but they actually wanted to make it unlimited like it was before the Tax Cuts and Jobs Act, so that you could deduct all state and local taxes, meaning your state income taxes, your property taxes, I believe your sales taxes too, against your federal income taxes.
So this went back and forth. And eventually what they settled on was, we're going to raise the state and local tax deduction cap from $10,000 to $40,000. However, it's going to be based off of your income. And so what does that mean?
Well, once you're what they call modified adjusted gross income, that is not taxable income, right? But your modified adjusted gross income, once it exceeds $500,000 for a married couple or a single person, your SALT deduction starts to phase out. And I think it's a 30% phase out for every dollar above $500,000, fully phasing out at $600,000.
So if you're listening to this, once your modified adjusted gross income is above $600,000, your state and local tax deduction drops back down to $10,000. So unfortunately, that state and local tax deduction increase doesn't help you. However, for clients that are in that, let's call it $500,000 to $600,000 range, there are several ways they can actually lower their modified adjusted gross income.
One of which is if you are a W-2 wage earner at a company and they offer a 401(k) plan, you max it out. For this year, that's $24,000.
Genevieve George: Pre-tax sellers.
Aaron Hattenbach: Pre-tax, correct. You want to put the money in pre-tax because that lowers your adjusted gross income. So, $24,500 for most people, we're not adding in the senior addition. That lowers your adjusted gross income.
Now, if you still can't get below that $600,000 number, you're still in the $550,000 to $600,000 range, and you're a small business owner, this is where things get really interesting. This is when you can actually utilize what's called the cash balance pension plan. We won't get into all the mechanics of how this works. Of course, there are costs to set this up. You have to hire a third party administrator to administer the plan and do annual filings.
So there are costs associated with it, but you can add in an additional, I think it's somewhere in the order of $285,000. I don't look at these things on an annual basis.
Genevieve George: Yeah, there's calculations that go into it, but it gives you the opportunity to defer significantly more than you can as a W-2 employee into your 401(k), like hundreds of thousands of dollars into the cash balance plan. And so it's a huge opportunity to reduce your taxable income.
Now, the other side of that is the previous discussion about Roth conversions, because now you've just increased your tax deferred dollars. So we're just having that conversation later, but are we trying to solve for taxes right now or are we trying to solve for taxes later? It's always a balance.
Aaron Hattenbach: It's always a balance. And then you throw in their IRMAA, right? So like if you're on Medicare and you do a Roth conversion, you increase your IRMAA wages and therefore your Medicare part B, part D premiums do increase. I believe it's just part B actually, if I'm not mistaken. And so each little decision matters and that's why like you don't want to make a decision in isolation because it will impact something else in your financial plan.
And so, yes, we're trying to illustrate here is that there are many different ways to go about interpreting and applying the new tax bill to your circumstances. And ultimately, I think to your point, one of the biggest one is this increase in the SALT cap deduction. So for someone that's in the 32% tax bracket, that additional, let's say $30,000 of state and local taxes they can deduct is worth over $10,000.
I'm not going to do the math right now, but we've done this for dozens of clients and they see that federal tax savings and they go, ”Oh wow, that's pretty compelling. It's worth it for me to put more money in pre-tax that I can't touch until I'm 59 and a half for the opportunity to save on my taxes now.”
That is something that is coming up quite frequently with our doctor clients. I'm sure this is coming up with your business owner clients too. And they may not even be aware of, in addition to a 401(k) and profit sharing, they can also set up a cash balance pension plan. Or they may not even be aware that they have a profit sharing plan component to their 401(k). And so again, good opportunity to revisit these tax deferral strategies.
Genevieve George: I love when we're able to have those conversations and really affect huge change there too, because it ultimately allows for huge tax savings in the years that you have that plan in place. But then it usually also benefits the employees that are part of the team too, if it's not just purely family-owned, but it really impacts the other employees as well with the way the calculations work.
So I love being able to show like, okay, if you do this, like this is your tax savings, it's a huge difference. So that's an important conversation. So one of the other things that changed or did not change, but gave us more clarity, was the estate plan exemption. I said estate plan, but the estate tax exemption.
During that period where we were under the Tax Cuts and Jobs Act, somebody could pass away with, it shifted for inflation, but we'll call it $14 to $15 million. And it would move from their estate to whoever there are heirs are tax-free. and so that is per person. So that's almost $30 million per couple. it was supposed to sunset.
And so for 2026, it was supposed to come back down to the inflation adjusted dollar amount that was 7 million.
Aaron Hattenbach: Like five to six million, something like that per individual.
Genevieve George: Yeah, at 30 million, that doesn't impact everybody. There's plenty of people that it does, but it doesn't impact everybody. But when it comes back down, when people start thinking about it, they may even think, “Oh, that still doesn't affect me when it's at 7,” but then they don't really include their home and their full net worth statements. So having that locked in at that 30 really changes a lot of the conversations around planning.
So how has that impacted your discussions with your clients and how you're feeling about that change?
Aaron Hattenbach: Yeah, I think you can probably relate to this, but you know a number of our clients are in that $30 million-ish area between real estate, commercial real estate property ownership through family limited, family LLCs through highly appreciated assets, their own primary residence. And so what we try to do with our clients is not make like hasty decisions or rush to get something in right before the deadline.
And to make an irrevocable gift, whether it's through an irrevocable trust or just making an outright gift so that that asset is growing no longer in your estate, but is growing out of your estate and is not counted towards that lifetime gift, or lifetime estate exemption.
So I think provides for more flexibility, right? I think because it's not impacting the vast majority of families out there, it's giving us the opportunity to not have to necessarily make decisions now that they may regret later, right?
Genevieve George: Right. like gifting dollars that you may actually end up needing in your lifetime.
Aaron Hattenbach: Correct.
Genevieve George: And that's where when the exemption amount is lower, you're having a lot more of those conversations, let's get this out of the estate, but then I don't want to say more likely, but there are the chances of you actually needing those dollars that you gifted away or higher than they are when it's, when you're talking about $30 million.
Aaron Hattenbach: Sure. And then obviously irrevocable life insurance trusts, for example, families that have assets that are just above that, let's call it $30 million. And let's just say they own assets that are not easily dividable, right? It might be a property that's worth $6 million or a multifamily property that's worth $12 million, $13, $14 million.
And it might be more challenging to divide up or it could be an asset, an alternative asset that can't be easily sold. And so I think most people like, if not all of the professionals in our industry like, is that this buys us some time to do long-term planning that fits what the client is asking of us.
Whereas 2025, we were rushing to estate planners, “Hey, what can we be doing right now? We're concerned that they are right above that 30 million or so number. Should we set up an irrevocable trust?” Should the client start gifting a higher percentage of their LLC that owns real estate properties to their children so that those assets are no longer in their estate when they pass, right?
So it just, provides more I think, room for the 97% or 98% of the population to not feel rushed to do anything that they may regret. And this is what I hear from estate planners all the time is they want to provide flexibility to their clients.
Genevieve George: Well, I've had a couple things come up in recently that have been somewhat related to this, but I had a client that is likely to be over the estate tax exemption and wrote their estate documents to essentially say, like anything that is over the exemption, we're going to be charitable with that. We don't really want to do the tax. We're going to be charitable with that.
But I think the important thing there that we're saying, but not necessarily saying is that this is the standard right now, but it could change. And so if those documents were written for a while, but like if we had sunset, that ultimately changes what the family picture looks like after mom and dad are not here.
You're right, the majority of my clients are not over this estate tax exemption. But I don't want them to think they don't need to do anything. And that is part of the discussion that we're constantly having with our clients, right? That making sure that they have a state document, making sure that they're updating them as their life is changing and just ensuring that they're not ignoring it because they don't think that, like, “I don't have that much money. It's fine. That doesn't apply to me.”
But it applies in other ways.
Aaron Hattenbach: It does.
Genevieve George: And so I want everybody to come out of this and be like, “Do I have a state document? I better go get those.”
Aaron Hattenbach: Oh yeah, I think like at a baseline level, what is it? A hundred million people in the United States don't even have a basic will that they could scribble on a napkin. It's a problem because what it ends up doing is it ends up putting unnecessary burden on your spouse, on your children to interpret. Probate is very expensive in public and can be expensive.
And so if you can document what you what you'd like to do with your assets.
Genevieve George: Well, I like the clarity that estate documents provide too. It’s saying, ”I'm still alive and this is what I want to happen.” And it's not a question. And when there is nothing in place, it can be very much a question. And I think the other important thing to just note while we're talking about the estate tax is we are talking about that at the federal level, but each state is different.
And so there may still be planning opportunities specific to your home state, which is important. We won't go through all 50 states here, but it's important to know that because I know like different states have different levels.
Massachusetts comes to mind. They have their own estate exemption. So you might not have to pay federal, but you have to pay state. And that's important to plan around.
Aaron Hattenbach: Right. And that's another, it brings up just a quick side note here that—we have clients that lived in New York and there's an estate tax in New York. So where did they move to? They moved to Florida. Believe it or not, California, which taxes us at the highest income tax rates, sales tax rates, property taxes are not necessarily as burdensome as they would be in New Jersey or North Shore of Chicago, for example.
Long story short, California doesn't have an estate tax. And so I think this comes into the retirement conversation too, where if somebody is in a state that has estate taxes and they want to kind of think about what they can do to reduce estate taxes, they don't necessarily want to move their entire life, your estate planner, and seeing what you can do to reduce the impacts of state taxes too.
So there are a lot of little things that can trip you up ultimately. And I think it's really important that you have somebody you trust to be able to turn to. Both of us, if we don't know the answer, we certainly are resourceful enough and we have the network to be able to find the right people to help us and get the answers our clients need.
Genevieve George: And the way I describe that when I'm talking with people is I really try to come alongside their other professionals if they have them or help them establish relationships if they don't. So we talked about implementing retirement plans or modifying retirement plans within a business, but I'm coming alongside the CPA to make sure like that still works on your side too, right? I have CPA by my name, but I'm not their tax preparer. Let's make sure we're all on the same page.
Let's make sure. Okay. I've spoken with somebody about what they want to happen from an estate standpoint. Let's make sure it's actually executed that way and establish all of those lines of communication and really try to come alongside those other professionals on behalf of the client. And I think that's how you operate as well.
Aaron Hattenbach: Yeah, it's really important to have a team-based approach and know your lane. And certainly, I will look at things that I haven't looked at in maybe a year or two and let my clients know that I need a bit of time to do some research and come back with a more educated response.
As we stated earlier, every little decision leads to changes with like the example being, if you convert to Roth, well, that increases your Medicare IRMAA premiums. So there's just so many examples of one decision, not being in isolation, one decision having an impact on everything else in your life. And so you don't want to just rush to that. You want to understand, ”What if I did this, how would this impact me, my family, my legacy and so forth?”
And it kind of leads to like the charitable conversation about the One Big Beautiful Act and the changes to charitable contributions. Yeah, I'm sure you know a lot about this.
Genevieve George: Yeah, and this is one where it really was a very truncated timeline because we got the new legislation. But if you wanted to take advantage of the benefits of 2025. You had a very short amount of time to take care of that before entering into 2026. So maybe talk to us a little bit about what those changes look like.
Aaron Hattenbach: Well, so what you noted earlier was obviously we have the standard deduction and we have itemized deductions. And it only really makes sense to itemize your deductions when the sum of all of your itemized deductions, mortgage interest, charitable giving, are two examples, exceed the standard deduction.
And so with the increase of the SALT cap from $10,000 to $40,000, you have more and more people that will be itemizing their deductions. So I've read up on this. I've produced one-pagers for our clients and actually got several of our clients to open up donor advice funds last year, especially the high-income earner clients that are in the 37% federal tax bracket. Now, their charitable gifts phase out or maybe I'm not getting terminology correct.
They're only able to get a 35% tax deduction.
Genevieve George: Yeah, there's a ceiling and a floor, which is fun.
Aaron Hattenbach: There's that ceiling and a floor. Yes, there's a ceiling and a floor. The ceiling is 35%. So 35% to 37 % isn't significant, but when you have clients that are well into the 37% tax bracket, it's a meaningful tax savings.
And then there's this new 0.5% AGI floor, adjusted gross income floor, that applies to itemized charitable deductions. So taxpayers, they have to subtract 0.5% of their AGI from their qualifying charitable contributions before they can deduct anything.
Genevieve George: I have that actually on my website, but I don't have it on me, but I did do an actual example of what that looks like. But ultimately, from what you're describing, if I was able to donate money last year and I was in the highest tax bracket, I received a 37% benefit of that charitable contribution where I am now going to get less as a tax strategy standpoint.
Now, I don't want to discourage anybody from being generous with their charitable dollars, but the tax benefit is lower going forward for 2026 going forward. And so that's why that donor advice fund was a huge opportunity in 2025.
But that doesn't always work for everybody, right? But a donor advice fund essentially allows you to say, if there's an organization that I give to every single year and I know that I'm going to give them 10 grand a year for the next 5 years, I could front-load $50,000 into a donor-advised fund. I get the full tax benefit in the year that I put it in the donor-advised fund, and then I can still distribute it to the organization over that five years the same way I would.
I like essentially front loaded the tax benefit and not to say don't do that anymore, but there was just like a tiny difference in the opportunity to do that in 2025 versus these new rules in 2026 going forward.
Aaron Hattenbach: Yeah, and you bring up a valuable tax planning opportunity that we work with our CPAs on, which is charitable bunching of contributions. And I think the common misconception that comes from most people who are charitable in nature and don't understand the mechanics of a donor-advised fund is, let's just say you had $10,000 of highly appreciated stock, Nvidia stock, right? And you wanted to be charitable, right?
You could put the $10,000 of highly appreciated Nvidia stock into the donor advised fund. And last year was the year to do that, but it still remains a significant tax planning tool, the donor-advised fund. And you get the full $10,000 market value charitable deduction for 2025. It goes into the donor-advised fund. The donor-advised fund is invested in income pools. When it's underneath $100,000 at trial, when it's over $100,000, can be a bit more customized with how you invest the proceeds. But the money is growing.
And then you don't have to pull the money. You don't have to gift all the money in one year. You could gift that money over a 5, 10, 15 year period. You can pay your church dues, your synagogue dues. If you're on a 501(c)(3) board, some of them accept donor advice funds. So donor-adviced funds are right.
Genevieve George: I think most of them, as long as it's a 501(c)(3), they're going to take your money. Whatever kind you want to send them.
Aaron Hattenbach: Yeah, so you're giving that $10,000 to the donor-advised fund. That is an irrevocable gift. I want to make it very clear to people listening. You can't take that money back. It's now at Schwab Charitable or Fidelity Charitable or the Jewish Federation's Donor-Advised Charitable Fund.
And it's being invested. And you have the ability to make gifts from that donor-advised fund—
Genevieve George: You still get to direct it to what…
Aaron Hattenbach: —and direct those gifts to organizations that you would like to gift to. So you're getting the full market value deduction in that tax year, but then you can spread out the gifting over a multi-year period.
And I think a lot of people don't think about that, but they are charitably inclined. They are giving to associations and nonprofits every year. And if they knew that they could get both tax benefits from this and then also that the money would continue to grow based on how it's investing, it increases their giving power. It's really interesting.
Genevieve George: And you get somewhat of a—I feel like it's a double tax benefit, right? You're getting the benefit of the contribution, but you also did not have to claim capital gains.
Aaron Hattenbach: Pay a capital gain. Yeah, that's the other thing. You don't have to pay a capital gain either.
Genevieve George: And that's huge. Like for your Nvidia holder, right? Like that they had the ability to do that. I had another client that had one concentrated position from work, right? It was restricted stock and over time it becomes unrestricted.
I was like, “You can use that for your charitable giving.” And they said, “What?” No, no, you can do that. You don't have to take the capital gain and or hold onto this forever. You're already generous. Let's use this for that purpose. So it's a very important tool. And we had an opportunity to remind people to use it in 2025.
But it comes up as well in like a year of where income is higher. Maybe there's a business sale or some other liquidation. It's definitely, there aren't a ton of tools at that point once things have already been set in motion. So that's one of the tools that you can use to help offset your taxes in those years where you have a higher income year. So it's a nice benefit, particularly if you're already charitable and you can still direct those gifts to the organizations that you want to receive those funds.
Aaron Hattenbach: Yeah, and then one other thing that I think people aren't aware of with this new tax bill is even if you don't itemize, you can actually still get a charitable deduction.
Genevieve George: Above the line. Yeah.
Aaron Hattenbach: It's $1,000 for single filers and $2,000 for married couples filing jointly. So there are a number of people that are not in high income tax states. Let's call it a Florida. Let's call it a Texas. Well, Washington, although they are going through some changes right now. Nevada and Idaho.
Where you might be a standard deduction and you're questioning, "Well, should I even be charitable? Maybe I'm not ready to be charitable yet in my life. I'm younger.” But now there's an opportunity to give a thousand dollars to an organization that you're passionate about. Maybe the university you went to, maybe you have a spouse that is suffering from a medical condition and you want to support that organization.
So you can give that $1,000 as a single filer or $2,000 as a married couple and have that be deductible to certain charities. And I'd recommend, of course, with these tax, pieces of tax guidance, obviously always speak with your tax professional. But I think that this bill, which wasn't just a tax bill, is so dense that there are things like this that really don't get a lot of publicity.
The new non-itemizer charitable deduction, which was something we experienced during COVID. I don't know if you remember that, but for a brief period of time, standard deduction taxpayers did get a minor benefit for charitable donations in 2020.
Genevieve George: Right, in the year of 2020, right? I believe because they wanted people to continue to be charitable. Just everything's shut down so much that these organizations were going to maybe not make it on the other end if they weren't continuing to be held up. And meanwhile, they're providing services to all these individuals and they need it. So yeah, that was a nice temporary benefit to have that now as a part of the code long-term is nice.
So if I'm hearing everything correctly, you're saying, don't panic. There are planning opportunities. There are strategies to be had. Do you want people to come out of this conversation? Do you want them to do anything specific, take any action?
Aaron Hattenbach: Yeah, I would say, obviously there are so many different planning opportunities with this tax bill. But even before this tax bill, there were always planning opportunities. And for people that own their own businesses, they're busy professionals, whether they're lawyers or doctors, or they work at a company in tech or healthcare, they don't really have the time.
Some people DIYers, of course, want to be up to speed on everything that's going on. But this is our full-time profession. And for CPAs, this is where they provide their value. The reason why you would go work with a CPA is that you're a business owner, you're somebody with a complex financial picture, and using a TurboTax or some sort of DIY system might miss some critical planning opportunities.
And so you want to do that planning well in advance of the tax filing deadline with your CPA, with your certified financial planner in coordination together. And so if anything, what I would take from this episode is great planning opportunities, but you certainly don't have to do all this on your own. You can obviously do your own research, but it's really nice to have a professional to bounce ideas off of.
And me myself, and I'm sure you too, like we get ideas from fellow professionals, planning opportunities from other professionals, simply because we're in that ecosystem and we're working, a hundred percent of our time is dedicated to this. And so I would say if you don't already work with someone, there are plenty of certified financial planners out there. Find someone that focuses on your specific niche, meaning if you're a small business owner, find somebody who is a small business owner or works as small business owners.
If you're a entrepreneurial woman who has a business that is growing and you're looking for a female financial planner that specializes in working with women, there are advisors like Gen who do that. So I'm giving you a little bit of a plug here, but I think that with all of the changes that have come about, it's just, I'd say heightened the need for good quality advice.
And I can tell you, and you can relate to this, when you run any questions through LLMs like ChatGPT or Claude, they're certainly helpful tools, but they get a lot of things wrong. They hallucinate, they don't source the right references. And so you don't want to necessarily 100 % rely on these tools for critical planning opportunities because I'll give you one quick example.
ChatGPT suggested that the MAGI phase out for the new SALT cap was, I think it was $500,000 for married couples filing jointly and $250,000 for single filers, which was incorrect. And so you want to like, again, most people are not going to know, well, that's incorrect.
Maybe I should prompt it and ask it where it got its information from and recommend that it only sources from the IRS. So I think that these LLM tools, just to bring that into the conversation quickly, are wonderful research tools, but they're not 100% accurate. And even the people that work at those companies would agree with that statement.
Genevieve George: Yeah, yeah, yeah, you have to exercise with caution, right? And not just take it as the final say when you get the responses there. We know tax laws change. That's just going to continue to happen. That is amazing job security for my friends in the CPA space.
But the big question around it is whether you're adapting and you're creating a strategy. So really working with your team, you mentioned it, like having a plan, doing tax planning is huge. Doing that in advance of year end is very helpful because there isn't always things that you can do after the fact where there are usually some strategies you can put in place before the year ends.
So we usually like to tell people at least by the fall, be having a conversation with your CPA and making sure, particularly if you're a small business owner, making sure that you know what the options are and what you should be doing before the end of the year.
But this has been amazing. So how can people find you and work with you, Aaron?
Aaron Hattenbach: Yes, so people can find me on my website, which is www.reportfinancial.com. I'm on LinkedIn as well, Aaron Hattenbach. And while I do help advisors like Gen leave larger institutions, what we call wire houses, like a UBS, Merrill Lynch, Morgan Stanley, and set up their own independent wealth management firms, that is really a passion project. It's not my core business.
I am a financial planner, we work with 30 families. It's a boutique practice and approach so that what Gen said, which is checking in. I wanna check in with clients monthly and make sure that they're not missing deadlines and we're doing as much advanced planning as we can do because that's the true value that we can provide.
A lot of things that advisors do have become, well, and at least in the investment management space, have become commoditized. So you really want to work with a financial planner, whether it's Gen, me, somebody with the Certified Financial Planner designation, I think certainly helps, and someone that also understands tax, but also knows that when they aren't the tax professional, they've got a good tax professional and team that they work and collaborate with. And so no one can do all of this alone.
You really want somebody with a team-based approach with the right professionals to support your planning needs.
Genevieve George: Yeah, that's wonderful. And you're you're you do have a niche of clients, right? You're primarily working with small business owners and entrepreneurs.
Aaron Hattenbach: Yeah, it's small business owners, doctors. And the reason that I work with doctors is my first client back in 2010 was a doctor. And it just happened that I started to grow the practice with more physicians, stable incomes, and a desire to save and plan for retirement.
So it's really physicians and small business owners—15 to 20 employees—one to 10 million of revenue. And I think, and Gen, you can relate to this, we think like business owners because we are business owners. And I think that doesn't just come up in the planning itself, it comes up in M&A, merger and acquisition conversations.
We can, I think, relate to being in the hot seat and having to make some really difficult decisions and knowing who to pull in because a team-based approach is what you need to be successful in this world. Whether you're a wealth advisor, a CPA, an estate planner, an entrepreneur. So yeah, small business owners and physicians are what I think are my bread and butter. And yeah, look forward to continuing to grow Rapport Financial.
Genevieve George: That's amazing. Thank you so much for being here.
That's it for today's episode of The Wealth Development Studio. Remember, financial clarity is powerful. Do you need help with your financial plan? Go to pelicanfinancialplanning.com to schedule a call with me. Until next time.
