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Dentists, Puns, and Money is a podcast focused on two things: The financial topics relevant to dentists leaving clinical practice and the stories and lessons of dentists who have already done so.
1. The stories of dentists who have transitioned from full-time clinical dentistry.
2. The financial topics that are relevant for dentists making that transition.
If you’re a dentist thinking about your exit from clinical, and you’d like to learn from the experiences of other dentists who have made that transition, be sure to subscribe to your favorite podcast app.
Host Shawn Terrell also dives deep into the many financial components of exiting dentistry, including tax reduction strategies and how to live off your assets.
And, we try to keep it light by mixing in a bad joke… or two.
Please note: Dentists, Puns, and Money was previously known as The Practice Growth Podcast until March 2022.
Shawn Terrell (00:03.608)
Dr. Bill was in his neighbor's backyard last summer enjoying a Fourth of July barbecue when his phone pinged with a new email. The email was from the Social Security Administration and it looked legit so Dr. Bill briefly scanned the email which mentioned that 90 % of Americans would no longer pay federal income tax on their Social Security benefit because of the One Big Beautiful Bill Act
which was passed earlier in the day on that 4th of July. In that moment, Dr. Bill thought that seemed like a pretty big deal. And his mind briefly raced to the idea that maybe he should start drawing social security earlier than he initially planned. Before getting the email, he had sort of thought that he would wait until he was 70 to max out his benefit over the long haul. But just as he started down this mental rabbit hole about when to start taking
Social Security, a neighbor walked over and handed him a cold drink, and his focused return to the summer holiday fund. It wasn't until a few weeks later that Dr. Bill read up on how the Big Beautiful Bill Act could potentially affect the taxes he and others would pay, or will pay, on Social Security benefits.
Shawn Terrell (01:28.952)
Hi again, welcome to Dentists, Puns and Money. I'm your host, Shawn Terrell. This podcast is brought to you by Dentist Exit Planning. At Dentist Exit Planning, we help dentists within a few years of leaving clinical practice build their financial treatment plan for their life after dentistry. So in this episode, we continue to examine the big takeaways from the One Big Beautiful Bill Act.
And today we're talking specifically about the additional tax deduction for those older than the age of 65. This episode.
Shawn Terrell (02:15.735)
So we continue to examine the big takeaways from the One Big Beautiful bill. In this episode, we're talking specifically about the additional tax deduction for those older than 65. This is one of the biggest tax breaks in the bill, and it probably affects the most people. It also seems like this deduction has probably been the biggest source of confusion, and none of this is a coincidence.
An incorrect application of this deduction is that it makes the money that people receive from Social Security tax free. That is not true. That's my analysis as well as the takeaway from many other people whose critical thinking skills I trust when it comes to financial analysis.
Shawn Terrell (03:05.921)
This deduction does effectively make Social Security tax-free for more people in the general population than before the One Big Beautiful bill was passed. For others, means that Social Security is still tax-free. This deduction does effectively make Social Security tax-free for more people in the general population than before the OBBBA was passed.
For others, it means their social security is still taxed, but not as much as before. But it does not make social security tax-free for everyone. I plan to go deeper and dive into how social security is taxed in the coming months. But for today, let's focus on the new tax deduction for those 65 and older. And I mentioned social security and its taxation because there's been, as I mentioned,
a lot of confusion about how this new deduction fits together with the taxation of Social Security.
Shawn Terrell (04:15.565)
First, the positives. This new provision provides a $6,000 tax deduction to anyone who is 65 years or older by the end of 2025. It's $6,000 per individual, not per couple, which means that couples who are both 65 and older at the end of 2025 will receive a combined $12,000 deduction if they are filing their taxes jointly.
And this 65 and older deduction is in addition to the standard deduction for everyone. What may have been forgotten is that there was already an additional deduction for those 65 and older that was on the books before the big beautiful bill was passed. And that additional standard deduction remains in effect.
Shawn Terrell (05:10.699)
So doing the math, if you take the married filing jointly standard deduction of $31,500 for 2025, and you add in the new standard deduction of $6,000 for each filer older than 65, and you tack on the $1,600 deduction for each 65-year-old married filer that was already on the books, in a situation where a couple
is filing jointly and both spouses are 65 or older by the end of 2025, that's a standard deduction of $46,000. 46. Let me try that again. So doing the math, if you take the married filing jointly standard deduction of $31,500 for 2025, and you add in the new standard deduction of $6,000 for each filer older than 65,
And you tack on the $1,600 deduction for each 65-year-old married filer that was already on the books in a situation where a couple is filing jointly and both spouses are 65 by the end of 2025. That's a standard deduction of $46,700 for 2025. It is also important to note that the $6,000 deduction per filer for anyone that's 65 and older
It's not just for those taking the standard deduction. It's also for those that itemize on their taxes. They are still eligible for this additional deduction. Now, the downsides of this deduction. Not everyone is eligible for it. It starts to phase out or get reduced on a prorated basis.
Now the downsides of
Shawn Terrell (07:07.723)
Now the downsides of this deduction. Not everyone is eligible for it. It starts to phase out or get reduced on a prorated basis once people reach a certain income level on their taxes. For married couples filing jointly, the deduction is completely phased out once $250,000 of a modified adjusted gross income is reached. So,
So if you're someone doing strategic long-term tax planning, Roth IRA conversions and tax gain harvesting are a couple examples of that, then you really need to do some analysis and be careful not to create any unintended consequences with this. An example would be deliberately realizing income in a lower tax bracket that then is...
An example would be deliberately realizing income in a lower tax bracket than is expected in the future, but also reducing or eliminating the 65 and older deduction in doing that, which would make the effective tax rate on that converted or realized higher income, which would make the effective tax rate on that realized income a lot higher than expected.
To reiterate what I've said many times on this podcast, it's not a good idea to make tax decisions.
Shawn Terrell (08:57.06)
To reiterate what I've said many times on this podcast, it's not a good idea to make tax decisions in a vacuum. Analysis of your specific situation is critical and taxes aren't any less complicated than they used to be. The other big downside of this deduction is that it's scheduled to expire at the end of 2028. Now,
future legislation could change that. And this deduction seems right for future political wrangling, call me a cynic. But as it stands, as of this recording, this deduction is temporary. So there's a four-year window to enjoy the tax savings, and also maybe to do some strategic tax planning. Again, as I just mentioned, careful analysis, strongly recommended when doing that. So to wrap it up,
At your next holiday barbecue, you get an email from a government entity, it's okay to jump to conclusions in your mind like Dr. Bill did. Just be sure to read the fine print and do some analysis of your personal financial situation once the smoke clears from the fireworks. How's that for a metaphor? If you'd like to learn more about how the OB-BBA applies to you and to your situation, we have a free checklist that we can send you.
whether you're watching this on YouTube or listening to this on a podcast app, scroll down in the show notes and look under episode resource. If you click there, we will email you our one big, beautiful bill checklist. Also, if you are a dentist leaving clinical in the next five years,
Also, if you are a dentist leaving clinical in the next few years and you are interested in a personalized consultation with Dentist Exit Planning, you can schedule a no-obligation virtual meeting with us. And to do that, you just go to DentistExit.com, which is our website, and click on free consultation at the top right hand corner of the main homepage. A reminder before I go that Dentist Exit Planning is a registered investment advisor.
Shawn Terrell (11:08.135)
and the information presented in this podcast should not be interpreted as investment, legal, tax, financial planning, or wealth management advice. It's for educational purposes only and past performance is not indicative of future results. Thanks again for watching and for listening. I am Shawn Terrell and we will talk to you again very soon.