What are the four new financial changes families and retirees should know about?
Several new programs and policy updates have quietly launched that could impact children, seniors, private school families, and retirees – but most people haven’t heard the details yet.
Some involve compounding investment accounts for kids. Others affect IRA withdrawals after age 65. And a few provide direct education funding opportunities in Texas that families can apply for today.
In this episode of Retire in Texas, Darryl Lyons breaks down four recent financial changes, including the new Trump Accounts for children, the $6,000 senior deduction for retirees, the $1,700 education tax credit, and the Texas Education Freedom Account program.
He explains how compounding interest can potentially transform consistent contributions into meaningful long-term savings, why retirees must carefully manage IRA withdrawals to avoid losing deductions, and how families can apply for education-related credits and funding before application windows close.
You’ll learn:
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How the new Trump Accounts work and what happens when a child turns 18.
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Why the senior deduction can be lost if IRA withdrawals aren’t managed properly.
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How the $1,700 education tax credit functions and who can use it.
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What the Texas Education Freedom Account provides – including funding levels for private school, homeschool, and students with disabilities.
This episode isn’t about politics – it’s about understanding the rules and knowing how to apply them strategically within your own financial plan.
If you’d like to see how these changes affect your personal situation, visit PAXFinancialGroup.com and schedule a conversation with an advisor.
Benefiting from the show? We’d appreciate it if you left a review on your favorite podcast platform. Your feedback helps more families think long term and make better money decisions.
Transcript:
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group, and you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax or legal advice. Visit PAXFinancialGroup.com for more information. I believe good money decisions happen in a conversation, and so we’re going to have a conversation today. And if you want to have a conversation with an advisor here, go to the Connect With us Now button on PAXFinancialGroup.com, a 15-minute consultation.
They are, the advisors here have the heart of a teacher. So, I think you’ll really appreciate just seeing if it’s a good fit. I want to talk about four recent tax changes, two of which are irrelevant if you don’t live in Texas. I know a lot of you live in Texas or don’t live in Texas, and many of you guys.
But so, two are very important for non-Texans or for an American in general, and two are relevant for Texans. So, but they’re really interesting regardless. So, stay with me I think it’s worth, in fact I would suggest to you that probably whatever state you’re in you might want to check it out on your own. So, these are brand new hot off the press.
Like you might not even heard about these things before. You might have them, you might not know what they are. So, I’m going to give you what they are. And then of course, my opinion. And just like everyone else, I’m an expert in my own opinion. But the first one is a Trump account. So, there’s four of them.
There’s, this is the Trump accounts. I don’t know if you’ve heard of the Trump accounts and you’re probably saying, oh, great, you create an account. You named it Trump. Of course, he names it Trump. Right. But what are you expecting? But don’t get all squirrely about who created this or whose name is on it.
This is really cool. The only reason you wouldn’t like it is because you don’t understand compounding interest. I’ve been studying compounding interest since 1995, when I went to Saint Mary’s University and started to explore compounding interest. Actually, I was working at a bank of Bandera Woodlawn, in San Antonio, Texas, primarily Spanish speaking community abroad, and I went to check in.
So, there were and so that’s where I learned about compounding. And I had a little HB1-2B and just really understood the power of it. And it’s not only understanding it, but also doing it and doing it consistently. So, there’s a lot of elements to compounding, but if you don’t understand compounding, you’ll never appreciate the Trump accounts.
If you understand compounding the Trump accounts are amazing. So, what they are is you can put, if you’re mom, dad, anybody can put $5,000 in per child, even an employer per year. And they can invest it now. It has to be invested in a specific way. It can only be invested in very low-cost investment portfolios that mimic the S&P 500, something we should have done with Social Security a long time ago.
That’s a different podcast. But the Trump accounts are pretty amazing, in fact. So, you go you go to TrumpAccounts.gov learn more. So, I just want to let you know that there’s an example on there. There’s actually an example of somebody put in $5,000 per year for their kid. And they let it compound over 18 years. This is their website TrumpAccounts.gov.
It says it would be worth 271,000, 5000 per year. It would be worth 271,000. Now those estimates are for illustration purposes only. The actual results may differ. It says all that on the website, but it’s crazy that that’s a potential outcome for an 18-year-old. Can you imagine an 18-year-old? So, this just started this year.
So, this year here’s something interesting that’s happening. The US Treasury wants to kickstart these programs. So, they’re putting in $1,000, $1,000 for a child who is born 25, 26, 27, 28 if you’re born in those windows, then there’s going to be $1,000 put in that account for you. And you just have to sign up for it.
You can sign up at, like I said, TrumpAccounts.gov. There’s also a tax form, IRS form. 45-47. So, when you file your return you may want to look for that. But there’s a specific Kickstarter program that the US Treasury is putting in a thousand bucks for kids born between 2025 and 2028. So that’s just a Kickstarter, $1,000.
And then Michael Dell and his wife come along and they did another Kickstarter. I call it, they call it pilots, not Kickstarter, but they’re putting in $250 for anyone that lives in a zip code. That’s in specific zip codes where the median household income is less than 150,000. So, they’re putting in money. And if you weren’t born in that window that I mentioned earlier, if you’re born outside that 25-28 window under 18.
So that’s 250 dollars from Michael Dell. If you have kids under 18, $1,000 if they were born in the next around, you know, 25 to 28 and the recent history and then the rest of the money is on your own. So that’s kind of on with air quotes, free money from Michael Dell and the Treasury. The rest of it you have to put on your own and you should really do it.
It’s really fascinating how this works. And the last thing I want to mention, this is the kicker. So, this is why I think it’s cool. So, all of that’s great. But here’s the kicker, I’m really actually kind of excited about this when a kid turns 18, it converts. And it’s a whole, I’ve read the bill.
It converts to an IRA, a traditional IRA. So, like, it just flips over. So 18, let’s say you use this example of $271,000. It flips over to traditional IRA. But here’s the kicker. You can convert that traditional IRA to a Roth. And if you don’t know, Roths are completely tax free. Now, an 18-year-old is not going to have a lot of income.
So converting it to a Roth and keeping it a little strategy here, but you keep it in a low bracket, so you don’t convert the whole thing. Every year you convert some to make sure you don’t pay taxes on the conversion are very little small, very small taxes. But I don’t think it’s going to be an impossible task with a good advisor and some good strategy to convert this bucket of money in the traditional that came from the Trump accounts, from a traditional to a Roth, and then from 18 to age 59 and a half it’s all tax free.
I don’t know if they’re going to change that, but it’s crazy, crazy cool. So, I wanted to let you know about that, Trump accounts. Like I said, if you don’t get compounding, then I’m sorry I can’t help you, but compounding makes this thing just crazy awesome. And, frankly, a game changer for a lot of people’s lives.
Really. I really, really mean that. So. Okay, that’s actually my most exciting one for me personally. The other three are awesome. I guess you judge my enthusiasm. I guess the next one’s cool. It’s called the senior deduction. So, this is really, this really only applies to you if you’re 65, but make sure your parents know about it.
If you’re not 65. And it’s not like something you have to do. But there is a problem if you don’t pay attention. And so, for example, I was working with somebody and they wanted to take money out of their IRA. They’re over 65. They want to take money out of out of their IRA. And when I looked at the math, if they took too much out of their IRA, they would lose this senior deduction, the senior deduction was, given in the one big beautiful bill, OB3.
And it was done because they couldn’t modify Social Security. There was a good chunk of people who are living off Social Security that’s subject to taxes. You know, if you have certain income, 50% of your Social Security can be taxed, 85% of your Social Security can be taxed.
So rather than changing up Social Security, because I guess the legislative process is different there. They came up with the senior deduction. And it’s about what it’s not about. It is six grand per person over age 65. So, 12,000. But it phases out if you make too much money. The reason I want to tell you about that is that you’ve got to manage your distributions.
So, if you have withdrawals from your portfolio, you need to make sure you know how you’re doing your withdrawals. You can mess it up and lose the deduction. And also, if you decide you want to convert to a Roth IRA, you’ve got to watch out. Because if you do too much, you might lose the deduction. So not thinking about how money comes out of your IRAs in the next few years, I think this is only going to 2028.
And then we’ll see if it gets extended. I’m pretty sure that’s right. But you got to make sure you don’t trigger too much income or you lose this. I think a pretty nice deduction, a $6,000 deduction. And this $6,000 deduction stacks upon your standard deduction. It stacks on other deductions. So, it’s not that there’s a tradeoff here where you get one deduction not the other.
No, this is 6000. So, I don’t want you to lose the 6000 by not thinking about your withdrawals from your IRAs or conversions to Roths. If you do that wrong, you lose it. So, I don’t want that to happen for you. Now let’s pivot to families. We’re talking about individuals. Trump accounts for kids. Senior deduction for seniors.
Let’s move to individuals. And actually, I’m sorry move to families. And actually, let’s talk the education freedom tax credit. This one’s cool too. This one again is a Texas thing. But it might work. There might be some in your state. So, check this out too. It’s $1,700 tax credit. Like one that you don’t think about.
And credits are better than deductions by the way. Deductions can get phased out and all that stuff. Credit is like a direct like here. Your taxes go down by 1700 bucks. So really cool. Everyone should, you know, should do it. There’s not an income limit, but how do you do it? Where do you go to do it?
You have to go to. If you go to, if you have, it’s for education. Right. So you need to find a school typically, and, private school, you know, I’m on the board at New Braunfels Christian Academy, and they’re going to set up the accounts to be able to accept the $1,700. And I don’t know the administrative side of it yet, but we do know that it has to be, it has to go to a specifically called a qualified scholarship granting organization.
So not an insurmountable task for those that are in the education space from a private perspective. So, if you have any private schools that you’re a fan of, you can make a $1,700 donation to their scholarship fund. I’m paraphrasing here to their scholarship fund. And if you do it right, you got to make sure it’s done right.
It can’t be, just it has to be specific. And again, these institutions will be able to help you. You get $1,700 credit and it’s just a real nice, I mean, really clean credit. And I think all the grandparents should go around and just write checks to these scholarship funds to be able to get the credit off their taxes.
And then at the same time, these scholarships are going to be used for a lot of kids to be able to get education in the private school space. So just kind of an easy credit if done the right way. And one that I think everyone should take advantage of. So pretty simple. 1700 bucks for a scholarship again, has to be specific.
Specific type of institution, qualified scholarship granting organization. But again, any of the private schools here in the community in Texas know about it already. The last one is amazing. The fourth one I want to tell you about. It’s another Texas thing. It’s called the Education Freedom account. You’ve heard a lot about school choices. This one is certainly a school choice thing that came out from the state of Texas.
And this is just a wonderful opportunity for people to choose their schools. Again, there’s a lot of debate on this. I’m pretty good. I’d say I’m an unbiased person. I have opinions, but I’ve had a kid at home, I’ve had a kid home schooled, have had a kid in private school, and I’ve had a kid in public school.
So, I know that there’s merits in all of them. I hear you, I have a lot of friends all across the board and you can talk, I guess, from one perspective politically about the reorganization of dollars. I don’t think I have enough information to give you an opinion on. Is it a good use of money? All I am going to do is tell you how to take advantage of it.
If you want to take advantage of it. I’m not here to talk about the fiscal responsibility of the federal government or the state. I’ve done that before, but not now. Now I’m saying, here’s the rules of the game and here’s how you play. So, at some point you’ve got to just stop whining. I say this and I’m saying this to myself about, you know what?
You know how the government should spend money and vote a certain way. And then other times you say, okay, what’s the rules? And how do I play by the rules? And so that’s what I’m trying to tell you today, is that if you go to private school or you want to go to private school, this is just a wonderful opportunity for you to apply to receive a little over $10,000 to help offset the cost of private school.
Now, a lot of private schools cost more than $10,000. So, you still have to come out of pocket. But if you apply for this and again, I’ll send a link to you, you can get up to, oh, I say up to, its $10,474 for private school, about $2,000 for homeschool. If your child has a disability. And that’s autism.
That’s a learning disability, you can get it up to 30,000. And so now if you want to if you want to pause for just a second, you can see the value of being able, if you have a child with a disability, being able to use these funds to select the school that would be able to give them the attention they need just for disability alone.
Children with disability. And I’ve actually had exposure to this, very intimately in the public school system. There are some challenges. It’s not insurmountable, but there’s some challenges. Having school choice for a child with a disability is really a fascinating opportunity for them to find the school that best accommodates their kid. And so, this is 30,000 they could use.
You just have to apply again. I’ll put a link on the show notes, education freedom accounts. It does take a little work. There’s an application process, but it the window is not forever. Let me see if I’ve got the window here. It’s in March. It ends in March. So, you’ve got a, don’t have it in front of me.
I’m sorry, but don’t wait. Go on there and apply. Make sure you apply for that. And the way they’re going to assign. So, they got a big bucket of money, it’s $1 billion. And the way they’re going to apply that money is they’re first going to go to the kids with disabilities, and then they’re going to go to kids that have a certain income level.
It’s a percentage of the poverty level, 500%, then 200%. And then they’re going to go another percentage of the poverty level and then everyone else. So really anyone can apply for this, and they expect about, I guess, about 90,000 students to get this money. It’s all based on I mean, that’s a roundabout number.
But here’s the crazy thing. It’s just launched, I think, last week. So, this is 2/12. So last week it just launched and already 46,000 students have applied for this. That was a record. So, regardless of your income level, you should probably take the time again, go online and understand that there’s some you got to look at your tax return.
There’s some verification things, but do apply. I think it’s worth it. Just know that there’s an order in how this money is going to be allocated. It’s going to start with the disabilities. Then it’s going to go to certain income levels. And then if there’s anything left over, then that latter group will get, you know, some money for that.
So, these are all really cool. So, forget the politics that exist. These are things that you need to be doing with your money. And you need to be looking at these details and paying attention because people with money find these little things and they’re scooping up pennies and all of a sudden the pennies turn into dollars.
So, in summary, we want to make sure that, you know, about these Trump accounts, whether you’re a grandparent or a parent, you need to know about the Trump accounts. Second, you need to, if you’re over 65, make sure you pay attention to that retirement, that senior deduction that was in the one big beautiful bill.
Third, that tax credit of 1700 bucks for scholarships for private schools. Really clean, really easy. Try to find a school, give them some money for a scholarship. I think that’s a great credit. We like credits. Deductions are good, but really like credits. And then finally, this education freedom account, this education freedom. I keep messing it up because they’re different, but yeah.
Education freedom accounts. Still learning all those nuance names, but yeah, if you have a child that you desire to go to private school, this is a great window of opportunity to get some money to be able to go to a private school. And of course, it’s a pitch for me. I’m on the board for New Braunfels Christian Academy.
So, if you haven’t seen that school, it’s a gem. I’m proud to be a part of it, so. Hey, I covered a lot, and I appreciate you hanging with me. I hope this was educational, and it was a lot of content. I didn’t want to give you all the information because you can look up a lot of this stuff.
But I did want to point you in the right direction so you can start digging in a little bit. Check with one of the advisors here to see how it affects your overall plan. And remember, you think different when you think long term. Have a great day.
Resources:
https://www.irs.gov/publications/p554
https://educationfreedom.texas.gov
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