In this episode of Retire in Texas, Darryl Lyons offers a general year-end reminder list to help listeners stay organized as they review their financial and tax-related items. As the year closes, Darryl walks through several topics that individuals and families may want to revisit with their tax or financial professionals.
He breaks the discussion into four broad areas:
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Considerations such as reviewing pay stubs, retirement distributions, and personal budgeting tools to help ensure your information is accurate.
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General guidance on contribution deadlines, RMD requirements, Roth conversion considerations, and recent legislative updates.
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An overview of options like Qualified Charitable Distributions and donor-advised funds that some people use as part of their charitable giving approach.
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Information on 529 plans, medical account deadlines, the annual gift-tax exclusion, and the new age-related deduction created under recent legislation.
Darryl also shares personal observations and real examples that illustrate how these year-end reviews can help individuals stay aware of key requirements.
This episode provides general educational information only and is not intended to provide specific investment, tax, or legal advice. Listeners should consult their tax professional, CPA, or financial advisor before making decisions related to their personal situation.
If you benefitted from today’s episode, feel free to share it with your family and friends!
Transcript:
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. And you’re listening to Retire in Texas. And if you’re looking for a place where we talk finances, but we really want us all to be collectively grounded in the way we think about money. And so, if you’re looking for something like that, you’re at the right place.
Remember, this information is general in nature only, not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. A quick commercial if you want a 15-minute consult with one of our advisors, you can go to that website, click and you’ll get a 15 minute consult. They really are wonderful people; our advisors and you won’t feel any pressure there.
They just want to see if it’s a good fit. Maybe they can give you some direction and be a thinking partner for 15 minutes. So, thanks today for listening. We are close now towards the end of the year, and I wanted to talk about some of the end of year tax stuff, even planning stuff in general, making sure that we’re all on the same page.
I mean, I can’t believe where we finished 2025. Time just goes by fast. As we all know, and as reading Ecclesiastes. And if you want perspective on life, meaningless, it’s all meaningless, is what He says. But, meaning and really, we just don’t understand the meaning. It’s peculiar. And it goes by really, really fast.
So here we are at the end of 2025. But I want you to think about maybe some planning stuff to do, before the end of the year. Warm up. Let’s get warmed up, because I am going to have to talk a little bit numbers today, which I don’t like to do a lot of, but let’s get warmed up.
Quiz. Pop quiz. What’s revenue minus expenses. What is that called? That’s called net income. Sometimes we call it profits. Number two quiz, what is a plan for future spending. What is that called. It’s called budget. I know, it feels like I’m speaking down to you, but I’m not. I promise I’ll tell you in just a second, what is a percentage profit that’s owed to the government?
What do we call that? Taxes. You know, I really try to keep things simple. I had, it dawned on me once, and that’s why I wrote the first book, Small Business, Big Pressures, because I had a CEO come to me once and he said, man, I am finding myself in a position where I’m having to understand numbers and I don’t get any of this stuff.
Can you help unpack it? And I was like, wow, you know what? Maybe some of this stuff that I take for granted is, just doesn’t translate very well to a lot of people. So, I do want to teach, and I just want to make sure that you leave this podcast and go, that made sense. So, this one’s a tricky one for me to really unpack.
So, you might have to do some digging on your own and maybe just ChatGPT some words that I might have used that are unfamiliar. But let’s talk. I’m going to do four. I’m going to break this up in four different tranches. So, the first one I’m going to talk about is just your income and deductions. So, I’m going to suggest that you review your pay stubs if you’re working right now.
And just double check before the end of the year that the numbers are right. Now, if you retired, I’d like you to double check the withholding. Maybe on your retirement distributions or any money that’s going to you just to double-check on the taxes that are being paid. Maybe take a look at the Social Security statement, look at how much is coming out for Medicare.
And just look at those things that you kind of take for granted. The really the nuances are for those that are working that have a salary that after, they get paid, they get this net income, what’s coming out, some of which are 401k contributions, are those 401k contributions exactly what you intended. I’ve had people for years not pay attention to that and realize, man, I’m not putting it as much as I thought.
So, you want to get that fixed. You also want to take a look at, you know, withholding. And now this is kind of confusing to some people, but if you have more dependents, you could check a box and say, I have more dependents. As a result, you’ll have less withholding. And then you might, as a result, get a lower tax return.
Does that makes sense? All right. Let me give you an alternative point of view. If you say I want less dependents, then you’re going to have more withholding. The IRS is going to take more, and you might get a higher tax return. So just to manage expectations, I’ve always said, and you’ve heard me say this before, that, I’ve been observant of people who have wealth and those that don’t over the years.
And I’ve noticed that people who don’t have wealth, they hyperfocus on their tax returns. That’s kind of a big player in the financial world for them. Those that do have wealth, they focus on net worth, assets minus liabilities equals net worth. So that’s food for thought. But I do want to manage expectations. If you are working on what your tax return might look like, one of the really, I think important things maybe let me say it with more authority.
One of the important things that you should do before the end of the year is just check your spending. I like to use Monarch Money. There’s a lot of different tools out there. Ramsey’s got some good stuff. But I’ve always liked Monarch Money because it’s very intuitive in terms of the tagging of the types of expenses.
It has a good memory and intelligence behind it. So, it makes it, I don’t like to do the administrative side of just continuing to tell the system how to tag H-E-B or Target or a gas station. I want it to know. So, it’s pretty good there. So I can just focus in on the data and interpreting the data for my benefit, my family’s benefit.
But check your cash flow and your spending, Monarch Money is a good way to do that. Like I said, adjusted withholdings. If your business owner. This one’s obviously important, you got to make sure you’re paying your quarterlies. Check with your CPA, make sure you’re doing that the right way. So you’re not finding yourself paying any penalties.
One time I paid penalties for overpaying, so that was stupid. Some people like to do bunching, bunching by the end of the year. By the way, not a lot of people. This is important for you to know. Not a lot of people get deductions for charitable contributions because the standard deductions are so high. So, you get the choice of either an itemized deduction or standard deduction, itemized or standard.
You get one of the two. And so most people because the standard deduction is so high, don’t get the itemized. So, meaning you don’t get your charitable deductions. So that’s interesting. So, some people this is interesting to think about. Some people avoid this dilemma by bunching their charitable deductions into one year. And so, then it becomes a big number, and it exceeds the standard deduction, bunching.
So, some people like to do bunching of itemized deductions in a specific year. That’s something you might be able to do and check with your CPA. Let’s go to the second tranche here which is namely and these overlap a little bit, namely the retirement space and tax, you know, kind of tax advantaged accounts. Make sure that you pay attention to those IRA and 401k contributions.
The IRA contributions can go into April of next year. So that’s cool April 15th. But your 401k those have all got to be done by December. You also have some catch up contributions to consider. So that’s pretty cool. They came up with this thing called a, it was a part of the Secure Act 2.0.
It’s called a super catch-up for those that are aged 60. Just as an aside, Trump, wanted to give a tax deduction on Social Security, but there are still legislative hurdles to be able to mess with Social Security. So instead of giving seniors a tax deduction or reducing the Social Security taxes or I don’t know how you want to frame that, he created this, like a super catch-up provision.
You know what? I’m getting ahead of myself. He did that, but I’m going to talk about something else in just a minute. But they are related to Social Security. So, I kind of fumbled there. But, there’s some. Well, let me mention it. Excuse me for bouncing around. There’s a senior credit that I was really referring to, so I was getting across in my head, there’s a senior credit that was the credit available for those that are age 65 or older.
So that’s pretty cool. But at the same time, I was also talking about that super catch up provision. So, I’m talking about two different things in OB3, the one big beautiful bill, OB3. If you’re aged 65 or older, you get an annual deduction of $6,000. It’s a senior bonus. That was the way Trump got around the Social Security hurdles that he came into.
But then there’s also this thing called a super catch-up provision. That’s for those who are 60. They can put a little bit more into their 401k. So sorry to confuse you there. But those are two different things. Both benefits. Now generally speaking the age 60 super-catch-up are for those that are working. But 65 is for anyone.
So, it’s pretty cool. Roth conversions. I think you have got to start thinking about that before the end of the year. Very important. Check with your advisor on that. I feel like financial advisors are not to say I love my CPA friends, but better at modeling those out than CPAs. The CPAs will double check the work and making sure that the withholding is accurate and but the financial advisors’ responsibility is saying, okay, if we convert some of this, what does that do to your future self?
Does that benefit your future self? So, there’s some modeling that needs to be done. But you know, you’ve got some time to meet with your advisor before the end of the year. So, make sure you do that and not miss that opportunity to do some conversions. Qualified charitable distributions are, I think, important for you to consider for the end of the year.
That’s, so when you have an IRA or 401k, you’re required to take money out. So you have to take money out at 70.5, and I was just kind of translating a couple of thoughts that I wanted to throw out there, but let me keep it focused on this one specific qualified charitable distribution because I think it’s important, you can, instead of taking that money, paying taxes on that qualified, or on an RMD, you take the money out, you pay taxes on it and then you donate it to charity.
A better way to do that is a qualified charitable distribution, where the money skips you and goes directly to the charity. That’s a tax saving strategy that you have to consider. I want to reinforce that qualified charitable distribution. If you have required minimum distributions and you are a giver, if you give to charity, you have to consider qualified charitable distribution.
I want you to check with your advisor on that. These are all strategies that I’m giving you a high-level overview of, but I want to touch on some of them that I think are important before the end of the year, we had one case of somebody who had missed their required minimum distribution. Jim and Carol, I’m changing the names, but, we’ll say they’re from Kerrville, and they missed out.
They just got busy, by the way. So, I’ve had to deal with this before because we’ve fumbled. We have much better systems on our RMDs. But there was a time where, you know, we fumbled and it, you know, the financial advisor and the CPAs, they do play a role in clients lives.
But ultimately the client is responsible for the RMD legally. And we feel the sense of responsibility as advisors to help the clients. We set up pretty good systems to catch it. Not perfect, but been pretty good over the years. But this was early in our iteration of PAX. Missed the required minimum distribution the client did, and we didn’t have the systems to let them know.
And so, under the previous rules, the penalty was 50%. You had to pay a 50% penalty. Can you believe that, under Secure Act 2.0 it’s 25%. But if you get it corrected quickly, it’s like 10%. I mean, these are huge penalties. This person had an RMD of $18,000. So, I mean you imagine that’s a $9,000 penalty.
So, you got to get these RMDs done. It’s kind of a dumb thing, but it’s a system in which the government wants people to take money out of accounts and start taxing it. So, it is what it is. You can apply for a waiver of the penalty. It’s form 5329. But make sure you get your RMDs.
RMD stands for really must do it. So that’s important before the end of the year. So, make sure you get your RMDs. If you’re not sure, check with your advisors. Third tranche here. Let’s talk about charity, which we touched on a little bit, the qualified charitable distribution, instead of doing the RMDs that go to you, and then you pay it into the charity, you do the qualified charitable distribution directly to charity.
So, I love that love, love, love the qualified charitable distributions, also love donor advised funds. It’s tough to set up a donor advised fund before the end of the year, but not impossible. So, any of these things that you’re doing, please don’t wait to like the last week because it’s hard to set things up. But if you want to get a tax deduction in this year.
So, some people are like, I want to get a tax deduction this year, and I know I can do a charitable gift, but I don’t know which charity to give it to. What you do, is you establish a donor advised fund and you put it in there, and that gives you a tax deduction immediately.
And then you could figure out who to give it to later. So that’s a pretty cool strategy is called a donor advised fund. Often my personal donor advised funds through National Christian Foundation. But you can use a bunch of them. I mean, Charles Schwab has some, Fidelity has some. I’ve done shows on that too. Also the thing like if you have a bunch of Nvidia stock and you don’t want to pay capital gains by selling it, you can just give the stock to charity and get a really nice deduction.
So that’s a strategy too. So those are a couple things that you got to do before the end of the year. Keep good records of all this stuff of course. And work with your CPA on all of it. I think giving is kind of understated. You hear me talk about this. If you don’t know who to give it to.
I just did a podcast on the bereavement center. I just did one, that, you know, helps with human trafficking. I mean, there’s, just listen to my previous podcast in the last couple weeks, some, some really important ministries that are helping a lot of people. I serve both domestic and internationally, but my church is my go-to person or go to institution.
And recently, you know, with the, we have a lot of military and civil service in our community. So I was, I felt bad for them not being able to, you know, pay their bills while the government was shut down. So, me and my wife made a contribution to our church and put it in the benevolence fund that can be used, for those families just to kind of bridge the gap.
We actually took it out of our donor advised fund. We already had the money set aside and then issued it to the church and tagged it Benevolence Fund. And it was used to help those people. So that’s kind of some of the cool things that you can do when you set up a donor advised fund and you’re thoughtful about your giving.
The last segment I want to talk about, this is just, you know, taxes, just family and education kind of tax stuff. Taxes are just really designed to control behavior. Aren’t they, you think about in the 1820s, Missouri imposed an annual tax on unmarried men aged 21 through 50 to encourage men to get married. So, if you weren’t married, you were taxed to try to encourage you to get married.
In Japan in 2008, I think it’s called, I think it’s pronounced Metabo Law. And so if you had a waist larger than 35.5, you were giving dietary advice. But if you didn’t stick to the advice, you were forced, fed a pun intended. A bigger tax bill. So just keep in mind a tax is ultimately designed to control, otherwise it just, you know, there’s simpler ways to get the revenue.
We talk about that another time. A fair tax, a flat tax. But this tax system that we have is designed to control behavior. 529 is an interesting family strategy, but I wanted to make sure that, you know, the 529 does not get you a federal income tax deduction. People ask that all the time, but it does give you a state income tax deduction.
But Texas doesn’t have a state income tax. But if you’re in another state, make sure you’re using a 529. They get you that state income tax deduction. If you have a medical savings account, an FSA or some type of account that’s used for medical expenses, a lot of times it’s a use it or lose it programs to double check on that.
That’s not the HSAs but the other ones through your employer. So, you got to spend that money before the end of the year. Some people have estate tax issues, which is a good problem to have. And in that case, you want to distribute money to your kids, and you can do that each year without filing form 709.
And that’s 18,000 a year. If you have a big estate, you want to gift to kids, you don’t get the deduction for the gift, but you don’t have to worry about filing a form if you do it under the gift tax exclusion. And then again, I touched on this, got ahead of myself. But under the OB3, the one big beautiful bill, age 65.
Don’t forget, you get an annual deduction of $6,000. Again, that was designed originally to be a Social Security kicker to help seniors, but can’t do it that way. So, it’s just an annual deduction of 6000. It’s a senior bonus. It does have some income limits on it. So, keep that in mind, especially if you convert. This is a little nuanced, but if you make a Roth conversion or you’re generating some other income in a specific year, make sure you’re paying attention to how that might impact that senior bonus, which this is new.
So, I could definitely see those things being overlooked if you’re not careful about it. So, lots to talk about. I mean, I hammered out a lot of like, to me, fun stuff. I still have more. I had more to cover, but I’m going to I’m going to I’m going to conclude there because I think that’s a good amount of stuff for you guys to noodle on.
I want you to maybe capture a few, check with your advisor, check with your CPA, make sure you don’t start trying to, make these things happen. The last week of the year. You’ve got a month here. And I hope this helps you. I hope it helps you think about your money, very specifically and with detail. And remember, as always, you think different when you think long term. Have a great day.
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