SALT Cap Raised, Clean Energy Credits Ending: Adapt Your Finances to the “Big, Beautiful Bill”

Summary

NerdWallet's Smart Money Podcast: Detailed Summary

Episode Title: SALT Cap Raised, Clean Energy Credits Ending: Adapt Your Finances to the “Big, Beautiful Bill”
Release Date: July 17, 2025
Hosts: Sean Pyles, CFP®, Elizabeth Ayoola, and Ana Helhoski

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Introduction

In this episode of NerdWallet's Smart Money Podcast, hosts Sean Pyles and Elizabeth Ayola delve into the intricacies of the newly passed federal budget bill, colloquially dubbed the "Big, Beautiful Bill." This comprehensive legislation introduces significant changes to tax policies, social programs, and financial regulations that could have profound impacts on households across the nation. Joining the discussion is Anna Helhoski, who provides expert insights into the bill’s various components.

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Tax Updates

1. SALT Deduction Changes

One of the most notable changes in the bill pertains to the State and Local Tax (SALT) deduction. Previously capped at $10,000 under the 2017 Tax Cuts and Jobs Act, the new legislation temporarily raises this cap to $40,000 for the 2025 tax year. However, this increase is set to revert to the $10,000 limit by 2029.

Ana Helhoski [03:59]: "The new bill increases the SALT cap to $40,000 beginning in the 2025 filing year, but it's only going to be temporary."

This adjustment primarily benefits taxpayers who itemize deductions, offering increased relief for higher-income households in states with higher taxes.

2. Child Tax Credit Enhancement

The bill permanently elevates the child tax credit to $2,200 starting in 2026, providing additional support to families with children.

Ana Helhoski [04:40]: "The increased amount will be permanent beginning with $2,200 in 2026."

3. New Deductions Introduced

Several new deductions have been introduced, which are available without the need to itemize:

• No Tax on Tips: Taxpayers can deduct up to $25,000 in tipped income from federal taxes.
• No Tax on Overtime: Up to $12,500 can be deducted against overtime pay.
• Car Loan Interest Deduction: A new deduction allows taxpayers to write off up to $10,000 a year in interest on new car loans for vehicles purchased after December 31, 2024.

Sean Pyles [05:41]: "There is a deduction for car loan interest. Taxpayers can write off up to $10,000 a year in interest on new loans on cars bought after December 31, 2024."

These deductions are temporary, effective from 2025 through 2028, and come with specific eligibility requirements, such as the vehicles being new and assembled in the U.S.

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Clean Energy Tax Credits Ending

Elizabeth Ayola highlights significant changes affecting households invested in clean energy:

1. Electric Vehicle (EV) Tax Credit

The EV tax credit, which offers up to $7,500 for qualifying new electric vehicles and $4,000 for used models, will cease after September 30, 2025.

Elizabeth Ayola [06:35]: "The EV tax credit will now end on September 30, 2025."

2. Home Clean Energy Credits

Tax credits for home solar installations and energy-efficient home improvements, such as heat pumps and solar panels, will also conclude after this year.

Elizabeth Ayola [06:35]: "Clean energy tax credits for homeowners who make green energy changes to their homes will end after this year."

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Introduction of "Trump Accounts"

The bill introduces "Trump accounts," a new savings mechanism aimed at helping families save for their children's future:

• Automatic Enrollment: Babies born between January 1, 2025, and the end of 2028 are automatically enrolled.
• Initial Funding: Each account is seeded with $1,000.
• Contribution Limits: Annual contributions are capped at $5,000 from individuals and $2,500 from employers, totaling up to $7,500 per year.
• Withdrawal Restrictions: Funds cannot be accessed until the child turns 18.

Ana Helhoski [06:35]: "The federal government plans to seed each account with a thousand dollars."

Though beneficial, experts like Sean Pyles caution that these accounts should complement, not replace, other savings vehicles like taxable brokerage accounts or 529 plans.

Sean Pyles [07:19]: "If I could get a thousand bucks for a kid, I don't have a kid, but if I did, I would love a thousand dollars for them."

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Cuts to Social Programs

The "Big, Beautiful Bill" allocates $930 billion in cuts over the next decade to key social safety net programs, including Medicaid, the Affordable Care Act (ACA), and the Supplemental Nutrition Assistance Program (SNAP).

1. Medicaid Adjustments

Starting before December 31, 2026, states will implement work requirements for Medicaid eligibility:

• Requirements: Non-disabled recipients must work, volunteer, receive training, or attend school for at least 80 hours a month.
• Exemptions: Certain groups, like parents of young children, may qualify for exemptions.
• Impact: Historical attempts, such as Arkansas’s 2018-2019 work requirements, resulted in significant coverage loss without meaningful employment gains.

Ana Helhoski [08:05]: "The bill makes it more difficult for people to stay on Medicaid."

2. SNAP (Food Assistance) Reductions

The bill tightens eligibility for SNAP, introducing work requirements for able-bodied recipients aged 18 to 64 and reducing benefits by up to $230 million over ten years starting in 2028.

Sean Pyles [09:42]: "The bill tightens eligibility for SNAP and shifts some costs onto states."

3. Affordable Care Act (ACA) Changes

The ACA will undergo reforms that could increase marketplace premiums by 25% to 100%, potentially leaving an additional 4.2 million people uninsured by 2034.

Elizabeth Ayola [10:42]: "Marketplace premiums could spike by anywhere from 25% to 100%, making health insurance prohibitively expensive."

4. Consumer Financial Protection Bureau (CFPB) Funding Cuts

The CFPB’s funding is halved, limiting its ability to protect consumers and oversee the financial industry effectively.

Ana Helhoski [11:13]: "Funding for the CFPB was cut in half by the bill."

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Student Loan Policy Changes

Significant adjustments to federal student loan programs aim to reduce cost burdens but may limit access to higher education:

• Income-Driven Repayment Plans: Current plans will expire on July 1, 2028, to be replaced by the Repayment Assistance Program (RAP) in 2026, introducing a $10 minimum monthly payment and extending forgiveness timelines to 30 years.
• Graduate and Parent PLUS Loans: Funding for Graduate PLUS loans ends on July 1, 2026. The lifetime borrowing cap is set at $138,500, with Parent PLUS loans limited to $65,000 annually and a $20,000 yearly cap per student.

Ana Helhoski [13:05]: "People won't necessarily be able to get those advanced degrees because they're not going to be able to afford it."

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Economic Implications of the Bill

Beyond immediate tax and benefit changes, the bill addresses overarching economic factors:

• Debt Ceiling Increase: The bill raises the debt ceiling by $5 trillion, preventing a potential default.
• National Debt Expansion: Total costs add approximately $3 trillion to the national debt over the next decade, exacerbating the existing $36 trillion debt.
• Defense and Security Funding: Allocates $1 trillion towards defense, border security, and immigration enforcement, including $45 billion each for the border wall and immigration initiatives.

Ana Helhoski [14:07]: "The bill adds some $3 trillion to the national debt over the next decade."

While tax cuts may spur short-term economic growth, the long-term impact includes a worsening national debt and adverse effects on lower-income households.

Elizabeth Renter [14:07]: "The bill might juice short term growth, but it will also worsen the national debt problem and hurt lower income households."

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Listener Q&A: Saving on Disability

Listener's Question:
A 35-year-old female, formerly an athlete and personal trainer, has transitioned to disability. She grapples with grief, financial uncertainty, and is considering starting a nonprofit. She seeks advice on saving while on disability and whether it's feasible near the poverty line.

Expert Response:
Kate Ashford, NerdWallet's Head of Multimedia Content, provides comprehensive insights into managing finances while on disability:

1. Understanding Disability Benefits

• Social Security Disability Insurance (SSDI): Provides income to individuals unable to work due to a qualifying disability, typically around $1,500 monthly, though it can reach up to $4,018.
• Supplemental Security Income (SSI): Offers need-based assistance with stricter income and asset limits ($2,000 in countable assets).

Kate Ashford [20:18]: "People receiving these benefits can have a savings account and there are no limits to how much money is in it."

2. Saving Strategies on Limited Income

• Savings Accounts: While there are no limits on savings, low income makes regular saving challenging.
• Investing: Interest, dividends, and capital gains do not count toward income limits, allowing for potential growth without affecting benefits. However, consistent investing is difficult with limited funds.

3. Starting a Nonprofit While on SSDI

• Earnings Constraints: SSDI benefits can be jeopardized if monthly earnings exceed approximately $1,200 to $1,600.
• Value Assessment: The SSA evaluates work based on the value provided versus compensation. Significant involvement may lead to benefit reduction or termination.

Kate Ashford [22:02]: "It's probably a good idea to consult a professional like a financial advisor or an attorney if you're pondering these sorts of decisions."

4. Coping with Emotional Challenges

• Support Systems: Leaning on loved ones for emotional support is crucial.
• Therapy: Professional counseling can aid in navigating grief and loss of former career identity.

Sean Pyles [24:02]: "Nothing beats a good therapist, too."

5. Building Financial Guardrails

• Disability Insurance: Advocated as essential for income protection. Covers both short-term and long-term disabilities with varying coverage based on policies.
• Emergency Funds: Recommended to have three to six months of living expenses to bridge gaps before benefits commence.

Kate Ashford [25:40]: "It's really important to make sure you have an emergency fund with at least three to six months of living expenses in it."

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Conclusion

The "Big, Beautiful Bill" introduces a mix of tax benefits and significant cuts to social programs, reshaping the financial landscape for many Americans. While certain provisions offer immediate financial relief, particularly for higher-income households and those invested in clean energy, the substantial reductions in Medicaid, SNAP, and ACA support raise concerns about accessibility and affordability of essential services. Additionally, changes to student loan policies and the introduction of new savings accounts like the "Trump accounts" present both opportunities and challenges.

For individuals on disability, the episode underscores the importance of understanding the nuances of SSDI and SSI benefits, exploring saving and investment strategies within the constraints of these programs, and the critical role of support systems and professional guidance in navigating financial and emotional transitions.

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Notable Quotes:

• Ana Helhoski [03:59]: "The new bill increases the SALT cap to $40,000 beginning in the 2025 filing year, but it's only going to be temporary."
• Elizabeth Ayola [06:35]: "Clean energy tax credits for homeowners who make green energy changes to their homes will end after this year."
• Sean Pyles [07:19]: "Don't rely on this solely for all of your retirement and college savings plans needs for your child. But hey, get it if you can."
• Elizabeth Ayola [10:42]: "Marketplace premiums could spike by anywhere from 25% to 100%, making health insurance prohibitively expensive."
• Kate Ashford [22:50]: "You can't buy disability insurance once you are disabled, or at least not for the condition that's disabling you."

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Additional Resources:

• Disability Insurance: Explore options through employers or insurance brokers to secure short-term and long-term coverage.
• Tax Planning: Consult with financial advisors to maximize benefits from new deductions and credits.
• Mental Health Support: Utilize services like Rula for affordable mental health care, as sponsored in the episode.

For more personalized advice, listeners are encouraged to reach out via voicemail at 901-730-6373 or email at [e-mail].

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This summary is intended for informational purposes and does not constitute financial or legal advice. Please consult with a professional advisor for personalized guidance.

Transcript

[Sean Pyles]

Today's episode is sponsored by Dell. Let's talk about the new Dell AI PC powered by the Intel Core Ultra processor. It's not just an AI computer. It's a computer built for AI. That means it's built to help do your busy work for you so you can fast forward through editing images, designing presentations, generating code, debugging code, categorizing your financial transactions, running lots of apps without lag, creating live translations and captions, summarizing meeting notes, extending battery life, enhancing security, finding that file you are looking for, organizing your receipts, managing your schedule, meeting your deadlines, drafting financial summaries, responding to Cody's long emails, leaving all the time in the world for more you time and the things that you actually want to do. No offense, Cody. Get A new Dell AI PC starting at [e-mail] AI PC that's Dell.com AI PC how those ahead? Stay ahead. A big budget bill passed Congress and the President signed it. Its beauty may be in the eye of the beholder, but it includes a lot of changes to the federal government's spending priorities, changes that could affect your finances. So today we'll run it all down for you.

[Elizabeth Ayola]

Welcome to NerdWallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerd. I'm Elizabeth Ayola.

[Sean Pyles]

And I'm Sean Pyles. Later this episode, we'll be answering a listener's question about how to save when you're on disability and what we should all know about disability insurance. But first, our weekly Money News roundup, where we break down the latest in the world of finance to help you be smarter with your money.

[Elizabeth Ayola]

In a moment, our news colleague Anna Helhoski will join us to talk about the recent budget bill that passed in Washington. But first, Sean, we've got an update to a story we covered a few months ago where we explained a new federal rule. It was designed to help you cancel subscriptions to everything from newsletters to streaming services and beyond.

[Sean Pyles]

This was called the Click to Cancel rule, and it was implemented back in October by the ftc, the Federal Trade Commission. It was designed to make it just as easy to cancel a subscription as to sign up for one, you know, with a click of your mouse. Some companies made it way more difficult. You'd have to call or jump through other hoops. It was supposed to take effect this week, but now that's not happening.

[Elizabeth Ayola]

The 8th Circuit Court of Appeals vacated the rules, saying that the FTC didn't follow the right procedures in making it. So it's back to those phone calls and hoops and more clicks.

[Sean Pyles]

Great. All right. Well, let's get to what is officially called the one big beautiful Bill Act, a sprawling federal budget that clocked in at nearly 900 pages. From tax cuts and credits to safety net rollbacks, we can't get to everything. So we're going to highlight what matters most to households. And Ana Hillhosky is here with us. Ana, let's start with taxes. What's staying, what's changing and who's going to benefit.

[Ana Helhoski]

And those are all pretty good questions, Sean. And speaking of, we can't get to everything, There was about 70 tax provisions in this budget and they added up to $4.5 trillion in total cuts over 10 years. And that was mostly because of the Tax Cuts and jobs act of 2017, which was made permanent. And those cuts were supposed to expire at the end of this year. And then it was going to go back to a higher tax rate, but that's no longer the case. But those cuts primari benefited higher income folks and corporations and they're the ones that saw the largest percentage increases compared with the rest of us middle and lower income households. Now the bill makes permanent the standard deduction, too, and that was doubled in 2017. So the new budget will increase that amount. Seniors are also getting a temporary deduction increase and that's on top of the standard deduction. So any senior earning $75,000 or less individually is eligible for a $6,000 deduction.

[Sean Pyles]

So, Ana, there was also a big change to state and local tax deductions as well. Tell us about that.

[Ana Helhoski]

Another deduction that increased significantly is the state and local tax or SALT deduction. There used to not be a cap on the amount that a taxpayer could deduct for certain taxes. And the 2017 act set a $10,000 cap, but that was supposed to expire. The new bill increases that cap to $40,000 beginning in the 2025 filing year, but it's only going to be temporary. And in tax year 2029, it'll revert back to the $10,000 cap. And that's really only for taxpayers who itemize. And there will eventually be a phase out according to your income. So tax credit that parents are pretty familiar with is the child tax credit. And the increased amount will be permanent beginning with $2,200 in 2026.

[Sean Pyles]

And there are a few other kind of very specific tax deductions that people should know about as well, that are new and piqued my interest. One is no tax on tips. We heard a lot about this during the presidential campaigns. Taxpayers can deduct up to $25,000 in tipped income from federal taxes. Similarly, there is also no tax on overtime. Taxpayers can deduct up to $12,500 against overtime pay. And one that really interested me, even though I'm not in the market to buy a car, is that there is a deduction for car loan interest. Taxpayers can write off up to $10,000 a year in interest on new loans on cars bought after December 31, 2024. Now, there are a couple specific details to mind with this deduction. One is that these cars must be new and assembly must be completed in the U.S. there's also a phase out according. Now, a big perk of these three deductions is that you don't need to itemize to be able to claim them, but they're only available for a short period of time. Relatively, all three of these deductions are only from 2025 through 2028.

[Elizabeth Ayola]

All right, let's move on to clean energy tax credits. So there are a few tax credits that households might miss with this new bill. More specifically, households who are invested in clean energy. One is the EV tax credit that was available to people who bought new or used electric vehicles. That particular tax credit will now end on September 30, 2025. So that's this year. Just for context, the credit provides up to $7,500 for qualifying new electric vehicles or fuel cell electric vehicles, and up to $4,000 for qualifying use models. Now, the second thing you all should know is that 2 clean energy tax credits for homeowners who make green energy changes to their homes will end after this year. So they include the home solar tax credit and the energy Efficient Home Improvement credit help homeowners get tax credits on things like heat pumps, insulation, ECV chargers, and also solar panels.

[Ana Helhoski]

All right, there's one more tax related item to point out, and those are the Trump accounts. And these are new savings accounts that automatically enroll babies born from January 1st of this year through the end of 2028. And the federal government plans to seed each account with a thousand dollars. Now, those babies have to have a Social Security number and be a US Citizen to qualify. And there are also some contribution restrictions. So you can only contribute about $5,000 per year. And employers can actually contribute up to $2,500 per year. So you could end up with $7,500 in those accounts every year, but the distributions aren't going to be allowed until a child turns 18. Now, Sean, I know that we've talked off mic about this and you've got some feelings.

[Sean Pyles]

Yeah, I think overall there are better options out there. Like I would say a taxable brokerage account which don't have contribution or withdrawal limits. Also for 529 plans are going to be a lot more flexible than the Trump accounts. They also have higher contribution limits. But at the end of the day, this is still free money. If I could get a thousand bucks for a kid, I don't have a kid, but if I did, I would love a thousand dollars for them. I would just say don't rely on this solely for all of your retirement and college savings plans needs for your child. But hey, get it if you can.

[Ana Helhoski]

All right, so we can move on from taxes from here, but I just want to say that the cost of all of these programs are really high. It's the biggest in the bill. In order to pay for all these things, you have to cut other areas. And there could be some really big consequences to those reductions.

[Elizabeth Ayola]

And that moves me on to a topic that I have big feelings about. For context, I studied social policies, so I love learning about social programs. And there are going to be some major rollbacks and changes to popular social safety net programs like the Affordable Care Act, Medicaid, and also food assistance. So the result will be $930 billion in cuts over the next 10 years to Medicaid, Medic, and also the Affordable Care Act. Currently, 71 million Americans are enrolled in Medicaid and more than 45 million Americans have health coverage through the ACA, according to government data.

[Ana Helhoski]

All right, so let's start off with work requirements. And the first thing the bill does is make it more difficult for people to stay on Medicaid. So Starting anytime before December 31, 2026 states are going to implement work requirements in order to enroll in Medicaid. Now, non disabled recipients will have to file paperwork on a pretty regular basis to demonstrate that they're working, volunteering, receiving work, training, or going to school at least 80 hours a month. Some are going to qualify for an exemption, such as those who care for a child. But eligibility rules overall are going to tighten. For some historical context, this has been done before at the state level. Arkansas briefly implemented a Medicaid work requirement that lasted only from June 2018 to March 2019. During that time, 18,000 people, which was about 25% of that population, lost their health care coverage. And that was largely due to failure to report or having documentation, not eligibility. And on top of that, there was no meaningful increase in employment due to the policy.

[Sean Pyles]

There are also some major cuts coming to food benefits to help reduce federal spending. The big beautiful bill tightens eligibility for a Supplemental Nutrition Assistance Program, or snap, and shifts some costs onto states. There will be up to 230 million in SNAP and food assistance cuts over 10 years beginning in 2028. It also adds work requirements that could begin as soon as this year, which would include able bodied recipients ages 18 to 64, up from 54. The requirements also include those with children older than 6 years old.

[Elizabeth Ayola]

So about five years ago, I actually was on SNAP. And as you all know, I have a son. I was an intern at an addiction rehab facility, and they were paying me maybe $8 an hour. So I needed SNAP to help me get groceries while I was looking for a higher paid job. But I can't imagine. I know it doesn't apply to parents with young kids, but I can't imagine having to jump through a whole bunch of hoops while you're facing financial stress and trying to look for a job and possibly working.

[Sean Pyles]

It's tough.

[Elizabeth Ayola]

All right, so onto the aca. So the Affordable Care act will tighten rules which are going to spike marketplace premiums by anywhere from 25% to 100%, which could make health insurance through these marketplaces prohibitively expensive. For many, those changes could lead to an additional 4.2 million people becoming uninsured by 2034, and that's according to the CBO. Now, there are multiple provision changes to the ACA, and they're going to roll out between 2025 and 2028.

[Ana Helhoski]

Another area of stress for a lot of consumers is going to be the lack of protections, since funding for the Consumer Financial Protection Bureau was also cut in half by the bill. And that's effective immediately. In case you're not familiar, that agency oversees the consumer financial industry, and they've secured more than $21 billion in refunds and relief for more than 200 million consumers. Now, the Trump administration has already been targeting the CFPB for dismantling. So with fewer dollars, the CFPB may be far less able to assist consumers.

[Sean Pyles]

Yeah, as someone who's covered scams for many years here at NerdWallet, I'm pretty concerned about what this means for a lot of average people and their susceptibility to fraud of all kinds. Okay, well, turning now to student. Lots of changes there. Current income driven federal loan repayment plans will sunset on July 1, 2028. On July 1, 2026, enrollment in a new repayment assistance program, or RAP, will begin. That's meant to replace the existing income driven plans, and it requires a $10 minimum monthly payment for borrowers and extends the timeline for forgiveness to 30 years.

[Elizabeth Ayola]

Now, graduate and parent plus loan changes that you all should know about. First of all, funding for Graduate plus loan programs, a type of federal stud loan that helps graduate and professional students to finance their education expenses, is going to be ending on July 1, 2026. Lifetime borrowing for graduate studies is also capped. As a graduate or professional student, the federal lifetime borrowing limit for subsidized and unsubsidized student loans is $138,500. So what's going to happen here is it implements a new $65,000 cap on Parent PLUS loans as of July 1, 2026. Additionally, there's going to be an annual cap of $20,000 a year per student. It's a notable change as the current system lets parents borrow up to the full cost of their child's education.

[Ana Helhoski]

I want to add to this that it's not like programs in college is going to get cheaper. It just means that people won't necessarily be able to get those advanced degrees because they're not going to be able.

[Sean Pyles]

To afford it or they may be pushed into more expensive private student loans.

[Ana Helhoski]

Yes, and that's problematic in its own right. So I want to talk overall about timing in this bill because there's clearly a strategy here with the rollout. Most of the tax cuts and credits that are given to households and corporations, by the way, are beginning this year. And the majority of the sweeping social program cuts that we've been talking about won't begin until 2028. Now, Sean, Elizabeth, what's right in between this year and 2028?

[Sean Pyles]

Would that be the midterm election?

[Ana Helhoski]

It is indeed. So it's very clear that there is some kind of timing strategy in place right now.

[Sean Pyles]

Well, there are also a lot of economic changes and repercussions in this bill. One is the debt ceiling. The bill increases the debt ceiling by $5 trillion, which will help the US avoid a default this summer, which, in case you didn't know, we were headed for.

[Ana Helhoski]

Yes, and avoiding a default is quite good. But there are some other economic results that are a little bit less positive here. While the Tax foundation says that tax cuts will temporarily stimulate growth by encouraging business investment, it's going to be really expensive. As I mentioned before, the bill adds some $3 trillion to the national debt over the next decade and the current debt is $36 trillion. And those main spending areas are tax cuts, as we mentioned before, along with $1 trillion for defense, border security and immigration enforcement, including $45 billion for the U.S. mexico border wall and $45 billion for immigration. So I had spoken to our resident economist Elizabeth Renter before our recording and she said, quote, the bill might juice short term growth, but it will also worsen the national debt problem and hurt lower income households.

[Elizabeth Ayola]

All right, Ana, thanks so much for walking us and the listeners through all of this. There is so much that is entailed in the big beautiful bill and hopefully we have a better understanding of what affects us now.

[Ana Helhoski]

Yeah, and we're going to be following this in the months and years to come.

[Sean Pyles]

Up next, we answer a listener's question about how to save when you're on disability. But before we get into that, a reminder listener for you to send us your money questions. Maybe you're wondering what all of these changes may mean for you and how you can best navigate them. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-Nerd. Or email [e-mail] A reminder listener, we're.

[Elizabeth Ayola]

Going to be doing a new budget rehab segment soon and we need your help. So if you're looking for some tips or strategies to improve your budgeting skills, click the link in the episode description to fill out the Google form. It would make us extremely happy in a moment.

[Sean Pyles]

This episode's money question Stay with us. Today's episode is sponsored by Rula.

[Elizabeth Ayola]

Telehealth has made mental health care more convenient than ever. But let's be honest, getting support can still feel more stressful than tax season.

[Sean Pyles]

Finding the right therapist, booking a time that actually works, figuring out if they take your insurance. It can feel like too much. That's where Rula comes in. Rula is on a mission to make high quality mental health care affordable for everyone. They take most major insurance plans and the average copay is just $15 per session.

[Elizabeth Ayola]

Yeah, I started therapy about, wow, almost six years ago now and I know how much impact that it's made in my life. I feel so much more and emotionally regulated and I have the tools I need to get through life's challenges. I've seen how therapy can change lives, mine, friends and family. And the hardest part of therapy is often just finding someone you click with Rula takes the stress out of that search.

[Sean Pyles]

Rula starts with a few quick questions about what matters to you. Then it matches you with in network therapists who fit your needs. You can book as soon as the.

[Elizabeth Ayola]

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[Sean Pyles]

Thousands have already trusted Rula to support them on their journey toward improved mental health and overall well being. Head to rula.com smartmoney to get started today. After you sign up, they'll ask you where you heard about them. Please support Smart Money and tell them our show sent you.

[Elizabeth Ayola]

Go to r u l a.com smartmoney and take the first step towards better mental health today because you deserve quality care from someone who cares.

[Sean Pyles]

We're back and answering your money questions to help you make smarter financial decisions. This episode's question comes from a listener's text. Here it is as read by NerdWallet's head of multimedia Content and my boss and also Elizabeth's boss, Hilary Georgi.

[Hilary Georgi]

Hi, I just found your podcast. Thank you for the content taking you up on your offer and submitting a question. My question is a tough one. I am a 35 year old female who went from being an athlete and personal trainer to needing to be on disability. It may need to be permanent. Needless to say there has been a lot of grieving. One of the many components of grief is the feeling of hopelessness. I earned a scholarship for best business plan in my graduating class and prided myself and identity as an entrepreneur. Now I'm capped at what I can earn. I need disability. Without it I was in the ER monthly. I'm looking into starting a non profit organization but still struggle. Any words of advice for those on disability? Is saving ever an option when you're on the poverty line?

[Elizabeth Ayola]

To help us answer our listeners question on today's episode we have personal finance nerd Kate Ashford who is not a stranger to the pod. Hello Kate.

[Kate Ashford]

Hi Elizabeth. Happy to be back.

[Sean Pyles]

Hey Kate. So let's start by talking about the complicated yet vitally important world of disability benefits. Can you outline what they are and how they work? We're going to assume that the listener is referring to Social Security Disability Insurance benefits here.

[Kate Ashford]

Social Security Disability Insurance, or SSDI is a benefits program run by the federal government that provides income to people with qualifying disabilities. So in general terms, you qualify if you can't work because you have a disability that is either expected to result in death or it's lasted or it's expected to last for at least 12 months. You also must have worked for at least five of the previous 10 years, although people under age 24 may not need as much work history. And there's a separate definition for children under 18, but we're not getting into that today. Every so often, the Social Security Administration will review your situation and make sure that you still qualify.

[Sean Pyles]

And that top line explanation really underscores how complicated all of these rules are around how you can qualify for this program. We should clarify that. We're talking about ssdi, which as you just laid out, is not the same thing as Supplemental Security Income or ssi. So there's SSDI and ssdi. I. So it's a little confusing.

[Kate Ashford]

That's right. Social Security Disability Insurance. SSDI is not the same thing as Supplemental Security Income. Ssi, which also provides pay to people with disabilities or who are blind or who are 65 or older. But there are much stricter income and asset limits. And SSI is need based, so you can't have more than $2,000 in countable assets. So it's a little different.

[Elizabeth Ayola]

Now, something I know to be true about SSDI is usually you get just enough to cover necessities and benefits, and it tends to be just above federal poverty level income. How can a listener and others save when working with disability or little income?

[Kate Ashford]

So in 2025, Social Security Disability Insurance can be as high as $4,018 a month. But the average monthly benefit this year so far is just a little over $1,500 a month. So, yeah, that's tough. The calculation is based on your lifetime average earnings covered by Social Security. The good news is that people receiving these benefits can have a savings account and there are no limits to how much money is in it. The bad news is when your income is low, it's really hard to save.

[Elizabeth Ayola]

With how inflation has been over the years, I can imagine that that might be a hard income to live off of. So with that said, what are some ways that people can grow their income? One thing that comes to mind is investing, even if you only have a little bit to put towards it.

[Kate Ashford]

It's a tricky question because the idea behind federal disability benefits is that you can't work. So if you're working and earning income, you could lose your benefits. So your monthly earnings are capped if you want to hang on to your disability pay. You mentioned investing and actually investing income like interest and dividends and capital gains don't count toward income limits when you're on disability. That said, I think it's safe to say that most people in this situation don't have a steady flow of extra income to regularly invest, so you're limited to whatever invested savings you might have already.

[Sean Pyles]

So our listener, despite being on disability, they really want to do things with their life. They are considering starting a nonprofit. So can you explain what it might look like to start such an organization like a nonprofit, a business, or even work while receiving ssdi? What might be the financial implications of that?

[Kate Ashford]

The Social Security Administration has set up a system for this with really specific guidelines. The precise details are a little complicated, but the gist is you can't earn more than a certain amount, around $1,200 to $1,600 over the course of a set amount of months without your benefits being reduced or ending altogether.

[Sean Pyles]

Again, another example of how complicated and restrictive these benefits can be for many folks on disability. They may want to work, but if they earn above what's quite a low threshold, the benefits that they rely on could be in jeopardy. And that leaves a lot of folks like our listeners in a bind.

[Elizabeth Ayola]

I want to ask you, Kate, are there any legal I'm going to emphasize on legal here, loopholes or way to deduct exp so that people can lower their income when they're on disability?

[Kate Ashford]

Sure, Elizabeth. One thing to note here is that although there are limits on earnings, in some circumstances you are able to deduct the cost of work expenses that are related to your disability. So like a wheelchair, specialized work equipment, co payments for prescriptions. So your actual income could be higher than the threshold and still meet requirements after you deduct expenses. And before you ask, yes, you can start a nonprofit and take no salary or a small salary, but the Social Security Administration may decide to evaluate your work based on the value you are providing versus the small salary you're taking. So if you're paying yourself a thousand dollars a month, but you're working 40 hours a week, they may decide you're basically doing the work of a full time employee. So you could be a full time employee and you could lose your benefits. So it's probably a good idea to consult a professional like a financial advisor or an attorney if you're pondering these sorts of decisions.

[Elizabeth Ayola]

So the listener also mentioned feeling hopeless because they went from being an athlete and a personal trainer to being on disability. How can people going through such a major transition move past those emotions? Sean, you always say part of being a CFP is being a therapist, so I'm popcorning that to you as well.

[Sean Pyles]

So I'm not gonna lie, this is really hard. And the conversation has me thinking a lot about my twin sister who struggles with a number of health that have led her to being out of work many times over the years. She's tried to get on disability and was denied. And it's all just so exhausting because she would love to work, but she physically can't most of the time. And so, given how hard this is, the best thing to do is often lean on your loved ones for emotional support. You know, I'm there for my sister when she needs me. Even when she doesn't need me, I'm always there pestering her. She also has a wonderful husband who is a huge helper. And all of this just makes a hard situation a little bit easier to endure. And also, you know, nothing beats a good therapist, too. So, Kate, do you have any thoughts on this?

[Kate Ashford]

Shawn? I second the good therapist for sure. I think it's completely valid to feel a sense of loss for a life shift like this, especially if you identify as this kind of person in this role and suddenly that role is gone or really different. And I'm sure there are a lot of ways people can handle this, but I think it's helpful to think about the fact that you are still you. You still have the same core values, and maybe you can point that sense of purpose toward a new set of goals, but you have to give yourself time to adjust and refocus.

[Elizabeth Ayola]

Absolutely. And this discussion makes me think of a statistic I came across, which is that more than 1 in 4 adults in the US have some type of disability. So what are some financial guardrails people can put in place to prevent losing a chunk of present and future income if they happen to become disabled. Disability insurance is one option that I can think of.

[Kate Ashford]

Yes, disability insurance is key here. There are two types. Short term, which covers temporary disabilities, typically three to six months, but even up to a year, and long term, which, as you might expect, is for disabilities that last longer. But it's really important to make sure you have an emergency fund with at least three to six months of living expenses in it, especially because sometimes it can take time for disability benefits to kick in. And if your situation looks like it could be long term, apply for disability as early as possible because it can take a while to get approved.

[Sean Pyles]

Well, let's talk about who needs disability insurance. Something that comes to mind as well is another stat that one in four workers will face an accident or illness during their lifetime that will keep them out of work for at least a year. So it sounds like something that most people should at least be considering.

[Kate Ashford]

Shawn, that's a really powerful statistic. And really, anyone who earns income should have disability insurance. But if we're being picky, it's most important for the sole provider of a family, people who support children, people who work in physically demanding jobs, and those with chronic or recurring health issues. So if someone depends on your salary or there's a good chance that an injury or illness could really make it impossible for you to keep working, disability insurance would be a smart move. And keep in mind that a good disability policy is for your own occupation, meaning that you can't do your current job. So it's easier to become unable to be a firefighter, say, than being administrative staff.

[Sean Pyles]

And that's in contrast to what can be called any occupation, disability insurance, which means that you wouldn't be able to do any type of job to qualify for the benefits. And this just kind of opens up the can of worms of how complicated different types of disability insurance can be.

[Kate Ashford]

For sure.

[Elizabeth Ayola]

Hopefully we're simplifying it for you listeners.

[Sean Pyles]

Yeah, we're putting a cap on this can.

[Elizabeth Ayola]

All right, Kate, so where should people begin to look for disability insurance? Some employers offer disability insurance, so that may be a good jump off point. And I'm also aware that over 35% of employers offer some type of disability insurance to their employees, according to data from the Bureau of Labor Statistics.

[Kate Ashford]

If you have access through work, that's a great option and usually much less expensive because employers typically cover part or all of the premiums. If you don't have access through work, start with a disability insurance broker who can give you quotes from multiple insurers. And also you should get quotes directly from major insurance companies who aren't on their list. You should get multiple quotes because pricing can differ from provider to provider, and you should aim to cover at least 60% of your gross income.

[Elizabeth Ayola]

Then is it worth getting a supplemental policy?

[Kate Ashford]

Even if you have coverage through work? You may want one. You may want supplemental disability benefits because employer benefits will be taxed and you usually can't take the insurance with you when you leave that job. Disability insurance on the open market can be expensive, so ask your broker about ways to bring the cost down, like choosing a longer elimination period, which is the period before benefits kick in, or buying a policy that covers a shorter benefit period, like five years. And maybe this goes without saying, but I'm going to say it. You. You can't buy disability insurance once you are disabled, or at least not for the condition that's disabling you. So this is something you should buy now when you're healthy.

[Sean Pyles]

Good advice. Well, Kate, thank you for coming on and talking to us about the ins and outs of disability.

[Kate Ashford]

Absolutely. Thank you for having me.

[Sean Pyles]

That's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730, nerd. If email is more your thing, you can shoot us [e-mail] or check out the link in the episode description to anonymously submit your budget. Join us next time to hear all about bonds, including whether they're a good idea for saving for education expenses. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

[Elizabeth Ayola]

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes. And honestly, it might not apply to your specific circumstances. This episode was produced by Tess Viglin and Ana Helhofsky. Hilary Georgi helped with editing. Nick Karisimi mixed our audio and we want to say a big thank you to NerdWallet's editors for all the help they give us.

[Sean Pyles]

And with that said, until next time, turn to the Nerds.

[Kate Ashford]

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[Hilary Georgi]

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[Kate Ashford]

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