July 15, 2025 • 32 mins
President Trump just signed the Big Beautiful Bill into law — and it’s packed with tax breaks for small business owners, real estate investors, and everyday entrepreneurs. In this episode, tax attorney Mark J. Kohler and attorney Mat Sorensen break down the most useful strategies you can implement right now to save big.
Here’s what you’ll learn:
- How to leverage 100% bonus depreciation for real estate, vehicles, and business equipment
- Why the QBI (199A) deduction is now a permanent win for small business owners
- How to tap into Opportunity Zones for tax-free investing
- The truth about the new $40K SALT cap — and the workaround that still works in 36 states
Whether you're an entrepreneur, investor, or just want to pay less in taxes — this episode is your playbook.
- Grab my FREE Ultimate Tax Strategy Guide HERE!
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the Main Street Business Podcast with
your distinguished hosts, mark JKohler and Matt Sorenson.
Both are bestselling authorsand have over 25 years of
industry experience, with 10,000client consultations, making
them the leading tax and legalexperts in the nation.
Together, they'll unpack themost complex tax, legal and
financial strategies crucial forsaving more, stressing less and
(00:22):
building generational wealth.
Crucial for saving more,stressing less and building
generational wealth.
Today they're your personaladvisors, ready to break it down
for you and make the tax andlegal game easier than ever.
Here is Mark and Matt.
Speaker 2 (00:34):
We're leaving millions of dollars on the table
with just simple strategies.
Speaker 3 (00:38):
on a year-to-year basis, the highest rate is going
to stay fixed at 37%.
If this bill didn't pass, itwas going to 39.6%.
Even if you were like in thecurrent 12% bracket, you were
going up to 15%.
This wasn't just the highbracket going down.
This is affecting everyoneacross the different tax
brackets.
Whether you're middle income,low income, higher income,
you're going to see a taxbenefit from that.
Speaker 2 (00:57):
This is the crème de la crème of the whole bill for
you, business owners andinvestors.
Welcome everybody to the MainStreet Business Podcast with
your hosts Mark Kohler and MattSorenson.
This is a big beautiful day andit's the big beautiful bill.
Finally, the fat lady sings.
It's all over.
The sausage is made.
(01:18):
You can enjoy that hot dog now.
You don't have to see it beingmade in Congress anymore.
It was disgusting, but it'sfinally done.
The bill is final.
Speaker 3 (01:26):
Matt, this has got to be a big day for you.
Oh, I'm so excited.
You know, like the House passedit by one vote and then the
Senate was like we're going tomake it even closer and go 50-50
.
So the vice president has tovote on this thing to make it
pass.
And then, of course, trumpsigned it right before the 4th
of July, before you actually atethat hot dog, because you were
so enthralled with all of thissausage making.
(01:49):
But there is some good news inthis bill.
There's some winners and losersin this, but mostly good news,
and we want to break that downfor you, for business owners and
then also for individuals.
Obviously, business owners areindividuals too, but we want to
hit those topics and lots tocover, lots to cover, lots to
cover.
Speaker 2 (02:05):
We're going to jump right into it.
I also want to tell you I thinkit was a little lackluster for
me because it just was extendinga lot of things we got used to,
but that's okay.
When people say it justbenefits the rich, I'm still
trying to find some angles formy wealthy client.
I'm like to find some anglesfor my wealthy client.
I'm like what?
Speaker 3 (02:31):
You'll hear a lot of these individual deductions when
we get to them have high incomephase outs, so I'm a little
confused on that too.
But obviously the higher incomepeople pay more in taxes
because they're in a higher taxbracket and that's just how our
tax system works.
So to say that they save themost is kind of accurate.
(02:54):
That's how math works.
They pay the most, so they willsave the most when you reduce
taxes.
But everybody's rates gotreduced.
We'll go over that today.
So let's jump in.
For business owners, mark, Imean, I don't know, you had a
favorite one in there.
You had to have had a favorite.
Speaker 2 (03:06):
Oh, I think yeah, thank you, you're giving me
first shot.
Man, I'll take it.
I'm going to do a layup.
If we're going to play horse,I'm going to go for a layup.
I'm not going to go shoot athree-pointer and pray for a
good shot.
Okay, so here it is.
Everybody, for the businessowner, bar none, this is the
best tax strategy and benefitfrom the bill from real estate
(03:31):
investor to business owner bonusdepreciation Absolutely the
best.
It's up to 100%, it's permanentand holy crap.
And for those that are techiesout there in the tax world, it's
going to be a balancing actbetween bonus and 179 and
(03:51):
tactical planning on spreadingout deductions.
But if you want a big write-offup front, bam, you can take it.
Let's break it down.
What do you love about thebonus depreciation?
Speaker 3 (04:01):
Well, I mean, if you're buying a new qualifying
vehicle or equipment in yourbusiness, I think right now the
max bonus depreciation you cando is 40% and next year it's
going to be 20%.
So, like you know, that's thatpiece of equipment I buy that
cost me 100 grand, you know, andlet's say has a five year life.
I can only write off 20,000 ofthat a year, but now I can take
(04:22):
that whole $100,000 reduction inthe year.
I acquire that asset.
That allows me, as a businessowner, to buy more assets, buy
more equipment, increase myproduction.
Obviously I see more spendingin the economy.
So I think it'll be good forthe economy.
But it's great for businessowners to have the ability to
take that.
It's not required, it's anoption.
You want to expense it more andtake the bonus?
You can take the 100%depreciation on it in year one
(04:45):
and I like how you said.
That too, it's permanent, andremember last time they did it
it was like 100%, 80%, 60%, 40%,20%.
Speaker 2 (04:53):
They stuck it at 100% right, yeah, and I want to give
you guys listeners.
You're going to be blessed.
Get a bonus, no pun intendedfor listening to this podcast.
We know there's a lot of voicesout there talking about the big
, beautiful bill, but you choseto get your summary here.
I'm going to give you twokick-ass strategies that go with
this bonus depreciation that Iwould swear 90% of accountants
(05:17):
are not talking about.
But first I want to get a littletechnical.
See, the 179 allows you toexpense that Five-year asset
immediately if you wanted to.
There's limits on 179.
I go over a million, whatever179, but it cannot drive you
into a loss.
So if I go out and buy a newpiece of equipment or a truck, I
(05:38):
can expense it without bonusdepreciation 100% of it.
But if it puts me into a loss,I can't.
And I have to look at all theassets I bought that year.
I have to choose the 179, allof them.
So the 179 is out there and somepeople still may utilize that,
but the bonus can now throw youinto a loss.
So your business may say let'shave $100,000 in profit, but you
(06:01):
expense a new piece ofequipment for $150,000 with
bonus.
Now you're in a $50,000 lossthat you can use against other
income.
With a $179,000, it drops tozero, but it cannot push you
into a loss.
So there's some techniquesthere, and I want to say this
for any of you out there thatare regularly acquiring
equipment you're making money,you're not making money, you're
(06:23):
expanding.
This is not a no-brainer gobonus.
You're going to want tostrategize with your accountant,
choose which assets to bonus or179, and be very tactical about
it.
Speaker 3 (06:34):
Great tip Dang.
All right, anything else youwant to say, alex, I'm ready to
hit the line.
Matt, you want to hear thestrategy.
Speaker 2 (06:41):
Okay, you got another one.
Guys, I'll tell you right now.
I don't have much more to sayabout the bill than this one.
This is the creme de la cremeof the whole bill for you,
business owners and investorswhat I love about bonus.
I'll give three of them realquick.
The short-term rental loopholestill available.
Any of you that want to go downand buy a short-term rental
before the end of the year andput in 100 hours of renovation
and decorating.
You can expense, with costsegregation and bonus, probably
(07:06):
40% or more of that acquisition,all on your tax return, and you
don't even have to be a realestate professional.
Bonus opens up that door wideopen again this year.
Number two self-rental.
Matt Sorensen and I areself-rental aficionados.
We buy buildings to rent to ourbusiness after our startup
phase and started making somemoney.
We wanted to buildings to rentto our business after our
startup phase and started makingsome money.
(07:26):
We wanted to quit paying rentto other people If you're a
business owner and paying rentto someone else.
This is your chance to goacquire a building before your
end a commercial condo, astorage unit, a warehouse,
whatever the hell you use andyou could bonus depreciate again
a huge chunk of it and wipe outyour income on your business.
Return this year and get even arefund.
(07:47):
Possibly Big deal Bonus opensthat up again.
Third, matt, here it is.
See, when you go to expense avehicle, matt said that at the
beginning I'm going to go buy atruck for, say, 50 grand.
Well, you can only bonusdepreciate your business use.
So if you say, well, I'm goingto use 70% of the truck for
business, okay, so $15,000 ofthe $50,000 truck is personal
(08:12):
use.
So I don't get to bonusdepreciate that.
I could write off $35,000 inone pop.
Okay, that's cool Bonusdepreciation.
But, matt, here's the strategy.
If you're out there looking atbuying a truck or vehicle and
you know you're going to onlyuse it 70% for personal I mean
70% for business wait untilDecember, buy that vehicle in
(08:33):
December, use it 100% forbusiness.
For the last week of the yearyou could write off 100% of that
vehicle because the percentageof business use is in the year
of acquisition For bonusdepreciation.
So I could 100 bonus depreciatethat truck.
Now you say, well, mark, Iconvert it back to personal use
(08:53):
to 70 on january.
First, I mean it's going to be70 Business use.
I got personal use in there,yeah, but the rule is, if you
don't go below 50 business useyou could.
You don't have to recapturethat 100% bonus depreciation so
you could 100% bonus depreciatea vehicle before you're in show
(09:13):
100% business use, start to useit for personal use.
Just don't go below 50.
I got 100% write-off and bonusopens that door as well.
Speaker 3 (09:23):
I'm glad we led with this one, good Lord.
I mean, I was like taking it tothe next level.
Okay, I like that.
You know, for any of you guysthat like to be strategic about
it, you know you want to game itas much as possible.
Awesome tips there.
Keep in mind a lot of those uh,that bonus depreciation we were
hitting for real estateinvestors.
A lot of times those lossesdon't come over to your ordinary
(09:45):
income, your W-2 or yourbusiness income, except for
those exceptions Mark wastalking about, like the
short-term rental, theself-rental Vehicle's a little
different there.
It doesn't have that same issue.
But awesome tips there.
I want to hit-.
Okay, what's your favorite?
What moves the needle?
I like.
I know you say it's boring.
You said $.
You said 199A is boring, butI'm telling you QBI is a big
(10:07):
deal.
Okay, qualified business incomethis is a big deal.
This was set to expire and thiswas a huge perk that small
business got back in 2017.
See corporate America in thelast tax bill.
They were smart.
Big companies that are Ccorporations pay corporate tax.
That used to be 35%.
When the last tax reformhappened, they went and lobbied
(10:28):
Congress and said no, no, no, wewant that to be permanent,
lower at 21%, and they got thatforever.
Permanent.
Small businesses there are like,well, what do we get?
And they're like, well, youdon't pay tax at your level, you
pay at your individual level.
It's pass-through for you, llcsand S-corporations.
So they said, we'll give you a20% deduction on your qualifying
business income, qbi.
So it reduces your businessincome 20% If you make 200 grand
(10:53):
.
You're only taxed if you made160.
It's huge, it's a big perk.
But they said, eh, it's notgoing to be permanent though.
We'll give it to you for nineyears, right, 10 years.
Well, that was the last year ofit.
It was set to go away next year.
So, even though we've gottenused to it and we've kind of
gotten, you know, a littlecomfortable with it, it was
going away next year.
(11:14):
Now that got extended and therewas a lot of talk about that,
about that just being renewedfor a pre a portion of time.
The house bill even bumped upto 23%, but the final bill that
Trump signed in the law that theSenate passed is 20% for QBI.
This is a deduction you get foryour qualifying business income
and it was made permanent too.
We're not dealing with anothercliff where this is going to die
(11:34):
again.
That was made permanent too,and I like that one because that
helps a lot of small businessowners and I know the bonus
depreciation can too.
But that's going to help andalready has been helping save a
ton of taxes for small business.
Speaker 2 (11:47):
Yeah, and Matt, you're absolutely right.
I just think you know Matt'sright.
I got used to it.
I was like, hey, the $199.8.
I mean, they took out that stopsign.
I don't have to stop thereanymore.
Well, I'm loving it.
Now you're saying, well, theywere going to put the stop sign
back.
I'm like, well, but they didn't.
So anyway, I love that.
(12:10):
This is a great write-off andthere's some strategy here as
well.
When you meet with youraccountant for those that are S
Corp owners, the salary levelyou take and the balance between
your 401k, your solo 401k,maybe even the backdoor, mega
backdoor, roth S-corp ownerssalary it will affect your 199A
(12:30):
and there's an art there offinding that sweet spot.
So make sure you're talkingwith your accountant about 199.
You don't want to just say, oh,I'm taking QBI, well, you take
more salary, you get less QBI,you take less salary, you get
more QBI, and so there's a giveand take and then you're oh, I
want to put money in my solo401k.
Oh, I want to put money in myspouse's solo 401k.
So strategy is absolutelycritical and I just want to say
(12:54):
this to everyone out there Ifyou're listening to this, if
you're like I have got to bemore proactive with my tax
planning.
Please make an appointment withone of our tax lawyers.
We do a comprehensive taxconsultation.
We'll build a trifecta.
We'll give you our top 10things you need to be working on
.
If you don't have a goodaccountant, we've got a network
of accountants that speak MarkKohler and Matt Sorensen.
Or you can take it back to youraccountant and say, hey, these
(13:16):
tax lawyers said we need to talkabout this.
You might get lucky and they gookay, we'll take advice from
someone else.
You might have to upgrade youraccountant, but come get a
second opinion.
You can down below in our shownotes click on kkoslawyerscom.
Meet with one of our taxlawyers and they will talk about
every one of these strategiesin detail with you and see what
you need to do differently.
(13:37):
All right, $199,000,.
Matt, I like it.
Okay, all right, I got to votefor it.
All right, okay, you know itonly got 50-50 in the Senate, so
I'll take it.
I can't believe that.
You know, it's this Trumpderangement syndrome again.
Every small business owner inAmerica wants it.
Why does it never?
Whatever?
Okay, now, what do you thinkabout opportunity zones?
(13:57):
Do you like those?
I could get into the detail.
Speaker 3 (14:00):
I'm for it, I support it and that's my message.
How could you not right?
Here's why because and I knowyou're a little more expert on
the Oz program and opportunityzone is like, a lot of people
are familiar with the 1031,right Opportunity zones a lot of
people aren't familiar with itAgain, a new thing that got
(14:20):
passed back in 2017, the lasttax reform.
It's all expiring now and it'salready kind of phased down,
frankly, but it's coming backmaybe.
But, like people are familiarwith the 1031, right, I sell
real estate like investment realestate and I repurchase
investment real estate.
I don't pay tax.
I can roll that gain and buy anew property of greater or equal
(14:41):
value and that's a great taxdeferral strategy.
Opportunity zone is like thaton steroids.
Opportunity zone sell stock,sell your business, sell real
estate.
We don't care what you sell.
Roll it in to qualifyingopportunity zone project, which
could be a real estate project,could be a business in an
opportunity zone.
Defer the tax.
Also, you can reduce tax.
(15:02):
It's a pretty.
It's a very, very generousprogram, I should say from a tax
standpoint, if you're lookingfor tax savings.
Speaker 2 (15:09):
Yeah, and some of you may be going okay, I haven't
heard of this.
Let me give you another way ofsaying this.
And Matt, great summary, andI'll keep this brief.
The principle behind the matteris the feds are now giving the
state governors the opportunityto choose opportunity zones in
their state and so they get tochoose X number of zones.
(15:32):
They call them qualifyingtracks or something like that.
Yeah, qualifying tracks, thesezones that need redevelopment,
and the best way to get shizdone in developing property in
America is to give incentives toinvestors to go there.
Whether it's Katrina and adisaster zone, they'll give
investors, sometimes taxbenefits to go rebuild.
(15:54):
So these governors get tochoose these zones.
Now this has been around fornine years, but it just hasn't
got as much traction for someodd reason.
But it's back with a vengeanceand even better.
So the point is, if you have acapital gain like Matt said,
sell stock, crypto, business,real estate and you don't want
to do a 1031, or you're late,you missed the 1031, or you
(16:23):
don't even qualify for a 1031,like stock or crypto wouldn't?
You can take whatever portionof that gain you want and deploy
it into an opportunity zone,let's say, real estate project
At our law firm, even DevinMunns, our attorney.
You can build your own LLC thatqualifies for the opportunity
zone.
You want to get on your statewebsite and go hey, this is
right down the street.
Holy crap, I can buy thisbuilding.
Put in X percentage of newimprovements, make it qualifying
(16:43):
, put your own capital gain intoit, defer the tax for a period
of time and if you hold thatproperty 10 years, any
appreciation you never pay tax.
May I quote Smalls Never From,of course, sandlot 4th of July
movie best ever.
So I just think the OpportunityZone needs to be on people's
(17:04):
radar.
Big bill back better, the bigbeautiful bill.
Speaker 3 (17:09):
Okay, cool, we got Opportunity Zones in All.
Right, let's shift over toindividuals.
You ready?
Yes, I think those are the bigthree.
Speaker 2 (17:15):
There's some others out there carry forward interest
.
There's some deal with solartax credits that got shot down.
We'll have some other podcastson that stuff, but I think those
are the big three that businessowners need to be aware of.
But every business owner is anindividual.
So Matt hit it.
What do you like about theindividual?
Speaker 3 (17:34):
Your income is hitting your individual return
also.
So we've got to figure out howwe're going to save there.
Well, I think.
Let me hit the main one, whichis rates are staying at the
reduced rate, and I know thatmight sound again like well,
rates are going up next year 2%to 3% For everyone but the 10%
bracket, the very lowest bracket, which doesn't pay tax anyways.
(17:55):
But for everyone else you'regoing up 2% to 3%.
So the highest rate is going tostay fixed at 37%.
If this bill didn't pass, it wasgoing to 39.6.
And then, even if you were likein the current 12% bracket, you
were going up to 15%.
All right, so this wasn't justthe high bracket going down.
This is affecting everyoneacross the different tax
(18:15):
brackets.
So everyone's going to see a 2%to 3% rate reduction, except
that bottom lower 10% bracket.
So that's huge and I think thatis something we're all going to
see tax savings on, and whetheryou're middle income, lower
income, higher income, you'regoing to see a tax benefit from
that.
There's more, but that's justthe first one.
On the individual rate Lowerlease rates and made permanent
(18:36):
Again.
It's not this 10-year cliffwhere it's going to die again.
That was made permanent as well.
Speaker 2 (18:40):
Yeah, and I'll just piggyback it and say and capital
gain rates did not change.
So some people thought thatmight be affected.
And oh, I sell crypto.
It was blah, blah, blah.
None of that's in the finalbill.
Capital gain rates don't changeand all of our personal rates
are now permanent and did not goup.
Here's another one that'sinteresting.
The estate tax exemption wasmade permanent at $15 million
(19:06):
for an individual and $30million for a couple, and it now
will be adjusted for inflationfrom that point moving forward.
Now what that means some of youare like $15 million.
Well, some of you on thepodcast are like maybe someday
I'll get there.
Some of you are like 15 million.
Well, some of you on thepodcast are like, maybe someday
I'll get there.
Others of you are like thatadds up quick.
You've got a small businessthat's add value.
You've got real estate, you'vegot your 401k, you've got your
(19:28):
home, you've got someinheritance, life insurance
proceeds, life insurance it alladds up.
The IRS takes a picture peoplewhen you die.
And every year, if you look atstatistics, more and more
millionaires are created everyyear in this country.
It's crazy.
So here's the point If you feellike in your net worth taking
(19:49):
that big picture into account,is worth $15 million or more and
you're married, you don'tautomatically get the $30.
You have to have a special trust.
It's called an AB bypassedestate plan trust.
They're not that expensive butwe do them every day in our firm
for clients around the countryand so you've got to get that AB
trust done in order to grab the15 and 15.
(20:11):
So if you're married, you onlyget the 30 if you have a trust
designed to grab it and use it.
It just defaults, if you don't,to the 15 per individual.
So be careful.
If your parents, a friend,family member or yourself are in
that area of around 15 mil plus, get a consult with one of our
tax lawyers and for under fivegrand you're going to have it
(20:33):
all taken care of.
Don't get some lawyer sellingyou some $10,000 blah blah, blah
plan.
You don't need to spend thatmuch on an AB trust.
Speaker 3 (20:41):
Yeah, and, by the way , if you hit a state tax, the
federal estate tax is like 45%,it's almost half.
It's like okay, I got taxedwhen I made it with income tax,
I got taxes, I own it withproperty tax and I got taxed
when I died and that one's thebiggest, that's the highest rate
.
So you get basically to keephalf over that amount.
(21:02):
So some good planning there isvery, very valuable, literally
can save billions.
All right, let me hit the onethat was like the political
football in this whole process,which was the state and local
tax.
Sometimes some people call itSALT.
This is that deduction that thefederal government gives you to
say, hey, you made 200 grandand you paid the state of
(21:23):
California $30,000 in stateincome tax.
We're not going to tax you likeyou made 200 grand, we're only
going to tax you like you made170, because that's all you got
to keep.
The state of California took 30grand from you.
We'd be crazy to tax money.
You had to pay tax to a stateon right and that makes sense as
a tax policy.
(21:43):
Why would the federalgovernment tax you on money that
you already had to send toanother state for their state
tax?
Okay, so in our tax law we havea deduction for state and local
tax.
Now in the last tax reform theysaid we're going to cap that at
$10,000.
They said you can't take adeduction larger than $10,000.
(22:03):
So for high-income people fromstates that have a large, high
state income tax and this caneven be property tax, local tax
this was not good because theywere not getting this deduction.
They were only limited to theten thousand dollars.
Well, basically that was set toexpire again and it's actually
the thing was going to go awayso you'd have no cap, which
(22:24):
would actually been good for onthis issue.
But the compromise in the billwas a new cap at 40 grand.
This is what passed.
Trump signed into law a new capat 40 grand,000.
There's some high-incomephase-outs on that we can touch
on, but now you get a new cap of$40,000 on state and local tax.
Speaker 2 (22:43):
Yeah, no, it caps out .
If you're making between$500,000 and $600,000 AGI, then
you can't use it at all, but itis so if you're making less than
$500,000, you at least get the$10,000.
Though, with all that said, I'vegot something better, and that
(23:05):
is the pass-through entity tax.
Ooh, I love this one.
Yes, now, this almost got.
This was in one of the Senate'sversion, or the House's version
.
In the joint committee theytook it out, thank heavens, that
they were going to federallyeliminate the state's ability to
do this.
So here's what it is 36 stateshave said oh, you hate the SALT
(23:28):
strategy and your state tax islimited to this 10 or 40 grand.
Pay for it through yourS-Corporation and you can take a
valid deduction on your S-Corptax return for federal and state
purposes.
And so now I can save that taxby going through my S-Corp.
Now, this is only for you outthere that are S-Corp owners or
(23:49):
1065s.
Actually, partnerships can pullthis off too, but there's a
unique way to pull this off andit allows you to get bypassed
that whole SALT issue Because,remember, salt is state and
local tax.
You're going to probably hitproperty tax of $10,000 to
$40,000 anyway.
So this is the state income taxthat can be paid for by your
(24:09):
entity.
Now, that's just a shortsummary.
Again, strategy planningsession.
When you meet with one of ourtax lawyers, they'll identify if
you're in one of these statesand if this could work for you,
based on your type of business.
So not all is lost.
Speaker 3 (24:25):
I love that strategy too.
Yeah, and that was kind of aloophole for business owners to
get around the SALT cap.
If you're a W-2 owner, there'sno way around it, but if you're
this pass-through business owner, the escort partnership, this
is the strategy where you can.
You know you're like well, I'mgoing to phase out on this stuff
, I'm not going to benefit fromthis increase in the 40K.
(24:48):
Frankly, you don't even worryabout the cap anymore.
You could be having 100K, 200khere, no cap, and you can use
this little.
They call it a workaround, nota loophole.
The AICPA came out and tried todefend this and they're like
this is the workaround.
We want to preserve theworkaround Everyone's like
loophole, but good tip.
(25:09):
Love that one.
Speaker 2 (25:10):
Yeah, Now I'm just going to bundle these up due to
time as well, because it affectssome people but not others.
I call them the big three orlittle three Social Security,
tips and overtime.
Those three all phase out Anybenefit.
Okay, in summary, we all heardit in the news Overtime is not
(25:34):
going to get taxed, Tips are notgoing to get taxed and Social
Security we're going to stoptaxing a portion of it.
All of it phases out at$150,000.
Single On Social Security, it's$75,000.
But $300,000 joint on tips andovertime.
The point is, if you or yourspouse are getting tips, you're
still going to pay FICA, SocialSecurity, Medicare.
If you're getting overtime,you're still going to get
(25:55):
withholdings on that, but you'renot going to pay income tax on
it until you hit thesethresholds.
Social Security is kind of aweird one.
They give you a credit that youcould go against your social
security.
Speaker 3 (26:06):
The one on the seniors, you know, because they
couldn't get anything on socialsecurity.
Right, that was Trump'scampaign promise and a lot of
Republicans are out campaigningno tax on social security.
Well, they couldn't do that, sothey got the $6,000 deduction
per individual that's age 65 orolder.
So if you're a married coupleand you're both 65 or older, you
can, you'll get $12,000.
And, by the way, if you're 65or older, you already get an
(26:26):
additional deduction on your taxreturn on top of the standard
deduction.
So you're basically gettingthree standard deductions
already on your dang tax return.
So it's not that bad, butthere's something there.
Now, those do also die.
Those are not permanent ones.
So that's the downside on thetips overtime and the senior
deduction is those are going tobe gone in, I think, four to
(26:48):
five years, so those are notmade permanent.
Speaker 2 (26:51):
Yeah, and here's the thing that is, I think, very
unique.
So let's say again here's anangle for you S-corp owners.
Now, if you're a soleproprietor, your tip income is
part of your gross income on aSchedule C and, as you know, at
our company we're going torecommend you convert to an
S-corporation as soon aspossible if you're paying too
(27:11):
much self-employment tax.
So sole proprietors, uberdrivers, if you get a tip you're
still paying tax on it.
It doesn't matter.
You're an independent soleproprietor.
But if you're an S-corporation,matt, this is a unique one.
So I'm an S-corp owner and Imake $100,000.
(27:31):
And so I take $40,000 inpayroll and I have $60,000 in
K-1.
All right, well, of that$40,000 in my industry, let's
say I'm a salon owner or abarber and I get a tip on a
regular basis.
So of my $100,000, let's say,$20,000 of it is tip income
because that's in my profession.
I'm an S-corp owner, not a soleproprietor.
And can I put that tip incomeon my W-2 and exclude it from
(27:57):
tax?
Yes, I can, but it's stillsubject to FICA.
So it's going to be in boxthree and box five on the W-2,
but not in box one.
So you're not going to payincome tax on it, but you're
going to still pay FICA on it.
Speaker 3 (28:13):
Now here's the I'm okay with that.
I'm okay with that because theincome rate's higher than the
FICA.
Now, here's the thing.
Speaker 2 (28:19):
Okay, how many of you getting tips claim it anyway.
If anybody's giving you cash,you're not going to claim it
anyway?
Well, I'm not going to gettaxed on it.
You're going to claim it, soyou can pay.
FICA, you're not going to dothat.
Well, you're supposed to.
I know I know, but I will saythis For those of you that get
(28:40):
tips via third-party pay now.
So you're getting your tipsthrough Venmo and through PayPal
or Apple Pay.
Those are going to come throughon a 1099.
So now my tips do matterbecause I could take them off my
W-2 and make a strategy of this.
So here's my takeaway If you'rean Uber driver and you're
(29:04):
making more than $40,000 or$50,000 a year and a third of it
is tips, maybe you should makean S-election even sooner.
So take that little LLC as anUber driver, make the S-election
, pick up payroll and put yourtips.
You can take your tips off boxone on the W-2.
Now, I know that soundedcomplicated, but again, people,
(29:24):
this is why you meet with a taxstrategist.
We want to save you far morethan you ever pay us and we're
cheap compared to a big city lawfirm that wants to charge you
tens of thousands of dollars.
So get a strategy session.
I think there's an angle therefor S-corp owners.
Matt, that's all I wanted tosay.
Speaker 3 (29:40):
Yeah, All right, let's hit some other ones here.
I want to just I'm just goingto rattle some off fast because
I know we're kind of wrapping itup here.
But um, for those of you havekids, the child tax credit that
was right now it's 2000.
That was set to go to athousand next year but it was
made permanent at 2200 bucks perchild.
This is a tax credit which isgreat.
There is again a high incomephase out on that.
But we do get the child taxcredit made permanent 2200 bucks
(30:04):
per kid.
If you got a kid or you'rethinking about having one,
that's a pretty good deal.
Anything else you want to throwout to let people know about.
On the individual side, I knowthere's a lot of little points
here.
We will never be able to hitthem all.
Speaker 2 (30:17):
Yeah, no, I'm good with that.
I think if everyone I want tosay good job For listening to a
podcast about tax legislation.
It's the number one cost inyour life.
It's the number one thingpeople don't want to talk about.
It's either boring orcomplicated.
But when you take a littleinitiative to do your personal
planning in this area, it can bea lifetime game changer.
(30:40):
Because if you can say 10 granda year, 20 grand a year in tax
planning and put that money away, you just look at the future
value of that.
It is insane.
You're leaving millions ofdollars on the table with just
simple strategies on ayear-to-year basis.
So I want to say thank you forbeing here.
Share this podcast with friendsof yours that may be on the
bubble of listening to taxstrategies.
(31:02):
Say hey, this market, matt,don't make it that bad, listen
to it, it'll change your life.
Speaker 3 (31:10):
So I want to say thank you for being here, yeah,
and if you do have questions,our team at KKOS Lawyers we're
here for you and please makesure you subscribe to the
podcast, because we're going tobe diving deep in a lot of these
other sections.
You might have heard somestrategies here.
You're like holy cow, I don'tcode that you might not even be
thinking about, and so we wantto open up your eyes to these
(31:31):
strategies.
Everybody's situation isdifferent.
This is not a one size fits allwhere you can just like Google
around on this or watch oneYouTube video and be like I
figured it out, that's what youdo.
No, it's a tailored approach toyour specific situation and we
can help you get, take care ofit and make it easy.
So thanks again for listening.
Please make sure you share theshow with your friends and
family.
Like it?
I don't know.
(31:51):
Give us a comment or review.
What do you do nowadays?
What is it called A review?
Speaker 2 (31:57):
Five star, two thumbs up, high five, you know we'll
take whatever, Just nothingnegative If it's negative.
Welcome to the Main Street Business Podcast with
your distinguished hosts, mark JKohler and Matt Sorenson.
Both are bestselling authorsand have over 25 years of
industry experience, with 10,000client consultations, making
them the leading tax and legalexperts in the nation.
Together, they'll unpack themost complex tax, legal and
financial strategies crucial forsaving more, stressing less and
(00:22):
building generational wealth.
Crucial for saving more,stressing less and building
generational wealth.
Today they're your personaladvisors, ready to break it down
for you and make the tax andlegal game easier than ever.
Here is Mark and Matt.
Speaker 2 (00:34):
We're leaving millions of dollars on the table
with just simple strategies.
Speaker 3 (00:38):
on a year-to-year basis, the highest rate is going
to stay fixed at 37%.
If this bill didn't pass, itwas going to 39.6%.
Even if you were like in thecurrent 12% bracket, you were
going up to 15%.
This wasn't just the highbracket going down.
This is affecting everyoneacross the different tax
brackets.
Whether you're middle income,low income, higher income,
you're going to see a taxbenefit from that.
Speaker 2 (00:57):
This is the crème de la crème of the whole bill for
you, business owners andinvestors.
Welcome everybody to the MainStreet Business Podcast with
your hosts Mark Kohler and MattSorenson.
This is a big beautiful day andit's the big beautiful bill.
Finally, the fat lady sings.
It's all over.
The sausage is made.
(01:18):
You can enjoy that hot dog now.
You don't have to see it beingmade in Congress anymore.
It was disgusting, but it'sfinally done.
The bill is final.
Speaker 3 (01:26):
Matt, this has got to be a big day for you.
Oh, I'm so excited.
You know, like the House passedit by one vote and then the
Senate was like we're going tomake it even closer and go 50-50
.
So the vice president has tovote on this thing to make it
pass.
And then, of course, trumpsigned it right before the 4th
of July, before you actually atethat hot dog, because you were
so enthralled with all of thissausage making.
(01:49):
But there is some good news inthis bill.
There's some winners and losersin this, but mostly good news,
and we want to break that downfor you, for business owners and
then also for individuals.
Obviously, business owners areindividuals too, but we want to
hit those topics and lots tocover, lots to cover, lots to
cover.
Speaker 2 (02:05):
We're going to jump right into it.
I also want to tell you I thinkit was a little lackluster for
me because it just was extendinga lot of things we got used to,
but that's okay.
When people say it justbenefits the rich, I'm still
trying to find some angles formy wealthy client.
I'm like to find some anglesfor my wealthy client.
I'm like what?
Speaker 3 (02:31):
You'll hear a lot of these individual deductions when
we get to them have high incomephase outs, so I'm a little
confused on that too.
But obviously the higher incomepeople pay more in taxes
because they're in a higher taxbracket and that's just how our
tax system works.
So to say that they save themost is kind of accurate.
(02:54):
That's how math works.
They pay the most, so they willsave the most when you reduce
taxes.
But everybody's rates gotreduced.
We'll go over that today.
So let's jump in.
For business owners, mark, Imean, I don't know, you had a
favorite one in there.
You had to have had a favorite.
Speaker 2 (03:06):
Oh, I think yeah, thank you, you're giving me
first shot.
Man, I'll take it.
I'm going to do a layup.
If we're going to play horse,I'm going to go for a layup.
I'm not going to go shoot athree-pointer and pray for a
good shot.
Okay, so here it is.
Everybody, for the businessowner, bar none, this is the
best tax strategy and benefitfrom the bill from real estate
(03:31):
investor to business owner bonusdepreciation Absolutely the
best.
It's up to 100%, it's permanentand holy crap.
And for those that are techiesout there in the tax world, it's
going to be a balancing actbetween bonus and 179 and
(03:51):
tactical planning on spreadingout deductions.
But if you want a big write-offup front, bam, you can take it.
Let's break it down.
What do you love about thebonus depreciation?
Speaker 3 (04:01):
Well, I mean, if you're buying a new qualifying
vehicle or equipment in yourbusiness, I think right now the
max bonus depreciation you cando is 40% and next year it's
going to be 20%.
So, like you know, that's thatpiece of equipment I buy that
cost me 100 grand, you know, andlet's say has a five year life.
I can only write off 20,000 ofthat a year, but now I can take
(04:22):
that whole $100,000 reduction inthe year.
I acquire that asset.
That allows me, as a businessowner, to buy more assets, buy
more equipment, increase myproduction.
Obviously I see more spendingin the economy.
So I think it'll be good forthe economy.
But it's great for businessowners to have the ability to
take that.
It's not required, it's anoption.
You want to expense it more andtake the bonus?
You can take the 100%depreciation on it in year one
(04:45):
and I like how you said.
That too, it's permanent, andremember last time they did it
it was like 100%, 80%, 60%, 40%,20%.
Speaker 2 (04:53):
They stuck it at 100% right, yeah, and I want to give
you guys listeners.
You're going to be blessed.
Get a bonus, no pun intendedfor listening to this podcast.
We know there's a lot of voicesout there talking about the big
, beautiful bill, but you choseto get your summary here.
I'm going to give you twokick-ass strategies that go with
this bonus depreciation that Iwould swear 90% of accountants
(05:17):
are not talking about.
But first I want to get a littletechnical.
See, the 179 allows you toexpense that Five-year asset
immediately if you wanted to.
There's limits on 179.
I go over a million, whatever179, but it cannot drive you
into a loss.
So if I go out and buy a newpiece of equipment or a truck, I
(05:38):
can expense it without bonusdepreciation 100% of it.
But if it puts me into a loss,I can't.
And I have to look at all theassets I bought that year.
I have to choose the 179, allof them.
So the 179 is out there and somepeople still may utilize that,
but the bonus can now throw youinto a loss.
So your business may say let'shave $100,000 in profit, but you
(06:01):
expense a new piece ofequipment for $150,000 with
bonus.
Now you're in a $50,000 lossthat you can use against other
income.
With a $179,000, it drops tozero, but it cannot push you
into a loss.
So there's some techniquesthere, and I want to say this
for any of you out there thatare regularly acquiring
equipment you're making money,you're not making money, you're
(06:23):
expanding.
This is not a no-brainer gobonus.
You're going to want tostrategize with your accountant,
choose which assets to bonus or179, and be very tactical about
it.
Speaker 3 (06:34):
Great tip Dang.
All right, anything else youwant to say, alex, I'm ready to
hit the line.
Matt, you want to hear thestrategy.
Speaker 2 (06:41):
Okay, you got another one.
Guys, I'll tell you right now.
I don't have much more to sayabout the bill than this one.
This is the creme de la cremeof the whole bill for you,
business owners and investorswhat I love about bonus.
I'll give three of them realquick.
The short-term rental loopholestill available.
Any of you that want to go downand buy a short-term rental
before the end of the year andput in 100 hours of renovation
and decorating.
You can expense, with costsegregation and bonus, probably
(07:06):
40% or more of that acquisition,all on your tax return, and you
don't even have to be a realestate professional.
Bonus opens up that door wideopen again this year.
Number two self-rental.
Matt Sorensen and I areself-rental aficionados.
We buy buildings to rent to ourbusiness after our startup
phase and started making somemoney.
We wanted to buildings to rentto our business after our
startup phase and started makingsome money.
(07:26):
We wanted to quit paying rentto other people If you're a
business owner and paying rentto someone else.
This is your chance to goacquire a building before your
end a commercial condo, astorage unit, a warehouse,
whatever the hell you use andyou could bonus depreciate again
a huge chunk of it and wipe outyour income on your business.
Return this year and get even arefund.
(07:47):
Possibly Big deal Bonus opensthat up again.
Third, matt, here it is.
See, when you go to expense avehicle, matt said that at the
beginning I'm going to go buy atruck for, say, 50 grand.
Well, you can only bonusdepreciate your business use.
So if you say, well, I'm goingto use 70% of the truck for
business, okay, so $15,000 ofthe $50,000 truck is personal
(08:12):
use.
So I don't get to bonusdepreciate that.
I could write off $35,000 inone pop.
Okay, that's cool Bonusdepreciation.
But, matt, here's the strategy.
If you're out there looking atbuying a truck or vehicle and
you know you're going to onlyuse it 70% for personal I mean
70% for business wait untilDecember, buy that vehicle in
(08:33):
December, use it 100% forbusiness.
For the last week of the yearyou could write off 100% of that
vehicle because the percentageof business use is in the year
of acquisition For bonusdepreciation.
So I could 100 bonus depreciatethat truck.
Now you say, well, mark, Iconvert it back to personal use
(08:53):
to 70 on january.
First, I mean it's going to be70 Business use.
I got personal use in there,yeah, but the rule is, if you
don't go below 50 business useyou could.
You don't have to recapturethat 100% bonus depreciation so
you could 100% bonus depreciatea vehicle before you're in show
(09:13):
100% business use, start to useit for personal use.
Just don't go below 50.
I got 100% write-off and bonusopens that door as well.
Speaker 3 (09:23):
I'm glad we led with this one, good Lord.
I mean, I was like taking it tothe next level.
Okay, I like that.
You know, for any of you guysthat like to be strategic about
it, you know you want to game itas much as possible.
Awesome tips there.
Keep in mind a lot of those uh,that bonus depreciation we were
hitting for real estateinvestors.
A lot of times those lossesdon't come over to your ordinary
(09:45):
income, your W-2 or yourbusiness income, except for
those exceptions Mark wastalking about, like the
short-term rental, theself-rental Vehicle's a little
different there.
It doesn't have that same issue.
But awesome tips there.
I want to hit-.
Okay, what's your favorite?
What moves the needle?
I like.
I know you say it's boring.
You said $.
You said 199A is boring, butI'm telling you QBI is a big
(10:07):
deal.
Okay, qualified business incomethis is a big deal.
This was set to expire and thiswas a huge perk that small
business got back in 2017.
See corporate America in thelast tax bill.
They were smart.
Big companies that are Ccorporations pay corporate tax.
That used to be 35%.
When the last tax reformhappened, they went and lobbied
(10:28):
Congress and said no, no, no, wewant that to be permanent,
lower at 21%, and they got thatforever.
Permanent.
Small businesses there are like,well, what do we get?
And they're like, well, youdon't pay tax at your level, you
pay at your individual level.
It's pass-through for you, llcsand S-corporations.
So they said, we'll give you a20% deduction on your qualifying
business income, qbi.
So it reduces your businessincome 20% If you make 200 grand
(10:53):
.
You're only taxed if you made160.
It's huge, it's a big perk.
But they said, eh, it's notgoing to be permanent though.
We'll give it to you for nineyears, right, 10 years.
Well, that was the last year ofit.
It was set to go away next year.
So, even though we've gottenused to it and we've kind of
gotten, you know, a littlecomfortable with it, it was
going away next year.
(11:14):
Now that got extended and therewas a lot of talk about that,
about that just being renewedfor a pre a portion of time.
The house bill even bumped upto 23%, but the final bill that
Trump signed in the law that theSenate passed is 20% for QBI.
This is a deduction you get foryour qualifying business income
and it was made permanent too.
We're not dealing with anothercliff where this is going to die
(11:34):
again.
That was made permanent too,and I like that one because that
helps a lot of small businessowners and I know the bonus
depreciation can too.
But that's going to help andalready has been helping save a
ton of taxes for small business.
Speaker 2 (11:47):
Yeah, and Matt, you're absolutely right.
I just think you know Matt'sright.
I got used to it.
I was like, hey, the $199.8.
I mean, they took out that stopsign.
I don't have to stop thereanymore.
Well, I'm loving it.
Now you're saying, well, theywere going to put the stop sign
back.
I'm like, well, but they didn't.
So anyway, I love that.
(12:10):
This is a great write-off andthere's some strategy here as
well.
When you meet with youraccountant for those that are S
Corp owners, the salary levelyou take and the balance between
your 401k, your solo 401k,maybe even the backdoor, mega
backdoor, roth S-corp ownerssalary it will affect your 199A
(12:30):
and there's an art there offinding that sweet spot.
So make sure you're talkingwith your accountant about 199.
You don't want to just say, oh,I'm taking QBI, well, you take
more salary, you get less QBI,you take less salary, you get
more QBI, and so there's a giveand take and then you're oh, I
want to put money in my solo401k.
Oh, I want to put money in myspouse's solo 401k.
So strategy is absolutelycritical and I just want to say
(12:54):
this to everyone out there Ifyou're listening to this, if
you're like I have got to bemore proactive with my tax
planning.
Please make an appointment withone of our tax lawyers.
We do a comprehensive taxconsultation.
We'll build a trifecta.
We'll give you our top 10things you need to be working on
.
If you don't have a goodaccountant, we've got a network
of accountants that speak MarkKohler and Matt Sorensen.
Or you can take it back to youraccountant and say, hey, these
(13:16):
tax lawyers said we need to talkabout this.
You might get lucky and they gookay, we'll take advice from
someone else.
You might have to upgrade youraccountant, but come get a
second opinion.
You can down below in our shownotes click on kkoslawyerscom.
Meet with one of our taxlawyers and they will talk about
every one of these strategiesin detail with you and see what
you need to do differently.
(13:37):
All right, $199,000,.
Matt, I like it.
Okay, all right, I got to votefor it.
All right, okay, you know itonly got 50-50 in the Senate, so
I'll take it.
I can't believe that.
You know, it's this Trumpderangement syndrome again.
Every small business owner inAmerica wants it.
Why does it never?
Whatever?
Okay, now, what do you thinkabout opportunity zones?
(13:57):
Do you like those?
I could get into the detail.
Speaker 3 (14:00):
I'm for it, I support it and that's my message.
How could you not right?
Here's why because and I knowyou're a little more expert on
the Oz program and opportunityzone is like, a lot of people
are familiar with the 1031,right Opportunity zones a lot of
people aren't familiar with itAgain, a new thing that got
(14:20):
passed back in 2017, the lasttax reform.
It's all expiring now and it'salready kind of phased down,
frankly, but it's coming backmaybe.
But, like people are familiarwith the 1031, right, I sell
real estate like investment realestate and I repurchase
investment real estate.
I don't pay tax.
I can roll that gain and buy anew property of greater or equal
(14:41):
value and that's a great taxdeferral strategy.
Opportunity zone is like thaton steroids.
Opportunity zone sell stock,sell your business, sell real
estate.
We don't care what you sell.
Roll it in to qualifyingopportunity zone project, which
could be a real estate project,could be a business in an
opportunity zone.
Defer the tax.
Also, you can reduce tax.
(15:02):
It's a pretty.
It's a very, very generousprogram, I should say from a tax
standpoint, if you're lookingfor tax savings.
Speaker 2 (15:09):
Yeah, and some of you may be going okay, I haven't
heard of this.
Let me give you another way ofsaying this.
And Matt, great summary, andI'll keep this brief.
The principle behind the matteris the feds are now giving the
state governors the opportunityto choose opportunity zones in
their state and so they get tochoose X number of zones.
(15:32):
They call them qualifyingtracks or something like that.
Yeah, qualifying tracks, thesezones that need redevelopment,
and the best way to get shizdone in developing property in
America is to give incentives toinvestors to go there.
Whether it's Katrina and adisaster zone, they'll give
investors, sometimes taxbenefits to go rebuild.
(15:54):
So these governors get tochoose these zones.
Now this has been around fornine years, but it just hasn't
got as much traction for someodd reason.
But it's back with a vengeanceand even better.
So the point is, if you have acapital gain like Matt said,
sell stock, crypto, business,real estate and you don't want
to do a 1031, or you're late,you missed the 1031, or you
(16:23):
don't even qualify for a 1031,like stock or crypto wouldn't?
You can take whatever portionof that gain you want and deploy
it into an opportunity zone,let's say, real estate project
At our law firm, even DevinMunns, our attorney.
You can build your own LLC thatqualifies for the opportunity
zone.
You want to get on your statewebsite and go hey, this is
right down the street.
Holy crap, I can buy thisbuilding.
Put in X percentage of newimprovements, make it qualifying
(16:43):
, put your own capital gain intoit, defer the tax for a period
of time and if you hold thatproperty 10 years, any
appreciation you never pay tax.
May I quote Smalls Never From,of course, sandlot 4th of July
movie best ever.
So I just think the OpportunityZone needs to be on people's
(17:04):
radar.
Big bill back better, the bigbeautiful bill.
Speaker 3 (17:09):
Okay, cool, we got Opportunity Zones in All.
Right, let's shift over toindividuals.
You ready?
Yes, I think those are the bigthree.
Speaker 2 (17:15):
There's some others out there carry forward interest
.
There's some deal with solartax credits that got shot down.
We'll have some other podcastson that stuff, but I think those
are the big three that businessowners need to be aware of.
But every business owner is anindividual.
So Matt hit it.
What do you like about theindividual?
Speaker 3 (17:34):
Your income is hitting your individual return
also.
So we've got to figure out howwe're going to save there.
Well, I think.
Let me hit the main one, whichis rates are staying at the
reduced rate, and I know thatmight sound again like well,
rates are going up next year 2%to 3% For everyone but the 10%
bracket, the very lowest bracket, which doesn't pay tax anyways.
(17:55):
But for everyone else you'regoing up 2% to 3%.
So the highest rate is going tostay fixed at 37%.
If this bill didn't pass, it wasgoing to 39.6.
And then, even if you were likein the current 12% bracket, you
were going up to 15%.
All right, so this wasn't justthe high bracket going down.
This is affecting everyoneacross the different tax
(18:15):
brackets.
So everyone's going to see a 2%to 3% rate reduction, except
that bottom lower 10% bracket.
So that's huge and I think thatis something we're all going to
see tax savings on, and whetheryou're middle income, lower
income, higher income, you'regoing to see a tax benefit from
that.
There's more, but that's justthe first one.
On the individual rate Lowerlease rates and made permanent
(18:36):
Again.
It's not this 10-year cliffwhere it's going to die again.
That was made permanent as well.
Speaker 2 (18:40):
Yeah, and I'll just piggyback it and say and capital
gain rates did not change.
So some people thought thatmight be affected.
And oh, I sell crypto.
It was blah, blah, blah.
None of that's in the finalbill.
Capital gain rates don't changeand all of our personal rates
are now permanent and did not goup.
Here's another one that'sinteresting.
The estate tax exemption wasmade permanent at $15 million
(19:06):
for an individual and $30million for a couple, and it now
will be adjusted for inflationfrom that point moving forward.
Now what that means some of youare like $15 million.
Well, some of you on thepodcast are like maybe someday
I'll get there.
Some of you are like 15 million.
Well, some of you on thepodcast are like, maybe someday
I'll get there.
Others of you are like thatadds up quick.
You've got a small businessthat's add value.
You've got real estate, you'vegot your 401k, you've got your
(19:28):
home, you've got someinheritance, life insurance
proceeds, life insurance it alladds up.
The IRS takes a picture peoplewhen you die.
And every year, if you look atstatistics, more and more
millionaires are created everyyear in this country.
It's crazy.
So here's the point If you feellike in your net worth taking
(19:49):
that big picture into account,is worth $15 million or more and
you're married, you don'tautomatically get the $30.
You have to have a special trust.
It's called an AB bypassedestate plan trust.
They're not that expensive butwe do them every day in our firm
for clients around the countryand so you've got to get that AB
trust done in order to grab the15 and 15.
(20:11):
So if you're married, you onlyget the 30 if you have a trust
designed to grab it and use it.
It just defaults, if you don't,to the 15 per individual.
So be careful.
If your parents, a friend,family member or yourself are in
that area of around 15 mil plus, get a consult with one of our
tax lawyers and for under fivegrand you're going to have it
(20:33):
all taken care of.
Don't get some lawyer sellingyou some $10,000 blah blah, blah
plan.
You don't need to spend thatmuch on an AB trust.
Speaker 3 (20:41):
Yeah, and, by the way , if you hit a state tax, the
federal estate tax is like 45%,it's almost half.
It's like okay, I got taxedwhen I made it with income tax,
I got taxes, I own it withproperty tax and I got taxed
when I died and that one's thebiggest, that's the highest rate
.
So you get basically to keephalf over that amount.
(21:02):
So some good planning there isvery, very valuable, literally
can save billions.
All right, let me hit the onethat was like the political
football in this whole process,which was the state and local
tax.
Sometimes some people call itSALT.
This is that deduction that thefederal government gives you to
say, hey, you made 200 grandand you paid the state of
(21:23):
California $30,000 in stateincome tax.
We're not going to tax you likeyou made 200 grand, we're only
going to tax you like you made170, because that's all you got
to keep.
The state of California took 30grand from you.
We'd be crazy to tax money.
You had to pay tax to a stateon right and that makes sense as
a tax policy.
(21:43):
Why would the federalgovernment tax you on money that
you already had to send toanother state for their state
tax?
Okay, so in our tax law we havea deduction for state and local
tax.
Now in the last tax reform theysaid we're going to cap that at
$10,000.
They said you can't take adeduction larger than $10,000.
(22:03):
So for high-income people fromstates that have a large, high
state income tax and this caneven be property tax, local tax
this was not good because theywere not getting this deduction.
They were only limited to theten thousand dollars.
Well, basically that was set toexpire again and it's actually
the thing was going to go awayso you'd have no cap, which
(22:24):
would actually been good for onthis issue.
But the compromise in the billwas a new cap at 40 grand.
This is what passed.
Trump signed into law a new capat 40 grand,000.
There's some high-incomephase-outs on that we can touch
on, but now you get a new cap of$40,000 on state and local tax.
Speaker 2 (22:43):
Yeah, no, it caps out .
If you're making between$500,000 and $600,000 AGI, then
you can't use it at all, but itis so if you're making less than
$500,000, you at least get the$10,000.
Though, with all that said, I'vegot something better, and that
(23:05):
is the pass-through entity tax.
Ooh, I love this one.
Yes, now, this almost got.
This was in one of the Senate'sversion, or the House's version
.
In the joint committee theytook it out, thank heavens, that
they were going to federallyeliminate the state's ability to
do this.
So here's what it is 36 stateshave said oh, you hate the SALT
(23:28):
strategy and your state tax islimited to this 10 or 40 grand.
Pay for it through yourS-Corporation and you can take a
valid deduction on your S-Corptax return for federal and state
purposes.
And so now I can save that taxby going through my S-Corp.
Now, this is only for you outthere that are S-Corp owners or
(23:49):
1065s.
Actually, partnerships can pullthis off too, but there's a
unique way to pull this off andit allows you to get bypassed
that whole SALT issue Because,remember, salt is state and
local tax.
You're going to probably hitproperty tax of $10,000 to
$40,000 anyway.
So this is the state income taxthat can be paid for by your
(24:09):
entity.
Now, that's just a shortsummary.
Again, strategy planningsession.
When you meet with one of ourtax lawyers, they'll identify if
you're in one of these statesand if this could work for you,
based on your type of business.
So not all is lost.
Speaker 3 (24:25):
I love that strategy too.
Yeah, and that was kind of aloophole for business owners to
get around the SALT cap.
If you're a W-2 owner, there'sno way around it, but if you're
this pass-through business owner, the escort partnership, this
is the strategy where you can.
You know you're like well, I'mgoing to phase out on this stuff
, I'm not going to benefit fromthis increase in the 40K.
(24:48):
Frankly, you don't even worryabout the cap anymore.
You could be having 100K, 200khere, no cap, and you can use
this little.
They call it a workaround, nota loophole.
The AICPA came out and tried todefend this and they're like
this is the workaround.
We want to preserve theworkaround Everyone's like
loophole, but good tip.
(25:09):
Love that one.
Speaker 2 (25:10):
Yeah, Now I'm just going to bundle these up due to
time as well, because it affectssome people but not others.
I call them the big three orlittle three Social Security,
tips and overtime.
Those three all phase out Anybenefit.
Okay, in summary, we all heardit in the news Overtime is not
(25:34):
going to get taxed, Tips are notgoing to get taxed and Social
Security we're going to stoptaxing a portion of it.
All of it phases out at$150,000.
Single On Social Security, it's$75,000.
But $300,000 joint on tips andovertime.
The point is, if you or yourspouse are getting tips, you're
still going to pay FICA, SocialSecurity, Medicare.
If you're getting overtime,you're still going to get
(25:55):
withholdings on that, but you'renot going to pay income tax on
it until you hit thesethresholds.
Social Security is kind of aweird one.
They give you a credit that youcould go against your social
security.
Speaker 3 (26:06):
The one on the seniors, you know, because they
couldn't get anything on socialsecurity.
Right, that was Trump'scampaign promise and a lot of
Republicans are out campaigningno tax on social security.
Well, they couldn't do that, sothey got the $6,000 deduction
per individual that's age 65 orolder.
So if you're a married coupleand you're both 65 or older, you
can, you'll get $12,000.
And, by the way, if you're 65or older, you already get an
(26:26):
additional deduction on your taxreturn on top of the standard
deduction.
So you're basically gettingthree standard deductions
already on your dang tax return.
So it's not that bad, butthere's something there.
Now, those do also die.
Those are not permanent ones.
So that's the downside on thetips overtime and the senior
deduction is those are going tobe gone in, I think, four to
(26:48):
five years, so those are notmade permanent.
Speaker 2 (26:51):
Yeah, and here's the thing that is, I think, very
unique.
So let's say again here's anangle for you S-corp owners.
Now, if you're a soleproprietor, your tip income is
part of your gross income on aSchedule C and, as you know, at
our company we're going torecommend you convert to an
S-corporation as soon aspossible if you're paying too
(27:11):
much self-employment tax.
So sole proprietors, uberdrivers, if you get a tip you're
still paying tax on it.
It doesn't matter.
You're an independent soleproprietor.
But if you're an S-corporation,matt, this is a unique one.
So I'm an S-corp owner and Imake $100,000.
(27:31):
And so I take $40,000 inpayroll and I have $60,000 in
K-1.
All right, well, of that$40,000 in my industry, let's
say I'm a salon owner or abarber and I get a tip on a
regular basis.
So of my $100,000, let's say,$20,000 of it is tip income
because that's in my profession.
I'm an S-corp owner, not a soleproprietor.
And can I put that tip incomeon my W-2 and exclude it from
(27:57):
tax?
Yes, I can, but it's stillsubject to FICA.
So it's going to be in boxthree and box five on the W-2,
but not in box one.
So you're not going to payincome tax on it, but you're
going to still pay FICA on it.
Speaker 3 (28:13):
Now here's the I'm okay with that.
I'm okay with that because theincome rate's higher than the
FICA.
Now, here's the thing.
Speaker 2 (28:19):
Okay, how many of you getting tips claim it anyway.
If anybody's giving you cash,you're not going to claim it
anyway?
Well, I'm not going to gettaxed on it.
You're going to claim it, soyou can pay.
FICA, you're not going to dothat.
Well, you're supposed to.
I know I know, but I will saythis For those of you that get
(28:40):
tips via third-party pay now.
So you're getting your tipsthrough Venmo and through PayPal
or Apple Pay.
Those are going to come throughon a 1099.
So now my tips do matterbecause I could take them off my
W-2 and make a strategy of this.
So here's my takeaway If you'rean Uber driver and you're
(29:04):
making more than $40,000 or$50,000 a year and a third of it
is tips, maybe you should makean S-election even sooner.
So take that little LLC as anUber driver, make the S-election
, pick up payroll and put yourtips.
You can take your tips off boxone on the W-2.
Now, I know that soundedcomplicated, but again, people,
(29:24):
this is why you meet with a taxstrategist.
We want to save you far morethan you ever pay us and we're
cheap compared to a big city lawfirm that wants to charge you
tens of thousands of dollars.
So get a strategy session.
I think there's an angle therefor S-corp owners.
Matt, that's all I wanted tosay.
Speaker 3 (29:40):
Yeah, All right, let's hit some other ones here.
I want to just I'm just goingto rattle some off fast because
I know we're kind of wrapping itup here.
But um, for those of you havekids, the child tax credit that
was right now it's 2000.
That was set to go to athousand next year but it was
made permanent at 2200 bucks perchild.
This is a tax credit which isgreat.
There is again a high incomephase out on that.
But we do get the child taxcredit made permanent 2200 bucks
(30:04):
per kid.
If you got a kid or you'rethinking about having one,
that's a pretty good deal.
Anything else you want to throwout to let people know about.
On the individual side, I knowthere's a lot of little points
here.
We will never be able to hitthem all.
Speaker 2 (30:17):
Yeah, no, I'm good with that.
I think if everyone I want tosay good job For listening to a
podcast about tax legislation.
It's the number one cost inyour life.
It's the number one thingpeople don't want to talk about.
It's either boring orcomplicated.
But when you take a littleinitiative to do your personal
planning in this area, it can bea lifetime game changer.
(30:40):
Because if you can say 10 granda year, 20 grand a year in tax
planning and put that money away, you just look at the future
value of that.
It is insane.
You're leaving millions ofdollars on the table with just
simple strategies on ayear-to-year basis.
So I want to say thank you forbeing here.
Share this podcast with friendsof yours that may be on the
bubble of listening to taxstrategies.
(31:02):
Say hey, this market, matt,don't make it that bad, listen
to it, it'll change your life.
Speaker 3 (31:10):
So I want to say thank you for being here, yeah,
and if you do have questions,our team at KKOS Lawyers we're
here for you and please makesure you subscribe to the
podcast, because we're going tobe diving deep in a lot of these
other sections.
You might have heard somestrategies here.
You're like holy cow, I don'tcode that you might not even be
thinking about, and so we wantto open up your eyes to these
(31:31):
strategies.
Everybody's situation isdifferent.
This is not a one size fits allwhere you can just like Google
around on this or watch oneYouTube video and be like I
figured it out, that's what youdo.
No, it's a tailored approach toyour specific situation and we
can help you get, take care ofit and make it easy.
So thanks again for listening.
Please make sure you share theshow with your friends and
family.
Like it?
I don't know.
(31:51):
Give us a comment or review.
What do you do nowadays?
What is it called A review?
Speaker 2 (31:57):
Five star, two thumbs up, high five, you know we'll
take whatever, Just nothingnegative If it's negative.
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