January 17, 2025 • 13 mins
Unlock the secrets of navigating 2025's tax landscape with Daniel, the innovative mind behind Bookkeeping for Painters, and Richard, our insightful advising director. As we transition into a new year filled with legislative shifts, get ready to understand the ramifications of the court's back-and-forth decisions on the Corporate Transparency Act and the intriguing fate of Beneficial Ownership Information Reports. With a possible change in administration, Richard and Daniel offer their expert predictions on how these developments could shape the future of both businesses and individuals.
Anticipate the expiration of the Tax Cuts and Jobs Act and its potential impact on tax rates, with a keen look at how political shifts might influence fiscal stability. Our conversation promises to equip you with the foresight needed to navigate these uncertain times, empowering your business and personal financial planning. Prepare to explore how maintaining steady tax rates can foster growth and secure retirement investments, ensuring you're ready for whatever 2026 may bring. Don't miss this chance to stay a step ahead in the dynamic world of tax policy.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is Daniel, the founder of Bookkeeping for
Painters, and this is Richard,the advising director.
How's it going, Daniel?
It's going well Going into thenew year, so that's exciting.
Just had Christmas with thefamily and the kids and then we
got 2025, which is crazy.
2025 seems like such a far-offyear.
(00:20):
I know right.
When 2020 hit, I felt like, ohmy gosh, a whole new decade.
And now it's already half overand we've got some cool things
in store.
We've seen a lot of politicalchanges in this year and I
thought maybe we could talkabout some of the key changes in
(00:41):
tax policies that we areanticipating for 2025 and onward
Before we jump into that.
Another big change is theBeneficial Ownership Information
Reports.
So if you've been listening tous, you've heard us talk about
the Corporate Transparency Actand how these Beneficial
(01:02):
Ownership information reportsare due by December 31st.
That has been the law of theland up until recently, when a
Texas federal court overturnedthe CTA as being
unconstitutional and then thereports were no longer legally
required until another court puta stay on that overturn.
(01:29):
So we went from reports beingrequired to not being required,
back to being required, but nowwith a January 13th deadline,
and then just today we'rerecording this on December 27th
2024, the exact same courtdecided to overturn itself and
(01:50):
say that the reports are now nolonger required.
So I don't know when you'regoing to be listening to this.
Maybe this is flip-flopped 100more times by the time you get
to it.
Hopefully not.
But as of now, the BOI reportsare on hold.
It will be very interesting tosee what the court ultimately
(02:10):
decides.
It will also be interesting tosee if a new incoming
administration and a newattorney general want to
continue to pursue this, or willthey let it go and let the CTA
die a quiet, painful death.
So stay tuned.
If you're listening to this inthe future, you probably well,
(02:31):
you definitely know more than Ido.
We'll see how it goes.
But as far as some morespeculative things for 2025,
right, the big thing that wewere looking towards the end of
2025 was the expiration of theTax Cuts and Jobs Act, and I'm
sure you're familiar with that.
(02:52):
That's the 2017 law.
That was one of the largestchanges to the tax code since
Ronald Reagan was president.
What a lot of folks didn'trealize is that many of those
provisions in the Tax Cuts andJobs Act were actually set to
expire at the end of 2025.
We were going to see anothermajor change to the tax code,
(03:15):
and tax professionals have beenkind of waiting with bated
breath to figure out what arethings going to look like in
2026.
What are things going to looklike in 2026?
Well, we still don't know forsure because nobody has a
crystal ball, but we do have alittle bit more clarity with the
new incoming administration andthe things that they have
publicly said as far as whattype of tax policy they would
(03:37):
like to see.
So what we're going to talkabout today is speculative.
It is based on things that havebeen said, but, as you know,
it's not over till it's over andthese provisions have not yet
been codified into law.
So take this with a grain ofsalt.
This is our best guess as towhat's going to happen in the
(03:59):
future.
So number one is that tax ratesare going to stay steady in 2025
.
If you've been around for awhile, you've seen tax rates
fluctuate all over the place,and they were last changed in
2017.
They were reduced.
We've got the 10%, 12%, 22%,24%, 32%, 35% and 37% tax
(04:26):
brackets.
I think that's right.
Those were actually set toincrease starting January 2026.
Well, we expect those rates tostay steady now that politics
have changed a bit, and that's agood thing, because stability
means that we are able to budgetmore accurately, we're able to
(04:50):
know what our tax liability isgoing to be, and it helps us put
money aside for things likegrowing our businesses,
investing in our retirement.
We know that we're going tohave the cash to do that.
So, keeping those tax ratessomewhat modest I mean, everyone
would like to see them a littlebit lower, but they are better
(05:12):
than they have been in previousyears.
Another thing we're lookingforward to is the standard
deduction for individuals andmarried couples.
So I think one of the mostnoticeable parts of the Tax Cuts
and Jobs Act was the doublingof the standard deduction, and
(05:32):
we are expecting that tocontinue.
In fact, we are looking atright now.
The standard deduction is about$29,200 for a married couple,
$14,600 for a single, and we'reexpecting it to increase in 2025
as that gets adjusted forinflation.
(05:52):
Of course, that's important,because the larger your standard
deduction is, the less you haveto pay in taxes.
Now, if you're itemizing, youmight have a little bit
different opinion on that, butgenerally speaking, a larger
standard deduction does improvethings for more people, kind of
(06:14):
the idea of a rising tide floatsall ships.
Speaking of this itemizing, oneof the more difficult parts, one
of the more uglier parts of TaxCuts and Jobs Act was the
$10,000 limit on the state andlocal tax deduction.
(06:36):
So this is often referred to asthe SALT deduction state and
local tax and what that meant isno matter how much you paid in
property taxes or state incometax, the most you could itemize
was $10,000.
And that actually pushed a lotof people into using the
(06:56):
standard deduction.
Me myself, I used to itemizebecause I had a lot of mortgage
interest and I live in a highertax state I live in Illinois, so
one of the higher state incometaxes.
But after that cap and thedoubling of the standard
deduction, I found myself justusing the standard.
(07:17):
It does make your tax reportinga little bit easier because you
don't have to fill out an extraschedule.
But if you are paying a lot ofstate and local taxes you're
probably missing out because ofthat cap.
So we are hoping that that capwill be removed and then you
know if you are in a fellowhighx state like New York,
(07:40):
California, New Jersey.
You know it.
If you're there you might beable to see a little bit more of
a deduction moving forward.
For small businesses, we've gotsome great provisions, and this
is the return of 100% bonusdepreciation.
This is one of my favoriteprovisions of the Tax Cuts and
(08:05):
Jobs Act.
It allows for the immediatefull write-offs for eligible
equipment and property purchases.
Buy computers, vehicles,machinery, office equipment.
You don't have to wait five orseven years to fully deduct
those costs.
(08:26):
You can choose to use bonusdepreciation and write the
entire thing off in year one.
So a huge tax savings formostly small businesses who are
purchasing these types of things.
We enjoyed 100% bonusdepreciation for several years
but starting in 2023, we saw itreduced from 100% down to 80%.
(08:49):
2024, we're down to 60%.
2025, we're supposed to go to40%, but we'll see.
Maybe we'll get back up to 100.
This is also a very importantprovision for people who are
real estate investors and whoqualify as real estate
professionals.
When you are doing costsegregation studies on your real
(09:14):
estate, being able to use bonusdepreciation and writing off a
good portion of that propertyyou just purchased is huge to
maximizing cash flow.
Just kind of an example, onethat we did a client was able to
use a cost seg, with bonusdepreciation, and the taxes he
(09:39):
saved with that strategy wasenough to cover the down payment
he made on his property, andnow he's going to be able to
rent that property for enough tocover his mortgage payments.
So the down payment was covered, mortgage payments and expenses
are covered.
In 30 years he's going to havea fully paid off asset that's
(10:01):
going to be worth probablyaround $2 million and he will
not put out any of his own moneyto obtain that.
So that's an ideal situation.
It doesn't always work out thatway, but just really cool
strategy that I like to bragabout.
So thank you for listening tothat.
(10:21):
All right.
Another business benefit isgoing to be the continuation of
the qualified business incomededuction or the QBI deduction,
or, if you're an accountant,it's the Section 199A.
This is a direct write-off ofup to 20% of your
(10:45):
self-employment or smallbusiness income.
This is a huge boon to peoplewho have businesses.
This applies to soleproprietors, to people who have
businesses.
This applies to soleproprietors, partners in an LLC,
S-corp, shareholders, and it isa very substantial tax savings.
(11:06):
That was supposed to go away in2026, so we're really happy to
see that that might be stickingaround.
We certainly hope so.
Now there's a couple of newthings that have been floated
out here.
So Now there's a couple of newthings that have been floated
out here.
Just by personal opinion, I'm alittle bit more skeptical of
these, but if we get them, thatwould be awesome.
We have heard about exemptionsfor Social Security income, tips
(11:29):
and overtime.
This is the no tax on tips thatwe've probably heard some of
the politicians talking about.
It would allow folks who haveSocial Security income or tip
income or overtime income tocompletely avoid having to pay
income tax on that.
Again, I'm a little skepticalabout this because I think this
(11:53):
is a bit of a heavier lift thansome of the politicians are
admitting to.
But if we get it, it wouldcertainly benefit some of our
hardest working folks.
And then, finally, we've talkedabout, or we've heard talked
about, the increased deductionfor startup costs.
This really only applies whenyou're first starting your
(12:15):
business.
Before you have revenue, youhave startup costs, maybe legal
fees, accounting costs,purchasing assets.
These things have to beamateurized and expensed over
the first 15 years.
The exception to that is youcan write off $5,000.
(12:36):
And this talk has been ofincreasing that to $50,000.
So if that happens, most smallbusinesses won't have to worry
about amortizing startup costs.
They'll be able to expensethose things immediately.
That would certainly help lowerthe upfront costs for people
who are trying to get off theground.
(12:56):
So those are the items that wehave for 2025.
Again, this is speculative.
We don't know what it's goingto be until it actually happens
but certainly some light at theend of the tunnel for small
business owners.
If you are a small businessowner, now is a great time to
kind of look at your budget.
Try to understand how theseprovisions would affect your
(13:19):
bottom line.
Talk to your tax planner.
Make sure that you're ready for2025, 2026 to take full
advantage of these provisions.
If you are looking forward to aparticular tax saving strategy
or provision, let us know, andyou can go to our Facebook group
.
It's Grow your Opinion Businesson Facebook.
(13:40):
Let us know in the commentswhat you're looking forward to
or what you might like to see,and we would love to get your
opinions.
But until next time, Iappreciate you listening and
hope you have a great rest ofyour 2024.
This is Daniel, the founder of Bookkeeping for
Painters, and this is Richard,the advising director.
How's it going, Daniel?
It's going well Going into thenew year, so that's exciting.
Just had Christmas with thefamily and the kids and then we
got 2025, which is crazy.
2025 seems like such a far-offyear.
(00:20):
I know right.
When 2020 hit, I felt like, ohmy gosh, a whole new decade.
And now it's already half overand we've got some cool things
in store.
We've seen a lot of politicalchanges in this year and I
thought maybe we could talkabout some of the key changes in
(00:41):
tax policies that we areanticipating for 2025 and onward
Before we jump into that.
Another big change is theBeneficial Ownership Information
Reports.
So if you've been listening tous, you've heard us talk about
the Corporate Transparency Actand how these Beneficial
(01:02):
Ownership information reportsare due by December 31st.
That has been the law of theland up until recently, when a
Texas federal court overturnedthe CTA as being
unconstitutional and then thereports were no longer legally
required until another court puta stay on that overturn.
(01:29):
So we went from reports beingrequired to not being required,
back to being required, but nowwith a January 13th deadline,
and then just today we'rerecording this on December 27th
2024, the exact same courtdecided to overturn itself and
(01:50):
say that the reports are now nolonger required.
So I don't know when you'regoing to be listening to this.
Maybe this is flip-flopped 100more times by the time you get
to it.
Hopefully not.
But as of now, the BOI reportsare on hold.
It will be very interesting tosee what the court ultimately
(02:10):
decides.
It will also be interesting tosee if a new incoming
administration and a newattorney general want to
continue to pursue this, or willthey let it go and let the CTA
die a quiet, painful death.
So stay tuned.
If you're listening to this inthe future, you probably well,
(02:31):
you definitely know more than Ido.
We'll see how it goes.
But as far as some morespeculative things for 2025,
right, the big thing that wewere looking towards the end of
2025 was the expiration of theTax Cuts and Jobs Act, and I'm
sure you're familiar with that.
(02:52):
That's the 2017 law.
That was one of the largestchanges to the tax code since
Ronald Reagan was president.
What a lot of folks didn'trealize is that many of those
provisions in the Tax Cuts andJobs Act were actually set to
expire at the end of 2025.
We were going to see anothermajor change to the tax code,
(03:15):
and tax professionals have beenkind of waiting with bated
breath to figure out what arethings going to look like in
2026.
What are things going to looklike in 2026?
Well, we still don't know forsure because nobody has a
crystal ball, but we do have alittle bit more clarity with the
new incoming administration andthe things that they have
publicly said as far as whattype of tax policy they would
(03:37):
like to see.
So what we're going to talkabout today is speculative.
It is based on things that havebeen said, but, as you know,
it's not over till it's over andthese provisions have not yet
been codified into law.
So take this with a grain ofsalt.
This is our best guess as towhat's going to happen in the
(03:59):
future.
So number one is that tax ratesare going to stay steady in 2025
.
If you've been around for awhile, you've seen tax rates
fluctuate all over the place,and they were last changed in
2017.
They were reduced.
We've got the 10%, 12%, 22%,24%, 32%, 35% and 37% tax
(04:26):
brackets.
I think that's right.
Those were actually set toincrease starting January 2026.
Well, we expect those rates tostay steady now that politics
have changed a bit, and that's agood thing, because stability
means that we are able to budgetmore accurately, we're able to
(04:50):
know what our tax liability isgoing to be, and it helps us put
money aside for things likegrowing our businesses,
investing in our retirement.
We know that we're going tohave the cash to do that.
So, keeping those tax ratessomewhat modest I mean, everyone
would like to see them a littlebit lower, but they are better
(05:12):
than they have been in previousyears.
Another thing we're lookingforward to is the standard
deduction for individuals andmarried couples.
So I think one of the mostnoticeable parts of the Tax Cuts
and Jobs Act was the doublingof the standard deduction, and
(05:32):
we are expecting that tocontinue.
In fact, we are looking atright now.
The standard deduction is about$29,200 for a married couple,
$14,600 for a single, and we'reexpecting it to increase in 2025
as that gets adjusted forinflation.
(05:52):
Of course, that's important,because the larger your standard
deduction is, the less you haveto pay in taxes.
Now, if you're itemizing, youmight have a little bit
different opinion on that, butgenerally speaking, a larger
standard deduction does improvethings for more people, kind of
(06:14):
the idea of a rising tide floatsall ships.
Speaking of this itemizing, oneof the more difficult parts, one
of the more uglier parts of TaxCuts and Jobs Act was the
$10,000 limit on the state andlocal tax deduction.
(06:36):
So this is often referred to asthe SALT deduction state and
local tax and what that meant isno matter how much you paid in
property taxes or state incometax, the most you could itemize
was $10,000.
And that actually pushed a lotof people into using the
(06:56):
standard deduction.
Me myself, I used to itemizebecause I had a lot of mortgage
interest and I live in a highertax state I live in Illinois, so
one of the higher state incometaxes.
But after that cap and thedoubling of the standard
deduction, I found myself justusing the standard.
(07:17):
It does make your tax reportinga little bit easier because you
don't have to fill out an extraschedule.
But if you are paying a lot ofstate and local taxes you're
probably missing out because ofthat cap.
So we are hoping that that capwill be removed and then you
know if you are in a fellowhighx state like New York,
(07:40):
California, New Jersey.
You know it.
If you're there you might beable to see a little bit more of
a deduction moving forward.
For small businesses, we've gotsome great provisions, and this
is the return of 100% bonusdepreciation.
This is one of my favoriteprovisions of the Tax Cuts and
(08:05):
Jobs Act.
It allows for the immediatefull write-offs for eligible
equipment and property purchases.
Buy computers, vehicles,machinery, office equipment.
You don't have to wait five orseven years to fully deduct
those costs.
(08:26):
You can choose to use bonusdepreciation and write the
entire thing off in year one.
So a huge tax savings formostly small businesses who are
purchasing these types of things.
We enjoyed 100% bonusdepreciation for several years
but starting in 2023, we saw itreduced from 100% down to 80%.
(08:49):
2024, we're down to 60%.
2025, we're supposed to go to40%, but we'll see.
Maybe we'll get back up to 100.
This is also a very importantprovision for people who are
real estate investors and whoqualify as real estate
professionals.
When you are doing costsegregation studies on your real
(09:14):
estate, being able to use bonusdepreciation and writing off a
good portion of that propertyyou just purchased is huge to
maximizing cash flow.
Just kind of an example, onethat we did a client was able to
use a cost seg, with bonusdepreciation, and the taxes he
(09:39):
saved with that strategy wasenough to cover the down payment
he made on his property, andnow he's going to be able to
rent that property for enough tocover his mortgage payments.
So the down payment was covered, mortgage payments and expenses
are covered.
In 30 years he's going to havea fully paid off asset that's
(10:01):
going to be worth probablyaround $2 million and he will
not put out any of his own moneyto obtain that.
So that's an ideal situation.
It doesn't always work out thatway, but just really cool
strategy that I like to bragabout.
So thank you for listening tothat.
(10:21):
All right.
Another business benefit isgoing to be the continuation of
the qualified business incomededuction or the QBI deduction,
or, if you're an accountant,it's the Section 199A.
This is a direct write-off ofup to 20% of your
(10:45):
self-employment or smallbusiness income.
This is a huge boon to peoplewho have businesses.
This applies to soleproprietors, to people who have
businesses.
This applies to soleproprietors, partners in an LLC,
S-corp, shareholders, and it isa very substantial tax savings.
(11:06):
That was supposed to go away in2026, so we're really happy to
see that that might be stickingaround.
We certainly hope so.
Now there's a couple of newthings that have been floated
out here.
So Now there's a couple of newthings that have been floated
out here.
Just by personal opinion, I'm alittle bit more skeptical of
these, but if we get them, thatwould be awesome.
We have heard about exemptionsfor Social Security income, tips
(11:29):
and overtime.
This is the no tax on tips thatwe've probably heard some of
the politicians talking about.
It would allow folks who haveSocial Security income or tip
income or overtime income tocompletely avoid having to pay
income tax on that.
Again, I'm a little skepticalabout this because I think this
(11:53):
is a bit of a heavier lift thansome of the politicians are
admitting to.
But if we get it, it wouldcertainly benefit some of our
hardest working folks.
And then, finally, we've talkedabout, or we've heard talked
about, the increased deductionfor startup costs.
This really only applies whenyou're first starting your
(12:15):
business.
Before you have revenue, youhave startup costs, maybe legal
fees, accounting costs,purchasing assets.
These things have to beamateurized and expensed over
the first 15 years.
The exception to that is youcan write off $5,000.
(12:36):
And this talk has been ofincreasing that to $50,000.
So if that happens, most smallbusinesses won't have to worry
about amortizing startup costs.
They'll be able to expensethose things immediately.
That would certainly help lowerthe upfront costs for people
who are trying to get off theground.
(12:56):
So those are the items that wehave for 2025.
Again, this is speculative.
We don't know what it's goingto be until it actually happens
but certainly some light at theend of the tunnel for small
business owners.
If you are a small businessowner, now is a great time to
kind of look at your budget.
Try to understand how theseprovisions would affect your
(13:19):
bottom line.
Talk to your tax planner.
Make sure that you're ready for2025, 2026 to take full
advantage of these provisions.
If you are looking forward to aparticular tax saving strategy
or provision, let us know, andyou can go to our Facebook group
.
It's Grow your Opinion Businesson Facebook.
(13:40):
Let us know in the commentswhat you're looking forward to
or what you might like to see,and we would love to get your
opinions.
But until next time, Iappreciate you listening and
hope you have a great rest ofyour 2024.
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