HI 78 - The GOP Tax Reform & Your Investments with Ryan Schellhous

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Hello and welcome to episode 78 of the Heroic Investing Show. Thank you so much for joining me. My name is Gary Pinkerton, co hosting this show with Jason Hartman. In this show we focus on the unique challenges faced by members of the armed services and first responders. But we also focus on those common to all investors. We aim to provide the tools that enable our listeners to secure their family, their future and their retirement. And we help them put in place a solid plan to replace their W2 job with passive income so they can focus on family and other goals like sharing their unique genius. Developing and sharing where they add that unique value to the world. In this episode, Jason Interviews Part one. It's actually part one of a two part series in an interview with Ryan Schellhouse. Ryan is a CPA and founder at Indigo Spire, CPAs and advisors. And they're talking about the new GOP tax reform. This interview Jason and Ryan did last week. And so it's really kind of hot off the presses as the new bill gets approved by President Trump and gets ushered out. Of course, all the members of the accounting and CPA world are now coming through it with much more fine tooth comb and finding out the real ramifications. But Jason and Ryan do a really nice job in this two part series of taking what Ryan calls a 30,000 foot overview of the plan and then they drill down into some specific components that would probably interest most of us and certainly would interest us as investors and business owners. I found Jason's actually more recent interview, very recent interview with Danielle DiMartino Booth, another great speaker we have coming up here at Meet the Masters. Kind of interesting because she said that her biggest complaint was it's just not simplified. That was the biggest letdown of the event. One of the primary goals was to have a large overhaul simplification of the tax code. If you remember, they said that you could file your taxes on a postcard in my view. And she backed this up. As I read through the thing, it did not simplify very much at all. It made things a lot more confusing and complex and I'm sure when we get used to it, it won't be quite so bad. Ryan explains that the biggest revenue raiser was in fact the removal of the personal exemptions. And that's on a personal level. The largest revenue raiser for America in general for our gross national product is absolutely the reduction in the corporate rate. It was a huge reduction down to 21%, which really brought us in line with many of the first second world countries across the globe. So that could very likely, as Ryan points out, cause a large influx return of wealth back into America as the dollars are, as they call it, repatriated. And it would be pretty difficult for that kind of an action to not have a positive impact on our economy. Hopefully it doesn't create the Roaring twenties where we printed lots of money, but it at least will put US businesses, large corporations, back on an even footing and help us play on an even platform, even playing field with other countries, which has not been true for many, many years. He talks about the widening of tax brackets and the adjusting of tax brackets, lowering them for most people. But it's a very marginal movement in my opinion. And what I've looked at, it's a couple of percent here or there. I mean, everything helps, but I don't see that as a massive change. And then back to kind of Danielle DiMartino's comment about not reducing complexity, but rather increasing complexity. The standard deduction was doubled from 12,000 to 24,000 for a couple. But then at the same time personal exemptions were eliminated. So for a family of two to three people, it really didn't change much. I mean, the combination of them before was essentially what they have now as a deduction. But larger families certainly were the bigger losers from that perspective. But then they, at the same time, by pushing thresholds up, they increased the number of people that would qualify for the child tax credit and increase the amount of that child tax credit. So again, complex, but I don't really see that one either having a big impact. I was surprised when Ryan Shellhouse commented that it was the second largest revenue generator. Kind of interesting. I just wonder if, taken in context with the changes in the standard deduction and the child tax credit, if the removal of personal exemptions actually in the end has. Has really any impact at all. There's a substantial change in the mortgage interest deductions, capping the amount of interest that you can deduct. Homes valued at over 750 or loans at over 750,000 will be impacted for new loans, which could, as he comments, have an impact on Mortgage activity in high cost areas, high land value areas, which is of course not where we're buying rental properties. And we certainly don't buy single family residences of that level to rent out. But it could affect those of us investors who, like myself, are living in high land cost areas. It could make us make some different decisions like move, which I'm seriously considering here for the family, or maybe shift into renters. And does a bunch of people shifting into renters impact rent, the amount of rent that you can demand? So I'm sure it'll have some impact on the economy and it'll be interesting to see what it does for real estate investors. Does it drive more competition, does it enable higher rents, etc. And also what we also have to worry about is property values, right? You know, last thing we want is for our rental properties value to take a nice dive like it did just about a decade ago as we went through 2008 and 2009. But perhaps the biggest one that he discusses in this segment that most directly impacts US is the 20% deduction that all owners of pass through businesses pass through taxed entities. So of course the LLCs, we have partnerships, all pass through entities. And at the initial read, Ryan comments that, you know, this would be the first 20% of your gains, your net earnings beyond expenses would not be taxed. And that would be a huge benefit for real estate investors. And then there's another one having to do with how you fund your down payments specifically, you know, are you pulling equity out of your house and are using a line of credit, a home equity line of credit? That one. There's been some tax ramifications associated with how those are, you know, deducted. And Ryan gets more into that in the second interview. So a little bit of a long interview today. So let's get to this discussion and please, I hope you enjoy Jason's discussion with Ryan Schellhouse. And we'll be back in the next episode with part two. Thank you so much.

It's my pleasure to welcome Ryan Schellhouse. He is the founder and principal of Indigospire CPAs and advisors. And he's here to talk to us about a very, very important topic that affects everybody in the US Very directly, but also all of you around the world. Of course, we have listeners in 165 countries worldwide and this will trickle throughout the entire planet. What we're about to talk about, and that is the first real tax reform we've had in about three decades. This is extremely significant. I think it's Very good for most people listening. You're going to benefit by this. I think everybody ultimately will probably benefit through the trickle up down and all around effect. But let's see what Ryan Sundays. He's a CPA and he knows his stuff. Ryan, welcome. How are you?

Great, Jason, thanks. Thanks for having me on.

It's good to have you on.

This is good stuff.

This is a big, big deal, folks. Everybody's got to realize the single largest expense in any of our lives are taxes. So we've got to be good at this. We cannot be bored by taxes. We cannot lay it off on somebody else. We have got to have some degree of knowledge. Of course we want to get experts like Ryan on board to help us prepare our tax returns, but we've got to have some level of our own knowled to bring to the table. Ryan, give our listeners a sense of geography. Where are you located?

I'm in San Jose, California. Firm's been here for about three years now. A little bit about me. I spent my most of my career at Ernst Young and Deloitte and Touche as a, as a tax guy. So been my pleasure to kind of strike out on my own a little bit. And our firm here's got a bunch of people helping out and working for us. We primarily do tax and tax advisory, but we also have a small audit practice, some advisory, kind of the traditional CPA service services that you'd come to expect.

Fantastic. Well, when I was introduced to you through a mutual friend a few, well, several months ago now, I was just always very impressed with your level of knowledge. And of course you've got that big firm background, so that's great too. But you know, without the big firm invoices and bureaucracy.

So I'm working on that part.

I'm working on the invoice. You try to get those invoices and bureaucracy up, right? Yeah, exactly. Yeah, that's, that's what happens ultimately with everything. But hey, Ryan, can we sort of take a high level view and then we'll kind of go down the funnel, if you will, on the GOP or formerly Trump Tax Reform Act. What are sort of some of the big nuggets that we want to know about and then we'll drill down?

Yeah, absolutely, Jason. And I think that's a great approach to kind of help get our minds around this. Like you said, this is the biggest reform in over 30 years, since 1986 is the biggest changes to the tax code in terms of complexity. The bill itself coming out of conference was over 1100 pages. And in terms of money, this is the biggest bill that we've perhaps ever had in terms of tax from a high level perspective. There's the way I like to think about is how did these things get rated in terms of revenue either up or down? Did these things cost the government or did these things raising money? And when you look at that from, from that perspective, the biggest items are and principally what's been celebrated on the floor of Congress is the lowering of the corporate tax rate from 35% for most companies down to 21%. Now this achieved a couple of different aims. Right. It was a goal of the GOP to get it to there. But maybe more importantly and kind of the big picture is it puts us more in line with all of our trading partners. Yeah, this is a corporate tax rate that for a long time we kind of stood out as being much, much higher taxed to corporations than almost any other country in the world. And this kind of puts us in line.

It was just an incentive for these companies to go offshore and do all kinds of crazy things. There are a couple of documentaries on this. I watched one of them. I think the technique that Apple and Google use to evade essentially taxes or avoid them maybe is the better word is the, the double Irish twist or something like that where they set up this entity in Ireland and Microsoft does it, do they license the software and the pre intellectual price. Just a big, big bunch of crap. And you know, this will make it so we're not penalizing these companies to keep more of this money onshore. So are we going to see a repatriation of wealth back to the us?

Well, yeah, and perhaps the, some of the most complex parts of this new bill deal with international taxation. So aside from the lowering of the rate, we're moving to a territorial income system for corporations. What that really means is that under old rules, companies could be taxed on their income wherever they earned it and all their subsidiaries would be subject to U.S. tax. And generally we would defer that tax until that money was brought back to the US we'd create these structures and you know, this is what I did at Ernst and Young. I'm guilty as charged. Right. We used to set these structures up and we had kind of a playbook of places and strategies we use, whether it was Ireland, Netherlands, the UK became in vogue kind of towards the end with some of their tax reform. Whole idea is that we would transfer certain types of intellectual property from big US companies to these low tax or no tax jurisdictions and then they would exploit that IP outside the US and earn a ton of money. So famously, and it's even mentioned in the conference reported this bill, Apple has, you know, some more, close to $250 billion sitting offshore and all these entities in cash because it can't bring that money back to the US without incurring tax and maybe even more importantly accruing the tax for their financial statements. So this bill also provides a transition period whereby Apple and all the other companies that have money stashed offshore are going to pay a one time tax of between 15 and a half and 8% of their stashed earnings. Once they pay that tax, which is payable over eight years, they're free to bring that money back to the US completely tax free. So Apple for example, with their 250 billion, they pay $20 billion, which is a huge bill, but now they've got 230 billion that they can bring back to the US and do whatever they want with.

Wow. If that doesn't trickle through the economy, I can't imagine it can do anything else. You know, I heard this one commentator, you know, a CEO, and I didn't catch the name because I came into the interview partway in, but you know, I was listening to CNN in the car. He was talking about how, I mean, he was obviously a liberal, so he didn't know what he was talking about. Little sarcasm there folks, but not really, you know, he was saying, well, all this is going to do is make the rich richer, it's just a tax cut for the rich, etc. We don't really need to hire any more people. So with all the money we save, I think, you know, it's not going to help the economy. He says, I'm just going to go out and buy more real estate and stocks. And I'm thinking, what a moron. I mean, he thinks that doesn't help the economy, that doesn't trickle through. I mean, every time I buy a property I look at how much more money I'm spending. You know, I'm hiring people to improve it, to fix it up. You know, the painters, the flooring people. I mean trickle down economics, man, how do you, how do you not understand that? And, and this is not a poor person, this is a wealthy CEO who actually thinks this way. I just couldn't believe it. So lower taxes will trickle through, you know, it'll cause more investment. Investment is capital formation. Capital formation creates employment, it creates wealth. You know, this is how the thing, this is how it works, folks. No, it's it's good, right?

And I think the Wall Street Journal, they've. One of the key aspects of this tax reform bill that we haven't even touched on yet is how quickly it came together. I was literally in a conference maybe six weeks ago, outlining to the participants at that conference that, yeah, tax reform, something everybody talks about but never can get done. They got it done, pulled together these tough decisions, and then. And honestly, it all kind of started when Senator McCain walked into the vote for Obamacare repeal, put his thumb down and handed the GOP a defeat on Obamacare repeal. And that just mobilized the forces and that, that's how we ended up with the tax bill we did today. I think there was so much political pressure to deliver a signature win by the end of 20 2017. This is where we're at.

Yeah, they, they did their workaround. They did it through tax policy rather than through the Affordable Care act or otherwise known as Obamacare. That has been obviously.

Yeah, we'll talk about that as one of the program provisions in there.

Yeah, okay, good. We'll talk about that. Now, why don't you talk about the. The mandate requirement? I guess it's been lifted. Right.

So one of the principal aspects of Obamacare was required everyone to get insured either through an employer or through the individual exchanges or through Medicaid. And what this bill does, interestingly, it's not even one of the highest scoring revenue losers to the bill. The penalty for not purchasing insurance now is statutorily set to zero. Like you said, it's using tax policy to repeal of certain parts of Obamacare. Now, if you do not go get insurance like you're supposed to under Obamacare, you still have a penalty. It's still calculated on your tax return. The penalty will never be more than zero.

I love it. That's awesome. It's like getting a traffic ticket from one of those unconstitutional speeding cameras or red light cameras. Right? You get your ticket in the mail, and instead of saying, you know, yo, 300 bucks, it says, yo, zero, you got a ticket, but you don't owe us anything. So, yeah, that said, all intents and purposes is nothing. Okay, good. Let's get back to the big chunks. I'll shut up about my political views because I'm getting some hate mail. I can tell people are already writing it, so go ahead.

Again. The biggest one was lowering the corporate tax rate to 21%. The next biggest one right after that was there was a substantial widening of tax brackets and lowering of rates for individuals. So the top rate used to be 39.4%. Now that the top rate's 37% and that trickles all the way through the rate tables, both for single people, heads of household, married, filing jointly. All the rates are down and all the brackets are wider. So you have to earn a lot more money in order to move up into the next tax bracket. Now, that was a big one.

So that's a tax cut. That right there is a tax cut for everybody or only most people?

Everybody. So there are certain tax brackets that overlap a little bit from the old law. So you may not necessarily see a tax rate decrease at your exact level of income, but it's $1.2 trillion worth of tax cuts just scored within this rate table expansion and rate decrease. So it's a tax cut across the board for, for almost everybody in terms of rate. Okay. Now obviously there's two parts to taxes. One is the rate and the other is the base upon which that rate is applied. And almost all these other provisions, we're going to be talking about the base. Either it's broadening the base by eliminating deductions, or it's narrowing the base by including other things that can be deducted from your income before those rates, which are now across the board lower, are applied.

Okay, go ahead just a little bit.

For your real estate investors out there who may be using their self directed IRA and incurring ubit. We'll talk a little bit about that now.

Now, further down the road is, is what's that saying for again? You know, like unrelated business income tax. Yeah, right.

Yeah, yeah. And I don't necessarily want to get into all the details about what UBIT is on this interview, but for those who are subject to ubit, they know who they are. The rates that are applied on unrelated business income are now just slightly lower as well. So even those guys are winning a little bit.

All right, good.

Perhaps most famous as it relates to the. For individual taxpayers, what we used to do is you would go through and you'd calculate all your items of income and then you take certain above the line deductions and then you'd apply either the standard deduction or your itemized deductions, whichever one was higher. Okay. So one of the things that is in this bill is the increase of the standard deduction. So more people will just use the standard deduction and will no longer be incentivized to itemize their deductions.

So that's a simplification, right?

You could call it a simplification. There are some underlying Policy things. Right. If some people may not be quite as incentivized to donate to charity, for example, because they're still in the standard, this higher standard deduction. So they wouldn't actually see a tax benefit from a contribution to charity or something like that. But yeah, it's a simplification. And there will be a lot more people who can file these simpler 1040 forms now because they're not necessarily going to be itemizing their deductions on schedule A.

Okay. Now one of the promises that I think got ratcheted out in the political infighting and lobbying is the idea that you could file your taxes and on a postcard. That's not going to happen, right?

No.

Okay. But, but it was a goal and we, we did move in that direction. Right. Granted you're going to make a lot of money and people in your business are going to make a lot of money because we've got a new thing, you know, that's the first new big thing in three decades. So you know, you're going to be explaining it, adjusting strategies for people, etc. Etc. But overall this is a simplification, isn't it?

For some people, For a lot of individuals it may be a simplification. There just be a little less paperwork they've got to keep track of. On the international side, it's more complex times four of what it used to be.

If someone's got stuff going on overseas, you mean.

Right, yeah. Right. So for like the apples and Facebooks that I'm sure no one is feeling that, who cares?

Hey, listen, Apple, Apple, the company I used to love and trust, I'm now really mad at them. They're throttling back everybody's old phone. Real scam scandal finally broke. I'm glad they got nailed. Okay, so yeah, I hope to see some litigation on that one. Class action laws.

Yeah, I'm holding one of those. I'm holding one of those right now.

Those throttled back.

I wonder why it started going so much slower.

As soon as the upgrade comes out, they just kill everybody's old phone. It's what a Disgusting, disgusting shame on Apple. But you know, no one listening. Is an Apple executive that's working in their tax department. Right. So you know, nobody cares about that. Very few people listening will have international affairs that they need to worry about. Most people are strict. Their tax life is simple. Yeah.

Yes. Skip a lot of that stuff. Nobody needs to know the new definition of globally low taxed intangible. I don't think that's interesting. For anyone.

Okay, we'll see.

Listening right now. Maybe some of the more interesting things is so kind of like I'd mentioned before, you start with income and then you get rid of your above the line deductions and then you take a standard deduction or an itemized deduction. Then you used to take a personal exemption amount for the number of people in your household, that personal exemption amount is gone. And that's actually the largest revenue raiser in the whole bill is the elimination of this personal exemption amount and it's being replaced by this higher standard deduction as well as for the people that that exemption amount was benefiting or people had a lot of people in their household most of the time, that that means you had several children that offset that revenue increase is being offset by an enhanced child tax credit. So for those with kids under the age of 18, your child tax credit is going from 1,000 to $2,000 and that's a credit instead of a deduction. Again, a credit is better than a deduction because it reduces your tax dollar for dollar. And maybe more importantly for a lot of the people that might be listening, the phase out income level is moving up. So a lot more people will have a chance to take the child tax credit. And that's part of the reason they introduced that into the bill was to kind of offset the problems or the increase of tax that comes about by having no more personal exemptions.

Okay, so is this an encouragement to have kids then? It's, it's a better deal, right?

In some respects, yeah, in some respects.

Okay, go ahead. What else?

A few more things on the individual side. Then we'll kind of shift to some more of the headlines of the bill. You know, famously the mortgage interest deduction remains, but the amount of interest you can take is capped to $750,000 of acquisition debt.

Down from a million?

Yeah, down from a million.

Okay.

There'd been a lot of haggling over that and so that's kind of where they landed. It's important to note this is for new debt. Anybody who had, you know, a million dollar loan before and was paying, oh, their grandfather claiming interest, expense deductions, those are grandfathers. And even revised of grandfathered acquisition debt. As long as the new refinanced amount is not more than the amount you owed on your old mortgage, that those are grandfathered as well.

Right, Right. Okay. So purchase money or refi, so long as it's not above what original acquisition cost.

Right.

And so yeah, anyway, whatever, it doesn't even matter. Because your grandfather didn't. It's just the old law. But this is going to have. Now this is going to have an interesting effect. I believe, Ryan, that overall this tax reform act is going to be massively good for the economy. I think it's a huge stimulus. Okay. Overall. But you know, okay, so say you're winning and life's going to be better, you're going to be more prosperous under this and the whole economy will. But if you're going to go out, buy a $1.5 million house and live in it and have a $1 million mortgage, you're gonna be a little less motivated to do that. Now, I did some math on this and you know, feel free to jump in on this. I was doing it this morning, talked about it on another episode, just briefly. But basically a payment on a $250,000 mortgage at 4.5%, I think I did it is about 1270 bucks a month. And so we'll assume that maybe $1,100 of that is interest in the beginning of the loan. Right. Amortized loan. That's the deduction. You would lose that delta, that $250,000. So this could put some dampening downward pressure on the high end market, right?

I would expect so, yeah.

Okay.

This is noted as a revenue raiser in the bill. So obviously the CBO guys, the Congressional Budget Office guys, they anticipate it to have an effect as well.

Yeah. Interesting. Okay, folks, go rent your high end home just like I've always told you to do, and then buy a bunch of lower priced rental properties you rent to other people. Go ahead, Ryan, what else?

Right, There's a limit on deductibility of taxes paid. This one's going to hurt for a lot of folks.

It's going to hurt in the expensive places. Yeah, yeah.

So your state income tax, property taxes, all taxes together, some together is capped at $10,000. Wow. That's going to hurt some folks.

If you're in New York or California or Boston or New Jersey, you're going to get. That's going to hurt.

Yeah, that is going to hurt some smaller bits that may be of interest to some folks. There's a repeal of all the miscellaneous deductions that used to be in there kind of towards the bottom of Schedule A. And I know that's just tax geek language, but there were a number of deductions such as union dues, tax prep fees, hobby losses, loss on IRAs, stuff like that that were all subject to 2% for those are all those are all taken out.

Okay, good.

One of the things that people were excited about about some of the drafts of the bill is the repeal of the individual Alternative Minimum Tax, the amt. Yeah, AMT is back and is going to stick around. However, and this is a huge revenue loser in the bill. The exemption amount is much higher than it used to be. So fewer people are going to inadvertently just bump into the amt. And something that the GOP has been trying to do forever with AMT is get this exemption amount scaled with inflation. So fewer people are going to accidentally look up at their tax return at the end in April and be like, what does add back here in Amtrak? That's going to happen to fewer people.

Okay, so that's good news. Right, because fewer people will have to pay alternative Minimum Tax or amt. Right.

It's not as good as what was initially sold to the American public, but it's not too bad.

Okay.

One of the signature pieces of this legislation, people are going to have to bear with me because there's a little bit of detail here, is a special 20% deduction for all flow through income. Okay, now there's going to be some exceptions to this, and I'll kind of get into it here in a minute, Jason. But the idea is, since the corporate rate is coming down to 21%, a majority of American small businesses are operated as pass throughs and therefore wouldn't benefit at all from this reduction in the corporate rate. So what Congress decided to do was enact this 20% deduction for flow through income. So for the tax geeks out there like me, this is box one on the K1s ordinary business income. You get a 20% deduction of whatever that amount is that flows straight into your tax return. It's a below the line deduction. So it's kind of taken into account right before the calculation of taxable income. I mean, this is a huge piece of the legislation. A couple key caveats here. This amount of qualified business income that gets this 20% deduction, everybody gets it up to $315,000 of total taxable income for a married person, or half of that for a single person, 157,500. Okay? So if all you do is have an S corporation or a partnership and you earn $315,000 as a married person through that partnership, as ordinary business taxable income, you get a 20% deduction and that's the end of it. It acts funny as we move above that threshold amount of 315,000 for married people. And 157,000 for single people. It acts funny in two ways. That deduction goes away very quickly. And hang with me here that companies that are in the performance of services in the fields of health law, accounting, consulting, financial services, brokerage services, any other business where the principal asset is the reputation or skill of the employees or owners.

Oh my gosh. That is a, that is a tricky. I can imagine all kinds of arguments on this one. And in tax court. Wow.

Oh yeah. That's where this is headed. So if you are one of those businesses that I just described and your pass through company as a married person causes you to have more than $415,000, that, that 20% deduction is all gone. Okay, so between 315 and 415 it phases. But once you go above 415, the deduction if you're in one of those businesses operating as a pass through, it's all gone. So employers and accountants, doctors, they're going to have issues using this deduction the way they think they might get it.

Okay, so let me. I might be mixing up two things here, so forgive me if I am, but we. One of the things that people are very excited about is the reduction in the corporate tax rate from 35% to 21%. That's huge, right? Hugely significant, correct?

Yes, absolutely.

The next part of that is, is that if you have an S Corp, which is a flow through entity or an llc, treated it as an S corp and you use the example of a partnership. I'm not too knowledgeable about partnerships because I don't do those. Maybe I have in the past, but can't think of it with this. What if you have the small business owner who has an S corp or an LLC or the real estate investor who owns a property or several properties inside an LLC with maybe an S corp election. I don't know if that matters or not. I think it does. How are they going to be taxed? Is this good for them or bad for them? Great question.

So it depends. First of all, let me start by saying the individual tax rates are lower. So even without this provision, if you have a profitable business, you're going to save money. What this provision does is tries to get the people that operate an S corp any entity that's even treated as an S Corp or an LLC that doesn't have an S Corp election Schedule C businesses. This also applies. What it does is if you had, for example, after all the, all the income and all the deductions, your real estate portfolio in an LLC made 100 grand. And all of your other income doesn't push you over this $315,000 limit. That 100 grand only comes onto your tax return as 80 grand, and then you apply the appropriate tax rate.

Okay, so that's.

Yeah, it's good. Yeah, it's good. What we're going to see a lot of, just like you said, is, you know, people that are doctors, lawyers, accountants, athletes, consultants, brokers, they're going to have a problem using this deduction at the higher income levels.

So in other words, it may not be great for me for my real estate business, right?

That's right. Depending on your total taxable income, at the end of the day, you may not see a benefit from this provision. The other kind of quirky thing that happens at this same income level, the 315, is if it's not one of those businesses, then you have a different limitation that kicks in based on, and I won't get into the actual formula, but based on wages that your company pays and assets that that company has. What they're trying to do here, because they anticipated guys like us sitting around thinking, well, how can we avail ourselves of this? They were worried about the doctor who makes way more than 315. So ordinarily wouldn't be able to use this hive off part of his medical practice that's maybe related to, you know, maybe puts all of his equipment into a different company and that equipment is leased back to his practice that isn't available to use this particular deduction. So there's limitations on this that they're trying to prevent people from working around it. Moral of the story, Jason, is that if you make less than $315,000 as a small business owner in one of these pass through companies, you're going to see a benefit above that. If you're in one of these personal services fields or in a company that doesn't pay a lot of wages or doesn't have a lot of assets, then you're going to see limitations.

Yeah, they're. They're always trying to engineer things through the tax code. You know, this is. It totally affects people's behavior, at least smart people's behavior. You know, if you're paying attention, it better affect your behavior because you want to align your interest with working through the loopholes and getting the best deal out of it. So no one can deny that, you know, it's. It affects people's behavior. We will continue the rest of this interview on the next episode. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you're using and write a review for the show. We would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode. Welcome to Meet the Masters of Income Property Investing. I'm your host Jason Hartman.

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