Joe Biden's Tax Plan for Small Business Owners & Investors

I want to be talking about a very important topic, Presidential candidate Joe Biden's tax plan. This is not a pro Biden speech. This is not a pro Trump speech. I want to give as honest, transparent results. I'm going to focus on tax strategies and what it means not for a big corporations, not for regular Americans. What he has specifically said about small business, that's it. That's what we're going to cover. I want you to understand what these tax policies mean. I want the average American Main street business owner to be able to understand these tax policies and procedures. I'm not telling you to vote one way or the other. I just want you to have all these, the facts, the four good things he's trying to do is he wants a true small business fund, true small business fund, $60 billion for small businesses with less than 20 employees. Number two, he wants to reduce burdensome regulations for certain industries. And then number four, three, sorry, he wants to do immigration reform so that you can, as a small business owner, hire more immigrants if you need to in your business. Then number four, he wants to support more funding for SBA and other organizations locally and regionally to help small businesses with education. Okay, so those are four things that he's already trying to say are good. Now, I guess I could. I'm just going to dive into the 10, 11. I got 11 things that you need to know about, and they're not all that great, but again, you just need to know, okay, number one, this is the thing that's not great. A flat tax is harder on people with lower incomes. And a progressive system says we're going to have lower rates for those that make less money and higher rates for those that make more. Well, we already have that. We already have that. But he wants to increase the rates at the higher levels with the Tax Cuts and Jobs Act. GOP and Trump, they reduced the rate down to 37 where it now he wants to bring it back up to 39.6. What's crazy, you put that together with the California state rate, you could be paying 54% in your next dollar you earn in taxes in California, as an example. Brutal. Number two, if you remember, in the Tax Cuts and Jobs act that became effective in 2018, it was a $2 trillion tax cut. He has said, quote, unquote, very specifically, I want to get rid of a bulk of Donald Trump's $2 trillion tax cut. I want to go in there and cut that 50% of the Tax Cuts and Jobs act expires by 2020. Four, the rest is gone by 2025. So that big tax cut that we saw is set to expire. Now, why the GOP did this is because it was job insurance, it was employment insurance. Because if Joe Biden gets into office, he said, hell no, I am not renewing the bulk of those tax cuts. I want to get taxes back up. I'm going to not allow a lot of these write offs. Now what that means, in summary, as a small business owner, whoever is in presidency the next four years will control these write offs. All right, so that's point number two for small business owners. A lot of these write offs that we've been seeing are going to expire. And Joe Biden has specifically said, hell no, I am not renewing those. The third thing he said, I'm going to jump around here a little bit on my notes is he said we're going to increase minimum wage across the country to $15. It also on the reverse side makes it very hard for business owners, small business owners that have to pay $15 an hour to everybody across the board and they want, he wants to increase the Family Sick and Medical Leave act, that's Family Medical leave Act, to 12 weeks paid vacation or paid time off to go have a baby or you're sick or whatever. So if you're a small business owner and you have an employee that I'm sick or I'm having a baby, you got to pay my wages for the next 12 weeks while I'm out. Wow. All right, number four, he wants to kill the 1031 exchange gone then. Very clear about that. Now for those of you that don't know what a 1031 exchange is in a nutshell, I can sell a property and go take the proceeds and then I go out and replace the property with one of equal or greater value. Now that's at its most simplest form, when you do that, you don't pay any tax, no tax, but the tax stays in the new property and that basis carries forward and you're going to pay the tax someday when you sell it. He thinks this is not fair. 10:31 Exchanges should be abolished. He also wants to get rid of flow through losses. What now how this works, if you've got a W2 day job or say you have a little small business, little 1099, maybe you've got an LLC or you've got an S Corp. So you've got all this little ordinary income over here. You're making money and it's all going to flow down to your 1040. All right, that's cool. That's great. Then over here you go buy some rental property. Oh, cool. When I buy rental property, I might have losses and that depreciation can wipe out the taxable gain. So I end up with cash flow and I get this loss that flows through onto my individual return. He's saying no way, don't like it. Number six, he wants to increase capital gain rates. Now, right now there's a 0% rate, a 15% rate or a 20% rate. Now what A long term capital gain is long term capital gain. If you own a property or a stock for more than 12 months, when you sell it, you don't have to pay taxes at your regular rate. So if I make a million dollars selling my business, selling my home, but you get to carve out that part and call it 20%, that's a good thing and we're motivated to build our business so I can sell it and have this lower rate. Joe Biden says if you make too much money, you don't get this 20%, you're going to go up to 39.6. Now I have a lot of clients that do not consider themselves rich, that own a little farm, own a rental property, a little 4 plex. They may own a small business and that's their retirement. And when they go to sell it, they could lose 40% to federal tax, not to mention state tax. If you're in a 10% state, that's 50% of your small business. When you sell it goes to taxes. Number seven, let's say your grandma died and she had her own home and it was worth 400 grand. Now if grandma was to have sold that during her life, she would have paid tax on 300 grand. Well, when grandma dies and you inherit it, your tax rate when you sell or tax when you sell it the day after grandma died, if you choose to zero no tax, step that basis to the value on the day grandma died. Joe Biden says no more. So if grandma dies, the IRS takes a picture. How much is grandma worth when she died? Since grandma made less than 11 million, she sorry, she was worth less than 11 million. 580,000, no estate tax. She's below the exemption. Well, here's the problem. Joe Biden says too high. Trump raised it way too high. It should be around 5 million. So if you're worth more than 5 million, which includes your life insurance and 401k and IRA and home and just want you to know that's the plan. So stepped up basis is gone. Estate tax exemption reduced. That's how we would say it. Let's jump to the 401k. Some of you love to put money in your 401k in the last month, Joe Biden said, yep, only the rich really max it out. So they need to. They don't get as big a write off for a 401k. Oh, my gosh. Talk about 401k is sacred land for so many people. Right? And a small business owner that makes too much money, he's going to say, yeah, you don't get a write off for your entire contribution. So 401k contribution reduction. I'm going to say another way to say is reduced deduction. And heaven help us if he wants to touch the backdoor. Roth number 10. He supports a ban on all unessential. I don't know the list. He didn't say non compete clauses. Sometimes your biggest risk is one of your employees stealing your idea and starting a business down the street. He feels non compete classes, for the most part, 90% of them are unessential and they should be removed. They should be banned across the country. Next, he supports. Now, for those in California, this was. This rocked your world. There's about nine other states that are doing this now. They're trying to force subcontractors and saying, you're really an employee. Now who's got the big lawsuit on this? Uber. Uber is under a huge lawsuit from the state of California saying those are all employees. We want you to pay FICA on all those people. It would be millions, if not billions of dollars. It would destroy Uber. Now, you may hate Uber, you may say they're all employees. I work for Uber. They're jerks. Right now they're giving all of their drivers a 1099. This ABC test starts to force people into this employee category. You can't have a side hustle with a 1099. I love a side hustle with a 1099. I want you to write off your auto and the kids and the fam and dining and my cell phone and TVs behind me. This is a write off. It's a business. Well, if I'm an employee driving Uber. Nope, you're not a small business owner. It's my car anyway. But you got to just know he supports the ABC test. All right, now I've only got one more. And we're going to wrap it up on this one. And this is a good one. And what's funny is that Joe Biden himself was using this strategy. This is Important, everybody, this is. I saved this for last because it's a really important one. If you're a small business owner, let's say you have an LLC and you have a small business, not a rental, I'm talking about just a regular small business. Whenever you make profit. So you got your income and you got your expenses. So income and expenses, your net, whatever that net is, you pay self employment tax of 15.3%. So if you net 100 grand, you're going to pay 15, $300 in self employment tax, then you're going to pay fed and then you're going to pay state. Now after all this you get what's called a QBI deduction, which is a 20% deduction. So off the 100 grand I get a deduction of $20,000 and I only pay tax on 80 grand. All right, that's cool. Now if you're an S corp and many of you have seen me talk about this before, and if I net that same hundred grand, I might take payroll of 40 grand and take net 60 and this would be a pass through. Well, the beauty of this is I only pay 15.3% on this portion, which is around six grand. So I saved close to $9,000 saved. But look at my QBI deduction is only 20, 20% of 60 grand. Ooh, that's only a $12,000 deduction. But look at this, this is a deduction where if I'm in a 30% tax bracket, I just save four grand. Well, I'm still saving $5,000 because the net benefit of the FICA savings is off the chart. Joe Biden in his S corp. Joe Biden has an S corp. I love this. He avoided 500 grand in FICA taxes over two years. Over two years he made $13.3 million. That was his net. That's cool. Speaking books, whatever. So Joe Biden made 13 billion net and he took a salary of 750 grand. The rest he did pass through. Joe Biden himself saved 500 grand in self employment tax. He must have read my book. I love it. Love the guy. I've been teaching this for 20 freaking years. I have a whole chapter in my book and everybody that makes more than 50 grand a year should be thinking about an S corp. And if you. I'm an LLC taxed as an S corp, that's an S corp. But if you're an llc, you're not saving taxes. All right, now this QBI deduction right here, this 20% deduction, 20% deduction. Joe Biden says no way we're getting rid of it. It's too expensive. I got more important things I want to pay for. Now, there's been talk of he'll phase it out at certain thresholds. Then he won't. It'll just be gone. He wants to get rid of the C Corp. Big corporate tax rate that was at 39, that went down to 21. He wants to bring that back. That, my friends, is what's called the QBI or the 199, a deduction which is 20% of your net income. I am not trying to be anti Biden. I'm not trying to be pro Trump. I'm trying to be a small business owner. I want you to know that President Biden has a different agenda for America than small business owners. Building the economy, per se. That's the summary of it. Don't give up, though. The American dream is still so powerful. I love it. I love small business. I want you to save taxes. It helps the economy, in my opinion, for what it's worth. And there's a lot of good things President Biden's for or candidate Biden is for and a lot of good and bad with President Trump as well. So you, I hope, can make an informed decision now, a little more accurately, now that you have a little picture into Biden's tax life. SA.