Trump’s New Tax Bill Just Revealed — What You Need to Know NOW

And you're live. Hey, everybody, it's Christmas. At least that's how us business owners and accountants should feel because we have a tax bill. And every day we hear more info, more leaks from the committee and staffers and all sorts of good stuff. I've been waiting all week to compile the juiciest nuggets. And I'm here with you now to break down the new tax bill, which I know it's got to go through the Senate. Lots are still, you know, players involved, some holdouts. I'm going to explain all of that for you now. But I think we're about 90% there and it's exciting. We are going to save money at every level of the American experience, from low income to middle income to high income. Everybody's winners. And I'm going to break it down here for you, for you today. And I want to answer questions as well. We are live, I'm here on multiple platforms. So, so please type up your question down below. And this is just so fun. You know what we did, I printed out the whole bill. Look at this. This is crazy. 389 pages. Now, you may have thought, Mark, you could have gone double sided on that. But you know what, it's exciting to have this big, you know, you come home and you feel like you really did something, you know, So I, yeah, I know it's probably a little reckless, but I'm excited. I'm even going to celebrate with my rockstar here. Now let's get into it. I'm gonna go with business owners first. I love the small business provisions because we now have over 40 million side hustles in America. If you're getting a 1099 for anything, guess what, you're a small business owner. You're on that gateway drug to live in the American dream. So I love to hear about tax strategies for small business owners. I'm going to go, the whiteboard is needed as well, but there's two big ones. We've got seven provisions for individuals. We'll get to those. But I want to go through these first two for business owners. Now, we have to remember that the Tax Cuts and Jobs act that was passed, the most sweeping legislation in Donald Trump's first term is going to expire this year. You've all heard that. And so it's going to get ugly if we don't see some of these extended. And what we're hoping is the good ones will be extended permanently. So I'm going to explain that as we go. Now, the first One we're going to talk about is what's called the QBI or the qualified small business income deduction. QBI, it's a 199A. There's all these little terms for it. Now what this says is if you're a small business owner and you make 100 grand net income, you get a 20% deduction. So you're only taxed on $80,000. So this was a big win the first go around in the Tax Cuts and Jobs act because corporate rates got cut all the way to 21%. But small business owners are like, hey, what's in it for me? Oh, well, we'll give you this 199A deduction. So whatever your net income is, knock off 20% and then you're taxed. So this deduction is nice. It's not a credit, it's a deduction. Well, this is pretty cool. Not only are we seeing a extension of this, it is slated to be permanent, but it is also going up to 23%. So this is a lot of fun. This is going to make a big impact on small business owners tax returns. So the math's pretty straightforward. We could do an example, but I love it. It's this noun in that example of 100 grand, it's now 23,000 off the top before you're taxed permanent. This is a good one, but it's not my favorite. Number two for small business owners, we are getting back 100% bonus depreciation. So what this means as a small business owner and a real estate investor, there's some strategies here that permeate a lot of investment. Small business type approaches is that if I go out and buy equipment or property, it could be even a vehicle or real estate and I do what's sometimes called a cost segregation and break it down into its smaller parts. Any of this 3, 5, 7, 15 year property, I can depreciate it all at once, 100%. That's what it was before. And then it got phased down to this year being 40%. So if I went out and bought new equipment or something for $10,000, I could write off 4,000 of it and then depreciate the rest over its useful life. Well, now we're going to go back to 100% and it gets better. It is going to be retroactive back to January 20th. So we are going to get 100% bonus depreciation for the entire year of 2025. So talk about stimulating the economy and giving a shot in the arm. For small business owners, real estate investors. This alone, I think, is a huge deal for the business community and I just love it. And it's really going to help a lot with the vehicle deduction, too, which is the best it's been since 1987 after the last tax Cuts and Jobs Act. So buying a vehicle for your business bonus depreciation is going to be huge. Now, as I said, we'll take questions on those here in a moment, but let's jump over to individuals and see what we're dealing with here. First thing is, are the tax rates. The tax rates were slated to go back up to nine different brackets. Higher rates for everybody across the board, 2 to 3% increases in the tax rates if Congress did not take action. So there was also talk of President Trump wanting to impose a higher tax brackets. We're going to add another tax bracket and it would be at 39.6% for anyone making 2.5 million or more. Now, there was a lot of talk of that, but it did not end up in our stack of paper here. No, not in the bill. So it's going to probably be a negotiation tactic. It still may bop in, maybe it's out. We'll see. But the current highest rate will now stay at 37%. So all these tax brackets that we were enjoying the last six, seven years are now going to stay the same. No decrease, no increase. We're loving that. And guess what? It's permanent. So these are going to stay for a while. And pretty exciting. Pretty exciting. Now, I want to just share this, too. This is on a personal note. I was doing some research this last week on, on the SNL bailout of the 80s and how it affected a lot of tax policy. And it was the biggest scandal of the 1980s was the savings and loans bailout. Back then there was a president that came in and cut tax rates that. Hold onto your seats here. Tax rates in 1985 were at 50% for average Americans. 50%. Crazy. So a guy named Ronald Reagan came in and said, let's change that. So the 1986 tax act made sweeping changes there. So right now, this isn't too bad. I mean, we're the highest rates at 37. So just wanted to mention that. So you're not feeling too bad. All right. Now, the second issue for individuals, this is a very contentious one right now in the negotiations in the House, and that's what's called the SALT deduction. Now, the SALT stands for state and local taxes. Now, what it was previously for last 30, 40 years since Ronald Reagan was that if you earn income and you pay state tax, whatever that amount might be, let's say you live in New York and you make 250 grand and you pay state tax of, let's say 20%. And well, you would never pay 20%. So sorry about that. So you live in New York and you pay 10%. It's 10.9% New York. I still had QBI in my mind. So at 250 grand, you would pay $25,000 in tax. Well, you go to file your federal return over the years, the Fed said, hey, you've already paid state tax of 25 grand. We're only going to tax you at the federal level for 225,000. You get a deduction for what you paid the state. We don't want you to be double tax. That doesn't make sense. So not a problem. Well, when they increase the standard deduction back to the Tax Cuts and Jobs act, they said you cannot deduct more than $10,000. And that also included property taxes too. So this is far sweeping. So this $25,000 that you paid to tax to the state of New York, you only got to deduct 10 of that before you paid federal tax. So you're actually paying federal tax on $15,000 more than you should be. You're getting double taxed on $15,000. So the first current proposal is that they're going to triple that $10,000 and that's in the bill right now. They're going to take the 10,000 and raise it to 30. Now, this would include property tax, income tax, and you may think to yourself, oh, that 30 will cover quite a bit. But if you're dealing with a lot of property tax income, they can add up quickly. So 30,000 is where we're at right now. And a lot of people are happy with that. But there are three states and Republicans in those three states that are not happy. You have to remember the Republicans only have a slim margin, both the House and the Senate. They need all the Republicans to come on board on this and be cool with it. Well, in New York, California and New Jersey, these Republican House members are like, hey, we've got people paying a lot more than 30 grand in property tax and income tax in these states. This is killing us. And I will not sign this bill unless that SALT cap is completely removed in total. And so right now, this bill released by the House and Wayne's House and Ways and House Ways and Means Committee is not going Anywhere until they resolve those representatives from those three key states. So we'll see how that plays out. We're already seeing that increase, but it may not be enough to get the bill through. All right, few more here for individuals. Move quickly through these. Number three, the big deal on tips and overtime. Wow, wasn't that exciting last fall? Donald Trump's on the campaign trail and he starts dropping. I don't think we should have to pay tax on tips or overtime. Crowds went berserk. Right? Pretty exciting. Well, it's in the bill. No tax on any overtime or tips. But they can't pay for this forever. The bill's gotta pencil out within 10 years based on the revenue and the cost. And so they're gonna allow for it for three years. In 20, 25, 26 and 27, there'll be no tax on tips and overtime. And then in 28, it's back. So right now it's another bargaining chip. But they can't find the money somewhere else. They're not going to be able to get that in the bill. Number four, we have the standard deduction. Now, what the standard deduction means is, let's go back to maybe that New York example. You live in New York, you make $250,000 and you're now going to take your standard deduction after your AGI before you have your taxable income. So the standard deduction could either be itemizing or a fixed amount. If you're single, it's 15,000. If you're married, it's 30. So that is the first haircut and one of the biggest before you pay your income tax. So the standard deduction is set to not change. If it did. And this is a big deal because if it reverts to the old numbers, it would be cut in half and we'd be down to 7,000 and 15,000. So it's a big deal and we want to see this stay. It's a wonderful thing. This is important too for the middle income Americans and lower income Americans because the standard deduction really provides a lot of benefit. If you're making say $100,000 and married, you're going to have that haircut of 30,000 before you pay taxes on 70, and that's a big deal. Now, talking about someone being married, you might have some kiddos. Well, that's number five in the package. That's kind of exciting. The child tax credit. Now, it was previously to go back to $1,000 per child and now it's not only going to stay at 2,000. It's going to even go further higher at 2,500. So there'll be a tax credit of 2,500 for all children with head of household or married, filing joint or separate. If you have children, you're going to get that tax credit. I'd love to. There was talk of, Donald Trump was saying we should throw out a $5,000 bonus if you have a child. And I thought, yeah, that'd pay off. That's, that's a good deal. You know, teenagers. I mean, that five grand, I'm. Sign me up, you know, that's, that's a killer deal. Okay. Anyway, number six, estate tax, estate tax. That is the death tax as we know it. Essentially, this is just going up a slight amount. It's not going anywhere. It'll be adjusted for inflation. And the concept with this is. And it exempts. Well, the concept is when you die, IRS takes a picture, how much are you worth? And if you're worth over a certain amount, you've got to pay tax on that. And you may say, well, I lived my whole life paying tax on all my income to build up this nest egg that I want to leave to my family, whether it's a family farm or a business or real estate, a home, 401ks, whatever. I got to pay 10 tax on that, my family does before they get it. Well, there's an exemption amount. And when I was growing up, in fact, until I even became a lawyer, was around $600,000 million dollars. Well, right now it's. With all the adjustments over the tax policies the last 25 years, it's now at 15 million if you're single or 30 million if you're married. Now, that may seem like a lot, but when you start looking at real estate and family farms and some of these issues, families have to sell assets to pay the tax. So this is going to stay the same. And then adjusted for inflation, moving forward, 15 million and 30 million. Number seven. Last one here I'll mention is the auto loan interest deduction. This is new. Never seen this before. The lobbyists in Michigan have been doing their job. Detroit's on fire. They're loving it. So there is a deduction of up to $10,000 for auto interest for a personal auto purchase, which is pretty phenomenal. So business owners, you've always been able to deduct your interest on your vehicle, even if you use the mileage strategy. So if that's new to you and you're hearing some new tips here, I better get following me Because I'm always dropping cool tips for business owners. Business owners have a choice between mileage or actual. But you always get to deduct your auto interest on your business vehicle. But now there's going to be a new auto loan interest deduction for all Americans and that's in the bill. Last thing I'll just mention, nothing on Social Security. So kind of, you know, that was a big talk. We're not going to tax Social Security. And you have to know too, 50% of Americans that receive Social Security aren't taxed on it already. There is a phase out amount that it so if that comes into play, it's going to be for those that already probably have other sources of income as well as. So I know it's been a big debate and we'll see more about that. Now we're still going to have to wait for the Senate version. Then it has to go to joint committee. Senators are working on their version. It could look very different. I remember the tax Cuts and jobs act debate. Lots could happen. So it's exciting. But I think we're headed in the right direction and we're 90% there. So buckle up. It's going to be fun. All right. Well, let's take some questions. Anybody here out there in the on the airwaves. What do you got?

Yeah, so Ryan Lee asked. Oh, you're good.

I did.

Ryan Lee asks how can I write off kids private school outside of playing paying them a for a job.

Okay, you bet. Next time a little louder. So I get it. So how would I write off my kids private school? So can I write off kids private school? Well, there's a couple options for this. One is you might be able to use the coverdell or the 529 plan. The coverdell is an educational IRA. And for any of you out there, parents with children even a year old, you can start this IRA for your kids that grows tax free and comes out tax free for college. It's called a Coverdell. Now it's a couple grand per child. But I love this. Even grandparents can, you can gift money to grandpa and grandma to put it in there if you need to based on income levels. There's always a backdoor method to get into that money, into the Coverdell. But what I love about the Coverdell is you can self direct it. You can take that Coverdell and buy crypto. You can buy stock, you can even buy real estate with it and pool it in an LLC and build it for when your kids go to college or private school. So if they're in secondary primary school and you've got that covered all built up, you can pull it out. 529. You don't get a tax deduction to put in money in a 529, but if you have family that wants to donate to it, it'll grow tax free and come out for private school. I'd still like the third option. I know you just said, well, I don't want to pay my kids. You know what? I love paying kids and putting them on payroll. And you don't even have to issue a W2 for your own children under age 18. And I want them providing legitimate services to help in the business. But you can pay them, take a tax deduction. They don't pay any income tax on the first $15,000. And they can use that to pay for the private school. On top of that, you could do an ira. You could also do the Coverdell. And so if you've got the money for private school for your kids, and I hope that's the case, I think there's some other methods here you ought to consider, and hopefully you have a little side hustle or small business to do it. So, next question.

All right, so Mike Lang says, do I need to pay myself hourly instead of salary? I own my own consulting firm in the oil field and work 12 to 15 hours a day, seven days a week. I pay myself $150,000 a year.

Okay, do you think he's taking that as a 1099 or is he W2? Jack, are you trying to. Oh, so he's trying to backdoor into the overtime. Well, one of the provisions that we've already seen in some of the committees. Now, let me repeat the question is that I'm a small business owner. I'm making $150,000 gross, it sounds like. And he works in the oil fields a lot of hours and works his tail off. By the way. I was out in Oklahoma yesterday, torn some oil rigs and fields. It was amazing the hard work you guys do. But. So he's making 150,000 and he wants to know, can I. Should I pay myself hourly so I can get this overtime benefit? The problem is, as a small business owner, you are not going to be able to take the overtime strategy and use it if you're paying yourself if it's your own small business. That was already part of the discussions in committee. I didn't read the line on that, but I can tell you that's probably going to be the case. Most Tax deduction strategy that come for W2, wage earners have to are not allowed for a small business owner paying themselves. Now, I don't know all the facts of your situation, but the way you frame that question, my fine sir, you have got to look at an S corporation. You should be driving down your salary already anyway. There are so many saving strategies you should be using. We have got so many oil rig clients that make great money and even use a solo 401k. Please get a consult with my law firm. I know we can save you money because the way you frame that too, I think there's some ideas that could really benefit you.

All righty. We have one more from Robert D. Harris Jr. If you have a living trust and you're married, can you transfer property from it to another living trust? And can you have more than one living trust?

Yes, you can have as many living trusts as you would like. I probably wouldn't recommend it. Living trusts do not save you taxes. They do not provide asset protection. They are there to leave a legacy, build wealth, avoid probate, avoid lawyers. I love the trust. And for all of you and you know, I want to just do a quick example here, let's go to the whiteboard and I'll show this example here for all of you. That and we'll use our oil worker. Let's combine the two situations here. What I like to do is design what I call the trifecta. And a trifecta is an example or a diagram that allows us to build a client's wealth. And what we're going to do is put their operations on the left, their assets on the right. And so the trust, a revocable living trust, is a great fit for that single individual or it could be a married couple. And the trust is there to leave all of the assets when they're both gone, or the single individual to the kids, to charity or wherever, but with rules and guidelines. And we avoid probate. We do not want probate. And so that's the purpose of a trust. Now if you want three or four trusts, freaking A. You can have 10 of them. I don't care. There just creates more work and it doesn't really help you. Now some people use land trusts as a strategy, but that's not a revocable trust strategy. Now that oil worker, I put him in an LLC taxed as an S corp. We're going to bring that income in and we're going to do a salary K1 split. And that's going to save you a lot of money and I want your trust to own it. Then we may even set up a Solo 401k which you can do as an entrepreneur. Many of you out there may already be doing this and take deductions over to that solo 401k and build it and even buy real estate in your 401k. Then you may even have some rentals in your own name. Have that owned by your trust. But notice how everything flows down into your trust. And I don't care if you're rich, poor, kids, married, no kids, whatever, it doesn't matter. The revocable living trust is for everyone in this month, every year. It's funny you bring this up every year for the last 13 years. We have a special on on estate planning. We provide a huge discount on this because 50% of Americans don't even have a will. And so I'm just going to throw a website out there if you want to check it out. We help clients all over the country. At KQS lawyers.com you meet with a real lawyer. You. It's affordable. So much more affordable than most lawyers out there doing estate planning. I wanted, I didn't plan on talking about it, but I'll just mention that now. And you do not need a bunch of revocable living trusts. Just one. That's all I have. And I think it's a great fit. Your trust should also own your home. And that's how it comes together. That, my friends, is the trifecta. Lots of fun. All right, next question.

Next one comes from Dan Oliver. What is the tax liability on a K1 distribution from a trust?

Oliver, it's going to depend on the type of trust. If this is an irrevocable trust, a trust you inherited, it's going to depend on the type of trust and more than likely, if it's a trust. Most people have a trust that they inherited from mom and dad or grandma and grandpa and they're just getting a K1 from there. You're going to pay your ordinary income tax rates and the trust takes a deduction for distributions to the beneficiaries. So you're not paying the high trust tax rates. Now, that's normal. But I have no idea what kind of trust you have. Now in my example of a revocable living trust, and this is 99% of our clients, you've got your trust. You've got your LLC with your rental property. You have your S corp for your operations. You're getting a K1 here, you're getting a K1 here, you would never get a K1 from here. What happens is everything comes down into your 1040 tax return. So if you inherit a trust that you are simply a beneficiary of, then then you would be getting a K1 here and you're gonna just pay your ordinary tax rates whatever bracket you're in of the seven brackets. We just see where you're at. So that's the story there. All right, next question.

Zach, next question comes from Brent Campbell. He says, I have a rental that was vacant for four months. Could I use the market rent as a rental loss on taxes as well as the expenses, mortgage, etc for those

four months, the answer is no and yes. You definitely for those four months that you didn't have a tenant, you still get to write off mortgage, interest, depreciation, utility bills, repairs, maintenance, landscaping, whatever. So even though you didn't have a tenant, you get to take all the write offs of expenses you incurred, but you cannot book a loss for no tenant in there. And as a American individual cash basis taxpayer, which we all are with rental property, you only have to collect the rent you receive, but you get to write off everything you incur during the year. So I guess you get half of a good answer there for you. Next question. Zach, some more questions. All right. Hey, if you guys have more questions, let's hit it. I'm all yours. I'm excited about the this tax bill in so many ways. I think it's going to help so many people. And I also want to mention our 360 big event we're having in Southern California. In three weeks. It's going to be in Orange County. Three days of tax and legal strategies. Accountants, lawyers, business owners, real estate investors, all hanging out. We've got parties at night, lunches and panels during the day. You get continuing education if you're a professional. Very affordable. A general ticket is under $1,000 and it's just incredible. Also we're doing. Oh, I just got handed me a note here. This is good news. And I remember this from earlier today. It's 10% off right now. If you want to come to the tax and legal360 event, you just use at checkout MJK 2025. MJK 2025. It's gonna be a lot of fun. And the tax strategies alone, you'll, you'll save if I. If you don't sit, walk away. Saving 10 grand in New tax strategies or wealth building strategy, we failed. It's going to be an awesome event. So check that out at tax and legal360.com all right, well, we got one last question here. And someone asked, should I have my home in a rental, my home in my trust? And I got that over here on another screen. I think that is a perfect move for the revocable trust. A revocable living trust should own all of your assets. So if you pass away, sorry, when you pass away, all of your assets flow down into that trust and go to your family with no probate, things are organized, clean, and the way it should be without court involvement or the government taking away anything. So the trust would be on title to your home. Don't worry about the mortgage. You're going to transfer the home to the trust. Don't care that you closed in your own name. We want to put your rental property in the llc, your home and your trust, and then the trust owns your llc. And you can do this. Banks are fine with it. Get it done. And it keeps you organized with better asset protection and better tax planning. Well, everybody, I'm going to keep you posted as we have more come out here with our tax bill and lots of developments to come. But all indications are we're going to see tax legislation by the summer and we're going to be breaking it down at our tax and legal event in June and hope to see you there as well. Thanks, everybody. Keep living the dream.