What You Don't Know About Joe Biden's Tax Plan - Live Q&A

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Welcome everybody to a very, it may appear complex and politically charged. Mark, are you crazy? You're stepping into a minefield to talk about President Biden and his tax plan versus Donald Trump, but we've got to talk about it now. For some of you that are ready to send me some hate mail because this may sound very anti Biden versus pro Trump. And I'm just going to say that when we talk about candidate Biden's tax plan, it's not great. And I think all of you know that. But you've said, you know what? I don't care if I pay more taxes. I hate Trump. Fine. That's cool. And 50 Cent, the rapper came out this last week and said, guys, what are you crazy? I don't want to be 20 cent. Have you seen this tax plan? So let me just say this to everybody before you scroll on. If you're a supporter of President Biden, great. There are some reasons why I would not want to vote for Trump either. But for those that are concerned about taxation, the capitalist conversation in the economy, and what business owners are going to be dealing with when it comes to operations in this Covid crisis under President Biden if he was to win, I just want you to have your. I just want you to go in with your eyes wide open. That's what this is about. This is not a beat up session. I don't want to get a tremendous amount of hate mail or frustration from people that are pro candidate Biden. I just want you to say, okay, cool. Thanks for giving us the facts, Mark. That's what I'm trying to do. So for the next 20 minutes max, I'm going to summarize what we know, what the facts are. I'm not trying to spin it in a certain way. I'll answer Q and A on that. Maybe we'll talk about some other tax strategies before year end. I'm here for you. I do this every Thursday. I want to give a shout out to Entrepreneur magazine that supports me in this live broadcast on their Facebook channel page as well as on my YouTube channel. And I want to say thanks to all of you that are watching this, that are regular viewers of my live broadcast every week. For those that are new and you're like, what's going on here? Again, I'm trying to give just the facts. I am very, very pro business. I'm very pro business Main Street America. I have clients that are very Democrat and they vote Democrat every year and they're trying to make money and provide a living and hire employees and. And they're very frustrated. They're concerned. There's things about Trump they hate. But they're also trying to look at their bottom line and what their business might look like and what their bottom line, after taxes, might look like under a President Biden administration. So sound. Okay, team. I got a team around me and did I say that? All right. Okay. We're going to freaking do this. All right now, I'm a CPA and attorney, bestselling author, got some books on the wall, yada, yada. You can Google me. I am not crazy out there. Left wing, right wing. I love small business. So let's break this down. I'm going to give you the good. I've done some other videos in the past, but we are a week away from the election. So I'm going to summarize this quickly. Any of you that have a question, I've got my team here ready to take those questions on YouTube or on Facebook. I need a first name and a city. That's all I ask. If I can't get your first name in your city, I'm not taking your question. I appreciate that, but I need a little bit of that out there. And if you want to vent a little bit in your question, call me out. I'm open to it. Let's do our best. First, four things President Biden is doing. He's already talked about this. There's not any really new ones in the last month. One, he wants to create a true small business fund, somewhere around $60 billion to give to small business owners with 20 or less employees. We don't know what the criteria is for that. But basically, after the ppp, the payroll protection program, or I should say the paycheck protection program, he was like, hey, these small business owners with less than 20 employees, they need more. So he has some idea. We don't know the details. Number two, he wants to reduce burdensome rules on small business owners when it comes to state regulation and state licensing and that sort of thing, which is really state regulated for the most part. So him saying that sounds nice. All of us business owners would like less regulation. But he has not been specific at all on how he would accomplish that. And he's got to tell the states to do it. This is really a kind of a state professional licensing board issue. But he says he wants to do better there. Bless his heart. I would love it, too. Third, he wants to do immigration reform that helps small business owners, people that are hiring immigrants, that Come in and do factory work or farm labor and we're shutting down immigration. He would say, if you're a typical Republican capitalist, you know we're anti immigration. He would say, well, and I'm not. But he says, no, we need to open up the borders for those that are going to work for small business owners. And I get that. I think that sounds great. I've got a lot of clients that would like to hire more immigrant workers when in those seasonal situations. Okay, number four. This is number four of what he wants to do. He wants to create more funding for entrepreneurs in the Small Business Administration, more SBA loans, fast track it more, give them more money, help small business owners start a business through the sba. Okay, sounds good. Alright, those are his four general platforms. Those are on his website. I've got all sorts of speeches, I quote in articles on where those comments came from. Now we get into, I've got a list of about 12 to 13 not so great things. Now here's the hard part. Even with Trump, with any presidential candidate, they say their wish list to try to get you to vote for them, but they don't provide a lot of details. And President Trump did the same thing. Mitt Romney did the same thing. President Obama did the same thing. Because once they get in office, they got to deal with Congress. You know, they just don't get to do everything they want. But they have their wish list. All right, so again, if you say, well, Mark, that's not exactly what he wants to do. Well, no one knows exactly what he wants to do per se. We just have some general parameters. So with that disclaimer, thanks everybody, let's go through them real quick. The first thing is he wants to tax the wealthy more. He wants to keep all the brackets the same that are currently in place, except the highest one is currently around 37%. He wants to get it back up to 39.6% at the federal level. Now when you start adding in state taxation that gets close to 50%. States like California and others that have a double digit tax rate. So people that make more than 400 grand a year, 500 grand a year, they're going to go over. At that point, any next dollar they make between state and Fed, it could be 50%. So not pretty. Now here's where a lot of people did send me some previous quote unquote hate mail or criticism is they said, mark, you make it sound like it's going to increase rates on everybody. Remember, it's only the rich. Okay, I get that. Then I want to be clear about it. It's people that make less than 300 grand a year. You're going to stay in the same bracket under President Biden as you would currently be under President Trump's administration. But here's the deal. When I talk to entrepreneurs and our law firm and accounting firm, we consult with them every day around the country. Most entrepreneurs want to make a lot of money. That's their goal. That's the capitalist system. We love that. Right? Well, if you start making more than 400 grand, you're going to pay more. That's the fact. And that's okay. Some of you, they're like, you know what? I'm never going to make that much. I don't like people that make that much. Even if it's my employer. It's not. You know, you may think it may not affect you, but it may. I don't know. But just. That's the fact. So I just again, want you to go in with your eyes wide open when you go into that polling booth this first week of November. All right? Number two, this is evident every day. President Biden's wearing a mask. President Trump is not. Generally, both of these guys have a very different position on how the country should operate under Covid. President Trump wants to get businesses opening and going and get the economy back on track at the risk of some people that may get infected and die. It's true. And President Biden's like, if he were to be elected, it would be President Biden. His administration says, nope. We want to keep the country more locked down, more slower openings, and we need more protection for people so they don't get sick. That's fine, too. Frankly, in my household, my wife is more on that Biden approach. Right, team? My wife's like, I want social distancing. Everybody should wear a mask. My wife has health issues. And then the other half, part of our household is like, no one should make me wear a mask. It's very divided. It's like the Civil War right back in 1800s. So brothers fighting brothers, sons fighting fathers. So just go in with your eyes wide open if you think businesses need to be opening sooner. We're going to see more of that with a continued Trump administration. If some of you want to see businesses closing more and a more slower approach to reopening, that's what you'd get with a Biden administration. That's number two. Now, does that affect your taxes? Does that affect your economics and your income? Absolutely. And that's why this is on an entrepreneur channel. I'm a small business advocate and I'm telling you, you want to be open, it's going to be a little slower. And we all know that. And it's okay. Just keep your eyes wide open. Okay? Slower opening. All right, number three, when we, the government, Congress and the American people signed off on the Tax Cuts and jobs act about four years ago, well, three years ago, it went effective January 1, 2018. There are a lot of cool small business tax strategies, better auto, bonus, depreciation, blah, blah, blah, all sorts of good things. Those expire in 2023. Whoever the next president is, is going to control the Tax Cuts and Jobs act in which is reenacted and which stays and what's gone. Well, President Biden, as many of you that support President Biden, you've heard him, he says, I don't like President Trump's tax policy. The rich need to pay more, and I don't like a lot of those policies. I want to gut what candidate Biden calls President Trump's tax act. I want to get rid of it. So if you're a small business owner and there's write offs and bonus depreciation and things that you've liked in the past, there's a good chance those are not going to be continued or reenacted. But again, we don't know. But when President Biden, when a candidate Biden says, if I'm president, we're getting rid of that, we got to take Note. Okay, number three, I'm sorry, number four, 1031 exchanges. That's when you sell one property and buy a new one of equal or greater value. You don't pay the tax in the process. Candidate Biden says, don't like it, don't want it, get rid of it. It's only the rich that own property that are selling property and getting out of capital gains tax. Ouch. Now, he has never alluded to, if you make more than 400 grand, you can't do 1031s. He's just like, I just don't like 1031s. So it could affect some of you in that 50 to 100 to 200 to $400,000 situation. You may not have a big salary, but you might have a farm. You might have a piece of property that you've been fixing up for 20 years. You might want to do a 1031 exchange. Candidate Biden says, no. Okay, that's number four. We moving. Okay. My team, you got to give me some feedback. We rocking. Do you want to do Q and A or should I just burn through? We got 12. We're on number four. Keep going. That's what I'm hearing. Okay, we're on. That's number four. Run two, three, four. Number five. He wants to increase the minimum wage flat 15% across the board, across the country. Part of me says, I get it. That's not a living wage in a lot of communities. In other communities, 15 is a pretty big raise. Business owners are freaked out. Business owners that are like, I have a big pool of part time employees that make less than 15. If I have to go to 15, I'm gonna have to increase my prices. That's a ripple effect for everybody, yada yada. So it's a tough one. I mean, we all want employees to get paid a fair wage. Candidate Biden has said should be 15 bucks at least across the board, across the country. So that's what he said. And if you like that, great. If you don't be aware. Okay, number one, two, three, four, five. Number six. Another thing that candidate Biden has said I want to get rid of are pass through losses. Now this is where I got some criticism before because I said pass through losses. Real estate professional gone. Now candidate Biden has said, if you make more than 400 grand a year, I want to start to trim those down or get rid of them. It's not fair for these big real estate barons to have depreciation wipe out their income. In other areas, those that are capitalists and real estate investors say, you know what, I took a lot of risk to buy that real estate. I'm a landlord. I got tenants during COVID that aren't even paying rent. I need my depreciation right off. And if I have losses, I want to use it against my other income that's on the chopping block. Now, we don't know what income level you would have to be at before they'd get phased out or eliminated. But if you're a real estate professional, candidate Biden's platform would be scary to you. And that's fair to say. Again, for those of you that again, are thinking of voting for Biden because Trump drives you crazy, I get it. I've said this several times and I will continue to do so. This is just an alarm. This is a wake up call. This is going with your eyes wide open type conversation. All right, number seven, that's 1, 2, 3, 4, 5, 6, and 7. Capital gains rates. This is the big one that's been in the news, right, Jack? We were Talking about it this week. Okay, capital rates right now, capital gains rates. If I sell a property and have a gain right now, they are zero if you make between $1 and 40,000. If you make between 40,000 and 441,000, it's a 15% rate. If you make more than 441,000 on your tax return, the capital gain rate is 20%. When you add state and the Obamacare tax, for lack of a better word, you could be as high as 28% across the board, across the country. So if I sell a property, I make more than $441,000 a year. My rate's going to be around 28%. Right now. The highest across Europe is 19.5%. We're already paying quite a bit compared to the other capitalist democratic countries in the world. Canada, Biden has said, I want to go from 20 up to 39.6. Basically saying if you make more than 44, $441,000, no more special rate for capital gain sales, you can pay 39%.6%. Whoo. 20% increase. You start adding state rates in there, that could be as high as 43.4%. When you sell a piece of property, farm business, if you make more than four hundred and something thousand dollars. Now, here's what's interesting. Some people go, well, I don't make 400 grand a year. The year you sell your business or you sell your property and the gain is greater than 441,000, it puts you in that bracket. So you got to again go in with your eyes wide open. All right, number eight. Woo. We're flying along here. Stepped up basis. Stepped up basis means if grandma gives me her home when she dies, the home is now worth 500 grand. But she bought it back long ago and it was worth bought it for 100 grand, now it's worth 500 and I inherit it, I get stepped up basis to whatever the value is now. So grandma bought it for 100 grand, now it's worth 500. When I inherit it, I get the $500,000 value. I can sell it the next day and pay zero tax. Candidate Biden has said, nope, don't like stepped up basis. He it people should pay a capital gains tax on the difference when they inherit it. Why are we doing this stepped up basis? Which brings us to number nine, which is estate tax. See, estate tax is when you die. The IRS takes a picture and says you're going to be taxed on your value of your wealth. Right now that exemption is 12, $13 million. And if you do an AB trust, it could even be more for those that are doing estate tax plan. And you know what I'm talking about for some of you, they're like, Mark, I'm never going to have a million dollars. And yeah, if I inherit grandma's house, I'll pay capital gains tax. That's okay. That's your choice and that's good. I'm not saying that's a bad thing or you're dumb or whatever. I'm not saying that. But for those that are business owners and say, you know what, I'm going to sell my business someday or I'm going to pass it on to my family and if it's worth more than four or five million dollars, I don't want to pay estate tax. And well, candidate Biden wants to bring down that level of when estate tax is applied and get rid of stepped up gains. So. Or the stepped up basis where you would avoid the gain. So both of those things work hand in hand. Candidate Biden doesn't like them, wants to reduce them, wants more people to pay tax if you're wealthy. You see the theme here. My business owners want to be wealthy. I'm sorry, they do. That's why you start a business. You take all this risk so you can make more money and maybe do some great things with it and do. Some of the most amazing charities in the world were created by those that made their wealth in business and real estate. I don't know. All right, number 10, 401ks. If you make more than 400 grand a year, your 401k deduction should be less. It should phase out. It could be eliminated. The more you make, the less you should have in your 401k. That's candidate Biden's position. So for those of you that feel the 401k is a sacred cow, it is on the butcher's block. Number 11, QBI, which is this qualified business income tax deduction. It's this 20% deduction on your net profit. Again. And this is true. I wanted, for those of you that have been critical of me, saying, I'm saying all this dramatic phraseology that Canada Biden wants to increase taxes on everybody and phase this out on everybody. This estate tax and this QBI deduction is again affecting those making $400,000 or more. So to be completely transparent, I'm going to repeat this. At least half of candidate Biden's tax increase proposals would be on those making $400,000 or more. A year. The other half are going to have some impact on all of us. And I want to be fair and transparent about that. Okay, number 12, he wants to ban non compete clauses. So if you go to work for a company and they say, sign here, you can't compete against us if you quit. He says that's not fair. Employees should be able to go and start their own business anytime you want. Sounds okay, but if you're a business owner, you're a little freaked out that I'm showing. I'm pulling back the curtain, teaching employees my business, and then they can quit anytime and be my competitor across the street. That's why we have non compete clauses and contracts historically and again, candidate Biden is against those. And then number 12, he wants more people that are treated like subcontractors to be treated like employees. This is the big Uber battle that's going on. And Lyft battle in California, where California said, if you're an Uber or Lyft driver, you're really an employee, you're getting screwed over. And the people are like, no, I want to be a subcontractor. Don't screw this up for me. But they're like, nope, you need to be paying Social Security. You should be getting state unemployment benefits and federal unemployment benefits. You should be an employee. But the funny thing is, you talk to any Uber or Lyft driver, they're like, no, I don't want to be an employee. I want to be a subcontractor. Anyway, it's been come. It's come around as the ABC test. There's about 11 states that have this rule that if you look like an employee, more so than not, you should be an employee. And it's a gray area. Well, more and more states are getting tough on it, saying you're an employee and candidate Biden's on that train. Okay, those are 12 things. Now let me say this. I want to open up the for callers comments. If you want to comment and say, don't forget this. Mark, there's something else you didn't hear about. Candidate Biden said this. I want to hear it. If I'm missing something, I want to know about it. If I've said something wrong that you don't agree with and there's a correction somewhere, I want to hear about it. I'm not out here again to just take cheap shots at candidate Biden. I said there was four good things he's trying to do. If there's something else good out there, please comment below. All I Want to know first name the city you're from? If you have a question, even if you want to go dramatically off topic and talk about how to write off your auto this year, I will go there. But I really want to try to focus on candidate Biden's tax policy before voting day next week. We already know what we're getting with Trump, right? It's not going to change. Yes. He's an idiot on Twitter. Everybody knows that. I wish he'd be quiet more. I get it. I'm willing to say those things. Trump's not perfect, but as a business owner, I've gotten a lot of good things. I want to pay less in taxes. I want a very open, capitalistic type economy for my business. And we've seen what President Trump has done for that. If you don't like it, you've got your vote for Biden. But if you're going to vote for Biden, I just wanted to talk about what he has said. Those are the facts. There's my summary. Are we good? Am I in trouble? Got some hate mail. All right, tell me what some comments or questions are. I'm going to try to help you guys out. I'll do my best.

So we're getting a lot of questions about the income gaps. So people are saying, like a lot of these tax increases only apply to people who are making more than 400,000 a year. Could you expand on that? What does that mean? Which of these don't affect people who

are making more than that? Well, here. And did everybody hear that right, Corey? I don't need to repeat that. Thank you, Jack. All right, so this income gap that's getting wider and wider and means the wealthy are getting wealthier and the poor or the middle income isn't getting richer, they're kind of just staying there. That is a problem. I mean, no one wants that, right? We all want to have a little more wealth. So candidate Biden's approach is let's tax the wealthy more, let's give more help to the lower income or middle income folks, and maybe we can get rid of that gap. That's the theory. Now, the problem with that, the counter argument is when you start to tax the wealthy more, they're less apt to hire more employees, they're less apt to give raises, they're more apt to increase their prices of whatever they're selling. And in turn, it kind of undercuts the middle income or lower income people because they're like, because it's all going to trickle down. That's the theory. And so when you tax the wealthy, the middle income and lower income are ultimately going to pay a higher price for products and services, and the wealthy may not hire as many employees. Okay, now, isn't it interesting? In life, it's kind of the middle ground we really want to be on. Isn't it crazy? It's hard. There's some crazy things going out in the media. There's people far, far on the right to scare the hell out of me and people on the left to scare the crap out of me. Right, I get that. So where do we want to be? Frankly, somewhere in the middle. And that's my opinion. I'm not. I don't think Biden is completely wrong, and I don't think President Trump's completely wrong. Our country is just getting more divided. And the sad part is out in the media, it's like, bring on Biden. We need more unification. Okay, how. How is he going to unify us more? Because business owners are already taxed quite a bit. They're scared. And taxing them more and closing their business down longer for the pandemic. They're not. That's not going to help them. So, Jack, I don't know. Right. It's tough. It's tough. Do the wealthy always take their money that they make and make the world a better place, or do they just sock it in the bank and live high on the hog? Some do. Some people do make the world a better place and start charities and give money back and help people and come up the ladder. Guys, I just wish we had maybe a better candidate right in the middle. Right? But we don't. And so we've got a really hard decision next week. And if you're watching this video the morning of the election, so follow your heart, think about where you're at in this equation. And if you think, and it really comes down to this, that more taxes on the wealthy, maybe a little more closed economy during this pandemic and more support or help for the lower income is your desire, then candidate Biden's your guy. That's the reality. If you're like, I want to go for it. I want to make a lot of money. I believe in the American dream. I. I don't want to be held back and I don't want to pay a ton in tax, and I do want to make the world a better place, and I want to hire more people and I want to make a better economy. Then more of the same of Donald Trump, wishing he went Twitter more is our plan. Right. Both extremes scare me sometimes. Right. There's my answer. Okay, more comments.

Next question. This is from Samuel, who's in Oklahoma City, Oklahoma. He says if we have taken significant losses to due to depreciation, real estate using cost segregation, bonus depreciation, what are the odds of having those losses challenged if we carry them forward in the future years with this new tax rule?

Okay. Samuel in Oklahoma City says I've acted as a real estate professional. That's what he said. And I've got these losses from my real estate. And he's saying what's the concern or risk that those are going to be taken away in the future if we get candidate Biden as president? Samuel I don't think they'll get be taken away. What's done is done with all administrations over the last 50 years. Once a tax policy is implemented, there's the grandfather clause, means we're going to keep it for those that have already used it. We're not going to just rip it back from them. That's very, very rare. Now, would you be able to do it again under a Canada Biden candidacy or presidency? Probably not. Would the loss be lower that you could take or the write off greater? Would it be, would it be a bigger write off under a Biden presidency? No, it wouldn't. He's been very clear about that. So Samuel, let me assure all of you out there, historically if you've already taken the write off, it's your 2010 and 2019 taxes or your 2020 taxes, you're going to wrap it up. It's going to be pretty much same game. But when it comes to 2021, if Biden is elected as president, he wants to get in there and tinker with it. So 2021 is when you're going to feel the heat. Samuel. Now one last thing, Samuel, if you said, well I've got these losses I want to carry forward, if you already did cost segregation, you've already taken those losses. If you're carrying them forward, you should have never done a cost segregation anyway. So at this point in many of my conversations, if you may need a consultation with my office or someone to kind of clarify that. But if you take the write offs, people, they're not going to take them away. I just don't see that.

Okay, this one is from Ryan Mills. He says any Biden proposed changes to selling your personal residence above $500,000, the profits married are tax free if you live there for two years.

Okay? Correct. This is Ryan. Ryan Mills, thanks for sharing Your last name? Ryan, you didn't have to do that. Your city would be fine. We appreciate that. Ryan says if I sell my home, my personal residence, and I'm married, I don't pay tax on the first 500,000 of gain. That's right. That's called the sale of home exemption. So let's say Ryan and his wife buy a home for 200 grand and now it's worth 700 grand. So there's a $500,000 gain and they go to sell the home. Current loss tax law says no tax under candidate Biden, no tax. He does not want to fiddle with that. He's never said he wanted to. But let's say you're in California and that $200,000 house is now worth a million or a million two, which happens all the time in these urban areas where home prices go crazy, right? Anything over 500,000, you're going to pay capital gain. Now we start getting into this potential Biden problem. He has said, you start having capital gains and you make more than 400 grand or a million dollars, I'm going to start increasing that capital gain rate. So, Ryan, that's where I'd get concerned. But all of you out there, the sale of home exemption is 250,000 if you're single, 500,000 if you're married. Meaning if there's any gain in those two ranges, you're not going to pay tax in those scenarios. Candidate Biden has said, I'm not going to fiddle with that, so you're okay. But if you're going to have more of the capital gain than that, you want to be sweating a little bit and it could change. Next question.

Okay, we're going to move away from that for a little bit. Dan from Madison, Wisconsin says our taxman says we can't use QBI since we do a guaranteed draw. Is he right and how can we change that?

And he. What's his first name?

Dan.

Dan in Wisconsin says, our accountant says I cannot do the qbi. Now are we going to go to split screen? We going to give it a shot, Cory? Okay. Okay, here's what we got, people. I'm going to go to the whiteboard. Love this. And Cory, my producer and studio director is just amazing. He does everything. He's the janitor, the producer and the director. Is that okay? He does it all. He's amazing, ladies. He can even make an amazing. So I'm just going to throw that up. All right? Now, if you're a small business owner in Wisconsin, he says we do a guaranteed payment. Ryan, I'm already Ryan, right, Dan in Wisconsin. Dan, I'm already concerned with guaranteed payments only take place in LLCs. And if he's doing a guaranteed payment and then you've got pass through income and he's doing a 1065 your accountant, this is already wrong in my opinion because if you're an active manager of this LLC of this business, everything is subject to SE tax. You cannot call the pass through passive. And Dan, you probably know what I'm talking about, right? He goes oh we're going to do a guaranteed payment and you pay your self employment tax and then on everything else it's all passive wrong. Under audit you lose 9 out of 1099 out of 100 CPAs will agree with that. It is clear factual tax law. So if he really does have you taking a guaranteed payment in an LLC 1065 so that you can limit your self employment tax, you got the wrong accountant and any accountant out there, you want to go head to head on it, let's start emailing. And this is pretty clear. So what we normally do Dan is you're going to be doing an S corp and you're going to take a W2 and a K1. Now you can take pay your self employment tax or FICA over here on the W2 and not on the K1. That is legit President candidate Biden did the same thing. Candidate Biden when he disclosed his tax returns has an S corp. He took a W2 and a K1, he got rid, he did not pay any Obamacare on this, he did not pay any FICA on this and he did not pay any corporate tax on this. He got it all kit and caboodle. So Dan, but when you say guaranteed payment that freaks me out. You should not be doing a guaranteed payment. You should be doing a W2 so I get a second opinion. You can call my office anybody that wants to review with one of our tax lawyers. We're affordable. We're Main Street America tax lawyers. We're not charging New York LA prices. So here's our number. I'm just going to throw it out there. 586-9366. You can talk to one of our tax lawyers or CPAs and we'll help figure that out. But what Dan's asking is about this QBI deduction which is a 20% deduction on business income. Well the 20% deduction applies on the K1 Dan, but what your accountant is saying is well you don't get the QBI because you take a guaranteed payment. And that's because QBI does, does not apply to passive income, which you don't have anyway. Your accountant's doing your tax return wrong. That's the bottom line. So is he right? You don't get the qba. Qbi? Yeah, because it's passive. Do you qualify for passive? No. Are you in the right type? Wrong. Are you in the wrong tax return structure? Correct. You are in the wrong situation, Dan. Get a second opinion. Get a third opinion, call me office, we'll talk you through it. Now, you may have said guaranteed payment and meant something else and I went down the wrong path. But for anybody out there doing an LLC making money, think about the S Corp. Seriously. All right, next.

Okay, this is Jason. He says capital gains. On the topic of capital gains, he says my grandparents are selling their home they lived in for 50 plus years and will get more than 500,000 in gains. Do they have to worry about capital gains?

Okay, Grandma and grandpa have a home. They bought it over 40 years ago and they have a capital gain of more than $500,000. So let's do some numbers here to get here. So let's say grandma and grandpa bought it for 50,000 and they live in California and now it's worth a million. That's very common. Fair enough, right? Okay, so let's say a few years ago they, you know, years ago they put in some additions, they added some benefits and blah, blah, blah. So let's say they put in 150 grand of improvements over the year, over the years. So now their basis is 200. Now this is not rental property where depreciation will reduce this, this is. They've got a $200,000 basis and now their fair market value is a million and they're going to sell this thing. Now let's just say there's no closing costs, there's no realtor in the mix. Just to get our math fair here, they've got an $800,000 gain. You see that? They're going to sell for 1 million minus the basis, that's $800,000. There's their gain. Now how much is the exemption? They're married, Grandpa and grandma haven't died. So their exemption is 500,000. Uh oh. Oh no, they've got a gain of 300 grand. That is what's called a capital gain. Now based on their tax bracket, this rate can go and fluctuate from zero up to. With state and Obamacare and oh my gosh, everything involved. Just some rough numbers. I Gave before. This could be as high as 28%. So you're gonna want to meet with the accountant and talk about. Sorry, people. You're gonna want to meet with the accountant in your world. I need to turn that off. I apologize. Corey's mad at me now. Okay, so you're gonna want to meet with your accountant right away and find out what you can maybe do about that 300 grand. But that is capital gain, and you're gonna pay tax on it. Based on what candidate Biden has talked about, I don't think you're gonna. You're not gonna pay this 39.6 capital gains rate that's off the chart. You're gonna be in probably the typical capital gain rate brackets. So don't worry. Now, if grandpa is inventor of some amazing thing and he, you know, he's the grandpa in Duck Dynasty, and he's making a million dollars a year, this could get ugly. So whatever grandpa's doing for an income or grandma, I don't know. So think about that. All right, next question. Thanks, everybody. I hope you're having a good time. I am. I love this. I hope I don't sound too rude at times. I just want to keep you out of harm's way.

Okay, this is from Antonio in Hawaii.

Okay.

He says, how do we write off the increase use of utilities? Working from home.

Oh, okay. So Antonio is in Hawaii, working from home. By the way, my heart goes out to all of you in Hawaii and my clients out in Hawaii. I love you because I tried to do a workshop out there every year over the last 10 years. Covid has killed the industry. I mean, no one's traveling to Hawaii for vacation. The tourism industry, as you all can imagine, is the number one job provider and industry in Hawaii. And it's been brutal. So, Antonio, God bless you. Hang in there. We hope things turn around soon. As soon as I can come spend money in Hawaii, I will. All right, so he's working from home. Now, here's the hard part. Antonio says his utilities have gone up. I'm working from home, so that could mean, I don't know, more power, gas, Internet. I don't know. So his utilities have gone up. He's like, how can I write this off? Here's the problem. If you're an employee, Antonio, of. And your employer said, go work from home, there's no write off. There is no write off for unreimbursed home expenses. It doesn't exist anymore. It used to be around about four years ago, but it's gone now. So nothing. Now, Antonio, if you're a small business owner or you have a rental property or a little side hustle or a little side gig, ooh, now we're in business. Now, these increased costs and utilities, you're darn right I'm going to write them off in your business. And that is totally legitimate. And the techniques are tricky because it's a home office type deduction. You can go to YouTube, type in Kohler home office. And I got all sorts of good videos there. Got this in my book, tax and legal playbook right up here on the wall. And lots to study there. But Antonio and anybody out there, your employers made you work at home. There's no extra write off. Sorry, there's nothing. So I hate to say that. Next question. No more. We're good. Okay, well, if I'm going to pause here for a moment because some of you are like, what? I was just listening. I love these questions. I want to hear what other business owners are doing. Mark, I hate you. I'm totally pro Biden and you just ruined my day. I don't know. So I'm going to pause here for a minute and just say a couple of motivational things. Small business is not a get rich quick scheme. Buying rental properties is not a get rich quick scheme. But I. Owning a small business and buying real estate is a get rich long term scheme. It works. One in three Americans now have a side hustle, a side gig. I want you to have a side hustle, a side gig. I want you to have a small business. And I'd love you to buy some real estate along the way. I'm not saying quit your day job. Learn about small business. Learn how to get great tax write offs for using your car, your home, your computers, your laptops, your cameras. Having a small business can help you pay off your debt quicker, pay off your home faster, and build more cash flow for you in the future. We all know it. We just got to start doing it. So I've got this workbook called the eight steps to start and grow your business. It's out on Amazon. It's great. It's very, very helpful. Lots of good little videos. Helps you with a business plan, a marketing plan, a strat plan. Don't give up. Even with this pandemic. That's crazy. We need to have some hope and not give up on this, on this concept. The American dream is still real. All right, final. Any other final questions?

Yeah, we got one more.

All right, one more question. We'll wrap up on this, he says,

how does the CARES Act NOL carryback provision work for an S Corp business with a loss in 2020?

Okay, any name from where?

Janice?

Janice says, I've got an S Corp and we're in 2020. And this is Janice. And she says, I've got a loss. Business took a crapper this year with COVID Pandemic. I'm losing money. So she said, under the CARES act, which included the PPP and the Eidl and all these little deals. Right. To help small business owners. If it still didn't help me and I have a loss, what can I do with that loss? Well, under the CARES act, here's how it would work. Janice, let's say, oh boy, where are we? Let's kind of create a little picture here. Let's say this is 2021 coming up in 2022. We're here in 2020 and we had a loss. Now let's assume that Janice had a profit last year and maybe the year before, maybe even the year before. Let's just kind of play with this. Under the CARES Act, Janice can take this loss. Let's say it's 50 grand, 100 grand, I don't know. Let's say 100 grand. I hope it's not Janice. But let's say it's $100,000 loss, you're allowed to go back and take it against the prior years and that loss can reduce the profit you had previously. And any tax you paid previously, you now get a refund. So if this loss going back up to three years, the CARES act says we can go back up to three years and use that loss to get a refund for taxes I paid in the past. If it doesn't work in the last three years, I can carry it forward. And there's more details on that. You'll want to talk to your accountant. But that's how it works. And that's a way to get a little refund and get a little extra cash in your pocket. So you won't be able to cash in on that until early 2021 when you file your tax return in here, when you'll make that claim and you'll get that process started to get the loss. Alright, I want to tell everybody thank you and good luck this next week. I hope the country holds together here. If you're on the hard far left or on the hard far right, whatever happens, let's just take a chill pill. We'll live with it for four years. Let's not turn the country into some crazy firestorm bloodbath. What are all the words that are out there? Let's just live with it. Let's focus on our small business. Let's focus on making some money and helping those people around us. There's a lot of great, wonderful, charitable people on the left and on the right. Let's not throw stones. Let's just be patient and we'll get through it. Love you all. Hang in there. See you next week.