Host: 0:00

Welcome to the Empowering Healthy Business Podcast. The podcast for small business owners. Your host, Cal Wilder has built and sold businesses of his own, and he has helped hundreds of other small businesses, whether it is improving sales, profitability and cash flow, building a sustainable, scalable, and saleable business, reducing your stress level. Achieving work-life balance, or improving physical and emotional fitness. Cal and his guests are here to help you run a healthier business and in turn, have a healthier life

Calvin: 0:32

Welcome back to the show, Greg.

Greg: 0:35

Thanks for having me.

Calvin: 0:37

So we've heard a lot about this, big beautiful bill that's pending before Congress that has what passed the house and is now on the Senate in probably expected to pass in some form close to what it currently is, right?

Greg: 0:52

Some way, shape, or form. we have like an outline at this point of what this might look like. like you mentioned it passed the house. and so I think assuming it passes the Senate, then we will have a few changes for tax season. This is really early for them, so I'm not getting my hopes up, but.

Calvin: 1:12

Right. A lot of headline is around, spending budgets, but there are a lot of taxlines. The big beautiful bill as well, right? So today you're gonna walk us through some of the key tax related items that may be impacting small business owners.

Greg: 1:27

Absolutely. Yeah. So, I mean, none of this is law yet. It could all change, it could all get scrapped, but things to likekeep an eye out for, if this does go through as it's written right now. I think there's a lot of benefits for business owners. Not sure how everyone feels about the other parts of it, but from a business owner standpoint, I think there iscould be beneficial. So the first one which I'm a big proponent of being in a high tax state is the increased salt deduction. I think as it's written now, it's going from $10,000 to $40,000.

Calvin: 2:03

what does SALT stand for or mean?

Greg: 2:06

State and local tax. So, you probably, if you're a business owner, or really any individual, you probably haven't itemized your deductions recently. Maybe you've been keeping track of all your medical expenses and you give 'em to your CPA every year. And they just, don't do anything with them because don't itemize anymore. This could change all that. And so when you itemize your deductions, you are allowed only $10,000 of your state and local taxes. And so that includes your real estate taxes, excise tax on your vehicles, and state income taxes. They want to increase that from 10,000 to 40,000. So you can see people who live in a high tax state this could be very beneficial. you heard me talk a lot about the pass through entity tax, in other episodes that, was a provision provided by the states to kind of alter this or to circumvent this rule.

Calvin: 3:11

Yeah, we spoke about the pass through entity tax, one of our other podcasts earlier this year, I think. Right. So that will become less relevant.

Greg: 3:21

it could become less relevant. It wouldn't be the worst thing in the world for business owners. It's every state does it differently. It can oftentimes get forgotten. So if we can streamline that a little bit, it would be, I know I'd be happy.

Calvin: 3:36

All What else might we be looking at?

Greg: 3:39

So an increase in the section 199A deduction, which is your qualified business income deduction. Right now you should be getting a 20% deduction on all your pass through income from your business. That's gonna go up to 23%, so another 3% on that which is nice.

Calvin: 3:58

It doesn't sound like a lot, but it's, 15% right?

Greg: 4:01

I mean, put that into perspective, right? You have a hundred thousand dollars of pass through income. Normally you'd get a $20,000 deduction. Now you get a $23,000 deduction. Tax effect that at 30% it's a thousand bucks.

Calvin: 4:15

Nice.

Greg: 4:16

Yeah. Calvin: And that applies to who, SCORP owners andpartners in an LLC. Yup. So, LLC's tax does a pass through business and SCORP owners.

Calvin: 4:27

All right. What else?

Greg: 4:28

You have a bonus depreciation going back up to a hundred percent. This is important for businesses that typically operate at a loss, like if you're pre-revenue, and this 179 does not apply to you then historically in the last couple of years, bonus depreciation has been getting phased out.

Calvin: 4:47

So remind us what exactly does bonus depreciation mean?

Greg: 4:51

So bonus depreciation is the ability to, depreciate your assets in the year that they're placed into service. the benefit here or the idea here is that, the US wants to promote businesses buying assets and, you know, increasing infrastructure and, stuff like that. Spending money to stimulate the economy, it typically works. Obviously it comes at a cost and so it's been getting phased down. They want to increase that backup to a hundred percent. Right now that would only apply to, property placed into service after January 19th, 2025. So, anything, if you bought a big asset prior to that, you might outta luck.

Calvin: 5:36

And it sounds great to be able to take the full depreciation in the first year, although, you know, we've talked about tax planning and that's not necessarily always the best move depending on what you expect your future income to be in the next couple years. Right.

Greg: 5:49

So it depends on a lot of factors. If you want to make the business look really good for, getting loans and qualifying for loans and stuff like that, then maybe bonus isn't the right tool for you. But if your goal is to reduce your taxable income, then it's a great opportunity. Not every state allows bonus depreciation though, so you might have a federal, state tax difference there.

Calvin: 6:15

Cool. What's next on the list?

Greg: 6:18

In the samelines as the bonus depreciation, they are increasing the section 179 depreciation deduction to 2.5 million. phasing out at 4 million. So basically if you want to take section 179, instead of bonus depreciation. Then you can purchase up to 2.5 million in assets

Calvin: 6:40

That's a lot of assets to purchase. But I guess if you've got a business model really heavily dependent upon assets and equipment, this could be a big deal.

Greg: 6:49

Yeah, exactly. And so it probably doesn't apply to a lot of small business owners. But if you're asset heavy and maybe you're just getting started, then it's a good opportunity to expense those assets right away. So the difference between 179 and bonus depreciation, bonus depreciation can put you into a loss situation. where section 179, you can't go below zero. So it would carry over to future years, which again is a good tax planning strategy if maybe you wanna use that section 1 79 expense in future years, because your NOL is still limited right now.

Calvin: 7:25

All right. What's next on the list?

Greg: 7:27

So those are the four big, probably I'd say like tax incentives.

Calvin: 7:33

Hold on. Before we get into, you're probably gonna go into some personal tax incentives, but so far it's like, feels like a cookie jar where, you know, you get some small business owners are getting some goodies in this budget bill, but you aware of any kind of big downsides that people also need to be aware of? Or is this mostly just upside?

Greg: 7:51

I don't know if there's any like, big downsides. I mean, I think there's, depending on your political viewpoints, there are some downsides. But from a business saving money standpoint, if you're a business that makes money, this bill in my opinion is a good thing for you.

Calvin: 8:10

All right.

Greg: 8:12

So the big thing I know he, you know, president Trump was talking about a lot on the campaign drill, the elimination of taxes on tips and overtime, This is in there and, you know, they're, they're trying to push it through doesn't necessarily affect business owners, but if you do pay your employees, you know, if your employees earn tips or if you pay them overtime, they might be a little bit more willing to put in that overtime. And that's the whole point of this, right? So, you know, maybe there are some opportunities to stimulate the work ethic of the employees.

Calvin: 8:49

Hmm.

Greg: 8:50

They're making it a little bit harder to qualify for Medicaid now. so if you have employees that might be losing health insurance because of this, maybe you need to revisit as a business owner, you need to revisit your part-time or low income, workers benefits. That could actually be a downside to you if you need to start offering those benefits. And now that costs you more money. More personal in nature, but you have a reduction in the clean energy incentives. Now you can put solar panels on your house and you can deduct 30% of that cost as a take that as a tax credit on your tax return. I've had clients get massive refunds because of this. They're trying to get rid of that. So if solar is something that you've been thinking of and maybe putting off. it might not be a bad idea to do that sooner than later in case they take that one away from you.

Calvin: 9:51

And so it might be prudent to see whateventually passes with this bill before making a major decision there. Should we know? Is it going away completely? Is it being phased out over a certain number of years? Right.

Greg: 10:03

Yeah, my guess is that it would be phased out. I can't imagine that, you know, if it passes today that they would make it, retroactive or, phase it out this year or, or something like that. my guess is that I think that, too many people are making decisions based on that, tax credit. it's pretty big. So. I would think that would get phased out over time. This is a unfortunate one for anyone that recently bought a Tesla. they basically wanna replace the gasoline tax for anyone that's not filling up the car anymore and they want to assess a fee. You know, I've, heard a couple of different things, but the, the one that seems to make the most sense to me is, when you get your car inspected, they would take the total miles driven throughout the year, and then they would assess tax, per mile onSo probably not a super popular provision for anyone that bought an electric vehicle or a hybrid vehicle, that is in there right now.

Calvin: 11:04

All right, so net net, if I'm a small business owner, what should I be keeping my eyes on now?

Greg: 11:10

If you're a small business owner and you're thinking about. buying some new assets, I would probably hold off until later on until we can see, what this looks like. the bonus depreciation is retroactive back to January 19th, but again nothing's a lie yet. So that could potentially change.

Calvin: 11:31

So don't count your chickens before they're hatched. Right? Let's see if this bill passes and what changes might be made in it.

Greg: 11:38

Yep. Absolutely. let's see, what else? Oh, the salt deduction. So that could have a pretty big impact on both business owners and individuals who are not business owners. if you typically, have higher medical expenses or something like that, you should. Start to keep track of those in case those come into play and you do itemize your deductions in. 2025

Calvin: 12:04

Well, great. This has been a nice, recap Greg. Make sure we're all aware of some major changes coming down the pike here in 2025. Is there anything else before we wrap up this episode of the podcast that, you want to bring up to the audience?

Greg: 12:18

Q2 estimates are due on June 16th, so if you have Q2 estimates due, you should, think about getting those paid sooner than the later.

Calvin: 12:27

That challenge a little tricky 'cause if right, this is one of those quarters that only has two months in it, right? April and May need to be paid, need to be paid in June.

Greg: 12:36

Yeah. I also heard through the grapevine that the IRS is getting rid of accepting paper checks, If you are not tech savvy or if you don't believe in paying bills online, you might wanna get used to doing that because, word on the street is the IRS is moving to a, pay online model.

Calvin: 12:58

And so would that be via E-F-T-P-S on the existing system or something new or you just don't know yet?

Greg: 13:04

So the E-F-T-P-S still exists, but they actually have a pretty good system. Now you just go to the IRS website on the main page. It's a link, you know, make a payment or pay now or something like that. And you just follow the prompts and it's pretty straightforward. I've had several clients shift over to that this year because you don't wanna worry about a check being lost in the mail orthe IRS losing it or something like that. So, now you can just pay online and you got a confirmation that it was paid, and now you've got your records.

Calvin: 13:42

Well, great. Well, thanks Greg. I'm sure we'll have you back when we have further developments to share. This has been another exciting episode of the Empowering Healthy Business Podcast. Until next time

Greg: 13:52

Thanks for having me.

Host: 13:54

The reference show notes and find other episodes on empoweringhealthybusiness.com. If you would like to have a one-on-one discussion with me. Or possibly engage SmartBooks to help with your business. You can reach me at Cal cal@empoweringhealthybusiness.com or message me on LinkedIn where I am easy to find. Until next time, this is Empowering Healthy Business, the podcast for small business owners signing off.