Profitable Painter Podcast
Profitable Painter Podcast is a rich resource for anyone interested in starting, running, and scaling a professional painting business, offering valuable insights, strategies, and interviews with industry leaders. Through case studies and in-depth discussions, we deliver a vivid picture of the painting industry, with a disclaimer that any financial or tax information is general and not a substitute for professional advice.
Profitable Painter Podcast
The One Big Beautiful Bill: What Small Business Owners Need to Know
In this must-watch episode of the Profitable Painter Podcast, Richard Dunton, Enrolled Agent and Advising Director for Profitable Painter CPA, breaks down the controversial House Resolution No. 1 (HR 1), the so-called "One Big Beautiful Bill", and how it could drastically impact your taxes, deductions, and bottom line as a small business owner.
🔹 Will the government raise taxes in 2025?
🔹 Hidden pitfalls in the new tax bill, what they’re NOT telling you!
🔹 Child tax credits, overtime rules, and SALT deductions, will you win or lose?
🔹 100% bonus depreciation is BACK (but for how long?)
🔹 The #1 tax strategy every painting business owner MUST know before 2026!
This isn’t just politics, it’s your money, your business, and your future. Whether HR 1 passes or fails, you need to act NOW to avoid a nasty surprise at tax time.
📢 WARNING: The information in this episode could save you thousands. Don’t wait until it’s too late, watch now and prepare!
Welcome to the Profitable Painter Podcast. The mission of this podcast is simple to help you navigate the financial and tax aspects of starting, running and scaling a professional painting business, from the brushes and ladders to the spreadsheets and balance sheets. We've got you covered. But before we dive in, a quick word of caution While we strive to provide accurate and up-to-date financial and tax information, nothing you hear on this podcast should be considered as financial advice specifically for you or your business. We're Hi. This is Richard Dunton.
Speaker 2:I'm an enrolled agent and the advising director for Profitable Painter CPA, and today is a special episode of the Profitable Painter podcast. We are going to talk about House Resolution no 1, better known as the One Big Beautiful Bill, what it means for you as a small business owner, and how this bill is going to change as it makes its way through the Senate. Now, this is a very politically charged bill and there is a lot in there. We're just going to focus on the tax implications for small business owners. We're also going to look at what happens if this bill does not pass. What is that going to mean for you? If this bill does not pass, what is that going to mean for you? And we'll talk about what you should be doing right now to prepare for 2025. So let's go ahead and jump into it. If you haven't heard about two weeks ago, the House did pass HR 1 by a narrow margin. It was one vote that allowed this to move through, and now the bill is with the Senate. This to move through, and now the bill is with the Senate. The Senate is making its own tweaks and adjustments and they will have a vote on their version pretty soon. So a lot can happen between now and then, and a lot is certainly going to change before and if it hits the desk of the president to be signed into law. But why do we even need to have this kind of tax reform right now, in 2025?
Speaker 2:This all goes back to the Tax Cuts and Jobs Act of 2017. Now, this was the largest tax reform that this country has seen since 1986, under President Ronald Reagan, and it drastically changed how you and I, and even big corporations, pay their taxes. There were a lot of benefits for everybody all around, but there was one big key difference between the benefits that big corporations received and the benefits that small businesses and individuals received, and that is the corporate tax cuts were permanent, they were locked in, but the tax cuts that you and I received, those were set to expire after 10 years, and now here we are at the bill, as they wanted to, 10 years down the road. And so now today's Congress has that difficult responsibility of deciding what has worked, what do they want to keep in and what do they want to change, and, as you can imagine, there's a lot of different opinions and ideas of what we should maintain and what we should jettison. Now, why is it so important that we have something? If nothing passes, then everything reverts back to before the Tax Cuts and Jobs Act, and that is going to mean an immediate overnight increase in your taxes. So, for whatever flaws these bills have and, believe me, they're not perfect we don't go back to the pre-2017 tax system. So let's talk about what specific areas are going to affect you as a small business owner. We'll talk about the House version, we'll talk about the Senate version and we'll talk about what happens if nothing passes, so that you can be ready for anything that might come down the pipe. All right.
Speaker 2:Number one is the income tax brackets themselves. We still have seven different tax brackets, but they are significantly lower than the tax brackets we had before the Tax Cuts and Jobs Act. So both versions started at 10%, but before 2017, it quickly jumped up to 15, then up to 25, 28, so forth and so on, until a max of 39.6. So after the Tax Cuts and Jobs Act, we started at 10, but then it only jumped up to 12, then it went up to 22, and then so forth and so on until it maxes at 37%. So, if nothing passes, you would see an immediate 2% to 3% increase in your taxes, and that is going to be thousands of dollars for most folks. Fortunately, both the House and the Senate agree. We want to keep the new tax brackets, we don't want them to revert to the old system and we want to make them permanent. So that is probably something that has a very good chance of coming out of the final version, because there seems to be a lot of agreement on that. Of course, nothing is written in stone until it's actually signed.
Speaker 2:Another big provision was the standard deduction. So if you remember, 10 years ago, we had a much smaller standard deduction. We also had personal exemptions back then that reduced your taxable income. Well, we got rid of the personal exemptions and we doubled the standard deduction, and we've gotten used to that. In 2025, the deduction is $15,000 for single and it's $30,000 for a married couple. If nothing passes, that deduction will get chopped in half starting next year and the personal exemptions are not coming back, so that would be a huge blow to most folks.
Speaker 2:The House bill wants to keep the standard deduction at the higher rate. It also wants to boost it for the next three years. It wants to add an additional $1,000 if you're single and $1,500 if you're married, and this would last through 2028, and then drop back to the rate that is now adjusted for inflation. So not a bad deal. And if you're a senior, you get an extra $4,000 on top of that. So that's a pretty good provision of the House bill. The Senate takes that and builds on it. It says we're going to bump up the standard deduction immediately to $32,000, and we're not going to let that expire. It's going to stay there and actually increase indexed for inflation, and if you're a senior, you're going to get a $6,000 bump up. Now, some of these extras do phase out when you get into a higher income, but for most Main Street Americans, you're going to be able to have the numbers that we talked about. So an increased standard deduction does give you a simpler return and allows you to take advantage of more tax breaks. Even if you don't own a home and pay mortgage interest, even if you live in a low property tax state, even if you don't have a lot of charitable contributions, you can still get that $32,000 standard deduction. So that's something that we're certainly hoping makes it into the final version.
Speaker 2:Another aspect of the bill has to do with the child tax credit. So before 2017, child tax credit was $1,000 per child. Tax Cuts and Jobs Act doubled that to $2,000 per child. We saw it bump up even higher during COVID, but now it's back down to its $2,000 limit. Well, if nothing passes, it goes back to $1,000. That would be a big blow to families who have a lot of children. If you have four children, that's a $4,000 difference and remember, this is a tax credit. So this is dollar for dollar in your wallet. This isn't a deduction. This dollar for dollar reduces the amount of tax you have to pay. So the house says they want to increase the $2,000 up to 2,500, and that would be for the next few years and after 2028, it would drop back down to $2,000 indexed for inflation. The Senate bill says let's permanently increase it to $2,200 indexed for inflation. So this is where the math gets a little tricky, but it feels like it kind of comes out to the same result for the most part. Under the House bill, you would get a slightly higher bump, an extra $300 per child, but only until 2028. Then it would go back down to $2,000. Under the Senate bill, you would get $2,200 and it would stay permanent. So, whether this one, whether the House or the Senate bill benefits you more has a lot to do with how old your kids are, when you plan on having kids, but in the end they both seem to be going in the right direction. So families who have a lot of children could really see a meaningful impact on their tax return.
Speaker 2:Let's talk about no tax on tips and no tax on overtime. This was big on the campaign trail. Both political parties were campaigning for this and it seemed like a little bit of a pie in the sky. Promise I'll be honest with you. A lot of us accountants were wondering how could you ever actually implement no tax on tips, no tax on overtime? This is what the House of Representatives came up with In their bill. There would be no tax on tips, but the tips must be voluntary. So tips that are added to your bill or to your receipt at a restaurant would not qualify. You must have the option of not paying it to make it voluntary. If a worker was to receive that kind of voluntary tip, they could deduct it from their taxable income and there would be no cap on the limit of tips that could be deducted. But there would be a phase-out where, if you make over $160,000 a year, this benefit would go away, and that would apply whether you're single or married. How about the Senate version? Well, they also have no tax on tips, but they would cap that at a maximum of $25,000 of tips. So if you have more than that, then you're out of luck and there would be phase out at $150,000 for single or $300,000 AGI for married. How about no tax on overtime? The house has that provision where if you have overtime that is separately stated on your W-2, so it's different than your regular wages then you could have no tax on that amount and that would be okay as long as your AGI was less than that $160,000 for all filers.
Speaker 2:The Senate does not have anything in its reconciliation bill about no tax on overtime. However, there is a separate bill that would cover that being debated right now, but that is a long way from being passed. Now what does that mean for you as a business owner? Because you probably don't get a lot of tips or overtime when you own your own business. Overtime when you own your own business, it might be good for your employees, especially if you're allowing your customers to give them tips for doing a job well done or if you want to incentivize them to work more than 40 hours a week. However, there is a bit of a pitfall here I want you to be aware of. The no tax on overtime in the House bill requires that overtime be separately stated on the W-2, which means your payroll is going to change. You're going to have to make sure that when you run your payroll you separate regular wages from overtime wages. Otherwise your employees would have to pay taxes on everything they make, so there could be a bit of an admin burden there. We should be ready to handle that if this comes through.
Speaker 2:All right, let's talk about the most controversial part of this bill and the part that is causing the most debate and problems among the Congress members themselves, and that is the state and local tax deduction. So the idea behind this is that if you make $200,000 and you live in a high-tax state, like I do here in Illinois, and you pay $10,000 to the state, the federal government says well, you shouldn't be taxed on a full $200,000 because you had to give $10,000 to the state. We'll let you write that off. That was the way it had been for a long, long time. Then comes the Tax Cuts and Jobs Act and they said well, we got to pay for some of these other tax breaks that we're giving. Let's take away some of this state and local tax deduction, some of this state and local tax deduction. So if you ever hear the acronym SALT, that stands for state and local tax. So it's okay, you can still do this, you can still itemize, but we're going to cap it at no more than $10,000. If you live in a low income tax state or a no income tax state like Florida and Texas, tennessee, this doesn't really affect you. You're not paying state income tax anyway. But if you're in California, illinois, new York or other places that have a state income tax, you're going to want to write those off the best you can.
Speaker 2:Now we've been getting around this with pass-through entity tax for all of you, partnerships and S-Corps out there One of my favorite tax strategies, and if you're not doing that you should be. Give me a call, we'll get this set up for you. But with the House bill they would increase that cap from $10,000 all the way up to $40,000, which would make pass-through entity strategy kind of irrelevant. It would also put a specific limit on the pass-through entity strategy, so it's not quite as valuable, but we'd still be using it when we could.
Speaker 2:Now the Senate they're a little bit less aggressive. This is where the controversy comes in. There's a lot more senators from states with no income tax, so this is not something that's important to them. So they say we want to keep the current cap at $10,000. And if you don't like how much you're paying in state tax, well then you should go tell your state representative to stop taxing you so much. Good luck with that. So this is where there's a lot of fighting, and there are members of both the House and the Senate who have said that they will not vote for this bill unless they can get their way on this. So we'll have to see how this works out.
Speaker 2:I'm not super worried about it because as long as we still have the pass-through entity tax deduction, that's going to help a lot of you S-corp owners around this. But I would love to see a full $40,000. Actually, I'd love to see no cap at all, but $40,000 is pretty good for most middle-income folks. So we'll have to keep an eye on this one. This could get interesting. All right, let's talk about stuff that is specific to business.
Speaker 2:One of the best parts of the Tax Cuts and Jobs Act was 100% bonus depreciation. Now I won't bore you with accelerated depreciation in Section 179 and Maycars, but basically 100% bonus depreciation allowed business owners to fully deduct the cost of vehicles and equipment in the first year. So this was huge. You buy yourself a new truck for work, you buy yourself a new sprayer or some new scaffolding. Instead of having to wait five, seven years to write this off, you are knocking it out in year one. Now this was set to phase out and it has been. It went from 100% down to 80%, down to 60% and now we're looking at 40% bonus depreciation in 2025.
Speaker 2:Both the House and the Senate versions of the bill would bring back 100% bonus depreciation retroactive to January of 2025. So this is huge. It means if you bought equipment in this year or you're going to buy equipment in this year and maybe you need to have a conversation with your tax professional to see you know in November or December do we want to buy something, that means you can write the entire thing off and get that deduction up front. Now the difference between the House and the Senate is the House bill would bring this back, but only through December 31st 2029. Then it would go away again. The Senate bill would make this permanent and we don't have to do this song and dance again every five years. So this is huge for companies that have a lot of big capital investments. So painting businesses maybe not so much, but you've definitely got vehicles as a big one and sprayers and ladders and scaffolding, so this is one that you can benefit from, and you might have some other things going on in your life involving real estate or other businesses where you definitely want to benefit from this. All right.
Speaker 2:Finally, we've got the qualified business income deduction. This is a beauty for small businesses. This allows you to write off 20% of your business income from your federal taxable income. This is an above-the-line deduction, so if you make $100,000 in your painting business, you are only going to pay taxes on $80,000 of that. Big boon to those who are self-employed and have small business. This was one of the best parts of the Tax Cuts and Jobs Act. I think I might have said that about some of these other ones too, but they're all really good. We want them to stick around.
Speaker 2:Unfortunately, this would go away at the end of 2025, which would mean a huge tax increase for self-employed folks folks. So the house provides that this would stick around and it also increases it to 23% through the end of 2029. And then we get to do this all over again. It also would simplify the phase-in rules for the wage and investment limitations. In plain English, once you start getting to certain levels, your QBI deduction is limited based on how much you pay out to your employees and wages or how much you reinvest in the economy. So that way, if you're getting a big tax break, you're also putting money back into the system. This would help simplify that and make it available to more folks who make more money. So those are good things.
Speaker 2:The Senate version also keeps the QBI deduction. It does not increase it. It keeps it at 20% where it is now, but it makes it permanent. No more song and dance after five years. It is what it is and we can count on it. What it is and we can count on it. It would also provide a minimum deduction of $400 for very small businesses who don't have a lot of profit yet. So that would be very nice for those of us who are maybe freelancing or have side gigs, who maybe haven't built our big business yet. We can at least get a certain minimum deduction, kind of like a reward for contributing back into the economy. If this was to go away, it would be terrible. Many small business owners would face an immediate 20% effective income increase overnight, because you're no longer being able to write that off. So this is something that we definitely want to see. Stick around, all right.
Speaker 2:So we talked about seven different aspects of HR 1 or the big beautiful bill. What is the reality here? Well, the reality is we're talking about politics, and there is a lot more going on here than just tax cuts. We've got other spending, we've got immigration, we've got energy. Politics is fraught with a lot of different viewpoints and, especially nowadays, we don't know how things are going to go. So what we do know is that we need something, because we don't want to go back to before, to the way things were before.
Speaker 2:Tax law changes rarely happen in isolation, so, regardless of your political opinions, there's probably going to be some things that we have to hold our nose on, and keeping in mind that what's proposed and what actually gets passed is often miles apart. So what should you do now, right? Should we panic? No, you should stay calm, but stay informed, right? Being well-informed is being prepared.
Speaker 2:So 2025 is a very important year for tax planning. Don't wait until it's too late. Don't wait until the end of the year and please do not wait until 2026 to start taking this seriously, because once the year is over, many of these opportunities will be closed. So talk to your tax professional, let them know what you're thinking, have them keep you up to date on the proposed changes and then be ready to make certain moves, especially if that 100% bonus depreciation comes back. That's going to benefit your business and help you pay the least amount of tax as possible.
Speaker 2:If you have questions about this, or if you just want to let me know what your favorite parts of the proposed bill are or the parts that you don't like, you can go to our Facebook group. It's called Grow your Painting Business. Just search for it there on Facebook. We'll be happy to let you in and you can join the discussion there. We would love to hear from you and we'd love to hear any possible future episodes of the podcast that you'd like to hear. But until then, thank you for listening to this special episode and I hope you have a great day. We will see you on the next episode.
