One Big Beautiful Bill

In episode 11 of Waste To Wealth, Michael McCall dives into the recently passed One Big Beautiful Bill Act and its implications for taxpayers and business owners alike, as he explains how the bill preserves important tax deductions that were at risk of expiring, particularly the bonus depreciation benefit.

Tune in to discover how these changes can boost profitability and improve cash flow for your waste hauling business.

Timestamps

[00:01:25] Bonus depreciation benefits for businesses.

[00:03:42] Small business tax deductions.

[00:07:36] Tax benefits for tips and overtime.

[00:11:28] Social Security double taxation.

[00:14:17] Taxable income from tips.

Quotes

• “You had limitations on how far forward and backward you could carry your losses, but now they've extended it so it's basically unlimited.”
• “If the business just takes care of the taxes, that's good.”

SOCIAL MEDIA LINKS

Michael McCall

Instagram: https://www.instagram.com/buffalo.finances.cpa/

Facebook: https://www.facebook.com/BuffalofinanceNC/

LinkedIn: https://www.linkedin.com/in/michael-d-mccall-03667714/

WEBSITE

Buffalo Finances: https://buffalofinances.com/

Transcript

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0:03

This is Waste to Wealth, a podcast about turning your waste hauling business into a profitable, scalable cash flowing machine. And now, here's your host, Michael Welcome to Waste to Wealth. I'm Michael McCall , your host, and I hope you're having a terrific day. The One Big Beautiful Bill Act has been passed, and that means good things for you. Good things because if the bill hadn't been passed, A lot of tax deductions that we received back in 2017's Tax Cuts and Job Act would have expired. We don't like expiring tax breaks. They would have made us pay more taxes than ever. Because of that, this is considered to be the biggest tax cut of our generation. I'm sure there's a lot of spin there, but what I want to go over is what does this actually do? What is happening in this bill? And if you are a business owner, a regular taxpayer, someone that's got kids or retired, this is good news for you. So that's most people. I think that's everybody, right? Everyone's a taxpayer individually. For businesses, you might know about bonus depreciation. Bonus depreciation is where you get to deduct something right now instead of having to expand it over time. So let's say you bought a truck. Truck costs $200,000. Well, that normally is deductible over five years because it's a five-year asset life. But with bonus depreciation, you can deduct more of that right now. They call it acceleration. You accelerate your deduction. And under the 2017 Tax Cuts and Jobs Act, they were phasing it out. So it become less and less and less until it would have gone to zero. Well, under this big, beautiful bill, now it's 100% again. So if you buy a vehicle on December 31st of 2025, you can write that whole thing off that second for the whole year, even though you put it in service just for one day, you get the deduction for the whole year. And that can be true even if you didn't pay cash for it. So let's say you finance a truck, you can get the tax deduction right now. Now that's great if you were gonna use the truck, it's gonna build your business, that way you have more profits and you get further ahead faster with your business. It's not good if you're buying it on credit and you can't afford the payment, very bad. And it's not gonna make you enough money to even make sense to pay taxes later. Because if you get the tax deduction today, you're not gonna get it later. And if you're going to have to pay taxes on it later and didn't make you any money, then it was a bad investment. So don't do that. But it's really great for anyone that's trying to buy a vehicle and it's going to help you. It's going to make it cheaper. It's essentially going to make it your tax rate cheaper. So if you're in a 32% tax bracket, that vehicle is 32% cheaper to purchase right now. Works really, really well for people that do Toro. Like if you're buying cars every year, you're constantly buying cars, you can buy more cars, which means you can grow your business faster. If you need more equipment, more dumpsters, then you can buy more dumpsters. You can afford more, and those are going to go to work for you. So take advantage of bonus depreciation. It's a great thing. I'm glad they brought it back. I'm glad they made 100%. Qualified business income is also becoming permanent. If you're familiar with QBI, that means that if you have a pass-through entity like a partnership or an S-corp, when you get income from your business for tax purposes, Under the 2017 Tax Cuts and Job Act, you got a 20% deduction right off, right away. As soon as you receive that money, you got a 20% deduction off that income. So, you're really taxed on 80% of your business's income. Well, that was going to expire and go away forever. It was just a temporary thing. Well, the big, beautiful bill made it so that it's permanent. So, it's going to stay in forever. And now you get that tax break going forward. So that's wonderful and very encouraging for small businesses. And it phases out after a certain level. So it's really not for big businesses, it's for small businesses, which is what I like to see. I care way more about Main Street than I care about Wall Street. Wall Street's always going to be successful. They got a lot of power and money behind them, but small businesses, we need our breaks because it's hard in the trenches. Not like it used to be. I guess it's always been hard. Excess business loss. This is a minor one. I'm not going to spend a lot of time on this one. You had limitations to how far forward and backwards you could carry your losses, but now they've extended it so it's basically unlimited. Previously, disallowed losses had to be retested for subsequent years before they could become considered NOLs, net operating losses. So it's good for businesses that have losses because they can carry those forward longer. If you're not making money, that's the problem though. So it's probably not gonna be a big deal for most of you. Yep. SALT cap. If you're familiar with SALT, that's state and local taxes. There's no longer a cap on how much a business can pay. Now they have pass-through entities. So got pass-through entities in SALT. So a pass-through entity is a partnership or an S-corp. And there's a recent election where you can make where the business actually pays your state taxes related to the business. So it doesn't have to pass through to the individual, which is unique. That's a new thing. And they had a cap on that. Well, now they've removed the cap. So you can have the business pay for the full amount, which is really great. So you don't have to deal with it on your personal taxes. It's particularly useful because if I'm a business owner and I have to keep track of how much all my businesses are making, And I had to pay those taxes personally. Well, that's a lot of extra work. If the business just takes care of the taxes, that's good. This is just at the state level. It's not really, it's not at the federal level. So it's not going to save you all the headaches, but we'll save you a little bit of headaches. Paid family leave credit. So I don't know much about the paid family leave credit. It does expand it and make it extends and expands the paid family leave and medical credit, tax credit. I'm not gonna go into that, cause I don't know much about it. I'll be honest, I haven't dealt with that for really anybody. For the employer provided childcare credit, it increases the credit from 25% to 40%, and in some cases, 50%. And it may raise the maximum credit from 150,000 to half a million dollars. and it increases thresholds related to inflation. So if we didn't have the bill, then it would not have increased the credit by above 25%. It was 25% capped at 150 grand. So very, very nice that this is going to grow. So that's if you provide child care for your employees. All right. Hopefully that's helpful. Hopefully that's helpful. Those are the big things for small businesses. You're getting a benefit on Your profit, you get a better profit. Deduction with QBI, that's permanent. It's not going away. It's gonna encourage you to continue to making money. I know there's businesses that operate at a loss on paper for tax purposes, like real estate. That's primarily the tax strategy for real estate. So it doesn't help you guys, but it helps any businesses that are trying to make money. that are being profitable for tax purposes. Individuals also get a big break. So no tax on tips, no tax on overtime and no tax on social security were the promises you probably remember from a campaign. And it's not quite no taxes, it's more like less taxes. So the taxes for tips, if you're paid in tips, then you can have $25,000 of that income of tips excluded from your income taxes, which is really good. I think that's really great because you're probably not getting a good way, a consistent wage if you're getting tips because it depends on the customers that come in and how good they're feeling and how much money, extra money they have and how much they throw your way, which is a tough way to live. So it does help out with income taxes, but it does not exclude you from payroll taxes. You still have to pay your FICA. 7.65% is how much the employee owes. The employer also has to pay that much, which is a total of 15.3%. So the payroll taxes still get paid in, but you don't have to pay the income tax, which is nice. The same thing for overtime, that has taxes, but it's less. The first $12,500 of overtime you receive is not gonna be subject to income tax, but it will be subject to payroll tax. That's true there as well. So if you're a small business owner and you have an S-corp, you have to pay yourself payroll. And if you pay yourself hourly, based on the hours you work, then you can pay yourself overtime. I'm sure you work more than 40 hours of overtime. So this actually can directly apply to you. The tips, not so much. I don't know a lot of people that get paid tips as a business owner, but as a S Corp, paying yourself by the hour, you just keep track of your hours and you can absolutely take advantage of this one. It's not huge, but it's a little bit more beneficial and it'll really help your employees. I mean, if you have employees that are working hard and they're working a lot of hours, they get a nice little perk and it'll make them happier to work those overtime hours. And they might pay attention to when they hit that 12,500 threshold. And they might say, hey, I'm done for the year. They get to September and then hit that number. They'll say, I'm finished for the year for overtime. Don't schedule more overtime. But, you know, the last couple of months, December, November, those are holiday months normally where we have less work. Unless you're in a really, really busy winter season, or I guess that's technically fall, November's fall. But December, that's holiday season. What else do we got? We've got social security. So it's not a no tax on social security. It's that people that receive social security get a tax credit. Sorry, is it a credit or a credit or a deduction? Sorry, it's a $6,000 deduction, which is the spirit of that is to reduce their social security burden, their tax on social security. And if you don't know how social security tax works now, it phases out depending on how much money you earn. So if you earn no money besides the social security, you really don't get taxed that much. You do get taxed a little bit, but not that much. I shouldn't say, there are people that pay no social security taxes right now because they have only that. But if you have all this other income because you've done well with your investments, maybe you have a job, then the government has a formula that says, hey, you make all this money over here, so we're going to tax your Social Security over here, because we don't need it as much. I don't like that. I think that's silly. It is double taxation. The reason why Social Security exists is because it got taxed away from individuals, and you had to pay taxes to be eligible for it in the first place. So it's taxes on taxes. So this is supposed to reduce the taxes for anyone that relies on that heavily. People that still make a lot of money, they're still gonna get taxed on social security. That's just how it is. That's what the law says. They're not too worried about the wealthy, the well-off people. So it's better to learn how to live poor, I guess. Families are going to get a lot of benefits. So the child tax credit increased from$2,000 to $2,200, which I think is an inflation adjustment. And that's a credit, which means it's actually going to reduce your tax liability, not just reduce your income that's getting taxed. So we love credits. Credits are way better than deductions. They're starting this new pilot program called Trump Accounts, where any child born in 2024 through 2029 is going to get $1,000 put into an account for them. I have no idea how that's going to work. I hope it works great, and I'm expecting it to do something positive. But when the government gets involved with trying to help people out, then you can never rely on it being 100% accurate. 529 plans, so those have been up until this point for people trying to fund college and university, but now they've expanded it so it can fund high school and elementary and continuing education for professionals. So you have a license to maintain. So 529 plan, it's not very attractive. for tax deduction because you don't get a tax deduction by putting money into a 529 account. You get a tax break on the growth. So if I put $1,000 into a 529 plan, and let's say it grows to $2,000, I did pay on the first 1,000, I paid it when I earned it, and then I put it in after tax, but that $1,000 of growth or whatever growth there is, that is excluded from tax. Government does not tax that money. And as long as I spend the money out of that account into an education-related expense, I don't pay taxes on that. It's great. It's incentivizing to invest in yourself, invest in your skills. I think that's wonderful. And you get to direct that. Before it was limited to just universities and colleges, but we learned so many other places than university and college. And many of you would argue, you don't learn that much at school, inside a classroom. You gotta be out and about. You gotta be taking tests specifically to what your profession is, not just, hey, I can do physical education or health class. Those are not that useful. It's really funny when you have a physical education, like a gym teacher who's really fat and out of shape. Like why is he the teacher? He's not a good example. I've had also the same thing with health professors. They are not very healthy. Why are they teaching about health? They clearly don't eat their vegetables. Eat a lot of Burger King. Although I do like Burger King. All right, those are the major things I wanted to touch on. And you're gonna see a lot of social media people talk about the no tax on tips and they're gonna get it wrong. Don't believe them when they say, hey, you can just exclude all your income from taxes by getting tips. There's a cap on that, up to $25,000. So that is something, but it's not everything. If you want to make 100 grand a year and you're going to do it through tips, 75% of that is going to be taxable. This has been Michael with Ways to Wealth. I hope that you're having a great day. Enjoy Thanks so much for tuning into this episode of Waste to Wealth. We sure do appreciate it. If you haven't done so already, make sure you connect with us on social media and subscribe to the show wherever you consume podcasts. If you feel so inclined, please leave us a review and tell a friend about the show.