Alright, this is the second of the ten-part series of the Trump versus the
Harris tax battle, is what I'm calling it. And this one is about businesses.
So if any of you have, if you've ever started a business,
so if you've ever started a business, and the business didn't end up watching,
or launching, or I guess more of you've tried to start a business,
it didn't end up launching, you had, maybe had some legal costs,
or accounting costs, or, uhm,
just designing a logo,
or just trying to figure out if you want to even start the business,
like even if the idea is possible,
or feasible, or profitable. Uhm,
if you've done that, you may have heard of a start-up deduction,
which is limited to $5,000, where you,
you can't deduct more than $5,000 in a specific year,
like, or in a, in one tax year,
in that year where you're trying to start up a business,
uhm. You can have more costs than $5,000,
and you can deduct them,
but it takes years and years to write it off if it's over that
$5,000 limit. It's kind of a,
it's a weird thing, and it's very misunderstood. I've, I've heard,
uh, Kamala Harris talk about this,
and it sounds like she doesn't even understand what it is,
but it's not saying her proposal is really a bad thing,
but it's not as good as I think she thinks it is, or some
of the people hearing it think it is. So she's proposing increasing the,
this $5,000 limitation on startup expenses.
Remember where you can write right off up to 5,000 in that year,
and the excess needs to be carried forward to future years.
She's proposing to increase that to $50,000.
And I think, I don't think there's anything wrong with that.
Honestly, I think they should just get rid of the limit. And if you're
trying to start a business, I think it should be deductible, but it's just
a 5,000 up to a $50,000 startup expense deduction that you can take.
It's not the government isn't paying for that. That's the most important thing.
People think the government's going to be writing a check for $50,000.
The government's not writing the check. You're writing the check.
You can just use it to offset some of your other income.
So remember that. There's some funny memes out there where it's like,
oh, it's a write-off. It's a Schitt's Creek if you've ever seen that,
but where he's like, he's trying to write something off and he's talking,
oh, it's a write-off. And then he goes, hey,
well, who do you think is paying for that? And he goes, the government,
but the government is not paying for your write-offs.
You're paying for the write-offs. Just remember that it's decreasing your taxable income.
And, and it can save you on taxes, but you're paying for it.
So that's, that's one of her proposals related to the startup expenses.
Trump hasn't brought that up. And so I would just assume that, you know,
it's going to stay the same at the $5,000 under Trump's policy.
Here's a big one though. So a new type of proposal that Harris has
come out with, and they're calling it a standard deduction for businesses.
So right now as a, an individual taxpayer,
like, as a all of us, we can all, we can all write off,
or we all get a free deduction of about $15,000 each person.
If you file a joint tax return, it's about $30,000.
So what that means is if you earn $30,000 combined with your spouse,
you have a standard deduction. Which brings your taxable income down to zero.
If you make $100,000 combined with your spouse,
you'll have a standard deduction, it'll bring the taxable income down to $70,000.
And if you have the, then we have to compare the standard deductions,
your itemized deductions, you might have more taxable
deductions than your actual deductions. So I don't,
yeah, hopefully I didn't confuse anything, anyone with that,
but, uhm, you got to kind of understand where they're,
where where they're getting this wording from. So it's a standard deduction for businesses.
So say you got a business and your business makes $100,000,
like top line. Let's say you're a real estate agent and you get $100,000
of, like $100,000 of commissions.
Of course you're going to have fees and travel and cell phone and vehicle
and business use a home. You're gonna have a lot of expenses to offset
some of that. Right. And we don't,
we don't know exactly how they're going to calculate this or what the amount
is yet. But the like the gist of it is that you make $100,000
top line gross revenue for your business.
There's going to be some standard deduction.
So you don't have to do even bookkeeping. You don't have to do the
bookkeeping. You don't have to do the accounting for those expenses.
It's just an automatic deduction. So when you think standard deduction,
think automatic deduction. So Trump,
under Trump's proposal, I've really liked his.
Since 2018, when they changed it,
it's a 20% deduction on your net income,
which is actually pretty amazing. So if you take, you take $100,000 for
this real estate agent, you take $100,000,
we write off business use of home and travel. And cell phone,
just all this stuff that are business related expenses.
You do need to track it, but let's say you get down to $50,000
of net taxable income.
So you have 100,000 top line, 50,000 of expenses,
you have 50,000 of remaining taxable income under Trump's Congress.
Current plan, this is how it is for businesses right now,
which we've really liked, uh, on that $50,000 of taxable income,
there's a 20% deduction.
This is a free, a 20% free deduction on that net taxable income.
So in this case, it'd be a $10,000 deduction. It's called a QBI,
or Qualified Business Income Deduction, and we can further reduce your income net from,
it was at $50,000, right, then we get this free deduction of $10,000,
and then we get down to, uh,
$40,000 of taxable income. So that's,
it's kind of like a standard deduction. Standard deduction is just another free version.
Uhm, but I,
without knowing how much the standard deduction would be on the Harris proposal,
it's hard to compare the exact impact.
And so there's that, specifically for the small businesses.
And remember, this episode is more about small businesses.
There's some other corporate tax rate stuff that we'll talk about later.
But here is the biggest,
to me, to me, this is, this is either the biggest or one
of the biggest things that I look forward like about the Trump proposals
that are coming out. So if you, if you remember, if you're a business
owner or a real estate investor, you're going to remember the 100% bonus depreciation.
Those laws that came out in 2018, if you haven't heard about them,
make sure you're maybe redoing your old tax returns through 2023.
But that's that bonus depreciation for real estate investors is a big,
a big chunk of the real estate that you're buying through a cost segregation
can qualify for bonus depreciation,
which has been amazing for real estate investors and has been amazing for business
owners writing off. Even if you have a vehicle that's,
with a loan, you can still write that vehicle,
vehicle off, vehicle off. It helps with like the cash flow because you can
knock down some of the taxes. It helps you reinvest in your business,
pay your employees, help you keep more of like the,
the take home profit and the cash. So that bonus depreciation.
Under his proposals, it would become a permanent part of the tax policy
instead of right now we're phasing down.
That's how they had to get it passed a few years ago. It's phasing
down at 2024. We're at a 60% bonus depreciation rate.
If he gets voted in, my expectation is that that's how it's going to
go back up to 100%. And from what I've been reading,
likely a permanent change in the tax law,
which, yeah, which would be really good.
So that would help small business owners.
It's going to help real estate investors. And yeah,
there is, there's a yeah,
actually we'll leave it at that. There's, there's a lot more to cover,
but we'll, we'll leave it at that for this one. This like the startup
deduction and then the standard deduction and the QBI,
the 20% deduction with Trump's business policies and then the
bonus depreciation. There, there's hasn't been any,
any comments or anything posted that I've seen on the
Harris side about bonus depreciation,
but for that's it, that's it for now. That's episode two of 10 of
the series for the Trump,
uh, verse Harris side.
So that will bring you the next, the third one here pretty soon.
See you later.
