In this special Tax Tuesday episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., break down the major provisions of the “One Big Beautiful Bill” – nearly 1,000 pages of new tax legislation. They cover significant changes to child tax credits (increased to $2,200), expanded 529 plan qualifications now covering trade schools and licensing exams, and modifications to personal casualty loss deductions. The attorneys explain the updated salt (state and local tax) limitations increasing from $10,000 to $40,000, new charitable deduction rules for both itemizers and non-itemizers, and the elimination of clean energy tax credits after 2025. They also discuss the extension of lifetime estate and gift tax exemptions to $15 million, the return of 100% bonus depreciation for real estate investors, revamped opportunity zone investments starting in 2027, and enhanced qualified small business stock (1202) exclusions with reduced holding periods and increased limits. Tune in for expert analysis on these game-changing tax strategies!
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Highlights/Topics:
- Child Tax Credit Changes – Increased to $2,200 with $1,700 refundable portion for qualifying children.
- 529 Plan Expansion – Now covers trade schools, licensing exams, and K-12 up to $20,000.
- SALT Deduction Limits – Increased from $10,000 to $40,000 for state and local taxes.
- Charitable Deduction Rules – Non-itemizers get $1,000 single/$2,000 married; itemizers face 0.5% floor starting 2026.
- Clean Energy Tax Credits – Electric vehicle and solar credits eliminated after September 30, 2025.
- 100% Bonus Depreciation – Applies to property with 20-year or less lifespan; requires cost segregation study.
- Opportunity Zone Investments – 10% stepped-up basis after 5 years; tax-free appreciation after 10 years.
- 1202 Stock Exclusions – Reduced holding periods: 50% at 3 years, 75% at 4 years, 100% at 5 years.
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Full Episode Transcript:
Amanda: Hey everyone. Welcome to another edition of Tax Tuesday. My name’s Amanda Wynalda, I’m an attorney here at Anderson Advisors, and this is…
Eliot: Eliot Thomas, manager tax advisors here at Anderson.
Amanda: And welcome. We’re going to give everyone a few moments to log in. Why don’t those of you who are here, tell us where you’re from? Use the chat and just throw in the chat where you’re joining us from. What’s the…?
Eliot: Vegas.
Amanda: Las Vegas. Well, next time you’re going to just have to come watch us live because we are also in Las Vegas at the infamous Studio 210.
Eliot: Yup, 500 North.
Amanda: It’s basically like the Today Show studio, but for tax.
Eliot: But cooler.
Amanda: Tacoma, Washington.
Eliot: San Diego.
Amanda: Summerland, Orange County. That’s my neck of the woods, where I’m originally from in California.
Eliot: North Virginia.
Amanda: Going by so fast. Michigan.
Eliot: Chicago.
Amanda: Huntington, Tennessee. Albuquerque.
Eliot: Dallas. Go Cowboys.
Amanda: New York, New York.
Eliot: Texas, Texas.
Amanda: Little Rock.
Eliot: LA, Tampa.
Amanda: We might get every state here today.
Eliot: Very close.
Amanda: Which is good, considering our topic.
Eliot: What are we going over today? Something big, huh?
Amanda: Well first, Eliot, we’re going to go over the rules, the Tax Tuesday rules. This is a Zoom call. There is a live Q&A. If you have a question about what we’re discussing or if a completely unrelated question, we’ve got a whole team of tax professionals ready to answer. You can put those questions into the Q&A. Who do we got with joining us today?
Eliot: Let’s see here. We got (of course) Patty running the show. We got Dutch, George, Jared, Jeffrey, Marie, Rachel, Ross, and Tanya. That’s what I can see so far. Of course, we got Matt taking care of everything in the back.
Amanda: Yeah, in the studio. We can’t do it without our AV guy, Matt.
Eliot: Not at all.
Amanda: All right. Tax questions put into the Q&A. The chat is for if you’re having any technical difficulties or things like that. If you would like to email your question in, you can email that to [email protected]. Eliot personally goes through all of the hundreds and hundreds of submissions to come up with the questions that we’re talking about here every other week.
If you need an even more detailed response than what you can get here live or through your email question, consider becoming a client. Here at Anderson Advisors, we can run custom…
Eliot: Analysis.
Amanda: Analysis, review your tax returns, figure out all the ways to save the money. We love to save the money. But the point here is to have a fast, fun, and educational dip into taxes.
Today we are breaking down the One Big Beautiful Bill Act. I heard it was so huge.
Eliot: It’s a lot. About 1000 pages. I didn’t read them all. Probably Toby did.
Amanda: Don’t tell everyone that.
Eliot: It was big.
Amanda: That’s a lot of words. The IRS likes to say things in the most confusing way possible. We’re here to break it down for you. Here are some of the topics we’re going to go over. What do we got, Eliot?
Eliot: We got child tax credits, 529 plans, personal casualty loss, limitations on tax benefits for itemized deductions, state and local tax (SALT) limit, still popular.
Amanda: And then we’re also going to go over charitable deductions for individuals that do not itemize, and also individuals that do itemize, plus our corporate charitable deductions, and talk about which way you may be wanting to do that. Also, the clean energy tax credits. That’s where Elon and Trump got in a little fight over…
Eliot: Disagreement.
Amanda: What else?
Eliot: Lifetime estate and gift tax exemption, 100% bonus depreciation. Yes, it’s back. Opportunity Zone Investments, Qualified Small Business Stock AKA 1202 stock.
Amanda: So a lot of topics that we got to get through in an hour. We’ll be going over them, how they intersect, doing some examples. It’s going to be a fun time.
We don’t want to forget. Please join our YouTube channel. This is Toby Mathis, our fearless leader.
Eliot: Made half a million subscribers.
Amanda: Hit a milestone, half a million subscribers. So smash that subscribe button and you’ll get a notification anytime he uploads a new video.
We also got our other founding partner, Clint Coons. He focuses a lot on asset protection. Subscribe to his channel as well. Between the two of them, what, 10,000 videos? At least.
Eliot: At least a million people.
Amanda: A million subscribers, so tons and tons of information out there, all for free. If you’d like to come visit us, not just to watch text Tuesday Live…
Eliot: That’d be cool, too.
Amanda: That would be cool. We’re just here in the studio alone. Come out to our live workshop. It’s Las Vegas, September 11th through 13th. We actually just held our Q2 workshop out here in Las Vegas. Was…
Eliot: Durango?
Amanda: Yeah. You saw some of our viewers here too.
Eliot: I did. Saw a lot of you. Thank you again so much for coming. It was just a great time catching up and getting to meet people.
Amanda: We love seeing you guys face to face, although I wasn’t there. I had to go on vacation, so I missed out. Sorry.
Eliot: Where were you suffering at?
Amanda: Maui.
Eliot: There you go.
Amanda: It was so rough.
Eliot: Durango was pretty cool, but it’s not Hawaii.
Amanda: It is not. Maybe next year we’ll go to Hawaii.
Eliot: There you go.
Amanda: Hey, if you want us to go to Hawaii, comment on all of Toby’s videos. Why don’t we have TAP in Hawaii? And then we’ll see if together we’ll make that happen. We’ll make that happen.
Eliot: I like it. I like it a lot.
Amanda: So that’s our three-day live event. If you can’t commit to all three days, if you’re new to the Anderson family here, consider joining us for our one-day seminar. The next one’s coming up this Saturday, July 19th. It’s our Tax and Asset Protection Workshop.
Another one July 26th. They’re most Saturdays, so if you can’t commit to the whole day, you can show up in parts. Most clients go to three or four of these events before becoming clients, huh?
Eliot: Yeah. Even when they are a client, they keep coming back. It’s just, again, a lot of information. Great chance to meet people.
Amanda: And there’s going to be a lot of new information in the tax section. We cover asset protection, tax strategies, and estate planning. With all of the new changes, of course we’re going over some of the big ones today, but that webinar’s going to hit on them as well.
Eliot: There’s no way we can get through all the changes in the tax bill in this show, but we just hit some of the highlights. For those of you were part of the quarterly tax planning, we’re going to be doing some more of it on Friday, so just give you a heads-up on that. I think we start at 9:00 AM Pacific (I believe) on that show, so we’ll see some more. You’ll be hearing a lot about this, getting a lot of information from us as things unravel here.
Amanda: So this Friday?
Eliot: Yes. This Friday.
Amanda: And the quarterly tax planning seminar, is that for Anderson clients or is that open to anyone?
Eliot: It’s for tax clients.
Amanda: It’s for tax clients. Again, consider working with us.
All right. One Big Beautiful Bill. Actually, when I first heard the name of it, I thought it was a joke.
Eliot: Yeah, that’s what I thought.
Amanda: But that’s the name. The child tax credits, where we’re going to start out. What was the old rule, Eliot, and what is the new rule?
Eliot: Before we got into all the Tax Cuts and Jobs Act, all the CARES Act, things like that, SECURE Act, all these different legislations we’ve had in the last few years, originally it was $1000 tax credit is where it stood for some time, about approximately 2016.
Amanda: Which makes sense because kids, you only spend $1000 on them a year, right?
Eliot: That’s all I’ve heard.
Amanda: They’re so cheap to have around.
Eliot: You’re dealing with what, four or five?
Amanda: We only have three that qualify for the credit. But we have six total. Some of them are adults now, but still.
Eliot: More than $1000?
Amanda: More than 1000 kids or more than $1000?
Eliot: More than $1000.
Amanda: That would’ve been nice when we had all of them at home. So it used to be $1000. What is it now?
Eliot: It is now moved. Well then into the Tax Cuts and Jobs Act, we moved it up with the CARES Act and things like that. During that era, though, it went up to a max of $2000 with a refundable $1700. If the tax credit caused you to lose all your liability, you’d get a little bit of a refund, perhaps up to $1700. Now with the new Big Beautiful Bill, it went up to $2200 with still that $1700 refundable amount.
Amanda: Let’s back up a little bit. Let’s just hit on the difference between a credit versus a deduction. Because this is a child tax credit, which if you have a choice between getting a deduction or a credit, you’re going to always want to take the credit, because the deduction is simply reducing your taxable income, then we’re applying your tax rate to it. But a credit is actually reducing your tax liability dollar for dollar. Then refundable. What does that mean?
Eliot: Let’s say we calculate our tax liability. Let’s say it’s $1500 or something like that. Then we have a $2000 credit, well that’s going to wipe out all that liability. We’d be able to take a refund off there for the extra $500 up to $1700 in this particular tax credit, so get money back.
Amanda: So when we’re talking about credits, you really want to pay attention to whether they’re refundable, which means you can actually make money off of them.
Eliot: Correct.
Amanda: Or non-refundable, which means it reduces it to zero, but you don’t get any refund from it. Considering qualifications, what type of trial, what type of relationship do you need to have in order to qualify for this credit?
Eliot: Typically, the child has to be 16 or younger. They label it as under 17, but 16 or younger. Dependency, it needs to be a dependent. Someone that is a relative or something that nature.
It actually could be outside of just being a relative. But you have to also have a support to it. You have to provide over a half of the individual support, for living conditions and things like that. Typically, they have to be living with you for at least half the year.
So we got these things that narrow the gap. But it doesn’t have to be bloodline. It could be an adopted child. It could be a sibling’s child or something like that if you’ve taken over the care for that individual. There is some flexibility there. Probably the most limiting is the age and the dollar amounts.
Amanda: And the citizenship.
Eliot: Yes, it must be a citizen.
Amanda: The qualifying child needs to be a citizen, under 17. My oldest son’s going to phase out of that. That’s when he gets the boot because they get the money off of it.
Eliot: No $1000 anymore. Going the wrong way.
Amanda: $2200. Then there is an additional credit. You mentioned adoption. In this legislation, there’s an additional credit for those who are adopting.
Eliot: There is, and that was really nice. I think adoption, I’ve felt beat up in the last Tax Cuts and Jobs Act a little bit. But yeah, there is a partially refundable credit up to $5000. The tax credit overall is $17,280. It’s not nearly as much as it used to be, I believe, but at least you get that. That’s per child. Again, $5000 of that is refundable. So again, a chance to get money back if we’ve gone through the tax liability there.
Amanda: So get out there, adopt some kids. Have some kids. Got a question in the chat. “Does the citizenship requirement apply to permanent residence?”
Eliot: I believe it does. As long as you got a green card or you’re an alien resident, permanent resident, yes.
Amanda: That’s still going to qualify.
Up next, 529 plans. A 529 plan, just starting with the basics, is a tax-deferred investment account. You can start putting money in. The investments grow tax-free. It’s like a Roth IRA. Then when you pull them out, you can pull them out tax-free, as long as you’re spending it on qualified education expenses.
Pre, which bill is it, the SECURE Act? So Pre-SECURE Act, pre-Tax Cuts and Jobs Act. What was the rule?
Eliot: I’m going way back 2016. These had been around a while, but again, it would just be primarily for higher education. It was much more limited in its scope of what you could use these funds for.
These were really based on state rules as well. Every state was disjointed. They all had their different rules. Maybe they wouldn’t even apply it to other state. It had to be their state college or something like that, or even specific colleges within that state.
There was very limited. I think the states have done a really great job of trying to make it more formalized or across the various state borders, so that you can have a little bit more access to your plan.
Amanda: And it makes sense, too, because for example, we’re in Nevada. I started 529s for my kids. A lot of states will offer a state tax deduction up to a certain limit for contributions to a 529. But in Nevada, we don’t have any state taxes. Other states want to encourage people in Nevada to invest into their fund, so I think we ended up going with New York.
Eliot: There you go.
Amanda: I used to live there. Sounded cool.
Eliot: It is cool,
Amanda: The numbers made sense. So expanding those qualifications there allowed for more investment opportunity for those state funds.
Now, originally it was very limited. You could only use it for actual four year university type of expenses—tuition, books—but it wouldn’t cover things like housing or anything like that.
Eliot: And then comes the Tax Cuts and Jobs Act aspect of all this and they expanded. First of all, it didn’t have to just be higher education, it also handled the K through 12. Kiters, as far as admissions saying that they’re in their school, I think it was up to $10,000 was a limit.
Still it wasn’t robust in that you could use it for just everything education. This new bill really expands it towards even accreditation expenses for certain licensing, interest exams and things like that. It’s far more vast of what you can use these funds for.
That $10,000 for the K through 12 activity has been up to $20,000. We’re just stepping back for a second under the SECURE Act. You could now roll into a Roth later on if you don’t ever use the funds. That’s still available. You can move up to $35,000. Got a lifetime limit of $35,000. If you never use a 529 plan funds for education, enrollment to a Roth up to $35,000. But you are still limited to the annual Roth contribution limitations, like just an ordinary contribution to a Roth.
Amanda: If you have a 529, your child has not used it for qualified education expenses. Maybe they got a scholarship, maybe they just had too much in the fund. When you do roll it over to a Roth, you can only roll over the $7000 this year. You’re rolling the larger amount over a number of years. If you’ve got $30,000 extra, you’re not just rolling $30,000 into the Roth. You’re having to do it over that time period there.
If you’re thinking of a 529 plan, I know there was a lot of commotion when they first started to cover K through 12 education. But the real benefit of this plan is that the money’s invested and then it grows tax-free.
If you start a plan for your child when they’re born, it may not be the best thing to pay for their private kindergarten because the money hasn’t really had a huge chance to grow, so really holding onto it for the 18 years it takes them to get to college.
But again, look at so many kids. College is so expensive. You don’t need to go to college to be an influencer these days, but doing a different trade school, things like that, those plans are going to cover all of those.
Eliot: That is a great point. A lot of the trade schools are now underneath this whole idea, this whole umbrella, the 529, which I think it’s a fantastic idea. You hear all the talk out there that we don’t have enough people getting into those trade schools. I know Toby did that huge video with a lot of people in the trade school industries. Really fantastic information on that. Go back to his YouTube.
Amanda: That’s true.
Next up is personal casualty loss. Now this was a really complicated rule beforehand. Give us a fairly simple summary of what it used to be.
Eliot: First of all, personal casualty loss is going to be your personal assets or something like that—fire, theft, what have you. I was all bundled in here. Basically, you had to be itemizing. Again, that means you had to have certain deductions that exceeded the standard deduction at that time. If you itemized, you could deduct up anything over 10% of your AGI. You had this artificial floor that you had to reach.
If you had an AGI of $100,000, your expense had to be over 10% of that or $10,000. Your loss would have to be over $10,000 before you could deduct the first dollar. And you had to be itemizing to begin with. That was all prior to the Tax Cuts and Jobs Act.
You were able to take advantage of it, but you had a lot of hurdles you had to clear, and there’s actually $100 extra fee that they tapped on for each event as well.
Amanda: Who would’ve thought the IRS would make it as hard as possible for us.
Eliot: But we fast forward now, then we had the Tax Cuts and Jobs Act, and in some regards that made it a little bit more restrictive. The big difference is they made that $100 hurdle, $500. So every event you had to pay $500. Then also, they got rid of the 10% AGI limitation. In that regards, it made it a little bit easier to get.
However, one more thing that they tacked on is that it had to be part of a federally-declared disaster. Now you had to wait on DC to call in and say this is a federal disaster before we would know if it would be applicable or not for that particular…
Amanda: We actually had a client who needed to replace their well because of an earthquake. I don’t really understand well engineering, but some natural disaster situation happened and they needed to replace their well. But because that wasn’t part of a federally-declared disaster area, they couldn’t claim that loss.
Eliot: Very restrictive in that regards. So what’s the Big Beautiful Bill do for us? They tacked on. Now, it can be at least a state declared disaster area, so it opens up a little bit more. We’re not as reliant on the federal government for this type of thing.
Still, no itemization as far as the 10% rule. That’s still gone, but they still have that $500 hurdle that you have to get over first before you can deduct anything. I think it was more favorable certainly for people to use. I don’t know if it still would be applicable for our client in that well situation because maybe it wasn’t a state disaster. Maybe it was that declared it, maybe not. But certainly that will help out.
Amanda: The limitation on tax benefit of itemized deduction. This was a big one.
Eliot: We got a lot about itemized deductions that we’re going to be talking about here back to back. But this is a particular one item.
First of all, before Tax Cuts and Jobs Act, before one Big Beautiful Bill, we had what was called P’s limitations. That just said that if you made too much—basically if you’re over $260,000 AGI for a single and $311,000 for married filing joint—you’re going to start phasing out and having limits on the amount of itemized deductions that you can take. It could be quite substantial. Up to 80% of the amount could be removed.
Come now the Tax Cuts and Jobs Act back in 2017–2018, we did away with that. But as many of you know, especially in states like California or New York and the eastern seaboard where you have high taxes (traditionally), we had that SALT limitation, state and local. That’s part of our itemized deductions that we can take, our state and local taxes, but they limited it to $10,000. Some of those taxes were property taxes.
Amanda: So the limit wasn’t on the overall itemized deductions anymore. They applied certain limits to sections of that Schedule A where you would take itemizations.
Eliot: But they hit right where it counts for a lot of this because we had a lot of clients that had six figure deductions in that area, used to do all the two-year tax reviews back at that time for Anderson.
Boy, I tell you what, that next phone call after that bill passed, people were just frantic because they would lose $90,000 a deduction just like that stroke of a pen gone. It was tough. But anyway, we got this up now with a new bill to $40,000, so we get a little more breathing room there.
There is another bypass here that works for some of our clients. I’ll just throw in here because it’s related to state tax. We have the pass-through entity tax, which is still out there under the new bill. That’s for your pass-through entities. That’s going to be your S-Corporations, your partnerships.
It just simply says that if those entities—partnership, S-Corp—pay the state tax on income, then you’re going to get a deduction at your federal level for that, and that does not disrupt your SALT tax. You can still get up to $40,000 there for SALT tax as well.
So if Amanda has an S-Corporation, she makes $100,000 coming in on our S-Corporation taxable income, she can pay tax (let’s say) to California for 10% or $10,000. That’s going to be a deduction on the federal level from $100 minus $10 for $90, so she’s only paying federal tax on $90,000 at that point.
She’s still going to get credit from the state for that $10,000, but any additional, if she has W-2 wages and things like that where she’s paying state tax, she’s going to get that ability to take that as well under the SALT limitations, up to $40,000 now.
Amanda: These last two topics, we’re smooshing them together. Specifically for the itemized deduction cap, if you are in the 37% tax bracket, that means that you’re really only getting a 35% benefit if you earned $800,000 married filing jointly.
Let’s say we’ve itemized deductions of $100,000. What does that actually come out to? Because the limitations for married, for a single person applies to people in the 37% tax bracket. For single people, you’re in the 37% tax bracket if you make $626,000 or more. For married filing jointly, you’re in that 37% tax bracket if you make $751,000. So that’s 37% tax bracket, which means the amount that you’re able to itemize, you’re going to take the lesser of?
Eliot: This is how it reads. The lesser of 2/37th or in other words lesser of 5.4%, or the amount that you go over into the 37% tax bracket, the amount your income goes into that. It’s a complicated thing. We’re just going to go call 5% here. Let’s just go with that.
Amanda: So you’re going to get the lesser of $49,000 or what’s 5%, is $95,000?
Eliot: About 105%, $5000.
Amanda: $5000.
Eliot: Let’s call it that. Nice and even number.
Amanda: $5000.
Eliot: Yeah. Here, your itemized deductions would be reduced to $95,000. You still get to do that, but it’s just a little bit of a slap because you lose 5% on it.
Amanda: A complicated example to pretty much say that if you are in the 37% tax bracket and when you’re itemizing, you’re not getting 37%, 37 cents on a dollar deduction. You’re actually going to get a little bit less, probably around 35%, is the long and short of it.
Now, the way to get around that is what Eliot was talking about with the state and local taxes. If you have a pass-through entity and taxes are supposed to hit your personal return, if you have your entity pay those taxes for you, there is no limitation on the amount of state and local taxes that an entity can write off. So you’re going to get the full amount deduction there.
That income is then not going to flow onto your personal tax return via a K-1. Then you’ll be able to take the full $40,000 individual limit for other types of taxes, which is most likely going to be your home’s property taxes, any other income taxes from other jobs that are involved with your company. Maybe a spouse’s W-2 income or whatnot. We had an example for that too, didn’t we?
Eliot: For the…
Amanda: For the workaround, the SALT pass-through workaround?
Eliot: Yeah, we can go with the…
Amanda: Yeah. Let’s say your LLC earns $500,000. That would normally then flow onto your personal tax return, and you’d report $500,000. Let’s say you owed $50,000 in state and local taxes. You have your company pay that 50,000. What is flowing onto your personal return is going to just be $450,000, right?
Eliot: Again, at the Federal level.
Amanda: At the Federal level, right. Then you’ll have the full SALT limitation or the SALT amount of $40,000 to then also take as an itemized deduction on your schedule A.
Eliot: Correct. Way to still work with this, and they actually just had a chance to remove that workaround dent, so I think they’re pretty comfortable having it in there. Fifty different states, not all of them tax, so there may be another 37 or so (I believe it was) that have signed on in some aspect to a pass-through entity tax, but they all handle it a little bit different.
You want to make sure some of them have quarterly requirements, not just one tax payment at the end of the year. But they all are really good at allowing you to put that credit towards your personal state tax that’s owed, that came through that entity. Again, as Amanda pointed out here, it’s a way to get a little bit more Federal deduction too.
Amanda: You did not pay tax twice almost.
Eliot: There you go.
Amanda: A rare double benefit. They usually don’t let us, so good news for our friends in California, New York. Not bad news if you live in a state that has no income tax. States like Florida, Texas, no income tax, but guess what? You have very high property taxes. You’ll be able to take advantage of that $40,000 limit and potentially even more.
Eliot: We’ll just add one more thing onto the SALT, that there is a phase out for that as well. If you’re over $500,000 modified adjusted gross income, basically just your income for each amount of each dollar you go over it, there’s a 30% deduction against that. It’s going to lower your $40,000 that you can do, but it won’t go lower than the $10,000 that we originally had prior to the Big Beautiful Bill, big bad bill.
Amanda: The big bad bill.
All right. Charitable deductions for individuals that do not itemize.
Eliot: This, going back again, we didn’t have anything like this prior to the Tax Cuts and Jobs Act and all the the COVID-related type of legislation that came through. This was a unique thing that came in. I believe it was CARES Act that added, said you can donate $300 per return into a charity even if you’re not itemizing.
Amanda: Itemizing is, instead of taking the standard deduction, you are counting up all those receipts and using your Schedule A. Now the tax Cuts and Jobs Act effectively doubled the standard deduction as a way to make tax reporting simpler for most Americans. Most Americans didn’t need to keep track of all of their receipts now because that standard deduction was so much higher than what they would even be able to itemize.
But still, even with that, the CARES Act, which was passed during COVID, you could get a $300 deduction per tax return. So this is one of those benefits that wasn’t attached to your filing status necessarily.
Eliot: Really, yeah. That was a surprise. You didn’t double it to $600 or anything like that. And that’s an above the line deduction to simply mean that’s the best kind. It happens before you deal with the standard deduction, so it goes directly against your adjusted gross income.
Now fast forward to where we are today. As of July 4th, we have $1000 for a single or $2000 married filing joint. If I’m not itemizing, I’m single, I can put in $1000, get a deduction. In the past, I couldn’t do that. So it’s very generous. Hopefully they increase that a little bit more. Courages donations to nonprofits.
Amanda: As a society, we want to encourage that. All laws are designed to encourage or discourage certain types of activity. This is going to encourage people who, even though they’re just taking the standard deduction, to still go out and give money to charity there. And that’s going to apply to any 501(c)(3). Also, if you start (let’s say) a Donor-Advised Fund, you’re going to get that deduction as well.
Now for those of you who do itemize, there are some changes there. 2025 is still going to be the old rules. Which are what if you itemize?
Eliot: Again, the only change there was the SALT limitations, which was again, was the old rules of $10,000. Now, it’s $40,000 SALT limitations. But for the overall charitable amounts, we didn’t really have an impact there, really, under the Tax Cuts and Jobs Act.
Amanda: You can still deduct 30% of…
Eliot: 60% AGI if it’s cash.
Amanda: If it’s cash, 30% if it’s property.
Eliot: Appreciated property, exactly. If we got some capital gains going on there and we don’t want to sell, we just want to donate the house or what have you, that capital asset, we’re limited to 30% AGI. Those things are still in play.
Amanda: Now there’s a slight limit. It was just a slight limit.
Eliot: Yeah. Now we got a floor for all of us itemizers who donate to charity. This is just on the charitable amounts. But you have half a 1%, 0.005 or that floor. Take all of your itemized deductions, take them times that amount, that 0.5%, that’s the amount they’re going to reduce your charitable contribution by.
A little bit confusing there, but let’s take an example. Let’s say have an adjusted gross income, $200,000. We take up by half of 1%. That’s $1000. Let’s say Amanda goes out and donates $5000 to her favorite charity. She’s only going to deduct $4000. She’s going to have that $1000 limit.
Amanda: That’s what a floor is. Is the first percentage is essentially free.
Eliot: And just being in the area of itemized deductions here, I just will point out real quick another completely unrelated but normal thing where we have a floor is the medical. That’s at 7.5% still. It was supposed to go back to 10%, I believe, but 7.5% of adjusted gross income’s is just throwing that out there.
Amanda: If your adjusted gross income again is $100,000, how much do you have to spend to get a medical deduction?
Eliot: Going to be $7500.
Amanda: You just spend $7501, you get a $1 deduction.
Eliot: Might be good. If you got it out there, if your planning works well, if you got good structuring, if you got one of those C-Corporations might have that medical reimbursement plan, HSAs was always ways to work with that, things that we’ll go over on Friday.
Amanda: So with this new floor, because this rule doesn’t start until 2026, what can we in this tax year be doing in terms of some tax planning? We can start looking at prepaying now or precontributing for our future charitable contributions here in 2025, because we’re not going to have that 0.5% floor.
If you do something like tithe, if you tithe 10% of your income to your church or whatnot, you can prepay as many years as you want into a Donor-Advised Fund. Then you can get the tax deduction this year under the slightly better rules. Then in the following years, actually do your tithing from that fund.
Another example was starting a charity. Maybe you want to, over your lifetime, donate $100,000 dollars to your alma mater, to your school, but you don’t necessarily want to give it all at once. You want to make sure that they’re not spending it all in one place, as they say, and you would plan to do $10,000 each year for the next 10 years.
Well, what you can do now is do that complete $100,000 charitable contribution to a Donor-Advised Fund this year, and then every year for the next 10 years, be paying out that $10,000 through that fund. You’re taking advantage of the charitable deduction rules for 2025. You’re not having to deal with that floor that starts up in 2026.
Eliot: Very good point.
Amanda: We’ve got a note here in the chat that the SALT limitation was clear as mud and that California’s groaning. Really the only thing to come away with the SALT is that when you previously could only deduct $10,000 of state and local taxes, you can now deduct $40,000.
I know for a lot of you out there in places like California and New York—I’m a former California resident—I feel your pain. It’s not a huge amount, but it is. It’s four times what it used to be, so it’s something.
C-Corp charitable donations. What do we got here, Eliot?
Eliot: Again, going all the way back in history, before approximately 2015–2016, if you were a C-Corporation, you could donate up to 10% of your taxable income. Whatever the taxable income was, take it times 10%. That’s the amount that the C-Corporation could donate to a charity and still get a deduction that year.
Then fast forward to the Tax Cuts and Jobs Act. Really, it didn’t do anything with that other than it had the all important flat tax rate on C-Corps making C-Corps a much more popular type of entity to use, tax structure to work with. So we saw a lot of increase in the use of C-Corporations, but they still had that 10% limit for their donations.
CARES Act though, during the COVID era, et cetera, that number went up to 25% for a year or two, then it went back down to 10%. Now, we get into what did the Big Beautiful Bill do for us? It added a floor to the C-Corporation, a 1% floor, meaning that now you will not be able to deduct the first 1% of your taxable income—that’s a floor—but you still have the ceiling of 10% of your taxable income. Someone just call that 9%.
Amanda: They made it as complicated as possible, instead of just saying C-Corps can contribute or deduct 9% of their taxable income to charities. That’s the shorthand for it, rather than 10 minus 1.
Eliot: But they don’t like to do it that way.
Amanda: Keep making things complicated, IRS, Congress. Keeps us employed around.
Eliot: It keeps us busy, that’s for sure.
Amanda: That’s why we have so many viewers. It’s not because of our jokes.
Eliot: No, it’s not.
Amanda: Clean energy tax credits. This is what got the girls mad at each other.
Eliot: A lot of people got upset at.
Amanda: Trump and Elon had their falling out. There was a big push in governments around the world for clean energy, green bills, things like that. What was the thing that they were talking about? The new green deal. All of that is going away, unfortunately. Maybe there won’t be 10,000 Teslas in my neighborhood anymore.
Eliot: But basically, the history here, we didn’t have a whole lot in this area prior to the Inflation Reduction Act and things like that, residential clean energy came out, energy-efficient homes. All those things came out more in the Biden administration, and we saw a real increase.
You get 30% of a tax credit on your home for having solar or your rental property, and you’d be able to deduct that solar on the rental as well. Of course, we had the vehicles as you mentioned, the electric vehicle, I think was $7500 tax credit. Is that…?
Amanda: It was $3500–$7500 depending on what type of vehicle it was. There was in the last… what was the Biden bill called?
Eliot: I had the Inflation Reduction Act.
Amanda: Yes. There was an additional requirement that the final assembly had to be done in the United States. That took out some vehicles that were qualified for the previous tax credit. They didn’t quite qualify because they were produced overseas.
That encouraged overseas car manufacturers to build factories here in the United States. Now, there’s just going to be no credit whatsoever. Still eligible for 2025, so see you to the Tesla dealership, as they say, some vehicles?
Eliot: I think we got until end of September for that.
Amanda: September 30th 2025, so vehicles, solar panels on your personal home, you get a 30% credit there, and solar on rental properties.
Eliot: I think you have to have them installed and used, and I don’t think it’s that fast of a process. I don’t know how long it takes.
Amanda: You know what? When we moved into our new house—we’re out in Summerland—the day we moved in, someone with a clipboard was knocking on our door to sell us solar panels. And they were installed. If you’re going to pay for them, they’ll get those puppies on the roof.
Eliot: There you go.
Amanda: They’ll do it. And I’m sure they’re gearing up knowing that that industry is going down. So after 2025, no credit for vehicles, no credit for solar on personal homes or rental properties either.
What about for energy efficient? So residential gone, but commercial properties, we do have a little bit of time left.
Eliot: There might be some, a little bit left there. I don’t have the exact dates where it phases out, but I think as best I could tell that there might be some commercial aspects to it. I actually don’t know what the tax credit was, but I saw a lot of the residential being cut out, but not so much. Maybe the commercial.
Wouldn’t hold it to it though because this was a very extensive attack, or not attack but removal of a lot of the green energy tax aspects that have been out there. Maybe even some of the commercial got cut back a little bit too.
Amanda: I think those are going to expire next June 2026.
A few topics. Lifetime estate and gift tax exemptions. Every time we talk about the lifetime estate tax exemptions, I think of my uncle when we see him on Christmas. How you doing, Uncle Jim? It’s a good year to die. It’s not a good year to die. I’m like, whoa, whoa. Calm down.
Eliot: Fifteen million reasons to die.
Amanda: To die this year. Not to make light. The estate tax exemption is the amount of your estate when you pass away that’s not going to be subject to tax. The estate tax is pretty high. It’s higher than individual tax rate. What, 40%?
Eliot: Yeah, and it accelerates really quickly.
Amanda: And it goes higher. That’s when as the more wealthy of us start to get older, start thinking of our own mortality, we start trying to do things to get funds out of what we call taxable estate. The estate tax has been up and down. I think the lowest it’s been in my lifetime was a million dollars, which is…
Eliot: I’m older. It was $600,000.
Amanda: That was BC. The Tax Cuts and Jobs Act launched that up, up to about $11 million, and then it has increased for inflation throughout. It’s currently a little over $15 million per individual, about $30 million for married couple filing jointly.
There are a lot of things that you should be working with your estate planning attorney so that you can make sure you are taking care of that, as one spouse generally tends to pass away before the other, making some of that a little complicated.
The new rule?
Eliot: For this, again, you have $15 million avoidance of federal tax on it.
Amanda: Starting next year.
Eliot: Yes, starts next year.
Amanda: Don’t die this year.
Eliot: Stay around.
Amanda: Hold on until January, please.
Eliot: Was that Uncle Jim? Was that one?
Amanda: Yeah, my uncle Jim.
Eliot: Hang out until January 1st and take off. Whatever’s got to be done.
One thing I wanted to point out here—because I heard Toby and one of our good friends to Anderson, Scott Estill, talk about this particular topic—there was a lot of people panicking as we got through the year. Will this come back? Will they reinstate? It’s supposed to go back to a million dollars, et cetera.
Toby warned everybody five years ago when the Tax Cuts and Jobs Act came out, don’t make rash decisions on those things. He said it again as we were coming into this year of battleground on this thing. It’s so true because a lot of people panic, put their assets into a certain trust or something like that.
It doesn’t mean your life’s destroyed or anything like that, but maybe you would’ve saved a lot more tax, still keeping around until the full bill was there, because this thing is always something up for subject to change. It goes back and forth. It’s a ping-pong.
Amanda: And then gifts. The gift tax exemption is the amount you can give annually and not have to file a gift tax return. If you give over this amount, you file a gift tax return, and then the excess gets added back into your estate to calculate your lifetime estate. That’s at $19,000 starting in 2026.
Eliot: Will be adjusted for inflation.
Amanda: And that’s per giver and per receiver. If you are a married couple, you and your spouse can each give $19,000 to each individual recipient. Pretty much doubles it.
Eliot: Very nice.
Amanda: My Venmo is… just kidding.
The one that our real estate investors are so happy about this one, this one they’ve been talking about for years, 100% bonus depreciation. First, depreciation. We talk about depreciation almost every episode of Tax Tuesday.
Depreciation is essentially a deduction you get to take for the business use of property. Things wear out. For example, this Apple pen stopped working earlier. When you have business use property, you get to depreciate it over its useful life, which can be anywhere from 5 years, realistic commercial real estate, 39 years. It’s what they call a paper loss. It looks like you’ve lost money on your tax return, but it’s not an amount you’ve actually paid out. Tax Cuts and Jobs Act 2018 granted us 100% bonus depreciation.
Eliot: Pretty ecstatic about that. We saw it happen to real estate.
Amanda: It encouraged a lot of real estate investment. If you were either a real estate professional or you could take advantage of the short-term rental loophole. Your real estate activity became active and you could generate losses of essentially 100%, and take that as a deduction against your W-2 or your active income, that was pretty significant. Now, this benefit slowly was phasing out. It was at 60% in 2024?
Eliot: 2024, yes. In 2025 it’s going all the way down to 40%.
Amanda: Then this bill brings it back.
Eliot: It does, gets us all the way back up to 100%. Now, this is anything that has a 20-year or less lifespan. If you’re talking about a single family rental or commercial building or something like that, those are straight line 39 or 27½ depending on which it is.
You’ll need that cost segregation study that we often talk about, which is just simply someone coming in, taking a look at the building, the structure, and determining that there are pieces in here to this building that have by themselves a lower, a shorter depreciation life, say five years. Carpet’s always a great example. Lights, windows. Then of course you have the foundation which is still 27½ for a rental or 39 for a commercial building.
You get that study done, and a significant amount will be under 20-year property, and that’s where we get this bonus depreciation. We get this massive write-off. It plays so well into the real estate investor’s hands. A lot of people (I think) will be happy to have this back and we will have it back for some time.
Amanda: The last one that I worked with a client on—just to give you some rough numbers; obviously this is going to be different and very specific to the property—they were doing what’s called the short-term rental loophole.
If you can’t qualify as a real estate professional because you work a full-time job, what you can do is materially participate in a short-term rental, meaning that your average length of stay is 7 days or less. you spend at least 100 hours managing that rental. And that’s more than anyone else. That’s what qualifies you for it.
This client had purchased an $800,000 property. What that ended up in after a lot of math was a $218,000 deduction. What that was able to do was wipe out almost all of their W-2 income. That’s the income that’s getting hit with the highest amount of taxes.
Then what was left were the other things like capital gains, which is at the lower 20%. Overall, an amazing tax strategy. The 100% bonus depreciation, we don’t have to wait until 2026 for it. It starts now. It applies to assets acquired in 2025.
Eliot: As of January 19th, I believe it was, 2025. That’s unusual. They actually went back in time and let us grab that.
The one thing I’m not yet set with my certainty is what if I purchased in 2024, but I didn’t place it in the service until after that January date? I’m not sure because under old rules, you would’ve gone back to the year that you purchased it, which was 60% bonus.
Clearly, still at 60% is very generous, but 100% is a lot better. I’m not sure yet. The code says just placed in service and purchased year after the 19th of January, so I’m not sure what happens to that unit bought in late 2024 yet. We’ll try and find that one out.
Amanda: Yup. All right. Opportunity zones. It’s been a minute since we’ve had to talk about opportunity zones. That’s because they’re really complicated. In 2018, the Tax Cuts and Jobs Act created this new thing, Opportunity Zone Investments, Opportunity Funds. It was like a 1031 on steroids, almost.
You could sell a capital asset—it didn’t have to be real estate like a 1031 is for real estate; it could be stocks, it could be any capital asset—and you could roll that into an Opportunity Zone Fund. Then that fund would then invest in specific areas, whether urban or rural. These areas were picked by each state and then okayed by the federal government. If you rolled it into it, you got a 10% step up in basis.
Eliot: And if you held onto that investment through the second year, you got an additional 5% for a total of 15%.
Amanda: And then if you held it for 10 years total, you locked your money down for 10 years, you got…
Eliot: No tax whatsoever on the appreciation of that. That’s huge.
Amanda: You will have to pay tax on the original gain, the part of the gain from the original investment that you deferred. That tax still came due in 2026, which is next year. That’s not going to change at all. But the additional gain from the 10 year investment, no tax whatsoever.
As you can imagine, there was a mad rush to do this in 2018–2019, because the biggest benefit you would get, you had to hold that property at least through 2026. Past that to get a benefit. Then as the year started going away, well the benefit reduced. That’s why we haven’t talked about it for a long time.
Eliot: Correct. It’s back now, though.
Amanda: But it’s back.
Eliot: But they did change some stuff.
Amanda: Of course. They got to earn their paychecks. They got to do something.
Eliot: Well, they need to do more than that. This new policy will take effect in 2027. They’re not going to retroactive anything.
Amanda: It’s almost completely unrelated because if you’re in an Opportunity Zone Fund now, there’s no way to connect that or roll that into the new rules because of the timing. We’re looking at new sales, new rollover starting in 2027.
Eliot: Correct. Again, just like for the original one from the Tax Cuts and Jobs Act, we had to wait a long time for answers, regulations from the IRS. I don’t know what to expect on this one or anything else for that matter in this bill.
But as written now in 2027, same story. You got a capital gain, you don’t want to pay the tax. You can defer it for five years and you’re going to get a stepped up basis, that artificial stepped up basis of 10%. Again, let’s say you had $100,000 in capital gains, you put it into the fund…
Amanda: First $10,000 tax free.
Eliot: Exactly. As long as you hold it five years in there, you only pay tax on $90,000. Then we do have to pay tax on that capital gains…
Amanda: Because it’s only a deferral.
Eliot: Correct, but you hold onto the overall investment for another 5 years, total of 10. Any additional appreciation, again, no tax whatsoever.
Amanda: Sounds good.
Eliot: It’s great.
Amanda: I’ve heard mixed about opportunity zones. The tax benefits, if you’re willing to have your money tied up for that long can be huge. It is a bit restrictive.
Eliot: And you’re very much reliant. There’s not a whole lot you can do for a decade. You’re at the whim of what’s going on in that environment.
Amanda: For one, you’re limited on the areas you can invest in, so make sure you’re looking those up. You have to improve property too, so you’re going to be putting in additional amounts to improve property, what, 50%?
Eliot: Yeah. The original was 100%. In other words, what Amanda’s talking about, let’s say you went out and you had a building that was $500,000—$100,000 for the land, $400,000 for the improvement we call it the building—you’d have to put another $400,000. You had to double the value of the improvement.
Here, I think we still have to do that, but we have 50% improvement for something very similar in the rural areas. This is a different type of opportunity zone. It’s a rural area.
Amanda: Rural-specific.
Eliot: Yes, rural.
Amanda: For our good friends in places like Iowa.
Eliot: Exactly, the Midwest. But there, you get a 30% step up basis and only 50% requirement for the improvements. Again, the same 10 year item for the appreciation, paying no tax on it. We get an extension of this, a little bit more added to it for other areas as well. We’ll have to wait and see what those areas are and where they get picked out by the local governments. But could be a good deal.
Amanda: So deferring tax, some tax-free gain, and you’re going to have to have some extra cash to put into that investment. A question in the chat. “What about depreciation recapture?”
Eliot: Oh, none of that. Don’t hear of it here.
Amanda: None of it?
Eliot: No depreciation recapture.
Amanda: Cha-ching.
Eliot: Yeah. Huge, huge tax play.
Amanda: We love that.
All right. Qualified Small Business Stock exclusion, 1202. What was that? What even is that, Eliot?
Eliot: This is going way back maybe to the 90s through 2010. The idea was to encourage investment, for corporations to invest in startup businesses, just get those enterprises up off the ground.
How are we going to encourage it? Well, if a founder starts something with just regular C-Corporation stock, then they could sell it later on. If they held onto it for five years and sold, they’d get a 50% deduction on the tax.
In other words, if you made $10 million, you wouldn’t have to pay tax on $5 million. You get to pocket it free of charge. Later on, that went up to 75%. Then 100%. We had seen that increase over time.
The Tax Cuts and Jobs Act didn’t really impact us. Again, other than it gave us a flat rate. C-Corporation, 21% made it far more popular to get in that C-Corporation. See this thing going on. Now we get to the new bill.
Some of the changes they added, instead of having to wait five years to get any bonus or benefit from this, you only have to wait three years and you get 50% off of your taxable gain. Four years, you get 75%. Again, if you hold the full five years, you’re still getting there 100%.
This isn’t up to an extensive amount. It was $10 million, now it’s $15 million of gain. Or it’s a greater of $15 million or 10 times your basis in your stock. That could be an exceptionally large number. Again, this is for those people starting the business. So many of us would say maybe S-Corp or partnership or this or that. Well, we really want to step back and say, well, what is the business?
Amanda: What’s our exit strategy?
Eliot: Exactly, and this is a great exit strategy. No tax whatsoever.
Amanda: If you’re planning to start your business and work in it your whole life, and that’s your income, maybe we’re looking at an S-Corp there. But if your plan is to start your business, build it up, and then sell, we want to really be considering that C-Corp here.
Eliot: Absolutely. If, oh, I just started my business last year and it’s this taxed this way or that way, doesn’t mean you can’t. Maybe turn it into a C-Corporation, take advantage of this from that point going forward, so just be aware of that too.
Amanda: Yeah, and there are a couple of limitations that are going to only apply to first issue stock.
Eliot: That’s correct. Have to be the original owner. You can’t get it for sweat equity. It needs to be something you put in there, I believe.
Amanda: And the total assets of the business?
Eliot: $75 million. That’s an increase a little bit.
Amanda: If you’re above that, it used to be $50 million, $75 million. It really is for those mid-size companies. It’s not for huge conglomerates or things like that.
Eliot: Correct.
Amanda: It’s to encourage that American dream, right?
Eliot: Yes. It has. It’s encouraged a lot.
Amanda: We’re at just about exactly an hour.
Eliot: That’s exactly one hour now. Now, it doesn’t mean that there is a lot more that went on in this bill. Simply that’s what we need time for. Again, this Friday, if, if you’re part of the quarterly tax planning, we’ll be going over a lot more. Probably won’t have enough time even in that to go over every change, but we’ll have more information coming out. We always do. We know videos. We got a lot of those.
Amanda: Again, subscribe to Toby’s YouTube channel. He’s going to be cutting a lot of videos as more and more information starts coming out about the bill, as the IRS starts issuing regulations to clarify what it means to be an opportunity zone, things like that. He’s going to be cutting a lot of his. We’ve already got updated tax changes for individuals. That is part one. Part two that was just uploaded yesterday.
So subscribe to his channel. Tey’ll get an alert anytime he uploads something. Then Clint Coons as well. His channel’s more focused on asset protection, but there’s really no separating the two. You can’t create an asset protection structure using business entities and not take into consideration the tax benefits. That’s why a lot of our structures, I call them, built-in tax strategies. Things that just automatically can start doing on day one.
If you want to hear more than just us, more than just one hour of tax. well come out to our live event. Our next one is on September 11th through 13th. That’s going to be a Thursday, Friday, a Saturday, which leaves you all day Sunday to go wild out here.
Eliot: Never had that happen in Vegas.
Amanda: It’s never happened at our events. It’s a fun time. We love seeing you guys in person. Eliot got to meet a lot of our viewers at the last one.
Eliot: You’re just great people. That’s all I can say. Great people.
Amanda: For sure. So take advantage, get that QR code here. Or you can just jump in the deep end with us. Schedule your free strategy session. You’ll meet with a business advisor. Tell us about what investments you have now, what your goals are, what your fears are, what you’re worried about, and we’re going to put together a plan for you.
We talk a lot about real estate investors, but we work with traders, we work with business owners, entrepreneurs. So come schedule that free strategy session. See what we can do for you.
If you want to email us at Tax Tuesday with your specific questions, [email protected]. The more detailed, the better. Or you can just visit us at andersonadvisors.com.
Thank you again for joining us. We’ll see you next time. Bye-Bye.
