Transcription
President Trump's new tax plan just unlocked a brand new tax break for the financially savvy. But unfortunately, most people will miss it.
While most of the media is focusing on the politics, I want to do something different. Instead of talking politics, I want to show you how you can use a tax code to your advantage as an investor, as a business owner, or even as a regular person by understanding the new tax changes.
Yes, I know I'm just a random guy on YouTube, but I'm also a licensed attorney who's not your attorney. And that's why in this video, I'm going to break down what the tax changes really mean, who is going to benefit, and how you can take advantage of these tax changes before the next tax season.
Some of the biggest changes that President Trump signed into law are: number one, lowering income taxes for many Americans and making that permanent; number two, removing taxes on overtime income and tip income up to a certain threshold; and number three, creating these Trump accounts, essentially free money for babies. This is what many of the media focused on.
But this new tax plan has also passed a new wave of opportunities that every wealthy person is asking their attorneys, their accountants, and their financial advisers about, which my firm has done a lot of research on, which include: number one, the bonus depreciation change; number two, the 20% pass through deduction; and number three, investment taxes. And I want to break all of this down for you in this video. So, even if you don't understand what this means, you'll understand how you can start to take advantage of the tax code by the end.
So, here's the plan for this video. I'm going to start by briefly going over some of the commonly discussed changes that President Trump has passed. And then from there, I'm going to talk about the tax opportunities and how you could potentially take advantage of these changes.
Now, I already did a full deep dive going over some of these changes that President Trump has done. If you haven't seen that video yet, I'll also link it for you down in the description.
Starting with the income tax. If this new Trump tax bill was not passed, we would have seen income taxes go to around here. I rounded the numbers to keep it simple, but essentially if you made under $12,000, you'd be paying 10% of your income in taxes. For every dollar that you earn between $12,000 and $50,000, you'd be paying 15% of that income, that bracket of income in taxes. For every dollar that you earn, between 50 grand and 120 grand, you would be paying 25% of your income in taxes. For every dollar that you earn between 120,000 and a quarter million, you'd be paying 28% of that money in taxes. For every dollar between a quarter million and 544,000, you'd pay 33% of the money in taxes. For every dollar between 544,000 and 546,000, you'd pay 35% of the money in taxes. And for every dollar that you earn above $546,000, you'd be paying 39.6% of your income in taxes.
But now this has changed because of the new income tax plan that President Trump has passed. This is what your income tax rates are expected to look like under this new tax plan. Again, this is assuming that you're a single filer. If you're married, then your numbers are going to be a little bit different. But the whole idea is if you're making under $50,000 a year, this doesn't really change. But now, this third bracket is not going to be at a 25% rate. It's going to be at a 22% rate up to $103,000. The fourth bracket is up to $197,000, but it's only going to be taxed at 24%, not 28%. The fifth bracket is going to be at 32%, not 33%, and it's only going to go up to $4 million, not the $544,000. The next bracket is going to stay at 35%, but it's going to go all the way up to $626,000. And the top tax bracket is not going to be 39.6%, it is going to be at 37% and it's going to be for every dollar you earn above $626,000, which means for many Americans you're going to be seeing lower income tax rates.
And if you're saying, "But Jasp, I make under $50,000 a year as a single filer, does that mean I don't get any tax breaks at all?" Well, not exactly. We have to take a look at the standard deduction. And this is where I also want to remind you that if you are an investor and you want to understand how you could take advantage of the changes that President Trump is passing through the technology changes that we're seeing and through the geopolitical tensions that we're seeing, how do these things create investment opportunity? I'm hosting a live free investor workshop on August 12th. This is my biggest investor workshop of the year where I'll be going over how you can find investment opportunities through this changing economy, through the turbulent times. It is a free workshop. It is my biggest investor workshop of the year. We have maxed out capacity every time we've done this. So, if you'd like to join me on this workshop, all you have to do is register. It's free. I'm doing it twice on August 12th. Once in the morning at 10:30 a.m. Eastern time, and then again in the evening at 8:00 p.m. Eastern time. So, if you'd like to join me, again, I have the link for you down in the description below.
You're also seeing the standard deduction go up in 2025 as a result of this new tax plan. So, the standard deduction is a tax write-off that everybody gets to qualify for regardless of your income. So, if you're making under 50 grand a year or more than 50 grand a year, you get to qualify and benefit from the standard deduction. And in 2024, this standard deduction was $14,600 if you're a single filer, $29,200 if you're married filing jointly. In 2025, single tax filers will get a $15,750 standard deduction, and married couples will get a $31,500 standard deduction just as the base because of this new tax plan.
And the last major change here when it comes to income taxes is if you're a senior and you make under $75,000 a year, you get to qualify for a $6,000 senior deduction as an additional deduction on top of this. So essentially, if you are relying and living off your social security, this will help you mitigate any taxes you have to pay on the social security income. If you and your wife are both seniors, well then you get to qualify for a $12,000 deduction.
Now that you understand the basics of the changes in the income tax, let's talk about the changes when it comes to overtime and tip income. Between now and the end of 2028, if you earn money from overtime or from tips, you can get a tax write-off on that if you make under $150,000 a year as a single person or $300,000 a year as a married couple filing jointly. But there are some exclusions to this because you can write off up to $25,000 a year in tip income and up to $12,500 a year in overtime income, assuming that you meet the income thresholds. This is a brand new tax deduction because we didn't have this in 2024.
And then we have this brand new concept called a Trump account. If you are born between January 1, 2025 and December 31, 2028, you will be deposited $1,000 into this Trump account, which is essentially a stock market account that is supposed to match the stock market. Meaning that it is money that's deposited into your account one time. It's not a $1,000 a year or $1,000 a month. It's a one-time $1,000 contribution to this account that will hopefully grow, that then you will be able to access partially when you hit the age of 18 and then as you get older you will be able to draw more money from this account. Your parents can contribute more money to this account as well, but it's a new way of trying to create some funds. I know $1,000 is not a lot of money, but it is a start to help create some funds, some savings funds, some investment funds for babies that are born in America.
That covers some of the biggest and most talked about changes from this tax plan. But these don't really create opportunities for regular people or investors or business owners. And this is where I want to shift gears and I want to talk about now some of the tax opportunities that are coming from the same tax plan. And to do that, I want to talk about these three things right here. So, let me start by talking about what is bonus depreciation and what are the changes that we're seeing through this new Trump plan.
This new tax plan is reimposing 100% bonus depreciation, which is something that you can take advantage of if you are a business owner or even if you don't have a business yet if you understand how the tax code works. So I'm going to explain this in three different examples and I'm going to get a little bit more spicy each and every time. Take a look.
Now I do want to remind you that I'm not here trying to tell you how to manage your own taxes. If you have specific tax questions related to your personal financial situation, get a financial adviser, get a tax accountant, get a tax attorney to help with your personal situation. I'm just speaking in generalities to help you get a better understanding of what's going on and what some wealthy people are taking a look at.
Example number one, I own a factory and I have this manufacturing equipment in my company and I need to buy this $30,000 piece of machinery. If this tax bill did not pass, I would be able to take a write-off of 40% of this. So, the old way is I would be able to take a $12,000 write-off right now, even though I spent $30,000 on this machinery. But now, under this new plan, I can qualify for a 100% bonus depreciation. Meaning, if I use this machinery for my business, my factory, I can take a full $30,000 write-off right now, which means I can spend $30,000 and get a $30,000 write-off on my taxes because I'm spending $30,000. Which means some businesses are going to be more likely to invest in machinery and things for their business because now you can take a full tax write-off instead of having to write it off in pieces over the next few years.
But now, let's turn it up a notch and make it more spicy. Let's assume you're not a factory owner. Instead, now you are a TikTok influencer. And because you have the certain image on TikTok, you want to drive around in a G Wagon so people think that you're a big baller. Well, this G Wagon that you want to buy, it's $100,000. And it could qualify as a business expense if number one, you use it at least 50% for your business, meaning for your TikTok influencing business. And number two, if this G Wagon weighs at least 6,000 lbs, which it does.
Now, if this tax bill did not pass, you would be able to take a 40% write-off this year, which 40% of $100,000 is $40,000. But now, under this new tax plan, you can qualify for 100% bonus depreciation. So, if you use this G Wagon 100% just for your TikTok business, well, now you can qualify for a $100,000 write-off, which means if you make $100,000 this year from your TikTok business, you walk into the Mercedes-Benz dealership and you say, "I'm going to buy this G Wagon for $100,000 and you put $10,000 down." You still have $90,000 in your bank account, but now you get to qualify for this $100,000 write-off. You get to tell the IRS, "Hey, I made $100,000 of income, but I have $100,000 of expenses," which is this G Wagon, when in actuality, you have $90,000 in your bank account because you only put $10,000 down. And now you have a $0 tax bill because you use this G Wagon as an expense. And because of the 100% bonus depreciation, you got to write off the entire amount year 1 even though you only put $10,000 down.
And if you think that's interesting, let's make it a little bit more spicy. Let's assume now that I'm not a business owner. I work in tech and I make $80,000 a year. It doesn't matter which industry that you work in. Just for the example, I'm making $80,000 a year. But now I had this idea to start a podcast because you're seeing all these TikTok influencers making so much money driving around a G Wagon. So now you want to start this podcast. Then you go and open up an LLC. You go and buy some laptops. You go and buy some cameras. You buy some audio equipment. Then you buy some other things to start this podcast, and it cost you $25,000 to start this podcast.
Well, under the old tax rules, you would be able to take a write-off of 40% of that. That's a $10,000 write-off even though you spent $25,000. Then you get to write off the rest over the next few years. But now, under this new tax plan, because you get to qualify for 100% bonus depreciation, assuming that you document all your expenses, you're doing all these expenses just for your business. Now you get to qualify for a new $25,000 full write-off because you spent $25,000.
But this is where it gets even more interesting because let's assume that you're just starting off and like many other new podcasters, you don't make a lot of money in year one. What if you only make $5,000 from your podcast this first year, even though you spent $25,000? Well, that means you spent 25 grand and you only earned five grand. That means you had a $20,000 loss. But remember what I said in the beginning of this example. You also work a job. You're making $80,000 a year from your W2 salary. Well, if you have this $20,000 loss because now you spent this money on your business expenses, you can take this $20,000 to offset your W2 income. Which means now you get to tell the IRS, "Hey, I made $80,000, but I'm only going to pay taxes on $60,000," because you get to take this active income loss from your business against your active income because you qualify under the income thresholds and now you get to pay lower taxes on your income because you spent this money on your business.
Again, get yourself a good accountant, get yourself a good attorney, get yourself a good adviser. That way you make sure you do these things the right way because if you do this wrong, not only could you pay penalties and interest and fines, but you could also end up in jail if you don't pay taxes the right way. But this tax code does open up opportunities for the financially savvy to take advantage of this 100% bonus depreciation. And this is just the beginning.
Oh, and one more thing I really want to emphasize. When you are spending money for your business, I don't care which type of example you're falling under, make sure you document everything because if you can show the IRS your documentation of how you're using these expenses for your business, it will help support your claims. Every good adviser, every good accountant, every good attorney is going to tell you to document everything.
Now, let's take it one step further by talking about this 20% pass-through deduction. This 20% QBI, qualified business income write-off, is arguably one of the most valuable tax deductions that small business owners, sole proprietors, and partnerships can qualify for. And it was set to expire at the end of 2025. But under this new tax plan, it is made permanent. And what this deduction says is if you were a sole proprietor, if you're an LLC, if you're an S corporation, or if you are a partnership, you get a 20% tax break for doing nothing except being a small business owner.
So, for example, let's assume that you make $200,000 in revenue. Then you have your expenses. Whatever your expenses are, your payroll, your rent, your softwares, you have $100,000 in expenses, which leaves you with $100,000 of profit. Now, normally the way it works is you're going to have to pay taxes on this $100,000 of profit because you have $100,000 of taxable income. But this 20% QBI rule says that you get to qualify now for a 20% tax write-off. So, you take a 20% deduction, which in this case is $20,000, and now you get to tell the IRS, "Hey, my taxable income is $80,000." Why? Because that's what this 20% QBI rule says.
If you're a small business owner, like I mentioned just a second ago, you get to qualify for this 20% QBI deduction, pretty much no questions asked, up to $200,000 a year for a single filer or $400,000 a year for married couples filing jointly. After that, you have to answer a few questions to see if you still qualify for this 20% write-off. Essentially what it says, and again I'm summarizing, there's more to this, but if you are a professional, you are a doctor's office, you're an attorney's office, you are some sort of accounting office, you do not get to qualify for this 20% write-off beyond those income thresholds. But if you're not one of those qualified businesses, well, then you get to qualify for this 20% write-off for whatever income that you're earning just because that's what the tax code says.
So again, if you have questions, talk to a professional tax adviser. If you are a business owner, you're making over a quarter million dollars a year, and you are looking for a good adviser, you can check out my partner accounting firm and get a free consultation with them to see if they can help you pay less money in taxes. I have their link for you down in the description as well. Yes, Minority Mindset is a paid partner with Commonwealth, so if you do use them, we will get compensated, but there's no additional cost to you. But if you want to check them out, I have their link for you down in the description.
And then last, but definitely not least, is understanding how the investing side of the tax code works because it is very different than this side of the tax code. Prior to President Trump passing this new tax bill, there was a lot of discussions about passing a wealth tax. Kind of like a property tax that you would have, which is where if you have the value of your investments go up, you pay taxes on that even if you don't sell your stocks. So if you are a billionaire or a very wealthy person and the value of your investments go up, you have to pay a tax on that even though you're not actually realizing that income in your bank account.
Well, under this new tax plan, all of that has been essentially put to rest. And the reason why this is so important for you to understand is because the tax code incentivizes you to be an investor and it kind of punishes you when you don't earn your money as an investor and you earn your money as an employee. Because earlier I showed you what the tax rates look like if you are earning your money from your job. Those were the income tax rates. This is what the investment tax rates look like. If you earn zero to $48,000 from your investments, you're going to pay 0% of that money in taxes. If you earn between 48,000 to $533,000, now you're going to be paying 15% of this money in taxes. And for every dollar you earn above $533,000, your top tax rate as an investor is 20%, which means as an investor you could earn more money and pay less money in taxes legally. And this is what the tax code again reaffirmed.
Now the reason why I brought up the concept of a wealth tax just a second ago is because what we have learned through history is that often times when a tax is started, it doesn't go away. It tends to get bigger. And this is something that I say just because while history doesn't exactly repeat itself, it does rhyme and it helps to understand how the income tax rates have changed over the last 100 or so years to see how this plays out in history.
When the income tax was first passed in the United States, the way it worked is you would pay 0% in income taxes for every dollar that you earned between 0 and $3,000, which if we adjust this $3,000 for inflation, it's about $61,000 in today's dollars. So, if you earned under 61 grand, you'd be paying 0% of that money in taxes. Then you'd be paying 1% of your income in taxes. For every dollar that you earn between $3,000 and $500,000, which if we adjust this half a million to today's dollars, this is approximately $10 million today. Which means in theory, according to the old income tax numbers, if you made $8 million a year, your top tax rate would be 1%. So, it was very different then. And that for every dollar you earned above $500,000, you'd be paying 6% of that money in taxes. So yes, income taxes have changed drastically. That's why there was such a big fight over this wealth tax because some people were concerned that if the wealth tax was passed, it would kind of be a repeat of the income taxes where income taxes were passed and then they have expanded a lot over the last 100 or so years because this passed in 1913. And so some investors and people were concerned that if the wealth tax was passed, well, it is going to expand and tax a lot of people over the next 100 years. What would have happened? Who knows? But for now, that talk has been put to an end.
But the whole idea here is there are benefits to being an investor besides just seeing the value of your money grow over the long term. Yes, I know recessions happen. Yes, I understand market crashes happen. But as an investor over the long term, we have seen investment values rise if you understand how to invest. And we've seen lower tax rates for investors as well. Again, this is why on August 12th, I'm hosting my live investor workshop. I would love for you to join me there. So, if you haven't registered for that, please register. I have the link for you down in the description.
And this is where I want to hear from you. What do you think about these new tax plans? Are you in favor of these generally lower tax rates and lower tax plans? Or are you against them? Let me know and let me know why down in the comments. I'm looking forward to reading your replies.
President Trump signed the One Big Beautiful Bill Act into law. This big bill will bring some big changes to our economy, starting with some big tax breaks to big funding for certain things like more deportations. And the reason why you want to pay attention to this bill is because it goes into effect retroactively. It goes into effect January 1, 2025.