Transcript: 

Voiceover [00:00:02]  

Welcome to the Life Unlimited podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way for life. Now let’s get into this week’s podcast episode.

Matt Halloran [00:00:18]: 

Hello and welcome to another Life Unlimited podcast with your host, Larry Heller. Today we’re going to be talking about the 2025 tax changes and with all of the stuff that’s going on with some tax sunsetting, they’re going to dive into all of that. But anyway, our guest, his name is Bill Minoff. Now he brings over 35 years of experience in accounting and taxation, working with high-net-worth families, individuals, and business owners. After serving as a tax director at a mid-sized CPA firm, he launched his own firm in 2021, focusing on personalized tax planning and compliance services. Bill has represented clients in front of the IRS, which I kind of hope you guys dive into, but you might not, and state tax authorities. And he brings deep experience in developing sophisticated tax strategies for clients just like you. Right. Larry, you’re up.

Larry Heller [00:01:05]:

Thanks, Matt. Thank you, Bill, for joining us today. I’m excited to talk about taxes now that the new administration has begun. There’s a lot of things to unwrap. So why don’t we just jump right in? In light of this new administration, how do you think the tax landscape is going to look by the end of 2025?

Bill Minoff [00:01:25]:

Well, it’s great to be here, Larry. Thank you. One of the things that was guaranteed with the Tax Cuts and Jobs Act that was enacted in December of 2017 was 2025 was going to be an extraordinarily significant year regardless of whatever Congress does. And the reason for that is because many of the provisions of the 2017 Tax Act that were enacted are scheduled to sunset at the end of 2025. So if Congress acts, then we’ll have a new tax bill in 2025, which I think is highly likely given the new administration in place, Republican president, Republican Senate, and Republican House, albeit a very slim margin. So I anticipate there’s going to be a lot of negotiation first amongst the Republicans and then with some Democrats who might be willing to cross the aisle to enact legislation that they can live with and their constituents can live with. So it’s a huge year regardless of whether Congress acts or not.

Larry Heller [00:02:46]: 

So let’s just go back to that. Let’s go back to sunset so everyone understands exactly what we mean by sunsetting. So what we mean is when this law was passed in 2017, it really affected every year through 2024 and now everything is now reverting back to the rules that were in 2017, correct?

Bill Minoff  [00:03:08] :

That’s correct. So, the legislation which was passed in 2017, certain provisions expire, but many provisions do not expire after 2025. So I thought it would be a good idea to go through some of the major provisions that are currently in law, the law now, and what the effect would be and some of the scenarios that might play out in the negotiations during the congressional period which will start in earnest once all of the conferees are in place and the Trump administration is ready to go.

Larry Heller  [00:04:03] :

So let’s just kind of talk about since if we had a split House and Senate and a Democratic president, maybe some of these would all just sunset and nothing would be changed. But now like you said, the Republican controlled across the board. What are some of the laws that are going to sunset? Let’s say give me a few key ones that you’re going to sunset and then what do you think?

Bill Minoff  [00:04:34]: 

At the top of the list are the tax rates. The tax rates were reduced from a high of 39.6% to 37% once the TCJA was enacted in 2017.

Larry Heller [00:04:49]:  

Married filing jointly rates, that is the.

Bill Minoff  [00:04:53]

Rates across the board for all, all taxpayers. The highest marginal rate.

Larry Heller [00:04:58]

Gotcha.

Bill Minoff  [00:04:59]:

So that rate kicks in at the highest level of income that will sunset absent a congressional agreement on an extension.

Larry Heller [00:05:11]:

So, if nothing’s done, everyone’s, if you’re in the highest bracket, your taxes, you’re going to be paying more in taxes in 2025, right?

Bill Minoff [00:05:19]:

That’s correct.

Larry Heller [00:05:20]:

Okay.

Matt Halloran [00:05:20]: 

Yes.

Bill Minoff [00:05:21]:

Yes. So that is one of the major provisions. Another really significant provision that’s going to sunset really affecting business flow through business owners, many of whom we both deal with, is the 20% pass-through deduction that was enacted as part of, in 2017 as a compromise. Because the major thrust of the 2017 legislation was the reduction of the corporate rates, if you recall, from 35% down to 21%. But as a gift, well, as part of the tax package, they effectively reduced the tax rate for individuals who had flow-through businesses which are taxed at the individual rate and that rate is 20%. So there’s a 20% deduction allowable as much as 20% for business income. And absent an agreement, that provision will expire at the end of 2025. And that is extremely significant for small and mid-sized business owners or even large business owners that have structured as pass-throughs and a pass-through is a limited liability company or partnership or S corporation where the income is shown and taxed on the individual return. So those are probably the most impactful provisions.

Larry Heller [00:07:12]:

If nothing gets done. If you own a business, you’re going to see your taxes a pass-through business, you’re going to see your taxes go up. And if you’re at the top bracket individually, you’re going to see your taxes are going to go up. So I guess those are the two most significant ones. If nothing changes. Let’s.

Bill Minoff [00:07:30]: 

Another provision that’s extremely significant that I wanted to mention off the top is on the estate planning side, the exemption amount. Currently, the exemption amount is for married filing a married couple is approximately 25 million. This is the lifetime exemption that’s available.

Larry Heller  [00:07:55]: 

Let’s just because just so everyone knows what we’re doing. So we talked about personal, we talked about businesses, now we’re talking about estate taxes. So this is if you die, correct?

Bill Minoff  [00:08:05]:  

Correct.

Larry Heller [00:08:06]:

Okay. So if you die or if you.

Bill Minoff  [00:08:10]:  

Die or if you transfer property to a family member or someone else, the lifetime, there’s a lifetime exemption. And that lifetime exemption is slated to be reduced by about 50%.

Larry Heller  [00:08:28]:  

So from what to what?

Bill Minoff  [00:08:29]

So now, you know, right now we’re looking at 13 and a half million and that’s going to go down 50% absent legislation that either extends it or changes it.

Larry Heller [00:08:42]:  

Right. So it’s 13 and a half million for each spouse or a family could actually.

Bill Minoff [00:08:48]:

25 million.

Larry Heller [00:08:49]:

Yeah. So that’s going to go down to. What’s that number going to go to?

00:08:54  

Bill Minoff  

That’s going to go down to about six and a half million and then index for inflation.

00:09:00  

Larry Heller  

Right. So technically before you’d have, you are worth 27 million, you had no federal estate taxes. Now anybody above roughly 13, 14 million is going to have estate taxes again, assuming none of this gets revised. So. So a lot of potential more taxes that you can pay both while you’re working individually and then if, and then if you die.

00:09:29  

Bill Minoff  

That’s correct, yes.

00:09:32  

Larry Heller  

Let’s kind of go back to the individual ones for a second. What are some of the other key provisions? I know one that’s top of my mind. But when it comes to deductions, and I think it’s for everyone’s. So let’s talk about SALT. Yes. So what is SALT, is that going to change? Is it going to be sunset? Why don’t you kind of give everyone what, what that is?

00:09:59  

Bill Minoff  

So the state and local tax deduction, which is, which has been certainly in the news lately is a deduction for state and local income and property taxes. And for those of us who live in certain jurisdictions like New York, California and other high tax states that impose both high property taxes and high income taxes. Before the 2017 Tax Act was passed, there was no cap on the SALT deduction. So you could take an unlimited amount of state and local taxes as a deduction. Now there were provisions in place that are still there that would minimize the benefit of that deduction, which applied in certain instances which we won’t get into in great detail. It’s called the alternative minimum tax. But as part of a compromise budgetary to the Tax Cuts and Jobs Act, they enacted a cap of $10,000 after 2017, which limited the deduction for individuals to no more than $10,000 for both income and property taxes. Now if no agreement can be negotiated between now and the end of the year, that cap is eliminated and we go back to the law in place prior to the enactment of the Tax Act. So there would be no cap at all, which in that respect would be a tax benefit to the taxpayers. Although what I just mentioned before, rates would go back to the way they were before the 2017 Tax Act. So that would act as somewhat of a counterweight to a certain extent. But that is one provision that is going to be heavily negotiated amongst the Republicans. And the representative of New York who happens to be in my district, Mike Lawlor, is currently negotiating within the Republican Party to increase that cap substantially for his constituents.

00:12:33  

Larry Heller  

Obviously that will help those that live in high state taxes, such as New York, California. It obviously doesn’t affect Florida, that doesn’t have a state tax. So it’s kind of interesting to see how this is going to play out. I know you mentioned the alternative minimum. You still may get caught into that. But for a lot of people, they may be able to deduct more if they live in those high state, state taxes. So like you said, that’ll be a very interesting one to see how it, how it plays out.

00:13:08  

Bill Minoff  

Yeah, I think that is one of the provisions and there are many that are, you know, there’s really no way to speculate where this is going to land. I mean, the only, you know, assuming they come to an agreement, I’m of the belief that the $10,000 cap is going to be increased, but it’s not going to be increased to the amount that the Congressman is looking for. He’s looking to for the cap to land at around 200,000 married filing joint, 100,000 per person. I think that’s an overly optimistic picture and that really means that something else is going to give.

00:13:53  

Larry Heller  

So what are a few other on the personal side, some of the things on the deductions that may be of importance so people should be cognizant of.

00:14:04  

Bill Minoff  

So one of the provisions, the miscellaneous itemized deductions, so that would include tax preparation and other investment advisory fees which were under prior law were subject to the phase out of based on your adjusted gross income. Those deductions were suspended until through 2025. So as of now, under current law, those miscellaneous itemized deductions are not available. They’re not deductible. However, if the sunset occurs and no agreement transpires, then those deductions come back and they’re resurrected after 2025. And that’s going to be the case for a number of other provisions. Yeah, the standard deduction and personal exemption. So right now the standard, the standard deduction is quite high. For married filing jointly, it’s 30,000. So unless taxpayers filing jointly have $30,000 of itemized deductions or more, most taxpayers are taking the standard deduction under the current law, whereas under prior law far more people were itemizing their deductions because the standard deduction was about 50% of what it is under current law. Same with the personal exemption. The personal exemption actually would which went away with the Tax Cuts and Jobs Act would come back absent legislation extending the Tax Cuts and Jobs Act. So there’s really a lot of missing pieces, a lot of moving pieces that are going to be subject to negotiation within both the House and then later the Senate. Some of the other items that are out there are charitable contributions. Right now that’s 60% of adjusted gross income for cash. That’s going to go down to 50% unless they come to an agreement. The mortgage interest deduction cap of $750,000 that would change unless right now, right now, the cap for deducting mortgage interest is capped at 750,000 principal. And that would then revert back up to a million dollars if the prior law comes back into play. A number of other provisions, one on the business side bonus before we go.

00:17:08  

Larry Heller  

Over to the business side. So let’s just stick to the personal side. Is there, so is there any steps that somebody should take personally now or really it’s really a wait and see to see what happens and really don’t do anything to the end, end of the year. What are your thoughts on that?

00:17:28  

Bill Minoff  

So I think the whole idea, you know, with, in terms of planning, this goes into the larger construct of planning, it’s never, in my view, it’s never a good idea to plan. It’s great. Knowledge is power. It’s great to know what’s going, what might transpire. But in terms of actual planning, it’s not prudent necessarily to go ahead and take any steps based on where the law may go until you know what the law will be. So I would say taking a wait and see approach is really the way to go.

00:18:08  

Larry Heller  

And is it possible that they basically don’t agree toward the end of the year? So a lot they can do. A new tax legislation that won’t come into effect to 2026, you know, anything is possible.

00:18:23  

Bill Minoff  

But the way the law is right now, absent an agreement in 2025, we get the law that was in place in 2017, in 2026.

00:18:41  

Larry Heller  

Okay, so that’s that.

00:18:44  

Bill Minoff  

So we have one thing that’s guaranteed absent any agreement on new legislation is that the 2017 tax legislation, the tax law will be in place in 20 through 2025 absent an agreement that changes the law.

00:19:03  

Larry Heller  

Okay, so let’s just kind of put our, I mean, our fun hat on knowing that we now have a new president, we have a Republican controlled House and Senate by slim margin, as you pointed out. Do you think that taxes for the average American is going to go down based upon possible changes, or do you think it’s going to go up?

00:19:30  

Bill Minoff  

I think for the large majority of people, I think the likelihood is that most of the provisions of the Tax Cuts and Jobs Act are going to be extended. And that would mean that essentially most people will not have to be concerned that their tax bills are going to significantly change one way or the other after 2025. But again, there’s no guarantee. My answer would be different if the Democrats controlled all three branches of government. But given that control is in the hands of the Republicans, I don’t foresee the entire tax landscape going up for most taxpayers. Of course, there’s going to be outliers, but for the most part, I see a stability of the tax law and that’s really going to be the driving force. I think most people in Congress want their constituents not to suffer from potentially higher taxes. So I think that’s the landscape that we’re looking at as we progress into 2025.

00:20:56  

Larry Heller  

Yeah, I mean, traditionally Republicans control, like to keep the taxes minimal. So the theory would be businesses can be more profitable, hire more people, generate more gross national products. So, so that’s kind of what it feels like is going to happen. It’s just going to see how much that they can cut without really sending us deficit off into another area. So, I mean, we know that there’s talk about, you know, eliminating tax and Social Security and some other things, and just how much can we afford to, you know, for it to, you know, cut or not raise and also keep a lot of the programs in place. So it’s going to be a very interesting, interesting 2025.

00:21:53  

Bill Minoff  

So there’s a number of provisions that President Trump has introduced that I just want to throw out for discussion. You alluded to it earlier, the Social Security benefits. Right now, they’re subject to tax for most beneficiaries of Social Security at either 50% or 85% of whatever the benefit is. President Trump has thrown out the salvo of exempting Social Security benefits from taxation at all. I think it makes some degree of sense given the fact that Social Security for the most part, represents funds that were contributed by the recipient in the first place. And by and large, they’re only receiving their principal back for the large majority of taxpayers. And there was a time, I’m old enough to remember, when Social Security benefits were not taxable. So there’s actually precedent for exempting Social Security benefits from taxation. But my view is that I think that’s a negotiating ploy by the president, similar to that is his overture to exempt overtime and tips from tax. I think that’s also a negotiating ploy on the President’s part. It sounds great. I’m kind of dubious as to how that would ever be implemented. And I think there are also constitutional issues with something like that because it puts people in different, you know, similarly situated taxpayers in a different situation given. And the definition of what constitutes a tip would become more paramount. So I think there are huge issues with the administration of this provision. And that’s not to say it doesn’t have any chance. I’m saying that that would be very difficult and there would be significant budgetary. It would be a negative on the budgetary side in terms of scoring. And again, the reason why a lot of these provisions in 2017 end up expiring is because of the budgetary scoring process that Congress has in place that required them at the time to have many of the provisions on a sunset.

00:24:44  

Larry Heller  

Of course, if they’re looking to reduce the taxes here, there’s also a lot of talk of reducing a lot of programs in the government to offset some of those. So it’s this kind of a double-edged sword and what’s going, and what’s going to happen and the checks and balances to keep, to keep us as close as we can in budget, not have this deficit spiral even more out of control.

00:25:10  

Bill Minoff  

Another one other item I just wanted to bring out that the President has proposed is a further reduction in the corporate income tax rate which is currently at 21%. He’s proposing to scale that back further to 15% and that would be enough. But the proviso for the 15% would be solely for domestic production. So corporations would have to be doing business solely in the US for them to reap the benefit of the lower tax rate. On the flip side, he’s proposing to substantially increase tariffs which would theoretically, you know, increase revenue to the government and the tariffs would increase would he would impose tariffs between 10 and 25% to our trading partners and also significantly higher tariffs for China. But like with some of the other items, I think that’s also part of negotiation on the part of the President and the new administration. We’ll see what ultimately happens.

00:26:22  

Larry Heller  

Yeah, we can have a whole podcast to talk about all the ramifications of putting in these broad tariffs. So, so it’s going to be there’s some very interesting things that are going to happen both from a business standpoint and a personal standpoint. So any kind of like key recommendations right now that you, that someone either as a business owner or an individual should be thinking of as we move along in 2025. That’s a great point because even on our standpoint when we get closer to the year-end and we’re looking at possible Roth conversions or capital gains and, or how that may come into play or if you’re looking to buy a place, there are a lot of things that you just want to be aware of and as this thing plays out through the government and then runs its course. So, so this has been I think highly informative for our listeners out there. Of course, if they want to learn more or if they have any question any from a business standpoint or from an estate tax standpoint like you mentioned, or a personal standpoint. Where can they reach out to you?

00:27:45  

Bill Minoff  

Well, they can always reach me at my email address, WilliamMinoff@gmail.com. They can reach out to me on LinkedIn. I’m very prominent on LinkedIn. Those are the two prominent ways of reaching out to me. And I appreciate that.

00:28:02  

Larry Heller  

Okay, Bill, thanks so much. We’ll have to maybe have you back towards the end of the year and see how this plays out with all the potential changes.

00:28:12  

Bill Minoff  

I’d be delighted. Larry, thank you very much.

00:28:16  

Matt Halloran  

I think that we’re going to have to have Bill back because you guys opened up a bunch of cans of worms that I know that people really want to know more about. And so what a fun episode. Listen, everybody. Who’s listening right now. This is the sort of stuff that we know that you need to share with your friends and family. These are very, very important decisions that you’re going to be making, not just in 2025, but in years to come. And make sure that you’re finding a great, trusted professional that you can sit down with and have these very meaningful, very powerful, and very important conversations. So for Bill and for Larry, this is Matt Halloran. And before I go, make sure you go to hellerwealthmanagement.com you can download a free chapter of the book, and you can also go ahead and find out a whole bunch more about what Larry and his team can do for you from a financial planning standpoint. And with that, we’ll see you on the other side of the mic very soon.