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021: How to Make the New Tax Law Work For You

How to Make the New Tax Law Work for You
Black Owned Businesses during the Holiday Season
Make It Work FOR You.

Don't Let It Happen TO You.

Make the New Tax Law Work For You

In this episode, I break down most of the new provisions in the Tax Cuts and Jobs Act of 2017 and explain how you can make the new tax law work for you.

  • Recording from 1981 Lee Atwater explaining the context of “The Southern Strategy” that Reagan used to beat Jimmy Carter.
    • Specifically, how you get the racist vote in a time when you can’t say overtly racist things.
    • Gives the coded language example of “Cutting Taxes” as the dog whistle for racists, knowing that these and similar policies will hurt black people more than white people.
    • This allows the Republican to court the racist voter without overtly claiming to be racist

Breaking Down the Tax Law for Individuals

The Tax Cuts and Jobs Act didn’t come close to delivering on Trump’s Campaign Promises.  Even his faithful #MAGA followers have to be scratching their heads about some of the things in this bill.  Here’s a quick overview:

  • # of tax brackets didn’t change
  • Standard deduction doubled
    • Families are less likely to benefit from itemizing
  • No more Personal Exemption
    • $4150 exemption for you and each dependent is gone
    • Family with three or more kids will lose more than they gain in rate cut
  • Child tax credit raised from $1000 to $2000
    • Only $1400 refundable
    • Other $600 only applies to reduce your liability if you owe taxes
    • Credit applies to incomes up to $400,000
    • Formerly only $110,000…benefit to upper-middle class
  • Added $500 credit for non-child dependents
    • College students, elderly parents, etc.
  • Cap on State and Local Tax Deduction ($10,000)
    • Will affect people in high-tax states most
  • Mortgage Interest Deduction on new debt capped at $750,000 (was $1,000,000)
    • No effect on existing mortgages
  • Student Loan interest still deductible $2500
  • Medical Expenses over 7.5% of your Adjusted Gross Income is deductible
    • Formerly had to surpass 10%
  • Teachers can still deduct up to $250 in supplies expenses
  • Electric Car tax credit still $7500
    • Only offered on first 200,000 cars sold by each manufacturer
    • Running out of time for buying from GM, Nissan, Tesla
  • No change in tax break for selling your home
  • 529 Savings can be used for private school tuition
    • Up to $10,000
  • Alimony tax deduction goes away
    • Applies to separation and divorce paperwork filed after 31 December 2018
  • Disaster deduction now only applies if loss occurred in official National Disaster
  • No moving expense, tax prep, bicycle commuter deductions
  • Individual Mandate penalty reduced to $0
    • Effectively repealed
  • Changes how inflation is gauged for tax purposes
    • From CPI-U to Chain Weighted CPI-U
    • Considered more accurate because it accounts for spending adjustments make in the face of higher prices
    • Potential for Bracket Creep

Key Provisions for Businesses

  • Top marginal rate for C-Corporations permanently dropped from 35% to 21%
  • Pass through companies taxes go by owners’ personal tax rates
    • Law adds 20% deduction for pass through income
    • Applies to all business owners with personal income below $157,500 ($315,000 Married Filing Jointly)
    • Affects income tax but not self-employment tax
    • Certain professional services with incomes over the threshold are excluded from receiving the 20% deduction
      • Legal, Accounting, Health, and others
      • These firms may consider tax structure changes to C-Corp depending on their financial realities

Note: Check out BuyBlack Podcast Episode 004-C, to review the advantages & disadvantages of different legal & tax business structures

  • More Businesses qualify for cash-based accounting versus the GAAP standard of accrual-based accounting (up from $5M in gross receipts to $25M)
  • This is less accurate for judging a business’ solvency, but simpler and more accurate at seeing how much cash a business has on hand today.

The catch to all of this is that most of the personal tax cuts and provisions expire in 2025 while the corporate cuts are permanent.  This tax law gives us a small peek into how the game is played…if we’re paying close enough attention.

  • GOP anticipating being able to ride the “low taxes” wave into a 2020 re-election for #45
  • This law keeps the low taxes through the presumed second term, then ends them in January 2025, just as the new president (who we can tell they are expecting to be a Democrat) takes office
  • Then, as taxes skyrocket and the economy crashes they can blame it on the “failing” Democrat president.
    • They will leverage that to try to pickup up some of the Congressional seats that they will inevitably lose over the coming seven years, and hope the story sticks long enough to win back the White House in 2028.

We should always be looking at the long game and how moves made today setup the chess board for the future.  I guarantee you, that’s how the people in Washington put things together, so it’s in our best interest to look at their moves through their eyes.

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How can you, I, we work this new law to our advantage

  • Take advantage of the 529 Savings Plan for private school
  • Start a small business as a side hustle
  • Convert your profitable professional services company from a pass through to a C-Corp
    • Check with your lawyer and accountant to see if this is best for your specific business and circumstances. Do not take my word…I am not a professional…this is not legal, financial, or tax advice

How “We” Beat this System Designed to “Hurt Blacks more than Whites”

  • Recognize that this is all a game
    • You can’t win a game that you don’t know is being played
    • This is a huge part of “consciousness”
      • Being aware of the levers, pulleys, and systems in motion all around you and learning how the gears work
    • Once you recognize the game, you learn the rules and how it is intended to be played
      • Figure out how to make those rules work in your favor, then dominate the board
    • This is basically The Matrix
      • That whole movie was essentially a lesson on unleashing the intense power that we each have when we wake up and become conscious of the power systems moving the world forward

  • Right now, the rules are being rewritten to heavily favor the producer, the creator, the owner
    • To benefit, you must define yourself as a producer.
    • You must create value for the market.
    • You must build and own things with appreciating value.

It just so happens, that is exactly what BuyBlack Podcast exists to promote in our community

  • We are currently America’s biggest consumers; its most loyal employees; its least successful entrepreneurs
  • This is why using coded phrases like “tax cuts”, “tough on crime” and “reducing entitlements” can actually speak to racists AND accomplish what they want…to implement policies that disproportionately harm our community
  • When we learn the rules to this game, then use the existing structure to move our community from net consumption to net production, none of those things will hurt us. In fact, they will help us more than the majority because of our smaller population
  • This is how David slays Goliath.
    • He is smaller, more agile, quicker to react, adjust, switch tactics, and use weapons of opportunity
  • We must become a community of economic Davids

Disclaimer: I am not a Tax Attorney (or any kind of Attorney) and I am not an Accountant.  This is not Tax Advice or Financial Advice.  It’s just information.  Please speak to one of the aforementioned experts before making ANY decisions based on the information you get from this episode.

Resources:

If you have a website of any kind, you want to hire Ratel SEO to help you get found.  Don’t waste another day living on the fifth or sixth page of Google, Bing, or Yahoo.  Darrin is a real life SEO wizard and he will get you set and teach you so much along the way.

If you’re ready to get your business started, listen to BuyBlack Podcast Episodes 004A-004D.  They’re relatively short and packed full of information to start you on the right track.  If you have questions, I’m always available to help.

Email me at gerald@buyblackpodcast.com or you can call 501-703-0363 to connect with me by phone.

Thanks for listening!