The news has been full of the headlines. Tax breaks for the wealthy! Only the rich can use this tax break! It’s unfair!
You’ve seen them and maybe you’ve wondered if it’s ever possible for the small business owner or investor to catch a break. Is the system rigged? Probably.
At the very least, the tax system is definitely not designed to give equal treatment. Some people will get better tax breaks than others.
You can put up with it. You can rail against the system. Or, you can learn the rules and win the game.
If you want to learn the rules, I can help.
Let’s look at the most commonly cited change that is “just for the rich.” (It’s not)
The Infamous NOL Carryback
Prior to the Trump Tax Plan (Tax Cuts and Jobs Act) which went into effect on 1/1/2018, we were able to take net operating losses (NOL) as a carryback against prior years with high income. That would mean a tax refund.
If you read just the quick headlines about this, you’d think it’s just the multi-millionaires who will benefit from the brand-new change in the CARES Act that rolls back the change in 2018.
It’s not new.
And it’s not just the rich who will benefit from this change.
But let’s start with the idea that the whole concept of NOL for tax planning is new. It’s far from that.
NOL rules first started in 1918 as a temporary post-WWI relief measure. In 1950, it was changed to 1-year carryback and 5-year carryover. Then in 1975, it was changed to 7-year carryover. In 1997, the carryover was extended to 20 years. In 2002, the NOL was changed to allow a carryback of 5 years. And in 2009, the carryback was changed to taxpayer’s choice of 3, 4 or 5 years. It stayed that way until 2018.
Since NOL carrybacks had been around for over 102 years, it was hardly a brand-new rule.
Now let’s talk about the idea of whether it IS just for the rich.
The idea is that the rich are the only ones with other income. An NOL offset against other income really only works if there IS other income. The argument by some is that small business owners don’t have any other income.
In my experience, it’s exactly the opposite. Many small business owners and especially small business owners just starting off still have other jobs or sources of income. It’s the rich who get the backing and have the money to start new businesses. Others need to bootstrap, pulling themselves up by their own boot straps. And that usually means having a day job.
And now, they suddenly have a way to get some of their hard-earned money back with a carryback.
It really is a disservice for the media to continue to insist this is something new and only for the rich. The people it can help the most might just pass right by this important strategy.
This is just one of the many new tax breaks for small businesses and their owners thanks to CoronaTax.
You have a couple of choices. You can continue to just read the headlines of stories that don’t tell you the truth or the whole story. Or you can get the straight facts from a CPA who ONLY works with small businesses, their owners and real estate investors along with strategies that work.
Here’s how to get started fast! Pick up your copy of CoronaTax, the only book current on Coronavirus-inspired grants, loans and huge tax saving strategies. It’s only available via digital at https://www.ustaxaid.com/shop/coronatax/
There are more, many more, such tax savings that have dozens of strategies possible. We’ll be talking about those in the weeks to come.
President Trump is now looking at some possible additions to the tax breaks in the next CoronaTax bill. It’s not law yet, but it’s interesting to see what’s being proposed.
Payroll Tax Cut: This would suspend the Social Security and Medicare payroll taxes for the rest of the year. With the amount of unemployment we currently have, the plan is criticized as not doing enough.
Capital Gains Tax Cut
The proposal here is to reduce the capital gains tax rate. It’s unknown how much it would be reduced. Increased 100% Bonus Depreciation There currently is 100% bonus depreciation allowed, which means for some personal property you don’t need to depreciate it over time. Instead you can take immediate and full expensing of the purchase 100% Deduction for Meals. Another proposed change will increase the meals deduction from 50% to 100%. This hasn’t been around in years and would make a big difference in deductions for small business owners.