Teaching Tax Flow: The Podcast

This episode of the Teaching Tax Flow podcast dives into the intricacies of bonus depreciation, a crucial element for effective tax planning. We discuss how this tax deduction, reintroduced by the One Big Beautiful Bill Act, offers significant tax tips for small business owners looking to optimize their income tax liabilities. Understanding these business tax deductions is key to your tax strategy.

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CHAPTERS
0:04 Electing Out of Automatic Bonus Depreciation for Tax Benefits
4:11 Strategic Tax Planning and Bonus Depreciation Decisions
8:48 Tax Planning Strategies for Equipment and Vehicle Deductions
10:50 Maximizing Tax Benefits Through Strategic Bonus Depreciation Decisions
12:11 Efficiency of Travel and Tax Savings Compared
13:28 Introducing The Hub for Tax Planning and Partner Connections

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EPISODE SPONSOR
Strategic Associates, LLC
Roger Roundy
http://www.linkedin.com/in/roger-roundy-86887b23

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  • (00:04) - Electing Out of Automatic Bonus Depreciation for Tax Benefits
  • (04:11) - Strategic Tax Planning and Bonus Depreciation Decisions
  • (08:48) - Tax Planning Strategies for Equipment and Vehicle Deductions
  • (10:50) - Maximizing Tax Benefits Through Strategic Bonus Depreciation Decisions
  • (12:11) - Efficiency of Travel and Tax Savings Compared
  • (13:28) - Introducing The Hub for Tax Planning and Partner Connections

Creators and Guests

Host
Chris Picciurro
Founder, Teaching Tax Flow
Host
John Tripolsky
VP of Marketing, Teaching Tax Flow

What is Teaching Tax Flow: The Podcast?

Welcome to “Teaching Tax Flow: The Podcast”, the show that’s all about demystifying taxes and helping you keep more of your hard-earned income in your pocket.

Hosted by tax experts from the Teaching Tax Flow team, this unfiltered (but clean) podcast is designed to empower you with the knowledge and tools you need to confidently navigate the world of taxes. We’ll cover everything from understanding tax laws and regulations to maximizing deductions and credits.

In each episode, we’ll break down a specific tax-related topic in a clear and accessible way, providing practical tips and strategies you can use to optimize your tax situation. We’ll also answer listener questions, share the mic with amazing guests, and share real-world examples to help illustrate key concepts.

Whether you’re a freelancer, small business owner, real estate investor, or just looking to understand your taxes better, this podcast is for you. So tune in, take notes, and start building your confidence in taxes today.

Produced and hosted by Teaching Tax Flow.
www.TeachingTaxFlow.com

John Tripolsky:

Hey, everybody, and welcome back to the teach from taxable podcast. Today, we are not gonna talk about something that you really are opting in to do or selecting out to do. We are gonna talk about when you elect out of bonus depreciation. So you've heard us talk about this a whole lot exactly, you know, what bonus depreciation is, how it's back on the table, because of the one big beautiful bill act, big change that we saw last year carry through into this year, the 2026. And we're gonna get into a detail.

John Tripolsky:

So we're gonna kind of condense this down for you a little bit. We're gonna make it clear, concise, and actionable for you if you're ready to do so. And I couldn't think of anybody else better to do it with me than, Chris McCarroll. Welcome back to your own show, sir. How's it going?

Chris Picciurro. CPA:

It's going well. How are you doing?

John Tripolsky:

Doing good, man. I'm excited. This is one that, you know, we're not telling people that they have to, like I said, opt into something. This is something you're opting out of. Correct?

Chris Picciurro. CPA:

Right. And bonus depreciation is it was a super hot topic with the one big beautiful bill act. Remember with the Tax Cuts and Jobs Act, bonus depreciation started at a 100%. And what bonus depreciation is? It's a wrinkle in the tax code, the federal tax code that gives you an accelerated a temporary accelerated deduction for any eligible assets that you purchase.

Chris Picciurro. CPA:

That could be an eligible vehicle. That could be a piece of equipment. That could be part of real estate if you do a cost segregation study, any personal property. Excuse me. So several assets fall into this bonus depreciation eligible bucket, for lack of a better term.

Chris Picciurro. CPA:

And with the Tax Cuts and Jobs Act, bonus depreciation, like I said, was set at a 100%, but it started scaling down, and, ultimately, it was gonna go bye bye. And the one big beautiful bill act threw around life support, and and made it permanent for now, of course. Everything you know, even permanent things in the tax code are are could be temporary. So this incentivizes business owners and real estate investors to put their money into buying assets. So that's that's the incentive.

Chris Picciurro. CPA:

And it could be a huge incentive. And for the 2020, five tax year and the 2026 tax year, that bonus depreciation percentage is a 100%. Meaning, I purchase a new piece of farm equipment. Assuming that farm equipment is a 100% business use, I could deduct the entire piece of equipment year one, which is a huge incentive. Now, what does that do for you?

Chris Picciurro. CPA:

Well, it reduces your tax based on whatever your marginal tax rate is. Bonus depreciation, remember we talked about section one seventy nine. We're gonna have another episode on section one seventy nine, the bone the cousin of bonus depreciation. But what you have to understand with bonus depreciation is it's automatic. So you are going to receive the bonus depreciation deduction by default on your tax return if you have eligible property.

John Tripolsky:

And I know when this was gonna go away. Right? I think the biggest, you know, like, oh, crap moment. Right? It's a lot of real estate investors who were like, oh, man.

John Tripolsky:

Like, there goes there goes one of the best things I can possibly have for now. And, you know, like, mentioned equipment. So I think it's I'm great or I'm I'm grateful that you explained what it is too, and then also, you know, why is it that you have to elect out of this thing? Well, that's because it's gonna be automatically implemented or executed. Right?

John Tripolsky:

You have no say

Chris Picciurro. CPA:

in that

John Tripolsky:

except to say you don't want it.

Chris Picciurro. CPA:

Absolutely. So here's the good news. Because sometimes, you know, if I say if you told someone, hey. You could add as much chocolate as you want. If you're a 10 year old kid, well, you're gonna get a stomachache.

Chris Picciurro. CPA:

Right? So you automatically get the bonus depreciation at a 100%. However, you can elect out of the bonus depreciation. Okay. That that might that might work out well.

Chris Picciurro. CPA:

Right? Yeah. So how do you so when should you elect out of it, and how do you elect out of it? Well, you can elect out of it by attaching a statement to your tax return that you're electing out of bonus depreciation. And the cool thing is you can elect out of bonus depreciation on a class by class basis.

Chris Picciurro. CPA:

Meaning you might have, as a business owner or real estate investor, five year property, seven year property, fifteen year property. When I say five, seven, or fifteen year property, that means that's the class life that the IRS has assigned to that property, and that's how long it is depreciated or deducted by default. Okay? You could you could say, you know what? I'm gonna take bonus depreciation on all my fifteen year asset class property and elect out of it on my five year property and spread the five year property over that five years.

Chris Picciurro. CPA:

So there's so it gives you flexibility, not just can you elect out of it, but you can elect out of it on what we call a class by class basis. Now when would you wanna elect out of this? Well, remember, tax planning is based on legally and ethically reducing the tax you pay in your lifetime and paying the lowest marginal tax rate possible. So if you are in a tax year that, you're already in a very low marginal tax rate, that may might that might make sense to elect out of the bonus depreciation. So the number one reason is gonna be tax bracket management.

Chris Picciurro. CPA:

I either can get the deduct let's say the deduction's a $100,000. Remember, deduction multiplied by your marginal tax rate is your tax benefit. So if your marginal tax rate's gonna be higher in a future year than the current year, that's when it makes sense to potentially elect out of the bonus depreciation and just take it over take your depreciation deduction or your cost recovery over the that, you know, that you the the longer period of time. Alright? You also might want to time it when you could take a loss.

Chris Picciurro. CPA:

So for instance, let's say you are real estate professional status. Let's say you in in this year, but you're gonna change careers, you're gonna change your activities, and you're not gonna be a real estate professional status next year, you might wanna do the cost go do a cost segregation study this year and take the bonus depreciation. But what if it was in reverse? You might wanna, like, add a bonus, or run the cost segregation study in the future, or if the deduction is just more than you expected on a cost segregation study. So, again, you wanna align it with your marginal tax rate and make sure that the year you're taking the bonus depreciation is the year that it can most benefit you.

Chris Picciurro. CPA:

I'll use another example. At the end of the year, you purchase a vehicle eligible for bonus depreciation. That vehicle is $60,000. Your business profit is $20,000. You you decide, you know what?

Chris Picciurro. CPA:

I really don't wanna take all $60,000 deduction this year because I wanna wanna have deductions in the future years when my business is gonna grow, and I'm gonna be in a high marginal higher marginal tax rate. Then you'd probably wanna elect out of it. And one big misconception is that the depreciation deduction is tied to your cash. Remember, one of the three laws of tax planning, tax flow and cash flow are different. So back to my example on that $60,000 vehicle.

Chris Picciurro. CPA:

If you paid cash for that vehicle or if you financed the entire thing, the depreciation deduction is not affected by it.

Disclaimer:

This podcast is brought to you by Strategic Associates. Are you a high income earner, real estate investor, or successful entrepreneur who is frustrated by having to pay $75,000 or more of annual tax liability? If so, Strategic Associates can help. Your first step to saving thousands, if not hundreds of thousands, is to contact Roger Roundy at roger@Strategicag.net or by calling (801) 641-2956, and be sure to tell them TTF sent you.

Chris Picciurro. CPA:

One of the reasons you might wanna lock down of it might be, you know, I financed a big portion of this piece of equipment or this vehicle. I wanna match that depreciation deduction in a similar fashion to when I'm actually paying for it so that years two, three, four, five, six, when I'm basically paying for a piece of equipment or a vehicle that I'm using, I'm actually getting a deduction in those years also.

John Tripolsky:

And you answered some really good questions there that I I do wanna reiterate before we move on too far. I'm sure we'll talk about exactly, you know, maybe how do you how you elect out of this a little bit. But the two things that I took away from that, and I'm sure a lot of people are thinking of is, well, how do I know if I need to elect out? How how is it gonna benefit me? Which you answered, obviously, tax planning.

John Tripolsky:

That is direct as it possibly can be. That is the answer. That's your guide. Right? That's your blueprint.

John Tripolsky:

But then also, I'm sure a lot of people are thinking that, well, why would I not want something that's great? Right? Like, you guys are always telling me how to how to make it better or how to get more or do something with it. Why would I say I don't want this? And you explain that very well.

John Tripolsky:

Right? Like through tax planning now, you know when you can actually take it and benefit from it most. Right? So it's almost like, hey, instead of turning away a a I don't know. I'm not a steak guy, but, oh, a 10 ounce steak.

John Tripolsky:

Oh, well, I don't want that. I only want half of it or, oh, you know, I'll save a little bit for, you know, every time I'm hungry year over year. You're in total control of it at that sense. So I appreciate you breaking it down that way.

Chris Picciurro. CPA:

Oh, yeah. And and, yeah, and you brought up a good point. How you lucked out of it? Said you attached a statement to your tax return. So that's the point.

Chris Picciurro. CPA:

When you when you purchase the the the equipment or vehicle or or whatever you you're purchasing, again, doesn't matter if you finance it or pay cash. You make that election when you on a timely filed tax return. So you're not obligated to take the deduction when you buy it. You're not telling, hey. I'm I'm at the automobile dealership.

Chris Picciurro. CPA:

I'm electing to take bonus depreciation. No. No. That all gets decided when your tax return is prepared. That's why it's good to work with a tax professional that understands that in that tax professional should be asking some questions, but you, you know, as tax professionals, we're not mindreaders.

Chris Picciurro. CPA:

You should be letting the tax professional know. You know what? I had a good year in business this year. I had a big contract come in. Next year, I'm gonna tell you my maybe my child's a senior in high school.

Chris Picciurro. CPA:

I'm not gonna work as much. My income's gonna be a little lower. That tells me to take more deduction this year versus, yeah, just started my business. I had a good last quarter, but man, next year is gonna be crazy. That tells me maybe you locked out a bonus this year and give me more deductions for next year when they could be used in a higher marginal tax bracket.

Chris Picciurro. CPA:

Now you also have to consider not all states honor bonus depreciation, so you could have two separate deductions. Many states still still make you use what's called MAKRS, which is a modified accelerated cost recovery system. In other words, write the or depreciate the deduction over the course of time. And you've gotta look at your marginal tax rate. Your marginal tax rate includes, we have a lot of content on this.

Chris Picciurro. CPA:

Are you getting phased out of tax credits? Are you getting phased out of deductions? Are you we don't wanna waste deductions. Are you getting the $1.99 a deduction anyway? So bottom line is fitting the bonus depreciation deduction in the tax year that you think is going to be most beneficial to you.

Chris Picciurro. CPA:

And if you're in that if you're in a tax year that that deduction is not gonna be as beneficial, then elect out of it. The best way to wrap this up is that I could describe this is this, John. You know, we like to travel and we and and we talk planes, trains, and automobiles all the time. I like to drive. But here's the way I would talk think I want you to think about this.

Chris Picciurro. CPA:

Let's say you live in Detroit, Michigan. Okay? And you are going somewhere. And I say, would you rather fly or drive? By default, most people would say, assuming the cost is the same.

Chris Picciurro. CPA:

Right? I'd rather I'd rather fly rather. Okay. What if I said you're gonna fly from Detroit to Flint? That drive is about an hour and a half depending on who drives.

Chris Picciurro. CPA:

But let's say about an hour and a half, right, with no traffic. Even if a flight was the same price as driving, you're gonna get there faster by driving because you've gotta check into the flight. You've got to get a rental car when you get there. You've got to fly. You've got to taxi.

Chris Picciurro. CPA:

But see what I'm saying? But if I said you're going from Detroit to Dallas, Texas, oh, a flight's more efficient. A flight saves me time. So the same thing with the bonus depreciation. If it's in a year that's saving you a lot of tax dollars, use it.

Chris Picciurro. CPA:

If not, you lucked out of it.

John Tripolsky:

It's a great way to explain it there.

Disclaimer:

And and back to the whole tax planning thing.

John Tripolsky:

Right? And and, again, another great point. I know you know that you hit this, but even if you're working somebody to create a tax plan, they can't forecast everything that's gonna happen next year. So it it all breaks down to that relationship. Right?

John Tripolsky:

Like, how much are you sharing with them? How you know, you can only forecast so much stuff. And I'm gonna leave it with this one actually, Chris, if you're good with that is, you know, we created something at Teaching Tax Flow called the hub. We've mentioned it a couple times, but I guess this could be maybe it's formal introduction releasing this thing in the world. Think of this as your your best friend and helping you find the best context to to really help you get the best result possible.

John Tripolsky:

Right? So by what I mean by that is you check the things that you're interested in, and we will send you introductions to those people. Plain and simple. We're not being sold anywhere. It's it's cut and dry.

John Tripolsky:

Right, Chris?

Chris Picciurro. CPA:

Absolutely. And I'd be remiss to say, you know, I'm gonna tie this into the hub. The hub is the hub is a way for you to connect with partners within the teaching taxable community that we have the utmost confidence in. And finally, on bonus depreciation, I should have mentioned this. If you have a partnership or an s corp attorney, you have other people or owners in that return that that entity, wanna coordinate with them before making any type of bonus depreciation elect out decisions.

Chris Picciurro. CPA:

So, yep, please jump into the hub. Thanks so much for the time. This has been a you know, the cousin of of a bonus appreciation. It's coming down the pipeline. It's called section one seventy nine, and we might have an episode one seventy nine coming up as well.

Chris Picciurro. CPA:

So appreciate y'all, and and have a great day.

John Tripolsky:

I do believe that's the case. As So Chris mentioned, thank you everybody for joining us here on the Teaching Tax Flow podcast. We'll see you again here back on the show next week, different date, completely different topic. Have a good week, everybody.

Disclaimer:

The content provided is for educational purposes only. We encourage you to seek personalized investment advice from your financial professional. For all tax and legal advice, please consult your CPA or attorney. Investment advisory services are offered through Cabin Advisors, a registered investment advisor. Securities are offered through Cabin Securities, a registered broker dealer.

Disclaimer:

The content of this podcast does not constitute an offer of securities. Offerings can only be made through an offering memorandum, and you should carefully examine the risk factors and other information contained in the memorandum.