Why Are Millionaires Worried About This New Bill?

Elon Musk is up in arms. Donald Trump is certainly ruffling feathers and millionaires want to know what in the world is going on.

Now you turn around and get a bill like this passed that is, it's monumental. The largest of its kind, the largest in our history. Yeah.

If you're a millionaire in particular, you have a limited window here. I could take a $20 million business, pass that thing next year to my children, estate tax-free. Wow.

And I'm not talking about a couple thousand bucks. I'm talking about $25,000.

You're a business owner and you've got several million dollars flowing through that business. Mhm. That could be a huge number. Enough to do a lot of funding. And for some people, it might be enough to hire a couple staff for sure.

At least for now, we've got about a fouryear window. We can do some really, really good stuff. We're going to show you how.

Welcome back to another episode of We're Talking Money. This week we're talking big, beautiful bill. Elon Musk is up in arms. Donald Trump is certainly ruffling feathers and millionaires want to know what in the world is going on.

No, no doubt. This thing is big, as Trump likes to call it. I don't know about beautiful, but it is big. And ruffling feathers, understatement. Yeah.

If you're a millionaire in particular, you have a limited window here. There's a lot of benefit in this thing. There's a lot of good to this bill. Yep. But let's face it, Trump's not in office forever. No, he's not. 2028, this thing could reverse. Who knows what happens, but at least for now, we've got about a fouryear window. We can do some really, really good stuff. We're going to show you how. 100%.

Let's talk taxes first. So, this big beautiful bill has a lot to do with taxes. Some of them are permanent, but what people might not understand is that they're continuations of 2017. So, talk to us about that just for a second.

Well, you just said it. That's the part that everybody's missing initially anyway. They think, hey, this is some kind of new tax savings. This is just carrying forward what he did in his first term, that is President Trump. So this is TCJA 2.0. So we took TCJA from 2017. Those rates now stay in place. So instead of sunsetting 1231 of this year, 2025, now we at least can rely on those rates coming forward.

Spell, that didn't create new money for people, right? Same tax rate they've had for the last several years. What it does is at least puts a little bit of smoothness on the road so people can understand where are we headed. There's no more of a, there's no question mark now, which we had for quite a while. Now there's no question mark. I know better how to prepare my budget as an individual and I know what I can spend now, so to speak.

So the top tax bracket has been capped, right? Didn't, wasn't that part of the change? That's right. So in 2017 the top rate was 37%. Right. It was about to, 1231 of this year, if this thing didn't pass, it was going to 39. And so now we at least know. And so a lot of people would say, well gosh, that's only 2%.

Well, that's what I was going to tell you. It's only 2%, Phil, but for people that are making sizable dollars, sizable amounts of money. If you're a business owner and you've got several million dollars flowing through that business, that could be a huge number. Enough to do a lot of funding. And for some people, it might be enough to hire a couple staff for sure. Tens of thousands of dollars, potentially hundreds of thousands of dollars. Sure. Yeah, that's big money. Yeah, it could be really, really big money.

And that, so, that's the first thing, is just making sure that people understand this isn't new tax relief on the tax brackets. It's the same thing. Now, there is tax relief deep in the bill. True. Certainly some things that we'll get to. I know. But yeah, for starters, extension of TCJA, everything at least is the same. Got it. We know that through 2028 anyway. They say permanent, but it's permanent to the extent that Donald Trump's in office or until Congress changes something.

Why is Elon Musk losing his marbles? Please. He's, you got to give us some answers, man.

I don't know. Look, I'll say this. I think Elon Musk, he was hired to reduce spending. Mhm. And so by his own valition, he took on that role and I think he did a good job. Oh yeah. Yeah, he did. He stripped away a lot of stuff that is part of this giant machine called the US government. Yeah. That was good.

And so now all of a sudden here's Elon Musk, a guy who believes in efficiency. It's really what he's built his businesses on. It's all about efficiency. That's how he's grown Tesla, SpaceX, other companies. Yeah. So he believes in efficiency. He really believed in Doge and I think he did a great job.

Now all of a sudden he's looking at this massive bill, the largest of its kind, the largest in our history. Yeah. We've never seen a bill passed like this. He's thinking, "Wait a minute. You hired me to fix a lot of this, to reduce spending, and now you turn around and get a bill like this passed. That is, it's monumental. This thing is, it's incredible." So, I think he has a right to be frustrated.

Is he showing his frustration the right way? I think that these are really, really big egos here. Donald Trump, Elon Musk, quite possibly the two biggest egos in the world. Well, Elon Musk is the world's richest man by a long shot. Yeah, by a long shot. We're not, there's definitely some ego there. And then usually the president of the United States has a pretty nice ego with him, too.

And then you take the president of the United States and couple that with Donald J. Trump, businessman, who was already an egotistical businessman. Y, not so much in a bad way. I think he's earned the right. Yeah. If he wants to be an egoist, fine. Sure. But you got two really big egos here. Definitely.

So I think in some ways the Tesla founder, I think Elon has a right to be a little frustrated because of what this means. It flies in the face of what he was trying to accomplish.

Now, there might be one other thing here, Spell, that I don't know if enough people are thinking about this, and this is conjecture, right? I don't know this to be a fact. Okay. What is a fact is that government spending plays a huge part in the success of Tesla and even SpaceX. Yeah. And in this bill, some EV tax credits are removed. Yeah. They're cut. And that's hundreds of millions, billions of dollars. That's revenue that is removed in terms of the Elon Musk ecosystem. I don't know what that means and I don't know if that's causing some of his disdain. I don't know. Yeah.

But I think he has reasons to be upset and believe me he is upset. The guy wants to start another party. Yeah. He wants to start the America's party or American party or whatever it is. And so hopefully cooler heads will prevail. I think they will, but I think they will. Until such time, we definitely have a little bit of a tugof-war. A rumble and a tumble, huh? It's a rumble for sure.

Let's get back on to a couple more of the points or more pressing things in the bill, Phil. One being the estate tax exemption. So, we talked about income tax and what the rates are going to be like. Talk to me a little bit about the estate tax change, if any, from this legislation.

Big change. Big change. Right now it was already big. We had about, what, 13.9 million per person, something like that. So all of a sudden, January 1, 2026 is 30 million for a couple. 15 million each.

Let me stop you for a second. Can you break that down? What does that mean? I have a $15 million exemption. I don't know what that means.

Well, so I can take, if I'm single, no spouse, y, and I've got a $15 million estate in 2026, if I died, I could leave that to my children or to whomever and there would be zero estate tax exposure. Got it. If I have a $20 million estate, I can leave the 20 million and 15 of it is exempted from tax. So only tax would be owed on 5 million.

And the tax difference on that 5 million was what? Well, you're talking about close to 50%. So $2.5 million depending on the assets. But if not, you're at least in the 40% range. But if, let's say, there's IRA assets in there, or what we call income with respect to decedent assets or IRD assets. Yeah. So all of a sudden there could be a double taxation. Wow. So, you could be paying even more than that.

But as the rule is written, I could at least pass 15 million with no estate tax. That's huge. Okay. If I have a spouse, it's times two. We can pass 30 million. Wow. That is pretty good.

Now, here's an even better example. Let's say we've got a business, Spell, that's worth $20 million. Sure. Okay. And that business grows every year by 10 20%. Lots of growth. That thing's going to get bigger and bigger and bigger. Well, eventually there's going to be extreme amounts of estate tax if I try to leave that to my children. Definitely.

Right now I could lock or freeze that value, and I could, using closely held business rules, if I use lack of marketability rules and discounted the value of that business, which is perfectly legal, I could take a $20 million business, reduce its value using lack of marketability rules, pass that thing next year to my children with, say, a value of $15 million, estate tax-free, don't have to worry about it. All the growth I get to enjoy because I can be the controlling member. I can get the benefit of the growth or the income, but all of the growth would be happening at my children's age, never to be estate taxed until they leave it to the next generation. Huge, huge advantage.

Sounds like that would be something that you need to consider pretty soon if you're in that type of a situation. Well, between now and 2028. Got it. Right. Because remember, if we get a different regime or a different president who, or when we get a different president, if they don't like this and, say, Congress agrees with them, they could certainly undo this. Interesting.

Yeah. So, we're on the subject of business. I know that there are some tax changes or maybe extensions of what was already in place for, say, a small business owner. And I think you probably know where I'm headed with this, but QBI, or qualified business income. For sure. There's part of the tax code, it's written today such that you can take a 20% tax deduction on your qualified business income. Is that changing at all? Does the big beautiful bill have anything to say about that?

It was going to. We're going to lose it, and so now at least that's been extended. Okay. And I think that's huge for the small business owner. There's so many small businesses in America that that is the bread and butter. That is the lifeblood of America. It's not the Fortune 500 companies. Yeah. They employ a lot of people, but the largest employer by far is small business. So, this QBI is very important for keeping money in the pockets of those business owners. That really is what makes America move, right? You need those kind of things. And so, that was on the chopping block. Not anymore. Yeah, it's back.

So any pass-through entity, you're talking S corps or LLCs, those kind of things, you've got great opportunity with that. So you can really maximize your income. That's one way. It's not the only one. There are other great benefits that came into play.

Section 179, I think great tool there. I don't know if you were going to talk about that, but Section 179, the way it worked, it had graduated to a point of about 1.25 million could be accelerated in deduction. So, if you bought equipment for your business, say a dental practice owner, if they wanted to upfit or buy a second practice and upfit that sucker with a million dollars worth of equipment, which is not unusual. Yeah.

Sometimes I go to the dentist office and the chairs are super uncomfortable. Yeah. So, they need to buy new ones, right? Got to get new ones. Yeah. Got to spend some money.

But they can literally, instead of depreciating those assets over seven, eight, 10 years, depending on the asset they're buying. Sure. They can accelerate that, Spell. And now that number is no longer 1.25 million for the business owner. They can accelerate $2.5 million immediately. It's a pretty big increase immediately. So they don't have to stretch that over five or 10 years. They can take the deduction right now.

So, business owners, listen up. If you wanted to spend that kind of money to upfit your business or expand it, you've got an opportunity now to accelerate those deductions. And if you had a windfall from another business, what a great way to offset it. And you get to do it immediately, no questions asked. For sure. Pretty awesome.

All right. One other thing. I like to put pepper on my food. I like pepper. I like pepper. I like pepper. Not too much, but I like pepper.

But I also think I read something about SALT in the bill.

Yep. They definitely put some salt. I'll tell you where else there's salt. They put some salt in the wounds of those who don't like the bill. Listen, how Trump got this thing done is pretty amazing. If people don't believe

Yeah.

that there's some semblance of a united front, people can say it passed by a narrow margin, but let me be clear. This thing passed, period, and it did it in record time.

Yeah, it's really surprising.

So, there's salt in the wound. But yes, there is something called SALT. Salt. Not salt like table salt, right? Or sodium chloride. I'm talking about state and local taxes.

Yeah, man. For sure.

It's in there. Yeah. Big change. At least temporarily, as I keep saying, from now until the end of 2028 when Trump's no longer in office, this could change. But at least from now, we had a maximum deduction, Spell, on SALT of $10,000.

Okay.

That started under TCJA 2017.

That's right.

So in 2017, we maxed it at 10,000.

Got it.

A lot of people were up in arms about that because if you had more than that amount of tax, you couldn't write that off on your taxes. Today, it'll go all the way to 40,000. Now, there's caveats to that. Depending on your income, you can phase out of it. But without digging into those details, here's what you need to know. 10,000 all the way to 40,000. Depending on your situation, that could be a big saver on your tax return. So, be looking for that one.

Let's talk a little bit more about clean energy. You mentioned Elon Musk just a second ago. Let's not go down that rabbit hole again, but talk to me a little bit more specifically about what's going on with clean energy in the big beautiful bill.

Okay. So, I think everybody knows that for years Donald Trump has railed against this incredible amount of money that's being spent on clean energy. He's not a big fan of windmills and all of these things. I'm not sure how I feel about all of that, Spell, because there's a lot of it that I can understand. There's a lot of it that I just believe is just a lot of fodder. It's a lot of useless information. I think we spend way too much time on it. I think we go through change in the climate naturally. We have for thousands of years and we have proof of that. So, I don't know how I feel about it.

What I do know is that this bill sort of says to this clean energy thing that, hey, we're going to wind it down. We're going to wind this thing down and we're going to say, look, it's okay to think about clean energy. It's okay to think about the atmosphere and the climate, but it simply says, look, if you're one of these developers and you're trying to use all of these credits, well, they're going away.

Yeah.

All of these clean energy credits are going away. And by 2028, they're gone.

Yeah.

So, if you're in project mode and you want to take advantage of these credits to maybe you're building apartments, whatever you

So commercial real estate, these big time developments.

100%. You need to get those things finished.

Got it.

And even as an individual you want to get these things finished because by 2028 phased out, starts in 2026, takes it a few years and then it's phased out. So it's not to say that it's bad necessarily or good necessarily. It is what it is.

Yeah.

Donald J. Trump believes that there's way too much, and we're talking billions being spent on all this clean energy, and I think there's a place for it. I think we need multiple sources of energy. I think all kinds of energy creation is going to be really important. I think we all know the grid is in trouble. It's probably overworked and we definitely need alternatives. But what is being said now, and the man that has the power now and the Congress that has the power, they've spoken and they're simply saying, "Look, if you've got these things and you want to take advantage of these credits, better get them while they're good because they go away."

Okay. Yep. So, clean energy is phasing out or being reduced to essentially phase out by 2028. Let's talk about something that is maybe being increased or phasing in, in child tax credits. There was a slight adjustment to what's being afforded to people with kids. So, what about that?

Hey, if you're a parent with a Social Security number for a child, you can take advantage of this thing. And it bumps up from 2,00 to 2,200. So, it's not a huge amount.

Nope.

But it's a move in the right direction. So it does give, it just says here, Spell, that the child tax credit, it goes to 2,200. Will it go beyond that? Maybe.

Yeah.

It's not a big benefit for wealthy people. It's not going to move the needle for them. But for people who don't have that kind of wealth, you've got kids, an extra four. If you got two kids, it's an extra 400.

I was going to say multiple kids.

Yeah. And that's a child, that's a credit.

Yeah.

That's a real offset of tax. That's not a deduction. And I think people need to understand the difference. A deduction will help reduce your tax, right? A credit reduces it dollar for dollar. It's just a straight up reduction. So I think that's good. Remember, if you happen to be a household or a family that's making pretty darn good money, it phases out when your AGI starts to hit 400,000. You get there, you're going to lose that child credit, but until you get there, you got a lot of room to run there. Take advantage of it 100%.

Well, dollar-for-dollar tax reduction is free. It's free money.

It's free money. So, it's a great opportunity for people that are trying to fund things like custodial accounts, 529. There's a number of, but by and large, whatever you do with it, just know it's free money.

Yes.

And if that'll help you, then you should take advantage of it.

All right. All right. And there's one other point about this big beautiful bill, Phil, that we have to touch on.

Well, Spell, let me correct you on that.

Okay.

There's probably 500 other points, and it'd take us three days to cover all of it. And there's a lot I'd love to talk about, particularly protection orders, things that are in place for border control, all that. But unfortunately, we don't have time today. We're spending time on how to help people building wealth and protecting their wealth. So, we'll save that for another day.

Okay. Well, we can certainly save that for another day. And if there are pieces of the bill that you would like for Phil and me to go through,

Sure.

leave a comment and we'll be happy to go through those. But the last piece on this bill that we're going to talk about today, no tax on tips.

Ah, that's what you're throwing at me.

Yes. So no tax on tips and overtime is in that.

Ah, to some extent. So, okay. Now, Trump campaigned on this stuff and he campaigned on it pretty hard. Trump said that he would just get rid of taxes on tips. He'd make that tax-free income. He'd get rid of tax on Social Security. He'd get rid of a lot of these things.

All right.

Unfortunately, he got some of it done, but he didn't get all of it done.

Okay.

He got it. He got a version of it, but it's certainly not elimination of tax on these things. And why? Well, it's what I've been saying throughout the show. It's going to phase out, right? So, 2028, who knows? It might stay.

Okay.

But at this point, what we know is that first phase out is based on your income. So, if you're reaching that 150 level, 300 as a couple, then you start to lose some of this benefit.

Got it.

All right. This may not be, this is really not for millionaires. They're not worry. They're not working for tips generally.

No.

And they're probably not working overtime. But for more of what I think is the Americanist, the average, it's who make America run, those people are going to get a real break. And the way this thing is going to work is you get to write off a big portion of those tips. And I'm not talking about a couple thousand bucks. I'm talking about $25,000.

Wow.

So you can just write that off as a deduction as long as you're not phased out. Again, 150,000 to 300,000 as a couple, you start to phase out. Now, the same goes for overtime. So that one's a little different. The tips, if you work on tips, by the way, it's better because you get a bigger deduction, if you're doing the overtime thing, which I also think is really good.

And why did Trump do this? Why did he want all this so badly? He wanted this because he's trying to motivate people to work.

Yeah.

Go to work. And this says to people, you know what? I know overtime might not be the best thing some days. Maybe you don't want to be there longer, but if you can get paid time and a half and you don't pay tax on it or you get to deduct a lot of it, that all of a sudden sweetens the pot a little bit and that creates a more productive America.

Yeah. Do you want to implement that here?

No. No, we're not. We're not doing that here. Most of our employees are exempted.

I know. And so we probably

And don't be putting that around the firms.

But Phil, one thing though that you mentioned, most people who are in better financial situations or have more money, the millionaires that we referenced at the beginning, this might not be relevant to them, but it could be because a lot of times they're business owners.

Well, they're the employer, right?

Right. So, you mentioned that the small business owners are what really make our country run. And so this information might be great for an employer to take to their employees to educate them.

Well, it might be great for them to attract employees, 100%, because depending on what they pay, their time and a half might all of a sudden look a lot better than the competitor.

Yeah, definitely.

Right. So yes, I think there's benefit here to both. It doesn't necessarily make a lot more money for the millionaires per se, right? But if it gets them better team, better people, then absolutely it translates into something to them financially. So yes, that's a great point, Spell, that you bring.

So remember, this tax-free thing on tips, not quite as good. Just like Social Security, it's very similar, Spell. We don't have time to go into it today, but Social Security, same kind of idea. It's a bit of a phase in, phase out kind of thing, but it at least helps. So seniors, I believe, shouldn't be paying tax on Social Security, but unfortunately Trump wasn't able to get that done. He got a lot of it done and so it will help, but it will phase out potentially in several years.

Two things I wanted us to touch on that I believe the listeners need to know.

Go for it.

The first one is Medicaid. And I'm hearing all kinds of information out there already. People are saying that this Medicaid, the cuts in Medicaid potentially from the federal level are going to be disastrous, deleterious for so many parts of the American business model, particularly in the hospital world. They think small hospitals are going to be annihilated.

Here's what I think. Number one, don't keep repeating that because I don't believe most people that are talking about it really understand what this bill does for Medicaid. Does it cut Medicaid? Yes. But the reason behind it is to motivate a more productive society. And so it's not saying that we're just going to pull the cord or cut the cord. It's saying that if you're going to be on Medicaid, if you're going to be getting a handout, you have to be productive at some level. And so if you're not disabled, if you don't have dependents, then why are you getting a handout in the first place?

It's a good question.

And so there's a limit to it. And then you have to be gainfully employed or productive in some way. Other parts of the rule say that maybe you don't have a job. What's the alternative? Volunteer.

Yep.

At least 80 hours. Do some volunteer work and earn your way, so to speak, even if you're not gainfully employed. What Trump is saying and what this administration is saying is we can't afford a country full of narrative people.

Yeah.

We can't afford that. And that's not what a government was intended to be anyway. It's not a way to subsidize laziness. And so that's part one. I don't think we're going to see hospitals start to close.

Right.

That is incredible conjecture that people are throwing out there. But it's not just conjecture. It's fear-mongering.

Yeah.

And they're trying their best to just make this bill be as bad as it can be.

Seems pretty extreme.

It is. It's so extreme. Our Medicaid system needs to be unwound and rebuilt so that it's creating productivity, not creating people who will simply live on those dollars as long as they can. Same with the SNAP program, which is nutri, nutrition.

You know that same thing. So we need to motivate people to get better. And a lot of people that are on those benefits, they're actually able to do some good. I think they should.

The other point that I want to bring up is what are some of the benefits of all these tax breaks that are happening, and there's one thing that I believe everybody should be considering, and especially if you're close to retirement. Spell, we talk about Roth conversions all the time.

Oh yeah.

Well, we have right now these new credits, the new standardized credit for individuals and households or couples. That's going to be up to around $31,500 in short order for the standard deduction. That's big, big time. If you're on social security, there is yet another that's going to flow into that. And all of a sudden, you may not be an itemizer, but you might have 35 or $40,000 or more of standard deduction.

Mhm.

It's going to create an ideal situation for Roth conversions for a lot of people who might be thinking they'd never get to do that. And I'm not saying that Roth conversions for everyone, but it could create an opportunity.

Real quick, what is a Roth conversion?

Yeah. Oh, it's a great question. Sorry. I'm so excited about some of this stuff that I forgot to tell you that we're here to help educate, too. So if you have an IRA, everybody knows that an IRA is never 100% yours. You were in partnership with the federal government.

Yes.

And the state government. And what I mean by that is that essentially, we'll just round it and just say it's 30%, 25% federal, 5% state. 30% of every dollar in your IRA belongs to the federal and state governments, right? So you're in partnership with them in your IRA. You get 70%, they get 30. Rough.

What's the point? The point is if you can transition out of that effectively into a Roth IRA, Spell, one of the beauties of that, as you well know as a wealth adviser, there's no tax on that Roth once you're in it, never to be taxed again on the income side, nor is it taxable when it goes to your children or to whoever you leave it to, which is pretty awesome. So, if this creates an opportunity or a path for people to do more conversion, yeah, I say bring it on. If you've never considered it, now might be the time to talk to your adviser and figure out if it makes sense.

Well, you just said it. Now might be the time. I think this particular legislation brings about some timely changes and some things that will probably need to be timed properly. Roth conversions are not something that you just snap your fingers and do. They require planning and timing.

Absolutely. Timing, planning, all of that's really important. And I think because we have a window here from say now until end of 2028, I think you don't want to delay the planning. You want to figure out if this makes sense, if all of these new benefits are going to help you enough to make that Roth conversion feasible.

Y

And if it is, get on it. But don't delay and show up at 2028 and say to me, "Gosh, I wish I'd known that." Because we're telling you right now.

We just told you.

Yeah. All right. There you have it. The big beautiful bill. Lots more to come on our next show. I can promise you this. We're going to blow your mind with more useful information.