Tax Update: What Real Estate Investors Need to Know About 2025

Legislative changes can have a massive impact on real estate investors, especially when it comes to taxes. On this Tax Smart REI Episode, Thomas Castelli, CPA, and Nathan Sosa, CPA, MST, Head of National Tax at Hall CPA, discussed the potential tax changes that could take effect in 2025—along with the political and legislative processes shaping them. Here’s what you need to know.

What’s at Stake in 2025?

The 2017 Tax Cuts and Jobs Act (TCJA) introduced lower tax brackets, a doubled standard deduction, and additional benefits for both individuals and businesses.

If Congress does nothing before the provisions expire in 2025, these favorable measures will disappear. According to estimates, an average American could see a 22% tax increase if no action is taken.

Key items at risk:

• Lowered Tax Brackets: Rates would revert to pre-2017 levels.
• Standard Deduction: Would be halved from its current doubled amount.
• Estate Tax Exemption: Could drop from $14 million to $7 million per spouse.
• QBI Deduction: The popular 20% deduction for pass-through businesses may vanish.

Why Higher Taxes Are Likely

If Congress and the White House fail to pass new legislation, higher taxes become a near certainty. Politicians on both sides of the aisle are wary of being blamed for tax hikes, so there is significant motivation to legislate—but it’s still a waiting game to see exactly what they’ll decide.

Potential 2025 Tax Changes

Several proposals are on the table, including:

• Eliminating taxes on: Tips, overtime pay, and Social Security benefits.
• Extending (or making permanent) the TCJA provisions: Lower rates and higher standard deduction.
• Raising or removing the SALT cap (currently $10,000).
• Restoring 100% Bonus Depreciation: This has bipartisan support and is a crucial incentive for real estate investors.

For real estate professionals, 100% bonus depreciation stands out as a potential big win. While some experts suggest it could revert to 50%, many in Congress want to see the full 100% restored—though timing will be critical in determining how far that legislation goes.

Carried Interest Changes?

Carried interest, long labeled a “loophole,” garners a lot of headlines yet generates minimal actual revenue (around $12 billion). Despite routine promises to close the loophole, significant changes seem unlikely—especially since the provision has been targeted before with little effect.

Legislative Timing & Budget Reconciliation

Both the House and the Senate have different approaches to tackling tax reform:

1. Single Comprehensive Bill
   • The House wants an all-in-one package dealing with taxes, border security, and other major issues.
2. Two-Bill Strategy
   • The Senate wants a “skinny” bill first (focusing on issues like immigration and border funding), leaving major tax changes for later.

Budget reconciliation is the key process that allows legislation to pass with a simple majority instead of the 60-vote filibuster threshold in the Senate. Due to the tight margins, no major bill is expected before September 30th. In a worst-case scenario, it could slide into January 2026.

Should You Delay Filing?

Some people wonder whether to extend their returns in hopes of a major tax overhaul (like 100% bonus depreciation or the elimination of income taxes via tariffs). According to Sosa and Castelli, this isn’t a practical strategy, tariffs are unlikely to replace income taxes anytime soon, and betting your tax filing on hypothetical provisions is risky.

Other Developments to Watch

• SALT Deduction: Could be lifted, raised, or eliminated entirely.
• Pass-Through Entity Tax (PTET) Elections: Might become obsolete if SALT deductions change drastically.
• Technological Updates: Legislative bodies are exploring ways to modernize the IRS and reduce government “waste,” but reforms likely won’t be immediate.

Staying Informed

For real estate investors seeking proactive tax strategies, following the latest updates is essential:

• Hall CPA 2025 Tracker: Stay current on proposed legislation.
• Social Media: Following experts like Thomas Castelli and Nathan Sosa on LinkedIn or X (formerly Twitter) can give you the latest insider scoops.

Bottom Line

2025 could bring sweeping changes in tax legislation. From the possible return of 100% bonus depreciation to new or eliminated SALT caps, real estate investors must stay on top of the conversation to minimize their tax liabilities.

While nothing is final, planning ahead by consulting with tax professionals and monitoring policy developments ensures you’re ready for whatever Congress decides.

If you want more personalized guidance, consider reaching out for a free discovery call with a qualified tax advisor. With careful planning, you can position yourself to make the most of any upcoming legislative shifts.

Transcript

Intro & Opening Remarks (00:20.494)

Thomas Castelli, CPA (00:20.494)

Welcome back to Tax Smart REI podcast. Taylor joined with Nathan Sosa, head of National Tax here at Hall CPA to break down the potential tax changes under the Trump administration that we might see in 2025. Will 100% bonus depreciation make a comeback? Could the $10,000 salt cap be lifted? Will opportunity zones be extended and will income taxes be eliminated by tariffs? We’re gonna see how this all plays out in this episode. So stick around, we’ll be jumping into all that in just 60 seconds.

All right, Nathan, thank you so much for joining us on the show today. I know you’ve been keeping close tabs on these 2025 tax changes and almost like a play-by-play on how everything’s going. So really excited to hear the news and latest updates.

Before we kind of dive into what’s gonna change and will tariffs, and will tariffs replace income taxes, can we just kind of talk about what do we stand to lose if no action is taken in 2025?

What’s at Stake in 2025? (01:24.024)

Nathan Sosa (01:24.024)

Hey Tom, thanks for having me on today. Super excited. Yeah, I find this political piece of tax to be really intriguing and fun to talk about, but what do we stand to lose at end of the day?

Jason Smith, head of the Ways and Means Committee, if you don’t know who that is, Ways and Means Committee are the people who basically, they do a lot of tax policy of the nation, right?

They’re the first ones, everything starts with, they run through, we’ll have a deeper discussion of that here in a little bit, but they came out and said that if,the Tax Cuts and Jobs Act does not get extended, right? Does not get extended after 2025 through 2026. That means that an average American will see a 22 % tax increase if they don’t, right?

So that’s an average number, right? So like, it sounds scary, right? It’s like, I’m gonna lose $20 out of my next hundred extra, right? So like, what does that mean? So that’s what we stand to lose. Essentially the reason why we stand to lose all of that is because back in 2017, the Tax Cuts and Jobs Act initially brought down tax brackets.

It decreased the rates overall. It increased a tiny bit at the top, at the upper rates, but for the lower rates, basically, from 24 % down, it reduced them, right? We had a lot more, there’s quite a few more brackets that were needed to be considered. There’s a lot more than 20%. Right now we have 22%, and 24 % tax brackets at the moment. Everything, and then in between there is a 15%. And so, right now we have a much lower tax system than we’ve had previously, than we’ve had prior.

And so if these expire, that goes away.

As does the standard deduction that got doubled back in 2017 as well.

We, everyone, if you’re married filing joint, you had a 24, like you get right now, you get a $24,000 deduction. like, basically the tax code just says, hey, this is the cost of living. We all know that’s not the cost of living, but they say, hey, this is the cost of living. You get to deduct it. So standard deductions one, cause that means it’ll get half.

So that will get halved. Another item to consider is those of you who are thinking about estate planning, other options that you really think you’ll be thinking about this year, and have communications with your estate planners or attorneys or tax advisors is the trust in estate exemption.

That gets halved. Right now it is 14 million per spouse. So can have up to $28 million that you could have exempted if you pass away. However, that’s gonna get halved and go back to normal rates. And so basically go back to where you could get a max of 14.

Nathan Sosa (03:46.456)

That’s a significant, $14 million, that’s a significant number at the end of the day. So there’s a lot on the table here.

QBI, Qualified Business Income Deductions, that also goes away at the end of 2025. So there’s a lot on the table we have to consider for like as taxpayers and like there’s a lot that needs to be taken care of and that’s why
this current tax legislation fight is so important for Americans abroad.

Consequences of Inaction (04:21.486)

Thomas Castelli, CPA (04:21.486)

So it sounds like for listeners of the show out there, it sounds like if no action is taken and some of these provisions that were in the Tax Cuts and Jobs Act, if they expire, it’s going to lead to higher taxes.

Nathan Sosa (04:32.288)

Unfortunately, yes, it will lead to higher taxes. And for politicians, that’s not good, especially when you are the party of lowering taxes, and all of a sudden, they vote you in and then now your tax rate gets increased. That doesn’t end well politically for most folks.

Potential 2025 Tax Changes (04:45.902)

Thomas Castelli, CPA (04:45.902)

Right, so it kind of sounds like there’s incentive here or there should be motivation to pass some type of legislation to… Okay, okay, so I know there’s been a lot of talk about this on the campaign trail in Congress, and we’ve heard a lot. What are the potential changes that listeners of the show should expect to see? What’s relevant for them? What do we think is gonna happen 2025?

Nathan Sosa (04:52.674)

Highly motivated, isn’t he? It’s a good way to put that.

Nathan Sosa (05:13.272)
That’s a great question, Tom. So a couple of weeks ago, after a five-hour long meeting with the top tax writers between President Trump and the top tax writers in Congress, they basically, as they came out, they asked them, what are the priorities that are going to happen here? And President Trump said, he said, I’m going to eliminate tax on tips. I’m going eliminate tax on social security. I’m going to eliminate overtime pay. Additionally, I’m going to extend and make permanent the Trump tax cuts, is what they’re calling them, which is this tax cuts and jobs, a bunch of the items that we just discussed. I’m going to increase the salt cap that the state and local income tax deduction on, for those who itemize, I’m gonna increase that cap. then I’m also going to, gosh, was there one other one, Tom, that I’m forgetting as of right now?

Thomas Castelli, CPA (06:03.406)

100% bonus depreciation

Nathan Sosa (06:05.116)

And 100% bonus depreciation, which does get passed through deduction and lowers the corporate tax to 15 % as well for American businesses, for American manufacturers.

Those are his promises. What’s relevant to real estate investors, it’s going to be 100% bonus depreciation. It’s going to be the qualified business income deduction. It’s going to be raising the salt cap actually, right? For those of you who live in high-income states, New York, New Jersey, and California, that’s a big boon for you. Sorry, Florida and Texas, but property tax is actually for those folks, anyone who lives in a high state tax state is going to, jurisdiction is going to benefit from a raised SALT cap. we’ll see what happens.

Like the really, honestly, the first four I mentioned, the no tax on tips, no tax on OT, no tax on social security, that applies to Americans abroad. In the end, but we’ll see if those are legitimate provisions that will actually get passed.

100% Bonus Depreciation (06:59.758)

Thomas Castelli, CPA (06:59.758)

Yeah, yeah, I’m a little bit skeptical on how viable those are and whether or not that will happen. really, think what, it’s just drilled down to 100 % bonus depreciation just a little bit. Because we know that there was a bill passed by the House last year, right? That included 100 % bonus depreciation through the end, I think it was the end of 2026, I think it was the end of 2025. But they wanted to bring it back.

That was ultimately shot down in the Senate. Now I’m hearing some people, some tax professionals believe that it might only go back to 50%. What do you think’s the most likely outcome? Is it gonna go back to 100 or will it be something else?

Nathan Sosa (07:38.858)

No, it’s a great question, Tom. And so it’s a tricky situation. Right now, every projection that’s being done from, and so like I say projection, from economists, from the Congress Budget Office, the Congressional Budget Office, they are the ones who do the scoring and estimate and say, hey, this is how much deficit of revenue the government’s not going to earn, right?

Because whenever you do implement a provision like bonus depreciation, that means you’re not getting as much in tax now because you’ve allowed

You’ve allowed taxpayers, real estate investors to write off more of their income so they’re gonna pay less in tax. And so they’ve scored that the cost of 100%, but they have not scored it as a 50% bonus depreciation, 60% bonus depreciation. They’ve scored it as 100% bonus depreciation.

I know, I listened to a Ways and Means Committee open hearing that they had a couple of weeks ago, and they mentioned immediate expensing, which is 100 % bonus depreciation. Very much wanna bring that back, and that’s what they mentioned when they said they want to bring back the tax cuts and jobs at it.

That’s what they’re talking about, referring to. They want to bring back 100 % bonus depreciation. Now, the caveat is, that the later we go in this year for tax legislation, the more difficult it might wind up being to get 100 % for a long period of time.

So that’s what’s going to be key to leniation. Look, if they can get this done fast and get it done maybe this summer, or early fall, I definitely think 100% bonus depreciation can come back.

If it continues to carry and drag and all of a sudden we see ourselves sitting in November, or December, I feel like 100% depreciation might not be as realistic.

Thomas Castelli, CPA (09:14.274)

Realistic for 2025 or realistic going forward?

Nathan Sosa (09:17.272)

I think going forward, I think going forward it could be difficult because they just got so much in this package they have to think about. so we can talk a little bit about how everything scored and looked at. mean, as of right now, so the overall cost of bringing back the country to bonus depreciation only costs $378 billion.

So it’s actually, I say $378 billion, like that’s just a small number, right? We can just throw around. it’s just pennies on the dollar, right? But at the end of the, but actually in terms of all the other provisions, it’s actually rather small. So like if you completely eliminate the salt cap, right? you raise, if you raise it, right? Or remove the cap out of what I’m trying to say, completely remove the cap, that would cost $1.2 trillion. So that’s definitely not gonna happen because that provision is just far too expensive.

Now 378 billion for a hundred percent bonus depreciation and what is actually viewed as bipartisan across the board, right? As you mentioned last year’s bill, the Tax Relief Act or whatever that was like the Republicans called it.
had bipartisan support on both sides.

And so it is definitely a favorable bill. And I think 100 % bonus depreciation is one of the top goals. Here’s how I’d order the priorities for Congress, right? I’m sorry, I will toss President Trump’s priorities out of here, but Congress’s priorities are to return standard, like anything individual, any individual tax rate, standard deduction, they wanna make sure that’s essentially a lock. That is going to happen in 2025.

You can mark me on it. You can come to me in six and eight months. And if I’m wrong, let me know. But that is going to for sure get passed this year. What happens? But what’s next? Actually, I feel like qualified business income is second on their priority list, actually, which is another individual provision. But it feels separate, in my opinion. I think that the 20 % deduction, that’s also a walk for 2025 as well to come back.

The next one on the list is 100 % bonus depreciation. And again, it is a significantly lower cost. So it kind of just feels like a freebie that you can give almost, like because it’s only three to $78 billion, stupid number, but I really feel like 100% bonus depreciation has a very solid chance of returning due to its overall cost over a 10 year period. Cause that’s how they’re all being scored currently.

Carried Interest (11:33.87)

Thomas Castelli, CPA (11:33.87)

Perfect, perfect, I know a lot of people are tuning in right now, 100 % bonus depreciation is major and it has been very powerful. I think we’re all hoping it comes back. looks like there’s a good chance. Before we move on a little bit, drill down a little bit more into timing and when we expect the stuff to get passed, can we just talk about carried interest, right? That impacts some of the syndicators who might be tuning in. Maybe you’re in the general sponsorship side or you’reto be a general partner or maybe on the sponsorship side or maybe even as a limited partner, they need to understand how that might impact their investments perhaps in the future.

So what is carried interest exactly and what are the, guess it’s on the chopping block. It’s considered to be a loophole that’s gonna be closed. What do you see going on there?

Nathan Sosa (12:21.622)

Yeah, so that’s a good point, Tom. Carried interest somehow always winds up in the mouths of every congressman saying, we’re going to get rid of it. This loophole will be done away with. It’s going to be gone. And President Trump listed it. I listed the taxes he wants to erase or lower. And I did not mention the fact that he specifically called out removing carried interest and then oddly removing sports franchise owners, business deductions. I don’t know what that means. everyone’s trying to figure that one out still, but we’ll see what happens there.

But carried interest specifically, that actually only raises about $12 billion of revenue, oddly enough. It’s not a significant raise. It’s a tiny, tiny raise. So it’s like, can they do it? Sure, they could. They would try to do it in 2017. In 2017, they suggested doing it, but then they just ended up having a three, a longer three-year holding period. But that three-year holding period didn’t even apply to real estate, right? It didn’t even apply to real estate. The other day, it just applied to other hedge fund owners.

I’m not sure that carries are, I think there might be some modifications to carries. Maybe real estate has to hold for three years now too. Maybe that, maybe it’s a five year hold period. I don’t know. I imagine that they’ll tweak it just so they can somewhat keep the political promise, but I don’t truly expect a large adjustment.

Thomas Castelli, CPA (13:38.082)

Yeah, it’s really interesting how some of these things catch a lot of headlines, and yet the impact, it’s almost like it catches headlines, gets people going, but the overall impact is just very minor, like 12 billion. I would expect that the amount of tension that carried interest gets every single time you turn around, And every year, every time, excuse me, every new tax bill they talk about a little bit, just for the impact, it’ll only be 12 billion. It’s just like, why bother, right?

Nathan Sosa (14:06.476)

Yeah, know, right? Yeah, $12 billion is nothing, Tom. I’m gonna give that in your bank account. Totally.

Thomas Castelli, CPA (14:10.51)

Yeah, I mean, in the grand scheme of things, just like, it’s not moving the needle tremendously. Meanwhile, 100 % bonus appreciation has a $308 billion impact, perhaps you mentioned. That’s significant. That seems to have more support, believe it or not, or at least in the headlines.

Timing of Legislation (14:28.014)

Thomas Castelli, CPA (14:28.014)

So switching gears a little bit into timing, right? We’ve heard mixed signals right over the last few months. I remember at first, you know, the White House wanted to do it ASAP, right, and they stated they want to do it as soon as possible. And then initially after the election, I heard that the stuff was gonna get done in one reconciliation bill within the first hundred days. Now later on, I heard chatter about two budget reconciliation bills because so much stuff needs to get packed in there and it’s gonna be taking over two bills with taxes being in the latter part of the year in that second bill. What’s going on today? Where do we stand?

Nathan Sosa (15:06.552)

So yeah, initially we took like promises of a hunt, like many representatives wrote letters saying we’re going to have tax, border, immigration, armed forces. We’re going to have all these bills done in a hundred days in Congress. It’s going to be done and over with and we’re going to be taken care of. And now we’ve approached a, as I call it, the duel, I call it the dueling houses now because right now the house, has a lot of budget deficit hawks.

And essentially what they’re saying is that like our current government’s debt is so insanely massive that we can’t allow this, that we can’t just like continue to not do things that’s in the economy and continue to add onto that debt. We have to be more careful and be more judicious in what we spend, what we don’t. And then on the flip side, so there’s a lot that needs to be kind of like neatly navigated over in the house. Because the margins are also significantly smaller.

All it takes is one vote in the House and then this whole situation, like now nothing gets passed. All it takes is one Republican House representative to flip and they’re done. They cannot pass this bill. But on the flip side, the Senate has a much healthier majority and much stronger majority.

Normally how this process works is the House will start the budget resolution and then the Senate will start a simultaneous one because everything has to technically start in the House. And so they have to go and do their process and then the Senate will follow their lead.

The House was taking a while and trying to get all of its party members in one agreement or in line together. The Senate basically got impatient. And so they said, we’re just going to do our own and we’re going to take care of it. It actually did motivate the House and they said, hey, OK, fine. We’re doing our budget resolution now. And so they were like a few days after the Senate passed their budget resolution, the House then passed theirs. However, the House is on recess this week. The Senate is not. So they’ll be voting on their budget resolution. And I don’t think I explained budget resolution either.

I’ll try to make this 30 seconds or less, but essentially to pass tax, to basically pass tax bills now, you have to go through a process that’s called budget reconciliation. The reason for this is, is it avoids the filibuster and bird rule in the Senate. Basically, instead of having 60 majority of senators who vote on a bill, because we’re so closely narrowed in this country now when it comes to Republicans versus Democrats,

Nathan Sosa (17:32.12)

where you need 60 members, you’re never gonna get 60 members. However, you have 53 majority, if you go through budget reconciliation process, you can actually avoid this and just have the majority in the Senate. So by doing it this way, by going through this and like, however, the key point here is that limits you because you can only work in a 10 year span. So you did like the costs have to be considered over a 10-year budget. You can’t do things, quote-unquote, permanently. Now there’s a little bit of a workaround actually, a loophole that…
the Senate is trying to go through. But most things need to start in the House.

They start in the Ways and Means Committee. We mentioned them a little bit earlier. They’re the ones who do tax stuff. And so essentially what’s happening now is the Senate’s impatient and doesn’t want to wait on the House. And so they have a two-bill approach, right? The House has the one big, beautiful bill that President Trump touted, approach. They want to get tax, immigration, border, and security all done in one bill. While on the flip side,
Senate wants to do a skinny resolution, give the presidency a big win right now, and just do border, and military. That’s what they want to do. They’ll leave tax for later, right? Because right now, they have two budget reconciliation bills. They can do 2025 and 2026. The deadline for the 2025 budget reconciliation bill is the end of September 30th.

There’s actually a little bit of movement and a little bit of pressure on Congress. Congress will take as much time as it wants, but this creates a lot of pressure. And that’s what the House is trying to do. They are trying to say, want this done by September 30th, which is a feature, not a bug. The fact that you’ve dedicated Congress’ deadline is actually a good thing. Now, right after the House passed their budget resolution, basically 10 senators came out and said, we’re not going to support that when it comes to our way. We’re not going to vote on it. And then simultaneously, the House has also said, when the Senate’s bill comes to our side, we’re not gonna support it, we’re not gonna hit the floor. So we’re kind of at an impasse on both sides. We’ll see who wins ultimately, right? That’s what like, we’re at an impasse, it’s dueling houses right now, because neither wants to give and neither wants to budge.

So we’ll see what happens there. I fully expect this to come at best on September 30th, right? Guys, that’s the deadline. So that’d be the earliest case scenario in my opinion. Worst case scenario.

Nathan Sosa (19:48.96)

January 1st, 2026 could potentially be an option for us here, which that would not be ideal, but I think that could be when this winds up happening.

Thomas Castelli, CPA (19:58.198)

Okay, so long story short, you don’t foresee it happening any earlier than September.

Nathan Sosa (20:03.978)

I don’t know. really don’t. I don’t see that happening. just there’s too much going on and too much. I truly don’t expect that with how much the house is already on recess this week. Like I just don’t I don’t expect them to move faster. Maybe it could. Summer would be a shock to me if that happened. I expect August and September is when this will go through.

Thomas Castelli, CPA (20:25.678)

And if it went all the way up to 2026, it was January, in that scenario, you foresee there being a lesser chance of 100 % bonus depreciation making it into the bad bill.

Nathan Sosa (20:37.056)

I think so. I think so. But however, right now, Senate, like, so if, if we get, so if we go to September, that’s because we’re doing it the House’s way. If we go to December, January, that means we’ve gone the Senate route. And so we’ve got the Senate route. They actually have said that they don’t, that they want to do a baseline policy. And basically what that means that like all these provisions that already exist are like, we don’t actually have to pay for those.

They just exist. They are.

And so we don’t have worry about paying for any of that. So a hundred percent bonus depreciation, all these numbers that I’ve been throwing out, like in the billions, trillions that I’ve thrown out thus far, they say, yeah, that’s actually not a cost. That doesn’t hurt our GDP or anything like that.

There’s no deficit or revenue there. So actually there’s a chance that we can still get a hundred percent bonus appreciation. I do think that the house has a slimmer majority, so they have to be able to pass it. So the budget deficit hawks are always going to, they’re going to nip at certain provisions and it might just nip bonus appreciation down just enough.

Thomas Castelli, CPA (21:36.226)

Got it, got it, got it. Okay, anything else we need to know about timing here? Anything else you think is important to highlight or you think we…

Nathan Sosa (21:42.668)

I don’t think there’s that much to know. I think if you want a summer bill, you’re going to be disappointed. And if you want a September bill, there’s also high chance you’re going be disappointed too.

Should You Extend Returns? (21:51.63)

Thomas Castelli, CPA (21:51.63)

Alright, so one last question along this line. I know people are thinking about it. Should people be extending their tax returns right now hoping 100 % bonus depreciation comes back in 2024 or should they just file a tax return?

Nathan Sosa (22:05.592)

Tom and I are laughing at this because we know how ridiculous that provision is. I’m sorry if you think that income tax is going away this year, it’s not going to happen. The government gets over 50 % of its revenue from income tax. Tariffs would only replace maybe 25% of that, right? That’s like as it’s been promised, like, hey, we’re just going to replace income tax, get rid of it, and we’re just going have tariffs. Poor the economists and the very smart people who do this stuff.

They say that tariffs are great from a leverage perspective. They don’t produce a lot of income. They actually pass a lot of costs down to other taxpayers at end of the day. unfortunately, I don’t really, I would not extend your tax return in hoping that it’s gonna get, that you won’t have to pay the tax this year.

Thomas Castelli, CPA (22:50.872)

Alright, okay, so long story short, tariffs will not get placed in income taxes anytime soon.

Nathan Sosa (22:56.364)

Don’t see that happening, Tom, personally.

The Role of “Doge” (22:58.604)

Thomas Castelli, CPA (22:58.604)

Okay, so let’s hope that’s going on with Doge, right? Because we know that some of these tax provisions that if they’re extended like we talked about throughout this episode, that is going to increase the deficit. So some of the ways they’re trying to offset the deficit, if I’m not mistaken, is through Doge. What’s going on with Doge right now? What do we need?

Nathan Sosa (23:16.012)

Yeah, Doge has a lot going on. Doge has lot going on politically. If you’re on X, you’ll be well aware of all the changes that are happening at Doge. One, in terms for real estate investors specifically, is they went into the IRS building last week. they have potentially, but I have not seen this confirmed yet. Last week it was mentioned that maybe 15,000 IRS agents were gonna be fired.

Well, I still haven’t seen any news on that as of yet. So we’ll see. I forgot it was President’s Day yesterday. So that might happen later today or tomorrow. That news might get released. And so Doge is looking to cut costs and make efficiencies. So that could be good for the IRS, potentially. I don’t know if getting rid of the organization is already low-staffed. So I don’t know if that’ll help. But maybe we could get some great efficiencies from Doge and Elon Musk and his team.

They could help us there. They’re also looking just for government waste. They’re supposed to be looking for quote-unquote government waste in general to help pay for the tax bill that will be coming, right? It’s supposed to cost about $4.5 trillion. And so they have to look for a trillion of cuts on Doge’s side and government waste to help pay for it. We’ll see what’s happening there. don’t, was it like? Doge tweeted, it’s like, what kind of adjustments would you want to see happening to the IRS?

Paper checks was a big one. It’s like getting rid of paper checks completely, which if we can find an efficient way to do that, great. I don’t know if there’s an efficient way to do that.

Thomas Castelli, CPA (24:40.246)

Yeah, I feel like there’s so much waste though in terms of like with the IRS, I remember this year, they mailed me a check and I’m like, why are they mailing me this check? Can’t they just deposit the check? I mean, there’s other things too. I feel like a lot of things within the government can be made more efficient with modern-day technology, whether it’s AI or just even, not even AI, honestly. It’s just like basic stuff that we’ve all been using in the business world for the last like 10, 15 years. They just apply that to the government. Things will be a lot more efficient.

Nathan Sosa (25:09.048)

I hope so. I hope that’s what Doge does. I hope they just like basically like, hey, here’s the computer from like just 2005 versus like the 1950s computer they’re working on, right? If we do that, like everything’s gonna work a lot faster.

Thomas Castelli, CPA (25:21.102)

Yeah, I mean, even the tax preparation software, I know this obviously is in Doge, but it just kind of goes to show you how far things are. I feel like the current tax preparation software, a lot of it feels like it was built on Windows 95, right? 98. Like it would go along with those platforms. But anyway, yeah, there’s a lot going on within the government right now.

DOJE is cutting out a government lease. That’ll help cover some of the spending bill.

SALT Deduction & Other Changes (26:01.698)

Thomas Castelli, CPA (26:01.698)

What else have we not covered right now? Do you think people need to know about 2025 tax changes?

Nathan Sosa (26:01.698)

Yeah, Tom, I definitely think that like, it’s gonna be interesting. mean, so while we’ve talked a lot about raising the salt cap, right? Raising it or eliminating it. It has been discussed completely eliminating salt deductions in general and not just for individuals, also for business taxpayers as well. So basically no one gets to deduct state income tax any longer. That could potentially be on the chopping block.

It provides a ton of space and revenue to allow for all these things to happen. So I don’t know, I can’t confirm if that’s for sure gonna happen, but I definitely think it’s an option that they’re considering. We’ll see what happens. I really think by the end of February, we’ll have a little bit better picture of what direction everything is gonna be going, but we’ll see, like it requires the House to be in session and we’ll see what the Senate ultimately tries to do if they try to push their brethren into line.

Thomas Castelli, CPA (26:57.678)

Yeah, that’s interesting. So on one side, they want to raise it to perhaps 20,000, I heard, or perhaps even like eliminate the cap itself, right? But then on the other side, let’s say they’re trying to eliminate it, like the deduction completely, like meaning zero, you know?

Nathan Sosa (27:12.152)

Yeah, yeah, I mean that like all businesses. So one thing that a lot of real estate investors might have used is the PTET deductions (pass-through entity tax deductions) where you basically elect into your state to pay forward taxes essentially. I think that’s gonna be gone; that’s gonna be used as a pay-for this year. So if that’s something you’ve used, I’m sorry, but I don’t think that’s gonna be allowed going forward.

Staying Up to Date (27:40.78)

Thomas Castelli, CPA (27:40.78)

All right, so we talked a lot about 2025 changes, what could be coming, what might be coming. There are still some unknowns. We don’t know exactly when the timing’s going to—when all the pins are gonna drop, so to speak. Where’s the best way— I know we have a lot of resources on this—what’s the best resource that our listeners can get that can help them keep up to date with what’s going on, all these tax changes?

Nathan Sosa (28:10.38)

Yeah, so I would highly recommend logging on to our 2025 tracker at Hall CPA. It’s an awesome way to do that. We’ll be posting updates constantly and consistently. Also, give me a follow on X, formerly Twitter, or LinkedIn, and I’m posting pretty much daily, minimum weekly, on what’s going on and what’s going on in the government. If there’s an announcement that’s made, you’ll hear it from me first before you hear it from anywhere else.

Wrap-Up (28:35.02)

Thomas Castelli, CPA (28:35.02)

Yeah, absolutely. We do have that tax tracker that Nathan just mentioned.

But with all that being said, if you are looking for proactive tax advice on how you can use these changes to your advantage and everything else that’s currently in place within the tax code, we’d love to learn more about your situation and how we can help you complete a tax plan that’ll help you reduce your tax bills. So you can learn more and request a free discovery call And we will see you on the next episode of the Tax Smart REI podcast.

That’s it.

Disclaimer: This podcast summary and transcript were partly generated and may contain some errors or miss key points from the audio recording.