Podcast Episode Summary

Podcast: Tax Smart Real Estate Investors Podcast
Episode: 315 - The Future of Bonus Depreciation and SALT: 2025 Tax Updates with Nathan Sosa, CPA, MST
Date: March 4, 2025
Host: Hall CPA
Guest: Nathan Sosa, CPA, MST (Head of National Tax, Hall CPA)

Episode Overview

This episode dissects the major tax changes looming in 2025, particularly under a Trump administration. Host Tom and guest Nathan Sosa delve deep into what happens if the Tax Cuts and Jobs Act is not extended, the potential for 100% bonus depreciation to return, possible modifications to the SALT deduction cap, and the legislative and political process governing these changes. The conversation is practical, no-nonsense, and focused on preparing real estate investors for what’s to come.

Key Discussion Points & Insights

1. What’s at Stake if the Tax Cuts and Jobs Act (TCJA) Expires?

(02:14 – 05:16)

• Potential Tax Hikes: If TCJA provisions sunset at the end of 2025, the average American could see a 22% tax increase.
  • “If the Tax Cuts and Jobs Act does not get extended...that means that an average American will see a 22% tax increase if they don’t.” – Nathan Sosa (02:43)
• Lower Tax Brackets & Standard Deduction: Key TCJA provisions like reduced tax brackets and the doubled standard deduction would be rolled back, impacting everyone, especially married filers.
  • “If these expire, that goes away, as does the standard deduction that got doubled in 2017 as well.” – Nathan Sosa (03:39)
• Estate Exemption Cut in Half: The $28 million exemption (for spouses) would return to $14 million.
• Qualified Business Income Deduction: The 20% pass-through deduction for business owners also set to expire.
  • “It’s like a free 20% tax rate for most business owners... That also goes away at the end of 2025.” – Nathan Sosa (04:38)

2. Possible Legislative Changes for 2025

(05:23 – 06:33)

• Trump’s Top Promises:
  • Eliminate tax on tips, Social Security, overtime pay.
  • Permanently extend the Trump tax cuts (TCJA).
  • Raise the SALT cap for state and local tax deductions.
  • Reinstate 100% bonus depreciation.
  • Lower the corporate tax rate for manufacturers to 15%.
• Key for Real Estate Investors: High likelihood that 100% bonus depreciation, QBI deductions, and a higher SALT cap will be prioritized if legislation succeeds.

3. The Battle Over Bonus Depreciation

(07:01 – 11:08)

• Current State:

  • Attempts to extend 100% bonus depreciation have passed the House but failed in the Senate before.
  • There are projections that it might return at a lower percentage (e.g., 50%), but the most recent Congressional scoring (used for evaluating policy costs) has modeled it at 100%.
  • Cost Consideration: 100% bonus depreciation has a projected cost of $378 billion over 10 years—substantially less than fully removing the SALT cap ($1.2 trillion).
  • Bipartisan support makes its passage likely if timing aligns.

• Key Insight on Timing:

  • If tax legislation is passed quickly (by late summer/early fall), 100% bonus depreciation is likely.
  • Nathan’s Priority Ranking:
    1. Individual tax rates/standard deduction
    2. Qualified Business Income deduction
    3. 100% Bonus Depreciation
  • “I really feel like 100% bonus depreciation has a very solid chance of returning due to its overall cost over a 10 year period.” – Nathan Sosa (10:53)

4. Carried Interest: Perennial Headline, Minimal Impact

(12:01 – 14:21)

• Definition: Carried interest affects syndicators/general partners; essentially, it provides favorable tax treatment for partnership gains.
• Political Discussion:
  • Trump promises to eliminate the carried interest “loophole.”
  • Real impact is minor—just $12 billion in revenue over 10 years.
  • “Every new tax bill they talk about it… just for the impact only be $12 billion. It’s just like, why bother?” – Tom (14:17)
• Real Estate Investors:
  • Historically, carried interest restrictions (like the three-year holding period in 2017) haven’t applied to real estate. Some tightening might occur but is not expected to be major.

5. Legislative Timing: When Might These Changes Happen?

(15:12 – 21:04)

• Conflicting Timelines:
  • The House wants a single, comprehensive bill—covering tax, border, military, immigration—done by September 30, 2025 (the budget reconciliation deadline).
  • The Senate prefers a two-bill approach, with tax pushed to a later reconciliation (possibly into December/January).
• Political Reality:
  • Both chambers are at an impasse, and because of razor-thin majorities, each side has “veto” power over the other.
  • Deadline pressure is significant, but passage before September 30 is unlikely.
  • “If you want a summer bill, you’re going to be disappointed. And if you want a September bill, there’s also a high chance you’re going to be disappointed, too.” – Nathan Sosa (20:55)
• Impact on Bonus Depreciation:
  • If passed later in the year (December/January) via the Senate, more concern about costs could mean bonus depreciation doesn’t get fully restored.

6. Practical Questions from Investors

(21:04 – 22:14)

• Should You Delay Filing Taxes Waiting for Depreciation?
  • No; there’s too much uncertainty and major provisions like the elimination of income tax in favor of tariffs are not remotely likely.
  • “If you think that income tax is going away this year, it’s not going to happen.” – Nathan Sosa (21:19)

7. Administrative Updates: DOGE & IRS

(21:57 – 24:11)

• DOGE’s Role: Elon Musk’s DOGE team rumored to be reviewing government waste, including the IRS, possibly cutting staff and modernizing operations.
  • No confirmed layoffs at the time of recording.
  • Focus on efficiency, digitization (e.g., eliminating paper checks).
• IRS inefficiency discussed:
  • Hosts note government tech/IRS is outdated and ripe for AI and basic upgrades.
  • “I feel like the current tax preparation software… feels like it was built on like Windows 95.” – Tom (24:11)

8. SALT Deduction—A Moving Target

(24:46 – 26:16)

• Varied Proposals Under Discussion:
  • Raise the cap ($20,000 mentioned), eliminate the cap entirely, or even kill the state and local tax deduction for individuals and businesses (including the PTET workaround).
  • “I think that’s going to be gone… if that’s something you used, I’m sorry, but I don’t think that’s going to be allowed going forward after 2025.” – Nathan Sosa (25:50)

9. Staying Informed

(26:16 – end)

• For frequent updates, listeners are urged to:
  • Use Hall CPA’s 2025 tax tracker (therealestatecpa.com/2025taxchanges)
  • Follow Nathan Sosa on X (formerly Twitter) and LinkedIn.
  • Subscribe to the new newsletter via the same CPA website.

Notable Quotes with Timestamps

• "If the Tax Cuts and Jobs Act does not get extended... that means that an average American will see a 22% tax increase if they don't." – Nathan Sosa [02:43]

• "The 20% [QBI] deduction... also goes away at the end of 2025. So there's a lot on the table." – Nathan Sosa [04:38]

• "100% bonus depreciation... that's a big boon for you." – Nathan Sosa [06:33]

• "The cost of bringing back 100% bonus depreciation only costs $378 billion. So it's actually... rather small." – Nathan Sosa [09:06]

• “If you want a summer bill, you’re going to be disappointed. And if you want a September bill, there’s also a high chance you’re going to be disappointed, too.” – Nathan Sosa [20:55]

• "If you think that income tax is going away this year, it’s not going to happen." – Nathan Sosa [21:19]

• "Every new tax bill they talk about [carried interest]... the impact only be $12 billion. It's just like, why bother, right?" – Tom [14:17]

• “I feel like the current tax preparation software… feels like it was built on like Windows 95.” – Tom [24:11]

Timeline Highlights

• 02:14 – 05:16: What will expire if TCJA lapses
• 05:23 – 06:33: Trump’s tax reform proposals
• 07:01 – 11:08: 100% bonus depreciation debate and prioritization
• 12:01 – 14:21: Carried interest and legislative “headline” issues
• 15:12 – 21:04: Legislative process, timing, and reconciliation
• 21:04 – 22:14: Guidance on tax extensions and tariffs
• 21:57 – 24:11: DOGE, IRS efficiency, government waste
• 24:46 – 26:16: SALT deduction—raise, remove, or eliminate?
• 26:16 – end: Staying updated; how to follow new developments

Final Takeaways

• Act Proactively: 2025 tax law is still in flux; be ready to pivot when legislation passes.
• 100% Bonus Depreciation: There’s a solid chance it returns, but timeline uncertainty remains. Don’t delay filings based on speculation.
• SALT Deduction: Watch for major changes—cap could be raised, removed, or erased.
• Reliance on Updates: Use trusted resources to keep up with fluid developments.
• Key Point: "Smart investors don't just make money, they know how to keep it."

For more updates and to follow the changes in real time:

• Visit therealestatecpa.com/2025taxchanges
• Follow Nathan Sosa on X and LinkedIn

This summary skips advertisements, promotional content, and non-tax-related segments per user request.