Anderson Business Advisors Podcast 100% Bonus Depreciation & Recapture Explained
In this Tax Tuesday episode, Eliot Thomas, Esq., and CPA Barley Bowler address listener questions on diverse tax topics including property management S corporations and QBI deductions. They explain how to structure management companies for rental properties, the relationship between W-2 wages and K-1 distributions, and the power of the 199A qualified business income deduction. Eliot and Barley dive deep into 100% bonus depreciation, cost segregation studies, and depreciation recapture rules—clarifying when to use Section 179 expensing versus bonus depreciation. They also cover maximizing education expense deductions through C corporations, leveraging oil and gas working interest investments for immediate ordinary deductions of 60-85%, structuring private operating foundations with proper payroll procedures, and optimal tax strategies for business sales including the powerful Section 1202 exclusion. Tune in for expert guidance on these advanced tax planning strategies!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:- 00:00 - Intro
- 05:34 - "I have a property management S corporation for my rental properties. All rents and expenses are paid to/from the S-corporation. I take a W2 from the corporation. At the end of the year I receive a K1 for the net rental income. Can I take a QBI deduction for this K1?" - The K-1 reflects only the management fee, not rental income. QBI applies to that fee.
- 14:07 - "I am curious how I can get the maximum benefit from a tax perspective for education class fees paid." - C corporations can deduct new business education via loans from shareholders arrangement.
- 19:04 - "Please explain 100% Bonus Depreciation recapture and eligible assets with a less than 20 year life being fully depreciated in Year 1." - Cost segregation identifies 5, 7, 15-year assets eligible for immediate bonus depreciation.
- 24:08 - "What happens if you sell a rental property with depreciation recapture after a cost segregation with bonus depreciation?" - Five-year and fifteen-year property recaptures at ordinary rates; building capped at 25%.
- 29:46 - "Please explain Section 179 expensing." - Section 179 allows immediate equipment expensing but cannot create a loss situation.
- 36:20 - "Is oil and gas a good tax deduction?" - Working interest investments provide immediate 60-85% ordinary deductions through intangible drilling costs.
- 40:36 - "My family has a private operating foundation. One family member works full-time for the foundation and we agreed to pay a wage to that individual. Would that family member have a w-2? Or does the owner withdraw? Also payroll?" - Pay reasonable W-2 wages through payroll; no owner withdrawals in nonprofit foundations.
- 44:40 - "What is the best tax strategy for selling a business?" - Stock sales create capital gains; consider Section 1202 for qualified small businesses.
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