Tax Expert: HUGE Loopholes In Trump's Big Beautiful Bill - What NO ONE Is Telling You!

Dennis stresses that the wealthy have access to a variety of tax strategies that are not widely shared, creating an uneven playing field. The tax system is rigged in favor of those with business income and investments, who can utilize deductions and exemptions to offset their tax bills. Meanwhile, wage earners, especially those in the lower income brackets, have limited options and often end up “tipping Uncle Sam” without realizing the opportunities available to them.

The Big Beautiful Bill: Winners and Losers

The “Big Beautiful Bill,” a nickname for the recent tax legislation signed by former President Trump, extends and makes permanent many of the tax cuts from the 2017 Tax Cuts and Jobs Act. Dennis explains that while the bill lowers tax rates across all brackets and increases the standard deduction substantially, the primary beneficiaries are the wealthy and business owners. The standard deduction for married couples, for example, has increased from $24,000 in 2017 to $31,500 in 2025, providing more immediate relief to taxpayers.

However, the bill also phases out certain credits and subsidies for the very low-income earners, particularly those making under $45,000. These individuals may actually see an increase in their tax liabilities due to cuts in welfare programs and stricter work requirements for benefits. Thus, while the middle and upper classes benefit from lower rates and expanded deductions, the poorest Americans face a net loss, exacerbating income inequality.

Tax Benefits for Tipped and Overtime Income

One of the more headline-grabbing provisions in the bill is the deduction for tipped income and overtime pay. Dennis clarifies that taxpayers earning $150,000 or less (single filers) or $300,000 or less (married filing jointly) can deduct up to $25,000 of their tipped income from federal taxes. This is a significant benefit for workers in tip-heavy industries, such as hospitality and food service, especially in cities like Las Vegas where tipping culture is prevalent.

Similarly, overtime pay deductions allow single filers to deduct up to $12,500 and married filers up to $25,000 of overtime income. While this sounds like a major win, Dennis notes that only a small percentage of workers actually receive overtime pay, and the deduction phases out at higher income levels. Employers, on the other hand, do not benefit from these deductions and may still prefer to limit overtime hours to avoid additional payroll taxes.

The SALT Cap Increase and Its Controversies

The bill raises the state and local tax (SALT) deduction cap from $10,000 to $40,000, a boon for taxpayers in high-tax states like California, New York, and New Jersey. Dennis explains that this change allows homeowners in these states to deduct a much larger portion of their property and state taxes on their federal returns, reducing their overall taxable income. This is particularly impactful for those paying high property taxes and state income taxes combined.

However, this provision is controversial. Critics argue that it effectively subsidizes states with high tax rates and potentially mismanaged budgets by shifting the tax burden to the federal government. Dennis, however, supports the increase, noting that prior to the 2017 tax reform, some taxpayers were deducting exorbitant amounts in state and local taxes, which influenced their financial decisions and investments. The increase to $40,000 helps maintain housing affordability and incentivizes investment in these states.

Business Structures and Tax Strategy

Dennis highlights the importance of business structure in tax planning. He explains that many taxpayers start as sole proprietors or LLCs but may benefit from electing S corporation status once their income surpasses $60,000. This election allows business owners to split income into salary and distributions, reducing self-employment taxes significantly. Distributions are not subject to the 15.3% self-employment tax, while salaries are, so optimizing this split can save thousands.

He also distinguishes between CPAs and enrolled agents, noting that enrolled agents specialize in tax code and strategy, passing rigorous exams focused on tax law and ethics. While CPAs often focus on accounting and tax return preparation, enrolled agents are better suited for consulting on deductions, credits, and audit defense. Dennis himself is an enrolled agent, which positions him to help clients leverage complex tax strategies effectively.

Bonus Depreciation and Real Estate Strategies

One of the most powerful provisions extended by the bill is the permanent 100% bonus depreciation. Dennis explains that this allows business owners to immediately write off the full cost of qualifying assets, such as vehicles over 6,000 pounds or equipment, in the year of purchase. This is a huge advantage for entrepreneurs who can reduce their taxable income substantially by accelerating depreciation.

In real estate, bonus depreciation combined with cost segregation studies enables investors to separate structural and non-structural components of a property, depreciating the non-structural parts much faster. Dennis introduces the “self-rental” strategy, where a business owner rents a property they own to their own business, allowing losses from depreciation to offset active income without needing to qualify as a real estate professional. This strategy can generate significant paper losses and tax savings.

The Trump Account and Child Tax Credit Incentives

Dennis discusses the “Trump account,” a government-funded savings account for children that starts with $1,000 at birth and grows tax-free until retirement age. Parents can contribute additional funds annually, with the potential for the account to reach close to a million dollars by age 59½. However, he cautions that if funds are withdrawn for non-qualified expenses, they may be taxed as ordinary income, making traditional Roth IRAs a more flexible option for many families.

The bill also increases the child tax credit from $2,000 to $2,200 per child, with a refundable portion up to $1,700. This increase is designed to incentivize higher birth rates in the U.S., a goal publicly supported by Trump. There is no limit on the number of children for whom the credit can be claimed, which raises questions about potential abuse, but the credit aims to provide meaningful financial support to families in the lower and middle-income brackets.

Audit Risks, IRS Enforcement, and Filing Strategies

Dennis sheds light on the audit process, explaining that audits rarely begin with surprise visits or emails; instead, taxpayers receive letters requesting additional information. Failure to respond promptly can escalate the situation to a formal audit, which can take 9 to 12 months to resolve. He notes that audit risk increases with income, but even high earners have relatively low audit rates, especially since IRS funding and staffing have been reduced in recent years.

Filing an extension and submitting paper returns can reduce audit risk because paper returns are processed more slowly and blend in with the volume of filings. Dennis advises self-employed individuals and investors to file extensions routinely, as they often wait on K-1s and other documents. He also warns against claiming excessive or suspicious deductions, such as large round numbers or losses without income, which can trigger IRS scrutiny.

Charitable LLCs, Private Family Foundations, and Art Donations

Dennis discusses some of the more complex and controversial tax strategies involving charitable LLCs and private family foundations. While charitable LLCs can be set up to funnel money into investments while claiming charitable intent, Dennis warns that these structures are often abused and heavily audited. He advises caution, as the IRS scrutinizes these arrangements closely.

Private family foundations, on the other hand, offer legitimate opportunities for wealth preservation and tax deductions. Foundations can own assets such as artwork or luxury cars, which can be displayed publicly or privately. Donations to foundations can reduce taxable income significantly, but setting up and maintaining a foundation is costly and generally only makes sense for those with net worths exceeding a million dollars. Dennis shares examples of clients who have donated millions in cars to their foundations, using them for charitable events and networking.

The Carried Interest Loophole and Tax Policy Opinions

The carried interest loophole, a perennial topic in tax reform debates, is explained by Dennis as a provision allowing hedge fund managers to pay long-term capital gains rates on performance fees rather than ordinary income rates. This results in significantly lower taxes on millions of dollars earned. Despite promises from politicians across the spectrum to eliminate this loophole, it remains intact due to its complexity and political resistance.

Dennis expresses support for certain tax policies, such as depreciation recapture, which he views as fair because it recoups tax benefits previously granted when an investment property is sold. He also advocates for a simplified tax code with a flat rate around 15%, elimination of property taxes, and removal of subsidies and credits that complicate the system. His vision is a streamlined tax system that rewards investment and business ownership while leveling the playing field.

Practical Tax Advice for Middle-Income Earners and Business Owners

For W2 earners making between $60,000 and $200,000, Dennis recommends maximizing contributions to qualified retirement plans like 401(k)s and IRAs as the first step in tax planning. Beyond that, he encourages exploring active income offsets through investments in real estate or oil and gas, which offer unique tax incentives such as depletion allowances and depreciation.

For self-employed individuals, Dennis stresses the importance of electing S corporation status to reduce self-employment taxes and take advantage of the Qualified Business Income (QBI) deduction, which can provide a 20% deduction on distributions. He also highlights the value of business deductions like home office expenses, vehicle write-offs, and the Augusta rule, which allows homeowners to rent their homes to their businesses tax-free for up to 14 days annually.