237 - What the 'Big Beautiful Bill' Means for Your Business

0:00We got a full docket today. The Fed rate cuts, the freaking Savannah bananas, some AI stuff, the QSBS. It was really bad. It was a PR nightmare. It'd be so easy for platforms like that to lose trust from users if you can't trust the outputs. Why do we have tips? If my meal is$15, I tip 20%. Just make my meal$18. Let's just get rid of tips. Problem solved. AI is going to make everything way more efficient. I do think AI is going to bring down the cost pretty significantly. I would trust probably the AI more than most doctors, crazy as that sounds. If you're listening to this and you're a small business owner, are going to make$200 ,000,$300 ,000 this year or more, don't take a distribution.

0:37Go buy real estate.

0:41Cool. We got a full docket today. We are going to cover the Fed rate cuts. We're going to cover changes in the big, beautiful bill and what that means for entrepreneurs. We're going to talk about the freaking Savannah bananas going on My First Million. We're also going to talk about some AI stuff, the QSBS. But we're going to start today with an interesting question. I don't know about you guys. I spend approximately$100 to$200 a month on premium AI services. So I've got a premium membership to ChatTBT, Perplexity, Claude. I have Grok just because I have the premium membership to Twitter and Gemini.

1:17And then on top of that, I have different software products. Do you guys do the same thing? How many do you have, Trenton? I think I have four if you count Grok, I guess. I don't really use Grok, but Claude used the most. ChatGPT, second. V0, been using a bit lately. I guess that's$60 for me, somewhere around there. Chris, what do you use? You guys are wealthy. I just have ChatGPT. Here's what I use each of them for. Perplexity, deep research. Like, if I'm looking for financial research, I should say, I think perplexity gets the best job on financial research. So you mean like stocks? a stock, right?

1:52Hey, tell me what the company's performance has been over this period of time. If I want to research an industry, like how fast is it growing? What's the total addressable market, et cetera. If I want to research like a specific business model, like, Hey, tell me how e-commerce stores work. What are their net margins? How fast are they growing this year? I feel like the quantitative stuff for perplexity, for whatever reason is fantastic. I use Grok for real time information. So for example, I mean, Charlie Kirk got shot and I went to Claude and I asked it a question and I was like, that's an irresponsible question to ask.

2:26Charlie Kirk is alive and well. I wouldn't want you spreading misinformation. I was like, oh, you're not up to date. So I went to Grok because I feel like Grok's kind of the most current. I also think it has a really good ability to be a thought partner. ChatTBT I use just because I've used it for a long time. so it knows me really well. And there's like this legacy built into it where it can access all of my conversations and all my chats. And then Claude, I feel like, does the best job of organizing projects and writing. So I use Claude a lot for copy, basically. Well, one thing that I think is interesting, I was thinking about like, why don't I use Grok?

3:01But what I'm hearing is a lot of people are starting to use Grok, especially on the coding side. And it changes really quickly of like, which one becomes best and which one is worse because they update so fast. I've heard lately that Grok is very good there. but grok went off the rails like a month or two ago and was spewing out like nazi stuff it was really bad it was a pr nightmare i think it like the next day the ceo of twitter or x quit who knows if it's related or not where she she resigned it'd be so easy for platforms like that to lose trust from users if you can't trust the outputs that like if it starts spewing out that kind of stuff like are you going to trust so i don't trust it at this point it'll be hard for me to That's interesting.

3:38To retrust it for a while. Although I'm hearing, like I said, that some people are using it for code and saying it's maybe the best at this current moment. That happened with Gemini when, or maybe it was barred at that point when Google first launched it. And then there was like, why is George Washington black? And you're like, people were like, what? How, you know what I mean? Like they got all up in arms. And then if you use any of them, you know, they all hallucinate. They all hallucinate, but you would hope none of them are perfect. True. But it's like the scale of the hallucinations. That one was a bad.

4:07It went viral. It was not a good look by any means. Nazi. I want to go look at this. That is nuts. So on Polymarket, which is like the prediction market or whatever, where you can gamble, it's going to be determined by a chatbot. So I don't know the context in which the chatbot will use, but they have which company will have the best AI model by the end of September. one company is at 98 likelihood that they'll have the best ai model at the end of september can you guys guess what it is everybody else is just containing that two percent one company is 98 likely to have the best google i still would have discussed chat gbt google google interesting it is google yeah it's surprising but it's also not surprising they shouldn't be surprised they have they have to have the most data they do it just took them a while to find and like catch up to everybody else yeah but their data i mean can't imagine how much more data they have than everybody else it's got to be insane is this like a rich person thing or not i don't know man like the amount of time and money i can make and save based on on this is pretty crazy you're asking about like use cases i write books and i've kind of like co-write now with ai sometimes and it's next level what it can do and the amount of hours that i save on that alone is crazy but like doing business financials that saves me tons of time and it's way more accurate probably dozens of hours research although i'm spending 60 or 80 bucks like it does a massive roi i feel like it's underpriced still probably there probably is some some solution out there but i would like it if i could just have it all in one chat window you know what i mean like in the same way i can go to chat tpt and choose the model if i could just have a chat window it'd be like all right i want to use perplexity and do some research or i want to use claude to write copy or i want to use grok to test my thinking on this i don't like having a bunch of windows and i i know it sounds so stupid but they all have really good specific use cases and i think that's why we're starting to see now more and more have you heard people talk about slms not llms no it's a small language model so so like chat gpt is this super large language model google has a bunch of slms where they're like x-ray specific or biomarker specific or english literature specific it would make sense to me that we start seeing more and more small language models yes but okay chris you gotta up your game man well i did i did have a conversation because i was in the market looking for pediatricians and then i found out about this new concierge thing that all these doctors are doing the scam of pay me seven thousand dollars and you can text me whenever you want like hey what's this bump And I'm just like, guys, I don't know if you know, but like Chad GBT can tell me what the bump is.

6:54So sorry, doctor, I'm not paying you. So I will be using it for that. And well, and Google has so much data. It's actually getting really good on the diagnostics. It's crazy good. I have to imagine asking a good AI model would be better than asking a specific doctor, like a specialty doctor, I still think has a lot of value. but just like a general pediatrician like hey is this chicken pox like i don't need to ask you that i wonder how much doctors will use this themselves because obviously they're taking catheters and they get stuff wrong so often yeah and if you can type in all the you know symptoms probably you'll at least get a probability ranking of what this could be i would trust probably the ai more than most doctors crazy as that sounds like anything ai is it's really a tool in a tool belt so the way i see it is a doctor is going to go and enter the symptoms and the ai is going to spit out like here are seven different probability or possibilities and the doctor's going to go filter through those with their information and context and say like oh that makes sense or that doesn't make sense i don't think it's necessarily going to replace the doctors or make them lazier but i do think it's going to help them yeah it should help them yeah in the diagnostic process but it also helped me it's also probably like you know web md people could just look up their symptoms and they come into the doctors and like, hey, I have this.

8:16It's going to for sure make that even more people just like, ChatGPT said I have cancer. Can you look at this? I'm sure that they're getting a ton of that now where they're even more convinced of whatever they think they have from online sources. Here's what I think is going to happen, like everything else, is AI is going to make everything way more efficient, which we need because there actually is a shortage of, and this is my background, right? Healthcare. There actually is a shortage of practitioners, providers. I mean, you try to go get in with a physician right now, it's like four months out that you're, maybe not four months, but depending on where you are, it's a long time to actually get in and get seen.

8:50So if you could using AI, answer simple questions or make the physicians 20 % more productive because they no longer have to type, they have it just recorded and transcribed automatically with AI, or they make the diagnostic process much better. So we're catching things earlier, screening for things that we know are going to be big problems down the road, we're actually doing preventative medicine so that we're not spending a lot of money when they actually develop something. We're like addressing these things, the root cause. I do think AI is going to bring down the cost of healthcare pretty significantly.

9:20At least that's my hope, looking at the technology and looking at what we need in the space. So I actually think it's a good thing. You know, being from the space, do you think 20, 40, 50 years from now we'll go in and it will all just be AI? It'll scan us. It'll be able to tell us what we have, what we need. My personal opinion is that AI is going to do a really good job at the diagnostics, at saying, this is the set of facts. Here is my analysis. What it's not going to do a good job of is the human component of talking people through things, being a therapist, helping them understand what the best course of action is.

9:59Because if somebody comes in with hypertension, let's say, high blood pressure, what is the best course of treatment? I could put you on medication that will solve your problem but is medication really the best treatment option nah might be diet it might be exercise how do i walk somebody through what they're you know what the best option is i don't know that ai is going to do that stuff so in my opinion it's going to allow physicians to do the things that is more of the bedside manner as opposed to necessarily the like meet my merp you have diabetes you know what i mean i think ai is going to help more long listings yeah interesting let's switch gears here two big topics we have a big beautiful bill or fed rate cut chris your choice big beautiful bill let's talk about it we mentioned it last week i wanted to talk about it in depth this week though because in the big beautiful bill there's a there's a bunch of different changes economic opportunity zones got extended qsbs changed qbi was extended it was only for a certain period of time and now it's been made permanent.

10:57We've got the accelerated depreciation. We've got the tips and taxes and overtime. Anyway, so there's a lot in there. And if I'm a small business owner, I'm looking at all this and I'm like, I don't even know where to start. Just tell me what, you know, give me the TLDR. So the first thing I wanted to talk about is if you're listening to this and you're a small business owner and you, you know, are going to make two,$300 ,000 this year or more, don't take a distribution, go buy real estate. Like if you can afford it, obviously go, whatever, go talk to your CPA, blah, blah, blah. Go buy real estate because of the accelerated depreciation.

11:29What that is, is if I go and buy a piece of real estate up to two and a half million dollars, I can have that purchase expensed in year one. It's not amortized over 30 years. It's accelerated into year one. So what does that look like? If I had otherwise made$500 ,000 in net income because I accelerated the depreciation of the purchase of that piece of real estate, I now made zero dollars. I owe nothing in taxes. So I saved a bunch of money this year on taxes. And if you are a small business and you're generating a good amount of cash and you want to save on taxes, I would find some real estate to invest in because it's almost like we have a president in the White House who was a real estate entrepreneur.

12:10I mean, I don't know any other way to explain it other than real estate is an amazing asset to invest in. This just makes it even more amazing. What types of real estate would you look at if you're a small business owner? What would they potentially be interested in? This is where I made the mistake after I sold a couple of my businesses. I put money in real estate because it's like, that's just what you do. You put money in real estate, it builds long-term wealth, and it does. But there's a difference between passive and active income. Passive income are things like RV parks, like storage units or storage facilities, things that you don't necessarily have an active business that you're running in there.

12:44Obviously, there's better definitions for this. I'm just saying this off the top of my head. But active businesses would be businesses that have real estate attached to them. Car washes are, I would look for a car wash as a perfect example because that would act as active income, a gas station, a car wash, any other business that requires the real estate piece in order to be a business. That's where I would look. If you're a small business owner though, and let's say you, like you said, made 500K and you have 300K to put in, what do you do? if the gas station is$3 million? How do you go about that?

13:17So I actually would not go buy it myself. There are small business funds or people on Twitter. You can go find whoever that talk about this stuff that are always looking to do a deal. Nick Huber, for example, at the time, he doesn't do it as much anymore. He was always raising money to go do these self-storage deals. So I think there are a lot of funds out there that are always looking for LPs to throw money into their funds. And that's probably where I would start. I would probably start by looking at somebody who's done it before, who's actually purchased and ran, let's say, a laundromat or a car wash or whatever, one of these businesses, and partner with them as opposed to doing it myself and learning on my own dime just because I think that the learning curve would be way too steep if I were to just do it myself.

14:00Interesting. That was a good question. That was a really good question. Yeah. And so if, let's say I put 300 grand in and I have to write off, what, 300 grand in year one, they sell in year three, what happens? Well, there's two things. Number one, if you put 300 grand in, is that the value of the real estate? Let's assume, yeah, it's all real estate. Let's assume that the 300 grand is all going towards real estate. Yeah, let's assume that. What I'm saying is if you put 300 grand in, but you bought a million dollars worth of real estate because you had to put 30 % down, you'd be able to take the million dollar deduction, not just the 300 ,000 you put into it.

14:33If you sell in year three, then it is a pretty common practice in accounting or in tax accounting. You would just have this thing called recapture where it's like, okay, if you resell it within that certain period of time, they take what would have been the depreciation or amortization schedule and then they apply it to that. And basically you now, against the gains that you've had, owe the rest of those taxes. So if in year one, you deducted the full million dollars and you sell in year three, you would effectively have to kind of like recapture the$900 ,000 that should have been depreciated over the rest of the 30 years of that useful life.

15:08Yes, you would pay it back. So it's not meant to be like this get rich quick scheme of like, I buy something, I flip it on and I'll have to pay taxes because I'd appreciate it all in year one. But it is meant to incentivize you, the business owner, to make investments into your business. And it's not just real estate. It's any CapEx. It could be heavy machinery. It could be a redesign of your warehouse or your shop, et cetera. It's basically any capital investment in your business. Obviously talk to a CPA, but that's the way it's currently written. Curious to get your guys' take then, because this kind of feeds into this as well.

15:40Just thoughts on real estate, where it's going. You mentioned, Nick, you think it's always been a good investment. The rate cut just happened, which is going to play into this big time. Where does it go from here? It's obviously very high right now on the residential side. Commercial has been a question mark for a bit on where it's going. When COVID happened, everyone's like, this is the worst investment known to man. That changed, though, a little bit. Where do you guys think it's going? Christoph? I mean, obviously, I don't know. But it's hard to say because you would have thought that when the rates went up, the prices would have come down.

16:14And they did not really do that. Now, you're starting to see some places where prices are coming down a little bit. But now that rates are getting cut back, like, you know, now that rates are getting cut, like, will the prices go up? But I have to imagine that there's a ton of activity waiting to happen for people who have been on the sidelines because either they have a low rate and they don't want to move because they're going to go into a high rate or people who aren't in a mortgage at all who are waiting to get into a mortgage, but they can't because the rates are so high. So I would think that there would be a ton of activity and usually demand increases prices, high demand, but the prices didn't really decrease with low demand.

17:00So it's hard to say. The residential market is weird because we've had obviously all time high asset values for homes. But at the same time, if you look at a lot of the data, we've actually seen not all time lows, but we've had less inventory on the market than we did during the lows of COVID. So really what we're seeing is the lack of supply is maintaining these high prices. So what happens when that flips and all of a sudden we have a ton of supply coming onto the market because they're like, oh, rates dropped, cool, people will actually be buying. There are some theories out there that is like, actually, prices will come down because there will be a glut of supply that enters the market.

17:39And so you'll have way too many options that will actually force the price to come down. So on the residential side, I'm with you, Chris. I don't know what's going to happen. As a business owner, I have just gotten to the philosophy of it's always a good time to put my money into real estate because my whole period is not two years. They ain't making any more land. I'm going to hold that for a long time. And so I like the real estate market. Obviously, some markets are more frothy than others, but that's in any macro environment. I don't know. What about you? Hey, I don't know if you remember this, but when we started this podcast, we entered into a social contract.

18:17I would spend time, energy, and money producing this podcast, interviewing these individuals and giving you insights into how to build, buy, start, grow your business. And you would like, subscribe, and leave me five-star review. Now, out of that, we both get to talk to really cool people and hear really cool insights. We both get a ton of value. But I just want to help you keep your word. So would you do me a favor? Will you go leave a five-star review for me on Apple or Spotify? It would really help. and if you want, even share this with a friend. I think that one thing that maybe has talked about some but isn't thought about enough is just how many investors buy, especially when rates go down.

18:55And so I don't know, I don't think that prices go down. I don't see how that happens unless we have some sort of big economic crash. And even if they do, I think that investors will come up and look at this as an opportunity to just scoop up real estate like they could have in 08, 09. But once like I live in Southern California, there is a lot of international buyers here and owners who just buy the place, don't live in it and they rent them out. And as long as that's allowed, I don't see how we see like a big dip in things. Like there's, it's crazy. It's actually like the city of Irvine, tons and tons of Chinese buyers have come in here and they bought up all the real estate and they rent it out.

19:32They don't live in it. A lot of them, they just rent it out. And a lot of them own multiple houses and they're just, and then you, we know a bunch of private equity and other, you know, firms that have bought up a bunch of like even apartment complexes, obviously mobile homes, trailer parks, that kind of stuff was getting bought up like crazy. So as long as these guys on the investment side and international side have access to come by here in the States, as many houses and properties as they want to, I don't think that we're going to see any sort of price go down. I don't think that rates will adjust, but that'll just make it cheaper for the people that have money to go buy more stuff.

20:04So I think it's going to go nuts again. Really? You think it'll go nuts? You don't think it'll stay the same? You think it would go nuts? I think that rates will keep dropping and then you'll see mortgage rates hit four at some point or like high fours. And I think that everything will go nuts. I think prices will just keep going bananas. So that's my prediction. I think that investors see this, as you just said, as the opportunity. Anytime that rates go down or prices go down a little bit, it's just going to keep jumping on it. For the short term, what do you think? I don't think we're going to see anything dip.

20:33Yeah, I think that we'll see them go up. Are you doing anything different right now? Let's say that you think that, like how - convicted are you in that thesis i'm saving cash to be able to buy stuff when the time's right so i don't know i already own some things i know you do too what's interesting about the three of us too actually we all uh i don't know christy if you own nick and i do but we're also now both choosing to rent instead of buy at this current time what's interesting is the place that i'm renting if i was to go buy this place new probably a couple million dollar place if i was to go mortgage it 20 ,000 plus dollars a month.

21:07And I can come in and rent that place right now for a fourth or a fifth of that cost. So that's also an interesting thing to think about is renting mobility. Yeah. Mobility. And the price of it is actually a little bit lower right now on the rental side than, um, if you were to go mortgage this stuff, the rates are just so high, or at least in my opinion, they are. We bought, I bought that 2.6 % my other place. And I think you were the saying nick right yeah yeah crazy yeah it's hard to move when you rate under three percent you're like why would i move yeah i've got a home that's supposedly on paper worth a million dollars and my mortgage on it's twenty five hundred dollars it's like what why would i move you know that there's a lot of people around the country who are in that in that position so like yeah there's not a lot of people who are looking to move i think anyways that i do think though for if you're an entrepreneur and you're in this for the long game, I would definitely look at whether it's capital expenditures to reinvest in your business, whether it's real estate to diversify your portfolio, whatever it is, the accelerated depreciation is a massive boon.

22:13It's not going away either, but this year it's happening. And if you already bought this year, it is retroactive to January 1st. So that's the good news. But obviously go talk to a CPA if you want to look more into it. The other thing that I thought was really interesting from this bill is the tips and overtime. do you guys know how it works well they're like putting restrictions on certain industries and certain incomes right yeah yeah so basically it's like under a certain income level it only applies to people and it's they're publishing it on october 2nd but it will be only specific industries or job positions that will be able to to use this deduction but it's not actually no tips or excuse me, no tax, it's a deduction.

22:56So I know that sounds like a weird nuance, but you are still going to be taxed on that. It's just at the end of the year, you will be able to take a deduction when you file your taxes. And so theoretically, you'll get a rebate. And for most people, it'll be up to between$12 ,500 and$25 ,000, depending on your family situation. It's interesting to me that it's being sold. It's just like no taxes on overtime, but you're like, no, you're still being taxed. You just now have a deduction that you can take at the end of the year. But there are going to be new burdens that small businesses have to implement.

23:32So I'd be curious to see kind of what other people are doing. Are you guys doing anything in your businesses to look at this? Or is it more of like, nah, we'll deal with it when employees start asking about it? I don't have any businesses where somebody would get tips. What about overtime? I do have businesses where people could get overtime. So it's no tax on any overtime or it's a deduction on any overtime or just below a certain threshold. It's below a certain income threshold. And I do think that there are qualifiers for the type of work on overtime. Let's go look. Yeah, that would be interesting.

24:04I'm not, because I could a white collar W-2 person getting overtime. They may make too much to get a deduction. That's the point. Here's the deduction piece. Individuals who receive qualified overtime pay may deduct the overtime premium. That means the extra compensation, so that it's the half and the time and a half against their taxes. Maximum deduction will be$12 ,500 per year. Only overtime reported on IRS-relevant forms count, and then the deduction phases out. But it's$150 ,000 and below is single. and then$300 ,000 or more is the joint eligibility requirement, which is actually pretty high.

24:45Yeah, that's pretty high. But that's the crazy part, right? It's like, okay, if I make$20 an hour and then I work 10 hours of overtime and I get time and a half, all right, so that's$300 that I made in overtime hours. But the tax deduction that you get is actually not the 300. No. It's the$100. Whatever, 20 % of debt. Yeah. Yeah, yeah. It's like, oh, it's the difference between what your normal wage would have been and what the overtime, which is that half piece. So it's really$100 that you would be able to deduct. And I believe it's actually just the taxable portion of that. So it'd be the 20 % of that$100.

25:23So it's going to be complicated. And that's going to be frustrating because you're going to have employees who are like, okay, well, I worked overtime, but I'd like my taxable deduction now. You're like, I don't even know what we're trying to do here. Yeah, that seems very complicated for people who probably don't have an accountant. Yeah. There's just people that are getting tips. They probably use TurboTax or whatever, go to H &R Block. So it seems very complicated for, it's not like QSBS where the people who are going to use that obviously have CPAs, but these people don't. So it sounds like there will be some confusion.

26:00It sounds like the Trump administration is in cahoots here with big accounting. They're making themselves more valuable. Big accounting. The last thing that they want. KPMG. Yeah, big accounting. Big four, all those. I don't know. It's just like this is it is going to be complicated. I have heard of some business owners trying to look into whether they can make this a thing for themselves and for their employees. I don't know. I don't know what the loopholes are. part of me just wishes that this was all streamlined and we just put all of our information in a system and pump it out without meeting cpas and all this complicated tax matter you just have a single percentage tax for everything would be a lot easier i feel like but as a business owner if you're smart and you have the money to pay for an accountant there's a lot that you can probably benefit from here i don't i what i wonder is like will an average employee benefit from this as much as they were hoping like they are like basically said, great, it's going to be great.

26:57No tax on tips and overtime, but then they made it super complicated for them to even go figure out how to go do it. It's not going to be easy. Yeah. I think what's going to happen is the following. In that example that I just gave, $300, they're paid$300 in overtime. Oh, cool. I can deduct$300 from my taxes. Well, that's going to be the first step is helping them understand that, no, they're not getting more money in their paycheck. It's going to be a deduction later against their taxes. but then the second step is going to be okay well it's 300 and i i owed 900 so it should just be a net of 600 like actually actually it's only on the piece that was the overtime piece so the hundred of that 300 okay we'll deduct the three the the hundred it's like actually it it's just the taxable portion of that hundred which is twenty dollars so you saved so you'll save $20.