Investing: One Big Beautiful Stimulus

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By Clint Gharib, AIF®, CFEd®

The passing of the “One Big, Beautiful Bill (OBBB) by the US Government on July 4th this year has a myriad of changes that can seriously impact investors. As an investment manager, I’m looking at this through the lens of what it means to the stock markets.  The biggest change from this was restoring and locking in prior tax cuts into permanency.

During the first term of President Trump, a big factor that fueled economic activity and stock markets was the 100% immediate expensing through ‘Bonus Depreciation’ put in place in late 2017.  This was set to phase out 20% annually to 0% by 2027, until the recent passing, which restores it back to 100%, permanently.  Not only can this be a big stimulant to economic activity, but it can also be utilized as a tax mitigation weapon.  For some, it may be the biggest one.  I’m not a tax mitigation expert, so I turned to someone who is.  Jeff Mowrer is the President/Founder of TaxPlanningTeam.com who comes alongside clients and their tax team or CPA.  I’ve known him for many years and have seen him show clients and their CPA’s pathways to reduce and in many cases, eliminate seemingly huge tax burdens over the years.  So once the OBBB was approved, I called Jeff to get his take on it. He told me, “With this passing, anyone who pays a big tax bill chooses to.”  There are many items in the OBBB that deserve discussion. Today, let’s look at a piece that I think can benefit nearly everyone due to its potential impact on tax mitigation, business activity, and thus the stock markets, which is my area.

Let’s look at a case he put together for a client couple in Alabama, who had a combined income of $1.2m and the husband sold a business for $9 million net proceeds. They were told their tax bill was going to be over $3m. That’s a lot of money! In comes tax mitigation.  Jeff worked with them and their CPA  to better harness bonus depreciation.

I showed them how using bonus depreciation, when it was 100% level before, they could purchase two car washes for $10 million but only put down $2mm (20% of the purchase).  Due to bonus depreciation they were able to deduct $10 million right away which covered all the profits from the business sale and even the $1.2 million they earned – so they paid zero taxes for that year, used the car washes’ cash flow to pay the loans and costs, plus still had almost a $1m in their pocket since they only put down $2mm to buy them.”  Yeah, my eyes popped out when I first learned this, too. Jeff sai,d “It’s like scoring a giant ‘Get Out of Taxes Free’ card — just for buying the right kind of asset.”

There are many details to consider when it comes to taxes and mitigation, and not every type of equipment or purchase works the same.  Bonus depreciation may not be for you, but think of all the people and businesses it could benefit, and what that means for possibly increasing economic activity and thus investment potential. I can’t guarantee that folks will make purchases to the same extent they did following 2017 for those few years, but as an advisor to many business owners, I’ve been hearing more conversations about expansion and acquisitions than I can recall in several years.

As trusted advisors to clients across the country, we don’t simply manage investment portfolios but work for clients like a head coach of their team, assembling strategies, and bringing together specialists, like Jeff Mowrer, to help clients try to save more of what they earn and try to earn more on what they save.  The next two updates I plan to go into additional parts of the OBBB that may benefit you. 

Please Note: Opinions expressed are that of the author and are not endorsed by the named broker/dealer or its affiliates.  All information herein has been prepared solely for informational purposes nature and should not be considered legal or tax advice.  It is not an offer to buy, sell, or a solicitation of an offer to buy or sell any security or instrument to participate in any particular trading strategy and is not intended to provide, & should not be relied on for, tax, legal or accounting advice. You should consult your own tax professional regarding your specific situation. Past performance does not guarantee future results. Certain statements contained within are forward-looking statements including, but not limited to, statements that are predictions of future events, trends, plans or objectives.  Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Oxford Retirement Advisors is an independent firm with Securities and Advisory services offered through Madison Avenue Securities, LLC (“MAS”), member FINRA/SIPC and a Registered Investment Advisor.  Oxford Retirement Advisors and MAS are not affiliated entities.