Three 2026 tax law changes that saved a client $22,400 a year

0:00 $22,000. That's how much a client of mine was overpaying taxes every single year. Not because he was doing anything wrong, but because his CPA made an error on his return. His CPA filed a perfectly accurate tax return. The problem is accurate and optimized are two completely different things. This guy is married, has two kids, making $320,000 as a W-2 employee in New Jersey. His CPA had no idea that the one big beautiful bill I talked to changed for his specific situation. And when we ran his numbers under the new law, we found $22,400 in annual savings across three provisions that went into effect this year. If you're in 200, 300, $400,000 or more, and nobody sat you down before January 2026 to walk you through the OBBA and what it means for your tax plan, there's a good chance you're leaving 15 to $40,000 or more on the table. I see it constantly. So, in this video, here's what we're going to be covering. First is the SALT deduction cap that just quadrupled. 100% bonus depreciation that's now permanent. An expanded section 179 deduction that more than just doubled to $2.56 million. I'm also going to show you the exact math at different income levels, the pass-through entity tax election that bypasses one of those caps entirely, and the five mistakes that get people audited when they try to use these provisions wrong. If you're new here, my name is Preston. I work with high-income earners and business owners every single day. We've helped over 3,000 members build more than $50 million in wealth over the past few years. And what I see over and over again is people earning great money, but getting reactive tax advice. Their CPAs file what they're given, make sure the math checks out, and then move on. That's just compliance. Tax planning is a different

1:16 job. It means looking forward, restructuring how income flows through your entities and accounts, and then positioning you to keep more of what you earn before the year ends. And that gap between compliance and planning is usually anywhere between 15 to $40,000 or more per year for someone in the $200,000 range. That's what shows up when we compare their old returns to what was possible. And with the OBBA that took effect January 1st of 2026, the opportunities are bigger than anything since the Tax Cuts and Jobs Act in 2017. Now, let's get into the specifics. The first change, and this is the one that hits W-2 earners in high tax states the hardest, the SALT deduction cap went from $10,000 to $40,400 for 2026. Now, quick context, if you're not familiar, SALT stands for state and local tax deduction. It covers your state income tax and your property tax. Before 2017, there was no cap. You deducted the full amount. Then the Tax Cuts and Jobs Act capped it at $10,000. And that crushed anyone living in California, New York, New Jersey, Connecticut, and so on. Basically, any state with meaningful income tax or high property values. Now, here's the math on why the old cap was so brutal. If you're making $300,000 in California, your state income tax alone is roughly 25 to $28,000. You have property taxes on a decent home, and you're over $35,000 in total state and local taxes. Under the $10,000 cap, you can only deduct $10,000. The other $25,000 in taxes that you paid, there's no deduction, it's just gone. Now, under the new $40,400 cap, you deduct almost all of it. That extra $25,000 to $30,000 in deductions saves you between $7,500 to $11,000 in federal taxes depending on your bracket.

2:33 So, for someone in the 32% bracket, around $300,000, that's roughly eight to $9,600 in savings from this one change alone. For someone in the 35 or 37% bracket, that's even more. Now, here are two things that most content out there doesn't explain properly. First is that there's an income phase-out. Once your modified adjusted gross income hits approximately $505,000, the benefits start shrinking. So, for every dollar over that threshold, your SALT deduction gets reduced by 30 cents. That means by the time your income reaches roughly $606,000, the entire benefit is gone, and you're back to the old $10,000 cap. So, if you're in that $500,000 to $600,000 range, you need to know exactly where you fall because the math starts changing fast. Second, this is the strategy that separates tax planners from tax filers, the pass-through entity tax election. Over 30 states now offer some version of this. What it does is it lets you pay your state income tax through your business entity, typically an S corporation or partnership, instead of on your personal return. The entity takes the deduction at the business level, which bypasses the SALT cap entirely. So, even if you're above the $505,000 phase-out, if you have business income flowing through an entity and your state offers the PTET election, you can potentially get the full state tax deduction without being subject to the cap at all. This is a structural move that requires your entity to make the election and the payment in advance. You can't do it retroactively after year-end. And most CPAs don't bring this up because it requires proactive planning, not just filing what's in front of them. All right, second provision, and if you own real estate or you're thinking about buying investment property, then pay close attention because this one is massive. 100% bonus depreciation has been permanently restored under the OBBA. Under the Tax

3:50 Cuts and Jobs Act, bonus depreciation started at 100% for assets placed in service between 2017 and 2022, but it was on a schedule phase-down. 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and then completely gone by 2027. The OBBA reverses all that. It brought back bonus depreciation back to 100% for qualified property acquired and placed in service after January 19th of 2025, and it made it permanent. So, let me show you what this looks like in real dollars because this is the part that actually changes your tax situation. So, let's say you purchase a rental property for $500,000. Let's say the land is worth $100,000, so your depreciable basis is $400,000. Under standard straight-line depreciation, you write that off over 27 and 1/2 years for residential property. That gives you roughly $14,500 per year in depreciation deductions. This is helpful, but it's not life-changing. Now, this is where you use a cost segregation study. A cost segregation study is an engineering level analysis of the property that identifies components eligible for shorter depreciation categories. Talking appliances, flooring, cabinetry, light fixtures, certain electrical and plumbing, landscaping, paving, fencing, decorative elements, et cetera. These get reclassified from 27 and 1/2 year property down to five, seven, or 15 year property. Now, going back to the $500,000 property, a cost segregation study typically reclassifies 20 to 30% of the building value into these shorter life categories. Let's use 25% for easy math. That's $100,000 worth of component. With 100% bonus depreciation, you write off that entire $100,000 in year one. You still get your normal

5:06 depreciation on the remaining $300,000 at about $10,900 per year. So, your total first year depreciation jumps from $14,500 to over $110,000. So, think about that for a second. A paper loss of $110,000 on a property that might be cash flowing $500 per month. And if you qualify as a real estate professional or you use this within passive activity rules, that offsets your other income. For a W-2 earner in the 37% bracket, $110,000 in depreciation translates to roughly $40,700 in tax savings from one property in one year. And the property itself is building equity and generating cash flow on top of that. Now, if you're thinking, "Okay, what if I'm a W-2 employee? How do I use these passive losses?" Here's the pass. If your modified adjusted gross income is under $150,000 through strategic structuring, you can deduct up to $25,000 in passive losses against active income. If you or your spouse qualifies for real estate professional status, those losses become non-passive and offset everything. I did an entire video on REPs that I'll link in the description as well. And even if you can't use those losses this year, they carry forward. So, when you eventually sell the property or generate passive income, the suspended losses activate and save you taxes then. One of my clients is a software engineer making $280,000, bought a $450,000 rental property last year. With cost segregation and 100% bonus depreciation, he generated $105,000 in first year paper losses. Combined with his wife's REP qualification, that wiped out a significant chunk of their taxable income and saved over $30,000 in federal taxes in year one. And the property cash flows $800 per month on

6:23 top of that. Now, I'm going to be running a live masterclass this week where we're going to go deeper on all of this. I'm going to give you the full tax playbook for high-income earners. It's going to be live. You can ask questions. I'm going to cap attendance so I can actually help people. If you want to join for free, the link's in the description. Now, the third provision, this is the one that most CPAs don't even realize changed, and the numbers are huge. The section 179 deduction limit jumped to $2.56 million for 2026 with a phase-out threshold starting at $4.09 million in total property placed in service. So, the OBBA more than doubled the old limit from $1 million. That's a massive expansion. Now, if you don't know what section 179 does, it lets you expense the full cost of qualifying assets in the year you buy them instead of depreciating them over time. list is broader than most people thinks. So, think computers, office furniture, equipment, certain software, phone systems, security systems, et cetera. This even includes vehicles with specific rules. Here's the strategy that comes up constantly with my clients. You have a W-2 job making $300,000. You also have an LLC. Maybe it's consulting, maybe it's managing your rental properties, maybe it's just a side business. The LLC buys a qualifying heavy SUV, something over 6,000 lb.

7:18 Under section 179, there's a special provision for heavy SUVs. You can deduct up to $32,000 in the first year. And with bonus depreciation on the remaining depreciable value, you can often deduct substantially more, sometimes the entire purchase price. Now, here's where most people get it wrong. The vehicle has to be used for business more than 50% of the time, and you have to document the business use with records. Also, the purchase has to go through a business entity with legitimate business purpose. You can't just buy a Range Rover personally and call it a write-off because you saw a TikTok about it. That's how people get audited. When we structure this for our clients, we document the business use percentage, we title the vehicle through the entity, and we maintain a mileage log. It's not complicated, but it has to be done right. The deduction is real and significant, but only when the structure supports it. Now, beyond vehicles, [music] section 179 at $2.56 million is a major tool for any business making capital expenditures, equipment, software upgrades, office build-outs. If you're going to spend the money anyway, timing the purchase and running it through the right entity is going to convert a cost into a meaningful deduction. Now, let me walk you through the five mistakes I see people making with these provisions. If you're going to act on anything in this video, avoid these. The first mistake is assuming these benefits happen automatically. The SALT increase only helps if you're itemizing and your CPA is calculating the optimal deduction. The PTET election has to be made in advance, sometimes quarterly depending on your state. Cost segregation requires hiring an engineer.

8:24 Bonus depreciation requires proper asset classification on your return. None of this shows up on its own. All of it requires someone planning ahead. The second mistake is not having an entity structure. If all your income is W-2 and you have no side entity, you can't access section 179 for business assets, you can't make PTET election, and your real estate options are limited. Setting up an LLC or an S corp isn't complicated, but it has to exist before you try to run deductions through [music] it. The third mistake is waiting until tax filing season to plan. By the time you sit down in February or March to file, the year is already over. Every strategy I've covered requires decisions made during the tax year. The PTET election, the cost segregation study, the vehicle purchase timing, the entity formation. If you're planning after December 31st, you already missed the window on most of these. The fourth mistake is confusing your tax filer with a tax planner. Your CPA files your return. A tax strategist plans your year. Those are two different roles. Many CPAs are excellent at compliance, but they don't do forward-looking planning. And the fifth mistake is getting tax advice from social media instead of professionals. There are viral tax hacks telling you to write off your entire lifestyle or start an LLC to pay zero taxes. These are getting people audited and penalized. Everything I covered in this video is documented in the tax code and holds up under scrutiny. But it has to be implemented correctly with proper documentation and legitimate business purpose. The difference between a legal deduction and a problem with the IRS is structure and documentation. Now, here's what you can do this week to start implementing. You can pull up your 2025 tax return, look at your total SALT deduction on schedule A. [music] If it was capped at $10,000, you left money on the table under the old rules, and you need to make sure that your 2026 return captures the $40,400 cap. If you want the full

9:41 playbook mapped out to your specific income and situation, then you can join the free masterclass. The link's in the description. We cap attendance and take your questions live. If you found this video helpful, make sure to give it a like. Send [music] this to anyone you know making $200,000 or more who's still filing their taxes the same way they did three years ago. This could literally save them tens of thousands of dollars. With that being said, I'll see you in the next video.