Episode 69: Taxes with Sam Driver CPA

Segment 1:

HELLO Lower Alabama! Hello Gulf Coast! Welcome in. Welcome to Coasting in Retirement! That’s. Right. Thanks for joining us today, Josh Null here, I’ve got a very special guest today, Sam Driver, CPA and partner with Foley based firm Johnson, Slaughter, Driver & Northcutt. Sam, how are you doing? We are back in Coastal College’s recording studio, beautiful downtown Fairhope, ready to put together another great show, and a brand-new show, for those of you tuning in!

Listeners: Sam and I are here to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the Gulf Coast. Here’s what we’ve got in store for you today: First segment – deep dive on our topic of the day. 2nd segment - at about 30 minutes past the hour - “Headlines of the Week”. Then at roughly 50 minutes past the hour, stick around for our 3rd segment, we call it” Josh’s Crystal Ball and Big Mouth”. So buckle up, we’ve got a lot to get to!

Quick background on me for those new to the show. Again, my name is Josh Null, I am a fee-based financial advisor, I hold my FINRA Series 65 securities license, and I am the owner of Gulf Coast Financial Advisors, that is a 100% locally owned, 100% independent investment management and financial planning firm with offices in Fairhope, Orange Beach, and Mobile! You can find more information on me and the team at Gulf Coast Financial Advisors by visiting our website gulfcoastfa.com, or feel free to give us a call at 251-327-2124. If you missed that contact info, get a pen and pad ready because we will repeat our contact info several times throughout the show!

And before we get into our main topic, Sam why don’t you tell the listeners a little bit about yourself?

Very good. Alright, let’s get into our main topic. As you can imagine, with an experienced CPA as a guest, we are going to be talking about taxes. We focus this show to folks in or near retirement, especially you business owners, so I asked Sam to come up with 3 tax topics that seem to be top of mind for you mature business owners. I’m going to list those 3 topics then we are going to discuss each in more detail. And a quick disclaimer – there’s no way for Sam or me to know your specific tax situation, so please don’t take this as individualized tax advice. That said my guess is that many of you will be curious about these 3 tax topics. Lord knows my Dad HB Null with his mutli-page equipment depreciation schedule should be paying attention. Here's our list:

1. The depreciation deduction under current law.

2. Business retirement planning, otherwise known as succession planning

3. Corporate entity structure

Let’s get started with our first item in our list. Sam, what is depreciation, and why is it so important to business owners?

Depreciation is a tax deduction that lets a business or property owner recover the cost of an asset over time rather than all at once. It applies to assets that wear out, age, or have a determinable useful life—such as buildings, machinery, vehicles, equipment, and certain improvements.

Under current U.S. income tax law, depreciation is governed mainly by the Modified Accelerated Cost Recovery System (MACRS).

Big Enhancements Currently Available

These provisions allow faster depreciation than traditional schedules:

1. Section 179 Expensing

Allows immediate deduction of qualified equipment and certain improvements.
Dollar limit (2025): $1,220,000 phase-out starting at $3,050,000 of qualifying purchases.
Good for small and mid-size businesses.

2. Bonus Depreciation

Allows a percentage of asset cost to be deducted right away.
Currently:
2023: 80%
2024: 60%
2025: 40%
2026: 20%
2027+: 0% (unless Congress extends it)
(This is why many businesses “accelerate purchases” at year-end.)

Example: Simple Depreciation Illustration

Business buys machinery for $50,000 in 2024:

It qualifies as 5-year property.
Instead of deducting $50,000 immediately, MACRS spreads it over 6 tax years (due to conventions), with larger deductions upfront.

But — if eligible:

Section 179 could deduct all $50,000 immediately if elected, or
Bonus depreciation could deduct 60% ($30,000) immediately, and depreciate the remaining $20,000 over 5 years.

Result: Significant tax savings earlier rather than later.

Depreciation for Real Estate

Cost segregation studies can accelerate depreciation by breaking a building into components such as fixtures, flooring, wiring, HVAC, etc. → creating much larger tax deductions early on.

Very good. Next up is business retirement and tax planning. So, Sam, in your line of work, there is a difference between tax preparers and tax planners, correct? How big of an impact can tax planning have on a business owner’s bottom line?

What Is Tax Planning for Business Owners?

Tax planning is the process of intentionally structuring a business owner’s income, expenses, retirement strategy, entity type, compensation, and long-term financial decisions in a way that minimizes taxes legally—both now and in the future.

It is not just about preparing a tax return. Tax planning is proactive, not reactive.

It involves:

Choosing the right business entity structure (S Corp, LLC, C Corp, etc.)
Optimizing how the owner is paid (salary vs. distributions)
Using deductions, credits, and timing strategies
Leveraging retirement plans and fringe benefits
Planning for business sale or succession
Coordinating with personal financial goals

Why Is Tax Planning Important?

1. Keeps More of the Money You Earn

Every dollar saved in tax is a dollar that can:

Fund retirement
Reinvest in the business
Pay down debt
Increase the owner's take-home income

Good tax planning increases both cash flow and owner financial security.

2. Reduces Unnecessary Tax Liability

Business owners often pay more tax than required because:

They don’t use available deductions
Their business structure is poorly chosen
Salary/distribution balance is inefficient
No retirement contribution strategy is in place

Strategic planning prevents overpayment and audit risk while staying compliant.

3. Supports Business Growth

Lower taxes → More cash → More capacity to:

Hire staff
Expand services
Upgrade equipment
Enter new markets

Tax planning directly fuels business expansion.

4. Coordinates Business + Personal Wealth

A business is usually the owner’s largest asset. Tax planning ensures:

The business supports personal financial goals
The owner isn’t forced to rely solely on selling the business to retire
Income transitions smoothly as the owner ages or steps back

This is where tax planning and retirement planning connect.

5. Helps Plan for Exit or Succession

Selling or transitioning a business can trigger major tax consequences. Proactive planning reduces taxation on:

Business sale proceeds
Buyouts
Transfers to family or partners

Done correctly, it preserves generational wealth.

Quick Summary (Client-Ready)

Last on our list is something we touched on with our last line item, corporate entity structure. As someone that paid self-employment tax for years, I can personally vouch for the importance of having a corporate entity structure, and for having the appropriate one for your situation. Sam do you have a go-to corporate structure for your small business owner clients?

1. Sole Proprietorship

What it is: You and the business are the same entity legally.

Pros:

Easiest and cheapest to set up
Simple taxes (reported on Schedule C)

Cons:

No liability protection — your personal assets are at risk
Harder to raise capital

Best for: Freelancers, hobby-to-business transitions, testing a business idea.

2. General Partnership

What it is: Two or more people share ownership by default if no other structure is chosen.

Pros:

Easy setup
Flow-through taxation

Cons:

Each partner is personally liable for the other partners’ actions
High legal/relationship risk if not documented well

Best for: Small firms where partners trust each other and income is modest.

3. Limited Liability Company (LLC)

What it is: A legal entity that protects the owner’s personal assets.

Pros:

Liability protection
Flexible taxation: can be taxed as a sole prop, partnership, S Corp, or C Corp
Simple compliance requirements

Cons:

Self-employment taxes can be high unless electing S Corp status

Best for: Most new businesses — especially service businesses and real estate owners.

4. S Corporation (S Corp Election)

What it is: Not a type of business by itself — it’s a tax election available to LLCs and corporations.

Pros:

Owners can split income between salary (W-2) and distributions, reducing payroll taxes
Profit passes through to the owner’s personal tax return (no corporate tax)

Cons:

Must pay a reasonable salary
Requires payroll and bookkeeping compliance
Limited to U.S. owners and one class of shares

Best for: Businesses making $60k+ in profit after expenses and salary; consultants, agencies, trades, professional service owners.

5. C Corporation (C Corp)

What it is: A separate legal and tax entity.

Pros:

Strong liability protection
Can retain earnings in the business
Allows outside investors and multiple share classes

Cons:

Double taxation: corporation pays tax on profits, owners pay tax on dividends
More formal compliance and paperwork

Best for: High-growth companies, tech startups, businesses seeking investors.

6. Professional Corporations (PC / PLLC)

For licensed professionals (doctor, attorney, CPA, financial advisor).

Why they exist: Certain states require service professionals to form PC/PLLC structures for malpractice rules.

Taxation: Generally taxed like LLCs, S Corps, or C Corps depending on election.

Listeners, if you’ve liked what you’ve heard and want to set up a follow up conversation with the team at Gulf Coast Financial Advisors, it’s easy. You can call us at 251-327-2124 or find us on our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. There are flexible meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, a 30-minute zoom, or my preference, an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach just down the road from the Wharf, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you!

Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance, investments and money. Every week we scour the internet for financial articles relevant to those of you in or near retirement, then give you our honest opinion about these headlines. So join us after the break to hear Sam and I discuss this week’s relevant headlines in our “Headlines of the Week” segment. Stay tuned!

Segment 2 - News of the Week:

Welcome back to Coasting in Retirement, your host Josh Null here, alongside guest co-host Sam Driver, CPA and partner at Johnson, Slaughter, Driver & Northcutt. As we discussed before the break, every week we scour the world wide web for financial articles that pertain to those of you in or near retirement. Our job, or at least we tell ourselves it is, is to help you all understand how these headlines impact you, especially when it comes to your money! Note – if you want to read our referenced articles yourself, we also include the links in our show transcript, which you can find on our website gulfcoastfa.com under the podcast tab. Now without further adieu, here’s the Headlines of the Week!

1. Alright Sam, on July 4th of this year, the Big Beautiful Bill was signed into law. This bill affects a wide variety of things, but I specifically wanted to discuss some of the most important changes to our tax code. Our first article is found on NPR.org, titled “Here are 6 ‘Beautiful Bill’ tax changes that will benefit wealthy Americans”. The article defines wealthy as any individual making over $200k per year or $250k for a married couple filing jointly. This article details changes such as lower tax brackets, bonus depreciation and a higher estate tax exemption. It also mentions a higher exclusion on capital gains from the sale of qualified small business stock issued after July 4th, 2025. What changes have you already dealt with in your practice, and are there any changes in this bill that sticks out as immediately impactful?

https://www.npr.org/2025/11/05/nx-s1-5590112/trump-beautiful-bill-taxes-republican-rich-wealthy

2. Alright, let’s stay on this Big Beautiful Bill train for one more article. Kiplinger has a recent article titled “New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here’s your 2027 Strategy”. The article states that for high net worth investors, the recent IRS guidance released on Sept 30th regarding opportunity zones, it may be one of the most important dates that they didn’t know about. I find this topic fascinating – basically Opportunity Zones are special geographic areas designated by the federal government where investors can receive significant tax benefits for investing in real estate or businesses located in those zones. The program was created under the 2017 Tax Cuts and Jobs Act to encourage long-term economic development in underserved communities. Now, these Opportunity Zones do not eliminate taxes by themselves — instead, they allow investors to defer, reduce, and potentially eliminate capital gains tax when the rules are followed. Despite the expotential growth in Baldwin county, there are still many parts considered rural, which this bill tends to favor, so Sam, what do you think about this relatively new tax shelter?

What You Can Invest In

You cannot invest directly in the zone. You must invest into a Qualified Opportunity Fund (QOF), which then invests in:

Real estate development or rehab in the zone, or
Operating businesses located in the zone

Common examples:

Multifamily apartment redevelopment
Mixed-use development projects
Warehouses and industrial buildings
Restaurants, retail, local business startups

What Makes Opportunity Zones a “Tax Shelter”?

Opportunity Zones are one of the few strategies where future appreciation can become permanently tax-free.

Who Opportunity Zones Work Best For

✅ Someone who has capital gains to reinvest

✅ Someone who wants real estate or business ownership

✅ Someone willing to invest for the long term (10+ years)

✅ Investors comfortable with development or emerging-market risk

Who They Do Not Work Well For

❌ Someone who needs liquidity in the next few years

❌ Someone without capital gains to reinvest

❌ Someone who prefers low-risk, stabilized real estate

❌ Investors looking for hands-off simplicity

Example (Very Simplified)

You sell stock and realize a $300,000 gain.

If you do nothing → you owe tax this year.

If you reinvest the gain into a QOF:

You pay no tax on the $300,000 today (deferral).
You hold the QOF for 10+ years.
The investment grows to $600,000.
The extra $300,000 of growth is completely tax-free.

Bottom Line

Opportunity Zones are a powerful tax strategy that can:

Defer capital gains tax now
Reduce the amount owed later
Potentially eliminate tax entirely on future investment growth

But they require:

Careful plan selection
Due diligence on the investment
Commitment to long-term holding

https://www.kiplinger.com/real-estate/real-estate-investing/new-opportunity-zone-rules-triple-tax-benefits-for-rural-investments

3. Next up, an article from Staples.com of all places. I found it while searching for tax planning mistakes that business owners make, and it had the most clear list, so here you go: it’s titled “The 7 Biggest Tax Mistakes Small Business Owners Make”. We’ve covered some of these mistakes, like choosing the wrong corporate entity, but this article brought up some interesting mistakes such as not classifying workers correctly, underreporting income, and my favorite, “taking unlawful deductions”. What are some common mistakes you see in your practice?

https://www.staples.com/stores/articles/small-business/the-7-biggest-tax-mistakes-small-business-owners-make.html

4. Last article Sam, I’ve been throwing you my fast ball every time, so let’s close out with an easy fatball right down the plate, plus help listeners find your website. Your firm, Johnson, Slaughter, Driver and Northcutt, has a recent newsletter titled “5 Smart Tips for Individual Year-End Tax Planning”. Can you explain what “using bunching to maximize deductions” or how to “balance gains and losses”? Also, fill the listeners in on how they can use potentially use their qualified accounts to make a year end charitable donation:

http://www.jsdncpa.com/newsletter.php#2

Listeners, if you’ve liked what you’ve heard and want to discuss your own personal retirement dreams and goals, then us a call at 251-327-2124, or find us through our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. We have several meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, all the way to an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach, or Mobile, near the intersection of Dauphin St and I-65. Reach out to us - we would love to meet you!

Alright folks, coming up next: Josh’s Crystal Ball and Big Mouth. What have been some of my predictions? Have I been right? Was I ever wrong? What do I think is going to affect investors in the near future, or maybe the distant future? Sam – do most CPAs tend to be cautious by nature? Ok, then, let’s see if we can get any big, bold predictions out of you Mr. CPaA. We talk about all of these things and poke a little fun at my big mouth. Stay tuned!

Segment 3 – Josh’s Crystal Ball and Big Mouth:

Welcome back! Your host Josh Null here, with special guest co-host Sam Driver, CPA and partner with Johnson, Slaughter, Driver and Northcutt out of Foley. So, I am opinionated, I have strong opinions at times, I would say a radio show host that isn’t probably wouldn’t be very interesting to listen to. And I am paid in my profession to offer professional guidance and opinions to my clients, otherwise what use am I? Just replace me with AI.

Well, listeners, I hope you enjoyed a little peek into how we form our opinions and make predictions. We invite you one last time, if you would like to have a no-pressure, no-obligation conversation about your investing goals and retirement dreams, you can call us at 251-327-2124, or find us through our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. We have several meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, all the way to an in-person meeting at any of our 3 office locations. You can find GCFA offices in downtown Fairhope, or Orange Beach off Canal Road, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you!

That’s our show for this week! I want to give a huge thank you to my guest co-host, Jay Stubbs, and for his company Providence Partners being our show sponsor, thank you to our awesome radio station, FM Talk 106.5 out of Mobile, many thanks to the provider of our show music, local band Sloth Racer, huge thank to the show producer, my son Payton Null, and as always my sincere appreciation for all of your out there that have been listening and joining us on this journey. We would love to be a part of your journey as well! Until we talk again, have a wonderful and productive week. This has been Coasting in Retirement with Josh Null!

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