How Real Estate Investors Can Save Big with Bonus Depreciation

Quentin (01:31)
Hello everyone. Welcome to the Investor Fuel Podcast. I am your host, Quentin Edmonds. As you know by now, you can call me Q. And today, I am super excited about our guest that’s here today. I’m looking forward to y’all listening to what he has to say. And trust me, he has something very, very important to say that’s going to benefit us in a mighty, mighty way. So today, I want you to welcome in, I want to introduce to you my friend, Lichterman.

Amen. He’s making big moves in this space of, guess what, helping us out with our taxes. He has a strong tax incentive. He’s a specialty when it comes to tax incentives. And so, like I said, this is one you want to definitely, definitely pay attention to. Sean, how are you feeling today,

Sean Lichterman (02:14)
Hey, feeling great, know, living the dream, happy to be on. I’ve been a long time listener, first time guest, so this is exciting for me. Appreciate you guys having me.

Quentin (02:22)
Yes, sir. What’s decided for you is decided for us, man. And like I said, I know our listeners is going to get a lot from you. So if you don’t mind, I want to dive right in. what market you’re operating out of.

Sean Lichterman (02:33)
So as Quinton mentioned, Sean Lichterman here, I focus and I specialize in especially tax incentives on the federal side. what does that mean? Well, like most people that are either in tax or tax strategy, we didn’t really grow up dreaming of depreciation schedules or tax returns, 1040s. But I kind of came into the trade really through the real estate side.

My grandfather was a city developer in Chicago. My dad fixed the flip houses. from very early on, real estate business entrepreneurship has really been ingrained in me, especially as I started growing older and doing projects of my own. And for anyone who’s been in real estate, you kind of notice a couple of things firsthand that really glues you to the industry. One, appreciation is great. Two, cash flow is even better. But three, there are a ton of tax strategies out there to help you keep more money.

That’s how I gravitated more to the tax strategy side. you know, a few of the incentives that we do offer here at Capstan is going to be cost segregation, maybe kind of the gateway for a lot of ⁓ industry professionals getting into energy incentives, as well as R &D tax credits for business owners who are developing and growing within the industry. So I enjoy what I do because I get to be that lifeline either to businesses, to real estate investors and help them grow their portfolios. But ultimately,

It’s keeping money out of Uncle Sam’s pocket and putting it back in yours. And that’s what I really enjoy doing day in and day out.

Quentin (03:52)
Yes, sir. That’s I was waiting for you to say, man. I had it. I had it queued up in my head, Keeping money in your pocket. I mean, that’s I think that’s what we all want to do. Right. And, you know, we’re all trying to build legacy for our families. We’re trying to, you know, make sure. Yeah. And so the more money we have, the better. Yeah. Yeah. You know. And so, of course, you know, with the new tax laws that’s in place, I know

Sean Lichterman (04:07)
Exactly.

Exactly right, yeah.

Quentin (04:20)
is not always especially easy in this climate. So tell me like what keeps

that machine that you have running smoothly? What keeps things running smooth before you go over there?

Sean Lichterman (05:17)
Yeah, and I like how you kind of alluded to that, right? currently, ⁓ for those who are probably like myself, setting off fireworks, enjoying the 4th of July, maybe having a hot dog in hand, there was also a very big pivotal movement that happened in the tax landscape. The big, beautiful bill was passed. It’s about 900 pages long, and it’s got a ton of tax provisions in there. Some very useful…

for the industry that we work in, especially for real estate investors and business owners. Two of the ones that really stood on the headlines for me was the reinstatement of 100 % bonus depreciation, which we’ll get into in a second, kind of elaborate on that. Then also the repeal of Section 174 amortization for R &D tax credits. Again, kind of the bonus version for businesses who are improving products, process, and software. So…

allows them to write off a significant portion within the first year rather than amortizing it. But yeah, there’s a lot of movement going on currently within the industry. There’s a lot of nuance within the tax code. There’s a lot to be understood. And there’s a lot of opportunity for you as real estate investors or even business owners to capture a lot of these new tax provisions and be able to benefit from them, especially as we go into extension filing time here in September, October, or even start planning for the future.

2025 and beyond.

Quentin (06:32)
That’s good, man. That is absolutely good. Now I know with things kind of constantly, well, things that change, you you always had to stay up on the lingo. You said 900 pages. Like Sean, are you reading 900 pages, bro? Like, now listen, don’t say anything that would, you know, incriminate you, but that’s a lot of pages, man. So with all of that change, can you tell me maybe about a time where things kind of maybe went sideways, maybe something that you had to pivot fast, like maybe,

you know, you had to come in and you thought you had something nailed down with understanding and maybe you had to go back and say, wait, wait a minute, let me relook at this and make sure I definitely understand what’s going on. So there was a time when maybe you had to pivot or, you know, had to make a change real fast.

Sean Lichterman (07:16)
yeah, mean almost every day. ⁓ Almost every day in our industry. But no, no, no, to that point though, yeah, you are correct. And there is kind of a little bit of a window of timing is of the essence, especially as these new tax provisions have been rolled out, especially for those for real estate investors and on the cost side and then even those on the business side for R &D. So with the bonus depreciation being reinstated to 100%.

Quentin (07:17)
Yeah. Yeah.

Sean Lichterman (07:42)
It’s not at the beginning of the year, right? It’s not January 1 of 2025. It’s actually for those properties put into service and acquired by January 20 of this year. So there’s a little bit of a trench zone, if you will, between January 1 through January 19. And if you acquired a property, you put it into service, unfortunately, you’re stuck back at the previous tax provisions in the Tax Cut and Jobs Act and getting only 40 % bonus allocation. That could be a

That could be a tough discussion to have with an investor when we’re doing a project with them saying, sorry, you’re caught in that trench zone. You’re getting 40%, but if you would have waited a week or two, you’d be looking at 100%. So yeah, there are some difficult conversations that we’ve had to have with a few of our clients, but on the up and up, we get to say, but now look at here. Here’s the benefit from here now into importuity because there is no phase out. is no sunset with this 100 % bonus provision.

Essentially, we can say any property you purchase here on out after January 20th is gonna recoup that 100 % bonus. So you do end on a positive note. Now shifting gears to the R &D side, right? If R &D is kind of a new tax provision for you, essentially

what allows is it’s incentivizing. So it’s a tax credit for businesses who are improving like a product process, software technique.

and allows you to get essentially a tax credit for some of the wages and activities you put into improving those product processes or software techniques. So think of lot of industries like manufacturing, tech, know, AI is constantly pushing the envelope, even agriculture. So there’s a number of industries that are doing this on a daily basis, they actually get a tax credit. Now, for a number of years, you had to amortize those tax credits over five years.

Very similar to kind of bonus, right? Bonus had a phase out after 20, after 2022. So you only got a certain percentage year after year. So with the new provisions, you’re now able to expense all of those tax credits in the first year. So when we talk about a timing issue, we can now look back at those years, we can apply those tax credits and move them forward and not have to advertise them. So you’re gonna get a large chunk depending on the size of the company, maybe actually go back to amend.

some of those tax returns, be able to benefit from that tax credit as well during that timeframe. But like you said, Q, there’s a lot going on. Kind of for us to be focused is that we want to be a beacon of education and resource within the industry, especially since, like you said, there’s 900 pages. There’s a lot to dissect. I have not read all 900 pages, though I am working my way through it, especially the ones that

you know, impact our industry, which side note, if you have little kids and you need to put them to bed, just pull out the one big, beautiful bill, start reading to them, they’ll be asleep in like 10 seconds. My daughter, I start pulling it out, start reading tax law and she’s going, uh, done. So if you need, if you need to put your kids to sleep, that’s a hundred percent going to work every time. Um, but no, not on a serious note. Yeah, there’s a lot to digest, but there’s also a lot of timing, uh, that can be beneficial for business owners, especially.

Quentin (11:03)
Ha!

you

Absolutely.

Sean Lichterman (11:25)
those who need the tax benefit.

Quentin (11:27)
Absolutely. So listen, you said a lot of things I’m not familiar with, trench zone, R &D, but I believe I heard the word perpetuity. Did I hear that word correctly?

Sean Lichterman (11:31)
Yeah.

In perpetuity, right. Yeah, 100 % is here forever. That’s right. As the current law stands.

Quentin (11:45)
And so this is something new with the current law.

Sean Lichterman (11:48)
Correct. Yep. Currently before that, yep, there was a phase out schedule. Now we’ve got just one schedule forever, 100%. Now keep in mind, right, with tax code, things often can change. However, it will have to, it can only change now with a new Congress passing a new bill. So as it currently stands, yes, forever.

Quentin (11:49)
Woo!

Yeah. Wow. Okay.

Okay, got you.

I got you. I got you. Absolutely. Absolutely. Yeah. That’s the word I learned on watching Shark Tank. That’s how I learned about perpetuity. was like, wait a minute. I had looked at that word. I knew the context they meant it in, but I was like, okay. Are we? Okay. That’s the word I’m looking for in life. Perpetuity. I want to make all my deals in perpetuity. Yeah. No, but no, that’s good stuff, man. Thank you. Thank you for sharing. And I mean, I hear the, I love when I hear the word education, right?

Sean Lichterman (12:13)
Yeah.

That’s right, that’s right. That’s right.

Quentin (12:34)
You would have to worry education. I love when, business owners, when business people, operators talk about educating the people, educating their clients, because that’s the stuff for me that, that people don’t do enough of. And I’m so glad to hear when people come on, I hear that word quite frequently, but that’s the stuff that kind of separates folks that, just like kind of the dabbling in the game from people that’s doing it long-term, educating people, bringing value to their life. That way, you know,

You plant the seeds and the breadcrumbs for to always come back because of the education piece. And so I really, really appreciate that.

Sean Lichterman (13:08)
No, I appreciate that. Yeah, exactly right. You said it right on the head. We’re in the service provider industry, right? We provide a service much like many other firms. So what really sets us apart outside of our experience is going to be how we articulate the education or the resources to the industry. So we do pride ourselves on being that for the industry.

Quentin (13:27)
Absolutely. Absolutely. I appreciate that, man. And especially when it comes to taxes, we look for people to educate and have integrity. thank you so much. I mean it, Sean. Thank you so much for the way that you’re breaking things down and information that you’re giving us. So listen, let me ask you this. Is there anything you’re looking, like a problem you’re looking to solve right now? Is there anything, like, is there room to scale? Like, what’s the next goal for you?

Sean Lichterman (13:32)
⁓ That’s right.

yeah, yeah, there’s always room to scale, grow. mean, we call this like our third tax season. I we’re busier than we’ve been all year, which is kind of interesting because typically during the summer, here we are in July, typically it kind of dips down. know, CPA is going on vacation. You know, your tax strategy is kind of out of the window. You’re vacationing with family. But because of these new tax provisions passing,

And because we have extension season closing in upon us, there really is a finite amount of time that we can actually make some changes to people’s bottom line. So yeah, main focus, not really hurdles for me, but really hurdles for taxpayers. If you have a portfolio of real estate, rentals, condos, commercial buildings, if you’re owner occupied, you’re a dental office that just acquired a new property, you’re expanding.

and you have a high tax liability, hey, there’s a good chance that we can reduce that, either put that reinvestment, that cash flow that would otherwise went to Uncle Sam back in your pocket. So that could be renovating your current portfolio. It could be hiring new employees. It could go to tech. Same thing on the R &D, which stands actually for research and development credit. So if you’re a business manufacturing that’s growing, that’s producing, you’re kind of pushing the envelope of innovation.

You know, there’s a lot of money that goes in on that from wages and expenditures to create those products on your end. Well, it’s probably best to recoup some of that as a tax credit. Pay yourself back so you can continually be able to innovate within your space. I mean, that’s the great thing about, you know, the US, our industries here is that we are able to innovate, push the envelope. You know, there’s a lot of products here that do get pushed out overseas.

to be able to have those types of tax benefits are extremely beneficial.

Quentin (16:20)
Absolutely, absolutely. Nope, that’s big. That’s big, especially when you are always trying to keep money in people’s pocket. That’s big. And you’re always trying to find ways, even with the changing laws, to make sure that the people that you serve are always taken care of. So that’s absolutely big. Yeah, absolutely big. So of course, know, everything can change. Things are moving. You’re scaling. And I’m sure the next move you make, it can even compound things.

Sean Lichterman (16:36)
Exactly.

Quentin (16:49)
It can create chaos, you know, depending on how you play it, right? And so a lot of people, listen into this and they don’t know where to start. trying to figure out what’s next. And I think maybe it would benefit from them hearing from you. Like when it comes to like building relationships and growing your network, like what’s made the biggest difference for you?

Sean Lichterman (16:51)
Mm-hmm.

Yeah, our company specifically, and especially for myself, again, kind of going back to that education piece, we constantly are at different industry conferences. We’ll do speaking events. do CPE, which continue education for CPAs or even any other professional within the industry. I mean, we align with a number of different associations. CCIM is just kind of a common one for, you know, the commercial real estate side.

⁓ you know, FICPA or the, ⁓ AICPA, know, Association for CPA. So we do a lot of work with a lot of large groups, conferences, and we do a lot of speaking events with them. So, you know, in order to kind of get that notoriety, and, and acceptance, you really have to one master craft, but then also have the experience and knowledge to able to back it up. I’m really proud of where we’ve been and what we’ve done in the short amount of time.

And there’s only going to be more to come as the future progresses, especially with these new tax provisions.

Quentin (18:02)
Absolutely appreciate that. Again, you know, when you talk about development and education, know, really relationships is kind of everything. Like, as you educate, you’re kind of building up that relationship core with your clients, right? To let you know, hey, you can rely on us. And so I think within business, relationships is everything. And so I’m so glad to hear, you know, the different groups that you’re in, because in this space, that’s going to be very, very a great thing when you can kind of leverage your relationship with other people.

I ⁓ love that. Yeah.

Sean Lichterman (18:31)
Yeah, and

word of mouth is powerful. mean, we grow a lot of our business through word of mouth, through referrals, through our different alignments and partnerships. And that speaks more volumes to me working with individuals that are trusting to refer more of their business or more of their clients to me. Because it puts…

Quentin (18:38)
Yeah.

Sean Lichterman (18:47)
It puts a little radar on yourself, on your back, that like, I gotta produce here, right? These people trust me. It’s kind of like a friend trusts you with something, right? You don’t wanna let them down. And that’s how we feel with all of our projects and all of our clients.

Quentin (19:00)
Absolutely, man. You’re absolutely right. And we definitely want to make sure we can trust the person that’s advising us when it comes to our taxes. So no, I appreciate that. Like I’m serious. I really appreciate that. Yeah. Yeah. Absolutely. So listen, man, I like to act as we got a little bit of time. I got probably two more questions. So this is the one I like to ask when I know we got a little bit of time. I kind of want to put the ball in your court. Is there anything that you’ve been thinking about anything kind of

Sean Lichterman (19:07)
Yeah, you know… Yeah.

Quentin (19:27)
been on your mind, anything you feel like maybe the people need to know as far as encouragement or as far as information, as far as education, like anything that comes to mind that you feel like maybe, you you will want the people to know right now. No pressure, but just if there’s something that comes to mind, you know?

Sean Lichterman (19:44)
Yeah, yeah, I appreciate that. ⁓ Yeah, I think a good place to start is, you know, bringing it back to where we currently are in the tax environment or the tax landscape, right? So a new bill just passed. So whether you’re a real estate investor, you’re buying your first rental property, or maybe it’s your 12th ⁓ short term rental, if cost segregation is a new term to you, it really is a fantastic gateway strategy for higher level tax planning. I urge you to

Google it, chat GPT, that may be the new Google term, but review what it is. If you have questions, reach out to myself. First and foremost, I love just educating, being a resource for any of my clients, whether they work with us or not. And we’re not trying to sell you an appointment. What we wanna make sure is that we’re working with you, your tax advisors, your tax attorneys, and we wanna make sure that this is actually ultimately gonna benefit you.

⁓ So a lot of my day is spent on educating, reviewing, and seeing do things align. If they do, it’s a no-brainer. If they don’t, hey, you we can look at different times. going back to, yeah, if it’s a first time hearing cost segregation, reach out, review it. It’s a phenomenal tool that allows you to essentially accelerate depreciation on your property, which turns into ultimately deductions. know, deductions you can apply towards your tax liability. That’s money I don’t have to pay to Uncle Sam. That’s money I can now…

reinvest in my portfolio, reinvest into my properties, my staff, such and so forth. On the other side, maybe you are a little bit more experienced in the tax strategy environment. If you’re developing, you’re putting in capital improvements to large scale manufacturing facilities, ⁓ industrial complexes, again, there are a number of strategies that we can stack on top of each other, being whether it’s energy efficiencies.

that you’ve improved, whether it’s EV type of credits, you put some solar on top of your roof so that there’s some different solar credits you can apply for, or on the R &D, research and development side. you’re in a business, even if you’re a startup, you haven’t made money yet, but you still have that high payroll tax, as long as you’re innovating, we can essentially help you. If you’re a business that’s been profitable for years and years and years, and you’re constantly pushing the envelope.

hey, now’s a great time because the new repeal of Section 174 to get in touch, you’re gonna get a much larger tax credit in the first year. And the benefit here is that you can actually get it year after year after year because it goes towards the activities and the expenses you’re doing. And typically, if you are pushing the envelope, you are innovating, you’re not just a one and done, right? You’re doing it every year. You’re putting in some type of effort of improvement. So we’re able to capitalize on that every year. So.

I’ll leave that as kind of my long-winded of who can be assisted, but ultimately if you got questions, reach out. I’ll put my contact information, I’m sure it’ll be on the podcast afterward, but either it’s just to say, hey, or you want to hear a funny tax joke. I do got a lot of these. Again, I’ve got two daughters, so I got to stay one step ahead of them. Tax talk’s not always the sexiest to have with kids or family, so I got to make it engaging, so I do have a number of tax jokes.

Quentin (22:45)
man. If someone wanted to reach out, connect with you, or maybe collaborate, of course, learn more about what’s going on. What’s the best way for them to reach out to you,

Sean Lichterman (22:53)
Yeah, a number of ways. you can call me directly. My cell is 224-814-3174. We’ll put my email down there in the chat. But find me on LinkedIn. It’s just my first, Sean, and my last name, Lichterman. I do a lot of posts. We do a lot of CPE webinars. We do a lot of podcasts. So you’ll be able to find kind of cuts and blips of me here and there. I’ll leave you with my last ⁓ tax joke. And I’m sure we can wrap up after that.

Just keep in mind, there’s two constants in life I’m sure everyone’s aware of, right? One of those is death, the other is taxes. Well, I’ll help you defer one of those.

Quentin (23:26)
Four years everyone! Sean Lichterman, I appreciate you, sir, man. Listen, I appreciate your time, I appreciate your story, your perspective. I appreciate your joke, We need more people like you, man. We need more people like you that’s educating, doing things the right way. So I really, really appreciate you coming through.

Sean Lichterman (23:27)
You

Hahaha

Now, thank you guys. Like I said, it’s been a long time listening to the podcast. I just appreciate the opportunity to sit and give my spiel for a bit. So thank you guys.

Quentin (23:53)
Absolutely. Absolutely. And for those tuning in, listen, if you got value from this, which I know you should have, please make sure you you’re subscribed. Listen, we got more conversations coming, just like with my friend, Sean Lichterman. Listen, if you like what you’re hearing, come back and let’s do it again. I’ll see you on the next episode. You have a great one.