ATHLLC2338037257

00:00:00.000 | (upbeat music)

00:00:01.680 | - Hello, and welcome to another episode of All The Hacks,

00:00:04.680 | a show about upgrading your life, money, and travel.

00:00:07.240 | I'm your host, Chris Hutchins,

00:00:08.400 | and today we're gonna help you save money on taxes.

00:00:11.360 | Now, I think we can all agree

00:00:12.760 | that taxes are an important part of our society,

00:00:15.560 | but with the tax code currently at over 4 million words,

00:00:19.160 | which by the way is about four times longer

00:00:21.400 | than all seven Harry Potter books combined,

00:00:24.200 | it is no surprise that finding all the completely legal ways

00:00:27.560 | to optimize and lower our taxes is no easy feat.

00:00:30.960 | So I wanted to invite my friend Ankur Nagpal,

00:00:33.240 | the founder and CEO of Cary, to join me

00:00:35.560 | because I've been scouring the internet

00:00:37.700 | for the best content on 2023 tax optimization,

00:00:41.120 | and I kept landing on workshops he's done.

00:00:44.080 | We're gonna cover ways that anyone can offset

00:00:46.520 | their W-2 income, maximize their deductions,

00:00:49.380 | save taxes on investments, and so much more.

00:00:52.800 | At the end, we'll also cover tax savings

00:00:54.920 | for business owners, and my goal is for you

00:00:57.260 | to find at least one tax strategy in this episode

00:01:00.160 | that you can use yourself.

00:01:01.820 | So let's get into it right after this.

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00:02:35.700 | (upbeat music)

00:02:40.060 | - Ankur, thank you for being here.

00:02:41.620 | - I'm excited to do this, let's go.

00:02:43.600 | - So you and I now, from the workshops I've watched,

00:02:46.440 | from the conversations we've had,

00:02:47.740 | share a passion for optimizing our finances.

00:02:50.740 | We both started companies in the space.

00:02:52.480 | Congratulations, yours is still in existence.

00:02:54.900 | - Yeah, I mean, if you had told me, you know,

00:02:57.260 | 10 years ago, this is what I'd be doing, I'd be shocked.

00:02:59.780 | I mean, it kind of takes like learning from your mistakes

00:03:02.500 | to get to this point.

00:03:03.620 | But yeah, I've spent the last year and a half

00:03:05.740 | diving deep into this world

00:03:06.900 | and now it's something I quite enjoy.

00:03:09.500 | - So I've seen you do a couple workshops

00:03:11.060 | on saving money on taxes as a business owner,

00:03:13.300 | as a just normal person who doesn't own a business,

00:03:15.560 | and lots of things.

00:03:16.580 | I wanna dive down all these rabbit holes

00:03:18.960 | and have this episode, for people listening,

00:03:21.020 | really be about all the different ways

00:03:23.320 | that you can take advantage, not of like breaking the law,

00:03:26.900 | but actually finding ways that other people

00:03:29.300 | are optimizing their taxes so you can do it too.

00:03:31.940 | I think you share a belief that like,

00:03:33.860 | we should pay our taxes.

00:03:35.540 | - Yeah, absolutely.

00:03:36.380 | I mean, it's so funny, right?

00:03:38.060 | Every time I do these workshops, we have two types of people.

00:03:40.860 | One type of person is like, dude, just pay your taxes.

00:03:44.160 | And my response to that is,

00:03:45.980 | if you think about the wealthiest people in this country

00:03:48.240 | and like who pays their fair share,

00:03:49.740 | there's a percentage of people that can afford

00:03:51.860 | the most expensive lawyers and accountants

00:03:53.800 | and all these people to figure it out for them.

00:03:55.740 | And our goal is like,

00:03:56.620 | can we just democratize this information

00:03:58.460 | and give it to everyone?

00:03:59.900 | And then you decide what you want to do with that.

00:04:02.680 | That's one group.

00:04:03.520 | The other group wants to straight up tax fraud.

00:04:05.940 | They come up with the most like crazy schemes.

00:04:08.300 | They're like, yeah, but how will the IRS know?

00:04:09.980 | And we're like, the goal is not to be fraudulent.

00:04:12.420 | It's like, let us give you all the information

00:04:14.500 | and the knowledge 'cause the tax code is so complicated.

00:04:17.060 | And then you decide what you want to do with that.

00:04:19.360 | - And just to be clear, it's probably worth clarifying,

00:04:21.640 | neither of us are CPAs.

00:04:23.560 | This is not tax advice or investment advice

00:04:26.360 | or anything of the sort.

00:04:27.840 | - This is for informational and educational purposes only.

00:04:30.240 | This is not tax advice, legal advice, investment advice.

00:04:32.520 | You know the drill.

00:04:33.720 | - And I think one of the interesting things that I said,

00:04:35.960 | I did an episode last year about kind of money moves

00:04:38.840 | to make at the end of the year.

00:04:40.360 | I'll defer people to there if they want to go beyond taxes.

00:04:43.400 | There's some other stuff there.

00:04:44.720 | I went down a few more rabbit holes.

00:04:46.340 | But one of the frameworks that I really liked was

00:04:48.200 | whenever we think about taxes,

00:04:49.880 | the goal is first try to avoid it,

00:04:51.920 | then try to defer it.

00:04:53.240 | And kind of then later in some future year,

00:04:55.240 | repeat this in case the tax code changes.

00:04:57.280 | And if you can't do either, try to minimize it.

00:04:59.500 | I think we're gonna hit on all three of those.

00:05:01.340 | Are there any other starting points

00:05:03.000 | that you want people listening

00:05:04.040 | to just kind of have some broad context

00:05:06.100 | when it comes to thinking about taxes?

00:05:08.440 | - Yeah, so a few like concepts to ground in

00:05:11.000 | that I think are really important.

00:05:12.040 | One is, I think people should know

00:05:13.720 | what their effective tax rate is,

00:05:15.340 | which roughly is just like how much you pay in taxes

00:05:17.960 | divided by your income.

00:05:19.280 | In itself, it's not that useful a number,

00:05:21.260 | but it's good to see for people in similar income brackets

00:05:23.520 | what that number is and how to reduce that.

00:05:26.240 | The other thing to touch on,

00:05:27.160 | 'cause you just said the best thing is to like avoid it,

00:05:30.040 | or if not that, defer it.

00:05:31.960 | In some rare cases,

00:05:33.600 | I do think it makes sense to front load it.

00:05:36.080 | And the reason for that is,

00:05:37.600 | I also think it's important to think about

00:05:38.960 | your lifetime tax rate.

00:05:40.160 | Like sometimes there will be cases

00:05:42.520 | where it makes sense to pay slightly more in taxes now

00:05:46.040 | to pay substantially less later.

00:05:48.000 | And a good example is like Roth accounts, right?

00:05:49.840 | Sometimes it can make a lot of sense

00:05:51.160 | to take a little bit of tax now,

00:05:52.880 | let that money grow and compound,

00:05:54.680 | but then over your lifetime,

00:05:56.180 | you're paying substantially less in taxes.

00:05:58.440 | I think those are important concepts.

00:06:00.480 | Also love telling people like,

00:06:02.120 | don't get too carried away with this.

00:06:03.740 | Like taxes are a part of life.

00:06:05.640 | I mean, the expression that people refer to

00:06:07.680 | is don't let the tax tail wag the dog.

00:06:10.000 | As an example is,

00:06:11.320 | your business can make no money and you'll have no taxes,

00:06:13.600 | but you know, that's besides the point.

00:06:15.520 | At the end of the day, like, you know,

00:06:16.900 | you don't want to live somewhere

00:06:18.880 | just to save money on taxes.

00:06:20.440 | Like you live the life you want

00:06:22.760 | and you know, figure out your tax strategy

00:06:24.600 | in response to that.

00:06:26.080 | - Two other things.

00:06:26.920 | One, on that point, I did meet someone

00:06:29.440 | and I kind of want to do a deeper dive on this.

00:06:31.040 | We're not going to go into it,

00:06:32.040 | but someone who basically ran their business

00:06:33.960 | to the point that it made no money

00:06:35.640 | and they were doing reselling and all this stuff.

00:06:37.640 | And so by lowering their margins,

00:06:39.480 | they had the best prices, volume went up

00:06:41.800 | and they were doing,

00:06:43.280 | I want to say more than $10 million a year of sales

00:06:45.880 | on a business that net income went to zero.

00:06:48.400 | But they were putting $10 million on a credit card.

00:06:50.920 | So all of the points in cash back

00:06:53.200 | created tax-free income.

00:06:55.280 | And by their math,

00:06:57.060 | they would have made less money

00:06:58.760 | by raising the margins and making more

00:07:01.480 | because they would have had income,

00:07:02.660 | but it would have been all taxable.

00:07:03.840 | So they like played the volume game

00:07:05.780 | and won on cash back.

00:07:07.480 | - I would love to see the analysis there.

00:07:09.040 | 'Cause I mean, with tax back, you get what, like 2%?

00:07:11.000 | It's very, very hard for me to see

00:07:12.960 | how that is the best outcome.

00:07:14.280 | But again, I still think, yeah,

00:07:15.760 | don't let the tax tail wag the dog.

00:07:17.600 | Live the life you want

00:07:18.840 | and then figure out your tax strategy in response to that.

00:07:21.880 | - And you've talked about return on hassle before.

00:07:23.600 | So like some things in tax planning

00:07:26.480 | and tax optimization can be a lot of work.

00:07:29.000 | And if it's really just going to save you a few hundred dollars

00:07:31.020 | make sure you know what you're getting into.

00:07:32.920 | - Yeah, like again, like I know some people

00:07:35.080 | who are, you know, want to make sure

00:07:36.480 | that they don't miss a single $14 expense

00:07:38.960 | or whatever.

00:07:39.800 | And again, I think if you're organized

00:07:41.280 | it's worth keeping track of all of that,

00:07:42.720 | but it's better to focus your energy on the few things

00:07:46.280 | that make a really big difference

00:07:47.840 | versus trying to do every single thing

00:07:49.600 | and burning yourself out.

00:07:51.080 | - Okay, so the way I think we're going to break this down,

00:07:53.460 | we'll start with all kinds of things

00:07:55.520 | that apply to a broad audience.

00:07:57.060 | People who have general W-2 income,

00:07:59.640 | things that apply to people in every circumstance.

00:08:02.280 | We'll move in not to retirement and tax advantage

00:08:05.240 | at accounts, which I know you've talked a lot about

00:08:07.000 | because if you go back a couple of weeks,

00:08:08.600 | I did an entire episode with Katie from Money With Katie.

00:08:11.560 | We went through every single element

00:08:13.560 | of tax advantage accounts.

00:08:14.760 | So we're actually going to skip over that

00:08:16.480 | and jump into investments.

00:08:18.200 | And there's a lot of ways that you can use

00:08:20.200 | the style of investing and the way you take capital gains

00:08:23.200 | and roll them over to be efficient with taxes.

00:08:25.340 | And then we'll end talking about things

00:08:27.600 | that apply to business owners,

00:08:29.360 | including ways that someone who might not be

00:08:31.080 | a business owner yet might want us to think about it.

00:08:33.080 | I think that's a good plan.

00:08:34.120 | So if we start with regular people,

00:08:37.500 | I think one thing that it's important

00:08:38.920 | to help people understand is not all income

00:08:42.040 | is taxed the same way.

00:08:43.280 | And so let's talk about capital gains

00:08:45.560 | 'cause it's a totally different type of income.

00:08:47.680 | But one other common thing that I just thought of

00:08:49.480 | that I often realize some people don't quite understand

00:08:52.280 | is marginal versus effective tax rates.

00:08:55.600 | So I hear some people say, I'm in the 39% tax bracket,

00:08:59.280 | I'm at the top.

00:09:00.160 | The way the tax code works for anyone not familiar

00:09:02.480 | is that it's progressive.

00:09:03.880 | So the first tranche of your income

00:09:05.640 | is at the lowest tax rate,

00:09:07.000 | and then it goes up and up and up,

00:09:08.160 | at least with income tax.

00:09:09.680 | Capital gains tax, similar,

00:09:11.560 | but it actually pushes you into a new bucket for everything.

00:09:14.540 | So just to be clear,

00:09:15.800 | your effective tax rate could be 28%,

00:09:19.200 | but your marginal tax rate could be 33% or more.

00:09:23.020 | And if you're in that circumstance,

00:09:24.800 | that actually means that the amount of money you'll save

00:09:27.760 | by reducing your taxable income

00:09:29.280 | is higher than what your effective tax rate is.

00:09:32.080 | And so it can be really valuable.

00:09:34.220 | But a common misconception with some people

00:09:36.660 | is if you're in the 39% tax bracket,

00:09:39.500 | and you reduce your income

00:09:40.620 | to be in the next lower tax bracket,

00:09:42.820 | it doesn't affect all your income.

00:09:44.400 | It only affects that marginal amount of your income.

00:09:46.900 | - Yep, that's a really good point.

00:09:47.900 | Yeah, there's so many people who are like,

00:09:49.260 | oh, let me go $1 under a certain bracket

00:09:51.580 | because it affects all my income.

00:09:52.900 | But no, it's only income above that threshold

00:09:55.300 | that gets taxed at the higher rate.

00:09:57.380 | - Okay, so let's talk about capital gains.

00:09:59.120 | - All right, so again,

00:10:00.260 | I think the way to think about this is,

00:10:02.380 | I said I was actually an economics major in college.

00:10:04.340 | So we actually remember learning this quite a while back,

00:10:06.720 | but like basic economics,

00:10:08.340 | ultimately people make income either through their labor,

00:10:12.060 | which is your salary or whatever,

00:10:13.700 | or through capital, which is when you invest in something

00:10:16.860 | and that asset grows in value.

00:10:18.580 | Don't ask me why.

00:10:19.780 | A lot of people can argue that, you know,

00:10:21.660 | labor should be taxed at a lower rate,

00:10:23.540 | capital should be taxed at a higher rate,

00:10:24.900 | but the way it works in America and most other countries

00:10:27.020 | is capital gains are not only taxed at a lower rate,

00:10:30.740 | there's just a lot more strategies you have

00:10:32.700 | to either defer or negate capital gains taxes.

00:10:36.220 | So as an example,

00:10:37.660 | the highest tier for long-term capital gains,

00:10:40.660 | which is when you hold an investment, a security,

00:10:43.500 | anything for over a year, is 20%,

00:10:45.860 | as opposed to the highest rate on your income is,

00:10:49.380 | I don't know, 35%, a little bit more than that.

00:10:51.620 | So in general, capital gains when held for a year

00:10:53.820 | are much more efficient,

00:10:55.060 | but you can also offset them with other capital losses

00:10:58.140 | to create this idea of no net capital gain,

00:11:01.260 | which reduces the amount of taxes.

00:11:03.180 | - So I think for people listening,

00:11:05.020 | it's important to know that not all types of income

00:11:07.100 | are taxed the same.

00:11:08.340 | So capital gains, obviously lower.

00:11:10.340 | At a certain level of income, I don't know the threshold,

00:11:13.060 | there's no capital gains tax.

00:11:14.620 | It's like, it's under $100,000 and under,

00:11:18.100 | then it goes to 15 and then 20.

00:11:19.940 | And then at the highest end,

00:11:21.300 | there's this net investment income tax,

00:11:23.300 | which adds on a few more percent after that.

00:11:25.540 | - Yeah, the other thing worth noting

00:11:27.700 | with capital gains taxes is like these preferential rates

00:11:32.380 | only apply when you hold onto a capital

00:11:35.500 | for any investment for over a year.

00:11:37.940 | If you're under a year,

00:11:39.540 | it counts as short-term capital gains,

00:11:41.460 | which is typically taxed at the ordinary income rate.

00:11:45.580 | But if you have short-term capital gains,

00:11:48.100 | you can still use other capital losses

00:11:50.500 | to try and offset them.

00:11:52.020 | So what I tell a lot of people

00:11:53.340 | is try and avoid short-term capital gains,

00:11:56.500 | because it means you could either find ways

00:12:00.060 | of canceling them out with losses

00:12:01.300 | or potentially holding the investment a little bit longer.

00:12:03.620 | But the fact that short-term capital gains

00:12:05.140 | are taxed the same as income means they're quite inefficient.

00:12:07.500 | And if possible, you wanna try and avoid paying that.

00:12:10.380 | - Obviously, you don't wanna necessarily hold onto an asset

00:12:13.420 | for an extra seven months that you don't feel great about.

00:12:17.060 | But if you were at 360 days

00:12:19.540 | and you could hold it for five more days,

00:12:21.660 | the benefit there is gonna be really high.

00:12:23.500 | But when it comes to the end of the year,

00:12:25.100 | I think one important thing to cover is tax-loss harvesting.

00:12:28.180 | Like you said, if you have capital losses,

00:12:30.140 | they can offset capital gains.

00:12:31.860 | And if you have $3,000 of capital losses,

00:12:34.980 | you can even offset your regular W-2 employment income.

00:12:38.700 | So towards the end of the year,

00:12:40.380 | if you're not already using some robo-investing platform

00:12:43.580 | that will automate this,

00:12:44.900 | I feel like it's something everyone should be doing.

00:12:46.980 | - Yep, so here's what I'd normally do.

00:12:48.460 | I'm not gonna do it this year

00:12:49.860 | because I had enough in losses last year

00:12:51.620 | that I'm not worried about paying capital gains taxes

00:12:53.860 | this year.

00:12:54.700 | But what I would normally do

00:12:55.540 | is at the start of December every year,

00:12:58.180 | I would open my brokerage accounts, wherever they are,

00:13:01.260 | and I would basically try and see

00:13:02.580 | what my net capital gain or loss is for the year.

00:13:06.060 | And if it makes sense, try and make the numbers line up.

00:13:09.100 | Again, we don't wanna do irrational things.

00:13:10.900 | Don't let the tax tail wag the dog.

00:13:12.940 | But if you're gonna be at a point

00:13:14.580 | where you're paying a little bit in capital gains,

00:13:15.980 | but there's a losing position

00:13:17.020 | you would otherwise wanna take,

00:13:18.380 | it may make sense to do that.

00:13:20.220 | This was a hard lesson for me a year or two ago

00:13:22.420 | when I was using Robinhood as my primary brokerage

00:13:24.500 | and realized it's actually not very well suited

00:13:27.660 | to doing any of this

00:13:28.740 | 'cause you can't analyze specific tax slots,

00:13:31.020 | you can't sell specific tax slots,

00:13:32.460 | you couldn't even see your net capital gain or loss,

00:13:34.620 | but any of the adult grownup brokerages

00:13:37.140 | will let you do that.

00:13:38.180 | And it's a worthy exercise to figure out

00:13:40.340 | what capital gains taxes you will have.

00:13:42.700 | If you're in a position like me

00:13:43.820 | where I had so much in capital losses last year

00:13:46.620 | 'cause it was a brutal year,

00:13:48.060 | you can actually carry forward those indefinitely.

00:13:51.300 | So my gains this year will be offset

00:13:53.740 | with the carry forward capital losses from last year,

00:13:56.860 | but it's a worthy exercise doing otherwise.

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00:16:30.420 | Let's talk about some of the ways

00:16:32.100 | that people can start to chip away at their income,

00:16:35.900 | 'cause ultimately the way the tax code works

00:16:38.140 | and your filing is you have your income,

00:16:40.340 | then you have a bunch of things you subtract

00:16:41.980 | and adjust it with.

00:16:43.220 | And then that final amount is your adjusted income,

00:16:46.500 | AGI, adjusted gross income,

00:16:47.700 | and that's what you pay taxes on.

00:16:49.500 | So one of those things is itemizing your deductions.

00:16:53.220 | Let's talk a little bit about

00:16:54.460 | how you can kind of optimize this and whether you should.

00:16:57.380 | - So in general, the government kind of gives us a choice.

00:17:00.980 | We can either just take their deduction

00:17:04.220 | called a standard deduction and apply it.

00:17:06.460 | And I think that is 27,000 roughly if you're married,

00:17:09.740 | about half that if you're single.

00:17:11.180 | And funnily enough, I think something like 85 to 90%

00:17:14.180 | of people just take the standard deduction.

00:17:16.340 | If you don't, if you choose to take itemized deductions,

00:17:21.020 | which is you turn down the standard deduction,

00:17:23.260 | you can take deductions for a lot of other things.

00:17:26.580 | A big one that we'll talk a lot about

00:17:27.900 | is charitable contributions,

00:17:29.620 | which you can't deduct

00:17:30.740 | unless you're choosing to take itemized deductions.

00:17:33.220 | But aside from that, things like student loan interest,

00:17:36.300 | mortgage interest, large medical expenses

00:17:38.820 | that I think are more than 7.5% of income,

00:17:41.580 | some random stuff like the cost of doing your taxes.

00:17:45.060 | I was actually amused to find out

00:17:46.900 | you can deduct gambling losses

00:17:48.580 | if you itemize your deductions.

00:17:50.220 | But there's a bunch of good stuff there.

00:17:51.700 | Oh, state and local taxes is a big one,

00:17:53.420 | even though that's limited to $10,000

00:17:55.100 | unless you're a business owner.

00:17:56.260 | But I tend to think if you either are charitably minded

00:17:59.500 | or your taxes are somewhat complicated,

00:18:01.420 | itemized deductions usually work out to be a better deal.

00:18:04.420 | But for everyone else, you can just take an automatic,

00:18:06.820 | you know, standard $27,000 deduction.

00:18:09.620 | Mortgage interest being one of the ones

00:18:11.300 | that often is the biggest.

00:18:12.740 | But you mentioned state and local taxes,

00:18:14.220 | which I can't remember what year it was at this point,

00:18:16.500 | but a handful of years ago got limited.

00:18:19.140 | 2017, so what happened in 2017

00:18:21.540 | is you had the Trump Jobs Act,

00:18:23.180 | which basically, it kind of reiterated

00:18:26.540 | the way the American tax code works.

00:18:28.060 | And the way the American tax code works

00:18:29.420 | is it benefits two groups of people above everyone else,

00:18:32.180 | business owners and real estate developers.

00:18:34.140 | And if you're a real estate business owner, even more so.

00:18:36.500 | And it gave a bunch of benefits to business owners,

00:18:38.620 | but to make the math work out,

00:18:40.180 | it created legislation to cap state and local taxes,

00:18:43.620 | the amount that could be deducted

00:18:44.700 | from your federal return to $10,000.

00:18:47.340 | What's worse is if you're married,

00:18:49.380 | the limit is still $10,000.

00:18:51.020 | So it's actually worse if you're married

00:18:52.300 | because you don't get like a collectively higher number

00:18:54.540 | with the idea of being this hurts states

00:18:56.500 | with higher state taxes,

00:18:58.020 | which typically tend to be Democrat states.

00:18:59.780 | But either way, we'll talk about that more

00:19:01.140 | in the business owner section,

00:19:02.540 | because as a business owner,

00:19:03.500 | you can actually work around it.

00:19:05.260 | But for everyone else,

00:19:06.100 | if you live in California and pay 100,000 in state taxes,

00:19:09.060 | you can only deduct $10,000 from your federal return,

00:19:12.140 | which is a bummer.

00:19:13.340 | - Yeah, absolutely.

00:19:14.180 | And one strategy I've heard,

00:19:16.140 | we'll talk about charitable donations

00:19:17.420 | and way to optimize that,

00:19:18.740 | but you don't have to make this decision forever.

00:19:21.660 | So I know some people who choose

00:19:23.540 | to make all their charitable contributions

00:19:25.660 | in alternating years,

00:19:27.060 | pay a few extra mortgage payments in alternating years

00:19:30.300 | so that in one year, they can deduct as much as possible.

00:19:33.220 | And then in the next year,

00:19:34.580 | they can go back to the standard deduction.

00:19:36.140 | So I think thinking about if you're on the cusp

00:19:39.140 | and you're looking at all your itemized deductions

00:19:41.220 | and you're like, wow, you're kind of near 27,

00:19:43.380 | then it might be wise to have a strategy

00:19:45.740 | of putting everything in odd years or even years

00:19:48.260 | and then swapping each year.

00:19:50.300 | - Yep, absolutely.

00:19:51.140 | It's on a year by year basis.

00:19:52.740 | So you can always sort of change.

00:19:54.500 | My guess is more people will start itemizing deductions

00:19:57.540 | slowly as interest rates go up, mortgage rate,

00:19:59.780 | mortgage interest.

00:20:00.620 | I think part of the reason

00:20:02.220 | standard deductions made sense for a lot of people

00:20:03.860 | is mortgage interests were so low for so long.

00:20:06.260 | And as that climbs up,

00:20:07.620 | I think more people will end up itemizing.

00:20:09.860 | - Okay, that's itemizing standard.

00:20:11.180 | One of those big ones you mentioned

00:20:12.340 | is charitable deductions.

00:20:13.820 | We did talk about donor advised funds in general

00:20:17.060 | in the tax advantaged accounts,

00:20:18.380 | but let's talk more broadly about charitable donations

00:20:21.420 | and how powerful that deduction is.

00:20:23.540 | - Yeah, I think it's one of the few things

00:20:26.300 | that you have the opportunity to do good in this world

00:20:29.700 | and get rewarded for it, right?

00:20:32.020 | Like I think the government is quite generous

00:20:34.060 | because a dollar donated to charity

00:20:36.260 | reduces your taxable income by a dollar.

00:20:39.460 | Super fair, very generous,

00:20:41.740 | and can be used to offset a lot of income.

00:20:44.540 | One of the things to note is if you donate cash,

00:20:49.340 | you can offset up to 60% of your income.

00:20:52.500 | If you donate appreciated assets,

00:20:54.500 | you can only offset 30% of your income.

00:20:57.060 | A lot of people read that and are like,

00:20:58.300 | "Oh wow, I should donate a lot of cash."

00:21:00.860 | But funnily enough, it's actually much more efficient

00:21:03.820 | to donate appreciated assets

00:21:05.780 | because you're getting a double tax break in a way

00:21:08.620 | because you're getting the deduction for donating the asset,

00:21:12.140 | but you're also getting the benefit

00:21:14.260 | of what would have been the gain you would pay

00:21:16.660 | if you sold that asset and donated cash.

00:21:19.340 | So if you donate appreciated shares, for instance,

00:21:22.500 | you get the tax deduction for the entire amount.

00:21:25.100 | But if you sell those shares,

00:21:26.940 | you'd have to pay taxes on that

00:21:28.300 | and only donate the net of tax amount.

00:21:31.460 | So donating appreciated assets, in my opinion,

00:21:33.580 | is something that is almost always better

00:21:35.700 | than donating cash.

00:21:37.180 | And you can donate all sorts of assets.

00:21:39.220 | I mean, public equities are a very common one,

00:21:41.180 | but based on how fancy you want to get,

00:21:44.340 | I know people who will donate art to a museum

00:21:47.020 | where they'll try and buy art very cheaply.

00:21:49.860 | And if they have a good eye,

00:21:51.620 | have it independently appraised,

00:21:52.980 | it's now worth 10 times more

00:21:54.300 | and they get a 10 times larger deduction.

00:21:56.860 | One other interesting thing is,

00:21:58.460 | I would maybe say you could extend this to everyone

00:22:01.740 | if you factor in the fact that there's no wash sale rule

00:22:04.540 | on charitable donations.

00:22:05.940 | And so if you're thinking,

00:22:07.380 | "I want to make a $500 donation to a charity,"

00:22:10.740 | if you hold any stock worth $500

00:22:13.460 | that you bought for less than $500,

00:22:16.020 | forgetting the return on hassle here,

00:22:17.900 | 'cause maybe at $500, it's not worth it,

00:22:20.180 | but donating that stock is going to save you capital gains

00:22:24.980 | and you will not save it if you donate cash.

00:22:27.060 | - Oh, that's actually fascinating.

00:22:28.260 | I never thought about that.

00:22:29.900 | - So if you wanted to do that,

00:22:31.140 | you could use that $500

00:22:32.500 | to immediately just rebuy whatever you donated

00:22:35.460 | and step up your cost basis.

00:22:37.260 | - Yeah, for free.

00:22:38.460 | - For free, exactly.

00:22:39.860 | Maybe the only argument against this

00:22:41.300 | is if you're very, very old

00:22:42.940 | and you're planning on passing these assets down,

00:22:45.540 | one other great thing about the tax code

00:22:47.500 | is that you get a step up in your cost basis

00:22:49.380 | when you pass stocks down to your children

00:22:51.660 | so that capital gains tax ends up being zero.

00:22:54.580 | So maybe in that rare case,

00:22:56.500 | you could argue that it's equal, but yeah.

00:22:59.300 | And another way to avoid a lot of the hassle here,

00:23:01.740 | which I've heard you talk about,

00:23:02.940 | is with donor-advised funds.

00:23:04.460 | And we talked in this example about $500.

00:23:07.060 | It would be a pain for every $100, $200, $300 donation

00:23:10.620 | you wanna make to call the charity

00:23:12.500 | and coordinate a stock transfer

00:23:14.500 | and work with your brokerage firm.

00:23:16.140 | So in general, I think donating,

00:23:18.580 | you can open up a donor-advised fund,

00:23:20.220 | which we talked about a couple of weeks ago,

00:23:21.980 | and donate all of those securities once.

00:23:24.620 | And this really helps with that alternating strategy, right?

00:23:27.260 | You could make your donation

00:23:28.380 | and then have a pool of funds

00:23:30.500 | that you could both invest so it grows,

00:23:33.180 | but then donate from whenever.

00:23:34.780 | And you can kind of separate the donating from the giving.

00:23:37.500 | - Yeah, super useful, right?

00:23:38.580 | Like again, let's say there's a year

00:23:39.780 | you wanna take itemized deductions in,

00:23:41.260 | you can front load your entire donation.

00:23:43.460 | You can basically do the tax planning part of it

00:23:46.140 | in isolation from the giving part of it.

00:23:48.660 | And the fact that once money's in a donor-advised fund,

00:23:51.460 | it's invested and is growing

00:23:52.780 | also means like charity will get more money in the future.

00:23:55.300 | So it's not like you're taking money away from charity.

00:23:57.220 | You're putting money into this pool of funds

00:23:59.020 | that you're marked for charity.

00:24:01.140 | It can be invested, it can grow,

00:24:02.780 | and then you can give it whenever is appropriate.

00:24:05.140 | - If some charities don't accept stocks

00:24:06.900 | or don't accept crypto or have high minimums,

00:24:09.820 | this kind of avoids that.

00:24:11.340 | I think anyone who's listened to this show for a while

00:24:12.940 | knows that we partner with Daffy.

00:24:14.700 | It's a donor-advised fund.

00:24:15.900 | It's the one I use.

00:24:17.140 | I think of the options that the average person

00:24:19.380 | can just sign up for personally,

00:24:21.180 | I like it the most if you're an average consumer.

00:24:23.700 | And so you can go to allthehacks.com/daffy

00:24:26.140 | and get a free $25 if you want.

00:24:28.060 | - Sweet.

00:24:28.900 | I mean, in general, charitable donations

00:24:30.380 | is something that I think makes a ton of sense,

00:24:33.540 | again, just 'cause it has a benefit

00:24:34.940 | of doing good in the world while also helping in taxes.

00:24:38.100 | - And it doesn't have to be money or stock or crypto.

00:24:39.980 | You can donate up to, I think, $5,000 of items

00:24:44.380 | absent kind of appraisals and anything.

00:24:46.500 | - Clothes, electronics, like all kinds of things.

00:24:49.460 | - There are a lot of different ways

00:24:50.300 | you can choose to value them, but that's up to you.

00:24:53.020 | But definitely something if you're thinking

00:24:54.980 | at the end of the year,

00:24:56.100 | I have a bunch of stuff in my house to get rid of,

00:24:58.300 | great time to go donate it

00:24:59.940 | if you'll be itemizing this year.

00:25:01.580 | And again, falls in line with that alternating strategy of,

00:25:04.660 | okay, this is the year we're gonna donate everything

00:25:06.420 | in our donor-advised fund, give everything away,

00:25:09.060 | make some extra mortgage payments,

00:25:10.860 | and then next year we'll donate from our DAF the whole year.

00:25:13.540 | Cool, so that is charitable donations.

00:25:16.500 | There's a couple other things I'll touch on on energy.

00:25:19.660 | Thanks to the Inflation Reduction Act,

00:25:21.140 | which we'll get to a bit more when we talk about solar,

00:25:23.860 | they increased the cap for lifetime cap

00:25:27.180 | on energy efficient improvements to your home.

00:25:29.540 | So things like heat pumps

00:25:31.780 | and upgrading windows or insulation and furnaces,

00:25:34.980 | I think it's a $1,200 limit now.

00:25:37.180 | So if there's any changes you make there,

00:25:39.220 | definitely look into it

00:25:40.180 | 'cause there's a bunch of stipulations on different items

00:25:42.780 | and how much you can get, but that's one.

00:25:44.900 | Also in energy, solar at your home.

00:25:47.980 | So when you install solar stuff,

00:25:49.660 | any company that's selling you solar knows this.

00:25:52.500 | And so I'm not gonna try to go through the details,

00:25:54.660 | but if you go to any website to buy solar anything,

00:25:57.900 | whether it's a Tesla Powerwall or solar roof

00:26:00.220 | or anything from another local vendor, there's that.

00:26:02.780 | And then also the EV tax credit, you get $7,500,

00:26:06.140 | but there is a salary cap to that tax credit.

00:26:08.820 | - Is December 31st a deadline for all of this,

00:26:11.140 | for anyone listening?

00:26:11.980 | - I believe all of the energy efficiency improvements

00:26:14.820 | apply based on a calendar basis.

00:26:16.740 | But a lot of the Inflation Reduction Act benefits

00:26:19.420 | were through 2033, I believe.

00:26:22.060 | And so some of these things,

00:26:23.580 | it's not a take it or leave it, right?

00:26:25.420 | If you don't get your energy efficient stuff done this year,

00:26:28.060 | you can aim for it next year.

00:26:29.460 | And I think that's gonna be a theme throughout this episode.

00:26:31.420 | There's a lot of ways that you can limit your taxes

00:26:34.300 | and we're recording this at the end of November.

00:26:37.100 | That doesn't mean that, you know,

00:26:38.860 | you're gonna be able to do all of them this year,

00:26:40.620 | but this is a long game.

00:26:41.900 | - Yep, absolutely.

00:26:42.980 | But for a lot of it, December 31st is a very important date.

00:26:45.380 | So the things that can be implemented quickly,

00:26:47.100 | it's totally worth looking into.

00:26:48.780 | - Yeah, the charitable donations,

00:26:50.020 | I can't remember the percent,

00:26:51.300 | but like the highest percent of charitable donations,

00:26:53.700 | I think on a given day in the year is December 31st.

00:26:56.660 | And I was talking to one of the people on the Daffy team

00:26:58.900 | and they said like up until 1157,

00:27:01.940 | people were donating crypto

00:27:03.340 | because it's like an instant donation

00:27:05.380 | or people were donating, you know,

00:27:06.820 | for their donor advised fund

00:27:07.860 | and putting on a credit card like right before midnight.

00:27:10.740 | So that's one of the few ways to reduce your taxable income.

00:27:13.660 | But just to be clear, you are donating money.

00:27:15.700 | Like it's not a give $1,000 and somehow make back 1200,

00:27:19.860 | it's give 1,000, create a lot of impact

00:27:22.460 | for other organizations and get back a few hundred.

00:27:25.860 | But for those of us who are charitably inclined,

00:27:28.180 | it's definitely a win for both sides.

00:27:30.420 | - If there's time at the end of the episode,

00:27:31.740 | we can talk a little bit about charitable remainder trust.

00:27:34.460 | Those are weird instruments,

00:27:35.620 | but those can sometimes,

00:27:37.180 | for people who have very large capital gains,

00:27:39.060 | literally be like you give money to charity,

00:27:40.620 | but also end up with more money yourself.

00:27:42.780 | I did an episode,

00:27:43.620 | I think you've done an interview with Manny from Valor also,

00:27:46.580 | and he and I did a whole episode

00:27:47.940 | and we went through all these charitable remainder trusts

00:27:50.020 | and grants and all this stuff.

00:27:51.380 | We'll touch on it at a high level too.

00:27:53.180 | On kids, is there anything other than 529s

00:27:55.940 | for people with parents to be thinking about?

00:27:58.460 | - One of the strategies that I think could make sense,

00:28:00.540 | and maybe this is more of a business owner thing,

00:28:02.540 | is I've seen a lot of business owners

00:28:03.980 | hire their children for, again, legitimate jobs, right?

00:28:06.780 | Like this, you don't wanna have tax fraud,

00:28:08.340 | but you have a 13, 14, 15 year old

00:28:09.940 | helping you with social media.

00:28:11.500 | You can hire them, pay them,

00:28:13.660 | and outside of having them get some income

00:28:15.780 | and if they're under the standard deduction,

00:28:17.380 | being able to keep that income,

00:28:18.540 | what is also cool is it makes them eligible

00:28:20.940 | to start a Roth IRA.

00:28:22.300 | 'Cause for a Roth IRA, you have to have earned income.

00:28:25.020 | So if you are able to have children pretty young,

00:28:28.900 | 13, 14, 15, start a Roth IRA,

00:28:30.940 | it starts a compounding a lot earlier.

00:28:32.500 | So I think that's something kind of cool

00:28:34.300 | that could make sense for people that are business owners

00:28:36.700 | and wanna have their children involved in the business.

00:28:38.940 | - And even if you don't,

00:28:39.780 | if you have a 13 or 14 year old child,

00:28:42.420 | you could encourage them to get a job

00:28:44.540 | and put that money away in a Roth IRA.

00:28:47.660 | If you wanted to encourage that savings,

00:28:49.900 | they could get a job, put it in their Roth IRA,

00:28:52.220 | and you could gift them some spending money.

00:28:54.020 | So like a way to backdoor into your kid's Roth IRA

00:28:57.340 | would be to make them get a job, invest the money,

00:29:00.380 | and then kind of replace their money

00:29:01.860 | that they probably as a 13 year old

00:29:03.620 | would rather keep and spend.

00:29:05.220 | - And you look at the math, right?

00:29:07.380 | Putting dollars into a Roth at 13 versus 25, 27,

00:29:11.980 | the amount of compounds, it's totally different.

00:29:14.580 | - I'm already, with a one and a three year old,

00:29:16.660 | we're already like,

00:29:17.500 | how do we try to max this Roth out as quickly as possible?

00:29:21.020 | So definitely thinking about that.

00:29:22.580 | There's a bunch of other tax advantage to count stuff

00:29:25.100 | that you can do before the end of the year.

00:29:26.940 | If you haven't put money in a Roth IRA

00:29:29.300 | or done a backdoor Roth or contributed your 401k,

00:29:33.700 | I guess in that case,

00:29:35.020 | you probably only have whatever comes

00:29:36.500 | in your 1231 paycheck.

00:29:38.180 | - HSAs, FSAs.

00:29:39.740 | - But like I said, we've covered a lot of those.

00:29:42.140 | The one thing I will flag that I've heard you say

00:29:44.340 | that I didn't realize, also on the note of kids,

00:29:47.180 | is that 529s don't necessarily have

00:29:50.180 | the most tax savings benefits in the year you contribute,

00:29:53.940 | though some states do have some perks to donating.

00:29:56.980 | California is not one.

00:29:58.580 | I didn't realize that it matters which state you pick

00:30:01.620 | for how you use your funds.

00:30:03.220 | - It absolutely does.

00:30:04.060 | Like different states have different rules.

00:30:05.420 | What that means is different states have different rules

00:30:08.020 | on what you can spend money on,

00:30:09.220 | different states have different investment options,

00:30:11.500 | and you absolutely are under no obligation

00:30:13.740 | to pick the 529 from your state.

00:30:15.820 | If your state gives you a tax benefit, you probably should,

00:30:18.700 | but for everyone else,

00:30:19.660 | just go pick a state with the best plan.

00:30:21.260 | I've heard some people do Utah, Nevada.

00:30:23.260 | Those are generally good ones.

00:30:24.380 | Do some research and pick the best state

00:30:26.020 | if you're not getting a tax break.

00:30:27.580 | - And 'cause I've heard they passed IRS legislation,

00:30:31.820 | I believe that, and maybe it wasn't even the IRS,

00:30:33.620 | but that you can use your 529 for K-12 education,

00:30:37.980 | but not in every state.

00:30:39.460 | And so the good news is I believe

00:30:41.420 | that if you have a 529 in a state that wouldn't let you,

00:30:44.380 | I believe you can transfer and roll it

00:30:45.860 | into a 529 in a state that would.

00:30:47.780 | So you're not really restricted that much.

00:30:50.060 | And if you're in a tax break state that doesn't allow it,

00:30:53.220 | well, donate or contribute, get the tax break,

00:30:56.380 | and then later, if you need it for K-12 education

00:30:58.660 | and your plan doesn't allow it, move it to another state.

00:31:01.220 | - Another thing I never realized until quite recently

00:31:03.460 | is if you're in a state that gives you a tax break

00:31:06.220 | for donating to 529, you could literally do it right away.

00:31:09.380 | If you're paying for college tomorrow,

00:31:10.820 | you could put money into the 529 right now

00:31:13.100 | and pay it out immediately just to get the tax break.

00:31:16.020 | There's no sort of minimum holding period or anything.

00:31:18.380 | - I believe you can also do the same with an HSA.

00:31:21.540 | Not that we talked about all the amazing tax benefits

00:31:24.380 | of an HSA and you should probably hold onto it forever,

00:31:27.260 | but if you don't have the funds to invest in an HSA,

00:31:30.180 | but you're eligible and you have medical expenses,

00:31:33.100 | you might as well just put the money in the HSA

00:31:35.180 | and take it out the next day

00:31:36.860 | if the alternative is not putting it in at all.

00:31:39.460 | - Yep, makes a ton of sense.

00:31:40.940 | - You all already heard me talk about our sponsor,

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00:31:46.420 | And if you've listened for a while,

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00:31:53.580 | especially during the end of the year

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00:32:40.340 | Though, as I said before, it probably shouldn't be cash.

00:32:43.820 | So if you want a better system for giving,

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00:34:33.740 | I just wanna thank you quick for listening to

00:34:38.900 | and supporting the show.

00:34:40.380 | Your support is what keeps this show going.

00:34:43.220 | To get all of the URLs, codes, deals and discounts

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00:34:51.220 | So please consider supporting those who support us.

00:34:54.620 | - One thing that I know you talk about

00:34:56.060 | for kind of W-2 employees is non-qualified

00:35:00.020 | deferred comp plans.

00:35:01.180 | - And QDCs.

00:35:02.140 | - And it's something I tried at Google and worked out,

00:35:05.220 | but can you talk a little bit more about this?

00:35:07.660 | - Yeah, absolutely.

00:35:08.480 | So in my opinion, the people that pay the most in taxes

00:35:12.040 | are like truly high W-2 earners.

00:35:13.900 | Like people earning high hundreds of thousands

00:35:16.500 | or even more in W-2, they're basically got

00:35:19.540 | the highest effective tax rate of anyone right there.

00:35:22.220 | There's billionaires that have a lower effective tax rate

00:35:25.180 | than someone making $500,000 in their job.

00:35:27.820 | So what if that is you?

00:35:29.180 | What if you're again, net in a very privileged position,

00:35:31.780 | you have a great life, you're earning five, six,

00:35:33.940 | $700,000 in salary, what do you do then?

00:35:37.380 | Chances are, if you live in California, New York,

00:35:39.300 | you're paying almost half of it in taxes.

00:35:41.660 | So you're probably looking for alternatives.

00:35:44.140 | One of the alternatives you can do is something called

00:35:46.260 | a non-qualified deferred compensation plan

00:35:48.820 | or an NQDC for short, 'cause it's a bit of a mouthful.

00:35:51.780 | What that does is it lets you bifurcate your income

00:35:54.500 | into money you receive today

00:35:56.420 | and money you put away for the future.

00:35:59.660 | And the money you defer to the future,

00:36:02.540 | the entire pre-tax amount gets invested

00:36:05.740 | and you then get paid out that money at a later point,

00:36:08.100 | potentially in retirement when you may be

00:36:09.500 | in a lower tax bracket or something.

00:36:11.420 | And this has two big benefits.

00:36:12.980 | One, in the years where your marginal tax rate is higher,

00:36:17.000 | that income is not taxed that higher marginal tax rate,

00:36:19.260 | it moves to a future year where you may have

00:36:22.100 | a lower tax rate.

00:36:23.540 | The other benefit is the entire pre-tax amount

00:36:25.980 | gets invested.

00:36:27.060 | So compounding starts working on a larger base,

00:36:31.220 | potentially leaving you with more money

00:36:33.240 | when it's time to pay you out.

00:36:35.360 | Both of these sound great.

00:36:36.700 | Also, what's great is they're not subject

00:36:38.900 | to discrimination testing the way, you know,

00:36:42.260 | like 401k plans and stuff are very limited

00:36:44.380 | because they can't treat different employees differently.

00:36:47.220 | But an NQDC can be set up on a per employee basis.

00:36:51.060 | So a lot of people can talk to their company about it.

00:36:53.500 | The one downside to bring up is the NQ part.

00:36:56.620 | Like, why is it called non-qualified?

00:36:58.180 | What does that mean?

00:36:59.500 | What it means is in case the company is going bankrupt

00:37:03.580 | or creditors are coming after the assets,

00:37:05.980 | your plan is not safe, which is very different

00:37:08.820 | from a 401k or stuff where your plan assets are protected.

00:37:11.900 | So my advice would be, if you are considering an NQDC,

00:37:16.260 | think about who your employer is.

00:37:18.340 | Like getting an NQDC from Microsoft, I'd feel pretty good.

00:37:21.500 | Getting an NQDC from like a six person company

00:37:23.980 | that may not be around in 10 years, I probably wouldn't.

00:37:27.000 | But definitely worth considering

00:37:28.020 | if you're a truly high W-2 earner.

00:37:30.340 | - When I was at Google, I did this.

00:37:32.660 | And one of the things they made very clear,

00:37:34.620 | and maybe this is plan dependent,

00:37:36.500 | is like, if you change your mind next year

00:37:38.580 | and want the money, like they had a minimum.

00:37:40.520 | It was like three years or I think it was like six months

00:37:43.760 | if you leave the company.

00:37:44.940 | So like, this is money you aren't going

00:37:47.420 | to likely have access to, so keep that in mind.

00:37:50.300 | But in my case, while I was at Google,

00:37:52.340 | I had a much higher salary than when I started as a company.

00:37:55.460 | And so I actually deferred a bunch of my income

00:37:58.060 | and then I quit Google.

00:37:59.960 | My salary dropped to like $30,000 a year.

00:38:02.820 | And like six months later, I got all of this money

00:38:05.260 | that I had earned three years before and it was great.

00:38:07.980 | And at Google, I trusted that they weren't gonna go bankrupt

00:38:11.060 | in three years, so great option.

00:38:13.100 | So that's a really interesting-

00:38:13.940 | - After a high W-2, very often you can negotiate this

00:38:17.020 | and a lot of companies, especially big tech employers,

00:38:19.860 | do these quite often.

00:38:21.220 | - Is it a lot of administrative work

00:38:22.660 | for the company to do this?

00:38:24.180 | - Yeah, but anyone that's like a Fortune 500 type company

00:38:27.060 | that has tons of people, they all do it

00:38:29.820 | 'cause it's kind of a big win

00:38:31.100 | and it helps them from a recruiting perspective.

00:38:33.660 | - Any other big things outside of investments,

00:38:36.940 | real estate and all that, that we'll get to next

00:38:38.940 | that W-2 employees should be thinking about?

00:38:42.180 | - We'll come to a lot of it in the business owner section,

00:38:45.020 | but I've also seen people in some cases

00:38:47.380 | who have a high W-2 getting the company to bifurcate it

00:38:50.460 | and also hire them as a consultant.

00:38:52.060 | So they are both a W-2 employee

00:38:54.140 | and provide consulting services

00:38:56.140 | and they can do a lot more planning with the consulting side.

00:38:58.860 | Again, it doesn't work always.

00:39:00.400 | - If you're making 250,000 and your employer can pay you 150

00:39:04.020 | and then give you 100,000 as a consulting job,

00:39:06.660 | it's actually probably gonna save them money

00:39:09.280 | in terms of employment taxes.

00:39:11.140 | So it could be pitched as a benefit to them.

00:39:13.900 | And then, the last part of this conversation

00:39:16.260 | is gonna be all about saving money as a business owner.

00:39:18.340 | You now go from not business owner to business owner,

00:39:21.020 | which as you said, is like what the tax code

00:39:23.800 | is designed to benefit.

00:39:26.040 | - Absolutely, and we'll talk a lot about that.

00:39:27.340 | But really, the more you look at the tax code,

00:39:29.420 | you just realize this country

00:39:30.860 | favors entrepreneurship so much.

00:39:32.300 | So my sort of parting advice to W-2 people always

00:39:34.820 | is think about the side hustle, think about freelance

00:39:37.140 | and think about sort of expanding your horizons.

00:39:39.140 | And if there's a business you may want to start

00:39:40.940 | in the future.

00:39:42.020 | - One that I didn't even treat like a business,

00:39:44.540 | though I should, and obviously clear this with your company,

00:39:47.800 | is there are a bunch of these networks out there,

00:39:50.220 | GLG, GuidePoint, where as someone who has expertise

00:39:55.220 | in an area, I'll put a link to a few of the ones

00:39:57.580 | I've done in the past in the show notes,

00:39:59.820 | but like they will just reach out to you and say,

00:40:01.260 | "Hey, we're doing a study where we wanna talk to people

00:40:04.240 | about their expertise in industry X."

00:40:07.540 | And they might tell you it's $100 an hour,

00:40:11.060 | but I've found that you could tell them,

00:40:12.340 | "Nah, 600, 900," like whatever.

00:40:14.540 | And all of a sudden you're driving this number up

00:40:16.660 | significantly.

00:40:17.740 | If you do five or 10 of those a year

00:40:20.120 | and you make five to a hundred to a thousand bucks each,

00:40:24.060 | that could be some business income that you can offset.

00:40:26.620 | So we'll get to that.

00:40:27.580 | But when it comes to side hustles,

00:40:29.260 | that's one that I've found,

00:40:30.980 | the likelihood of you being a highly paid W-2 employee

00:40:34.640 | and having expertise that other people

00:40:36.780 | from a research standpoint might want to pay you

00:40:39.220 | to tap into, obviously without giving away

00:40:42.140 | any kind of proprietary information

00:40:44.060 | or breaking any NBAs you've signed with your employer.

00:40:47.340 | That's one way also to get business income.

00:40:49.840 | The two slight notes that I'll share.

00:40:52.100 | One, I learned from talking to my tax advisor,

00:40:56.620 | just in general, the IRS statistically,

00:40:59.380 | returns that are signed by a CPA

00:41:01.300 | have a lower audit percentage.

00:41:03.860 | So I guess one big question here is,

00:41:06.180 | when do you think people should consider

00:41:08.700 | working with a CPA versus doing this on their own

00:41:11.260 | and using something like TurboTax?

00:41:13.380 | - I think as soon as you have some degree of complication.

00:41:16.260 | So I would say, if you have your,

00:41:18.180 | if you're a business owner that makes six figures,

00:41:20.140 | you probably want someone looking through it

00:41:22.060 | just because you'll save more than it is.

00:41:23.940 | I think TurboTax is fine

00:41:25.220 | if you have the simplest financial life ever,

00:41:26.980 | which is like, which I did for a while, right?

00:41:28.900 | I have a W-2 income and that's really it.

00:41:30.420 | And then you hit a couple of buttons

00:41:31.860 | and let TurboTax kind of do it for you.

00:41:33.740 | But if you're a business owner,

00:41:34.660 | if you have real estate investments,

00:41:35.760 | if you're doing anything kind of interesting,

00:41:37.780 | I think it's absolutely worth having a CPA.

00:41:40.500 | You also ideally want to, I know this is hard

00:41:42.420 | because almost no one is happy with their CPA,

00:41:44.260 | finding someone good,

00:41:45.700 | because there's a lot of CPAs out there

00:41:46.980 | that are trying to process the highest quantity of returns.

00:41:50.060 | And you want someone who kind of is up to date.

00:41:52.140 | Like, again, we talk a lot about taxes,

00:41:53.820 | but there've been so many people

00:41:54.780 | who listen to something we say,

00:41:56.460 | go to their CPA and then their CPA's,

00:41:57.900 | "Oh yeah, actually we should do that."

00:41:59.780 | So you want to find someone good,

00:42:01.380 | but as a business owner,

00:42:02.860 | ideally you want to be working with your CPA.

00:42:05.760 | But again, there's always benefit to listening to stuff

00:42:08.920 | like what we're talking about

00:42:10.360 | and knowing what to ask your CPA,

00:42:11.840 | because even the best CPAs will say it's a partnership.

00:42:14.320 | It's not like a go figure this out for me.

00:42:16.240 | It's a partnership between you and them.

00:42:17.920 | - But I will say the big thing that a CPA will do for you

00:42:20.200 | that TurboTax won't.

00:42:21.800 | I talked about that kind of like alternating strategy.

00:42:24.640 | A TurboTax is just going to take in all your inputs

00:42:27.280 | and give you the answer.

00:42:28.360 | And they'll fill out the forms

00:42:29.540 | and they'll ask you the questions

00:42:30.720 | to make sure they don't mix anything,

00:42:32.420 | but they're probably not going to bring out the strategy

00:42:34.560 | of, "Oh, if you do this thing now versus later,

00:42:37.960 | it's going to be better or worse for your situation."

00:42:40.780 | So I think that's one.

00:42:42.040 | And then I've often told the story of the CPA I work with

00:42:46.840 | was a company called Gelt.

00:42:48.240 | And they went back and reviewed past returns

00:42:51.000 | and found mistakes that actually netted me

00:42:53.160 | like a significant amount of money

00:42:55.400 | that I was pretty disappointed in my prior CPA.

00:42:57.760 | So I would say, if you're a business owner

00:43:00.600 | or kind of a high income earner, that makes sense.

00:43:03.620 | If you want to support me,

00:43:04.820 | allthehacks.com/Gelt, G-E-L-T is their URL.

00:43:08.720 | And after we used them, I was like,

00:43:10.960 | "Can you guys please be a partner with us?

00:43:12.820 | 'Cause you guys have been great."

00:43:14.060 | So I've been a fan of them.

00:43:16.020 | - It's shocking how many tax returns are messed up,

00:43:18.940 | especially since we built a tool to analyze tax returns.

00:43:21.660 | I ran mine through and like, despite being in this space,

00:43:24.260 | I found my CPA.

00:43:25.940 | I'm not going to name them and publicly shame them,

00:43:28.180 | but there was a year I made $100,000 charitable contribution

00:43:32.240 | to my donor advised fund.

00:43:33.520 | They skipped it and took the standard deduction.

00:43:35.200 | So just like really bad stuff.

00:43:36.920 | - The firm that I used that made a mistake

00:43:38.600 | was a very reputable firm and they just made a mistake.

00:43:42.320 | And I've actually talked-

00:43:43.160 | - We'll talk offline.

00:43:43.980 | Mine is a reputable firm too, maybe it's the same one.

00:43:46.400 | - And funny enough, I've talked to a few people

00:43:48.440 | that have very complicated tax situations

00:43:51.000 | who make a lot of money.

00:43:52.660 | And they actually hire two firms

00:43:54.600 | to prepare their taxes each year and compare notes.

00:43:57.280 | Because it's just, even with the best firms,

00:43:59.460 | people make mistakes.

00:44:00.920 | - Like we built a really simple tool

00:44:02.360 | that literally you just upload your tax return

00:44:04.040 | and it shows you like all the numbers in a nice format.

00:44:07.040 | And that's how I found it.

00:44:07.920 | 'Cause like, who's going to look through a tax return?

00:44:10.880 | - Yeah, so I played with this tool.

00:44:12.600 | It's at decode.tax.

00:44:14.240 | Can you touch on the privacy side of it?

00:44:17.120 | 'Cause I know one thing that when I first used it,

00:44:19.000 | I was like, God, do I really want to upload a return

00:44:20.940 | with my name, social address,

00:44:22.880 | and all my personal financial details?

00:44:25.000 | - So, I mean, a few different things.

00:44:26.180 | One, you can always like remove your name

00:44:28.200 | and all of that from the return itself.

00:44:29.840 | Like the tech, basically it's OCR.

00:44:31.700 | It scans for the important numbers and pulls them.

00:44:33.800 | But beyond that, a few different things.

00:44:35.280 | One, you can delete your data at any point.

00:44:37.520 | So what a lot of people do is they'll like upload it

00:44:39.320 | and then just immediately delete it.

00:44:41.000 | Two, even if you don't delete it,

00:44:42.160 | like we don't share that data with absolutely anyone.

00:44:45.240 | Like it's literally just stored in our database.

00:44:47.520 | Third is like no identifying information is stored

00:44:50.160 | as we're storing that data.

00:44:51.640 | You know, we're just like pulling the numbers

00:44:53.000 | and storing that part.

00:44:53.880 | But yeah, a lot of people just end up

00:44:54.920 | deleting it right after.

00:44:56.120 | 'Cause obviously privacy and stuff is super important here.

00:44:58.760 | - What I did was the Preview app on Mac

00:45:00.880 | has a really good redacting tool.

00:45:02.560 | And so I just pulled it up, redacted, redacted, redacted,

00:45:05.860 | and ran through, so.

00:45:06.700 | - It would still work totally fine, yep.

00:45:08.900 | - I got all the numbers out of it.

00:45:10.140 | So I'll link to that tool in the show notes.

00:45:12.380 | And we mentioned CPAs.

00:45:13.540 | One stat I learned recently was that,

00:45:15.740 | 'cause the IRS publishes a lot of stats,

00:45:17.340 | that returns signed by a CPA

00:45:19.660 | end up having a lower audit risk.

00:45:21.580 | So I would just say,

00:45:22.980 | if your tax situation is very complicated,

00:45:25.460 | just another one in the corner of go with the CPA.

00:45:29.140 | And then this is a bit of a strange note,

00:45:31.560 | but recently I was trying to kind of model out

00:45:35.080 | a couple alternatives of what to do for taxes.

00:45:37.980 | And I found while I wouldn't have them prepare a tax return

00:45:41.400 | or write anything for you,

00:45:42.820 | ChatGPT is really good at tax questions.

00:45:45.040 | Like really, really good.

00:45:46.500 | And so I had a question around S-Corp elections

00:45:50.220 | and whether it made sense

00:45:51.140 | and how it would affect my future social security benefits.

00:45:53.860 | And it took my verbal input, built out a model,

00:45:56.580 | explained it.

00:45:57.660 | So I would say,

00:45:58.500 | if you're listening to any of this and you have questions,

00:46:00.860 | don't replace your CPA with AI,

00:46:03.560 | but absolutely ask ChatGPT questions

00:46:05.940 | and the results are pretty good.

00:46:08.000 | - Again, I do want to caveat though, they're pretty good.

00:46:10.620 | Like we, for instance, when we built our tax tool,

00:46:12.580 | we actually first loaded a lot of it into GPT.

00:46:15.260 | We got a lot of good data,

00:46:16.700 | but at the end of the day, every once in a while,

00:46:20.420 | could be one in a hundred, one in a thousand,

00:46:22.340 | AI does kind of hallucinate right now.

00:46:24.300 | So don't let that be the be-all and end-all of advice.

00:46:27.400 | Absolutely use ChatGPT as one data point,

00:46:30.260 | but it can't be the sort of sole deciding factor

00:46:33.200 | in any sort of strategy you do.

00:46:34.840 | And again, so we actually ended up pulling out

00:46:37.300 | the AI component for now.

00:46:38.820 | It just needs to be kind of tightly leashed a little bit

00:46:41.260 | because once in a while,

00:46:42.220 | it would just kind of do bad things.

00:46:44.500 | - If you're asking a question like,

00:46:46.680 | how does capital gains tax work?

00:46:48.580 | And you want someone to explain it to you,

00:46:50.500 | where previously it was like find a friend

00:46:52.620 | or pay your accountant, you know,

00:46:54.380 | a high hourly fee to explain things to you.

00:46:56.980 | I think that's where it's becoming

00:46:58.260 | pretty big handy with me.

00:46:59.180 | - Yep, absolutely.

00:47:00.020 | But don't tell it like, what should I do for taxes?

00:47:02.300 | And then blindly follow its advice without, you know,

00:47:04.980 | kind of double checking with the CPA or whatever.

00:47:07.460 | - Absolutely.

00:47:08.300 | Okay, so another big area is investments.

00:47:11.540 | And I think a lot of the things in this area

00:47:13.740 | apply broadly to everyone.

00:47:15.780 | You don't need to be a business owner for many of them.

00:47:18.020 | So maybe let's jump in and start with

00:47:20.200 | kind of the one you highlighted is who the tax code is for.

00:47:23.540 | And it's people that are involved in real estate.

00:47:25.820 | - Yeah, so two big categories of people

00:47:27.820 | that like the tax code benefits, like as an asset class,

00:47:30.180 | I think real estate is amongst

00:47:31.420 | the most tax advantaged asset class out there.

00:47:34.280 | The one other thing that may compete is like startups,

00:47:37.260 | especially with the new sort of QSBS rules.

00:47:39.580 | But those categories are just like tax advantaged

00:47:41.900 | asset classes that have all these benefits built into them.

00:47:45.420 | Should we dive into real estate?

00:47:47.180 | - Yeah, let's do it.

00:47:48.020 | - Cool, let's talk about owning your own home.

00:47:51.160 | Even that is something that the government

00:47:53.160 | clearly wants us to do.

00:47:54.560 | For instance, you can take not a lot of money,

00:47:57.440 | but $10,000 out from any retirement account

00:48:00.040 | at any time to buy your first home.

00:48:02.000 | Like it doesn't matter if you're 25 years old,

00:48:03.800 | 35 years old, 45 years old,

00:48:05.200 | you don't have to wait for retirement to do that.

00:48:07.680 | When you sell your home or a home you've lived in

00:48:10.740 | for two out of the last five years,

00:48:12.620 | you pay no taxes and up to half a million dollars

00:48:14.680 | if you're married on the gain for that home.

00:48:17.660 | Even the way mortgages kind of work, right?

00:48:20.280 | It gives you the ability to lock in

00:48:23.880 | a predetermined interest rate,

00:48:25.440 | protecting you from rising interest rates in the future.

00:48:28.000 | The interest rates fall, you can always refinance it,

00:48:30.480 | all while mortgage interest in turn is tax deductible.

00:48:33.780 | So all of these things have been created

00:48:35.200 | to like really get Americans to buy a home.

00:48:39.320 | And as a result, I think something like 50% of people

00:48:41.560 | in this country own their home,

00:48:43.120 | which is a staggering number

00:48:44.600 | compared to the rest of the world.

00:48:46.040 | And that's just for your own home.

00:48:47.360 | When you get into commercial,

00:48:48.440 | there's a whole other bunch of benefits.

00:48:50.880 | The one thing that I find, you know,

00:48:52.920 | obviously as I explain it,

00:48:54.320 | you have to be in a fortunate financial position,

00:48:57.320 | but that $750,000 limit.

00:49:00.040 | So for people who don't know,

00:49:00.920 | you can deduct your home mortgage interest up to $750,000.

00:49:04.880 | However, there is a tactic that I've learned

00:49:07.880 | from a lot of people who have significant savings,

00:49:10.960 | where one of the other things that is deductible

00:49:13.800 | in the itemized deductions is investment interest.

00:49:17.000 | And so that would be if you take out a margin loan

00:49:19.600 | and invest that money,

00:49:20.960 | the interest you pay to borrow money

00:49:22.440 | for the purpose of investing is deductible.

00:49:24.560 | Well, one thing that a lot of people have been doing,

00:49:26.840 | especially in California,

00:49:27.920 | where there's a lot of cash buyers,

00:49:29.760 | is if you buy a home in cash

00:49:31.680 | and then you do a mortgage after the fact,

00:49:35.080 | the money doesn't actually go to the seller

00:49:37.000 | because you already bought the home.

00:49:38.520 | So what happens is if you bought a $2 million home,

00:49:41.960 | then you refinance it,

00:49:43.260 | which is kind of technically what's happening

00:49:44.680 | 'cause you've already bought it.

00:49:45.960 | Let's say you keep 500,000 in as equity,

00:49:49.440 | you're gonna get a $1.5 million wire into your bank account.

00:49:53.200 | And if you take that $1.5 million,

00:49:56.040 | and one thing that's very important

00:49:57.720 | is that you need to be able to trace the path of it.

00:50:00.880 | But if you take that $1.5 million and go invest it,

00:50:03.360 | put it in a brokerage account,

00:50:04.540 | put it in treasury bills, whatever it is,

00:50:06.720 | now to the IRS,

00:50:08.520 | you can classify the interest you're paying to the bank

00:50:12.320 | as investment interest

00:50:13.760 | because it is a loan that you invested the proceeds of.

00:50:16.880 | And that's one tactic to increase

00:50:19.400 | the interest deduction limit of 750,000 on real estate.

00:50:23.240 | - That's genius.

00:50:24.080 | That's another thing I never knew.

00:50:25.000 | That's awesome.

00:50:26.120 | - So the other way that's gonna be really relevant

00:50:28.600 | to people as homes appreciate,

00:50:30.880 | especially if your home appreciates

00:50:32.920 | and the interest rates drop,

00:50:34.620 | is this doesn't have to be,

00:50:35.880 | I can buy the whole house with cash.

00:50:37.840 | Let's say you buy a home and you buy it for $500,000

00:50:41.880 | and it goes up because if I remember correctly,

00:50:45.780 | the $750,000 limit is locked in at the price

00:50:48.840 | when you first get the mortgage.

00:50:50.720 | And so if your home appreciates,

00:50:52.720 | you can do what's called a cash out refinance,

00:50:54.880 | which lets you take equity out of the home

00:50:57.000 | and refinance your mortgage.

00:50:58.520 | Very few people are gonna be doing that right now

00:51:00.380 | because interest rates for almost everyone

00:51:02.520 | are higher today than they were when they got their home.

00:51:05.080 | But in the future, interest rates drop

00:51:07.720 | and now you have really low interest rates again

00:51:09.900 | and your home has appreciated,

00:51:11.520 | or even you've paid it off enough

00:51:13.100 | that there's a lot of equity value.

00:51:14.700 | When you do that refinance and you get that money out,

00:51:17.940 | it's gonna be hard in many cases

00:51:19.740 | to claim your new mortgage interest

00:51:22.060 | as deductible to the full extent

00:51:24.260 | because it's higher than it was when you bought your home.

00:51:26.500 | But if you take that cash out and you invest it,

00:51:29.380 | similarly, if you work with a CPA,

00:51:31.580 | you can validate this

00:51:32.580 | and make sure you're doing it correctly,

00:51:34.500 | but you can classify the cash you took out

00:51:36.960 | and that portion of your mortgage as investment interest

00:51:40.240 | and it qualifies as an itemized deduction.

00:51:42.560 | The big important caveat is you have to follow

00:51:45.360 | what's called interest tracing guidelines.

00:51:48.160 | I'll try to link in the show notes to a couple articles

00:51:50.200 | about this tactic and interest tracing,

00:51:52.840 | but you really wanna be able to show here's the money,

00:51:55.400 | it went into this other bank account

00:51:57.120 | that I opened separately,

00:51:58.480 | it didn't get commingled with my expenses

00:52:00.680 | and all of my personal finances,

00:52:02.400 | and then it went directly into an investment.

00:52:04.520 | So in the future, when interest rates are lower,

00:52:06.800 | you may wanna cash out refinance, that's a tactic.

00:52:09.880 | But for people right now who have a lot of cash

00:52:13.000 | and are buying a home

00:52:14.080 | and are scared about these interest rates

00:52:16.400 | and their mortgage is gonna be over $750,000,

00:52:19.600 | you could potentially, if you're at the highest tax bracket,

00:52:22.320 | kind of cut the mortgage rate in half

00:52:24.720 | if you can make it deductible beyond 750,000.

00:52:28.360 | - That's awesome.

00:52:29.200 | Is there a cap on the maximum amount of investment interest,

00:52:33.320 | income interest costs that you can deduct?

00:52:36.360 | - Yeah, so you need, and again, not a CPA,

00:52:38.960 | but my understanding is that you need to deduct

00:52:41.480 | that investment interest expense from investment income.

00:52:44.640 | So the cap would be how much income

00:52:47.120 | did the investment generate.

00:52:49.520 | Generally, and the advice I got from a CPA

00:52:52.680 | was that it's not just the income from that investment,

00:52:56.520 | it's all of your investment income.

00:52:58.280 | But typically, if you figure interest rates

00:53:01.200 | are usually not that far off from your investment returns,

00:53:05.680 | so as long as this isn't all of your investments,

00:53:08.280 | you are likely to have more investment income.

00:53:10.560 | - Got it.

00:53:11.400 | But presumably your investment income

00:53:13.120 | is like what's been realized, right?

00:53:14.800 | Like you could theoretically--

00:53:15.920 | - Yes, yeah, so it'd have to be interest paid out

00:53:18.480 | or dividends or realized capital gains

00:53:21.160 | or anything like that.

00:53:22.000 | But I would imagine that for most people

00:53:24.160 | who are buying a home

00:53:25.200 | where the mortgage interest is above 750,000,

00:53:28.040 | they are probably in a situation where,

00:53:30.080 | and they have the cash to buy a home using this tactic,

00:53:33.680 | they probably also have investments

00:53:35.600 | that are spitting off investment income to deduct from.

00:53:38.760 | - Makes a ton of sense.

00:53:40.040 | All right, let's pivot to commercial real estate.

00:53:42.480 | So again, if you look at some of the wealthiest people

00:53:45.480 | in America, you'll find that a lot of them

00:53:47.560 | eventually end up buying real estate.

00:53:48.840 | Some of them start with it,

00:53:49.680 | but a lot of them eventually end up buying real estate.

00:53:51.360 | And that's 'cause commercial real estate

00:53:53.040 | just also gives you a ton of benefits.

00:53:55.880 | - And just to be clear,

00:53:56.720 | when you say commercial real estate,

00:53:58.120 | you don't necessarily mean buy an office building,

00:54:00.400 | you mean buying real estate as a business--

00:54:03.200 | - As a business activity, you're right.

00:54:04.160 | That's a very good clarification.

00:54:05.680 | And yeah, I should, by that I mean not your primary home,

00:54:08.120 | but real estate you invest in as an investment.

00:54:11.480 | That's probably a better word.

00:54:12.520 | - Or a rental property.

00:54:13.360 | - Yep, basically any real estate that you're buying

00:54:15.520 | for the purpose of making an income

00:54:17.320 | rather than living in it yourself.

00:54:18.760 | So a few different things that are important to touch on.

00:54:20.960 | One is, we could have covered this

00:54:22.920 | in the capital gain section as well,

00:54:24.680 | but if you have a capital gain,

00:54:27.920 | you can actually defer paying taxes on that capital gain

00:54:30.360 | till 2026 by investing in an opportunity zone.

00:54:33.560 | I don't know if you've covered that in previous episodes.

00:54:36.240 | - That is one where if we did, it was briefly.

00:54:38.760 | So let's touch on that and then talk about

00:54:40.800 | kind of more broad real estate investing.

00:54:43.480 | - Oh yeah, we'll talk about opportunity zones real quick.

00:54:45.600 | The way they work is the government wanted to incentivize

00:54:48.120 | investments in certain underdeveloped areas.

00:54:51.280 | And you can basically take dollars from any capital gain,

00:54:54.800 | short-term or long-term,

00:54:56.240 | and within 180 days,

00:54:57.800 | invest it in what's called a qualified opportunity zone

00:55:00.320 | fund, which is a fund to develop properties

00:55:02.680 | in these qualified opportunity zones.

00:55:04.640 | What's fascinating about these opportunity zones is,

00:55:07.160 | at least in New York,

00:55:08.000 | I don't know how it works in other cities,

00:55:09.120 | is a lot of them have happened to be in very trendy areas

00:55:13.000 | because they're based on 20-year-old census data.

00:55:15.560 | So like I live in Williamsburg,

00:55:16.920 | which is a trendy neighborhood in New York now,

00:55:19.320 | it wasn't so much 20 years ago,

00:55:21.080 | but a lot of parts around here are characterized

00:55:23.080 | as an opportunity zone.

00:55:24.040 | So I know a lot of people that have set up

00:55:26.000 | qualified opportunity zone funds themselves

00:55:28.280 | and are buying these properties

00:55:30.240 | and this gives you two big benefits.

00:55:31.520 | One, you can defer paying capital gains till 2026,

00:55:34.720 | but more than that,

00:55:35.600 | if you hold on to that investment for 10 years,

00:55:38.360 | you get an automatic step up in basis.

00:55:40.600 | What that means is 10 years from now,

00:55:42.560 | whatever the property is worth,

00:55:43.760 | that's your new cost price,

00:55:45.280 | or if you were to sell at that price, there's no taxes.

00:55:47.800 | So it's kind of a cool strategy if you end up at a point

00:55:50.160 | where you have a large capital gain

00:55:52.000 | and you are interested in commercial real estate,

00:55:54.760 | as well as all the other tax benefits

00:55:56.960 | we're going to talk about

00:55:57.960 | that can be combined with opportunity zones.

00:56:00.240 | - Okay, so that means like if I bought Tesla stock

00:56:02.600 | and I'm now sitting on a big amount of Tesla stock

00:56:04.600 | that's up 10X, but I don't want to hold it anymore,

00:56:07.640 | I can sell it, invest those proceeds in an opportunity zone,

00:56:11.040 | hold it for 10 years and kind of avoid all of those taxes.

00:56:14.960 | - Yeah, yeah, and you get an automatic step up in basis,

00:56:16.800 | which we talked about happens at death,

00:56:18.320 | but otherwise it's very rare

00:56:20.120 | to get an automatic step up in basis.

00:56:22.280 | And you do that and you get that with opportunity zones.

00:56:24.440 | Again, I wouldn't do this

00:56:26.200 | unless you're interested in real estate

00:56:27.920 | and would be investing in real estate already,

00:56:30.200 | because again, this does take time.

00:56:32.240 | But otherwise, if you are interested,

00:56:33.720 | it's absolutely worth thinking about,

00:56:35.480 | at least looking up,

00:56:36.320 | what are the opportunity zones in your city?

00:56:38.000 | You can always Google the name

00:56:39.200 | of your city opportunity zones, see a map,

00:56:41.320 | like the one in New York is very favorable.

00:56:43.320 | So I know a lot of people that have been doing it.

00:56:45.120 | But cool, that's opportunity zones.

00:56:46.320 | Outside of that, let's talk about some of the bigger benefits

00:56:48.440 | of investing in real estate for income.

00:56:51.040 | Two very big ones that are super important.

00:56:54.400 | One is this idea of a 1031 exchange.

00:56:58.920 | And what that means is if you buy a property

00:57:02.160 | as an investment, and then sell that property,

00:57:04.960 | you have the opportunity

00:57:06.280 | to take the entire pre-tax proceeds.

00:57:08.720 | So whatever you'd make from selling this,

00:57:10.200 | the entire amount into a bigger and more expensive property

00:57:13.880 | without paying any taxes.

00:57:15.600 | What's cool is you can kind of do it

00:57:17.400 | an unlimited number of times.

00:57:19.040 | You can start with a $100,000 property,

00:57:21.240 | then a $200,000 property,

00:57:22.920 | and kind of keep buying bigger and better properties

00:57:26.320 | while continually deferring taxes.

00:57:29.120 | - And the other thing is you can keep doing that.

00:57:31.480 | And someone might think, well, what if I need the money?

00:57:33.040 | But a lot of these properties

00:57:34.400 | are gonna be spitting off money throughout the year.

00:57:36.040 | So it's not that you don't have a way

00:57:37.720 | to make money from your real estate.

00:57:39.160 | It's just that you can avoid the taxes

00:57:41.160 | on buying and selling.

00:57:42.400 | - Absolutely, makes a huge difference.

00:57:44.440 | The other big category of why people invest in real estate

00:57:48.920 | is this idea of depreciation.

00:57:51.120 | Some people go far enough to call it

00:57:52.320 | the eighth wonder of the world.

00:57:53.400 | But the way depreciation works

00:57:55.000 | is when you buy any physical asset,

00:57:56.640 | let's say you buy a building,

00:57:58.200 | it loses value over time, right?

00:58:00.920 | Depreciation refers to the loss of value over time.

00:58:04.160 | And some people call it a phantom loss

00:58:06.080 | because it's not taking money from your pocket,

00:58:08.400 | but this building has lost some value year over year

00:58:11.520 | because it's older and worthless.

00:58:13.480 | And you can claim that as a loss

00:58:16.640 | either against your real estate income,

00:58:18.560 | if you're just doing this as something on the side,

00:58:21.000 | or if you somehow can classify yourself

00:58:23.240 | as a real estate professional,

00:58:24.640 | you can use that depreciation

00:58:26.600 | to actually offset other income as well.

00:58:29.080 | - Okay, so we get depreciate.

00:58:31.480 | I believe there are some things,

00:58:32.960 | if you do a cost segregation study,

00:58:35.280 | you not only can depreciate over the life,

00:58:37.520 | but you can actually accelerate certain items

00:58:39.800 | and take it all up front or 80% of it up front.

00:58:42.680 | And I think I heard you say in another thing

00:58:44.360 | that in certain cases,

00:58:45.760 | you can depreciate 20 to 25% of the entire value

00:58:48.560 | in the first year.

00:58:49.560 | - Correct, so again, back to Trump,

00:58:52.160 | 2017 Jobs Act, right, that Trump did.

00:58:54.640 | Again, I mean, who is Trump?

00:58:56.360 | Like, who is he trying to favor?

00:58:57.480 | Real estate developers is a big part of it.

00:58:58.920 | So what he did is you can take any property.

00:59:03.320 | Let's say we have a building.

00:59:04.840 | I can get what's called a cost segregation study.

00:59:07.440 | And what that is, it's a study,

00:59:09.040 | it'll cost a few thousand dollars.

00:59:10.240 | Someone will come look at my building.

00:59:11.520 | They'll be like, one, this is the cost of your land.

00:59:14.280 | Land can never be depreciated.

00:59:15.600 | Everything else gets depreciated to zero,

00:59:17.040 | but land does not lose value.

00:59:19.040 | But everything else, they'll come up with like,

00:59:21.120 | oh, your windows are worth X dollars.

00:59:23.360 | Your HVAC is worth Y dollars.

00:59:25.440 | And anything that has a schedule of less than 15 years,

00:59:28.760 | like all of these things

00:59:30.000 | typically have different schedules.

00:59:31.640 | Anything less than 15 years,

00:59:33.720 | 80% of it can be depreciated year one out of 2023.

00:59:37.800 | Next year, it drops to 60%.

00:59:39.800 | But the upshot of all of this

00:59:40.920 | is very often you can buy a property

00:59:43.360 | and get almost 20% of the purchase price

00:59:46.400 | as a year one deduction,

00:59:48.040 | which is very relevant

00:59:49.120 | 'cause sometimes your cash down payment is also 20%, right?

00:59:52.640 | So it's a very, very efficient way of building wealth

00:59:56.640 | for people that are interested in it.

00:59:58.520 | - And the income from this,

01:00:00.120 | or the lack of income 'cause you've deducted all of it,

01:00:02.840 | is that only from your real estate taxes

01:00:05.520 | or can it also go off your primary income?

01:00:07.320 | - So this is where it gets a little bit tricky, right?

01:00:09.200 | So in general, for most people,

01:00:11.160 | let's say you're a W-2 employee,

01:00:12.840 | this will help offset your real estate income.

01:00:15.400 | But let's imagine you wanted to offset

01:00:18.760 | your other non-real estate income.

01:00:20.680 | There's a few sort of ways it can happen.

01:00:23.560 | I say this facetiously,

01:00:24.920 | but like when people with a high W-2 salary ask me like,

01:00:27.880 | "Okay, what should I do to save money in taxes?"

01:00:29.560 | I'm like, "Marry a real estate professional."

01:00:32.120 | But very often that does work very well

01:00:35.080 | 'cause if you or your spouse are a real estate professional,

01:00:37.840 | you can offset all your income with depreciation.

01:00:41.680 | But being a real estate professional is hard.

01:00:43.720 | It takes 750 hours a year

01:00:46.000 | and you have to show that this is your primary job.

01:00:49.080 | So it's very, very unlikely you can qualify

01:00:52.200 | if you have a high W-2

01:00:53.400 | to also qualify as a real estate professional,

01:00:56.000 | which is why having a spouse that's a real estate professional

01:00:58.880 | can be a very potent combination, right?

01:01:00.920 | Someone who has a high-paying tech job, for instance,

01:01:03.600 | pairing with a real estate professional,

01:01:05.960 | y'all can buy investment properties

01:01:07.880 | and use that depreciation to not pay any taxes

01:01:09.720 | on the other spouse's Facebook salary, for instance.

01:01:13.080 | So super effective combination.

01:01:14.880 | - And are there any other ways to be able to do it?

01:01:17.120 | - There's another way,

01:01:18.080 | which is if you use the property

01:01:20.840 | for primarily short-term rentals

01:01:23.440 | and you're somewhat involved in running that process,

01:01:26.360 | the IRS takes the stance that that's an active business

01:01:29.080 | and as a result, you can offset regular income.

01:01:32.440 | So it's a little tricky,

01:01:33.720 | but I have seen people pull it off

01:01:35.360 | where let's say they own a building,

01:01:37.520 | they're staying in one of the floors,

01:01:38.760 | another floor is an Airbnb

01:01:40.600 | and they're using that depreciation.

01:01:41.920 | So the short-term rental loophole also exists.

01:01:44.760 | We could talk about it a little bit

01:01:46.040 | in the business owner section,

01:01:47.080 | but I've also seen people buy real estate

01:01:49.520 | with their business.

01:01:50.520 | So if they have an office, buying the office building,

01:01:53.720 | if they have a storefront, buying that physical asset

01:01:56.640 | and using that depreciation

01:01:57.680 | against their business owner income,

01:01:59.160 | even if it's not connected to real estate.

01:02:01.200 | - And if you needed one more reason

01:02:02.600 | to know that we're favoring real estate,

01:02:04.440 | I believe if you have a side hustle that is freelance work,

01:02:09.040 | you have to pay self-employment taxes.

01:02:10.880 | But if you have a side hustle that's a rental property,

01:02:12.840 | you don't, is that right?

01:02:14.240 | - Yep, it's crazy.

01:02:15.240 | But yeah, no self-employment taxes on rental income.

01:02:18.040 | - It's crazy.

01:02:18.880 | Okay, so that's real estate.

01:02:20.120 | One that I think a lot of people here

01:02:21.560 | haven't heard talked about on the show

01:02:23.520 | that is relatively new,

01:02:24.920 | but really, really interesting is solar.

01:02:28.280 | - Commercial solar.

01:02:29.120 | Again, this goes back to Biden's Inflation Reduction Act.

01:02:31.600 | There were a ton of incentives created for solar investing.

01:02:36.600 | And as it stands today, I still think of solar

01:02:39.200 | as like it's a subset of real estate.

01:02:40.520 | It's still sort of a type of real estate,

01:02:42.120 | but commercial solar, in addition to depreciation,

01:02:46.240 | also gives you tax credits.

01:02:47.920 | And sometimes tax credits can be up to 40%

01:02:51.200 | of your investment.

01:02:52.600 | And worth noting,

01:02:54.080 | a tax credit is not the same as a tax deduction.

01:02:56.640 | A tax deduction reduces your taxable income.

01:02:58.760 | So you save your tax rate into the tax deduction.

01:03:01.880 | A tax credit is a dollar for dollar reduction

01:03:04.280 | in taxes paid.

01:03:05.640 | So it's super, super powerful where,

01:03:07.640 | let's say you invest a million dollars

01:03:09.040 | and get a $400,000 tax credit,

01:03:11.040 | that directly reduces your taxes by $400,000.

01:03:14.040 | That can be applied moving forward.

01:03:15.600 | It can also go back a couple of years.

01:03:17.480 | Super, super powerful,

01:03:18.960 | because when you combine that with depreciation,

01:03:21.200 | and typically commercial solar also spins off income,

01:03:24.240 | very often, you're getting 70 to 80% of the money

01:03:28.320 | back in tax savings right away

01:03:30.520 | with the income then coming in and compounding on top.

01:03:33.320 | - Yeah, so if you're a high W-2 earner

01:03:36.040 | or a business owner with a lot of income,

01:03:38.840 | I have not seen a strategy for reducing your taxes

01:03:41.920 | that is better than solar.

01:03:44.040 | - It's wild how big the effect is.

01:03:46.040 | And again, just to like quickly break it down,

01:03:48.280 | you get the tax credit, you get the depreciation.

01:03:50.960 | A lot of it can be,

01:03:52.200 | the depreciation can be front-loaded

01:03:53.440 | and bonus depreciated as well.

01:03:55.360 | And then typically these projects will pay

01:03:57.280 | like 5% or so of your investment every year

01:04:00.360 | based on the energy generated

01:04:01.840 | from the solar projects for 20 years.

01:04:03.440 | So you kind of get that back as well.

01:04:05.400 | And a more advanced tactic I've seen people do

01:04:07.120 | is you can take that income

01:04:08.640 | and put that back into a tax advantage account

01:04:10.920 | and not even pay taxes on the income itself.

01:04:12.760 | So lots of levels to this.

01:04:14.840 | - But does it need some amount of solar professional

01:04:18.000 | similar to real estate?

01:04:19.360 | - Yeah, so if you wanna offset your active income,

01:04:21.520 | which most people would want to,

01:04:23.440 | you wanna ideally be classified as a solar professional,

01:04:26.360 | but the advantage is being a solar professional

01:04:28.520 | is maybe 10 times easier than your real estate professional

01:04:31.680 | because a solar professional, you need 100 hours a year,

01:04:36.280 | which is about eight hours a month,

01:04:37.880 | which is not that much.

01:04:39.040 | I mean, you probably have to tour the site

01:04:40.560 | a couple of times, go to a solar conference.

01:04:42.640 | It's a lot easier to hit a solar professional status.

01:04:44.920 | Real estate professional is really, really hard.

01:04:46.960 | You can't half-ass it.

01:04:48.360 | Solar can kind of be the side hustle that you do

01:04:50.680 | and hit solar professional status.

01:04:53.120 | - And where do you find these projects?

01:04:54.680 | Like commercial solar projects,

01:04:56.400 | is there an easy way to find them?

01:04:57.880 | - We've been partnering a bunch with Valure,

01:04:59.680 | and I know you had Mani on your podcast as well.

01:05:02.120 | They have a bunch of solar projects that have been doing that

01:05:04.120 | so I've been working a lot with them and other providers.

01:05:07.000 | - Okay, we'll link to that in the show notes.

01:05:08.720 | But you said earlier investing in startups

01:05:10.320 | is pretty lucrative.

01:05:11.160 | So let's run through that a little.

01:05:12.480 | - Yeah, absolutely.

01:05:13.320 | So there's probably the most generous tax break

01:05:17.400 | by just raw size is something called QSBS

01:05:20.840 | or Qualified Small Business Stock.

01:05:22.880 | And that allows anyone who either invests in a startup,

01:05:26.560 | works for a startup, or starts a startup,

01:05:29.200 | and there's a few rules.

01:05:30.320 | It has to be a qualifying startup.

01:05:31.640 | It has to have less than 50 million in assets

01:05:33.640 | when you invest or buy shares.

01:05:35.400 | What you can get is no taxes and up to $10 million

01:05:39.360 | when you sell that stake

01:05:40.960 | as long as you hold your shares for five years,

01:05:43.360 | which is, it's just massive.

01:05:45.080 | And it's something that I personally benefited from

01:05:47.040 | when I sold my last company.

01:05:48.600 | But interestingly, it also applies

01:05:50.080 | to people who invest in these startups.

01:05:51.960 | So it's something that I've seen awareness has spread

01:05:54.560 | so more people are doing this,

01:05:56.000 | but it's a $10 million break from federal taxes

01:05:58.800 | and in 42 states, no state taxes as well.

01:06:02.000 | So super, super effective.

01:06:03.280 | And there's actually even strategies

01:06:04.960 | that you can use to multiply that benefit

01:06:06.760 | from $10 million to 20, 30, or $40 million.

01:06:09.680 | So if you are inclined to work with or invest in startups,

01:06:13.920 | again, you need a startup to be successful,

01:06:15.800 | which the odds aren't great, but if it happens,

01:06:18.800 | you get to keep almost all of the money.

01:06:20.960 | - And I'll just clarify.

01:06:22.440 | Oftentimes, I think of startups as like tech companies.

01:06:24.960 | It's really any business, right?

01:06:26.560 | It doesn't have to be a venture-backed tech company.

01:06:29.400 | - It has to be a C corporation,

01:06:31.120 | and that's sort of the main rule.

01:06:32.720 | And very often, people who set up C corporations

01:06:35.520 | are those that raise external capital

01:06:37.880 | or plan to go public in the future,

01:06:39.520 | but it does not have to be a tech company at all.

01:06:41.600 | But it's not possible with an LLC or an S corporation.

01:06:44.240 | For the first time, I'm seeing some people

01:06:45.960 | set up C corporations just for the benefit

01:06:48.120 | 'cause the size of benefit is so large here.

01:06:50.360 | - And a couple other caveats.

01:06:51.680 | One, I know that, let's say you invest

01:06:53.600 | in one of these companies and it does really well,

01:06:56.000 | but it's only in three years.

01:06:57.280 | You can actually roll over those gains

01:06:59.120 | into, I think they're like QSBS rollover funds

01:07:01.640 | or new companies, and similar to a 1031 exchange,

01:07:04.880 | you can extend that runway until it gets to five years,

01:07:08.160 | and then you can take your money out tax-free.

01:07:09.560 | - You could do it in a company you start as well.

01:07:11.280 | Like you could literally be like,

01:07:12.400 | "Oh, this investment is going to hit,

01:07:13.760 | and I can start my own C corp

01:07:15.200 | because I wanna start my own startup,"

01:07:16.480 | and immediately roll that pre-tax dollar amount in.

01:07:19.120 | So super effective.

01:07:20.360 | The other cool thing about QSBS

01:07:21.840 | is the limit is per company per taxpayer.

01:07:24.800 | So if you invest in 10 companies,

01:07:26.280 | each of these companies will have

01:07:27.440 | their own $10 million limit.

01:07:29.160 | The other thing is it's per taxpayer.

01:07:30.960 | So what I did with this company, for instance,

01:07:32.960 | is I gave some shares to my mom,

01:07:34.800 | some shares to my dad, some shares to my brother,

01:07:37.520 | and now each of us have our own

01:07:39.120 | $10 million theoretical limit.

01:07:40.600 | As a household, it can be a 30 or $40 million limit.

01:07:44.640 | - But like you said,

01:07:45.920 | this is not a strategy without risk, right?

01:07:48.520 | Most startups fail.

01:07:49.880 | Both the startups I worked for and started

01:07:52.280 | are not around, actually all three of them.

01:07:54.640 | And so I still, my advice is,

01:07:57.520 | if you wanna invest in startups,

01:07:58.960 | it's a losing game, but you can win big,

01:08:01.520 | but keep it to a small single-digit percentage

01:08:04.120 | of your net worth. - Absolutely.

01:08:05.800 | - Because the odds are not in your favor.

01:08:07.920 | But I believe if you do lose money,

01:08:10.560 | you can also write it off as a startup investment.

01:08:13.080 | - The actionable thing here

01:08:14.760 | is I think more for startup founders

01:08:16.560 | where what I have done this time,

01:08:18.720 | and I would encourage other founders

01:08:19.880 | if they're listening to,

01:08:20.720 | is be conscious of the five-year clock

01:08:22.920 | and try and make sure your employees participate in it.

01:08:25.160 | And I'll give you an example.

01:08:26.560 | At my last company, we gave our early team stock options.

01:08:30.200 | So a lot of them didn't exercise it

01:08:31.680 | until year one or year two.

01:08:33.440 | And as a result, they weren't at the five-year mark,

01:08:35.360 | even though it had been six years since we sold the company.

01:08:37.720 | This time around, I'm giving everyone shares

01:08:39.640 | they can buy up front

01:08:40.480 | and get the QSPS clock started sooner for them.

01:08:43.000 | That's something actionable.

01:08:44.320 | - Yeah, if you work at a company,

01:08:46.040 | and it's not the valuation, it's the assets.

01:08:48.760 | But if you work at a company,

01:08:50.320 | my wife worked at Lyft.

01:08:51.520 | And by the time we realized this,

01:08:53.400 | the company had already raised more than $50 million

01:08:55.720 | and it was too late.

01:08:56.640 | So if you're just an employee of a company

01:08:58.560 | that's assets are worth less than 50 million,

01:09:01.280 | that's a good time to think about exercising your stock.

01:09:04.640 | But one investment tax break around exercising stock

01:09:08.680 | is if you work for a company

01:09:09.600 | and you hold incentive stock options or ISOs,

01:09:12.800 | a lot of the challenges around taxes

01:09:14.440 | and where you might wanna work with a CPA

01:09:16.400 | is that when you exercise that stock,

01:09:18.280 | you can trigger something called AMT,

01:09:20.040 | which is the alternative minimum tax.

01:09:21.840 | But there's usually a threshold every year

01:09:24.480 | where you could exercise some of your stock

01:09:27.160 | without triggering additional taxes.

01:09:29.320 | And so that's a way that early on

01:09:31.400 | in the life cycle of a company,

01:09:32.560 | if you're holding incentive stock options,

01:09:34.520 | you can start to slowly exercise them

01:09:36.320 | without any additional taxes.

01:09:38.080 | - Yep, you said everything I need to there, so.

01:09:41.160 | - A couple of quick other ones

01:09:42.280 | that I'll share in the investment space.

01:09:44.000 | So one, there are a lot of government securities

01:09:46.200 | that save you money on state and local taxes

01:09:49.320 | with high interest rate environment.

01:09:51.000 | One thing I didn't talk about in the past

01:09:52.920 | 'cause that wasn't the case,

01:09:54.360 | investing in treasury bills

01:09:55.600 | or funds that invest in treasury bills

01:09:57.440 | or state muni bonds can save you taxes on the gains.

01:10:01.600 | Obviously, those come with some risks

01:10:03.720 | depending on what state you're in

01:10:05.080 | and what type of investment,

01:10:06.560 | but that is one way to limit your investment taxes.

01:10:09.880 | - That's a really good point,

01:10:10.800 | especially because some people will look at

01:10:12.360 | a high yield checking account offering 5% or whatever,

01:10:16.320 | buying the equivalent yield or more

01:10:19.240 | in let's say a mutual fund that only invests in treasuries.

01:10:21.880 | And if you live in California, New York,

01:10:23.320 | you're saving an additional 10%

01:10:25.360 | by going with the treasury mutual fund

01:10:26.880 | versus your high interest checking account

01:10:29.040 | because of not paying state taxes.

01:10:31.640 | - And that's not 10%, like five plus 10, 15%,

01:10:35.640 | but boost that return.

01:10:36.760 | So like divide the number by 0.9

01:10:39.120 | if you're in the highest tax bracket.

01:10:40.560 | - Up your knees.

01:10:41.400 | - If you're getting 5% on your treasury bill fund,

01:10:44.240 | it's like you're getting 5.5%

01:10:46.560 | or similar in the high yield savings account.

01:10:48.880 | Another one for someone who has a lot of stock

01:10:51.400 | in an individual company,

01:10:53.680 | there's these things called exchange funds.

01:10:56.600 | So there's one that I recently came across

01:10:58.480 | called the usecash.com.

01:10:59.720 | I don't have any affiliation with them.

01:11:01.400 | They basically pool together investors

01:11:04.480 | who have large positions in companies

01:11:07.360 | that are in the tech sector.

01:11:09.120 | They let you contribute your Facebook, Microsoft,

01:11:12.080 | Amazon, Netflix, whatever stock to a fund.

01:11:14.880 | And in return, you get shares of that fund

01:11:17.040 | without triggering any taxable situation.

01:11:19.680 | So if you are really, really heavy on a tech stock

01:11:23.120 | from an employment or an investment,

01:11:24.560 | and you want to diversify,

01:11:26.440 | but you don't wanna realize capital gains right now,

01:11:29.440 | you can use a company like Cash or any other exchange fund

01:11:32.840 | and find a way to push out the capital gains,

01:11:35.560 | but also diversify.

01:11:36.920 | - Do you know what their fees are?

01:11:37.920 | I love exchange funds,

01:11:38.840 | but most of them I've seen just have such high fees.

01:11:41.600 | So similar to, I think, what you guys are doing with Cary,

01:11:45.240 | what we did at Wealthfront,

01:11:46.840 | it's leveraging technology to bring down the cost

01:11:50.000 | of a lot of these things.

01:11:51.640 | And so in the past, I can't remember what their fees are,

01:11:55.760 | but I'm looking on the site,

01:11:57.160 | 0.4 to 0.8% management fee based on contribution.

01:12:00.960 | No performance fee, no sales fee.

01:12:03.400 | - Okay, cool.

01:12:04.240 | That's, yeah, that's definitely much, much better

01:12:06.760 | 'cause yeah, the products I've seen pitched

01:12:08.280 | are 1% to 2%, which are so high.

01:12:10.400 | 0.8 is still probably a tad higher than I'd like,

01:12:12.280 | but yeah, it's definitely moving the right direction.

01:12:14.560 | - And then last, we talked about trusts.

01:12:16.360 | I think we'll skip over all the different types of trusts

01:12:19.320 | you can use to offset capital gain,

01:12:21.560 | to move stock places so you get access to money.

01:12:24.680 | Go back and listen to the episode I did

01:12:26.240 | with Manny from Valor.

01:12:27.720 | I'll link to it in the show notes.

01:12:28.960 | And I think that's it for everything non-business owner.

01:12:32.360 | So we talked a bunch earlier about ways

01:12:34.760 | to generate business income if you're not already

01:12:37.040 | starting a side hustle, getting into real estate,

01:12:39.160 | even asking your employer to help you out

01:12:41.920 | by making some of your income, 1099 income,

01:12:45.000 | consulting income instead of just W-2 salary.

01:12:48.240 | And then obviously there's start a business.

01:12:50.120 | So let's talk about things for people

01:12:52.640 | who've started those businesses or want to in the future

01:12:55.040 | and why that's really valuable.

01:12:56.880 | Let's start with the benefits of the QBI deduction.

01:13:00.360 | - Yeah, so I mean, again, if you ever want proof

01:13:02.560 | that the tax code is like rigged for business owners,

01:13:05.000 | consider like two things.

01:13:07.000 | Again, both are from the 2017 Trump Jobs Act or whatever.

01:13:10.760 | One is the QBI deduction where they basically decided

01:13:13.640 | to give a bunch of business owners a free 20% deduction

01:13:17.360 | just because there's some rules around it

01:13:20.560 | for high income earners specifically

01:13:22.320 | and how you optimize that.

01:13:23.720 | But for most people, it's an automatic,

01:13:25.280 | up to 20% deduction right there

01:13:27.320 | just for being a business owner.

01:13:28.880 | The other one that we talked about a little bit before

01:13:31.400 | is if you're not a business owner,

01:13:32.920 | you actually can't deduct more than $10,000 worth

01:13:36.040 | of state and local taxes.

01:13:37.880 | But in response to that,

01:13:39.080 | a lot of states created legislation

01:13:41.400 | that let you pay an elective tax from your business entity

01:13:45.680 | whereby you can pay the entire state tax amount

01:13:48.600 | through your business entity

01:13:49.680 | and thereby bypass the $10,000 limit

01:13:52.360 | and get a deduction for the entire amount

01:13:54.040 | of state taxes paid.

01:13:55.520 | - That's a pass through exemption, I believe, right?

01:13:58.040 | If someone's looking to kind of Google and search up more.

01:14:00.840 | - Every state has structured it a little bit differently.

01:14:03.800 | Like the rules vary a little bit by state,

01:14:05.520 | but yeah, in a lot of cases, it's an elective tax.

01:14:07.840 | So if you're in California, if you are in New York,

01:14:10.040 | if you're in a high income state

01:14:12.000 | and most of your income is business owner income,

01:14:14.000 | make sure your CPA is doing that

01:14:16.320 | or make sure you're thinking about that

01:14:17.560 | because in a lot of cases, it's an elective tax.

01:14:19.840 | So if you don't know, you're not gonna do it

01:14:21.360 | and you may miss out.

01:14:23.040 | - This is another great place where TurboTax

01:14:25.040 | is not gonna say, "Hey, do you wanna do this other thing?"

01:14:27.120 | It's gonna say, "Hey, did you do this thing?"

01:14:28.880 | Can they pass on property tax

01:14:30.400 | or is it only state income tax?

01:14:32.480 | - I think it's primarily state income tax

01:14:34.400 | or anything attributable to the business.

01:14:35.960 | So my guess is if it's something,

01:14:37.360 | property under the business is probably fine,

01:14:39.200 | but not if it's under you individually.

01:14:40.960 | Also, some states are fine with LLC,

01:14:42.560 | some states require S-Corps,

01:14:44.240 | so it depends a little bit on that.

01:14:45.880 | While we're on the topic of QBI,

01:14:47.240 | which we briefly talked about,

01:14:48.480 | if you're a high income earner,

01:14:50.040 | which I think is 160,000 single, 320,000 as a couple,

01:14:55.040 | your QBI is also limited by 50% of the wages paid.

01:15:00.040 | And if you have an S-Corp, for instance,

01:15:02.360 | we didn't talk a lot about, maybe we will later,

01:15:04.640 | there may be a temptation to pay yourself

01:15:06.480 | the lowest W-2 salary possible.

01:15:09.160 | But because of QBI,

01:15:10.400 | sometimes you would wanna pay yourself

01:15:11.920 | a slightly higher W-2 salary

01:15:14.040 | to maximize the amount of taxes you save on.

01:15:17.400 | So my recommendation overall is if you're a high income earner,

01:15:20.400 | have an accountant, have someone qualified,

01:15:23.080 | run the calculation on what is the precise amount

01:15:26.600 | you should pay yourself.

01:15:27.440 | 'Cause there's one specific dollar number in salary

01:15:30.400 | that will reduce your taxes

01:15:31.840 | because you have to balance self-employment taxes and QBI

01:15:35.440 | to find the perfect number

01:15:36.640 | that results in the lowest amount of taxes.

01:15:39.000 | - The team I was working with at Gelt,

01:15:40.640 | I have a spreadsheet that we just went through

01:15:42.680 | and the result was the amount of money

01:15:44.680 | I should pay myself as a salary

01:15:46.480 | was higher than I had expected.

01:15:47.800 | - Correct, and that's what happened because of QBI, exactly.

01:15:50.480 | And again, if someone's like,

01:15:51.720 | "Okay, what do I really need a CPA for?"

01:15:53.240 | This is a great example.

01:15:54.520 | Getting that one number correct is so important.

01:15:58.040 | - Yes, and just to be clear, I love this stuff

01:16:00.160 | and we've been talking about it for over an hour

01:16:02.080 | and I still looked at that spreadsheet and said,

01:16:04.240 | "I am so glad someone else was preparing this for me."

01:16:07.200 | - And again, if people are curious,

01:16:09.200 | I mean, we, for instance, are releasing online resources

01:16:12.160 | to self-calculate it just so people are curious.

01:16:13.960 | But the idea is just like, use this as a guide,

01:16:15.840 | have a professional actually run the numbers.

01:16:17.480 | You don't want to do it yourself.

01:16:19.360 | - But we talked about S-Corps

01:16:20.520 | and this is a decision I was making recently.

01:16:23.760 | But one of the things is

01:16:25.120 | when you have self-employment income as a business owner,

01:16:28.080 | you are subject to pay your self-employment taxes

01:16:31.000 | entirely yourself.

01:16:32.080 | And that's your social security, your Medicare,

01:16:34.720 | which your employer usually picks up half of.

01:16:37.440 | And so the advantages of making sure you're electing

01:16:40.720 | for an S-Corp election are that you split your net income

01:16:45.480 | into salary and owner distribution.

01:16:47.920 | And the salary is subject to those self-employment taxes,

01:16:50.120 | but the distribution isn't.

01:16:51.440 | How important is that?

01:16:52.320 | How much savings could that be?

01:16:53.880 | - It depends a lot on how much you earn.

01:16:56.480 | For me, $100,000 in net income

01:16:59.080 | is when it sort of enters no-brainer territory.

01:17:01.600 | I know some CPAs or people will do it at 70, 80K,

01:17:05.880 | but to me, it goes back to return on hassle.

01:17:08.200 | And an S-Corp is undoubtedly more hassle than an LLC

01:17:12.000 | and payroll costs, all of those,

01:17:13.960 | your CPA will charge a little bit more,

01:17:15.640 | could be maybe $1,000 a year.

01:17:17.800 | So to me, $100,000 a year is the point

01:17:20.640 | at which it sort of makes sense.

01:17:22.040 | And then as you get higher and higher,

01:17:24.200 | it just scales further up from there.

01:17:26.560 | And that's $100,000 in net income.

01:17:28.720 | The one caveat I should add,

01:17:30.920 | not relevant to most of the universe,

01:17:32.400 | but in our universe, very relevant,

01:17:34.000 | is New York City has a higher tax on S-Corps.

01:17:37.320 | It's about 8.8%, so it wipes out a lot of savings.

01:17:41.160 | So I know a few people that have listened to these podcasts

01:17:44.200 | in New York City, signed up for an S-Corp,

01:17:45.880 | and ended up with higher taxes.

01:17:47.240 | So for New York City S-Corps, maybe chill,

01:17:49.960 | your thresholds are a little bit different,

01:17:51.520 | but for everyone else, about $100,000 in net income

01:17:53.720 | is where it makes sense.

01:17:55.360 | - I ran the math on this.

01:17:56.600 | This is actually the model I built with ChatGBT,

01:17:59.080 | but one other factor I never hear anyone mention

01:18:02.080 | is that by lowering your salary,

01:18:04.880 | you are reducing the amount

01:18:06.320 | of Social Security credits you earn.

01:18:08.320 | So the way Social Security is calculated in the US

01:18:10.960 | is actually much more complicated than I thought,

01:18:13.720 | but it basically looks at your top 30 earning years,

01:18:17.640 | and you get credits for how often you've earned

01:18:19.920 | and how high you are in that peak.

01:18:21.760 | I believe right now it's somewhere around like 190,000,

01:18:25.440 | but don't quote me on that number.

01:18:26.840 | And so if you reduce your income to 100,000,

01:18:29.760 | you are going to get less Social Security benefits

01:18:32.680 | in retirement, if Social Security benefits.

01:18:35.360 | TVD on the future of the entire program,

01:18:37.520 | but just know that that is one implication

01:18:40.040 | of pairing yourself a lower salary through an S-Corp

01:18:42.880 | is that you will earn lower Social Security benefit

01:18:46.040 | in retirement.

01:18:47.040 | However, I built an entire model

01:18:49.200 | to factor precisely this in,

01:18:51.720 | and at the end of the day,

01:18:53.360 | the savings you get if you turn and invest that

01:18:55.800 | and earn a modest return

01:18:57.400 | would outweigh the Delta of your Social Security benefit,

01:19:00.320 | unless you live to like 130 or 140,

01:19:02.840 | which there are people trying,

01:19:04.480 | but I'm not planning on.

01:19:05.840 | - That's a breakeven point.

01:19:07.240 | The other thing worth pointing out

01:19:08.480 | while you're on that topic

01:19:09.360 | is same with solo 401(k) contributions.

01:19:11.560 | We'll talk a little bit about solo 401(k) soon,

01:19:13.400 | but that is limited by how much you pay yourself

01:19:16.600 | in W-2 as an S-Corp,

01:19:17.760 | which is another reason you wanna have someone

01:19:19.800 | find the perfect number for you.

01:19:21.600 | - For me, the math was,

01:19:23.120 | if you pay yourself at least 66,000,

01:19:26.320 | you can through a combination

01:19:27.680 | of pre-tax employer contribution

01:19:29.680 | and after-tax mega backdoor Roth rollover,

01:19:33.200 | you can make sure you get that.

01:19:34.640 | But if you don't pay yourself at least the threshold,

01:19:38.240 | there's not a way to max it out.

01:19:39.920 | - Exactly.

01:19:40.760 | - So that's S-Corp.

01:19:42.200 | Another big thing

01:19:43.160 | and something that I think every non-business owner

01:19:45.200 | is always jealous of

01:19:46.120 | is business owners are walking around saying,

01:19:47.560 | "Oh, I got all these business expenses."

01:19:49.440 | Let's talk about some of your favorites.

01:19:51.200 | - Yeah, so big, easy one, right?

01:19:53.600 | Let's imagine two people.

01:19:54.600 | One is a W-2 employee that works from home.

01:19:56.560 | The other person is a business owner that works from home.

01:19:58.640 | Guess what?

01:19:59.480 | The business owner can deduct

01:20:00.320 | the pro rata square footage of their home office,

01:20:03.000 | which the W-2 employee

01:20:04.040 | who also uses their home office as much cannot.

01:20:06.000 | So pro rata rent or mortgage can be deducted,

01:20:08.960 | which is pretty substantial, right?

01:20:11.160 | Like some people's home office,

01:20:12.560 | especially in New York,

01:20:13.400 | can be 15, 20% of their overall square footage.

01:20:16.040 | You can deduct 15, 20% of rent, mortgage, utilities,

01:20:19.280 | cleaning, all kinds of miscellaneous things there.

01:20:21.720 | I've also seen some homeowners

01:20:23.000 | actually rent their home to their company,

01:20:26.600 | potentially for a meeting or an offsite or whatever.

01:20:30.120 | What you can do then

01:20:31.120 | is you can actually pay yourself rent from your company.

01:20:34.400 | And if you do it for up to 14 days a year or less,

01:20:37.400 | pay no taxes on the gate.

01:20:39.480 | 14 days, you can rent your home

01:20:40.840 | even not to your business and pay no taxes.

01:20:43.120 | But as a business owner,

01:20:44.200 | you also have the benefit

01:20:45.040 | of money from one hand into another.

01:20:47.000 | - And one thing that I learned from my accounting firm

01:20:49.440 | is that you do not have to use square footage

01:20:52.160 | as the calculator.

01:20:53.480 | So I looked it up and it said-

01:20:54.680 | - There's two methods, there's two methods.

01:20:56.560 | - There might even be more.

01:20:57.560 | I read the code right before we got on.

01:20:59.080 | It said you can use square feet

01:21:00.400 | or any other reasonable method

01:21:02.480 | if it accurately figures your business percentage.

01:21:05.320 | And the one that sometimes does a better job

01:21:08.400 | is percentage of rooms.

01:21:10.800 | So if you have five rooms in your house

01:21:12.800 | and they're of roughly equal size,

01:21:15.360 | then it can be one fifth.

01:21:16.880 | That's potentially a way

01:21:18.680 | that you could increase your home office deduction,

01:21:21.840 | especially if your home office

01:21:24.080 | is on the smaller side of the other rooms in your house.

01:21:26.440 | It might give you a slight edge there.

01:21:28.440 | - Yeah, and outside of that,

01:21:29.400 | you can deduct all the other things

01:21:31.520 | that you need to run your business,

01:21:33.280 | like phone, internet, conferences,

01:21:35.920 | travel to and from conferences, software.

01:21:39.000 | One of the things we always saw at my last company

01:21:41.520 | is towards the end of the year,

01:21:43.240 | a lot of business owners would email us

01:21:45.240 | and ask us if they could buy annual plans

01:21:47.200 | and pre-pay for the next year,

01:21:48.440 | or sometimes more, the software,

01:21:50.240 | because they could then pre-buy it,

01:21:53.400 | reduce their taxable income for the year

01:21:55.520 | while pre-paying their expenses for the next year.

01:21:57.880 | So as a business owner, you can deduct all these things

01:21:59.720 | to the degree I actually have some people

01:22:02.760 | that have either expensive hobbies

01:22:05.880 | or things they're interested in

01:22:07.280 | now conspiring to start businesses around it,

01:22:09.840 | because then those things

01:22:10.960 | can start becoming tax-deductible.

01:22:12.400 | Like I have a friend who's a travel blogger

01:22:14.680 | who can write off all his trips

01:22:16.760 | because he legitimately makes money

01:22:18.600 | by teaching other people how to travel and things like that.

01:22:21.560 | - A few other fun things, health insurance.

01:22:23.840 | If you provide health insurance for your family,

01:22:26.080 | that's a business expense.

01:22:27.600 | And then because we like credit card points on all the hacks,

01:22:31.040 | if it's related to your business,

01:22:32.920 | the annual fees on those credit cards

01:22:35.640 | is a fair business expense.

01:22:37.480 | And then deducted from your business income

01:22:39.960 | can be the employer contributions, correct?

01:22:42.560 | Any employer contributions to your retirement account.

01:22:44.840 | - Yeah, I mean, basically you can choose

01:22:46.760 | whether to make them pre-tax or post-tax,

01:22:48.320 | but both employer and employee contributions

01:22:50.160 | can be pre-tax if you choose.

01:22:52.280 | - And then you said the pre-paid expenses for next year.

01:22:55.280 | I would even go as far as to say

01:22:56.520 | there are some companies where if you reached out

01:22:58.680 | and said, hey, we've all seen those calculators

01:23:00.840 | buying something online that say,

01:23:02.240 | here's the monthly price, here's the annual price.

01:23:04.880 | As an individual, it's like,

01:23:06.600 | maybe you do it for the savings,

01:23:07.840 | but as a business, you could do it

01:23:08.880 | for the savings and the deduction.

01:23:10.720 | - And one way of looking at it is like, okay, cool.

01:23:13.200 | I can pay for this with my business

01:23:14.920 | and this is a business expense and I save money there.

01:23:17.240 | Another way of thinking about this is, wow,

01:23:18.880 | you can now choose the best benefits in the game.

01:23:21.720 | You can kind of pick the exact health insurance you want.

01:23:25.160 | You can customize the best retirement plan you want.

01:23:28.240 | You can pick and choose like literally

01:23:30.360 | and set everything up just the way you want to,

01:23:32.240 | which I also think is a really cool benefit

01:23:34.480 | that you wouldn't have at a corporation

01:23:36.280 | where you have to pick their retirement plan,

01:23:37.720 | their health plans, and all of that.

01:23:39.400 | And a lot of cases, often the same for your family.

01:23:41.960 | - Exactly, and so just to clarify so everyone knows,

01:23:44.920 | Ankur, you didn't pay me to do this episode, right?

01:23:47.280 | Like this is not an ad for Carry that you guys said,

01:23:49.920 | hey, we'll give you some money

01:23:50.920 | if you do an episode about taxes, right?

01:23:53.360 | - No, absolutely.

01:23:54.200 | I mean, it's a match made in heaven,

01:23:55.120 | but the fact is you've been using the platform now

01:23:57.480 | for a bit and it's been great to onboard you there.

01:23:59.720 | But yeah, I started this company

01:24:01.360 | because I was trying to set up a solo 401k,

01:24:05.360 | which in my opinion is the best retirement plan in America.

01:24:07.680 | And I honestly wanted to find a good provider

01:24:09.640 | and they all kind of sucked.

01:24:10.560 | And we had to then build a platform,

01:24:12.840 | but that was not the goal.

01:24:14.440 | It just sort of happened after searching the internet

01:24:17.600 | high and wide for something that did exactly

01:24:19.520 | what we wanted it to.

01:24:20.640 | Couldn't find it, so built it ourselves.

01:24:22.440 | - So the reason I clarified that is 'cause I will share,

01:24:24.480 | like I had actually opened up a solo 401k

01:24:26.880 | with another provider.

01:24:28.160 | I'd paid them the fee to set it all up.

01:24:30.480 | And they sent me like all these documents.

01:24:32.840 | I had to go to a fidelity office,

01:24:34.560 | like an actual branch with papers.

01:24:36.200 | We got it all opened up.

01:24:37.560 | And right before I funded it,

01:24:39.240 | I got connected with Cary and I was like,

01:24:41.200 | "Whoa, this is exactly what I was looking for."

01:24:44.040 | I never ended up getting them to give me back

01:24:46.280 | any of the funds for starting up,

01:24:47.520 | but I did open a Cary account.

01:24:49.040 | I've now since rolled all of the 401ks

01:24:51.680 | that my wife Amy and I have had at Google

01:24:54.080 | and other employers into my Cary 401k.

01:24:57.040 | And I think their product's great.

01:24:58.240 | Cary is not a sponsor of the podcast,

01:25:00.040 | though I will be hitting up Ankur for the indefinite future

01:25:02.960 | to try to see if we can make that happen.

01:25:04.760 | But as a member of Cary, they have a bunch of content

01:25:08.160 | and you guys have been putting out all these workshops

01:25:11.040 | on tax savings for business owners,

01:25:13.240 | on even some stuff on credit card points

01:25:16.120 | and all kinds of stuff.

01:25:17.320 | And when I saw all the content you were putting together,

01:25:19.680 | I was like, "Wow, I wanna do an episode on end of the year,

01:25:21.760 | kind of tax savings and everything.

01:25:23.440 | Why not have you on?"

01:25:24.360 | So I'm really glad you've been putting out that content

01:25:26.480 | because I've appreciated it.

01:25:27.960 | And I'll link to some of the things that people can watch

01:25:30.400 | and some of the workshops they can sign up for.

01:25:32.600 | And we'll absolutely link to Cary.

01:25:35.000 | I think if you use allthehacks.com/cary,

01:25:38.080 | there's a good deal on the pro plan right now,

01:25:40.720 | which gets you a handful more perks over the base plan.

01:25:43.920 | But I don't know, I just really like the platform.

01:25:45.960 | Like it's become my solo 401k,

01:25:48.560 | both for pre-tax, Roth, everything.

01:25:51.200 | - Nope.

01:25:52.040 | I mean, again, that makes us so happy to hear that, right?

01:25:53.880 | We've been working on this for a year

01:25:55.040 | and wanted to build something

01:25:56.400 | that like kind of leveled up the game.

01:25:57.960 | I mean, if you had actually gone through

01:25:59.480 | with the Fidelity plan, I don't know if you realize

01:26:01.520 | they would want you to deposit paper checks still

01:26:04.240 | for whatever reason.

01:26:05.080 | - I literally have three paper checks from Fidelity

01:26:09.000 | in my hand right now, three checkbooks they sent me

01:26:12.000 | because they were like, if you want to do anything,

01:26:13.680 | here's how you do it.

01:26:14.800 | And it was just so ridiculous.

01:26:16.880 | - Yeah, it's super old school.

01:26:18.200 | In terms of the content and education, frankly, look,

01:26:20.480 | I've been learning this stuff myself

01:26:22.160 | over the last year, 18 months and teaching it, sharing it,

01:26:26.080 | coming on this podcast, talking about it

01:26:27.680 | is kind of reinforcing my learning as well.

01:26:29.960 | So it's been cool to be able to like learn this.

01:26:32.720 | And every once in a while,

01:26:33.920 | I'll read about something in the tax code

01:26:35.200 | and I'll either like tweet it or something like,

01:26:36.720 | wow, do you know it works this way?

01:26:37.960 | And it's honestly just been great for me

01:26:40.240 | and a bunch of people to like get smart about these things

01:26:42.920 | and get educated.

01:26:44.480 | - Well, in the spirit of learning,

01:26:45.840 | I've got one more really cool thing

01:26:48.200 | that we didn't talk about related to QSBS

01:26:50.760 | that you may or may not know.

01:26:52.440 | But again, if anyone's interested,

01:26:54.760 | they can find everything you guys are doing on the website,

01:26:57.240 | which I will redirect to a special deal

01:26:59.840 | at allthehacks.com/carry, C-A-R-R-Y.

01:27:03.040 | But on QSBS, which was the last thing

01:27:05.400 | on this talking point list I had,

01:27:07.600 | we already talked about it as an investor.

01:27:09.560 | You briefly touched on it as a business owner.

01:27:12.080 | But the thing that you didn't mention

01:27:13.800 | is that you get the greater of $10 million

01:27:18.400 | or 10X your investment.

01:27:20.800 | And that rarely comes into play for most people

01:27:24.160 | because 10 times the investment to beat 10 million,

01:27:27.480 | you'd have to put a million in.

01:27:29.000 | Very rarely is an individual investing a million dollars

01:27:31.880 | in a company that isn't already past

01:27:34.120 | that $50 million of asset level.

01:27:36.920 | So it's not often talked that way.

01:27:38.800 | But as a business owner,

01:27:40.400 | the ultimate strategy is to start an LLC,

01:27:44.000 | assign all of your IP to that LLC,

01:27:47.840 | and then at the point that you end up raising money

01:27:51.120 | and converting to a C-Corp,

01:27:52.600 | which is, as you said earlier, absolutely a requirement,

01:27:55.280 | if that happens at a point where that value of the stock

01:27:59.560 | from the LLC is worth,

01:28:02.280 | let's say as close to $50 million as possible,

01:28:05.800 | but definitely under.

01:28:07.560 | Price is right for olds, right?

01:28:08.640 | You don't want to go over.

01:28:09.840 | You do not want to go over.

01:28:11.400 | Then your cost basis of your investment,

01:28:15.040 | which you contributed not as dollars from your bank account,

01:28:18.640 | but as shares in your LLC becomes the cost basis.

01:28:22.400 | So it's possible to get right under 50 million

01:28:25.800 | if you owned the company outright yourself,

01:28:28.040 | which means that you would actually get

01:28:30.240 | $500 million tax-free.

01:28:32.760 | Or if you and your co-founder were able to do this

01:28:35.280 | and split it up,

01:28:36.120 | you could see how that would go higher

01:28:37.640 | or if someone else in your family had those shares.

01:28:40.080 | So that would mean that it is possible to use QSBS

01:28:43.680 | to get a tax-free $500 million or slightly under.

01:28:48.680 | Yep, it's crazy.

01:28:49.920 | I mean, the things to be careful of there

01:28:51.400 | is you don't want to go over 50 at all.

01:28:53.600 | So if it means 40, 45, that's totally fine.

01:28:56.960 | You also have to be relatively confident in a good exit

01:28:59.520 | because the benefit would only kick in

01:29:01.160 | after your cost basis.

01:29:02.520 | So if you actually end up selling the company

01:29:04.520 | for $50 million,

01:29:05.920 | you actually won't get any QSBS benefit at all.

01:29:08.080 | So you have to be pretty confident

01:29:09.320 | and the company is going to do really, really well.

01:29:11.560 | I highlight it not as the strategy

01:29:13.680 | that might make the most sense for everyone,

01:29:15.760 | but that there is a way to get right up close.

01:29:18.880 | If you play your cards right,

01:29:20.560 | this particular tax benefit

01:29:23.280 | could generate half a billion dollars of tax gains

01:29:26.320 | or slightly under 'cause it's 10 times a number

01:29:29.160 | that has to be less than 50,

01:29:30.680 | but it's pretty wild what the tax code can do

01:29:33.840 | if you just understand it.

01:29:35.760 | And I'm really appreciative of you being here

01:29:37.680 | to help me explain a bunch of these things to people

01:29:40.800 | so that they can take advantage of it

01:29:42.120 | and not be in the vast majority of people

01:29:44.800 | who don't learn these things

01:29:46.280 | because we haven't grown up millionaire

01:29:48.840 | who've had access to all of these resources our whole lives.

01:29:51.760 | - No, absolutely.

01:29:52.600 | Look, that's the mission, right?

01:29:53.640 | I'm a first generation immigrant here.

01:29:55.120 | I learned about all this literally while selling my company

01:29:57.400 | and I'm like, wow, there is so much stuff here.

01:29:59.320 | We need to make this available and accessible to everyone

01:30:01.480 | or at least the people who care enough

01:30:03.040 | to kind of read and follow this.

01:30:04.320 | So yeah, thanks for having me.

01:30:05.600 | It's been a blast.

01:30:06.840 | - Yeah, thanks for joining.

01:30:08.080 | (upbeat music)

01:30:09.640 | If you couldn't tell from my voice,

01:30:10.920 | I was so excited to be doing this episode.

01:30:13.360 | I love thinking about ways to optimize taxes

01:30:15.960 | and I'm so glad Ankur was able to join us.

01:30:18.320 | I really hope you found some practical and tactical ways

01:30:21.440 | that you can apply this to your own life

01:30:23.640 | and your own tax situation.

01:30:25.680 | So thank you so much for joining me.

01:30:28.040 | If there's one final favor I have for anyone

01:30:30.400 | during the holiday season,

01:30:31.640 | if you wanna go ahead and leave us a five-star rating

01:30:34.120 | and review in either the Apple Podcasts app or Spotify,

01:30:37.680 | it would be so awesome.

01:30:38.720 | I really appreciate it.

01:30:40.240 | Other than that, thank you so much for joining and listening.

01:30:43.120 | I will see you next week.

01:30:44.440 | (upbeat music)

01:30:47.040 | (birds chirping)

01:30:49.800 | (birds chirping)