# How the Rich Avoid Paying Millions in Taxes: Wealth Secrets You NEED to Know w/ Karlton Dennis

An episode of [Earn Your Leisure](https://invisiblenetwork.ai/podcast/1450211392), 18 Jun 2026, 1 h 05 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/8dbc4f54-a337-4481-9ef2-b355012b0a3d/0e12e2e5-c1c3-4a61-9403-b46d00bfc3ba/audio.mp3?utm_source=Podcast&in_playlist=eac4c628-29cb-469a-b5c8-b355012b0a48

TIMESTAMP: 00:00 IRS Wake Up Call 01:18 Meet Carlton Dennis 03:05 From Fitness To Taxes 05:40 Learning The Tax Plan 07:34 What A Tax Plan Is 09:38 Who The Tax Code Rewards 11:01 Capital Gains And Losses 13:12 LLC To S Corp Setup 16:07 S Corp Vs C Corp 18:14 Retirement And Key Dates 21:48 Roth And Kids Payroll 23:14 HSA And Car Write Offs 25:44 Cost Seg And Short Term Rentals 29:17 Augusta Rule Explained 30:39 Audit Triggers And Omissions 31:07 Audit Red Flags 32:33 SALT Deduction Update 34:12 Child Credits and Accounts 36:58 Earners vs Owners 38:18 Entity Structure Basics 40:29 Delaware vs Wyoming 42:21 California Billionaire Exodus 44:09 LLCs for Liability 45:27 Unrealized Gains Debate 46:41 YouTube Growth Story 49:05 Top LLC Write Offs 50:21 Charity Foundation Strategy 54:16 Income Shifting with C Corps 56:49 Firm Model and Training 01:02:50 Movie Tax Write Offs 01:04:14 Timing Asset Purchases 01:04:54 Final Takeaways In this episode of Earn Your Leisure, tax strategist Karlton Dennis breaks down the wealth-building tax strategies that business owners, investors, and high-income earners use to legally reduce their tax burden and keep more of their money. Karlton explains everything from capital gains taxes, LLC structures, Delaware vs. Wyoming incorporations, cash balance plans, HSAs, cost segregation studies, rental property tax strategies, the Augusta Rule, vehicle write-offs, SALT deductions, child tax credits, retirement planning, and the most common mistakes that trigger IRS audits. He also reveals why understanding the tax code is one of the most important skills for building and preserving wealth. Whether you’re an entrepreneur, investor, real estate owner, or simply looking to become more financially intelligent, this conversation is packed with actionable insights that could save you thousands—or even hundreds of thousands—of dollars. Don’t miss this masterclass with Karlton Dennis on how the wealthy use the tax code to their advantage. #EarnYourLeisure #KarltonDennis #Taxes #TaxStrategy #WealthBuilding #BusinessOwners #Entrepreneurship #RealEstateInvesting #Investing #FinancialLiteracy #TaxPlanning #LLC #CapitalGains #IRS #PersonalFinance #WealthCreation #MoneyManagement #SmallBusiness #TaxSavings #FinancialFreedom Subscribe and watch more videos here: https://www.youtube.com/@EarnYourLeisure Join the EYL community for deeper training and a more detailed approach: https://www.eyluniversity.com Join the number one stock club in the world: https://www.ianinvest.com Invest Fest | August 7-9, 2026 Grab early bird tickets now: https://www.investfest.com See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: I got a letter in the mail from the IRS
[0:01] Speaker 1: telling me that I owe them more money than I
[0:03] Speaker 1: had at that point in time, I had to humble myself.
[0:05] Speaker 1: Finally picked up the phone called my mom. My mom
[0:07] Speaker 1: had owned a tax and accounting firm, and I asked
[0:09] Speaker 1: her what I did wrong? And she told me, you
[0:10] Speaker 1: could have done this, this, this, and that.
[0:12] Speaker 2: What's the network for the average client?
[0:14] Speaker 1: Tax planning makes sense? Right over three hundred K. That's
[0:17] Speaker 1: when you have enough liquidity to be able to invest
[0:19] Speaker 1: in tax reduction strategies.
[0:21] Speaker 2: What do you see that people get audited to most for.
[0:24] Speaker 1: I have seen some of the craziest things on some
[0:26] Speaker 1: of these other expense items massages for my team.
[0:29] Speaker 3: People see corporations pay zero percent tax, and they're like, how.
[0:34] Speaker 1: You're shifting income from one entity to another entity that's
[0:37] Speaker 1: filing tax returns on a completely different fiscal year.
[0:39] Speaker 2: In we'll benefits the most from the tax code and why.
[0:42] Speaker 1: The government has created a bunch of incentives inside of
[0:44] Speaker 1: the tax code because they know that they can't afford
[0:46] Speaker 1: to provide affordable housing for everybody. They know that they
[0:49] Speaker 1: can't get everyone a job in stimulus checks, so they're
[0:52] Speaker 1: partnering with business owners. You can be an earner in
[0:54] Speaker 1: this government, but they're going to penalize you for just
[0:57] Speaker 1: being an earner. Debt is a good thing. It's a tool.
[0:59] Speaker 1: It's something that I can used to my advantage. I
[1:01] Speaker 1: understand that there are certain wealth teachers that teach you
[1:03] Speaker 1: to be one hundred percent debt free. However, the tax
[1:05] Speaker 1: cod's not written like that. IRC one any one allows
[1:07] Speaker 1: for you to write off the cost of the production
[1:10] Speaker 1: of a movie film. These taxpayers have to spend one
[1:12] Speaker 1: hundred hours watching other movie films in order to qualify
[1:14] Speaker 1: as an active participant in the movie space.
[1:18] Speaker 2: All right, guys, welcome back Eyl. We are here with
[1:21] Speaker 2: a special guest, Carlton Dennis. Yeah, came from California and
[1:27] Speaker 2: specializes in tax strategies for high end wealthy clients.
[1:33] Speaker 1: Yeah, is that correct, Yes, that's great.
[1:35] Speaker 2: Okay. So this is a conversation that we can never
[1:38] Speaker 2: have enough of, especially around this time. It's tax time,
[1:43] Speaker 2: and I feel like, no matter how much we talk
[1:46] Speaker 2: about the tax code, most people don't have any idea
[1:51] Speaker 2: about it, and people still make mistakes. We just talked
[1:53] Speaker 2: about some entertainers that made some big mistakes when it
[1:56] Speaker 2: comes to taxes. So learning about the tax code, learning
[2:00] Speaker 2: about best ways to you know, really shelter really maximize deductions, really,
[2:07] Speaker 2: you know, make the most out of the code because
[2:10] Speaker 2: it's very complex. I think it's something that is always
[2:13] Speaker 2: educational to teach people on. So you know, this episode,
[2:16] Speaker 2: we're gonna go over that, we're gonna go over your
[2:18] Speaker 2: journey and you just get a lot of gym. But
[2:20] Speaker 2: first and foremoll, thank you for joining us.
[2:21] Speaker 1: Yeah. Absolutely, I appreciate you guys having me on. Excited
[2:24] Speaker 1: to talk taxts today. I want to be able to
[2:25] Speaker 1: help a lot of people kind of crack the code today,
[2:28] Speaker 1: if you will.
[2:28] Speaker 3: Yeah, I think it's going to be an interesting conversation,
[2:31] Speaker 3: one that obviously the audience is going to learn from,
[2:33] Speaker 3: but we're gonna learn from too, because one thing about
[2:35] Speaker 3: the tax code, especially when new administration's come in, it
[2:38] Speaker 3: always changes. Yes, right, things are take it now, things
[2:41] Speaker 3: get added, some things get put back.
[2:43] Speaker 1: So I got I got a bunch of stuff.
[2:45] Speaker 3: Yeah, yeah, because you know, we're trying to make sure
[2:47] Speaker 3: that that we can keep as much as possible out.
[2:50] Speaker 1: Of doubt, without of doubt. I love that. I love that.
[2:52] Speaker 2: So let's get into it. How did you even get
[2:55] Speaker 2: to this point, Let's let's start there. How did you
[2:57] Speaker 2: get into the world of taxes? How did you start
[3:01] Speaker 2: working with clients? Like, explain your whole background from start
[3:04] Speaker 2: to where you are now.
[3:05] Speaker 1: Yeah, so I actually don't have the traditional background that
[3:08] Speaker 1: most CPAs or a tax professionals have. I didn't go
[3:10] Speaker 1: to school for accounting. I went to school for kinesiology.
[3:14] Speaker 1: I thought I was going to go to the NFL.
[3:15] Speaker 1: That whole story didn't end up happening. And right when
[3:17] Speaker 1: I graduated college, I got a W two job working
[3:20] Speaker 1: for this company called Galo Wine Company, where I was
[3:22] Speaker 1: selling like wine and liquor, and I also started my
[3:25] Speaker 1: personal training business. I did not realize that when you
[3:28] Speaker 1: are a ten ninety nine contractor that you have to
[3:31] Speaker 1: report all your ten ninety nine income and if you don't,
[3:35] Speaker 1: dirs will report it for you. And so I got
[3:37] Speaker 1: a letter in the mail from the IRS telling me
[3:39] Speaker 1: that I owed them more money than I had, And
[3:42] Speaker 1: at that point in time, I had to humble myself.
[3:44] Speaker 1: Finally picked up the phone called my mom. My mom
[3:46] Speaker 1: had owned a taxi and accounting firm for over thirty years.
[3:48] Speaker 1: She was literally called America's tax lady, and I asked
[3:51] Speaker 1: her what I did wrong, and she told me you
[3:52] Speaker 1: could have done this and that to have prevented it.
[3:56] Speaker 1: I moved out of Hollywood, California, moved back home with
[3:58] Speaker 1: the parents, joined the family business, and within six months
[4:01] Speaker 1: I realized making personal training programs was never going to
[4:04] Speaker 1: do equate to the revenue she was receiving on selling
[4:07] Speaker 1: tax plans and helping people save money. And I decided
[4:11] Speaker 1: to go all in on tax and got my enrolled
[4:13] Speaker 1: agent's license and got on YouTube during COVID and to
[4:17] Speaker 1: twenty twenty and started sharing tax information with the world.
[4:20] Speaker 2: So your family you have a far Yeah.
[4:23] Speaker 1: My family has a firm, that's correct. Yeah, you still
[4:26] Speaker 1: work with them now? Oh yeah, absolutely, Yeah. My mom
[4:28] Speaker 1: has her firm, and then I have my firm too.
[4:29] Speaker 1: That's great.
[4:30] Speaker 3: You know, most times we hear stories and people try
[4:33] Speaker 3: not to stay in the family business. Yeah, what you
[4:36] Speaker 3: said you had to humble yourself, yes, right, Like growing
[4:38] Speaker 3: up obviously knowing that your parents did that line of work.
[4:42] Speaker 1: Were you like saying like, I'm going to do something
[4:44] Speaker 1: completely different. I don't want to do that. That was
[4:46] Speaker 1: it was just being stubborn about it. Yeah, one hundred percent.
[4:48] Speaker 1: I was super stubborn. I wanted to be the football guy,
[4:52] Speaker 1: the limelight guy. Athletics was always the thing that came
[4:55] Speaker 1: easy to me. And when I saw the writing on
[4:57] Speaker 1: the wall that I wasn't going to go to the NFL,
[4:59] Speaker 1: I needed to pivot into something else. So I immediately
[5:02] Speaker 1: went to career fair found the first job that liked me,
[5:05] Speaker 1: which was you know, Gallo Wine company. Fell into that.
[5:08] Speaker 1: But then I picked up personal training right at the
[5:09] Speaker 1: exact same time, and I called myself a celebrity fitness trainer,
[5:12] Speaker 1: moved to Hollywood, California, and started getting clients just by
[5:15] Speaker 1: posting on Instagram and social media. At that time, not
[5:18] Speaker 1: too many people were really using Instagram like that for
[5:21] Speaker 1: videos yet, and so I was like putting out a
[5:23] Speaker 1: bunch of videos to get people attracted to my business.
[5:27] Speaker 2: So at what point do you like, hit your stride
[5:30] Speaker 2: and say I'm all in on the taxis thing. I'm
[5:33] Speaker 2: done with, you know, trying to be a personal trainer. Yeah,
[5:37] Speaker 2: this is my so my chosen path.
[5:40] Speaker 1: Yeah, it happened actually within the first month working in
[5:42] Speaker 1: my mother's firm. So I convinced my mom I'm going
[5:44] Speaker 1: to go one hundred percent commission base, so I don't
[5:46] Speaker 1: want a salary. I'll just come in on sales and
[5:48] Speaker 1: I'll be one hundred percent commission based. Well, the first
[5:50] Speaker 1: four weeks I didn't make any money because I didn't
[5:52] Speaker 1: understand anything about taxes. I was just calling people and
[5:54] Speaker 1: didn't know what to say. She came into my office
[5:56] Speaker 1: one day and said, Hey, if you can't sell a
[5:58] Speaker 1: tax plan within the next four weeks, I am going
[6:00] Speaker 1: to fire you. Do you have plenty of You have
[6:02] Speaker 1: plenty of information here, so get to work. So what
[6:05] Speaker 1: I did that day is I went to Target and
[6:06] Speaker 1: I bought a recorder and I slid this black recorder
[6:09] Speaker 1: was eighteen dollars underneath her desk, and for eight hours
[6:12] Speaker 1: it recorded everything. I took that recording, sent it off
[6:15] Speaker 1: to REV dot com. Rev dot com sent me back
[6:17] Speaker 1: a transcript within forty eight hours. Now I had a
[6:20] Speaker 1: transcript of how my mother communicated tax Does she notice
[6:24] Speaker 1: she knew this? Okay? Now, when I got the transcript,
[6:28] Speaker 1: the first couple of calls that she has was just
[6:30] Speaker 1: regular taxpayers that are looking for tax returns, very simple conversations.
[6:33] Speaker 1: A thousand dollars return here, A thousand dollars return there.
[6:36] Speaker 1: But then in the middle of the calls is when
[6:38] Speaker 1: she got to the tax planning. She had a husband
[6:40] Speaker 1: and wife come in. They're a real estate agent and
[6:43] Speaker 1: a firefighter, and instead of looking for tax preparation services,
[6:47] Speaker 1: they were looking for ways to reduce their tax They
[6:49] Speaker 1: were making about half a million dollars a year, and
[6:50] Speaker 1: my mom elaborately explained in the writing how a tax
[6:55] Speaker 1: plan works, how you can leverage the tax go to
[6:57] Speaker 1: the fullest extent versus just filing a tax return. By
[7:00] Speaker 1: the way, the fee is twenty five thousand dollars and
[7:02] Speaker 1: on the spot they signed. The conversation was only twenty
[7:05] Speaker 1: five minutes. I had been writing workout programs for two
[7:07] Speaker 1: hundred and fifty dollars for a month, trying to get
[7:09] Speaker 1: up to one hundred clients. She made twenty five thousand
[7:12] Speaker 1: dollars in thirty minutes. That showed me everything that I
[7:15] Speaker 1: needed to know when it came to providing value to people.
[7:17] Speaker 2: So the twenty five thousand dollars was when you say,
[7:20] Speaker 2: a tax plan just for the audience, Yeah, this is
[7:22] Speaker 2: not just like a regular like you do somebody taxes
[7:25] Speaker 2: like you're putting together a strategic plan for wealthy people
[7:28] Speaker 2: to kind of guide them on the dues and dolls
[7:31] Speaker 2: what they should do, like explain what the tax plan
[7:33] Speaker 2: actually is.
[7:34] Speaker 1: Yeah, so the tax plan works like this. Someone is
[7:37] Speaker 1: going to take your income for the year, project out
[7:39] Speaker 1: your income for the full twelve months, and figure out
[7:41] Speaker 1: what your expenses are so they know what your net
[7:43] Speaker 1: profit is. That is going to allow for us to
[7:45] Speaker 1: be able to know how much taxes are you going
[7:47] Speaker 1: to pay federally on the state side, even Social Security
[7:50] Speaker 1: and Medicare. But that's going to be the number we
[7:52] Speaker 1: want to change. The next thing to do is to
[7:53] Speaker 1: figure out what your goals are. Maybe you want to
[7:55] Speaker 1: become a real estate investor, maybe you want to own assets,
[7:57] Speaker 1: maybe you want to focus on retirement. So you spend
[8:00] Speaker 1: time with the customer to kind of understand what their
[8:02] Speaker 1: goals are, and then you match it up with the
[8:04] Speaker 1: strategies that exist in the tax code. This is where
[8:07] Speaker 1: the fun starts to happen, because some people are going
[8:10] Speaker 1: into investments for the first time. Some people are setting
[8:12] Speaker 1: up entities or shifting income to children for the very
[8:16] Speaker 1: first time, and now they're able to reduce their tax
[8:19] Speaker 1: bill before the end of the year, giving them far
[8:22] Speaker 1: less stressed when they go to file their tax returns
[8:23] Speaker 1: with their CPA come April of the following year.
[8:26] Speaker 2: And what's like, what's the network for the average client?
[8:29] Speaker 1: I would say tax planning makes sense right over three
[8:32] Speaker 1: hundred k, because that's when you're at the point where
[8:34] Speaker 1: you have enough liquidity. You're three hundred K year in income,
[8:39] Speaker 1: that's when you have enough liquidity to be able to
[8:41] Speaker 1: invest in tax reduction strategies. Most strategies that are actually
[8:45] Speaker 1: going to save you a lot of money do require
[8:47] Speaker 1: you to invest money. And that's the secret that the
[8:49] Speaker 1: wealthy have been utilizing for years when it comes to
[8:52] Speaker 1: the tax code.
[8:52] Speaker 3: And in terms of pricing, because I know somebody's going
[8:54] Speaker 3: to hit it and say, oh my gosh, twenty five thousand,
[8:57] Speaker 3: that's based on obviously thirty years of work. But is
[9:00] Speaker 3: that also a strategy, right, because that could that be
[9:03] Speaker 3: written off in terms of tax expenses, like actually having
[9:07] Speaker 3: having somebody that builds a plan, like sometimes if you
[9:09] Speaker 3: hire an instructor like that could be a part of
[9:11] Speaker 3: your plan. Is that the pricing is it incorporated into
[9:14] Speaker 3: the strategy as well?
[9:15] Speaker 1: Yeah, it is. Because legal and professional services are one
[9:18] Speaker 1: hundred percent tax deductibles. So hiring a tax professional is
[9:21] Speaker 1: a tax write off for you. So before they've even
[9:23] Speaker 1: done anything at a thirty seven percent marginal tax bracking,
[9:25] Speaker 1: you might have already saved five thousand dollars for example number.
[9:29] Speaker 1: Once I heard the price, I'm like, oh no, they
[9:30] Speaker 1: wrote that off, yeah, one hundred percent. You're going to
[9:32] Speaker 1: place that underneath the business as a tax deduction. Yeah, absolutely, So.
[9:36] Speaker 2: Let's get into this. Let's get into taxes. So all right,
[9:38] Speaker 2: so the world of taxes. I always say, like, you know,
[9:42] Speaker 2: the tax code wasn't meant for employees, it was meant
[9:45] Speaker 2: for investors and entrepreneurs, correct, right, because that's the people
[9:49] Speaker 2: that benefit the most. Yes, se right, So kind of
[9:53] Speaker 2: explain it from your vantage point. Who benefits the most
[9:57] Speaker 2: from the tax code and why?
[9:59] Speaker 1: Yeahusiness owners and investors benefit from the tax code most
[10:02] Speaker 1: because they're doing what the government can't do the most.
[10:06] Speaker 1: The government has created a bunch of incentives inside of
[10:08] Speaker 1: the tax code because they know that they can't afford
[10:11] Speaker 1: to provide affordable housing for everybody. They know that they
[10:14] Speaker 1: can't get everyone a job in stimulus checks, so they're
[10:17] Speaker 1: partnering with business owners and allowing business owners to take
[10:20] Speaker 1: ordinary necessary expenses because they know business owners are going
[10:24] Speaker 1: to grow and eventually hire employees and be able to
[10:27] Speaker 1: get jobs. And that's what we want in this society.
[10:29] Speaker 1: We want people to have jobs. We also want energy
[10:32] Speaker 1: as well, and investors invest in energy, oil and gas, solar,
[10:36] Speaker 1: and most importantly, affordable housing. If you're a rental real
[10:40] Speaker 1: estate investor, you're probably taking on the loan, but instead
[10:43] Speaker 1: of you paying that loan, you've arbitraged the debt and
[10:45] Speaker 1: you had someone else paid down the loan aka your tenant.
[10:49] Speaker 1: So you're partnering with the banks in order to buy
[10:51] Speaker 1: an asset to provide affordable housing. That is why the
[10:55] Speaker 1: tax code is incentivized for real estate investors and business owners.
[11:00] Speaker 3: Perfectly put, we talked to a lot of people that
[11:03] Speaker 3: invest for the first time. A lot of people have
[11:05] Speaker 3: made money and decide to stock mark over the past
[11:07] Speaker 3: three years. One of the things that they don't realize
[11:09] Speaker 3: is there's a capital gains tax. Yes, can you break
[11:11] Speaker 3: down capital gains to the average investor at the beginning
[11:15] Speaker 3: to investor so they can understand it and prepare themselves. Right,
[11:17] Speaker 3: A lot of people like hey, I made a lot
[11:18] Speaker 3: of money, yes, and of the year comes like, hey, yeah, yeah,
[11:22] Speaker 3: you forgot about that part.
[11:24] Speaker 1: Yeah. Capital gains is tax treatment on investment income. If
[11:26] Speaker 1: you held an asset for more than three hundred and
[11:29] Speaker 1: sixty five days, you get favorable tax treatment zero, fifteen
[11:32] Speaker 1: or twenty percent. And really, if you're single, you would
[11:35] Speaker 1: have to make over four hundred and fifty thousand to
[11:37] Speaker 1: even get into the twenty percent bracket, So you're really
[11:39] Speaker 1: at zero and fifteen percent for most of the time.
[11:42] Speaker 1: When you have capital gains that are long term capital gains.
[11:45] Speaker 1: If you sell an asset like a stock Apple stock
[11:47] Speaker 1: or Google stock, or an asset less than three hundred
[11:50] Speaker 1: and sixty five days, this is when you have short
[11:52] Speaker 1: term capital gains. Short term capital gains are ordinary tax rates.
[11:56] Speaker 1: They start off at zero percent, they go all the
[11:58] Speaker 1: way up to thirty seven percent. See a lot of
[12:00] Speaker 1: day traders subject to ordinary tax rates, whereas sometimes long
[12:04] Speaker 1: term investors are subject to more of the favorable capital
[12:06] Speaker 1: gains tax rates. Here's the follow up to it.
[12:08] Speaker 3: Because sometimes you can have a great year, yes, and
[12:11] Speaker 3: then you might have a down year, right, twenty twenty two.
[12:13] Speaker 1: Is one of those years.
[12:14] Speaker 3: Yes, people don't talk about the capital loss that you
[12:17] Speaker 3: can actually contribute to those gains.
[12:20] Speaker 1: That's right.
[12:20] Speaker 3: How does that work and can that be spread out
[12:23] Speaker 3: over the course of years or do you have to
[12:25] Speaker 3: execute that right away?
[12:26] Speaker 1: Yeah, So one of the things that many investors will
[12:28] Speaker 1: do is tax loss harvesting, because if they have a loss,
[12:31] Speaker 1: they'll go ahead and capture those losses to be able
[12:34] Speaker 1: to offset gains they might have experienced earlier in the year.
[12:36] Speaker 1: Let's just say that you have an excess loss, You're
[12:39] Speaker 1: able to absorb three thousand dollars of that loss against
[12:41] Speaker 1: other forms of income W two to ninety nine income.
[12:44] Speaker 1: Anything that's an excess will roll over into the following
[12:46] Speaker 1: year to offset new forms of income. So those losses
[12:49] Speaker 1: will always travel with you.
[12:51] Speaker 2: So as far as like for entrepreneurs, right, it's made
[12:54] Speaker 2: for entrepreneurs. As far as the tax code the benefit entrepreneurs, Yes,
[12:57] Speaker 2: some what are some ways w like you're seeing and
[13:00] Speaker 2: even your clients like high and how they taken advantage
[13:03] Speaker 2: of it, like through retirement ployanes or like through different deductions.
[13:07] Speaker 2: Like what's some of the strategies that you're advising your
[13:09] Speaker 2: clients to take advantage of the tax code? So they
[13:11] Speaker 2: could pay less money in taxes.
[13:12] Speaker 1: Yeah, the first thing is making sure you understand how
[13:14] Speaker 1: to receive the income. Most business owners starting out are
[13:16] Speaker 1: going to have an LLC. You graduate from the LLC
[13:19] Speaker 1: right when you hit about sixty thousand dollars in business profit.
[13:21] Speaker 1: That's when we introduce the S corporation. The reason why
[13:23] Speaker 1: is because now we're separating your income into two different buckets,
[13:26] Speaker 1: distributions and salary. When you're an LLC owner, you just
[13:30] Speaker 1: take distributions and all of that business profit is subject
[13:33] Speaker 1: to fifteen point three percent self employment tax which is
[13:36] Speaker 1: sold security and Medicare. I don't want to pay fifteen
[13:38] Speaker 1: point three percent on all my business's profits, so instead
[13:41] Speaker 1: I transition over to an S corporation. I give myself
[13:43] Speaker 1: a W two salary, only paying that fifteen point three
[13:46] Speaker 1: percent self employment taxes on that salary, and the rest
[13:49] Speaker 1: of my business profit is only subject to federal or
[13:51] Speaker 1: state taxes if I'm going to state that taxes. So
[13:54] Speaker 1: making sure you have the right setup first is always important.
[13:57] Speaker 2: Wells with the state if woman.
[14:01] Speaker 1: LLC.
[14:01] Speaker 2: That's why everybody knows the LLC right, Yes, in the
[14:04] Speaker 2: S corp and the C corp. But there is. It's
[14:07] Speaker 2: more complicating, right, Like you have to pay yourself a
[14:09] Speaker 2: set salary. That's correct, right, Yes, So explain that too,
[14:13] Speaker 2: because that's something that I don't think most people are
[14:17] Speaker 2: aware of as far as like the benefits. But then
[14:19] Speaker 2: there's actually things that are required that are a little
[14:23] Speaker 2: bit more complicated than just the LLC.
[14:24] Speaker 1: You're absolutely right. When you transition from an LLC to
[14:26] Speaker 1: anes corporation, your tax compliance gets a little bit trickier,
[14:30] Speaker 1: but not too much trickier. When you're an LLC, everything
[14:33] Speaker 1: goes into your business bank account. You can transfer money
[14:36] Speaker 1: from your business bank account to your personal account. Things
[14:38] Speaker 1: are just so easy. When you go to file your
[14:40] Speaker 1: tax returns, everything flows over into your individual tax return.
[14:43] Speaker 1: You file things just one time. But when you're an
[14:45] Speaker 1: S corporation owner, you have a pretty awesome business that's
[14:49] Speaker 1: saving you money on taxes. That comes with more complexities.
[14:52] Speaker 1: What are those more complexities? Now? You're going to have
[14:55] Speaker 1: to give yourself a W two salary sometime throughout the
[14:58] Speaker 1: year and cut yourself a payroll. Could choose to give
[15:00] Speaker 1: yourself a bi weekly payroll, or you can choose to
[15:02] Speaker 1: give yourself just one payroll for the entire year. But
[15:06] Speaker 1: you have to give yourself a salary based off of
[15:09] Speaker 1: what your net profit is going to be and what
[15:11] Speaker 1: someone else is expected to earn in the same job
[15:15] Speaker 1: or profession that you are in. So this is where
[15:17] Speaker 1: it gets a little bit tricky, because business owners need
[15:19] Speaker 1: to manage their business profits in order to determine how
[15:22] Speaker 1: much of a salary they need to give themselves. But
[15:25] Speaker 1: the beautiful part about giving yourself that salary too is
[15:28] Speaker 1: that you're still only paying fifteen point three percent self
[15:31] Speaker 1: employment tax on whatever that amount is. So if my
[15:34] Speaker 1: business profits one hundred K for the year and I
[15:36] Speaker 1: only give myself a salary of thirty thousand dollars, I'm
[15:38] Speaker 1: only paying fifteen point three percent on that thirty thousand
[15:41] Speaker 1: and the other seventy thousand dollars in business profit, which
[15:44] Speaker 1: I could transfer to myself whenever I want to, is
[15:46] Speaker 1: only subject to federal taxes and state taxes in a
[15:49] Speaker 1: state that taxes me. So I mean, that's a lot
[15:52] Speaker 1: of game. That's a lot of game.
[15:53] Speaker 3: They should know that you talked about well, which I
[15:55] Speaker 3: brought up retirement accounts. Yeah, high earners, how should they
[15:59] Speaker 3: maximize as we're talking, But I just wanted to just
[16:02] Speaker 3: follow up. Oh, yeah, cause this is something that's important.
[16:06] Speaker 2: I don't want to skip over this C corp es core. Yes,
[16:10] Speaker 2: what's the difference between a C corp? What's differ between
[16:12] Speaker 2: the escorp?
[16:13] Speaker 1: Yeah, the S corporation is a flow through entity? What
[16:15] Speaker 1: does that mean? A flow through entity means that all
[16:18] Speaker 1: of the income flows over to the individual tax return
[16:22] Speaker 1: of the shareholder. The S corporation has no taxes that
[16:25] Speaker 1: it pays when it files its return on March fifteenth.
[16:28] Speaker 1: It's just an information return. It spits out a K
[16:31] Speaker 1: one at March fifteenth that goes into your individual tax return,
[16:35] Speaker 1: and that is what you pay taxes on your business
[16:38] Speaker 1: profit inside of your individual tax returns as high as
[16:41] Speaker 1: thirty seven percent. By the way, when you decide to
[16:43] Speaker 1: set up a C corporation, there is no flow through
[16:46] Speaker 1: anymore of that K one. The C corp has its
[16:49] Speaker 1: own tax rate and it's a flat twenty one percent,
[16:53] Speaker 1: which means the only way that you're going to ever
[16:55] Speaker 1: see that on your individual return is if you decide
[16:57] Speaker 1: to give yourself a salary from the C corporate. And
[17:00] Speaker 1: this is when we have what's called double taxation. My
[17:03] Speaker 1: sea COREP paid twenty one percent on business profit. But
[17:05] Speaker 1: then I decided to give myself a salary of one
[17:07] Speaker 1: hundred or two hundred k, and now I'm paying taxes
[17:10] Speaker 1: over here personally. Where Also, sometimes sea corporation owners can
[17:14] Speaker 1: get into a little bit more tax is if they
[17:16] Speaker 1: transferred money to themselves throughout the year. You see, when
[17:19] Speaker 1: you're a sea corporation, anytime you transfer money to yourself
[17:23] Speaker 1: that's considered a dividend, you're going to be tax at
[17:25] Speaker 1: flat twenty percent on that. But if you choose to
[17:27] Speaker 1: give yourself a salary out of your sea corporation, that
[17:30] Speaker 1: becomes a deduction for the sea corporation. Because salaries are
[17:34] Speaker 1: deductions for the business.
[17:35] Speaker 2: So which one is better, It.
[17:37] Speaker 1: Just depends on your circumstances. In some situations, sea corporation
[17:40] Speaker 1: shareholders will take a loan because a loan is non taxable, right,
[17:44] Speaker 1: So maybe you want to take a loan from your
[17:45] Speaker 1: business profits and you're going to repay it back and
[17:47] Speaker 1: you don't want to take a huge salary. So there's
[17:50] Speaker 1: different ways in which we can play this as well.
[17:52] Speaker 1: Maybe we want to give you a huge salary because
[17:54] Speaker 1: you're qualifying for a loan and you know that you're
[17:56] Speaker 1: getting ready to buy a house, so we decide to
[17:57] Speaker 1: give you a salary. But maybe you're in a year
[17:59] Speaker 1: where you don't really have a need to have a
[18:02] Speaker 1: big salary, but you transferred money to yourself because you
[18:04] Speaker 1: wanted to continue your investments. So you took a dividend
[18:07] Speaker 1: out of your sea corporation to keep your business profits high,
[18:09] Speaker 1: so you have a strong EBITA in the event that
[18:11] Speaker 1: you want to exit. There's different ways in which we
[18:13] Speaker 1: can leverage this.
[18:14] Speaker 3: I'm going to keep it in that thing because you
[18:16] Speaker 3: said an important date, marshifteenth. A lot of times people
[18:19] Speaker 3: don't understand the dates, the quarterly dates that you should know. Yes,
[18:23] Speaker 3: so I'll tie that into I guess the retirement plan again,
[18:26] Speaker 3: because this is something that like, if you're a high
[18:28] Speaker 3: earner you want to have a deduction, Which are the
[18:31] Speaker 3: retirement plan strategy should we use? What are the dates
[18:34] Speaker 3: that we should definitely know if we're planning taxes? You said,
[18:36] Speaker 3: marsh fifteenth, I think everybody knows April fifteenth, Yeah, sure, absolutely.
[18:40] Speaker 3: What are there other dates that we should know to
[18:42] Speaker 3: make sure that we highlight circle put on our calendar?
[18:44] Speaker 1: Is a year in advance so we hey, we can't
[18:47] Speaker 1: miss this day. Yeah. If you are on extension for
[18:49] Speaker 1: your S corporation, you have until September fifteenth to file
[18:51] Speaker 1: the S corporation and then if you're on extension as well,
[18:54] Speaker 1: that means you have until October fifteenth to file your
[18:57] Speaker 1: individual tax returns. A lot of taxpayers are self and
[18:59] Speaker 1: place lloyd that have investments will typically go on extension
[19:02] Speaker 1: because they're waiting for their k ones to come in
[19:04] Speaker 1: so that those k ones can be verified and then
[19:06] Speaker 1: filed inside of the tax returns with their proper CPA.
[19:08] Speaker 1: When it comes to retirement planning, I always recommend getting
[19:11] Speaker 1: a retirement planning done by December thirty. First, there are
[19:13] Speaker 1: certain circumstances when you're self employed where you can do
[19:15] Speaker 1: a catch up on your self directed four oh one
[19:19] Speaker 1: K or your step IRA, and that allows for you
[19:21] Speaker 1: to put up to about twenty three thousand, five hundred
[19:23] Speaker 1: almost twenty four thousand dollars away or sometimes up to
[19:25] Speaker 1: sixty nine thousand. If you are self employed with a
[19:28] Speaker 1: step IRA, that is a way for you to reduce
[19:30] Speaker 1: your taxble income. That money can't be touched until you're
[19:32] Speaker 1: fifty nine and a half, but it can grow and
[19:34] Speaker 1: continue to be invested for you. Another retirement account that
[19:38] Speaker 1: most self employed individuals are unaware of is called the
[19:40] Speaker 1: cash balance plan. The cash balance plan is even bigger
[19:44] Speaker 1: than the four oh one K allows for you to
[19:45] Speaker 1: make a larger contribution by determining how much money you
[19:49] Speaker 1: wish to retire off of today, allowing for you to
[19:52] Speaker 1: evaluate your age, the size of your business, how many
[19:55] Speaker 1: employees you have, and make a lumpso contribution into a
[19:59] Speaker 1: retirement account. We had a client that was fifty nine
[20:01] Speaker 1: years old that contributed two hundred and forty nine thousand
[20:03] Speaker 1: dollars last year into his retirement account because he decided
[20:06] Speaker 1: to create a cash balance plan and that reduces tax
[20:09] Speaker 1: bills significantly.
[20:10] Speaker 3: Dam I'm glad you brought up the cash balance to
[20:11] Speaker 3: something that we are familiar with. Yes, and we've taken
[20:14] Speaker 3: advantage of. Uh So, the first two years of the
[20:16] Speaker 3: cash balance has to be consistent, Yes, it does.
[20:19] Speaker 1: Right, So it's not exact same amount.
[20:21] Speaker 3: If it's one hundred thousand year one, it has to
[20:23] Speaker 3: be one hundred thousand year two.
[20:24] Speaker 1: What happens here three? Though year three you can you
[20:26] Speaker 1: can change the amount substantially. However, you still have to
[20:30] Speaker 1: make a contribution every single year. Okay, okay, yeah, perfect,
[20:33] Speaker 1: good enough.
[20:34] Speaker 2: And that's the define benefit polant.
[20:38] Speaker 1: Yes, defined benefit plan very similar to the cash balance plan.
[20:41] Speaker 1: They almost work the exact same way.
[20:43] Speaker 2: So when you're looking at a client, like you tell
[20:47] Speaker 2: them like, okay, four one k, that's one way to
[20:50] Speaker 2: save money. Yes, right, they're definamiliar with that, solo fur
[20:53] Speaker 2: one k, I ray stuff like that. But if you
[20:55] Speaker 2: really want to get the maximum amount, then you look
[20:59] Speaker 2: at the cash Yes, and that allows you to save,
[21:03] Speaker 2: like you said, two hundred thousand alls dependent on how
[21:06] Speaker 2: much money you.
[21:06] Speaker 1: Make, your age and stuff like that.
[21:07] Speaker 2: That is correct and that and that goes directly against
[21:10] Speaker 2: the money that you make. So if you make a
[21:12] Speaker 2: million dollars, you put two hundred thousand, now you rate
[21:14] Speaker 2: eight hundred thousand.
[21:15] Speaker 1: You reduce your tax bill income by two hundred k
[21:17] Speaker 1: relative to your company.
[21:17] Speaker 2: Dollar dollar for a dollar.
[21:19] Speaker 1: It's not a dollar for dollar credit, it's a dollar
[21:21] Speaker 1: for dollar deduction deduction. Yes, yes, absolutely. Is there is
[21:24] Speaker 1: there a cap on the cash balance. There is a
[21:26] Speaker 1: cap based off of your age. Yes, it is. And
[21:28] Speaker 1: it's based off of your age, the health of your business,
[21:32] Speaker 1: the type of revenue you have in your business, but
[21:34] Speaker 1: there is a cap and the older and older you get,
[21:36] Speaker 1: the bigger and bigger the amount you're able to contribute.
[21:39] Speaker 2: So for people to have a business, well, what's what
[21:42] Speaker 2: what would you recommend as far as like a retirement plan,
[21:45] Speaker 2: like just what's the what's the go to a retirement plan?
[21:48] Speaker 1: I always recommend a WROTH four oh one k first
[21:51] Speaker 1: or a ROTH set. So most of the taxpayers that
[21:54] Speaker 1: I work.
[21:54] Speaker 2: Why do you recommend the role and explain it difference
[21:56] Speaker 2: between the rowth and the.
[21:57] Speaker 1: Traditional The reason why I recommend a WROTH is because
[22:00] Speaker 1: because when you put money into the ROTH, you're going
[22:01] Speaker 1: to pay taxes. Today. We know what the tax rates
[22:04] Speaker 1: are today, and we know that these are the lowest
[22:06] Speaker 1: tax rates that we have had in the last fifty years.
[22:09] Speaker 1: So why not take the beating on the chest today
[22:14] Speaker 1: and allow for that money to grow tax free for
[22:16] Speaker 1: the rest of your life. I want tax free accounts
[22:19] Speaker 1: in my retirement. I don't want to have to manage
[22:21] Speaker 1: taxes in my retirement. So if I can make the
[22:24] Speaker 1: sacrifice right now and grow tax free wealth right now,
[22:27] Speaker 1: I know in twenty thirty forty five years I'm going
[22:29] Speaker 1: to be very happy about the decisions that I made.
[22:31] Speaker 1: I also recommend that to a lot of parents that
[22:33] Speaker 1: have children that work inside of their businesses. One of
[22:36] Speaker 1: the strategies that we recommend to a lot of parents
[22:38] Speaker 1: is setting up a management company for their real estate
[22:41] Speaker 1: and hiring the children through the real estate management company.
[22:43] Speaker 1: Because we can pay children up to sixteen one hundred
[22:46] Speaker 1: dollars without the child needing to file a tax return,
[22:48] Speaker 1: we turn around and set up a roth ira for
[22:51] Speaker 1: that child and contribute about seven thousand dollars into that
[22:53] Speaker 1: row on money that neither me nor the taxpayer had
[22:57] Speaker 1: to pay taxes on, and now that money can grow
[22:59] Speaker 1: tax free. You start that at the age of five
[23:01] Speaker 1: by the child that by the time the child's sixty,
[23:03] Speaker 1: there should be close to about a million a million
[23:06] Speaker 1: one inside of that wroth account. These are simple habits
[23:08] Speaker 1: that we can develop for our children right now that
[23:11] Speaker 1: can you know, pay dividends and create generational wealth. What
[23:14] Speaker 1: about an HSA is that a tax deductible?
[23:17] Speaker 3: A lot of times as entrepreneurs, you know, health a
[23:19] Speaker 3: service or something we we got to figure out on
[23:21] Speaker 3: our own, or how do you approach clients when it
[23:24] Speaker 3: comes to that.
[23:25] Speaker 1: Yeah, The HSA is absolutely amazing. I think everybody should
[23:28] Speaker 1: have an HSA. You can contribute up to eighty three
[23:30] Speaker 1: thousand or eight thousand, three hundred for a family. It's
[23:33] Speaker 1: awesome because it's set up to provide for health related costs.
[23:37] Speaker 1: So it's a tripled tax account. When you put money
[23:40] Speaker 1: inside of the HSA, you get a tax deduction for it.
[23:43] Speaker 1: It grows like a roth ira, so you don't pay
[23:45] Speaker 1: any or you don't have to be subject to any
[23:48] Speaker 1: taxes on the growth of the account. And then when
[23:50] Speaker 1: you go to take money out of the account, you
[23:52] Speaker 1: don't pay any taxes on it as long as it's
[23:54] Speaker 1: for qualified health related reasons. So we have taxpayers that
[23:57] Speaker 1: have put one hundred percent of their HSA into IDIO
[24:00] Speaker 1: stock and they may have contributed only six or seven
[24:03] Speaker 1: thousand dollars where they're sitting on fifty or sixty thousand
[24:05] Speaker 1: because they started their HSA back in twenty twenty three,
[24:09] Speaker 1: when in video is a lot lower.
[24:10] Speaker 2: If you don't use it and turn into like a
[24:12] Speaker 2: retirement plan at sixty.
[24:13] Speaker 1: Five, that's correct. Absolutely, it can convert into a retirement plan.
[24:16] Speaker 1: You can take distributions from it.
[24:20] Speaker 2: Okay, let's talk about this car situation, something that wow,
[24:23] Speaker 2: let's do it. Talked about Section one seventy nine.
[24:26] Speaker 1: Yeah, Section one seventy nine in Code Section one sixty
[24:28] Speaker 1: AK allow for business owners to buy a qualified vehicle
[24:32] Speaker 1: or piece of equipment that's over six thousand pounds and
[24:34] Speaker 1: write it off all in one year. The issue that
[24:37] Speaker 1: I'm seeing with most business owners is they're taking one
[24:39] Speaker 1: hundred percent depreciation on a vehicle. They're not using one
[24:42] Speaker 1: hundred percent for business. In the event of an audit
[24:45] Speaker 1: from what I've seen, if you don't have a log
[24:47] Speaker 1: booklet that is determining the amount of time that's being
[24:51] Speaker 1: spent in business with documentation and substantiation, the IRS can
[24:55] Speaker 1: disallow your one hundred percent and relegate it down and
[24:58] Speaker 1: that disqualifies you from being able to use that bonus
[25:00] Speaker 1: depreciation that you're able to capture on that tax return
[25:02] Speaker 1: that year.
[25:03] Speaker 3: So this is this is something that's changed, right and
[25:06] Speaker 3: during the pandemic it was at one hundred and I
[25:08] Speaker 3: think the last previous administration. Every year it had dwindled
[25:11] Speaker 3: down the yeas eighty percent, sixty percent, and I think
[25:15] Speaker 3: it was expired and then.
[25:19] Speaker 1: It was going to go to forty percent. Next year,
[25:21] Speaker 1: we got the one Big Beautiful Bill July fifth. We
[25:23] Speaker 1: don't call it that, but yeah, yeah WBBA, and that
[25:27] Speaker 1: bill essentially gave us one hundred percent bonus depreciation restored.
[25:31] Speaker 1: So now business owners are able to deduct one hundred
[25:33] Speaker 1: percent bonus depreciation on qualified equipment or vehicles. And that
[25:36] Speaker 1: even rolls over into the real estate space too. With
[25:38] Speaker 1: the cost irrogation study, we like to accelerate depreciation on
[25:41] Speaker 1: rental properties, just like we like to accelerate depreciation on vehicles.
[25:44] Speaker 2: Cost segregation. Yeah, talk about that, explaining that.
[25:47] Speaker 1: Yeah, So a cost irrogation study is a really awesome
[25:49] Speaker 1: strategy that we use for real estate investors to accelerate
[25:52] Speaker 1: depreciation on the asset to force a paper loss. This
[25:57] Speaker 1: paper loss is normally passive, so in order for us
[26:00] Speaker 1: to be able to use it against active forms of
[26:01] Speaker 1: income like W two or self employed income from anes
[26:04] Speaker 1: corporation or an LLC, most times we have to qualify
[26:07] Speaker 1: the taxpayer or the spouse as a real estate professional.
[26:10] Speaker 1: A real estate professional someone who can show the IRS
[26:12] Speaker 1: that they spend seven hundred and fifty hours in their
[26:14] Speaker 1: real property trader business or managing their own investment property.
[26:17] Speaker 1: But The second part of the test is you have
[26:19] Speaker 1: to show the irs that you're spending more time in
[26:21] Speaker 1: real estate than any other job you have. And for
[26:23] Speaker 1: most W two taxpayers who are working forty hours a week,
[26:25] Speaker 1: there's no way they're going to be able to prove
[26:27] Speaker 1: that their real estate professionals because they would have to
[26:28] Speaker 1: spend more time in real estate. It works if you
[26:30] Speaker 1: have a spouse that's maybe a stay at home spouse
[26:33] Speaker 1: that can be the real estate manager, but for most
[26:35] Speaker 1: taxpayers that have both working spouses, it doesn't work. This
[26:39] Speaker 1: is where the short term mental strategy comes into play.
[26:42] Speaker 1: You see, Airbnb and VRBO came out in what twenty
[26:45] Speaker 1: eleven maybe twenty thirteen. However, the passive activity loss rules
[26:48] Speaker 1: were written in nineteen eighty six, and back then Airbnb
[26:53] Speaker 1: and vrbos weren't around, but they did have hotels and motels.
[26:56] Speaker 1: And if you had a hotel or motel business that
[26:59] Speaker 1: was being rented out for seven days or less, you
[27:02] Speaker 1: had an active real estate operation, which means you can
[27:05] Speaker 1: take active depreciation against your active forms of W two
[27:09] Speaker 1: or ten ninety nine income, Which means if taxpayers today
[27:12] Speaker 1: run airbnb businesses, they're no different than hotel and motel
[27:16] Speaker 1: like businesses, and they have their customers stay in the
[27:19] Speaker 1: Airbnb or vrbo seven days or less. You have an
[27:22] Speaker 1: active real estate business. Under Code section four sixty nine.
[27:26] Speaker 1: This allows for taxpayers now to do the cost segregation
[27:28] Speaker 1: study to accelerate depreciation, and now they can take a
[27:32] Speaker 1: loss against their W two or ten ninety nine income
[27:34] Speaker 1: on an average investment property. You're taking it around thirty
[27:37] Speaker 1: percent of the building's purchase price as a year one loss.
[27:41] Speaker 1: So if you have a million dollar property, for example,
[27:43] Speaker 1: you're putting down two hundred thousand dollars down twenty percent
[27:46] Speaker 1: down payment, but then the government's turning around and giving
[27:48] Speaker 1: you a three hundred thousand dollars loss right off on
[27:51] Speaker 1: your tax returns. And if you're running it as the
[27:53] Speaker 1: Airbnb strategy that we just talked about, you're offsetting your
[27:56] Speaker 1: W two income or your ten ninety nine income. If
[27:58] Speaker 1: you have three hundred k and W two inc. You're
[28:00] Speaker 1: tax free. Now specifically for investment property. That's a specifically
[28:04] Speaker 1: for investment real estate only. You cannot depreciate personal property.
[28:08] Speaker 1: It has to be investment property hold for investment purpose.
[28:11] Speaker 3: So here's the tricky part, right because what if it's
[28:15] Speaker 3: new build, right, like you have primary residents, but you
[28:19] Speaker 3: have a new building, obviously you have to apply for
[28:21] Speaker 3: it as specifically primary go investment correct, But is there
[28:25] Speaker 3: any fine line in between that that you can use
[28:29] Speaker 3: tax code or it's pretty finat like this is your
[28:33] Speaker 3: primary residence, you can't do it.
[28:34] Speaker 1: I mean you can have a portion of your primary
[28:36] Speaker 1: residence being rented on Airbnb or set up as an
[28:40] Speaker 1: investment asset. We have clients all the time that will
[28:42] Speaker 1: set up ADUs in particular states like California and Texas,
[28:45] Speaker 1: and so the front unit is their home and then
[28:47] Speaker 1: the back unit is being rented out for real estate purposes.
[28:50] Speaker 1: We take the square footage of that back unit and
[28:53] Speaker 1: perform a cost irrogation study based off of the square
[28:55] Speaker 1: footage of that back unit. Are able to accelerate depreciation
[28:58] Speaker 1: in that light, Maybe you have a vacation home. Instead
[29:01] Speaker 1: of you putting twenty percent down, you put ten percent
[29:02] Speaker 1: down because it's a vacation home. Because it's a vacation home,
[29:05] Speaker 1: you're not there all the time. I might be able
[29:07] Speaker 1: to use that property as a short term mental for you.
[29:09] Speaker 1: Perform a cost irgrogation study and now accelerate depreciation, forcing
[29:13] Speaker 1: some losses on your tax return that can offset flow
[29:15] Speaker 1: through from your s corporate W two income. Yeah. One
[29:18] Speaker 1: of the things we did was the Augusta Rule. Oh,
[29:20] Speaker 1: I love it, august rule. Yeah.
[29:21] Speaker 3: Obviously, you know we tape in different locations. Yes, when
[29:25] Speaker 3: we tape in Atlanta, we use that studio. Obviously, is
[29:27] Speaker 3: it still up to fourteen times?
[29:29] Speaker 1: That's correct. Explain to the audience and how they can
[29:31] Speaker 1: take advantage of. Yeah. The Augusta rule started by really
[29:34] Speaker 1: it was popular because of the Master's tournament that was
[29:36] Speaker 1: happening in Augusta, Georgia. There weren't enough hotels to house
[29:40] Speaker 1: all of the different tourists that were coming out for
[29:42] Speaker 1: that tournament. So homeowners were opening up their houses for
[29:44] Speaker 1: those two weeks and we're providing housing at very high rates.
[29:49] Speaker 1: The city of Augusta said, you know what, our homeowners
[29:51] Speaker 1: shouldn't have to pay taxes on this, so they disallowed it.
[29:53] Speaker 1: If you're in the state, if you're in the state
[29:55] Speaker 1: of Georgia, will disallow for you having to pay taxes
[29:58] Speaker 1: on the rental income that you're receiving during this Master's
[30:00] Speaker 1: golf tournament. Well, the IRS loved that rule and made
[30:03] Speaker 1: it a law the following year. We call it the
[30:05] Speaker 1: August rule or the fourteen day rule. As tax professionals,
[30:09] Speaker 1: many business owners have taken advantage of that law as well.
[30:11] Speaker 1: What they'll do is they'll set up a contract between
[30:14] Speaker 1: their s corporation and themselves, and all they're doing is
[30:16] Speaker 1: renting their house to their business for fourteen days to
[30:19] Speaker 1: conduct business activities. These could be business meetings, business conferences,
[30:23] Speaker 1: business events, as long as those business events are ordinary, necessary,
[30:27] Speaker 1: and reasonable to the business in the pursuit of income
[30:29] Speaker 1: you are now conducting in behalf of the AUGUSTA rule.
[30:32] Speaker 1: I love this strategy because it directly puts money back
[30:34] Speaker 1: in people's pocket without them having to go spend more
[30:37] Speaker 1: money to save.
[30:38] Speaker 2: Yeah, with some of the mistakes, Like what do you
[30:41] Speaker 2: see that people get audited the most for?
[30:44] Speaker 1: Yeah, Like what's the mistakes that they make? As far
[30:46] Speaker 1: as us concern, Yeah, most audits happen because people make omissions.
[30:51] Speaker 1: Omissions means you left something off of your tax return.
[30:55] Speaker 1: Most taxpayers who get audited are scheduled see business owners riderships,
[31:00] Speaker 1: single member LLCs. Why because they receive a lot of
[31:03] Speaker 1: ten ninety nine They sometimes forget to report all their
[31:05] Speaker 1: ten ninety nines. And guess what if you forgot to
[31:08] Speaker 1: report that ten ninety nine, it got submitted. The IRS
[31:10] Speaker 1: knows you receive that ten ninety nine, and they match
[31:13] Speaker 1: it up to your tax return and flag your tax
[31:15] Speaker 1: return immediately. That is one of the biggest ways that
[31:17] Speaker 1: people get into audits. The second is using categories on
[31:20] Speaker 1: your tax returns that are essentially red flags of the IRS.
[31:24] Speaker 1: For most single member LLC owners, the two categories that
[31:26] Speaker 1: they like to use is other expenses and miscellaneous. To
[31:30] Speaker 1: this day, I do not know what a miscellaneous expense is,
[31:33] Speaker 1: but I know that many taxpayers who like to file
[31:35] Speaker 1: their own tax return love to use that category and
[31:37] Speaker 1: other expenses. When you have other expenses as a category,
[31:41] Speaker 1: that means you don't know how to really categorize the expense,
[31:43] Speaker 1: so you're putting it in the category that the IRS
[31:45] Speaker 1: set up for you called other expenses, and now you
[31:47] Speaker 1: have to list out each line item of what those
[31:50] Speaker 1: other expenses were. I have seen some of the craziest
[31:53] Speaker 1: things guys on some of these other expense items. Massages
[31:56] Speaker 1: for my team baseball, memorabile cards. What are these? Are
[32:02] Speaker 1: not ordinary? Necessary? Expenses to your business whatsoever. So why
[32:05] Speaker 1: are they landing here? That gets you flagged and that
[32:08] Speaker 1: gets you audited, and yes, schedule. See, businesses are highly
[32:11] Speaker 1: more likely to get audited, actually thirty three percent more
[32:14] Speaker 1: likely to get audited than as corporations or partnerships.
[32:17] Speaker 3: Man, that was triggering because every month I get that
[32:19] Speaker 3: itemized sheet and it's a breakdown and I'm like, all right,
[32:22] Speaker 3: I got to think about what that was. I to
[32:24] Speaker 3: think about, like, Yo, that's not my card. Let me
[32:27] Speaker 3: figure then, Like I'm pretty good with it. My memory
[32:29] Speaker 3: is pretty good. Yeah, but yeah, yeah, one hundred percent
[32:32] Speaker 3: spot on. I want to talk about started because I'm like,
[32:36] Speaker 3: I got to ask them about.
[32:37] Speaker 1: The salt deduction.
[32:38] Speaker 3: Yeah, because I don't think people are familiar with it.
[32:41] Speaker 3: You know that the rules have change. As a homeowner,
[32:43] Speaker 3: this is something that people can take advantage of. So
[32:45] Speaker 3: break down what the salt deduction is, how it's increased,
[32:48] Speaker 3: and how we can benefit from it.
[32:49] Speaker 1: Yeah. Absolutely, So salt stands for state and local tax.
[32:53] Speaker 1: If you are in a state that taxes you, or
[32:55] Speaker 1: you are in a local municipality that taxes you, the
[32:59] Speaker 1: government allows for you to deduct that off of your
[33:01] Speaker 1: tax return. So let's just say that I'm here in
[33:03] Speaker 1: the state of New York and I live in Manhattan.
[33:05] Speaker 1: Manhattan has its own city tax, and then the state
[33:08] Speaker 1: has its own state tax. I can deduct that off
[33:11] Speaker 1: of my tax returns. But here's the issue. I'm limited
[33:13] Speaker 1: to only ten thousand dollars between state and local tax. Well,
[33:18] Speaker 1: if I own a property here too, I may have
[33:20] Speaker 1: fifty thousand dollars in property taxes. This year, I might
[33:23] Speaker 1: have paid sixty thousand dollars in state taxes, and then
[33:26] Speaker 1: the city of Manhattan charged me another twelve hundred dollars.
[33:30] Speaker 1: I'm only able to deduct ten thousand. Well, with the OBBA,
[33:33] Speaker 1: we got an update. Appreciate you for that. We got
[33:36] Speaker 1: an update, and now it has increased to forty thousand.
[33:40] Speaker 1: There's a cap. If you're making over four hundred thousand dollars.
[33:42] Speaker 1: A justice grows income, you don't receive that forty k.
[33:44] Speaker 1: It drops right back down to ten thousand. But it
[33:46] Speaker 1: still helps out a significant amount of taxpayers because most
[33:49] Speaker 1: taxpayers make under four hundred thousand. So if you're in
[33:52] Speaker 1: a high tax state like Callo four in Hawaii, New York,
[33:55] Speaker 1: this helps you significantly you're now able to write up
[33:58] Speaker 1: up to forty thousand dollars of your or state taxes
[34:01] Speaker 1: on your tax returns, property taxes, or local taxes, helping
[34:04] Speaker 1: out many people.
[34:05] Speaker 3: So high earners not going to really help the average person.
[34:09] Speaker 3: Definitely helps.
[34:10] Speaker 1: Yes, does not help high earners at all. You will
[34:13] Speaker 1: not qualify for it.
[34:15] Speaker 2: Enough when you look at like the child tax credit,
[34:20] Speaker 2: right like, that's something that a lot of people are
[34:23] Speaker 2: not familiar with and don't even take advantage of. Line,
[34:26] Speaker 2: what should ever be parent, No, as far as ask concern.
[34:29] Speaker 1: Yeah, the child tax credit is something that you should
[34:31] Speaker 1: take advantage of. As your child is underneath the age
[34:33] Speaker 1: of eighteen and they are someone that you support, You're
[34:37] Speaker 1: able to get two thousand dollars per child, and that's
[34:39] Speaker 1: a credit, it's not a deduction. Part of the reason
[34:41] Speaker 1: why the child tax credit is so powerful is because
[34:44] Speaker 1: many low income households will have multiple children, and when
[34:47] Speaker 1: they go to file their tax returns and report their income,
[34:50] Speaker 1: they're getting back a sizeable refund because the child tax
[34:54] Speaker 1: Credit is a refundable credit, which means if I only
[34:57] Speaker 1: paid eight thousand dollars in taxes, but I have sixteen
[35:00] Speaker 1: thousand dollars in a tax credit. I'm getting back eight
[35:03] Speaker 1: thousand dollars in a refund from the government. Eight thousand
[35:05] Speaker 1: dollars when you're only making forty thousand dollars a year,
[35:08] Speaker 1: is a significant amount of money that could support you
[35:10] Speaker 1: and your family possibly for another month or two without
[35:12] Speaker 1: you having to receive money from your current job. So
[35:15] Speaker 1: for many low income households, the child tax credit is
[35:18] Speaker 1: one of the most beneficial things that they apply for.
[35:21] Speaker 1: Let's talk.
[35:21] Speaker 3: Let's keep it with the kids, because I believe first
[35:24] Speaker 3: of this year, Trump accounts going to effect.
[35:27] Speaker 1: Yes they do.
[35:28] Speaker 3: Yeah, Scott's good at marketing, so talk to us about that.
[35:34] Speaker 3: The benefits as employers, how you can use this to
[35:37] Speaker 3: your advantage. It's for every kid that is born in
[35:40] Speaker 3: twenty twenty six, or is it every kid under the
[35:42] Speaker 3: age of ten as of twenty twenty six.
[35:45] Speaker 1: I believe it's for every kid that's born from born
[35:48] Speaker 1: in twenty twenty six moving forward, and for children who
[35:50] Speaker 1: are currently under the age of ten can apply for
[35:53] Speaker 1: a Trump account and get a one thousand dollars funded
[35:56] Speaker 1: by the government, and that money can continue to grow
[35:59] Speaker 1: in a tax advance. Honestly, it's great I still favor
[36:03] Speaker 1: the roth IRA for your children. You can set up
[36:05] Speaker 1: a custodial roth. I think it's way more beneficial to
[36:08] Speaker 1: have the custodial wroth. But why not just set up
[36:11] Speaker 1: the Trump account for your child? That's money that's just
[36:13] Speaker 1: going to grow. I mean, the analysts are already doing
[36:15] Speaker 1: numbers on it. If you just let that account grow
[36:18] Speaker 1: from the day your child is born to the time
[36:20] Speaker 1: that they're believe sixty two years old, there should be
[36:22] Speaker 1: close to about eight hundred thousand dollars in that account.
[36:25] Speaker 1: That is generational wealth. So I think the Trump account's
[36:27] Speaker 1: absolutely amazing. It's one of the many things that Trump
[36:30] Speaker 1: kind of slid in there as a part of all
[36:32] Speaker 1: the other updates to be able to bolster his candidate
[36:35] Speaker 1: presidential candidacy.
[36:36] Speaker 3: Is it Do employers have the ability to match it?
[36:40] Speaker 3: Or is there still some clarity that needs to be
[36:43] Speaker 3: provided to us on that.
[36:44] Speaker 1: Based off of what I know, I don't believe the
[36:46] Speaker 1: employers allowed to actually, you know what, I believe there
[36:49] Speaker 1: is a way in which the employer can match it
[36:52] Speaker 1: for their own child, but I don't know about for
[36:54] Speaker 1: the children of their employees. I would have to look
[36:56] Speaker 1: into that. I would have to look into that.
[36:58] Speaker 2: Yeah, so, like a high income earner can still be
[37:02] Speaker 2: fragile if they don't transfer over to ownership. Yes, just
[37:06] Speaker 2: because you make a lot of money doesn't mean that
[37:08] Speaker 2: you're like, you know, in a stable position when it
[37:10] Speaker 2: comes to finances, when it comes to the tax code,
[37:12] Speaker 2: and just in general, so correct explain that.
[37:16] Speaker 1: Yeah, so there's a lot of taxpayers that make a
[37:19] Speaker 1: lot of money, But just because they make a lot
[37:20] Speaker 1: of money on paper doesn't mean they're taking home a
[37:22] Speaker 1: lot of money. And a big reason why is because
[37:24] Speaker 1: they're earners, they're not owners. You can be an earner
[37:27] Speaker 1: in this in this you know government, but guess what
[37:31] Speaker 1: they're going to penalize you for just being an earner.
[37:33] Speaker 1: Or you can choose to be an owner by assets
[37:36] Speaker 1: like rental, real estate, oil and gas, solar, and now
[37:39] Speaker 1: you have incentives that were written into the tax code
[37:42] Speaker 1: flowing onto your tax returns that you own. This turns
[37:45] Speaker 1: around provides deductions for you. The biggest one, of course,
[37:49] Speaker 1: is going to be depreciation with real estate, but solar
[37:52] Speaker 1: is also a powerful tax credit for many taxpayers. You
[37:55] Speaker 1: could choose to put solar on your own house, or
[37:57] Speaker 1: you could choose to start a solar business and work
[37:59] Speaker 1: with the third party company and install solar on others
[38:03] Speaker 1: people's houses. You still own the assets, so you get
[38:06] Speaker 1: to depreciate them, and you get to take the tax
[38:08] Speaker 1: credit relative to thirty percent of the purchase price. So
[38:11] Speaker 1: that ends up being a significant, significant tax savings that
[38:14] Speaker 1: people can receive when they're going into energy. It's a
[38:18] Speaker 1: good one.
[38:18] Speaker 3: So there's this idea. Obviously, financial education and u side thing.
[38:23] Speaker 3: I feel like financial structure is your thing. Can break
[38:28] Speaker 3: those two things down because I feel like people the
[38:31] Speaker 3: first step is understanding.
[38:32] Speaker 1: Yeah right.
[38:33] Speaker 3: The next step for me is being able to be
[38:37] Speaker 3: fluent about the understanding and explaining it. And there's this
[38:40] Speaker 3: piece I think that is vidently important, which you do
[38:42] Speaker 3: the financial structure.
[38:43] Speaker 1: Yeah, talk about that. Why that's so important? I believe
[38:47] Speaker 1: it's important because a lot of people, over time, as
[38:50] Speaker 1: they build wealth, they're building wealth based off of their
[38:54] Speaker 1: own understanding. Maybe you'll choose to go read a book someday,
[38:57] Speaker 1: but that book is not going to give you all
[38:58] Speaker 1: of the different tidbits to how the tax system is
[39:01] Speaker 1: structured to be able to serve you and your financial growth.
[39:04] Speaker 1: What I've chosen to do is I've chosen to structure
[39:07] Speaker 1: my finances in a way with the tax code so
[39:09] Speaker 1: that I'm doing things that the government wants me to do,
[39:12] Speaker 1: so I can turn around and make more money at
[39:13] Speaker 1: the exact same time. And in order to do that correctly,
[39:17] Speaker 1: I have to understand that debt is a good thing.
[39:19] Speaker 1: It's a tool, it's something that I can use to
[39:20] Speaker 1: my advantage. I understand that there's certain wealth teachers that
[39:23] Speaker 1: teach you to be one hundred percent debt free. However,
[39:25] Speaker 1: the tax cod's not written like that, and we all
[39:28] Speaker 1: operate underneath that tax code, and so getting the correct
[39:31] Speaker 1: financial structure can be the big difference between you getting
[39:33] Speaker 1: to one hundred rental houses or only having ten, just
[39:36] Speaker 1: based off of the way you think right. Another thing
[39:39] Speaker 1: too to take into consideration when it comes to financial
[39:41] Speaker 1: structure is entities. Many taxpayers may have a few LLCs,
[39:46] Speaker 1: but maybe those LLCs are all just floating out there
[39:48] Speaker 1: without one centralized parent company. I love using parent companies,
[39:53] Speaker 1: and I typically gravitate towards states like Wyoming and Delaware
[39:56] Speaker 1: because the state of Wyoming has a quarter chancery that's
[39:59] Speaker 1: been set up to handle disputes for business owners and landlords.
[40:02] Speaker 1: But more importantly, they don't require your name and information
[40:06] Speaker 1: to be at the county assessor's office or on public record,
[40:09] Speaker 1: So I can fly under the radar owning all these
[40:11] Speaker 1: different entities. When people go look up my entity, they
[40:14] Speaker 1: don't know who owns those entities. So I'm in a
[40:17] Speaker 1: different financial structure for growth, whereas someone who doesn't even
[40:21] Speaker 1: understand about these different things might be completely exposed gets
[40:24] Speaker 1: a lawsuit. While I'm running at one thousand miles per hour,
[40:26] Speaker 1: They're only running at fifty miles per hour. There's the
[40:29] Speaker 1: difference in speed to wealth, and it all comes down
[40:32] Speaker 1: to structure.
[40:34] Speaker 2: So talk about like what's the difference between Delaware and Wyoming.
[40:38] Speaker 2: And if somebody starting, should they incorporate their business in Delaware?
[40:41] Speaker 1: Yeah?
[40:42] Speaker 2: Should they move it later on once it's profitable? Like
[40:44] Speaker 2: what should they do?
[40:45] Speaker 1: Yeah? Delaware is the golden state for most corporations. You'll
[40:48] Speaker 1: see all publicly traded companies have their companies set up
[40:51] Speaker 1: in Delaware. And then real estate is probably the best state,
[40:54] Speaker 1: or Wyoming is probably the best state for rental real estate.
[40:57] Speaker 1: You'll see a lot of landlords set up their llcas
[40:59] Speaker 1: and Wyoming Wyoming's a perfect place to have your parent company,
[41:03] Speaker 1: the entity that's going to own every other entity underneath it.
[41:07] Speaker 1: Why because that state doesn't require your name and information
[41:11] Speaker 1: to be public record. If you go to set up
[41:13] Speaker 1: in an LLC in Wyoming, you'll set up a registered agent,
[41:16] Speaker 1: you'll create the LLC underneath the name, but it's not
[41:19] Speaker 1: going to post your individual name, you being the managing member,
[41:23] Speaker 1: on the public records. So then that parent company can
[41:25] Speaker 1: own in LLC maybe in Texas that has rental properties
[41:28] Speaker 1: in Texas. It could also own an LLC in Arizona
[41:31] Speaker 1: that has rental properties in Arizona. And at the same time,
[41:34] Speaker 1: if something were to happen in Arizona, you're abiding by
[41:37] Speaker 1: Wyoming laws in the event that you get into a
[41:40] Speaker 1: dispute with your tenants or there's a circumstance that comes
[41:43] Speaker 1: up that shields you because Wyoming has specific laws that
[41:46] Speaker 1: are favorable for landlords. Delaware has specific laws that are
[41:50] Speaker 1: favorable for corporations. Large corporations go to Delaware to incorporate
[41:55] Speaker 1: there because there is a Court of Chaucery in Delaware
[41:57] Speaker 1: that deals with corporate issues effically for business owners, a
[42:01] Speaker 1: lot of business owners feel like the laws and legislation
[42:05] Speaker 1: that was written in Delaware supports the growth of a
[42:07] Speaker 1: business owner more than any other state. That's why most
[42:11] Speaker 1: business owners who are publicly traded companies are looking to
[42:14] Speaker 1: exit will set up their entities in the state of Delaware.
[42:18] Speaker 1: I'm glad you said that.
[42:21] Speaker 3: There's another thing that's happened in the great state of California.
[42:24] Speaker 3: We're starting to see a lot of you know, those
[42:28] Speaker 3: the billionaire exodus. We recently we saw Elon and then
[42:34] Speaker 3: we now have seen Mark Zuckerberg pick up his things
[42:36] Speaker 3: and buy one hundred and seventy million dollar mansion in
[42:39] Speaker 3: Miami happening.
[42:40] Speaker 1: Yeah, talk about that.
[42:42] Speaker 3: I mean, on the surface, it feels like your wealthiest
[42:46] Speaker 3: residents are not going to be incentivized to stay there,
[42:50] Speaker 3: and so they leave, and then you know that continues
[42:53] Speaker 3: at a higher rate.
[42:55] Speaker 1: What's your thoughts about this? Criminal? Absolutely criminal, to be
[42:58] Speaker 1: completely honest with you, How are you going to put
[43:01] Speaker 1: a billionaire's tax on the wealthiest billionaires in California based
[43:05] Speaker 1: off of the amount of assets that they have. That's insane.
[43:08] Speaker 1: You're essentially saying, sell your assets in order to pay
[43:11] Speaker 1: a tax. Because we said so, we're the ones that
[43:14] Speaker 1: got ourselves into this debt, but you're going to be
[43:15] Speaker 1: the ones that have to get us out of it.
[43:18] Speaker 1: Billionaires are like, no, thanks, I'm out of here. Why
[43:20] Speaker 1: Because billionaires have choice, and they want to go to
[43:23] Speaker 1: places where they're respected. They want to go to places
[43:26] Speaker 1: where they feel like they're wanted and they're appreciated. That's
[43:30] Speaker 1: why they're gravitating towards states like Texas and Florida, primarily Florida.
[43:33] Speaker 1: Why because you have people like Ron DeSantis that are
[43:35] Speaker 1: on the news every single week speaking up for his
[43:39] Speaker 1: own state, pushing for no property taxes, supporting entrepreneurship, and
[43:43] Speaker 1: then you have people like Gavin Newsom, you know, bashing
[43:47] Speaker 1: billionaires misappropriating California funds. We have no idea what's happened
[43:53] Speaker 1: with all the taxpayer dollars, and there's a whole investigation
[43:56] Speaker 1: going on right now into that. I'm sure when you
[43:58] Speaker 1: talk about that for a later time, but we're dealing
[44:00] Speaker 1: with a situation where people are losing trust in California,
[44:03] Speaker 1: and then you slap us with this billionaire's tax. That's
[44:06] Speaker 1: the last straw from many people.
[44:09] Speaker 2: I mean, you own real estate, should you always have
[44:11] Speaker 2: it in the LLC.
[44:13] Speaker 1: If you believe in long term wealth creation, you will
[44:15] Speaker 1: always have your rental properties inside of an LLC. No
[44:18] Speaker 1: matter the fact that it may cost you eight hundred
[44:20] Speaker 1: dollars to set up an LLC and you have to
[44:21] Speaker 1: file a tax return. That's a small drop in the
[44:24] Speaker 1: bucket for a big problem that can happen later. We've
[44:27] Speaker 1: seen taxpayers that have had customers slip and fall in
[44:30] Speaker 1: their airbnbs, storm drains, have fallen down during rains and
[44:33] Speaker 1: have hitten people in the head. Next thing you know,
[44:35] Speaker 1: one hundred thousand dollars is going out and a check.
[44:38] Speaker 1: Two hundred thousand dollars is going out in a check
[44:40] Speaker 1: because we never set up the right proper liability of
[44:43] Speaker 1: protection that is so so important.
[44:46] Speaker 2: So it's really for protection purposes. It make any different
[44:49] Speaker 2: for taxes or no.
[44:50] Speaker 1: Absolutely, not setting up an LLC does not save you
[44:52] Speaker 1: money on taxes. This is a big misconception that many
[44:54] Speaker 1: people have. I need to save money on taxes, I
[44:57] Speaker 1: should just go set up an LLC. And LLC is
[44:59] Speaker 1: just a tax structure. Is saying I want limited liability protection. Really,
[45:03] Speaker 1: how you choose to utilize that LLC will determine if
[45:06] Speaker 1: you can save money on taxes. What expenses are you
[45:09] Speaker 1: putting inside of that LLC that are going to draw
[45:10] Speaker 1: down your taxbile income. So it's a big misnomer in
[45:13] Speaker 1: the tax place that setting up anet LOLLC automatically saves
[45:16] Speaker 1: money on taxes. It doesn't.
[45:17] Speaker 3: It made me think of the idea of having your
[45:19] Speaker 3: Brokens account inside of ther LLC. Yeah, more for protection
[45:22] Speaker 3: than it is for tax. Capital gains is capital gains.
[45:25] Speaker 1: Yeah, short term and long term, that's correct.
[45:27] Speaker 3: Yeah, I wanted because we talked about capital gains short
[45:30] Speaker 3: term and long term, but there was this idea, this
[45:33] Speaker 3: premise of maybe we tax unrealized gains. I want your
[45:37] Speaker 3: thoughts on that because I'd have mine, but I want
[45:39] Speaker 3: to hear from the professional.
[45:40] Speaker 1: Yeah, I mean taxing unrealized gains is pretty tough because
[45:44] Speaker 1: you're essentially penalizing me for holding onto an asset that
[45:47] Speaker 1: I believe in. And then let's just say we get
[45:50] Speaker 1: to the end of the year and I have all
[45:52] Speaker 1: these gains, but then the stock market takes a huge hit. Well,
[45:55] Speaker 1: now I just lost everything and I paid taxes for
[45:58] Speaker 1: on money I don't technically have anymore. I don't see
[46:02] Speaker 1: how that's fair in any world. And I don't see
[46:05] Speaker 1: I don't see that being passed. I don't see that
[46:07] Speaker 1: coming to fruition. But we get all these different proposals
[46:10] Speaker 1: because you know, these different agencies, what they like to
[46:13] Speaker 1: do is they like to shoot for the stars and
[46:15] Speaker 1: land on the trees. They like to swing for the
[46:17] Speaker 1: highest things that they can possibly achieve and land on
[46:20] Speaker 1: something a little bit softer and right now. You know,
[46:23] Speaker 1: we originally had Trump shooting to you know, get rid
[46:27] Speaker 1: of some taxes, but we landed on only forty percent
[46:31] Speaker 1: salt tax. These are the types of things that happen
[46:34] Speaker 1: when Congress is talking. They're shooting these big, big ideas
[46:37] Speaker 1: out and then we kind of vote and land on
[46:39] Speaker 1: these smaller ideas.
[46:41] Speaker 2: So talk about social media because that played a part
[46:43] Speaker 2: in your branding, your marketing. Yeah, what gave you the
[46:48] Speaker 2: vision for that? And how has that shaped your career path?
[46:52] Speaker 1: Yeah? So I picked up a camera when I was
[46:54] Speaker 1: fourteen years old, and part of the reason why is
[46:57] Speaker 1: because I really loved the TV show Jackass and all
[47:00] Speaker 1: the little different skits that they were doing. And when
[47:05] Speaker 1: I got into fitness right when I graduated college, it
[47:08] Speaker 1: was important to have videos out teaching people how to
[47:12] Speaker 1: work out correctly. I had spent years perfecting my fitness,
[47:15] Speaker 1: you know, in college with football, so that's kind of
[47:17] Speaker 1: when I started picking up the camera. It didn't happen
[47:20] Speaker 1: really the blow up until twenty twenty when I decided
[47:24] Speaker 1: to get on YouTube and I researched how do you
[47:27] Speaker 1: pay yourself as an LLC? And I realized there was
[47:29] Speaker 1: no YouTube video for So what I did is I
[47:32] Speaker 1: decided to create a long formatted video on how to
[47:35] Speaker 1: pay yourself as an LLC, posted it on YouTube. Didn't
[47:39] Speaker 1: think anything was going to happen. Thirty days later, I
[47:42] Speaker 1: got emails that I that were unresponded from Google Ads
[47:46] Speaker 1: and saying they needed me to open up a bank
[47:48] Speaker 1: account and connect it to my Google ADs' account because
[47:50] Speaker 1: they're trying to send me a check. And I went
[47:52] Speaker 1: back to my YouTube account. Within thirty days, I had
[47:55] Speaker 1: thirty thousand subscribers on my YouTube account on video how
[48:00] Speaker 1: to pay yourself as an LLC. That video is now
[48:03] Speaker 1: well over five six seven million views and has allowed
[48:07] Speaker 1: for me to create more videos. And what I focused
[48:10] Speaker 1: on early on was not creating videos for myself. I
[48:13] Speaker 1: created videos based off of what was missing on the internet.
[48:16] Speaker 1: I just started typing in on the internet, how to
[48:18] Speaker 1: pay yourself as an escort, how to pay yourself as
[48:21] Speaker 1: a LLC, tax as an es corporation. There was just
[48:24] Speaker 1: none of these videos. Then I found out about Google trends,
[48:27] Speaker 1: and I realized that people google search things and you
[48:29] Speaker 1: could just find out what is the trending Google searches.
[48:32] Speaker 1: So I typed in tax and found out all the
[48:34] Speaker 1: things that people were Google searching right during the pandemic.
[48:37] Speaker 1: How to receive a stimulus check, how to receive the
[48:40] Speaker 1: EIDL loan, how to receive the PPP loan, how to
[48:43] Speaker 1: place my children on payroll? Should I set up an LLC?
[48:45] Speaker 1: Should I What are the top five write offs for
[48:47] Speaker 1: an LLC? I covered the entire landscape, and I viewed
[48:51] Speaker 1: YouTube as real estate. I wanted to take up all
[48:54] Speaker 1: of the real estate on the internet for anything related
[48:57] Speaker 1: to tax. And that's when I put my head down
[49:00] Speaker 1: into work and fast forward. We're at I think like
[49:03] Speaker 1: over a million subscribers now, so I've been doing well grass.
[49:05] Speaker 3: So I mean you said it, I'm thinking I used
[49:09] Speaker 3: to have this idea of, you know, what people can
[49:12] Speaker 3: write off when they're entrepreneurs right as a WT employee
[49:15] Speaker 3: for like fourteen years. Yeah, and I'm like, man, that
[49:17] Speaker 3: would be great if I could write off you know,
[49:19] Speaker 3: my uniform, the equipment. What are the top five things
[49:23] Speaker 3: that LLC should be looking at to write off?
[49:25] Speaker 1: Yeah, I mean, for starters, most LLC owners are living
[49:29] Speaker 1: under a house, so they should definitely be taking a
[49:31] Speaker 1: home office deduction. If they're working for the convenience of
[49:33] Speaker 1: their home. They're most likely using a computer to conduct
[49:36] Speaker 1: a business, so those are automatically ordinary necessary expenses. They're
[49:39] Speaker 1: going to have a cell phone, so these are just
[49:40] Speaker 1: the basic things that say they should be deducting. If
[49:42] Speaker 1: they have a vehicle, they need to determine if they're
[49:44] Speaker 1: going to take the knowledge expense or the actual expense.
[49:46] Speaker 1: Knowledge means that you can take, I believe. I think man,
[49:49] Speaker 1: it might be up to seventy five per cents now
[49:51] Speaker 1: this year per every single mile that you drive, or
[49:53] Speaker 1: you can choose to take the actual expenses associated with
[49:55] Speaker 1: your car, your car payment, the gas, the utilities associated
[49:59] Speaker 1: with running your car. And then last but not least,
[50:02] Speaker 1: if you ask me, advertising, I mean, most businesses can't
[50:05] Speaker 1: grow unless people know who you are, and so if
[50:08] Speaker 1: you get on the internet and you pay for subscriptions,
[50:10] Speaker 1: you're paying for YouTube videos SEO. All of those expenses
[50:14] Speaker 1: are ordinary necessary to the pursuit of income. Those are
[50:16] Speaker 1: the basic things that every single LLC owner should be
[50:20] Speaker 1: taking on their tax returns.
[50:21] Speaker 2: What's the biggest secret of the wealthy or like, what's
[50:26] Speaker 2: the biggest thing that you think most the common person
[50:29] Speaker 2: doesn't know that wealthy educated people are doing to take
[50:33] Speaker 2: advantage of tax system.
[50:34] Speaker 1: Wealthy educated people are taking advantage of charitable structures. They're
[50:38] Speaker 1: setting up five oh one c threes and using them
[50:40] Speaker 1: completely different than the average public. When you set up
[50:43] Speaker 1: a private family foundation, you can roll over thirty percent
[50:45] Speaker 1: of your adjusted gross income into your own foundation. It's yours.
[50:49] Speaker 1: It could be a non performing foundation, meaning you don't
[50:51] Speaker 1: even have to let the public know what you're even doing.
[50:53] Speaker 1: You can just have a foundation and it doesn't even
[50:55] Speaker 1: do anything. Yet thirty percent of your adjusted gross income
[50:58] Speaker 1: can go into it. Only five percent of the charitable
[51:00] Speaker 1: assets have to be contributed to another five h one
[51:02] Speaker 1: CE or qualifying charity of your choice every single year.
[51:07] Speaker 1: There's no capital gains tax. Inside of a foundation. You
[51:09] Speaker 1: can have that money invested inside of stocks or assets
[51:12] Speaker 1: that can continue to grow in a tax advantage manner.
[51:15] Speaker 1: Not to mention, many of these wealthy families will hire
[51:17] Speaker 1: their children or family members to run their foundations and
[51:20] Speaker 1: carry out the philanthropic work. And that's another way to
[51:24] Speaker 1: shift income to a taxpayer that you were trying to
[51:27] Speaker 1: get income to without creating another tax for them.
[51:30] Speaker 2: So explain, or say, you have ten million dollars, right,
[51:34] Speaker 2: mm hmm, you said, do you put thirty percent?
[51:36] Speaker 1: You can shift thirty percent of your just a gross income,
[51:38] Speaker 1: so three million.
[51:39] Speaker 2: So three three million dollars into a charity that you
[51:43] Speaker 2: set up yep.
[51:45] Speaker 1: Five oh one c three called a private family foundation.
[51:47] Speaker 2: Private family foundation. Correct, three million dollars goes into the
[51:50] Speaker 2: private family foundation. Then what happens at that point?
[51:54] Speaker 1: Only five percent of those assets have to be contributed
[51:56] Speaker 1: to another qualifying five oh one c three by the
[51:58] Speaker 1: following year. Percent of the three million.
[52:02] Speaker 3: Three million, that's correct, it has the fifteen thousand, one
[52:06] Speaker 3: fifty thousand.
[52:06] Speaker 2: Yes, so one hundred and fifty thousand has to go
[52:08] Speaker 2: into a charity.
[52:10] Speaker 1: Correct.
[52:12] Speaker 2: The remaining two million, eight hundred and fifty thousand dollars
[52:16] Speaker 2: stays in the foundation. And what happens with.
[52:19] Speaker 1: That, Well, hopefully you're going to grow it. Right, it's invested.
[52:23] Speaker 1: We want it invested. What we don't want to just
[52:24] Speaker 1: sit in stale cash, Absolutely not, that'd be a horrible idea.
[52:27] Speaker 1: We want it invested in conservative assets. And then what funds,
[52:31] Speaker 1: so mutual funds. So if you can do that in
[52:33] Speaker 1: on behalf of the nonprofit correct?
[52:35] Speaker 2: All right, So it's so that two million, eight hundred
[52:40] Speaker 2: and fifty thousand dollars stays in your family nonprofit correct,
[52:45] Speaker 2: is invested in the market, it's growing.
[52:48] Speaker 1: Correct, Then what you're going to have to make another
[52:51] Speaker 1: donation in the following year. But before you make that donation,
[52:54] Speaker 1: what if you use the foundation to carry out philanthropic work.
[52:57] Speaker 1: Then the assets inside of the foundation are assets that
[53:00] Speaker 1: are used on behalf of the shareholders of the foundation.
[53:03] Speaker 1: So if I need to go fly to Africa for sake,
[53:06] Speaker 1: for example, one of our clients did this last year.
[53:07] Speaker 1: She flew to Africa and she built wells out in
[53:10] Speaker 1: Africa with her and her family. She paid for her
[53:12] Speaker 1: and her family to go out there. She paid for
[53:14] Speaker 1: a lot of the stuff that she did. She had
[53:16] Speaker 1: a film crew out there with her, She paid for
[53:18] Speaker 1: their experience, she stayed in a great hotel. All of
[53:20] Speaker 1: those were expenses, so it dropped down the asset value
[53:24] Speaker 1: of the foundation. There's a calculation too to where legal
[53:28] Speaker 1: fees go into that five percent as well, So her
[53:31] Speaker 1: legal fees get calculated, a part of the payroll gets
[53:34] Speaker 1: calculated into that five percent, so she's paying out salaries
[53:37] Speaker 1: as well. It's actually math that gets involved in that
[53:39] Speaker 1: five percent versus just saying five percent of whatever's left
[53:43] Speaker 1: over just has to be written off. There's a calculation
[53:45] Speaker 1: that's involved with that.
[53:46] Speaker 2: And so the travel, all of that is deducted from
[53:50] Speaker 2: the two point eight million.
[53:51] Speaker 1: Bract reducing the charitable.
[53:52] Speaker 2: Assets, and that's tax free.
[53:55] Speaker 1: That's sax ray.
[53:56] Speaker 2: Yes, and the money that grows is tax free.
[53:58] Speaker 1: Yes, it grows tax free.
[54:00] Speaker 2: And if you hire somebody, you can pay them from
[54:01] Speaker 2: the two point eight million.
[54:02] Speaker 1: Dollars, Yes, you can, and they'll earn a salary that's taxable.
[54:07] Speaker 1: To know that's taxable to them. Correct, Yeah, it's a lot. Yeah.
[54:16] Speaker 1: So one of the strategies that our clients utilize that
[54:19] Speaker 1: are making over two million in net profit with anes
[54:21] Speaker 1: corporation that spend a lot of money on ads is
[54:24] Speaker 1: they set up an advertising company as a C corporation,
[54:27] Speaker 1: But instead of setting up the SEA corporation to exist
[54:30] Speaker 1: on the same fiscal year end as THEES corp, we
[54:32] Speaker 1: set up the fiscal year end to be three hundred
[54:35] Speaker 1: and sixty five days later than the S corporation. Let
[54:37] Speaker 1: me give you an example. Let's just say we're in
[54:39] Speaker 1: the month of November and you have two million dollars
[54:42] Speaker 1: in net profit sitting inside of your business. But I
[54:44] Speaker 1: know that you spend money on ads. You rip one
[54:46] Speaker 1: hundred two hundred k in ADS every single month to
[54:48] Speaker 1: grow your businesses. Well, you know what your AD budget
[54:51] Speaker 1: is going to look like for twenty twenty six. We're
[54:52] Speaker 1: in twenty twenty five, still in the month of November
[54:54] Speaker 1: and December. So I set you up a C corporation
[54:58] Speaker 1: advertising company in the month of November that has a
[55:01] Speaker 1: fiscal year end of September thirtieth, twenty twenty six. That
[55:07] Speaker 1: means that if you make a contribution or a management
[55:10] Speaker 1: fee over to that SEA corporation, your S corporation gets
[55:14] Speaker 1: a tax deduction. You will file tax returns for your
[55:17] Speaker 1: S corp March fifteenth. If you go on extension all
[55:19] Speaker 1: the way until October fifteenth, But your sea corp now
[55:22] Speaker 1: has money inside of it, and its year doesn't end
[55:25] Speaker 1: until September thirtieth, When it's year ends four months and
[55:29] Speaker 1: fifteen days later is when it files its tax return.
[55:32] Speaker 1: So if September thirtieth is the fiscal year end October, November, December,
[55:37] Speaker 1: January fifteenth of twenty twenty seven is when we filed
[55:40] Speaker 1: a tax return for that sea corp. So that means
[55:42] Speaker 1: that if you had two million dollars sitting inside your
[55:44] Speaker 1: es corp, and we write a check for half a
[55:46] Speaker 1: million dollars over to that sea corporation, you just got
[55:48] Speaker 1: a half a million dollar deduction. Congratulations. You said about
[55:50] Speaker 1: one hundred and fifteen thousand dollars on your taxes. Five
[55:53] Speaker 1: hundred k is sitting inside of your sea court. Now
[55:55] Speaker 1: you're going to have to spend that money down or
[55:56] Speaker 1: you're gonna be subject to twenty one percent tax rate.
[55:58] Speaker 1: But I bought you nine I bought you from January
[56:01] Speaker 1: all the way up until September thirtieth for the ads.
[56:04] Speaker 1: For the ads. Whatever you don't spend is subject to
[56:06] Speaker 1: twenty one percent tax rep. So this is a way
[56:09] Speaker 1: for taxpayers who you know want to be able to
[56:11] Speaker 1: still stay in business, to be able to use entity
[56:14] Speaker 1: structures successfully to reduce their tax liability, and to also
[56:20] Speaker 1: be able to grow their business at the exact same time.
[56:22] Speaker 3: This is the conversation I feel like that's had when
[56:25] Speaker 3: people see corporations pay zero percent tax and they're like,
[56:31] Speaker 3: how it's like these type of these strategy.
[56:34] Speaker 1: That's an income shifting strategy. You're shifting income from one
[56:37] Speaker 1: entity to another entity that's filing tax returns on a
[56:39] Speaker 1: completely different fiscal year end. Absolutely incredible. You set your
[56:44] Speaker 1: fiscal year end, you set your fiscal year in with
[56:46] Speaker 1: a se corp. Pretty awesome. Yeah, makesense. Yeah.
[56:51] Speaker 2: So the marketing that you do social media and stuff
[56:53] Speaker 2: like that, Yeah, has that helped your business or has
[56:56] Speaker 2: that taken away from you actually practice seeing the business
[57:00] Speaker 2: and focusing more on like the branding, Yeah, aspect of
[57:05] Speaker 2: a business.
[57:05] Speaker 1: Yeah. So early on it was just creating content, as
[57:09] Speaker 1: Carlton Dennis, the YouTube guy putting out education. The education
[57:12] Speaker 1: led me to creating my own firm, and me creating
[57:14] Speaker 1: my own firm led me to bottlenecking myself to then
[57:17] Speaker 1: needing to hire a bunch of tax professionals and CPAs
[57:19] Speaker 1: underneath me to then being able to focus back on
[57:22] Speaker 1: the personality. Ninety six percent of tax Alchemy's revenue, it
[57:26] Speaker 1: comes from social media, primarily from YouTube and from Instagram.
[57:30] Speaker 1: I would say seventy percent of that is from YouTube
[57:33] Speaker 1: and the other thirty percent clients clients.
[57:35] Speaker 2: So that's still your main business, Yes, is clients clients?
[57:38] Speaker 1: Yep, tax planning high income clients. Yeah, so half a
[57:41] Speaker 1: million up to one hundred.
[57:43] Speaker 2: Million, you only take a half a million out.
[57:45] Speaker 1: Only half a million and up. Yeah, there needs to
[57:48] Speaker 1: be enough liquidity that the taxpayer has in order to
[57:50] Speaker 1: invest in tax advantage strategies, because we use a lot
[57:53] Speaker 1: of tax advantaged strategies that require investments. But if you're
[57:59] Speaker 1: underneath that amount, you could still do tax planning. You're
[58:02] Speaker 1: just not going to save the amount of money that
[58:03] Speaker 1: you might hope to save because real savings comes from
[58:06] Speaker 1: paying real tax and if you're not paying a lot
[58:09] Speaker 1: in taxes yet, you're not going to feel like you're
[58:11] Speaker 1: saving a whole lot. Yeah, you know what I mean.
[58:13] Speaker 1: If you're only paying twenty thousand dollars in taxes and
[58:15] Speaker 1: you save four grand, is that life changing money? Life
[58:18] Speaker 1: changing money is being able to come back to somebody
[58:20] Speaker 1: to say, hey, you were about to write a check
[58:22] Speaker 1: for one hundred and fifty thousand. You don't have to
[58:23] Speaker 1: do that anymore.
[58:24] Speaker 2: So what's that process if somebody wants to work with you,
[58:26] Speaker 2: walk us through the process of your firm, like what's
[58:29] Speaker 2: the yeah, the intake and what's the step yeah.
[58:33] Speaker 1: So for our process, as most of our clients will
[58:36] Speaker 1: come to our website, we have a VSL so they
[58:38] Speaker 1: watch a video sales letter for about fifteen twenty minutes
[58:40] Speaker 1: just educates them on the process of tax planning. They
[58:43] Speaker 1: get on a call with one of my tax specialists.
[58:45] Speaker 1: What we're doing is we're qualifying you. We're looking at
[58:47] Speaker 1: your income. We're trying to figure out what's the pain level.
[58:49] Speaker 1: Are you are are you are you tired of paying taxes?
[58:51] Speaker 1: Like this, Ninety percent of our clients that come over
[58:53] Speaker 1: to us already have a CPA. They're already working with
[58:55] Speaker 1: somebody that's filing their tax returns that they trust. We
[58:58] Speaker 1: understand that you have a CPA, but you don't have
[59:00] Speaker 1: a tax strategist, somebody who's sole job is to figure
[59:03] Speaker 1: out how to reduce your tax bill in real time.
[59:05] Speaker 1: So for many of them, they're understanding what a tax
[59:07] Speaker 1: strategist is for the very first time.
[59:09] Speaker 2: So you don't do taxes.
[59:10] Speaker 1: Oh, we do, absolutely, but we earn that business after
[59:12] Speaker 1: we've done a tax plan. We never offer tax prep initially.
[59:15] Speaker 1: We only offer advisory initially, and then we pick up
[59:18] Speaker 1: tax prep on the back end. A tax and accounting
[59:20] Speaker 1: firm will offer you whatever. You can call them up
[59:23] Speaker 1: and say, hey, I need my tax return. Sure here
[59:24] Speaker 1: it is to do a tax return, but an advisory
[59:27] Speaker 1: firm only offers advisory first. Then we pick up the
[59:31] Speaker 1: tax and accounting business on the back end, which means
[59:33] Speaker 1: that we're only working with the right type of clientele
[59:35] Speaker 1: that we choose to work with. If I'm doing tax returns,
[59:38] Speaker 1: I could work with someone who's making only sixty or
[59:40] Speaker 1: seventy thousand dollars a year and then go serve someone
[59:42] Speaker 1: who's also making one point two million dollars a year.
[59:44] Speaker 1: That's not my business model. My business model is to
[59:47] Speaker 1: work with high income earners because I know exactly the
[59:50] Speaker 1: type of involvement that I have to spend with them
[59:52] Speaker 1: in order to get them to save real money and
[59:55] Speaker 1: to get them to walk through doors they've never walked
[59:57] Speaker 1: through before. And that requires spend a lot of time
[59:59] Speaker 1: educating them. And if you're not at a point yet
[1:00:01] Speaker 1: where you're paying a lot in taxes, what's the point
[1:00:03] Speaker 1: in educating you about things that you don't really get
[1:00:05] Speaker 1: an opportunity to use yet. So we have a really
[1:00:08] Speaker 1: structured system. There.
[1:00:10] Speaker 3: Are you training the employees that you bring under the
[1:00:13] Speaker 3: firm and what's that process like? If somebody's looking like, Hey,
[1:00:17] Speaker 3: that sounds like a firm I definitely want to be
[1:00:19] Speaker 3: a part of or try to apply to be.
[1:00:21] Speaker 1: A part of.
[1:00:22] Speaker 2: Yeah.
[1:00:22] Speaker 1: We train CPAs on how to do tax planning, and
[1:00:25] Speaker 1: we train enrolled agents on how to use tax planning.
[1:00:28] Speaker 1: They use our software, they learn how to create our
[1:00:30] Speaker 1: tax projections the way that we do it, factoring in
[1:00:34] Speaker 1: state jurisdictions, using our court case law that we have
[1:00:38] Speaker 1: garnered over years of experience of collecting irs court cases
[1:00:42] Speaker 1: and shaping our understanding around tax law. And we build
[1:00:46] Speaker 1: a system around how to train them, just like how
[1:00:49] Speaker 1: many course creators will create you a course on how
[1:00:51] Speaker 1: to do X, how to do Y. I have an
[1:00:53] Speaker 1: internal course inside of my company on how to do
[1:00:56] Speaker 1: tax planning and deliver high level advisory services and communicate
[1:00:59] Speaker 1: it in a way that can get a desired result
[1:01:01] Speaker 1: for a customer.
[1:01:05] Speaker 2: There's a lot good information, for sure. So what's the
[1:01:09] Speaker 2: social what's the website? What's the YouTube like? How can
[1:01:11] Speaker 2: people actually follow?
[1:01:13] Speaker 1: Yeah? Absolutely?
[1:01:14] Speaker 2: And what do you put on you on a consistent basis?
[1:01:16] Speaker 1: My goal is to continue to put out the best
[1:01:18] Speaker 1: tax knowledge that I possibly can on my YouTube account
[1:01:21] Speaker 1: and on my social There is a gap in the
[1:01:23] Speaker 1: tax and accounting space and an absence of tax professionals
[1:01:26] Speaker 1: that want to teach people the tax code. My duty
[1:01:29] Speaker 1: and my obligation is to simplify something that is very
[1:01:31] Speaker 1: complex and to make something that is boring seems sexy.
[1:01:35] Speaker 1: And I think I'm doing a pretty good job of that,
[1:01:36] Speaker 1: and I need to continue to do a even better
[1:01:38] Speaker 1: job at that. People can reach out to me on
[1:01:40] Speaker 1: social media, but they also follow us on our website
[1:01:43] Speaker 1: at ww dot tax alchemy dot com, look for us
[1:01:46] Speaker 1: on our YouTube account Carlton Dennis, and you can also
[1:01:49] Speaker 1: reach out on our LinkedIn account as well. We get
[1:01:54] Speaker 1: a lot of tax professionals that are interested in applying
[1:01:56] Speaker 1: to work with us through our LinkedIn page as well.
[1:01:59] Speaker 1: How is mom looking at you? You know? Mom is Mom?
[1:02:01] Speaker 1: Is proud Mom is absolutely proud. Mom has done so
[1:02:04] Speaker 1: much in the taxan accounting space. I mean, she is
[1:02:07] Speaker 1: a humble a humble woman already as it is, but
[1:02:10] Speaker 1: she blew up off of TV and radio shows and
[1:02:13] Speaker 1: I blew up off of YouTube and Instagram. So we
[1:02:16] Speaker 1: have two different paths, but we are literally the same person.
[1:02:19] Speaker 1: And it's really beautiful now being able to see her
[1:02:21] Speaker 1: step back from her firm, allowing my two younger brothers
[1:02:24] Speaker 1: to run her firm, and me being able to take
[1:02:27] Speaker 1: some of the things that she taught me and the
[1:02:29] Speaker 1: processes around tax planning and how to handle an IRS
[1:02:31] Speaker 1: audit and build an advisory firm that serves the clients
[1:02:35] Speaker 1: that I like to work with. And so we have
[1:02:36] Speaker 1: a beautiful family that works really well collaborative to lead together.
[1:02:39] Speaker 1: And we both have our own separate firms because my
[1:02:42] Speaker 1: clients are completely different than the types of clients that
[1:02:44] Speaker 1: she serves. But there's an ecosystem that allows for us
[1:02:47] Speaker 1: to be able to serve one in another, and that's
[1:02:48] Speaker 1: what's beautiful about our relationship. One of the strategies I
[1:02:51] Speaker 1: have to leave you guys with is I RC one
[1:02:53] Speaker 1: eighty one IRC one eighty one allows for you to
[1:02:56] Speaker 1: write off the cost of the production of a movie film. Now,
[1:02:59] Speaker 1: movie film producttion companies, they spend tons of money on
[1:03:02] Speaker 1: these movie projects. But what they do is they seller
[1:03:04] Speaker 1: finance the production rights to investors. And so what my
[1:03:08] Speaker 1: clients do is they invest money into movie films and
[1:03:10] Speaker 1: become partial owners of the movie films. But in order
[1:03:13] Speaker 1: to do so, they take out a loan from the
[1:03:15] Speaker 1: production company through seller financing. It's a leveraged four to
[1:03:19] Speaker 1: one strategy. For every dollar that they put in, they're
[1:03:22] Speaker 1: taking on three dollars of recourse debt the loan, but
[1:03:25] Speaker 1: then their whole for a total four dollars. So if
[1:03:27] Speaker 1: you put in one hundred thousand dollars, you're getting a
[1:03:29] Speaker 1: four hundred thousand dollars deduction by investing money into a
[1:03:33] Speaker 1: movie film. Last year, we had clients invest money into
[1:03:35] Speaker 1: Mark Wahlberg movies, Jackie Chan movies. They are owners of
[1:03:39] Speaker 1: those movies. They're going to earn cash flow from those movies,
[1:03:42] Speaker 1: and they're receiving an active deduction on their tax returns.
[1:03:45] Speaker 1: When they ask how is this active in the movie space.
[1:03:49] Speaker 1: You have to materially participate in material participations one hundred
[1:03:53] Speaker 1: hours spent in your real property trader business. These taxpayers
[1:03:56] Speaker 1: have to spend one hundred hours watching other movie films
[1:03:59] Speaker 1: in order to call as an active participant in the
[1:04:02] Speaker 1: movie space. That is one of my favorite strategies we
[1:04:04] Speaker 1: like to utilize. Yeah, I feel like we all do
[1:04:06] Speaker 1: that exactly. Who wouldn't do that? Right? We put over
[1:04:11] Speaker 1: seven figures into movie films last year.
[1:04:14] Speaker 3: Me and my wife to talk about the timing of
[1:04:16] Speaker 3: acquiring assets as a tax strategy.
[1:04:18] Speaker 1: Acquiring assets is extremely important. For example, when it comes
[1:04:21] Speaker 1: to the short term rental strategy like we were talking about,
[1:04:23] Speaker 1: you don't have to run a short termamenttal all year long.
[1:04:25] Speaker 1: Direst states that you only have to spend one hundred
[1:04:27] Speaker 1: hours managing your short tournamental and your tenants have to
[1:04:30] Speaker 1: stay in the property seven days or less. So we
[1:04:31] Speaker 1: have clients that acquire short tourmental in the month of October,
[1:04:34] Speaker 1: they run it as an str for November and December,
[1:04:37] Speaker 1: and then they converted into a long term mental managed
[1:04:39] Speaker 1: by a paid property manager in January. They literally only
[1:04:42] Speaker 1: ran the property as a short tournamental for twelve weeks
[1:04:45] Speaker 1: out of the year. Yet we're able to perform a
[1:04:47] Speaker 1: cost irrogation, study, and accelerate depreciation. That's just one of
[1:04:50] Speaker 1: the many ways when timing strategies makes so much sense.
[1:04:54] Speaker 1: Oh a lot of game there you have it. Whole
[1:04:59] Speaker 1: lot of there you have it.

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