Ep. 169: Discussing Various Tax Strategies
Podcast 12/24
[00:00:00] Good afternoon. This is Gabriel Shahin, certified Financial Planner and your host, more Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth, not to the listener. You can always reach out to myself or anyone of our colleagues here at Falcon Wealth Planning.
[00:00:18] Our phone number is eight five five nine six three twenty five. 26. That's 8 5 5 96 Falcon like the bird, or visit our website@falconwealthplanning.com. That's falcon wp.com for short. Now I'm a president of Falcon Wealth Planning. We are a fee only non-commission true fiduciary, independent investment advisory.
[00:00:43] Firm registered investment advisory firm. Man, that was a mouthful. First time I tried that one. So the point is, folks, we give advice. We sell a brain here. Sure, we manage money as well, but we handle everything that involves a dollar sign. Folks, that's where you are today, how retirement looks like. Talking about taxes, investments, estate planning, insurance, social security.
[00:01:01] Folks, you name it. Anything that involves the dollar sign. And folks, if you want help with this, if you want help to relate the show to your specific situation, we help all across the country, folks. Doesn't matter where you are, our headquarters is here in Southern California, but we help with any question that you may have.
[00:01:16] And we are offering one to two hours, one to two meetings of our time to give you a free financial assessment. Folks, this is the best time of the year to do it. Could you get two for the price of one? What do I mean by. You could do year end 2022 planning and 2023 planning as well. Folks, give us a call.
[00:01:32] We would love to help. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the bird, and it is the perfect time of the year for you to start talking to a professional. There is so much to discuss and I'll give you an example of something that. Earlier this week, and it was with somebody that was self-employed and they have a SEP IRA and they're wondering about putting their money in by the end of the year, and I politely said that a SEP ira, you don't have to.
[00:02:04] And not just a SEP ira, a Roth ira, and a traditional ira. , you can actually contribute until April 15th of next year. That is extremely important to know, and it could be March 15th, depending on the corporation, but the point is, is you have until next year to work on for 2022. So in 2023 you can do it until.
[00:02:29] Uh, and instead of doing it by the end of the year, it'll count for the previous year. Now, not all tax strategies work that way. Let me give you an example. If you're a business owner and you wanna buy a new vehicle for your, uh, car or for your business, assuming it's over 6,000 pounds, you could do a section 1 79.
[00:02:45] You get the 100% bonus depreciation. Guess what? Did you know that goes away this year? That goes away. That's crazy. Did your accountant tell you that it's going away? It gets reduced to 80% in 2023. , this is extremely important. This is what tax planning is. Now, I'm not saying to go buy a vehicle that you don't need.
[00:03:04] Obviously, if you do that, even if you're in the highest tax bracket, you spend a hundred thousand dollars on a vehicle, you know, 54 cents on the dollar, it's gonna save you. . So that means that vehicle of a hundred thousand really only cost you 46,000, but you're still out $46,000. You get what I'm saying?
[00:03:21] So it is extremely important to understand the benefits of this strategy. So that is one way that it can save you money. But I've seen so many people do things improperly when it comes to how they pay themselves, number one. The profits they leave in the company, plus the retirement accounts that they currently have.
[00:03:41] Let me give you a simple example, and I see this with a lot of maybe older generation individuals. Why do I say that? Because number one, older generation doesn't like change. Number two as, so set by array is something that was very popular over 10 plus years ago, but really in the past 10 years, a solo 401K is, in my opinion, infinite.
[00:04:03] Time is better than a SEP ira. Why is that? Well, AEP ira, you could save 25% of your pay. Now, if you make a hundred thousand dollars, you could save 25% of the a hundred thousand. You could save $25,000 a year in the SEP ira. That's fantastic. Good job. Congratulations. I'm proud of you. If you had a solo 401k, now check this out.
[00:04:27] A solo 401k you can put up to 20,500 or 27,000. , you are over the age of 50. So let's say you only made $50,000. Okay, well you can put match the employee side. You can put in that 27,000, assuming you're over the age of 50, which, oh, by the way, that's more if you made a hundred thousand where you can put 25% of compensation.
[00:04:52] Why is that important, folks? Because when you pay yourself a salary or if you have a sole proprietorship at our LLC where you don't have to, but what I say applies to that as. , you are subject to payroll taxes on that, on the employee and in the employer side. Okay, well that could be 15%. So if you make a hundred thousand dollars, you're paying $15,000 in self-employment tax.
[00:05:15] That's crucial to know. Now, if you paid only $50,000 salary, five zero, well you're paying 7,500, you're paying half. You just say like that, $7,500 in payroll tax. Now guess what? There's a second piece to this. When you have leftover profits in the company, you are subject to what's called qualified business income, which is a new writeoff that is available for those who have sole proprietorships, LLCs, which are partnerships, or an S corporation.
[00:05:47] You get 20% of your net profits as a tax writeoff. So in a situation where you make a hundred thousand dollars and you pay yourself 50,000 salary and the other 50. comes out as a K one. We're specifically talking about an S corporation. That 50,000, you get 20% as a write off. That's a 10% write off depending on your tax bracket.
[00:06:06] That could save you 37, uh, hundred dollars, uh, in taxes, which is on top of the 7,500. , you get what I'm saying? This is substantial. Now, there are many more complicated pieces to this, like the type of business, special trade business that you're in, uh, other types of income that is available, uh, and your actual tax bracket.
[00:06:30] There are many other factors in this, but why is this important? Because in that simple, just snapping of a fingers that could save you $10,000, you're not doing anything illegal. You are just smart enough to understand the tax. And here at Falcon Wealth Planning, we are tax advisors. We are allowed to give tax advice.
[00:06:47] We have a department that does taxes. We have in-house cpa. This is the value where it's so important to work with someone who's comprehensive, who looks at everything that involves a dollar sign. You know what? If you're managing a million dollars and you just save 10,000 in taxes, that 1% maybe cover the management fee and you just delegated it out where you don't even have to deal with it anymore.
[00:07:07] You get what I'm saying? You now have a partnership with somebody that's the IRS legally paid for. This is crazy that a lot of people are not taking advantage of this. By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified financial Planner and your host of More Knowledge, more Wealthy on every weekend, talking about all important topics of personal finance.
[00:07:28] And if this sounds like you, if you want help with this, we're talking that was an example of a business owner. There is people who own real. Whether it's a primary resident, whether it's investment property, rental property, whatever the case is, there are ways that you can be helped. We can add value. We do this on a daily basis.
[00:07:45] I don't care if you have 500 properties. I think our largest client, I think has over 200 properties, doesn't matter. We've managed indirectly through our clients, probably 10,000 plus. The point is, is we have seen a sheer volume more than you, and we can give you that recommendation. And even if you have a great accountant, you only meet with that accountant once or twice a year.
[00:08:08] As we explained earlier. There is a lot of value that can be provided by meeting with them before the end of the year. If you're meeting with your accountant once or twice a year, you don't have a tax planner folks, you have a tax preparer, and nothing is wrong with that. It is just a different industry.
[00:08:23] It's a different position, it's a different skill and a different talent. You, there's no way that accountant is gonna be able to understand or even care about what Mortgage Balance you have and what the rate is, how much you have in a retirement account, where are you saving it, what the business is doing on additional r and d credits, along with E R C and seeing if you're available versus being cross sold by a social media ad saying you are eligible.
[00:08:48] I mean, come on this. You need an unbiased third party partner to be able to understand your situation better than anybody in the world. And that's where a lot of our value comes with our clients, is they trust us heavily because we know more about them than anywhere else in the world. Anybody else in the world.
[00:09:05] Why? Because we spend the time hours to get that intimate understanding of their situation of your. . That's the only way we're able to have that advice and recommendations. It takes hours of just question and answers and communication and delivery to, until you get to that recommendation piece. That's where we are offering a free financial assessment.
[00:09:28] That's how confident we are. We, and by the way, When we do this and ask you a bunch of questions, we're gonna give you the answers. We're not gonna say, oh, we found a way to save you 10,000, 50,000, a hundred thousand dollars, but we're not gonna tell you until you hire us. That is garbage. We will tell you exactly what you need to do, not us.
[00:09:47] I don't know if you're gonna hire us yet. If you want us to implement it on your behalf, that's where we start a fee. That's where we quote. , but we're gonna tell you what you need to do. This is why we grow so much from referrals because there are very few honest firms that have the confidence to tell you and give you and do the all the analysis on the backend and give you all the information that you need and what you should be doing.
[00:10:12] It just doesn't exist. So nobody out there does that because it's a lot of work. You spend a lot of money. Well, when we have a large staff, almost 50 people, we help people all across the. It's more than just Gabriel Shahin. This isn't Gabriel Wealth Management. This is Falcon Wealth Planning. This is a firm that's designed to help the masses.
[00:10:32] We specialize in the mass affluent and we can help in your situation. We don't want to just listen. A firm like us should really only have minimums of two to 3 million minimums, but I have a problem with that. I don't like just to help the rich get richer. You know why? Cuz they're not even that grateful.
[00:10:47] Who cares if you save somebody with 10 million in. $30,000. Like who cares? Do they really care? No. But when you help somebody who's aspiring to be rich and financially independent, and you get 'em there, there's nothing better than that. This is why we want to cater to the mass affluent. So give us a call, folks.
[00:11:08] We would love to help. We've got offices all over and we have our headquarters here in Southern California. Our phone number is eight five five nine six. 25 26. That's 8 5 5 96 Falcon, Mike the Bird. We can help put a personal confidential assessment to help relate the show to your specific situation. So give us a buzz.
[00:11:30] We'd love to help. Now, folks, we're gonna come right back after a break. We're still gonna talk about the other side of a solo forum ca versus a SEP and other items that you should be doing in other planning techniques. Folks, stay with us. We'll be right back after a few.
[00:11:47] Welcome back folks. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth, and that's what I try to do every single week, folks, and the tone of the company starts with.
[00:12:08] I believe in selflessly helping everybody will selfishly benefit us later, but the core to that is selflessly help everybody. If you just continue to do what's right, forget of Falcon Wolf Planning. Forget you in general. If you just do what's right, over and over and over again, success is eminent. I don't care what you do in your life, in your work, in your personal life, in your profession, in your family, you will continue and have that success if you just do what is.
[00:12:38] always just do the right thing. You know how I know when things are going great, when I start being tempted by things that are not right, , when I, things are come up to me and opportunities arise when I'm like, this is shady. This is, I'm, I'm being tempted here and this is how I know that things are going right with me.
[00:12:57] I call it being tempted by the. . And so by continually doing the right thing, by continually being able to focus on your goal and having a partner to hold you accountable, it is absolutely crucial. And that doesn't happen often. Why? Because who out there truly cares 100% selflessly for your success?
[00:13:21] Seriously, think about that question. Maybe you're lucky enough for your mother and father to be alive. Maybe you're lucky enough to have siblings that are not jealous, and even if they're not jealous, maybe their spouses are jealous. I know you know what I'm talking about, right? It's just very rare to have a true unbiased opinion, and even if you're lucky enough to have that, do they have the knowledge and skill to point you in the right direction that had seen this situation multiple.
[00:13:49] Your success is our success at Falcon Wealth Planning, and that's what we do for our clients, our thousands of clients that we have. Our goal is to make sure they succeed, that their overall net worth goes up, that the risk they take goes down and they pay themselves first, take care of themselves first.
[00:14:05] I say the so of the town when you go flying an airplane, what did they tell you? If, uh, they're having air pressure issues? Put the mask on yourself first before you put it on your. . This is extremely important folks, and I see a lot of people often mess that up. Excuse me. Woo. I'm talking a lot today.
[00:14:27] Needed some water. . So going back, is that going back to, uh, for people that have a solo 401k and a step ira, we talked about that 25% of compensation where you could put in the step IRA versus the SOLO four you could put in up to 27,000 if you're over 50. What we didn't share with you yet is that you can also do a profit sharing of 25% of your salary.
[00:14:54] Oh, by the way, just like this f I. It's the same thing, except you get to put an additional 27,000 on top of that. You get what I'm saying? There is no reason not to do a solo 401k except for laziness and contentness, but that's costing you money, especially if you're in a high bracket looking to save. It upsets me when people don't wanna make a change for sake of convenience.
[00:15:19] Well, that's costing you money. Convenience costs you money. I'll give you an example. Two liter sodas, two bucks. You go to the local cookie mart and get a 20 ounce soda. It's $3 and 50 cents. You pay more buy almost twice for what? One 10th of the bottle. But you're paying for convenience, so you have to know what is valuable to you.
[00:15:45] If it's convenience, great. Pay more to the irs. That's what you care about. I'm here to tell you that. to save more. Sometimes you have to even spend a little more, and that could be with straight up tax savings, and that could be also with just planning, maybe paying for planning. This is why we're offering a free financial assessment where we can help relate this show to your situation.
[00:16:11] Folks, give us a call. We've got offices all across. We can help you all across the country. Our phone number is eight five five nine six. 25 26. That's 8 5 5 96 Falcon like the bird. Or visit our website@falconwealthplanning.com. That's falcon wp.com for short. So folks, I'm also want to discuss with you.
[00:16:36] with. It's not just about the salary you pay yourself, the type of retirement account that they put you in, and how much leftover profit that you have left over. That's extremely important cuz as we discussed earlier, that could save you tens of thousands of dollars by having that proper formula that's there.
[00:16:51] And depending on your situation, depending on your industry, depending on how long you've been around, there was a formula that's necessary to decide what. Here's another thing. You have to look at your tax situation now and what it will be in the future. Now, there's no crystal ball for that, but I will tell you tax sales are sunset to change in 2026.
[00:17:09] So now until 2025, our enjoyable low tax rates on the federal level are gonna maintain. They are gonna go up higher, come. 2026. By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified Financial Planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.
[00:17:30] And right now I'm talking about the changing of taxes that's gonna happen come 2026, let me go over those lists with you. Now. The dollar amount per bracket doesn't change outside of the obvious change to inflation that happens on an annual basis. But the num, the brackets, the 10% bracket, 12%, 22, 24, 32, 35, and the 37% bracket change.
[00:17:51] Now the 10% bracket actually doesn't change, right? The lowest bracket, but the 12% bracket is gonna move up to 15%. Now you might say, whoop the due. Well, that's a 3% increase on a 12% number. What does that mean? It's a 25% increase in taxes in just that bracket alone. Yeah. When you put it like that, it is.
[00:18:12] Okay. If you were paying 4,000, now you pay 5,000. You get what I'm saying? Let's continue this. The 22% bracket moves to 25. Also another 3% increase. The 24 goes to 28, which was a 4% increase, and the top bracket. goes to almost 40% instead of 37. 39.6 to be exact. This is important for you to understand and know and plan for because depending on the write-offs you currently have with your mortgage, which your write-offs will be in the future, depending on the income that you'll be bringing in, whether it's pension, whether it's social security, whether it's IRA withdrawals, whether it's capital gains, dividends, rental.
[00:18:47] annuity, whatever it is, you have to factor what that looks like. And then the thing that sneaks up on everybody is that IRA that required minimum withdrawal. The R M D required minimum distribution to be specific taking. There's two parts of this. Number one is taking a look at that and seeing if in fact you're gonna be in a lower tax bracket in retirement.
[00:19:11] Cause if that's the case, you should probably reconsider some of your. The whole point of saving for retirement and pulling it out later is to pull it out when you're lower tax bracket. When your situation, you might be pulling it out in a higher tax bracket. That's step one. But step two is the tax brackets are gonna change.
[00:19:28] Hell, we're 30 trillion in debt. Social security is not social secure. Folks, if I was a betting person, wouldn't you bet taxes are gonna go up. I mean, , do you think they're gonna go down? Heck, they went down before when Trump came into office he'd lowered taxes, which was kind of crazy to think cuz people were upset about those taxes.
[00:19:50] And so now they're just gonna rebe, uh, re revert back to the previous taxes, which, oh, by the way, people were upset at originally. Anyway. You get what I'm saying? So these are the things that you have to factor in. Yes. Our slogan here is Planning made simple. We trade. and it is simple. Why? Cause we do it every day.
[00:20:10] But you know what the irony is? You take a thousand simple things, a thousand simple things, and guess what you built? You built something ex, something extremely complex. Let's say it's not a thousand things. Let's say it's 150 to 200 things. Well, guess what? That's the same process of building a vehicle, whether you're building a Tesla or any sedan that's out there, typically there's 150 to a 250 step.
[00:20:35] So yes, each one independent process doesn't need someone who's college education. It's an assembly line. They just need to do one thing, and that one thing needs to be done well. Well, you also need to understand the full vehicle that you put together. That vehicle by itself is complex. Your situation, folks.
[00:20:53] Is complex. I can tell you any situation that's out there where it just seems simple that you've been a W two your whole life, you have 500,000 in retirement, you've got 2000 in social security, and you're looking to retire, I can tell you every single situation requires attention. And let me give you a few examples.
[00:21:10] Number one, when are you gonna retire? If you're gonna retire at 62 years old, what are you gonna do for healthcare? What are you gonna do for. Are you going to take advantage of the marketplace? Are you gonna try to control your income? Maybe you should do some conversions, put some in Roth. Save something in a brokerage account.
[00:21:24] Live off that until Medicare comes out. That could be an option for you. Well, what's gonna happen with your taxation on social security? Maybe you could be in a situation where social security is tax free for life. Maybe you should do some conversions or take money out early. Maybe you could do it in the first five, 10 years of retirement.
[00:21:39] Pay some taxes through conversions, so the rest of your life, your social security is tax free forever. Or hell, you don't even have to fill out a tax. , you get what I'm saying? I can make your situation as complex as I want it to be. Why? Because I respect money. And our goal is to find ways to help reduce your tax situation legally.
[00:22:00] To make the only winner here is you or your heirs. And the only Le loser here, legally loser is the irs. Long term. Hey, short term, you might have to pay 'em up. No idea. There's no magic wand here, folks, but there are strategies in place where you take one step back for infinite steps forward. This is why you should talk to a financial professional.
[00:22:22] I took the most simplest situation and I turned it into four different aspects that can factor in complexity of your retirement. This is our job security. This is the skillset we offer. This is the comparison and the difference between us and your local broker at the bank, or your Charles Schwab Fidelity or TD Ameritrade or whatever you.
[00:22:43] That tells you what, please consult with your tax advisor. Can't even give you a tax advice. Heck, you could sell investments tax free if they just looked at your tax return. It's crazy. It's unfortunate, it's sad, but you know what? It's makes us special. Why? Cuz we're different than everybody else. And when they sit with us, we find ways to save them money.
[00:23:07] Folks, if you need help with this, give us a call. We would love to. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the Bird. Folks, that was a fast, fast show and thank you for tuning in with us. Tune in every weekend as we go over all important topics of personal finance. Folks, have a fantastic weekend, a fantastic holiday.
[00:23:29] Have a great week and God bless.