The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 93 - How to Live the Tax Free Lifestyle
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Let's look at how wealthy individuals create tax-free lifestyles through legal strategies that anyone can implement. From borrowing against assets to writing off hobbies as businesses, these approaches can dramatically reduce your tax burden while increasing cash flow.
• Borrowing against real estate, stocks, or life insurance policies creates tax-free cash flow
• Depreciation strategies can offset other income and potentially eliminate tax liabilities
• Converting hobbies into legitimate businesses creates write-offs for activities you already enjoy
• Business travel can become partially tax-deductible when properly structured
• Credit card points and rewards are completely tax-free forms of value
• Hiring family members, particularly children, creates tax advantages for both parties
• The Augusta Rule allows tax-free income when renting your home for 14 days or less annually
• Proper write-off strategies can save entrepreneurs hundreds of thousands in taxes
If you found any of this helpful and would like to know how to actually implement some of these ideas, or if you've done all these ideas but you're still paying a lot in taxes and want to know what else is out there, go to prosperalcpa.com/apply to see more about how we can help out.
Your tax savings is going to give you all your down payment back. The rest is just profit coming in. It's like you're investing in real estate for free. He was a limited partner, so there was zero risk and he really liked you. This was one of our more risk adverse clients. All right, welcome to the show.
Speaker 1:I always love nerding out with experts in the world of money and finance. With experts in the world of money and finance, here's how you and the wealthiest individuals can live the tax-free lifestyle. What I mean by tax-free lifestyle here's how you can go about your life doing the things you love and actually writing off the things that you love, and also having income and having profits. Having money hit your bank account without paying a dime in taxes. So we're gonna share some of the ways where the write-off is an excess of the cost, how you can create write-offs that don't cost you anything at all, and how you can actually see profits in a way you pay zero taxes at all on those profits. Little asterisks here, because we may call it a profit, but your income statement is going to show a loss. I got to be a little exact on the CPA, sorry. All right, let's get into it. Enough with the minutia.
Speaker 1:So one of the most common ways we see our clients get tax-free lifestyles is by borrowing their money, and this is very popular with real estate investors, and you may have heard about Elon Musk and a bunch of people complaining because he has all this Tesla stock worth billions and billions of dollars and he doesn't pay a dime when he borrows against the Tesla stock. Well, as a real estate investor or someone with high valued assets, you could do the same thing. So a lot of our clients, instead of selling their real estate and paying capital gains tax or navigating that whole space of cap gains planning, they just borrow against the equity they have in their real estate. They do a cash out, refi and there are no tax implications at all on those events. Now there are other ways you can do this. You can also borrow against your life insurance policy. So you may have heard the concepts of cash. There's so many ways to do it that are really fun and exciting. You may have heard of private placement life insurance, financed premium life insurance, where you're using big money to help pay your premiums. You may have heard of infinite banking. All of these are different structures and ways and also kind of fancy words on how you use life insurance to grow your wealth tax-free and you borrow from it and pay no taxes. So many wonderful opportunities there.
Speaker 1:Now here's another way, through depreciation strategies, by which you can reduce your taxes and pay no taxes on your profits. Again, a lot of real estate investors are doing cost segregation studies to offset profits from their other sources of income. Maybe they have real estate professional tax status, maybe they have short-term rentals. They're having profits that may not only result in zero tax liabilities but will also reduce or eliminate all their other taxes. Really exciting stuff here May even get more exciting if we go back to 100% bonus depreciation.
Speaker 1:Now let's go into some other ways. We can be a little more resourceful here in living the tax-free lifestyle. And here's a way that we can live the tax-free lifestyle where we're getting write-offs for things we normally would have done anyways for our own enjoyment, but now they are tax-deductible. Done anyways for our own enjoyment, but now they are tax deductible we may be able to turn our hobbies into legitimate businesses that create write-offs. Now. One example of one idea I've kind of played around with is I would like to make a travel blog because I love talking about food, so why not make a travel blog where I'm making content and selling something related to food education, and now I'm writing off my trips to explore the culinary history of Italy or the Caribbean?
Speaker 1:Now, as I say this, you gotta make sure that you wanna have legitimate intention to drive profit. If you operate at a loss because of all these write-offs, you might be scrutinized. But listen, get it out of your head that you have to show profit to have a write-off, because there are many unprofitable businesses. But what we need to see and the documentation has to show this that you are doing this for the intention of driving profit. You can help substantiate this by showing that you have a website and that you're actually selling something and that there's some form of marketing and legitimate efforts. But if you can do this, we may have an opportunity to take something we would have already done for pure enjoyment and now create legitimate write-offs. How cool is that?
Speaker 1:Okay, here's another way that we can create write-offs in the tax-free lifestyle is writing off the things that we already enjoy, even if they're not a hobby. We can have meals with our spouses. We can write 50% off. We can turn our vacations into potentially tax-deductible events. Now we need to say that more than 50% of those workdays are legitimate work days. But if we do have the facts aligned, we may still be able to write off all of our flight and travel to California for these business events while we're on the beach and doing enjoyable things on the side. So you may be able to write off significant travel costs going to places you would have loved to go. Because we've created legitimate business purposes around that travel, we may now be able to write off those adventures that you wanted to go on, or a portion of it. Still potential tax wins here.
Speaker 1:Okay, now let's go into another one here, and this is really cool and I did a great conversation with our buddy on this on credit card points and we were just talking about this. Now, when you have a credit card for your business, you rack up the points, and when you the cool thing about this is you you write off the interest on the credit card and hopefully you're not paying any interest. But the fun thing here is that you eventually rack up all these points and now those points are not taxed as income. So let's say, we rack up $30,000 worth of free travel in our points. This is value. This is value that we are creating from our expenditures that we can spend however we'd like. We can fly our family to visit us if we're too busy to have fun, but hopefully you're having fun and you're using those points to go on epic vacations and you're paying zero taxes on your efforts to do this, because you're writing off your expenditures and accumulating the points. Now, what I would say here is there's also an opportunity to move more of your expenses into credit cards. There are systems to do it. You may incur additional costs, so a lot of times there's going to be like a 3% fee. Well, that sounds like a lot, but think about this You're writing that off against your business income, you're writing it off against your taxes and if you can get more than that value in the form of points for travel and you use those points, now it's like you're getting a tax write-off to finance your travel. Really cool stuff here.
Speaker 1:Okay, let's get into another topic of family deductions, of living the tax-free lifestyle, family deductions. So it talks about hiring your kid in the business. You get a write-off. The kid doesn't pay any taxes on the first $15,000 in 2025. Now, we talked earlier about this. You got to pay them legitimately for the work they do. It may be less, it may be more, but there's an opportunity to see tremendous tax advantages and you likely were going to have to pay for some of your kid's stuff anyways. Now you're sending money to your child in a way that is highly tax advantaged, where you get a write-off and they pay little or no taxes on it. Awesome tax savings opportunities. But don't forget, this is a legitimate employee-employer relationship and hopefully an opportunity to teach your child some responsibilities.
Speaker 1:All right, let's get into the next topic here, and I would like to talk about just being resourceful with your write-offs. And I find so many business owners, and especially early stage entrepreneurs, never had the chance to or I would say even better, it's never had the chance to sit with their advisor and make sure they actually know they're allowed to write off. And we find some of you guys are leaving hundreds of thousands on the table by just not being knowledgeable of the tax write-offs that you are legally entitled to. That may even be credits. So just by having a good write-off strategy, you're not really doing anything extra to reduce your taxes. You're just having good docs and records and understanding and sometimes, when you're resourceful, you can take ordinary expenditures and activities like travel and meals, find business purposes for them now that you understand the law, create the business purposes and document them, and now you're writing off additional items and creating additional tax savings.
Speaker 1:Now we talked earlier about hiring your family as a great tax strategy, but some of you guys don't want to have your family in the business. I get you guys. So one of the opportunities we'll sometimes explore is creating a nonprofit or private family foundation. Sometimes explore is creating a nonprofit or private family foundation. So now you have expenditures in the name of charitable organization and now you get the charitable deduction instead of a business deduction. Bringing the family together and maybe they'll be more aligned around a charitable cause. Great opportunities. And again, if you desire to be philanthropic, this can be another wonderful way that you can work towards achieving that tax-free lifestyle.
Speaker 1:Okay, now here's the last one, and I'm sure you may have heard about this from other folks the Augusta Rule Renting out your property, your personal residence, and not paying taxes on it, right? So we're here in Atlanta and a lot of our colleagues are asking me, a lot of my friends are asking me hey, with the World Cup coming in. Can I make a couple of bucks on this? What are the tax implications? I say, well, hey, rent out your home, you're not going to pay any taxes at all. You just got to rent out your home 14 days or less and there are no taxes on that revenue. So if you could jack up that rate on Airbnb and rent it at a really high amount for the World Cup or another event in your town where there's a housing shortage, maybe you go out of town, go on vacation and they'll finance the vacation and you don't pay any taxes on that revenue when you rent out your personal residence 14 days or less. So here's a wonderful way again to get that tax-free lifestyle have money come in, pay no taxes.
Speaker 1:So there's so many different ways here where we can get to this tax-free lifestyle, and some may work for you and some may not. And some may work for you and some may not. To summarize what these are we can borrow money from our assets, including real estate, stocks and life insurance. We have depreciation strategies to offset our revenues and potentially create really massive tax losses. We have the opportunity to turn hobbies into legitimate businesses with tax write-offs, and we have the opportunity to create credit card points for tax-free opportunities for travel or even cashback rewards no taxes on those opportunities.
Speaker 1:We have family-related business expenses. We can hire kids in the business. We can have really strong write-off strategies. We also have the opportunity to maybe do some charitable structuring and events around the charities we care about and create some massive tax savings. And finally, we have the very popular Augusta rule, which everybody likes to talk about as well. So if you found any of this helpful and you would like to know how to actually implement some of these ideas or let's say, you've done all these ideas but you're still paying a lot in taxes and you want to know what else is out there go to prosperalcpacom slash apply to see a little more about how we can help out, or go to the links below for some of our free resources. Subscribe to our newsletter and we'll hear from you soon.