The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
Ep 95 - Build & Protect Your Wealth w/ Holistic Tax Planning
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We've evolved from focusing solely on real estate tax strategies to becoming holistic tax planners who consider all income sources and create comprehensive tax-saving approaches. This shift occurred because many clients have diverse income streams beyond real estate, and others have lost interest in real estate due to market challenges or landlord burnout.
• The seven elements of holistic tax planning include examining all income sources, not just real estate
• Consider every asset - stocks, retirement accounts, real estate equity, business valuations - when planning
• Timing matters - look at prior, current, and future income to prevent taxation across your lifetime
• Family considerations should include spouse strategies, hiring family members, and estate planning
• Understand where your cash is going after tax events to align strategy with your true objectives
• Align tax planning with personal goals like retirement, business growth, or investment expansion
• Provide diverse strategies beyond the obvious - from charitable giving to advanced entity structures
• Each person has a unique "tax planning DNA" based on risk tolerance, liquidity needs, and preferences
Visit taxplanningchecklist.com for a high-level overview of potential tax opportunities, or go to prosperlcpa.com/apply for a free consultation to see how we can reduce your taxes.
We originally started off by describing ourselves as real estate tax strategists, because we love real estate and we still do. I find that real estate is the most tax advantaged way to build wealth and get rich in our country because of the tax treatment of real estate activities and we still do lots of cost segregation studies and capital gains planning opportunities. This is a reason why we kind of switched our focus and now consider ourselves to be holistic tax planners, because what we found is many of our clients have so many other sources of income that were non-real estate and what we found was sometimes the best opportunity and way we can help our clients was not just using real estate to reduce your taxes or avoiding capital gains, but trying to determine how can we use tax planning to create more tax savings to allow our clients to buy more real estate. So how can we look at the W-2 in the business income, reduce the taxes that are incurred from that so they can buy more real estate, which can further drive down their taxes? Another thing we found was a lot of our clients started to lose interest in real estate because they found that they couldn't find a good deal. They were burnt out as landlords and their time was better spent in their business activities and whatever they were doing that allowed them to afford the down payments and to purchase that real estate. So I'm going to share with you what holistic tax planning is and the seven most important elements of holistic tax planning, where we're looking at more than just the real estate and more than just the current year activities.
Speaker 1:So let's get started with topic number one. We want to look at all of your sources of income, whether it be investment income, stock portfolio income, interest income, passive interest in businesses. It could be your W-2 income, it could be the income of your spouse. Anything potentially hitting that 1040 has to be considered in your tax plan. And this really gives us again moving into the holistic tax planning opportunities to give you the optimal solutions to drive down taxes here. We may find that one spouse has a really high W-2 and the other spouse has the opportunity to create losses from their activities to offset the taxes from the W-2. We may find that your investment income is highly profitable. You have major capital gain events. How can we create losses in the business or other investments to offset that investment income? We may see, let's say, we have a W-2 and we have a reserve stock unit, an RSU or a significant bonus or a major commission bump. How can we account for all of these spikes and drops in volatility in income when looking at the full picture of all your other income sources, to make the optimal decisions to minimize your taxes? That's why it's not just about real estate. Real estate is one of the many factors. We may use real estate and depreciation and other write-off strategies to offset your other sources of income. But there's a whole other world of things that we want to consider, whether it's the timing of events, the purchase of assets, retirement accounts and some other more advanced and sophisticated strategies out there. It all has to be considered.
Speaker 1:Second element I want us to emphasize here is we want to look at every asset. So it's looking at what are again looking at our stocks and potential unrealized gains or losses. What about our retirement accounts? How much do we have in them? What's our strategy here for maybe moving some of these funds from a tax deferred vehicle like a 401k or a traditional IRA and moving it into your Roth when it's untaxed? How much is in there? What opportunities are in this asset?
Speaker 1:Also, we want to look at the real estate. If you're planning on selling it, what's the fair market value? How much equity do you have in it? You may even want to look at your equity for some asset planning, asset protection purposes, and also looking at what's our potential exit if we want to exit out of this real estate. And then, finally, we want to look here at our business ownership and the valuation. If you are ever planning to sell your business, start doing some exit planning on that as well. So understanding what do we have is going to be very helpful in optimizing our tax savings. If we have a lot of equity in our real estate, maybe instead of selling our stocks and paying capital gains, we have opportunities to do a cash out, refi, pay no taxes at all, or maybe if we have some unrealized losses that we never used, we can recognize them to offset a real estate capital gain. All of these things are considered and factors in how we can look at your full picture to maximize tax savings.
Speaker 1:All right, let's get into number three, and this is timing. What is your prior income, what are we expecting for your sources of profits and what is going to happen to you in the future? So there are so many variables here, and this is where it really helps to collaborate with not only a strategist but an enthusiast, a tax geek like us, who can consider the timing implications of all these opportunities and understanding what's going to happen in the future and plan for it. Now. We find a lot of people do tax planning and they do the stuff that you're going to find online. They do a cost tag, they eliminate the taxes. They say the work is done. Well, the work isn't done.
Speaker 1:After we've eliminated or reduced your taxes for the current year, we want to think about how can we do something now to prevent future taxation. So if we're in a $0 tax bracket, don't let a good tax bracket go to waste. Remember, if you're in a $0 AGI, your first $90,000 of long-term cap gains if you're married is completely untaxed. Maybe you go back and look at those assets. We start freeing up some of those stocks, selling them and pay zero taxes on the capital gains so we don't pay taxes in the future when you might be in a higher bracket. This was one of the many examples. We also want to think about the optimal way to time taking money from the 401 s and the IRAs into the Roths, based on changes in your situation. If your profit is only going up and up and up, maybe now is the time to do the Roth conversions before you jump into the 37% tax bracket. But if you were planning to slow down and drive into lower brackets, maybe we wait until the future to do these Roth conversions. So it's not just about now. It's about looking at the full spectrum and timeline of your time on this planet, and also your heirs, and creating the optimal solutions here to create long-term results, tax savings and hopefully create generational wealth.
Speaker 1:All right, now let's go into the fourth category. Speaking of generational wealth, we want to be considering your whole family. That includes not just you, but your spouse and your future spouse, if you have one, or if you're getting divorced. All of these decisions are going to have tax consequences. We love the idea of having one spouse create losses to net against the other spouse, especially with real estate, professional tax status or real estate investing or other asset purchases. There's so much more to consider here. Also, dependents how can we maybe consider hiring the family? How can we shift money into the family members of the low brackets? Are there partnership structures with other family members? Is there an estate plan in place All these variables we want to consider here. Also, when we think about having dependents and having those basic tax credits and tax deductions, such as related to child care and education. Where are we recognizing and aware of the opportunities here written in the law, or are we just dilly-dallying and just racing through the return? All these things are gonna give us a chance to look at your situation and make sure that you were paying as little pocket as possible, and not just you, but your future heirs and your current family members.
Speaker 1:Another thing I forgot to mention is there's a lot of great tax planning involved in setting up your retirement accounts to be inherited by your heirs. I had a great conversation with Joe Clark on this, where we talk about the nature of this, 401ks and Roths when they're inherited and planning for that optimal inheritance. There's also some incredible gifting strategies and also thinking about real estate and getting that step up basis. All these conversations should be in scope. Also, if you are going to inherit real estate or any type of assets or get income from your parents, that should all be considered when we're doing the holistic tax planning. Okay, here's another thing you're not going to get from someone who is just talking about.
Speaker 1:One topic is what we call element five. Here is what do you want to do with your cash and the implications? So if we have a capital gain event for example, we're selling our real estate maybe a 1031 may not be the best opportunity for you. So we want to create strategies that align with what you want to do with your cash and doing a holistic look at what is going to be the tax strategy that enables you to do what you really set out to do, whether you want to invest, grow your business, or if it's more about using this for your personal living expenses, fund money, investment vehicles and really creating the strategy that aligns with, or at least considers, what you're doing with this cash outside of the real estate, whether it be purchasing life insurance, passive income again, it's just looking at what are. What's the after effect of this real estate when the money comes in? Where is the cash going?
Speaker 1:And then six, I really want to touch on the topic of understanding the goals of the clients to have funds in our bank and have pain? Or do we want to live a debt-free lifestyle, so we don't owe anyone anything? Or are we looking to drive profit? There are going to be tax strategies associated with all these goals. Or maybe we're looking to have a cryptocurrency empire. So, for example, if we're looking to have a cryptocurrency empire, so, for example, if we're looking to build and scale and sell our business at a profit that may impact the entity structure If we have enough time, we might even turn to a C-corp to exclude all the gain.
Speaker 1:If we're looking to retire now, we got to consider what are we going to do to set up the retirement and create some tax efficient vehicles for that? Are we going to have real estate professional tax status to help out with that? Or where is the money going to be going to support us through retirement and how can we make sure that this is done in a tax-advantaged manner? Through a combination of investments and maybe retirement account strategies so many things to consider here. Maybe retirement account strategies so many things to consider here.
Speaker 1:If we're looking to grow and scale, we're going to likely consider more opportunities that are going to give us maximum liquidity through valuation strategies or leverage and depreciation, so we can continue to reinvest into this engine that's going to grow and provide more and more profit. If we're looking at liquidity again, we're going to hopefully find ways where we get deductions in excess of the cost on the charitable side or on the asset purchase side, maybe find ways to get you tax credits and then, if we're looking to just drive profit again, there's just so many ways we can do this and align the tax planning recommendations in a way that you're deploying your cash in a way that is going to help you in expanding your business and growing your business and having the capital to do so. So, by aligning with our goals and understanding what your overall result is. If you're building an investment empire or looking to be passive or move into another business activity, there's all sorts of tax planning opportunities that we can do now to set yourself up for future success and tax savings to enable that to happen. And what you'll find is, if you have a really good holistic tax plan, you're going to take your tax savings and that allows you to reinvest into these goals and opportunities. Whether you're looking to retire early and spend more time with your family or leave your job to be full time in your real estate investments, the tax savings are going to is going to be redeployed into accomplishing those goals and if it's if it's properly executed we will slash years of the time that it takes to reach your goals with tax planning.
Speaker 1:And then element seven I want to talk about, which is just providing a diversity of strategies. So if you come to us with tax planning, it's not just and you say you want to do cost size. I want to make sure you understand here that if we want to really create optimal savings here and make sure that we're serving you as effectively as possible, we're not just going to stop at the tax playing and at the real estate strategies and maybe the real estate strategies is all you need. But Again, if we're in a $0 tax bracket, what kind of opportunities does that create for us to avoid capital gains or future taxation on our retirement accounts? What about other charitable strategies? Let's say, after those cost segs, you're still paying a lot of taxes. How can we use some sophisticated charitable strategies that can save you hundreds of thousands of dollars in taxes? And these are the strategies really reserved for the top 1% of income earners.
Speaker 1:What types of tax credits are you missing or can you create From assets, from activities, from energy-related assets or from creating retirement accounts for your employees? These should all be considered as potential opportunities as well, and we don't want to miss out on a credit because this is a dollar for dollar tax savings. So many things we can explore here, and maybe even some potential state level credits, some other things again. We kind of touched on energy incentives with solar. We had a great podcast on the 45L tax credit for developers. And then there's oil and gas investing, which creates incredible tax savings as well, and you have tax advantage profits because you get QBI deduction and depletion deductions. So certainly for a lot of you folks who can't find real estate or you're burnt out, maybe diversifying and adding oil and gas into the mix can help you reach your goal of financial freedom and passive income in a way you didn't even think about.
Speaker 1:Another thing we want to consider here is advanced entity structure. We recently created an advanced entity structure that will be saving the client approximately $200,000 a year in mitigating his risk. Now, this may not be for everyone. It was very complex, but the tax advantages were incredible and this is something that the client was unaware of. And when we reach a certain level of income, some advanced entity planning may be one of the things that we want to add into this mix as we're looking at all the available opportunities that could potentially help you. Now some of our clients want something that is more simplistic, so that may involve just using leverage and buying assets or using some pension plans or retirement accounts. We may want to consider deferring or deferring or permanent tax elimination.
Speaker 1:Some other things you may want to consider here is a lot of folks like to do the complex. They like to do the more aggressive strategies on the cusp of things and take those aggressive stances, or they enjoy the complexity, knowing that they're doing the types of things that are reserved for the very exclusive 1%. But other folks like the simple, like we referenced earlier, and everybody's going to give you a different answer. It's really really a personalized decision on where we go, even if you have the same situation financially as someone else, and there are also very creative opportunities as well, and some people enjoy that and some people don't. So we really have, when we do this holistic tax planning, we want to look at the tax planning dna and everyone's going to have a different tax planning dna based on their interests and their needs and circumstances. So along this spectrum that we evaluate, we have a risk tolerance, a compliance risk tolerance, whether you want to take an aggressive stance where maybe the audit risk or the chance of an adjustment on whatever K1 you get could be changed. That's on the higher spectrum. We don't do illegal, we don't go past there.
Speaker 1:We don't do the Wesley Snipes tax planning strategies, but some of the clients do like to take the more aggressive strategies and then't do the Wesley Snipes tax planning strategies, but some of the clients do like to take the more aggressive strategies. And then there are the more conservative and traditional strategies where it's black and white written in the tax law. Then there are the aggressive economic strategies where they can get massive tax savings because they are taking risks but they could lose their money. Or there are more conservative strategies where they're investing in more conservative vehicles, like, for instance, within pension plans. You're doing more reliable and conservative investments. In those circumstances there's a need for liquidity where you're using leverage but you're taking on lots of debt which may be a little bit hard for some of you to stomach, but you can create massive savings and you get more bang for the buck. Or you may decide to do something that's a little more capital intensive, where you don't want to take on the debt. You still want the tax reduction. So maybe you put money to something like oil and gas, or create more write-offs, or maybe just do some of the foundational strategies like hiring the family and just being resourceful, and then also all these different things here.
Speaker 1:There's just so many ways to look at this. What is the best for you? That really involves a conversation, and the answer may change over time as your preferences change, the tax law changes, your circumstances change. But we want to look at all these things and I just want to summarize again these seven elements so we can have the most effective and impactful tax services and tax savings for you. So summarize these seven items.
Speaker 1:We want to look at every source of income.
Speaker 1:We want to look at all of your assets. We want to consider at all of your assets. We want to consider the timing of events. We want to consider the circumstances and income and everything involved in your family. We want to know where your cash is going. We want to know what your goals are and, finally, we want to present the diversity of strategies even if you didn't come to us to look at them, to make sure we leave no stone unturned and you're considering all of the potential opportunities to reduce your taxes. Now I know I threw a lot at you here, so a couple of things. One you go to taxplanningchecklistcom for a brief, high-level overview of how we'd like to look at our taxes and give you an understanding of what may be possible for you. Additionally, if you want to just get into some consultations and get our free video from me on what we can do from you to reduce your taxes, go to prosperlcpacom slash apply. That's prosper with an L cpacom slash apply and let's see if we can help you out.