The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 101 - Tax Savings Strategies for Anyone can Use
Tax planning strategies work at every income level, creating legitimate savings that can accelerate your journey to financial freedom. Implementing these approaches strategically can significantly reduce your tax burden while staying within legal boundaries.
• Turn side hustles into legitimate businesses with clear profit intentions to create tax deductions
• Real estate investing offers tax advantages through depreciation, even at small scales
• Those earning under $100K can write off up to $25K in rental losses against ordinary income
• Proactive tax planning includes optimizing write-offs for meals, travel, and supplies
• Strategic stock portfolio management minimizes capital gains taxes
• Traditional IRA contributions can be converted to Roth IRAs for tax-free growth regardless of income
• High earners can utilize $14-16K annually in "backdoor Roth" contributions for tax-free growth
• Education credits like the American Opportunity Tax Credit provide up to $2,500 in direct tax savings
Ready to slash your tax bill? Schedule your free consultation and let's strategize your tax savings together! Book now at: https://www.prosperlcpa.com/apply Or, if you still need more time, here are some other ways to begin winning the tax game...
Learn more about applying these strategies to your situation by taking our mini-course at taxplanningchecklist.com, which includes personalized feedback based on your circumstances.
Whether you're making millions of dollars in your business or at your job or just getting started, here are some tax strategies that are going to be applicable to you that you can start implementing right away, that can create legitimate savings for yourself. First one I want to talk about here is taking a side hustle and turning it into a legitimate business. So we need to show here. Before we get so excited here and before you start thinking that you just write off your PlayStation 5 because you turned your hobby into a business, hold on a second. We need to show legitimate intention to drive profit. So you have to have a real business. It'll help if you have a website, you have an offer, you should have some form of marketing and you need to show clear intention to generate revenue and profit. However, there are instances where we can take activities that you enjoy doing and if we can find a legitimate business to make out of it, if we can find a way to maybe create some sort of blog or passion project around the thing that you love most, we may be able to create tax deductions. Now, one of our clients had a very expensive hobby and he was also in a high tax bracket and he loves and that hobby is duck hunting. Apparently, duck hunting is an extremely expensive hobby. I like to eat ducks there's probably too many hanging around Long Island but I never thought about hunting them. I did enjoy playing the game for Nintendo. But anyways, before I lose your attention with my ADD, if we could show that he was testing the gear and he was marketing and selling the gear for duck hunting and he was trying things out, he may have the opportunity to utilize something involved in duck hunting that will create tax write-offs. Now there still are some personal things that he's doing, things that he's doing. So if he's going to the ranges and if he's actually hunting the ducks and shooting the ducks, so he can just carve them up and, you know, cook them up or whatever they do with the ducks. You know there's going to be some limitations here, but we may have some opportunities where we can write off the travel involved in the trips to try out the gear and demonstrate the deer and test the gear. And he does do a lot of traveling into South America and there are lots of expenses that we may find are ordinary and necessary to this business. So any of you here, even if you're in high school, you may be able to start a business. And even better than that, maybe we can start driving some profit in as well as we create more write-offs.
Speaker 1:Another thing real estate investing, even in the smallest scale, has its tax advantages. So if you're making under $100,000 a year, you can write off $25,000 of your rental losses against your ordinary income. For those of you over $150,000, that deduction is phased out. So then you're going to need real estate professional tax status to use your losses or short-term rentals to use your losses to offset your ordinary income. Real estate is always going to be tax advantaged because of the depreciation. If you're broke and just getting started, you may decide to just sign a lease and rent out the other bedrooms in the lease. I was there at one time and did it myself. I met some very interesting people doing it. But it's an opportunity to create write-offs and start having a business. And again, because you're in the real estate space, there's a good chance you can see some tax advantages. The real estate is passive. Invested it is offset by depreciation. Even in those situations you have write-offs and you don't pay FICA taxes on the earnings and then being proactive with your tax deductions. So, whether it's a side hustle, a hobby, our main business, if it's a real estate investing portfolio, once we have an opportunity to create write-offs, now we think about how we can optimize those write-offs, being resourceful and finding legitimate ways that we're writing off our meals and our travels and supplies.
Speaker 1:For some of you, early stage entrepreneurs, this may be the first time that you get to do this, and another thing I want you all to think about, regardless of your your income levels, is being proactive with your planning portfolio. You'll likely see a recent episode I did on this. If you have a stock portfolio, how are you going to plan for the long-term and short-term capital gains? You may decide to integrate this with some qualified in opportunity zone investments to diversify your portfolio and potentially have tax-free exits from your stock portfolio. Or maybe you're just being proactive with your advisor and when you have cap gain events, you activate cap losses against from other stocks to mitigate the taxes there. Or there are all sorts of ways where we can use the wealth from this to reinvest into other, all sorts of ways where we can use the wealth from this to reinvest into other things. For instance, we can borrow from the stocks, and that could maybe be your first down payment into real estate. So, at the very least, you want to consider the tax implications of your stock portfolio, and who knows what they could save you here.
Speaker 1:And then here's another strategy that a lot of you don't realize is applicable to anyone at any level, which is the traditional IRA. So you can contribute $7,000 a year if you're under 50, or $8,000 a year if you're over 50, into the traditional IRA, and that's whether or not you own a business. Now here's some of you listening. You're going to say to yourself well, I can't write off a traditional IRA. Why does this matter for me? Well, you probably. There's a good chance. It doesn't reduce your taxes at all when you put the money in because there's a phase out. So your first $77,000 to $87,000 if you're single, or $123,000 to $143,000 of income if you're past those thresholds, you're not able to defer your taxes.
Speaker 1:So you're wondering what's the benefits? Well, we can roll the funds from those traditional IRAs to a Roth. So even if you're not deferring your taxes, you can still put those funds into a Roth. And now it grows tax-free. So let's say you're making half a million a year.
Speaker 1:Well, you and your spouse can each put in $7,000 to $8,000 into the IRA, move it right into the Roth and then that can invest into other things. They could be self-directed to invest into other stocks, cryptocurrencies, passive investments, et cetera, et cetera. And if you do this every year, think about the compounding effect of $14,000 being moved into the tax-free bucket, growing and compounding, being completely untaxed year after year after year. So why not? It's a nice little win, and a lot of you guys are overlooking this. I mean, we could talk all day about capital gains planning strategies. If we can get this moved into the Roth early, then we don't even have to worry about that in the future. And then another cool thing is you can take the principal, the amount that's already been taxed. You could take it out at a later date if you decide that's what you want to do. So if you're worried about liquidity and that you may need it at a later date, move it into the Roth can maybe create that possibility for you. So there's a lot of really cool and exciting things out there, even on the smaller scale.
Speaker 1:Some of the things that we could also touch on for some of you folks that are maybe not ready for a full blown tax planners is some college planning opportunities or tax credits.
Speaker 1:If you guys are in college and there's the american opportunity tax credit, which could be up to twenty five hundred dollars to pay for your books and your earnings, that could be another really nice win.
Speaker 1:If you have some income and you're just in college, there's just a whole world of cool and interesting stuff. So so if you find this interesting, I suggest you subscribe, and if you want to learn more on how any of this may apply to you, I suggest you start by taking our mini course at taxplanningchecklistcom. It's going to be a series of emails and even gives you a chance to get my direct feedback based on your situation, if you go through the whole course. But overall, the key takeaway here is, regardless of your situation whether you're making lots of money or very little money it's time that you start thinking about learning tax planning and the tax incentives available, the opportunities for you, so you can achieve your goals and reach your financial freedom more quickly through proactive tax planning. All right, I hope you guys found this helpful. Stay tuned. We got some more great content coming your way.