The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 126 - High-Income W-2? Do THIS Before December 31st to Unlock Massive Tax Savings
We show high‑earning W‑2s how to cut taxes now, not months from now, and convert savings into immediate cash flow. We walk through year‑end tactics, stacking limits, overlooked credits, and why adjusting your W‑4 can supercharge wealth growth.
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• Foundational strategies for high‑income W‑2 tax reduction
• Year‑end actions still available in Q4
• Real estate limits and how to stack credits
• Turnkey short‑term rentals and cost segregation
• Capital gains planning and expense acceleration
• Solar credits and bonus depreciation on rentals
• Adjusting W‑4 to unlock cash now
• Reinvesting savings for compounding growth
• Strategic Roth conversions in low‑bracket years
• Building a multi‑year plan to preserve wealth
Go to Prosperal, ProsperWithan L, CPA.com slash opportunity report, and you'll talk about how we can put that together for you
ProsperoCPA.com slash apply if you want to get started
I want you to pay very close attention if you're a high income earning W 2. I'm talking about a combined income of$750,000 and up. Now, if you're making a little less, this is all going to be applicable. But for really you guys earning$750,000 and up, if you want to know what is possible for you to reduce your taxes, and not, I'm sure you've maybe heard of some of the things on the episode, but I'm about to share with you some ideas that you'll probably not hear anywhere else on how to really optimize and maximize your tax savings potential as a high income earning W 2. So today, what we're going to talk about, first we're going to just refresh in your memory and just cat or catch you up to speed on some foundational strategies that are going to help you reduce your taxes if you're high income earning W-2. But then we're going to talk about how you can take action and what can we do as of now, the time I'm recording this episode, which is uh October 16th, what can you do now and between now and the end of the year to maximize savings? And then we're going to really drive into some really impactful stuff where we're putting gasoline on the fire. Once we've established what's possible and what do we want to do to reduce our taxes? And if you don't know already, you may be very surprised that there's a lot that you can do to reduce your taxes as a high income earning W-2 employee. But now, how do we put gasoline on the fire? Once we've identified these strategies and have a plan of execution, how do we really take advantage of this and take it to the next level in ways you're not going to see other practitioners or tax strategists sharing with you? We're going to dive into that. And then we're going to talk about how do we plan into next year? How do we take these opportunities and make the most of them going into the next year? And how do we execute to create that multi-year, long-term wealth preservation in the form of tax savings? And how do we use that tax savings to help you build wealth and achieve the financial incentives you're looking to achieve? Maybe retire early or quit your job or maybe pursue those passions, whatever it is, we're going to talk about how to accelerate your path in that way in ways that you're not going to hear anywhere else. So stay tuned, pay close attention, because that's what we're going to cover today. All right, so let's get into it. So I'm going to start off for those of you listening with some foundational concepts. In case you haven't heard me riff on this topic, and by the way, actually, before I even get into any of this, as I'm about to jump into the some of the minutiae here, if you feel overwhelmed and you want to get some one-on-one time with someone on our team, and if you're interested in a personalized video from me producing what we call an opportunity report, sharing with you based on a survey, what may be possible for you with some actual projections and insights you're not going to find anywhere else personalized to you. Go to Prosperal, ProsperWithan L, CPA.com slash opportunity report, and you'll talk about how we can put that together for you. But, anyways, now let's catch you up to speed. If you haven't heard me riff on any of this stuff before, there's a lot you can do. And I also have a playlist, and this will be part of the playlist. Just look at my playlist for W-2 earners for tax reduction strategies. Lots of great insight, diving deeper into a lot of these concepts. But, anyways, there's so much you can do to reduce your taxes as a W-2 employee. Some of the strategies we have helped our clients out is with starting businesses that are highly tax advantaged. This may involve renting out assets using leverage, where maybe you're paying 10% down on an asset and you write off the whole asset in your one and click cash flow. Or maybe we're doing this where we're also taking advantage of the depreciation deduction to offset our income plus tax credits. Or maybe we're investing in real estate. We have real estate professional tax status or the short-term rental loophole. Or maybe we're doing advanced charitable strategies where we're taking advantage of timing and structuring and valuation that is found in the tax law of certain assets that we're donating. There's so many ways to look at this. And then there may be tax advantaged investments. There's so many ways to do this when you're dialed in with the right resources and you had to know how to do this in a way that is not going to be economical and risk adverse, but also compliant. And then also there are retirement account strategies and deciding on how much and when to put those monies into those dollars into the retirement accounts. You may recall I had a really great episode on really targeting that sweet spot where if you may want to put more money into your retirement accounts because it may open up and give you access to other tax incentives and deductions and credits. All of these things are possible when you're proactive and really know how to win the tax game as a highly paid W 2. Now, if you haven't gone that far, your first step is you really want to make sure you have an opportunity to thoroughly explore those opportunities those different types of strategies. Hopefully, you have an advisor of some sort or some sort of game plan to execute on one or some or some combination of these strategies. And by the way, if you're a high W-2, and I'm really talking to those of you making 750 and up, but you should still listen if you're at at least 400,000. But for those of you 750 and up, you should know that when it comes to these real estate strategies where we're taking business losses to offset our W-2s, there's a cap. The max you could take as a loss against your W-2 in 2025 is$630,000. If you're listening after six after 2025, the amount likely is a little more, but adjusted for inflation, but not much. So if you're making a million, two million, three million, you may find that you're even if you're maximizing and optimizing your real estate strategies and your rental loss strategies, you're still paying a lot in taxes. So we like to stack it with charitable and credit strategies and other things that are going to open up that aren't going to be as limited or subject to those limitations when you're in a really high bracket. So hopefully you've navigated that space and you're in a good tax bracket. Now, let's say we've executed on some strategies or we couldn't, but maybe we haven't taken them far enough. Or maybe we just got acclimated to these ideas, we just became familiarized and we're in Q4 now, and we're wondering what else we can do. Time is running out. You know, I hear all these amazing things about how I can use rental losses and cost seg, but I don't know if I'm gonna be able to find a property in time. How can we do this? Couple of things we can think about. I mean, we can do this, and I don't encourage this, but we have been able to execute on some highly advantageous charitable strategies as late as mid to mid-late December, as late as maybe December 20th. December, maybe like between Christmas and New Year's, we were able to get a transaction in that was highly advantageous on the charitable side. Now you may be thinking that sounds great, but then where's all my money go? I'm giving it to the church. What are you talking about? There's so many other charitable strategies involving trust and structures, and there is a reason why all the most affluent people have some sort of involvement in charities, and maybe because they're great people, but I can also tell you that there are other financial and economic incentives for why all these affluent people are involved in charitable causes. So if you know these, this is we still have those opportunities. A lot of the oil and gas funds are still gonna be able to take in contributions. You can still use the losses to offset your W-2s if you contribute as late as December as well. Now, if you're interested in real estate, it's gonna be tricky, as you know or may know, it can take some time to close on those rental transactions. So, some thoughts here. Make sure if you do want to get another source of depreciation, whether it's from short-term rentals or long-term rentals, make sure that property is ready to go. But you say it's place to service, and we can use depreciation in time. Now, I personally am at a point where I need about a quarter million dollars of additional deductions. So, my game plan short-term rental turnkey. I'm gonna buy a short-term rental that's turnkey, meaning it's already operating. Their guests are already scheduled after I've purchased it. So it's gonna be up and running. I can run those costs eggs and I'm gonna already have that property in service. I'm not gonna be able to buy a short-term rental and hope I can buy all the furniture and have everything set up in time. I may fail at that and then lose my ability to use a write-off and say that property is in service in 2025. Some other thoughts you may have right now is you might want to move some more deductions into the year for those rental properties, or if you have those other businesses with depreciation, maybe consider purchasing more assets or prepaying some expenses, also doing capital gains planning. It's really important if you do expect capital gains of any kind that you are notifying a someone here. Uh, it could be your advisor or you're aware of what you can do to mitigate those capital gains activities. So, hopefully, at this point, we've considered all these things, and let's say we've had the ability now to do some game time decisions. Let's say we we maximize our rental losses and the rental losses didn't take our taxes low enough, so we're stacking it now with maybe some credit strategies, and maybe we're using some charitable strategies on top of that. And by the way, speaking of credit strategies, here's something that a lot of you are overlooking. I don't know why the internet gurus aren't going crazy over this because you should. And I'm not a guru, I'm a practitioner. You can tell I'm not the most fancy guy here, but I'll tell you what, you can put solar panels on those rental properties and get tax credits and bonus depreciation on them, and you're reducing your energy costs at the same time. And hopefully, this is another simple transaction. It may not be as simple, it's something you can get done by the end of the year. Now, hopefully, by this point, you're familiar with these all these concepts, you've taken it as far as you can. You know, and you are fully confident that if you've optimized and maximized all these write-offs, you've considered and you haven't missed out on any opportunities to also start to layer in the depreciation write-offs and the business write-offs with the alternative investments and the charitable and the tax potential tax credits that you can receive all at the same time. And if we've optimized and invested the optimal amounts into all these strategies to produce the ideal outcome, that's going to be fantastic. You may be looking at a fantastic refund, especially if this is your first time doing this. Now, you may be thinking to yourself, well, hey, my accountant's great. I just saved, you know,$300,000 on my taxes. So I'm ready to just call it a day with this tax planning thing. Uh, our work is done. We won the game. Well, you're not done just yet because we can take this further. And now I'm going to talk about something that you're not going to likely hear from too many other people on how we can take this to the next level. Again, putting gasoline on the fire of our tax strategies and our tax reduction to show how we can convert this tax reduction into real wealth and real cash in our pockets faster and more efficiently. So we're not just creating massive refunds and on the edges of our seat waiting for the results of that 1040 tax return, but we're seeing immediate benefit and reinvestment and additional cash flow and money in our pocket as soon as possible and accelerating the growth of our wealth. The growth of our wealth, not the gross of our wealths. I don't know what I was saying there. But, anyways, so the way that we can do this now is once we are familiarized with what we are doing to reduce our taxes in 2025, we can strategize with the clients as practitioners, or you can just try to figure this out on your own and adjust your W4 withholdings. So essentially, we have clients now. Let's say you've eliminated the taxes on 60% of your income, but you've been paying federal and state taxes out of that W 2 paycheck based on the assumption that you didn't have any of these strategies in place. You're making a million dollars a year at your W-2, and your employer assumes that you're paying taxes on all that million, so the taxes come out before you even have a chance to think about anything else you could do with that cash. Just go straight to the government. Doesn't that feel great? Well, obviously it doesn't. So, um, what we can do here is we can adjust your form W4 withholdings. Now that we know we have X dollars of business write-offs and charitable, we can adjust those withholdings because we know now it's most likely that you paid all of your federal taxes necessary for the whole year. We should not have to pay more taxes for the remaining three months of the year because we've already paid in and we know that we are gonna actually pay less than the amount that has already come out of our paychecks and to Uncle Sam. So, what we can do, we adjust the W force and we bring your withholdings to around zero dollars in federal in income taxes for the remaining amount of the year, the next few months. So, already we're gonna have the cash in our pocket. So instead of having to give the IRS and the federal government a tax-free loan, we are gonna have access to our tax savings immediately. And how awesome is that gonna be when all of a sudden your paycheck is significantly larger when it hits your account. And now that we know what strategies work for you, think about how impactful this can be when you have the cash right away. And this is not just something that we think about for the end of the year. Now, this is about rolling into the next year and bringing that momentum forward and continuing along with these strategies and seeing now the compounding effect of the tax savings and the tax savings reinvested, and then the tax strategy on the profits of the reinvestment of the tax savings, or real really seeing the snowballing growth of your wealth. So, what we're doing now is we look at what strategies are you comfortable with now that we've built that relationship, you've become acclimated with the strategies we've listed, we've touched on above. And now we're thinking going into 26, how again can we adjust our withholdings? So instead of waiting until Q4 to see everything, or waiting until April or sometime after that to get our tax return in the following year to see the impact of our tax strategies. Now we're seeing immediate impact of our tax reduction strategies. Now, a lot of you think, oh, you know, tax reduction and all these fancy things are really only for business owners. Well, we already talked about how we can turn W-2s into part-time business owners that create incredible tax reduction. But also when we realize that we can be proactive with adjusting your withholdings from your paycheck, we now have the ability to control how much are we going to give to the government, right? And we may decide that it's gonna be little or nothing based on the impact of our tax reduction strategies. And here's a chance to really supercharge it because we're working with a lot of clients right now where we're introducing these amazing strategies. For instance, we could potentially invest in solar, and imagine for every dollar, you create a dollar 20 to$1.40 in tax savings. We're saying to ourselves, well, instead of paying the IRS, we're gonna spend less than that amount to acquire solar panels that give us tax credits. Well, that all sounds fantastic, but the challenge is a lot of our clients who just came to us don't have the money to buy those panels because they've already given the money to the IRS. So it's this vicious cycle. So to break the cycle now, we're going to eliminate or maybe not eliminate, but we're gonna put a we're gonna greatly reduce the withholdings from the client's paycheck going into 26. And because they have more cashing in their account, they can control where it goes. Instead of it going straight to the IRS, they're gonna let's say instead of having$100,000 every quarter going straight to the IRS, they're gonna pay maybe$70,000 to acquire panels. Those panels are gonna give you bonus depreciation deductions in tax credits that'll cover the tax bill. So imagine paying$75,000 for maybe something that'll give you$80,000 of credits and a certain amount of tax deductions that'll offset the remaining amount. The net effect here is essentially what we're saying here is instead of paying the IRS all this money, I'm gonna give a little bit to the IRS and then the rest, I'm gonna pay into the to some solar panels that may give me a little bit of cash flow, but I'm gonna spend less on panels to offset the taxes that I'm using that I'm withhold that I'm taking out and not paying to pay the panels. I hope that makes sense. Let me see if I can say this again. It's just like it's saying this instead of giving$100 to the IRS, I'm gonna pay$70. I'm gonna use$70 to purchase panels, and then I'm gonna take$30 and do whatever I want with it now. So I'm gonna be up ahead. And those panels may give me a little bit of cash flow too. But the panels are also gonna give me tax credits and write-offs to completely wipe out the liability on that$100. You can see how impactful this is. And if we have access to that cash and we're not waiting until spring of the following year to see the savings and to get our money back from the government, think about the other things that we can do here. So, some of the things we would maybe want to think about here is now that we have more liquidity, it's not just about solar that I've referenced, but all these other strategies that can further grow your wealth and reduce your taxes. Now we have more money to put down into real estate and run those cost sags, and that real estate will further reduce your taxes. Or maybe you decide that you want to build some more passive income and you want that money to now that we have access to our cash and our tax savings about a year earlier, we have the opportunity to grow it and compound it instead of let it sit, instead of giving the government a tax-free loan on what the money that is ours. We now have the chance to reinvest our fortunes into things that are gonna grow in a tax advantage manner, like real estate, like life insurance, and other passive investments, maybe even index funds, simple products here, or maybe put more back into the retirement accounts. So we want to start profiting now from our tax savings instead of waiting into the future. And this is especially important for those of you who have who are waiting for these delayed K1s, and some of you guys can't even file your return into October because you can't control when these K1s hit, and you're waiting forever for your tax refunds. So this is this could really be huge and life-changing when you think about the impact year after year after year, the compounding effect of us taking our immediate tax savings, growing it, and growing it in a tax-advantaged manner, and having access to the time value of money. Now, some of you may find that you may even have too many tax deductions because of the liquidity and the opportunities you found, or maybe the volatilities and your pay or life circumstances. So, just uh what I say here is you never want to let a good tax deduction go to waste. Sorry, you never want to let a good tax bracket go to waste. So we may want to do some strategic Roth conversions, move that money from the IRA or the 401k, which is eventually gonna be taxed at your marginal rate, and who knows what that's gonna be in the future, move it into the Roth. And now we've taken care of the tax bill at a low bracket, and it's gonna grow and compound and build year after year after year, tax-free. And you can also, by the way, you can access the principal of that money, the original amount put in. You can access a set at any time, you don't have to wait until you're 59 and a half. So you may find that, and by the way, that's gonna be tax-free, no penalties. So let's say we put in$100,000 to our 401k and it grow to grew to$150 before the Roth conversion. The first$100,000, once we do that Roth conversion, when you take it out, no tax consequences. Obviously, the conversion could be taxable, but again, we're gonna try to time that in a low bracket year and mitigate the taxes. So there are so many things that we can do when we're planning for the next year. Um, and some other things you may want to do when we're planning is to think about our passive income sources, maybe passive income generators, plan and timing of our losses, and really thinking about how this all comes together so we can really accelerate your wealth by being cognizant of these opportunities. So, to sum it all up, if you really want to win the game and you're a high income earning W-2, this is the stuff you really want to know. Um, and if you don't know it, you really should start finding someone who you can work with. Obviously, obviously, you know you can go to us, prosper, prosper with an L, prosperocpa.com slash opportunity report for that, or ProsperoCPA.com slash apply if you want to get started. So what you so at overall summarize what we want to think about here, make sure you're aware of the foundational strategies and combination of potential strategies that can reduce your taxes. And then make sure you're aware of what you can do to take action between now and the end of the year, and you may be surprised that even as late as December, you can still make decisions that are gonna have a profound impact on your tax liability. And then once we have a game plan and hopefully we have some sort of roadmap what we're gonna do rolling into 2026, we can start adjusting our withholdings. So instead of giving that tax-free loan to the government, we have access to the tax savings right now. We are scut, we're telling the government, I'm cutting you off. This money's mine, I'm gonna have this deduction, so you're not gonna take that money. And then we move that money in a smart manner, strategic manner to grow in a tax-advantaged way. And now we're building a system where that wealth is compounding and growing year after year as fast as possible. So I hope this gave you some insight into what's possible. Now, if you feel a little overwhelmed or you really want to learn more, maybe check out, you know, I'm gonna help. Hopefully, my editor will put right here a link to our playlist for high W-2 income earners. And again, reach out if you have any questions, you know where to go. And I really hope you enjoyed this video or podcast. Let me know your thoughts and stay tuned. I have lots of other great content coming your way. Happy tax savings, we'll talk soon.