Tax Tuesdays w Toby Mathis – June 25, 2019 EP 94

Tax Tuesdays w Toby Mathis – June 25, 2019 EP 94


(bright music) – [Toby Mathis] Hey guys, Toby
Mathis here joined by, I’m just gonna have to do this right off, ’cause usually, it’s Jeff, but we’re not gonna have Jeff today. What are we gonna do with Jeff? Let’s see, I’m gonna have
to make my computer work. So I’m gonna put a big X on Jeff, and we’re gonna change him
with somebody who is younger. (Toni laughs) (laughs) There we go, we got Toni. Hey, Toni. – [Toni] Hi. (Toby laughs) – [Toby] So you’re on
the right Tax Tuesday, but you don’t get Jeff today. Jeff is home recovering from some surgical procedure of some sort on, was it his tooth or something? – His eye.
– Or just, the eye, oh, that’s right. It’s his eye, I have to make fun of him. So let’s jump into this, and
we have a ton to go over, so just going back over the ground rules. If you’ve never been to
a Tax Tuesday before, you can ask live questions, especially if they’re pertinent
to what we’re covering, I go right to them. If they are not pertinent to what we’re covering at that moment, I flag them and answer before the end. We usually get a couple
hundred questions in. It’s fast and furious. You can send your questions in at any time to [email protected] We’ll either answer them
right away, flag ’em to be put onto the Tax Tuesday, the live, course like this, or we just forward them to a staff if it’s very personal. Especially if you’re platinum, then we’ll actually get through it. Toni, you do a lot of platinum, right?
– I do. – [Toby] Yeah, so she’s
answering questions. You have a pretty good size
staff that just answers questions all day, right?
– Yep. CPA’s, tax attorneys
down there plugging away. – [Toby] Plugging away. So if you need a detailed response, then you need to become a client. Somebody says they are not hearing us, so that might be, Stacey,
you may need to dial in on a phone line ’cause I think
everybody else is hearing us. This is fast, fun, and educational. We want to give back and help educate. So we’re trying to give
tax knowledge to the masses and make sure everybody understands and quits being afraid of them
’cause it’s really important. So we wanna make sure
everybody can understand what’s going out there in the tax world. By the way, the IRS recently published its 2018 data book which is way early, in my mind. Usually I think we get them in the fall but they’re already publishing it. Then the auto rate’s down to about a half of a percent now. If you’re scared of the IRS, don’t be. They’re really, they
got bigger fish to fry than us guys who are just
trying to do everything right. There’s lots of folks
out there doing things completely wrong, not
even filing tax returns. So our job is to make
sure that we’re doing the best that we can. Take everything that
you’re allowed to legally, underneath the law, and pay
the least amount of tax. If you can defer something, defer it, but do it with your eyes open. Let’s take a look. Hey, if you want to
join us and learn more, you can always go onto Facebook, AndersonAdvisors.com/Facebook. Please like us. And then AndersonAdvisors.com/YouTube. Go and there’s hundreds of videos. I mean you could just spend
hours, and hours, and hours, not just on my stuff, clients,
but lots of our attorneys, lots of our accountants. Including Miss Covey here. You guys just did a bunch, didn’t you? – [Toni] We did. – [Toby] Yeah. So it’s always fun. You can always spend some time. Now the questions we’re
gonna be going over today, and there are a lot of them, so I’m just gonna tell
you right off the get-go, we are gonna be cracking. I didn’t realize how many
questions I had selected. Must have been drinking. (Toni chuckles)
And we picked a lot. So how do you know if you’re
overpaying taxes with your LLC? We’ll answer that. What are the most beneficial types of QRPs and LLCs for tax shelters? What every lawyer and every
accountant wants to hear is you use the term tax
shelter, ’cause everybody, that doesn’t have a negative
connotations. (laughs) – [Toni] Yeah. – [Toby] How can we protect a special needs trust from probate? Do I always need to take a
salary out of my C corporation? Can we get the same tax
write-offs for travel and meals as before the Trump Tax Plan? Which I assume you mean
the Tax Cut and Jobs Act. If your home and car are under an LLC, does the business pay the
utility and maintenance bills? I have rental properties already, will they be taxed differently if they are part of a C corporation? Usually I file with my 1040. We’ll go over all these fun ones. When switching your LLC
designation to an S-Corp, what accounting changes should you make? Paying yourself unknown
deductions, question mark. What is your opinion on investments in the oil and gas space as
a tax mitigation strategy? I have a full-time job, W2, and I do real estate
investing on the side. How can we use property depreciation to deduct against the W2 income? That’s a fun one.
– Mm-hm. – What are common tax
deductions that apply to real estate investors? After finishing a rehab
with the intent to sell, what is the best way to
minimize capital gains tax? Will an LLC help reduce
rental property taxes? So this one gets fun. Which is more tax-advantageous, a 1031 Exchange, or a
Charitable Remainder Trust? So that’s somebody getting
kind of crazy there. – Mm-hm.
– Yep. And how often should
you take a distribution from a holding LLC? Now there’s two more. If you thought that was enough. What are the tax benefits
for a real estate investor in Florida to use a trust
to hold real estate? How should money flow from
personal to business back to personal in the most
tax-efficient manner? So we got a lot to go over. Wow, we’re getting all these questions. We already got a bunch of questions. Something that we were talking about. So I was going over these questions, as there’s so many of
them, with Toni here, and she said there’s a lot of these ones that it seems like the answer over, and over and over again is it depends. And if you’d know that’s always the joke of why do people go to law school? So they can learn to
charge for those two words. One size fits all. We hear about this depends. Is there such a thing? And I always say no, but I
don’t believe that people listen to it so I’m gonna burn it into your minds with the simple image. There is no such thing
and sometimes if you want a one size fits all answer,
that’s what you’re getting. Which is not something necessarily good. I’m gonna get out of that, ’cause I’ve seen enough of that picture. All right, you guys think
you have to see it often. I’ve had that thing on my
computer for about 20 years. All right. And see if you can tell
which one was Michael Bolton. How do you know if you’re overpaying with your taxes with your LLC? Well, the easy way to consider
this is if you’re driving, and I use this example a lot, where somebody flies into Disney World, and they fly into Orlando Airport. They grab a rental car and
they drive to the airport. And if they follow the signs, they’re gonna hit about
five or six toll booths along the way. It’s a lot. I might be exaggerating,
it might be three or four, but it’s a lot. And you seem to be hitting a
toll booth every couple miles. Now locals, or if you know
how to use Google Maps and say avoid tolls, know
that you can actually avoid any tolls by simply driving
down Sand Lake Road. And Sand Lake Road, you avoid the tolls, but you hit a couple red lights. That’s about it. So it might take you a
couple minutes longer. How do you know whether
you’re overpaying just comes to you have to know somebody
that knows the area, knows what you should be paying. Then you can tell whether
you’re actually overpaying. What you don’t do is go to somebody who doesn’t know that area. Unless they’re really well-versed in it, like they know business tax. Go to a business tax person and say, “Hey, is this consistent with
the other businesses you see?” If somebody knows real estate tax, have them take a look at your return. And they’ll be able to
tell whether you’re on the toll road or whether
you’re on the no toll road. And it really comes down
to it’s that simple. People that know this stuff, know it. If you don’t know it, you don’t. So how do you know if you’re
overpaying taxes with your LLC? You have somebody take a look. Now, if you guys have heard me over the last many months and years, we always make fun of people that say, “Well I save tax with an LLC,”
or, “I’m taxed as an LLC,” ’cause we know that doesn’t exist. An LLC is a state designation, and it chooses how it’s
gonna be taxed by the IRS. So you can be a
Sole-Proprietor, Partnership, S-Corp, C-Corp, whatever. You could have it ignored. So what it really comes
down to is we’d take a look, and we’ll say, “Hey what
would you be best taxed as?” So if you had rental real
estate, for example, Toni, and you had some rentals, are you gonna want to
stick that in a C-Corp? – [Toni] No. – [Toby] No, right? So how would we know if
you’re overpaying taxes? Well we’d look and say
well how is that LLC taxed? Where is it landing? We know there’s a lot of benefits to having real estate and we
don’t want you to lose it. So how do we know if you’re overpaying? Look at the tax designation of that LLC and we compare it to the other choices. Used to say that taxes,
there’s three rules. That is calculate, that’s rule number one. Rule number two is a
version of rule number one which is calculate. Rule number three is way more difficult than the first two, which is calculate. Right. You just get a pen and paper
out and you gotta figure out which way is gonna be better for you. Same thing as if you’re
doing retirement plans. You gotta figure out whether
it’s worth it for you to save some taxes if you’re
gonna pay taxes in the future, which would be like a
traditional IRA versus a Roth. Would it be better to pay the tax now? – [Toni] It’s best to look
at it on a quarterly basis. – [Toby] Quarterly basis. From the accountant. – [Toni] That’s when you’re making your estimated tax payments,
so obviously if you’re going to be making quarterly
estimated tax payments, you should be having your taxes looked at on a quarterly basis. Or your financials looked at
on a quarterly basis, rather. – [Toby] Yeah, that makes sense. Is that what you guys like to do? – [Toni] Absolutely. – [Toby] All right. So Toni, by the way, is
an EA, which stands for– – [Toni] Enrolled Agents. – [Toby] And Enrolled Agents, who gives you that designation? – [Toni] The IRS. – [Toby] Right, so it’s
different than a CPA. A CPA, that’s a state designation? – [Toni] State, mm-hm, state, state. – [Toby] And then there’s
lawyers, which is also state. The only federal designation
that you can get, that I know of, is that EA. – [Toni] Well there’s a few others but it’s not specific to tax. – [Toby] So it’s just for tax, the only one is–
– The Enrolled Agent. – [Toby] Yes, Enrolled Agent. So you guys know, you learned how to do all the forms and fun stuff. – [Toni] Absolutely. – [Toby] And Toni, you’ve
been with us forever, right? Well over a decade. – [Toni] 13 years. – [Toby] Jeez, she just started. 13 years. So she knows her stuff. So what she’s saying is do it quarterly. I say you gotta look at
your finances quarterly and make sure that you’re
not going off the rails. ‘Cause it sucks when you
get to the end of the year and somebody says, “Oh
I wish you had told me.” – [Toni] Absolutely. – [Toby] You like having those conversations?
– So many things we can, oh. Those are fun. There’s so many things we
can do throughout the year for you if we just have the
opportunity to look at it and play around with it. Peak out with the numbers a little bit. – [Toby] Yeah, somebody says
this is my first time hearing of an Enrolled Agent. Yep. So– – [Toni] My feelings are hurt. (laughs) – [Toby] Janice, this is
interesting, ’cause I used to say, I like CPAs and I like EAs, but 80% of the paid preparers out there have neither designation. And CPA doesn’t mean that, well I don’t want to say that yet. I don’t want to say
anything bad against a CPA, but you don’t necessarily know tax returns and how to prepare taxes. – [Toni] It is what they specialize in. Not all CPAs specialize in taxation. – [Toby] A lot of them
are doing audit work, which means they’re
verifying the information that’s created in the finances. So if you’re a big publicly-traded company you’ve got auditors running around and what they’re doing
is verifying everything. – [Toni] But then you have
a CPA who’s like the ones we have here at Anderson
who do specialize in tax. – [Toby] Yeah, can’t
CPA testify against you? Anybody can testify against you. (laughs) Yeah, CPAs have some rules
that sometimes we fight with where they have different
masters sometimes. So Jeff’s a CPA, he’s
awesome, he’s amazing, but CPAs tend to be more conservative because not only do they owe you a duty, but they have licensing issues, too. And so you always wanna deal with somebody who has a license, I’ll just say it. So whether it’s federal
license or state license. What messes you up is
when you have somebody with no license. Honestly there’s some
situations where you’ll see somebody who’s working in a
fast food restaurant two weeks before they go over and start
preparing people’s taxes, and that scares me. – [Toni] Us as well. – [Toby] When the Inspector
General did a study, you don’t have to take my word
for it, go read this stuff. We quite literally had a 0% accuracy rate on business returns on
the paid chain preparers. And it was pretty ridiculous. It’s like wow, 0%? 0%. It’s freaky. So the answer is EAs
specialize in taxation. They understand the IRS
forms, pubs, and codes. Yep, that’s what they learn. So they’re not gonna go
audit a company doing like a publicly traded audit. What they are going to
do is they are going to prepare returns, and
they know the federal laws. And they learn the state laws,
too, when they’re doing prep, but for the most part
what they really care about is the IRS. – [Toni] Yep. – [Toby] Yeah, your state taxing agency is something different, but they obviously have
to learn that, too. All right, so next question. What are the most beneficial
types of QRPs and LLCs for tax shelters? This is always a fun one. So again, they say tax shelter. Stop that. That has a negative connotation. Although, I still like
to say it too, sometimes. All it’s doing is hey, what
can we do to defer tax? So the beneficial types, it
really depends on your activity. And this is like remember
no size fits all, right? But QRPs, that stands for
Qualified Retirement Plan. LLC doesn’t exist in the
tax code as a taxable entity so you could actually have
an LLC that’s owned by a QRP. And the taxation goes to the QRP and then that QRP denotes whether or not you’re gonna pay tax later as
to whether it’s a Roth 401K, or a traditional 401K
and whether it’s subject to mandatory distribution or
minimum required distributions. So all those things come into play. So the most beneficial types, I like things that defer taxes. So I like 401Ks. As far as owning real
estate, holding real estate, I’m gonna have an LLC
that is either disregarded to an individual, or
taxed as a partnership which flows to an individual. If I am flipping real estate, I am either going to
be an S-Corp, a C-Corp, or an LLC taxed as an S-Corp or a C-Corp. Because when you are flipping real estate, it is considered ordinary, active income. I do not want that flowing
onto my return helter-skelter. I want to be able to
avoid as much of that tax as humanly possible for as
long as humanly possible. So those are some of those, do you have anything you
want to throw on there? – [Toni] Not particularly. It’s just, when I look
at questions like this, I’m with you. It just depends on what you’re
trying to accomplish, right? So you want to defer income,
all taxed QRPs are beneficial. It depends on what you’re trying to do. Whether you’re doing it in a
version of a Roth, Traditional. So you could have the
Roth where it’s growing, the income’s growing tax-free, or you can defer the
income if you’re doing it in a traditional-type matter. Or, maybe we’re looking
at a different type, we’re kind of going across AD types here. We’re talking about QRPs,
we’re talking about LLCs. But what about a non-profit? – [Toby] Mm-hm. Yeah it all comes out, again
we could do general rules. You’re not making much money, if you’re below $25,000 for example. Let’s say it’s your, it’s a kid that’s getting started. I’m telling them use a Roth
IRA as a savings account. There’s no penalty to
take the money back out, only if you have gain on it,
and they’re not gonna have much if it’s only in there for a little while. But if it stays in there for a long time, then you never pay tax on it ever again. You’re in a really low tax bracket, so you’re not trying
to get a tax deduction. For example, the first
$12,000 somebody makes, they’re a college student it’s tax free. Why mess around with that? If I put that in a Roth
and I let it sit there and I do that every year. Let’s just say I put $1,000
in every year for 10 years, and I never paid tax on any of it anyway, that $10,000, and give
it 50 years to ferment, you’re talking about hundreds of thousands of dollars tax free. You know, so that’s issue number one. What if somebody’s in a high tax bracket? They’re in California,
they have state income tax, federal income tax, they have a little bit of a penalty with the net investment income tax. They have all these little things that are nibbling at them, and they’re
really in a 50% tax bracket. Well now you’re gonna
look at deferring that. And you’re gonna be looking at 401Ks, you’re gonna be looking at things like defined benefits plans. You’re gonna be trying to
get that into something else. – Right.
– Absolutely. I want this make this volume
up, somebody says it’s low. A charitable LLC there isn’t. There’s charitable remainder
trust, we’ll go over that, but a charitable LLC, not really. You’re talking about a
501c3 or a charitable entity that does not pay tax. Even if I am a high tax, I’m making a million dollars a year, well I know that I can make
$600,000 of it deductible with the stroke of a pen. That’s what I know. ‘Cause I could write a check to a 501c3, even if it’s my own 501c3, and I could get a $600,000 deduction, ’cause
that’s what the code says. So I know I can lower tax. There’s different tools out there. But just as a rule of thumb,
if you’re buying and holding, you want it to flow onto your Schedule E. So you gonna make sure that
it’s going on page one or two, either disregarded LLC or a partnership. If I am flipping a property, wholesaling, I’m a real estate agent, I’m more than likely gonna
run that through an S-Corp. If I have too much money, maybe a C-Corp. Especially if I’m in the
$100,000 to $200,000 range, I’m adding a 401K. – [Toni] Mm-hm. – [Toby] And I’m gonna try
to jam some money in there and defer it. So anyway, kind of an open ended question. – [Toni] Oh I could go on. (laughs) – [Toby] How can we protect a special needs trust from probate? This is very interesting
and there’s some pretty bad stories out there with special
needs arrangements gone awry. So the first question is, why should we protect it from probate? And what happens when
it goes through probate, and I’ll give you guys an
example out of Pennsylvania where grandparents tried to give a special needs grandson money. And they skipped the parents, saying, hey it really needs to go to my grandson, ’cause he’s gonna need care
for the rest of his life. And the state of Pennsylvania took it all, because they’d been providing
care for the child since he was an infant. – [Toni] Wow. – [Toby] When the
grandparents passed the child was in his early 20s. So they just said thank
you for paying us back. That’s if it goes through probate. Probate’s really there
to help the creditors. It helps lawyers and creditors. So, let’s just say this, avoid probate. You use a trust to avoid probate. So then you say special needs trust. You make a living trust and you
add special needs provisions so that when it becomes irrevocable. When you die, is when that living trust
becomes irrevocable, you already have the provisions in there that says to the trustee, don’t give the beneficiary
money if it’s gonna cost them benefits. So if the state is
providing them benefits, give them the maximum
allowance that they can receive on an annual basis, without
losing that benefit. So, they’re actually letting
the trustee make a decision. If you set up a irrevocable trust where you give up all
incidence of ownership, then it’s not gonna be probated anymore. So if I create a special needs trust that I have no say on, I’m giving it up and I’m
gonna have a third party manage it for the benefit of
somebody who’s a special needs individual, then I’m gonna
have those same types of provisions, but I’m
getting rid of my ownership during my lifetime, then that
would also avoid probate. Since if you don’t own it,
it’s not going through probate. Somebody’s asking a
question that has to do with the last question we had. Which is I have several
personal IRA accounts and want to convert them to a QRP in a real estate investment company. Can I use that money to
purchase additional properties for investment rental income properties? The answer is yes, in the QRP. So the QRP would be the buyer, or here’s an easy one. If you have a QRP you
can borrow money from it. I can borrow up to $50,000 per participant up to half of the money. So if I roll $100,000 into a
QRP, I could borrow $50,000 out the next day, and I can use
that to invest individually. So there’s a couple
different ways to do it. A lot of people like to
invest inside the QRP. I’m not necessarily one of them. Because I know that with real estate I could avoid taxation for the most part. And if I put it in a QRP
and it’s a traditional QRP, eventually I’m gonna have
required minimum distributions. At 70 1/2 I’m now I’m gonna have tax. Let’s see somebody says, I have owned a property
located in an opportunity zone for a number of years. Is there any special tax
benefit if I install a new roof? No, unfortunately no. That’s not how the qualified
opportunity zone works. And a roof would just
be added to your basis. And it would be depreciated
over 27 1/2 years if it’s residential. If it’s commercial then
it will be over 39 years. But you do get a little
tax benefit on whatever amount of the roof, the previous roof that you didn’t depreciate. So you might get a little
tax benefit, but no. Chances are you’re not gonna get anything. Why did I answer that? I’m crazy. Do I always need to take a salary out of my C-corporation? Toni, I’ve been ho-barding
this whole show, which you guys know I’ll do. What do you think? – [Toni] There’s no requirement, – Yay! So the answer is–
– to take a salary out of a C-corporation, yet. – [Toby] So the answer is no. Do I always need to take a
salary out of my C-corporation? No, you don’t ever have to take a salary. So here’s how it works. Salary is just part of compensation. So I could pay you in cars. I still have to do withholding, yeah, but if I wanted to give
you a car every month. Here Toni here’s a new Mazzarati. – [Toni] I’ll take it. (laughs) – [Toby] You have tax on it, you’re gonna have to pay the tax on it. You really want a new
Mazzarati every month? – [Toni] You know, I’ll pay that tax. – You’ll pay that tax.
(Toni laughs) Yeah, you got to do withholding and stuff. See I can hear Patty cackling again. I can hear her through my wall! Nah, I’m just kidding. I have never taken a
salary from my C-corp. That’s good, we’d like to zero them out, in fact, 80% of them or
so, probably more of ours. How many of ours do you think do you see where we actually pay a tax? We have thousands of returns. – [Toni] Pay a salary? – [Toby] Yeah, do you see it
where they ever pay a tax, or pay a salary? – [Toni] Oh, very seldom. – [Toby] Where you do
if, yeah somebody says, what if it is a lease? Then you have to pay
tax on the lease value. So if I get Toni a car, the value of that she’s paying tax on. If I give her the car, it’s
the full value of the vehicle. If I let her use a car, then it’s the lease value
for her personal mileage. So if I’m a business and I
say, hey real estate agent employee, here’s a car. And 100% of that mileage is business. It sits at my office and they only use it when they drive clients around. Then that individual has
to pay zero tax on it, it’s all company. But if they drive it
home and they drive it on vacations, and they drive
it to pick their kids up, and going to soccer games, or
going and doing whatever else, they pay tax on that portion. And there’s actually a
schedule that the IRS gets out. And that kind of stinks. How do owners receive a yearly
salary from their businesses? You pay it. So there’s no rule under the federal law to receive pay at a certain period. Like there’s nothing that says you have to pay people bi-weekly. Your state may have that. And it’s only certain employees. So if it’s you, you pay yourself whenever. If it’s somebody you hired, then it might be, hey I
got to pay them at least every other week, or something like that. Every state’s a little different. Don’t you love questions like that? – [Toni] I do. – [Toby] Let’s see
somebody asked a question, this is gonna be kind of weird. If I seller finance
real estate properties, can I be taxed on installments, or would I have to pay tax
on the entire sales gain, even though I’m not getting
the money right away? So Fred, you asked a great question. The answer is, it depends
on whether you did a flip, or if you’re selling
properties that you were doing a buy and hold. So if I fix up a property and I sell it, and I do it on an installment note, there’s no such thing
as an installment sale for tax purposes, when I am a dealer. If I’m buying property to sell property, I can do an installment sale, but I have to recognize
the tax the day I sell. If I am doing investment properties, so I have something that
I’ve held for a lot of years, and I’m just gonna sell it to somebody, because I’m getting tired of owning it, then I could take that
and I pay tax as I go. And I’m paying, part of
it’s return of basis, which is zero, part of it’s
long term capital gains. Which is at whatever
you’re at, could be zero, could be 15, could be
20%, depending on what your tax bracket is. Part of it is depreciation recapture, the 1250 recapture which
is the ordinary bracket capped at 25%, and then part
of it would be interest. ‘Cause it’s a note, and the
IRS will impute interest if it’s over $10,000. – [Toni] Mm-hm. – [Toby] So, good question, Fred. – [Toni] Well he can
still do the installment and if you so choose you can
opt out and opt to recognize all that income in the first year. – [Toby] Yup. And, here’s a good one,
Fred responded with, do I have to designate myself as a dealer if I do fix and flips,
or does the IRS designate me as a dealer? The IRS would say you’re a dealer. The facts and circumstances
make you a dealer. And it doesn’t matter how
long you hold the property. There’s a case out there with a poor guy who held a property for 10 years, but his intent when he
bought it was to sell it. Took him 10 years to sell it. And he was still a dealer. It was taxed all as you receive it. So on that one there might
be a way to sell the paper, maybe you sell the note to somebody else, or you get a third
party financing company. So instead of doing seller finance you get somebody else to
get the interest on it, so you can get the money now. But it would more than
likely be ordinary income. Somebody says, I thought there was a way to write off a vehicle
that’s 6,000 pounds or more. How does that work? Alfonso, you can write that off. What they’re doing is it’s
beyond the luxury car limitation. So a luxury car, or a passenger car, you’re really limited
to about $18,000 a year. So if you buy a big old
suburban or a Land Cruiser, or even the Tesla X, those
are over 6,000 pounds. You can write the whole
thing off in year one. The problem is more than 50%
of it has to be business use, or you have to recapture
that whole thing again. You have five years where
you have to worry about that. Plus, as you receive the money, like if you’re personally
driving around that car, that’s the same as receiving
money and they tax you on it. They say, oh! We look at the value of the vehicle and then we assess your portion, so it kind of gets stinky. Let’s keep going. Oh Martin asked a question. My buddy, and I know who that is, hello. What are the benefits of cost segregation? So cost segregation, there might be a question
here that lends itself, actually no, there isn’t one this week. The cost segregation, all we’re doing is, so when you have, what is
it, the modified accelerated cost recovery system, or MACRS, normally I’m taking a house
like a rental property. And the IRS says, write
it off over 27 1/2 years. So, this property you’re
gonna have to replace every 27 1/2 years. So if I have a $250,000
house on a $100,000 lot, that I paid $375,000 for
if you know what I mean, they’re gonna say you can
write off the $275,000 house over 27 1/2 years. So that’s $10,000 a year
I take as a write off. When I do cost segregation, I’m saying that house isn’t
just 27 1/2 year property, it has carpeting in it that
might last seven years. It has paint on its walls
that might last five. It has light fixtures and light, and it has the switches
on the wall panels, you know all these things. It has thermostat, it has
linoleum, it has tile, it has all these other things that have less than a 27 1/2 year life. So you break those out and
then you can write them off, all in year one if you want, depending on the type of property. So if I buy a property it’s not a problem. I’m wondering if you have
the bonus depreciation on stuff you’ve already had for awhile. But I think you still can. Yeah, you can still write it off. So, you’re gonna get what
I see if it’s between 20 and 25% on cost seg. Is that, have you looked
at bunch of those, Toni? – [Toni] I haven’t. – [Toby] All right, so. What I’ve seen is it’s up 20%. So if you have a piece of
property that’s worth $275,000, the improved value. So $100,000 in land,
$275,000 in the improvement. I’d probably get an extra
$55,000 deduction in year one. Which is great! If I can actually use that
to offset my other income. If you’re doing other
things in real estate and you’re not a real estate professional, then the passive activity loss rules say, you just have to carry it forward. So it’s gonna offset your rents, then you’re gonna carry it forward. But if I am a real estate professional, then I could write it off against all of my other income. And a real estate professional,
you guys have heard me say this a million times,
if you’ve been listening. Real estate professional
is a two part test. You have to meet the 750 hour test, and then you have to meet the
material participation test. So 750 hours in the realm of real estate, could be construction, you
could be a real estate agent. And you have to spend
sufficient time to be considered a material participant in
your real estate activities. And that’s per rental property you have unless you choose to
aggregate them as one acivity. And the material participation,
there’s three tests. 500 hours, doesn’t matter
who else was involved, you automatically qualify. The lower end of that
is you do all the work, nobody is a property manager, then you automatically qualify. Or, if you have other people managing, then it’s 100 hours
between you and a spouse, and nobody did more than 100 hours. You know nobody did more time than you. That’s material participation. So anyway, that sounds like fun. Somebody asked, I had
a commercial building, had it for more than 30 years,
cost basis was $150,000. It was depreciated fully
on my personal taxes. I consolidated for $850,000,
so congratulations. The building is in my personal name. Is there a method I can move the building to an IRA and then sell it? Mm, I don’t know if you can
do a, usually you’re putting cash into an IRA. I suppose you could try
to contribute something. I wouldn’t even do that,
you can 1031 exchange it, and just sell it, buy
$850,000 worth of property. Or, if you want to re-depreciate it, and you want to lock in your
game, which is about, oh man. You’re not gonna have much in the way of, you’re gonna get nailed in tax if you don’t 1031 exchange this. Or, you could invest
it, you could sell it, and then reinvest it in a
qualified opportunity zone. Even if you do the opportunity zone, you just have a seven year deferral. So you’re still gonna
be paying tax on that. So I wish there was an easy way. What you may want to do
if you want the deduction and sell it and not pay tax, John, you may put it into a charity as well. You could set up a non-profit,
get a huge deduction, carry forward the
deduction if you don’t have enough income to wipe
that out, completely out. You’d carry it forward
up to five years beyond the year of the transfer. And you could get a nice,
big, fat tax deduction. If the charity sells it, it pays no tax. So you still have the 850 in your realm, but it’s now in a charity. All right, let’s go back
to the questions we have. Somebody says, oh, how
detailed do you have to be in tracking real estate
professional hours? Use your smartphone and
keep it in a calendar. That’s how detailed you have to be. You just have to keep some
contemporaneous record. I suggest that you use
either a spreadsheet, or the easiest thing is
just to use your calendar. All right. Can we get the same tax write offs for travel and meals as
before the Trump tax plan? Toni, they need to hear from you. Can you give them the
answer to this question? – [Toni] Well travel didn’t change. Your travel expenses are
still going to be deductible the same as before. There was change to meals. You still get your 50% deduction, but the employer provided
meals did go down from 100% down to 50% with the rest. – [Toby] Ouch! So it used to be that
if you provided meals to your employees, saying, “Hey guys. “Work late, here’s some pizzas.” You used to be able to write it all off. Now what is it? – [Toni] 50% – [Toby] Ah, 50%, so at
least you get something. Travel didn’t make any changes. The big change, for those of you who like to do meals, is there’s no meals as
entertainment anymore. You can not entertain a client. There’s no entertainment anymore. I can’t buy tickets to a
baseball game and write them off. It’s gone. If I buy them for a client and I give them and I’m not using it,
perhaps I might be able to get by with a gift, or an advertising, or something along those lines. – [Toni] Yeah, it’s so limited
in the deductible amount– – [Toby] It’s 25 bucks. – [Toni] Per recipient. – [Toby] Yup, per year. That kind of sucks. – [Toni] That does. – [Toby] So the entertainment went away. So what do you always have to
make sure is what you’re doing is it used to be, hey I’m
entertaining John Smith, potential client, no. I’m meeting John Smith
to discuss business. It has to be what you’re doing. It’s in all how you do it. You could still entertain the client, the cost just went up. (laughs) That’s about right. All right, there’s still
a way to write it off. You can always look at it. You just can’t write it off neccessarily the way that you used to. So, let’s see, if your home
and care are under an LLC, I keep thinking of
Dorothy, and like the witch who gets squished by a house. I don’t know why I keep thinking, your home and your car are under an LLC, it just fell on them. Does the business pay the
utility and maintenance bills? This is a weird one. Honestly I’m not a big fan
of putting in cars in LLCs, unless you have a fleet of cars. Otherwise I’m not doing it. If the house is under an LLC, you’d have to have a business reason. If I’m putting a house
that’s a rental property in an LLC, then yes. If this is your personal home, and you’re trying to protect the equity, then yes, but you’re not
getting a deduction for it. The LLC could still pay
it, or you could pay it, it doesn’t really matter. It’s disregarded to you anyway. The car, just don’t know
why you’d put it in an LLC. Unless there’s a business purpose. Somebody says, I recently
heard if you send a gift to your office,
I’m not limited to $25.00. It says they’re sending
a platter of baked goods. Yeah, I don’t know anything
about that, never heard that. But if you send it to your office, you’re not giving it to a third party. Now you have, baked goods for the office. That’d be a 50% deduction. – [Toni] Might be. – [Toby] Or you’re just gonna
lump it into office supplies. – [Toni] I mean, – You’d probably get 50%.
– you could, yeah. – [Toni] From this question though, I’m looking at it I’m thinking, okay well, if you did,
let’s just say you did put real property or an auto into an LLC for whatever the taxation of the LLC is. Well now it’s an asset of the business, and now the business should be paying the expenses associated with those assets. And if you are paying those expenses personally out of pocket
on behalf of the business, now again, depending on the taxation, what you have is you either have an expense reimbursement if we’re talking about the C-corporation. Or you just have capital contributions if we’re talking about this
regarding a partnership. I mean just looking at it directly, but again to your point, the real question is, do you really want to have that vehicle in the LLC? Which can sometimes complicate things. And if not done properly can result in more taxing personally. – [Toby] I tend to not
like them in the LLCs, and I’ll tell you why. ‘Cause you’re insurance
tends to become commercial and it’s like twice as much. I get cranky when– – [Toni] A more reason. – [Toby] Because they’re
saying, other people could be driving it.
(Toni laughs) Now it’s an employer
provided, the other employees. So I tend to don’t like that. And besides, cars don’t cause liability, people driving them cause liability. So, if I have Anderson Business Advisors and I buy a car in it,
the car doesn’t create the liability, it sits in a parking lot. What causes the liability
is me giving the keys to somebody and say, “Drive around.” And frankly, I’d rather be driving around as an individual, then having
a bunch of representatives of my company drive around
trying to get me sued. So, I’d rather not have that. Hey get this, what are
the details that I need to write down when tracking
mileage for a business? So, Alyssa, technically
you write your odometer at the beginning of the year
and at the end of the year. And then you’re tracking miles. I’ll just tell you, use Mile IQ, it’ll GPS you, and use
that and it’ll tell, it’s so much easier. Don’t even dink around.
– Yeah, I’ve used it. It’s super easy, it makes
it much easier then. – [Toby] Yeah, Mile IQ? – [Toni] Mm-hm. Yeah.
– Yeah. And so you’d swipe left
if the mileage is ugly, and swipe right if it’s pretty. It’s like a app, that’s
(mumbles) isn’t it? (Toni laughs)
See some of you guys know what that means, and
you’re all dirty dogs. Literally it says if it’s
personal you swipe one direction, is it business, the other. If you, no you don’t have
to write it down every trip. You don’t have to write the
odometer down every trip. It’s once at the beginning of the year and once at the end of the year. They want to know how many
miles was put on the vehicle. And what they really care about is, they’re looking for percentages. If you’re a real estate agent and you say, hey 100% for business
they’re gonna say, BS, nobody does that. – [Toni] Yup. – [Toby] But if you have 65% business, and it’s your only
vehicle they’re gonna say yeah that’s probably right. That’s what they’re looking for. And plus, if you have
10,000 miles on your car, and you wrote off 16,000 miles, they’re gonna be like, uh no. What did you do? – [Toni] Something’s off. – [Toby] Yeah. You heard about the guy, it
was actually a lawyer who died, so this is a good story for you guys. So a lawyer died goes to heaven.
– Must have been devastating. (Toni laughs) – [Toby] This is bad. So St. Peter’s up there and goes, “What the heck’s this
lawyer here for,” right? Lawyer’s kind of, again,
this is hypothetical guys. So the lawyer died and went to heaven. St. Peter looks to him and
says, “Hold on for a second. “I got to get all the angels over here. “Got to check you out.” And the guy’s looking at him like, “Why? “What, I got something
on my tie or something?” He goes, “No, no, no.” Brings all the angels over and he goes, “No, we haven’t had anybody
up here who’s 323 years old.” And the lawyer’s looking
at him kind of perplexed and thinks about it
and he goes, “Oh shoot, “you’re going off my billables” Dah, da, da, da, da, da, da, da, da, da.
(Toni laughs) So, I write off vehicle usage, one way is keeping
track of business miles. Is there another way? Yeah there is Martin, and that is to do the actual expense method,
which isn’t so great. So either I’m doing 58 cents a mile, or I am tracking all of my miles and
figuring out what expense actually there was, all the
gas, oil changes, repairs. Add it all up, I used it 50%
for business, 50% personal. I write myself a check for 50% of it. That’s not nearly as good as
doing the mileage by the way. And then if you leave town for business then yes, you get meals,
it’s 50% deductible. Unless it’s included in
your airplane ticket, your cruise ticket, your
train ticket, whatever. Yeah, I didn’t mean to say cruise. You can actually use a
cruise ship for travel. Anyway, if a vehicle is being
used as an investment only and has a business name,
will that be allowed? Yeah, so Allan, if you’re
leasing it to somebody else, you’re gonna have sales tax on it, too. But now you’re actually
using it just for business, you’re not driving it around personally. If you are, then you still
pay tax on whatever portion of that total mileage is put
on it, so it’s kind of weird. So let’s say that I have three cars that I lease out to Uber drivers, but I drive them myself, too. They take a look and say total miles, put in the year, let’s say it was 90,000 and I put 10,000 on for personal. So I have 1/9 of the values that I’m gonna have to
recognize on all three cars. They’re gonna say what’s the lease value of those vehicles? It might be $3,000 a month. Okay, I’m gonna have to
recognize 1/9 of that. So, I just used a really bad example. But let’s just say $400 a month. I’m gonna have to recognize $400 a month, ’cause that’s the personal of that. That’s how the IRS does it. I have rental properties already. Will they be taxed differently if they are part of a C-corporation, usually I file for my 1040? So, if you put them in
the C-corp don’t do that. I’ll just be real clear, do don’t that. It’s not in your best interest. Capital gains are gone. If you take it out it’s a taxable event. Putting it in, it’s not gonna be taxable. But, all your appreciation is no longer long term capital gains,
you lose all these benefits. You can still 1031
exchange through a C-corp. And somebody asked me to
explain what a 1031 exchange is. I’ll just tell you. A 1031 exchange is a fancy way of saying, selling real estate and buying more of equal or greater value. If you do that you don’t have to pay tax. But you have to use an intermediary. You have to complete that
transaction with 180 days. There’s a 45 day property
identification process. You could do a reverse
exchange and go backwards. Anyway, so I would not
put it in the C-corp. If a C-corp is managing an LLC that is owning the real estate, and you’re paying it a
management fee, that’s fantastic. Yeah, that money will be
taxed far differently. And usually it’s used to expense things and get it back to you. It’s like your home office
and things like that. There’s a bunch of other questions that aren’t neccessarily, is LLC, not necessarily, so I
wouldn’t have the C-corp owning an LLC, unless I’m flipping. The only time I’d do this is, if I am buying property to sell it, that’s the same thing as being a car lot. I’m buying cars to sell them. There’s no such thing as
long term capital gains, installments sales, it’s just inventory. And then I don’t want to be
taxed every time I sell a car, I want to be taxed at the end of the year based off of what’s left in the company. So I’m not gonna do that individually. I’m gonna make sure I’m doing that through either an S or a C-corp. And then the C-corp, by
the way, go back to this. It files an 1120, a
completely different tax form, and it pays its own tax on its profit. What does somebody say? Realtor lease a car for
use as a sales agent, and rent it out as a Turo car, I don’t know what a Turo car is. What’s a Turo car, Mr. Ron? Let’s see, what is the
deadline to elect S-corp tax treatment for a single member LLC? That’s interesting. The S-corp tax treatment
of a single member LLC, you’d have to chose to,
as a single member LLC, it depends on who’s the owner. If it’s you, you actually
have to make an election to be taxed as a corporation. And then the S election
technically is supposed to be made by the 15th day of the third month following the beginning of that company. – [Toni] You have 75 days. – 75 days then?
– 75 days from the date of the effective date, the date you’d like the election to be effective. Is that what the question is? – [Toby] Nah, they’re
asking when’s the deadline? – [Toni] To do the 2553? – Yeah, so.
– Yeah. – [Toby] But the problem that you have is a single member LLC doesn’t mean it’s being taxed as a corp. Usually you have to tax it as a corp, so you’re doing the 8832,
saying tax as a corp. – [Toni] Now they’re saying you can go straight to–
– You just go straight to the 2553, 75 days to do it? – [Toni] 75 days, but. – [Toby] See I knew you were a rock star.
– Not but, and. Even if you’re outside of that 75 days, they do give late election relief. – [Toby] If you have a good
reason why you were late, and you still treated it as an S-corp, they’ll let you keep it as an S-corp. And a good reason could be– – [Toni] You didn’t know
you need to file a form? (Toni laughs)
– Yeah, I didn’t know. My accountant screwed me up. – [Toni] Wait. (laughs) – [Toby] Toni did it. It’s all Toni. Let’s see, rent out my car to the public. So Mr. Ron is talking about, hey I have a car and I’m
renting it out to the public. Then I might put it in an
LLC, just to keep it separate. But that’s different. I’m also getting sales
tax and other things when I’m leasing it, Turo might use it. So that might be a third party service. And I’m not driving it,
somebody else is driving it. So now I’m looking at it saying, hey. I’m just gonna keep that puppy separate from everything else that’s going on. So I might do it under that circumstance. All right. Did I answer this one? Oh yes, oh when switching your LLC? Designate, this is bizarre, – Oh that’s close.
– yeah because she just asked that question right before this. When switching you’re LLC
designation to an S-corp, what accounting changes should you make? Paying yourself, unknown deductions. So, the tax and bookkeeping is identical for all entities. Whether you’re a sole
proprietor, an S-corp, C-corp, LLC taxed as an S-corp,
LLC taxed as a partnership, a partnership, you get the idea. It’s all the same. So the accounting wouldn’t change. The only thing that would change is if you went from an LLC that
was a single owner to you, or to something else, somebody else, and then it switched to an S-corp. Now we have to worry about if
we’re taking distributions, are we paying ourself, as seller? – [Toni] Right. – [Toby] The other thing is once you have an S-corp
you can be an employee of that S-corp. If you are an employee you
qualify for an accountable plan. If you qualify for an accountable plan, I can now reimburse you for tons of things that I can’t do if you
are a sole proprietor, or a partnership. For example, I can reimburse
for an administrative home office, without
having to do a home office schedule and file it on my Schedule C. I just get free money. I could reimburse for my cellphone. I could reimburse for
anything that’s in the house that I’m using for the
benefit of the business, at least proportionality. So at least, like on my house, good chance I’ll be writing off 20% as a check from the S-corp
for ordinary expenses. That goes to you that you
don’t have to recognize as tax. So it’s free money. We like free money. – [Toni] Yeah, free money’s great. – [Toby] Yeah, and to it the A, which another way to get a bunch of money. Let’s see, how do I get my Realtor broker to my S-corp, or LLC or
C-corp venture set up. Allan, this is where it gets fun. A lot of brokers won’t pay your LLC, or your S-corp, or anything like that. What you do is there’s a way. There was a tax case where
the IRS told us what to do. There’s a letter that you
provide your broker saying, hey you work for your S-corp. Your S-corp gives you
an employment agreement. And now even if they
don’t pay your S-corp, you put it in your S-corp. You treat it as though it
was received by the S-corp. You can’t do that without that letter, without the letter and
the employment agreement. But you do those and you’re good as gold. Otherwise you just have them
pay directly to your company. Like you’re in Nevada,
they can pay an entity, as long as the entity comports with the Tealtor association, the licensing. – [Toni] Well from what I’ve
seen it goes either way. I’ve had plenty of clients who, plenty of folks who, their
broker did go ahead and do it, did go ahead and pay it, but I’m saying there is a way around it. – [Toby] There is a way. – [Toni] You just have to ask. – [Toby] Yeah, And you
have to just make sure you’re documenting ahead of time. So in the case where,
there’s always a tax case. So somebody lost, or somebody won. And in this case the guy lost. And it was because he
didn’t provide a letter. I think the IRS said,
“Well if it had said this, “you’d have been fine.” But it didn’t. So all we do is we make sure
that the letter we send says what they said it should say. So we just use their magic language. When to the exclusive
control of the S-corp. Even though you’re not
gonna pay the S-corp. We know you’re only gonna
pay me, it’s actually I am 100% at the service of the S-corp, I’m an employee of the S-corp. You should be paying the
S-corp, even if you don’t. Kind of fun stuff. Where do I get the letter? You got to come to Tax-Wise my friend, we’ll give you the letter. No, if you’re platinum, we’ll
give you whatever you need. So if you’re a platinum
service member with Anderson, just email in. If you need the letter just go to, write into
[email protected] We’ll make sure we get you squared away. La, la, la, la, la, la,
la, let’s keep going on. What is your opinion on investment in the oil and gas spaces as
a tax mitigation strategy? This is kind of fun. Not everybody has an opinion. So first off, it’s an investment. Make sure that you’re, you
could lose all your money in any investment, so I’m just
gonna say stuff like that. Not telling you to do this. Somebody says, does S-corp
need to pay payroll taxes? Not neccessarily. Only on the amount of the wages you take. Everything else that flows down to you, you avoid Social Security
or the self employment tax. You could also always death
and survivors in Medicare if you want to get technical. It avoids about 14.1% when
you actually do the math. It ends up being really
good, so S-corps are awesome. Yes, you have to pay some payroll taxes on only the payroll, as
opposed to a self proprietor where you pay payroll taxes on 100%. – Right.
– The self employment tax. – [Toni] That’s why I love S-corporations, ’cause it gives you back the control of how much you’re
going to put as payroll, and how much you’re going
to just have flow through, and you don’t have to pay
payroll tax on that part, or self employment tax. So we have the control
back now in our hands. – [Toby] Yup, and it even gets better. Somebody had said something
about the 20% deduction, yeah, you get to take
the 20% deduction, too on the income out of the S-corp. You do not pay, or you do not get a 20% deduction on payroll. So, you always want to do your math. I’ve broken this thing
down painfully in detail whenever we do the Tax-Wise Workshop, which we just did one last week. Gosh, blessed, it just
seems like yesterday, but I think it was last week
or the week before that. We just did one. Yeah we go through this over,
and over, and over again. Do you have to take a salary
out of an S-corp, says Ron. Yes, if you take distributions. Now, if you don’t. So if I just have an S-corp
and it makes $100,000 and I leave it in the S-corp, technically I don’t have to take a salary. But if I make $100,000
and I take $50,000 out, I need to make sure that I am paying a portion of that as wages. So if it’s $50,000 I’m
probably paying myself 1/3 of it as wages. But, technically if I don’t take anything out of an S-corp, I don’t technically have
to pay myself a salary. Somebody says, will the
recording of this be sent? Yes, you’ll have access to the recording, so you can go back and listen to it. What is the 20% deduction? It’s called a 199A deduction. You can go out to our site and look at it. But its the qualified
business income deduction that was under the Tax Cut and Jobs Act, so the Trump tax act. What it says is, hey
corporations get a flat 21% tax, if you’re a C-corp. If you’re an S-corp and
you pass through the wages, not the wages, but if
you pass through profits it gets a 20% haircut
under many circumstances. If it’s any pass through,
so a partnership, a sole proprietors even qualify. But there’s some different tests. If you draw a profit
out the following year do you have to, and you have
no problem in the corporation do you have to take it as a salary? John, you’re getting smart. You took the distribution
out in a following year, but had no tax, you’re
gonna create a loss, and you’d have basis. So you’d be able to take it as a loss, you’d create a loss for yourself. So it wouldn’t be that you have no profit, it’s just if I take a salary
it’s gonna be an expense in excess of any profit I have. So I’d still get to write it off. Let’s go back to this. What is your opinion on
investments in oil and gas? So the way oil and gas,
the reason people invest in that a lot for tax purposes, is that intangible drilling costs, the cost of digging your hole in the earth to pull out the oil, and
all that goes along with it, is 100% deductible against
your ordinary income. So if somebody, let’s say they
have a salary of $500,000, and they know, oh shoot I’m
in a really bad tax state, I’m in New York, New Jersey,
Connecticut, Maryland, California, you know some
state with a high state tax, and they say, “Gosh,
my federal tax is high, “my state tax is high. “I’m paying essentially
50 cents on the dollar. “If I invest that $100,000
I’m gonna save $50,000 of it, “if I end up with some loss.” So if I invest $100,000 and
get a $100,000 deduction, then I’m getting a 50% return right away. So that’s why people do it. I wouldn’t invest in oil and gas simply for the tax mitigation. ‘Cause then you have no
deduction on the depletion, but you lose that portion of it. You’re gonna end up paying the
tax in the long run anyway, but people do it, because
they want the deduction now. It’s worth it something to them. So even if the investment
doesn’t make you anything, I’m getting a nice fat deduction. So I could invest
$100,000 into oil and gas, but it only costs me really $50,000. That’s the way they kind of look at it. Somebody says I have a 1099 job, can I form an S-corp to avoid
the self employment tax? The income in my 1099 is
for investment purposes. Okay so first off, if you have a 1099 job that’s not a job. You’re not an employee,
you’re a contractor. So if you’re a contractor, could you run that into an S-corp? Yeah, and avoid bunch of
the self employment tax, that’s exactly why people
do it, so yes you could. Great question. I have a full time job, W-2, and I do real estate
investing on the side. How can I use property depreciation to deduct against the W-2 income? Toni, you say it. – [Toni] Well, it depends on your adjusted gross income. So if you have depreciation
that’s resulting in rental real estate losses, that can be deductible
against your W-2 income up to $25,000 and starts
to phase out at $100,000 of your adjusted gross income. Or, you can qualify as a
real estate professional. In which case you’d be able to take all of your rental losses
against your ordinary income or W-2 income. – [Toby] Mm-hm, right so. Since 1986, they closed
this wonderful loophole. All the rich guys and gals out
there would buy real estate and then they would depreciate
them really fast and hard and offset their income. So Mr. Doctor out there making $500,000 would invest in real estate,
so he didn’t have to pay tax. So they said, oh that’s a tax
shelter, this is so unfair. So they said if you’re an
investor in real estate, it’s passive if it’s
investment real estate. And then they said you can
only use your passive losses against your passive income. So that was rule number one. So if I have a bunch of real
estate and I depreciate it, and I end up with $100,000 of loss, I can only offset my
rental income with it. Now there’s two exceptions. What Toni said is 100% correct. If you make $100,000 then you could be an active participant in real estate, which mean you hire the manager,
or you manage the property, and you get to write off up to $25,000 of depreciation or loss,
against your other income. So my W-2 income, whatever income. Now if you’re above that, and, (laughs) how do we say that? Depends, you guys are goofy out there. Let’s say that somebody, you’re making $200,000, you’re
phased out of the $25,000. And you have a bunch
of real estate losses. Then the only way you’re gonna get to write that loss off personally, first off you can carry it
forward into future years to offset future passive income. But, if I want to take it
against my other income, so I have my W-2 income, and I want to offset whatever I have, I can do some accelerated depreciation or a cost seg and I
get lots of extra loss. Then I have to qualify as
a real estate professional. And only one spouse has to qualify. And then you can take
it on a joint return. And again, that rule is real simple. One spouse has to spend
at least 750 hours. And it has to be their number one use of their professional time. If I have a full time job,
and I do 2,000 hours a year, I’d have to do 2,001 hours of real estate, or I don’t meet test number one. When test number two is
the material participation. The example I always give is
if I’m a real estate broker obviously I meet the 750 hours, ’cause I’m a real estate broker. But then if I do nothing
with my own properties, and let’s say I have
three other properties and I do nothing, and all I do is hire it out, I’m not a real estate professional. I’m not gonna meet the
material participation test. It has to be at least,
in that particular case, it would have to be at
least 100 hours a year. And if I do nothing I wouldn’t meet it. But if I did, it could be one spouse. So let’s say that one spouse is a successful lawyer making,
I’ll use a real life example, making three million dollars a year, and the spouse is a real estate agent, who specializes in commercial. And the lawyer’s buying
everything that he can get his hands on. Because he knows that if
he depreciates it heavily, he can offset his three
million dollars of income. That’s exactly what he did,
the got it down to zero. So, he got audited as a result,
’cause it was so extreme. And he won, ’cause it was
clear, his wife qualified. So it only had to be one. So, we have a bunch. Casino winnings and losses
you can write off your losses against your winnings, unless you’re a professional gambler. It’s kind of weird. – [Toni] Well, yeah I mean but, the doubling of the standard deduction. – [Toby] Does that go on Schedule N? – [Toni] Oh does. – [Toby] Oh, yeah, so don’t gamble. – [Toni] (laughs) Or do it well. – [Toby] Yeah, so if
you make a whole bunch of money at it, what is that
going on your Schedule C? Otherwise–
– Actually it’s other income. – [Toby] Mm. Ah, let’s see. A self employed real property appraiser’s considered real estate professionals and they’re gonna meet the
material participation test. So again, here’s a real
estate professional test, number one, which is 750 hours, and material participation test, which is about your properties. So if you’re an appraiser, you probably aren’t in
the transactional world. That time probably wouldn’t qualify as real estate professional time. The same way as I am a
lawyer who does nothing but asset protection and
taxes with real estate, but I’d never qualify as a
real estate professional. ‘Cause is do a bunch of other stuff, too. Your appraising isn’t
a real estate activity as weird as that sounds. When somebody says, oh $7,000 of loss. Keep in mind that whenever
you’re doing gambling, you can only take your
losses up against your wins unless you qualify as
a professional gambler. And that’s like a weird test, right? So, my guess is that you’re
just carrying that forward to future years when
you might want it back. Most people that gamble and lose, don’t get it as a write off. What are the common tax deductions that apply to real estate investors? So the basic ones is
you’re buying real estate. So you’re gonna have real estate taxes, you’re gonna have closing fees, you’re gonna have, if you have– – [Toni] Mortgage interest. – [Toby] Mortgage interest
if you have loans. You’re gonna have repair expenses. You’re gonna have depreciation
if you’re holding properties. And by the way, repair expenses, you have a safe harbor of $2,500, for the area of the home
that’s getting fixed. If you take something
that’s broken and fix it, it’s a repair if you take something that’s long in the tooth and make it new again, then that is an improvement. So if I put a new roof on a house, that’s an improvement,
that’s not a repair. If I fix a hole in the
roof, that’s a repair. So I write off repairs, I
add improvements to my basis. I don’t get to write it off right away. Other tax deductions, so the
depreciation’s a big one. I’m taking the actual
structure I put on in doing it. – [Toni] And sometimes people get confused with the depreciation
saying, “You know what? “I don’t want to take any depreciation, “because I don’t want to have to recognize “a depreciation recapture.” Whether you take the depreciation or not, you are going to have to recognize the depreciation recapture on that, so take the depreciation deduction. – [Toby] Yeah, what Toni
just said is actually like a mean thing that they do. Here’s the scenario. Husband and wife own a house. They have a piece of rental property, no not even rental property,
they had a vacation home. And they rent it out. And they say, hey I’m gonna rent it half the time I’m not there,
the rest of the time we’re gonna go spend
our summers on the lake, on this beautiful property. You’re entitled to the depreciation whether you take it or
not, the fact that you were renting that out for
more then 14 days a year, the IRS says that’s a rental property. You have recapture to the depreciation, whether or not you wrote it off. It’s kind of mean. Carpet replacement, you’ll
be able to write that off. Mr. Ron has $7,000 of wins. Where would he put that on a gambling? Just other income? – [Toni] Just other income, yeah. – [Toby] So it goes on his 1040 page one. – [Toni] Yup. – [Toby] Good job, Mr. Ron. How about a loan? (Toni laughs) – [Toby] I always think that comes in. Good wins, (audio echoed). – [Toni] And just to this
question we have up, as well, what I see is, and what I look for if I’m reviewing you’re return is, I’m looking to see if you
have management fees on there, or if you have auto or
travel expenses on there. If you don’t have one, you
should have the other, or both. – [Toby] Okay, carpet. We’re writing that off,
just ’cause it’s such a short period of time, right? On us depreciating it? – [Toni] Yes. – [Toby] So Mina, anything
less than 20 years, you can write off in year one. So if you have carpet,
paint, all that stuff, you’re writing it off. We have to call it a repair. It’s just a deductible item. All right, so that’s
real estate investors. Oh, by the way, one that we didn’t cover is management fees. So you can always pay it up. – [Toni] I submit. – Oh you did?
– Yeah. (laughs) – [Toby] Oh you’re smart. So you can always throw
the corporation in there to manage the thing and
pay it a bunch of money, so I must have been vegging on that part. If you get dinged for
depreciation in the year of sale on an un-depreciated property
can you back previous years and claim the deprecation? So think about this. If somebody does not depreciate, they could have
depreciated but they don’t, they sell the property, they
have depreciation recapture on depreciation they never took. If it’s within they
years they could go back and amend the return to
take the depreciation. – [Toni] Yes, actually you
don’t even have to go back and amend, if it was multiple years, you don’t have to go
back an amend every year. The IRS made it a little bit easier, for us to just put it on a schedule and catch that up. – [Toby] So you could you catch it up. So Bruce, good catch,
you can write it off. What are common tax deductions for a future’s trader from home? MJ, that’s funny, ’cause futures traders, first off you get some
nice tax treatments, like 60% longer term capital
gains, 40% capital gains. But, you don’t get any unless you set it up as a business, and then you’d have to have
an LLC taxed as a partnership with a corporation as the manager. But a topic, there’s a bunch of videos on the site, I’d watch that. So you’d want to make
sure that you are not just sitting home doing futures trading, it’s not gonna give you any tax benefits. If you’re gonna do futures tradings, like what I really would do is do it in a retirement account. Or, I would set up a corporation, if I’m a small account,
like less than $10,000. If I’m over that I’m
setting up an LLC taxed as a partnership with the
corporation as a partner, and also as a manager. All right, when finishing a
rehab with the intent to sell, what is the best way to
minimize capital gains tax? Yeah somebody has said I
do in another, perfect. ‘Cause I’m just gonna zero
that puppy out anyway. So first off we have a
rehab with intent to sell So there’s no such thing as capital gains tax, it’s inventory. You just sold Cheerios and
you’re a grocery store. Or I just sold a car and I’m a car lot, however you want to talk it. It’s ordinary income. So if I want to minimize
the capital gains tax, then flip houses, because
there is none. (laughs) That’s just mean. So, what I want to do
is I want to have that in an S-corp or a C-corp
to minimize my total tax. So in all seriousness, what
you do is you never do flips in your name, personal name. You don’t want it on your personal return. You’re gonna do it under
a C-corp or an S-corp, and I’m gonna aggregate them all together, and have all of my gains
and all of my losses at the end of the year. As opposed to transaction by transaction, what you would have as an individual. Plus, if I make that
money in an individual, I’m paying self employment
tax on all of it, which has the nasty habit
of making my taxes way more. – [Toni] You could also go
back several questions ago, how do I minimize my tax? Set up a tax deferrable vehicle. – [Toby] Since you don’t
have capital gains, I could use a 401K now. So I could set up a company, and I could minimize my tax completely. I’m over 50, I’m jamming
what 24, 25,000 into this. The first 24, $25,000 a
game, plus 25% of whatever I decide to pay myself. So it’s kind of fun. At what point is the intent established, and is it documented somewhere? It’s facts and circumstances. So they look at what you do. So, if you buy houses all the time, and you fix them up and sell them, they’re gonna call you a
flipper, that you’re a dealer. If I do it once in awhile,
then they’re gonna look at the total activity that
you do and they’re gonna say, “What is your primary intent?” And they’re gonna look at it
from facts and circumstances. – [Toni] Yeah it is
documentation, as well. Because you actually
can change the intent. If you purchase a property
with the intent to sell it, and let’s just say, you
know, the market took a dive. – [Toby] Mm-hm. – [Toni] Now is not the
best time to sell it, so you change the intent of
that property, to hold it and wait for it to appreciate. Now I’m changing it from
inventory to a capital asset. – [Toby] Mm-hm. – [Toni] But just
documenting it and showing, well the comps in the area,
the industry’s saying this, the market’s saying this right now. – [Toby] Well, you got to be careful, so I’m not gonna disagree with you, I’m just gonna say that
there’s a case out there. In 2006, the guy bought a building. And he was gonna fix it up and sell it. And then 2007 happened. And all of a sudden they couldn’t sell it. So what the court did, ’cause this was actually a court case, is they looked at every year. And every year he would get
an appraisal on the building and say is it time to
sell, is it time to sell. And he sold it in 2017. It ended up being a
wonderful tax court case. – [Toni] Now did he change
it to a business property? – [Toby] It was already,
when he bought it, he was intending to sell it. So it was held in the same
entity the whole time. But what they said is, was
that a dealer property, or was it an investment property? I think he did, he had
an installment sale. And so my guess is, and I
forget the amount at issue, but it was a few hundred thousand, is they nixed his ability
to recognize that over time. So he got nailed with the tax on money he never received yet. Now he will receive it, but it’s always fun when they do that. But it was 10 years a hold. So, you’re gonna want to make
sure that if you’re flipping, so here’s the way you do it. It’s really easy actually. It’s what all the accounting
journals will tell you. You buy your flips in a corporation, you buy your holds, and you use LLCs. By the way your corporation
is a tax designation, so it could be an LLC
taxed as an S or a C-corp. If you’re doing your buy and holds, it’s a flow of return on your Schedule E, either as a disregarded
entity, or as a partnership. So, that way the IRS knows
exactly what you’re doing. And if you accidentally
buy something in a C-corp, or an S-corp, that you’re gonna flip, and then you decide you’re gonna hold it, you sell it to your holding
entity, or vice versa. If you buy it and you
think you’re gonna hold onto it for a long time, sell it and grab your
long term capital gains before you fix it up and
make it into a flipper. ‘Cause there’s nothing worse than losing long term capital gains,
which have a cap of 20% by making it ordinary income
where your cap is 37%. So you just use those two entities, and treat it just like you
would they were just buddies that you know, and not just
you, and I would sell it. You can even do that with your house. We talk about this a lot. People that have had their houses forever, not much value, they’ve
didn’t pay much for it, but now it’s worth quite a bit. And they want to use their 121 exclusion, which is the, I don’t have
to pay tax on my house up to $500,000 of capital
gains when I sell it, if I’m married, $250,000 if I’m single. You sell the house to your S-corp and then let the S-corp hold it. As long as you’re never gonna sell it, we don’t really care. And your basis steps up
so you can depreciate it at a much higher amount. It ends up being really
a good way to do it. Well we’re going along. I do my flips in LLC,
but that LLC is just go to my C-corp, is that fine? Yes, Chris, because the
tax designation of that LLC is the C-corp. All right. Will an LLC help reduce
rental property taxes? The answer is rental
property taxes, probably not, unless you have a corporation
that’s in with it. And, we could always play games with this. How is that LLC taxed? So if it’s rental
properties, I don’t want it to be taxed as an S or a C-corp, but I probably want to have
a manager managing that and then I could reduce my taxes. – [Toni] Mm-hm. – [Toby] It’s kind of fun. Anything you want to add? – [Toni] No I think that’s
pretty straight forward. – [Toby] See, Toni’s
such a good accountant. She wanted to say it
depends on how you’re gonna tax the LLC, I ruined it for her. – [Toni] Well you kind of said that. (Toni laughs)
– But I know you wanted to say it. She was chomping at the
bit, she started laughing. Anytime we see LLC, we
know what we could do. How would it work with C-corps involved? The C-corp would be the manager, and the C-corp has
another tax designation. So I could pay management
fees to the C-corp, that rent would no longer
flow under my return and be taxed, it would be
taxed at a C-corp level. Let’s say I had a bunch of profit, or the rents were positive. So I was making $20,000 a year. Let’s say I’m a tax payer
in the highest bracket, that $20,000 a year is
gonna get nailed at 37% plus my state tax. If I kick it over to the corporation, and then the corporation pays 21% on it. So it’s gonna pay $4,000
as opposed to much higher. And there’s lots of ways
to get money out of a corp that’s tax free. Which is more tax advantageous, a 1031 exchange or a
charitable remainder trust? Want to nail this one? – [Toni] Well, (sighs) here I go again. I think it depends on what you are, what the asset is, so if
it’s real property then you have the opportunity
to another exchange. The 1031 exchange on
the Tax Cut and Jobs Act is limited now to only real property. – [Toby] That’s a big one. 1031 exchanges are only
for real property now, no longer for business inventory. – [Toni] You want to
pick up the charitable– – [Toby] No, you do the
charitable remainder trust. You think I want to do the
charitable remainder trust? – [Toni] You’re doing
the charitable. (laughs) – [Toby] All right,
here’s the big difference. So in a 1031 exchange
we like joshing around. 1031 exchange is a deferral. I’m kicking it out until the end of time. If I die owning that real
estate, the basis steps up. If 1031 exchange
properties my entire life, I’ll never pay tax, on the capital gains, or the depreciation recapture. When I die the basis steps up and my heirs will no longer pay taxes
on any of that growth as of the date of my death. In a charitable remainder trust, well, just think of what it is, it’s a trust with a charity
as a remainder interest. So I get a deduction based on the value of whatever I put into that
charitable remainder trust, and what it’s gonna be
worth in the future. So if I give, let’s say it’s not a house, but let’s say, what if I
give a bunch of Bitcoin. That’d be kind of fun, since Bitcoin is
technically a capital asset, and it just jumped up 300% this year. It keeps doing weird stuff. So let’s say that I gave a
charitable remainder trust a bunch of Bitcoin. I get a deduction based
off of a percentage, I’m gonna say close to 10%
of the value, it’s not huge. ‘Cause they look and say,
“Hey how long is this thing “gonna be in trust before the
charity gets their interest?” And it’s gonna be spent down, like I’m gonna get income off
this thing my entire life. Under most charitable remainder unitrust I’m getting an amount every
year that I get to receive. Or I can roll forward
and not pay tax on it. I want to make sure that I have the right to receive income off this thing. So let’s say I have Bitcoin
that’s worth $200,000 I throw it in a charitable
remainder trust, I’m probably gonna get about
a $20,000 deduction this year as a charitable deduction. It goes into trust. The entire $200,000, let’s
say I sell the Bitcoin and turned it into US
dollars, no tax, no tax. And then as it grows and as it makes money I might be kicking out a
certain percentage of that, let’s say 3% or something
like that a year. And I’m gonna pay tax only on
that amount that I received, the income that it’s generating. And then when I pass,
the remainder interest, the remainder holder is a charity. And technically it
could be my own charity. Some people use it. And the reason they’re using it, if they have highly appreciated assets. So, it’s pretty cool. So what’s more tax advantageous? Frankly, I’m gonna tell you 1031 exchange is always gonna be better. Charitable remainder trust, you’re gonna have income your whole life. Frankly, they’re a bit of a sticky wicket, we don’t too many of them, because there’s such a complexity to it, and nobody really wants
to give it all away. I’d rather just give it to a charity now and take the full deduction. And then if I want to
pay myself income I can, rather than force myself to do it. So I tend to stay away from
charitable remainder trusts, and I’d rather just go
straight to the charity. And then I’ll go ahead and
give the assets to the charity. So my same example,
$20,000 worth of Bitcoin, I give it to a charity I can
write the full $20,000 off. Even if it’s my charity,
now I turn that into cash, I’ve got $20,000 that I’m
doing what I want to do. Maybe I can give it to
my church, whatever. It’s oftentimes better to do it that way, than paying a taxable event on the Bitcoin and giving the dollars, me having to recognize the capital gains than me giving it away. I’m getting both. If you guys get a pen out you’ll realize what I’m saying and go, “Whoa!” How do you take money out of a corporation without it having to pay taxes? You reimburse yourself
under an accountable plan, meaning that you’re gonna write off literally anything that
you incur personally for the benefit of that
company, including education. So all utilities, internet, car, a home office, 280A, equipment, your computers, all sorts of fun stuff. Then if it’s a C-corp even your
medical, dental and vision, even your long term care,
and yes you can write off, somebody asked this way long time ago. I didn’t answer it. Long term care policies,
you have restrictions on what you can write
off as an individual, and then you still have to exceed 10% of your adjusted gross income. If it’s through a C-corp I can write the whole thing off from dollar one, if it’s qualified long term care. How often should you take a distribution from a holding LLC? As often as you like, but
not on a regular basis. Yeah if you have, somebody says vitamins, co-pays, prescriptions, yes, yes, maybe. The vitamins you just got to make sure a doctor says you should take them. So you’ll want something in
writing from a doc on that, then it qualifies. What about an S-corp? No, S-corp if you pay yourself stuff that is health related it’s
considered income to you, it’s considered wages. You could still write off
the insurance premiums individually as self
employed insurance premiums. But all the other stuff, the co-pays, deductibles, non-covered items,
all that is actually income. So it has to be a C-corp. In a flip corporation
can you have an LLC taxed as an S, and simply pay yourself a salary to reduce the employment tax? Your salary won’t reduce
the employment tax, ’cause you’re still paying it. It’s just not the self employment tax. You’re paying the employer
and the employee sides of old age, death, and
survivors in Medicare. So, that’s not gonna do it. What you do is you pay
yourself a very small salary, and then the distributions are not subject to the self employment tax. So let’s get back to this distributions from a holding LLC. You don’t want it to be a pattern, ’cause then a corp could say, hey, you’re always giving money every month, you need to keep giving money any month. So you want to make sure it’s sporadic. There’s no tax event when you’re taking a distribution from a holding LLC. If it’s disregarded or
taxed as a partnership, it’s like a safe, you can put money in it, take it out, put money in it, take it out. So he says, what about
athletic club memberships for a C-corp? You have to get a doctor
to prescribe it, then yes. Otherwise, no. So athletic club memberships,
I wish they were deductible. But if your doctor says, “Hey Allysa you got some stress girl, “let’s get you, you need to go in there “and push some iron.” Get him to write it up. Then you can reimburse yourself. And you could be a beast. My wife does all that stuff. – [Toni] Mm-hm. – [Toby] My wife, she kills it, she goes in every day. She says, “I’m in the office.” She does it. Somebody says, yes! All right, what if any
are the tax benefits for real estate investors in Florida to use a trust to hold real estate? So, that’s a great question, because it illustrates it a point. You want to make sure that you
know what trust you’re using. So, are there any tax
benefits for an investor in Florida to use a trust
to hold real estate? There’s only one that I can think of, and that is when you use a land trust, and you’re using the LLC to
hold the beneficial interest and it’s rental and I have a
corporation as the manager. Or, if I’m flipping property, then I’ll use the trust
and point it towards an LLC taxed as an S-corp or a C-corp. But the trust itself
gives you no tax benefit. Trusts usually are gonna
be revocable trusts, and we’re not gonna be, we’re
probably gonna ignore them. I really don’t want to get
too far into these things. Even if you have an irrevocable trust, like I sometimes use Nevada
Asset Protection Trust. And I set them up and make
them intentionally defective for tax purposes, so not to
create an extra tax return. Frankly, ’cause trust taxation, if it’s trust in estates,
it’s taxed really bad. The highest tax bracket you’re at, $11,000 you’re already there. So, we don’t want to do that. We want it to flow down to you. How should money flow
from person to business, back to personal in the
most tax efficient manner? All right, so here’s how that works. Let’s say that I put money
into a holding company and take it back out,
zero tax, no benefit. Let’s say that I put money into a C-corp, and the C-corp ends up reimbursing me, and I create a loss in the C-corp. No benefit to me, other than
I get money back out to me, the money’s tax free, but
it’s not a deduction to me, now the deductions stuck in the C-corp. If it makes any other monies, that’s good, because now it’s not gonna pay tax on it. Let’s say that I put money into an S-corp, and then it reimburses me
for a bunch of expenses and it creates a loss,
fantastic, I get those losses. The answer becomes this horrible thing, the two words you guys hate hearing, which is, it depends. It really, how should
money flow back and forth? You got to work a tax professional and say how we want to get money where. This is a good example,
if I have personal money, I put it in a corporation, the corporation makes some money, puts it into a 401K. The 401K grows for 30 years, then it starts paying me out at 70 1/2, so minimum distributions. And I pay at my rate
then, a pretty light tax, that too, that’s the
really tax efficient manner to get the money back out. And I’ve had decades of tax regrowth. That’s pretty good. And I did that by taking my money and dumping it into a corporation so it could make some money. But, every little situation’s different. Somebody says, should the
management corporation be an S or a C-corp? It depends on whether you have an S, or a C-corp floating around, what your tax bracket is, and
what you’re tax appetite is. So, it really gets down,
I hate saying it depends, ’cause we say it a lot. But it really does, it’s
fact and circumstances. I mean the IRS is gonna
tell you the same thing when they look at stuff. So I look and see what’s
your tax appetite? If you wan to know your tax appetite, this is a good transition. Your Tax-Wise Workshop. I went over on June 13th and 14th, what a great group that was. We had over 100 and some
odd people, even online, and we had a full house, live. And we did over 30 tax
strategies in detail. And you can get that
recording of both that one, and the one we did in January, which is kind of beginning of the year. And then November we’re
gonna do an end of the year tax planning Tax-Wise. You can get that whole
thing, all three of them, including attending the live stream. You can watch in November the live class and ask all the questions you want. You can go to anderadvisors.com/3for1, it’s $197 and you get it
all, you get all three. I started that in January, I happen to think it’s
probably the best deal in town, because I have quite literally
had people go to this, in January and already
I’ve had a $178,000 winner, where somebody says that they were able to get that type of tax benefit. I had a guy this weekend who had gone to one on cost site, and found $130,000 of
deductions this year, that he’s actually gonna be
able to use every dollar on. And he was like, “I didn’t
even know you could do that.” And guess what? He learned one thing. I always tell people there’s 31 deductions that we went over, like tax strategies. I said, “Pick three. “Pick three, if it doesn’t pay for itself, “I’ll give you your
money back no problem.” This will absolutely put a ton of money back in your pocket, it’s $197. It’s ridiculously low for what is two days of intense, intense tax deductions and tax strategies. Itunes, so if you guys
like the Tax Tuesdays we make them into podcasts. So here you guys could go back, somebody’s asked for the address, Patty can give it to you as well. It’s andersonadvisors.com/3for1. If you just email us too, and say I want to do the three for one. We’ve had hundreds of people do it. And, the response has been great. I wish I could say thousands, but we’ve had thousands of
people go through our workshops. Not everybody loves the taxes. Some people just like
to go to the workshops and think about it, but
not everybody loves taxes. I love taxes, Toni do you love taxes? – Yes. (laughs)
– You love them. She loves dealing with them. All right, so then you go to iTunes, Anderson Business Advisors, and you could watch and listen to a bunch of the old Tax Tuesdays,
and this one as well. We have a very special guest
here with us with Toni. She’s not always with us. How many of these have you done? – [Toni] This is my second one. – [Toby] This is your second one. So Jeff always, Jeff likes to sit here, and he’s talking loudly with his eyes. He doesn’t vocalize. But I tell he wants to
say things all the time. I’m a ho-bart, so I
just la, la, la, la, la. All right you could do
that on Google Play, you could do Anderson Business Advisors, jump on the podcast. Oh I forgot about this. We’ve been doing this for
the last couple months. Go to the Infinity Investing
Workshop and sign up. You get a free code to do an 11 part, how do I find an EA? You call up a tax group
like us and you say, “Do you have any EAs?” Let’s see what else, you’ve done job, telling me all those
over the last 10 years. I like that. There are some clients here
that have been with us, 20, 10, a lot of years. So Infinity Investing,
this is a get rich slowly, and if you like more of
a methodical approach towards making money
and looking at things, you use that code, FREETAX. It’s an 11 part series. It’s very much something that I designed and built for younger people. Especially 20, 21, 18, before they get in and
develop a bunch of bad, bad habits. And they want to
understand what an asset is versus what a liability
is from a very easy to understand, but hard to screw up way. And I talk about the
losing loop, how to use, when you’re buying
liabilities with liabilities and you’re able to figure that one out. You realize when somebody’s
duping into something. Then this is great, it is free. So when it says free tax, it
is free, there’s no strings. It’s 11 part series and I
think I have another five hours of financial stewardship built in there. I have a very simple philosophy which is, what is it? I forget, it’s like if, if it’s really not yours. So the simple philosophy
is you treat it like it’s somebody else’s then you quit doing goofy things with your money. If I win money down at the casino I treat it very differently than if I, then if I did something else. Yeah if I send you 18, use
this and have them pop on it, more than happy. And, if somebody they paid for it, yeah I’ll give you a credit on that. I forgot that I had this in there. Sometimes I give stuff away and I forget that I’m giving it away. Somebody says, yes, needs versus desire. We actually break it down
mathematically, so this is funny. Infinity Investing in a nutshell is this. There’s a certain amount
of money that I live on on a daily basis. If that money comes in without
me having to work for it, then I don’t ever have to work again. So if I live off of $200 a day, and I have $210 coming
in from rents, royalties, dividends, interest,
something that’s passive, then I never have to work again. I could live an indefinite period of time without having to do a bunch
of work, that’s infinity. So when I look at your net worth, I don’t care how much you have. I care how many days you
could live without working. That’s it. And if it’s less than infinity,
then we got work to do. If you could do that in an indefinite period of time, fantastic. Then we worry about giving it away and how you create a legacy
where they can’t screw it up. ‘Cause kids will screw it
up, I’m just telling you. It’s about a 16% likelihood
that they’ll actually be successful with your money. It’s really, really small. Federal rent checks,
don’t know what that is, never heard about it. And chances are it’s fake, yeah somebody says, is that real? I don’t know it sounds
weird, federal rent check. What I’m thinking of
is that’s called a HUD, so it might be Section 8 and that is real, where the feds pay for your property. And the beautiful part about HUD is, it could be for profit, or not for profit. If you don’t want to pay tax
on it, you don’t have to. Replays, if you are a platinum, you get all these replays for, yes, this has been all
over Facebook lately. I’ll look it up Chris and Mr. Ron, I’ll figure this one out. That’ll be on my to do list
is federal rent checks. But I’m pretty sure,
it’s probably gonna be Section 8 I bet you. But I will do a little
thing on it next time. Replays in your platinum portal. If you’re not platinum,
it’s a whopping $35 a month to be a platinum member at Anderson. There is a sign up fee,
a lot of time it’s waived if you’re already a client, or if you’re doing other things with us. But, you could always just ask. [email protected] gets you in. Free stuff, follow us on social media, go to Facebook, YouTube, ample opportunities to interact. I tend to answer any
question anybody asks me, I don’t really care. You know if you always come on to here, or ask it via the Tax Tuesday, we’ll answer it, we’ll do our very best to get to it as you can tell. We answer a ton of questions. We always say these are an hour, but I think we went a little bit over, every single time. (Toni laughs)
Sorry, Toni. She’s sitting here going,
hey I gave you an hour, and you took and hour and
45, can’t get it back, right? – [Toni] It was fun. – [Toby] Waive sign up
fee for, hey Allysa. You ask, and you might receive. So if you ask Patty
we’ll see what she does. All right [email protected] I don’t know why this
things doing weird stuff, there we go. [email protected],
or visit us online. Do the Google, do all the fun stuff. And this will become your favorite thing to do every two weeks. Yes we have some weird groups that do the Tax Tuesday parties. I hope they drink a lot during it, because, well we didn’t drink at all. – [Toni] We didn’t. – [Toby] So next time
we’re cracking a bottle, and we’ll get a little crazy. All right guys, really
appreciate you joining us. You have anything you want
to add, miss chatty Cathy? – [Toni] No, I think I’m good. – [Toby] The counters you sit here and it’s like my cats, they
just sit here and look at me. Every now and again they go, “meh.” (Toni laughs)
That’s like Peaches. – [Toni] Therapy for your cats. – [Toby] No, you’re better than a cat. No, my cats are awesome though. You ever see Peaches? – [Toni] No. – [Toby] What?! Oh my god I got the best cats. All right, do you all want
to do this every week. It depends. With that, not where I should drink. Hey, that’s how they write the
laws, is drunk third graders. And they write it in crayon. And somebody says, is
this the same material as in the November? No, it’s a little more, and we fill in some of the
blanks, but absolutely. It’s the same philosophies. It’s just I did I all,
it’s 11 part series, there’s no audience participation. So it’s 11 hours of content, or 11 parts of content that
they might be over 11 hours. Anyway, there’s tons in there. ‘Til next time guys, really
appreciate you joining us. Share it with your friends,
there’s never any cost to doing a Tax Tuesday. Feel free to bring them bring and asking any questions that they can get us. Thank you again, Miss Covey, – Thank you.
– for coming in here and spending some time with us. It’s not the easiest
thing in the whole world for an accountant to come
in and answer any questions. – [Toni] Because it depends. – [Toby] ‘Cause it
always (laughs) depends. (Toni laughs)
Leave it at that. Thanks guys. (bright, piano and synthesizer music)

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