A Wiser Retirement®
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A Wiser Retirement®
239. How can I reduce my current taxable income?
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On this episode of A Wiser Retirement® Podcast, Casey Smith and Shawna Theriault, CFP®, CPA, CDFA®, explore strategies for reducing taxable income, such as deferred compensation plans, retirement contributions, and tax-loss harvesting. They highlight the importance of understanding the tax implications of various investments and caution against risky practices like creative accounting or intentional losses.
Podcast Episodes Referenced:
- Ep 229: How do I avoid capital gains tax?
YouTube Videos Referenced:
- Can a donor-advised fund reduce taxable income?
- How to Reduce Taxable Income as a Business Owner?
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This podcast was produced by Wiser Wealth Management. Thanks for listening!
Growing Firm and Financial Advice Discussion
Speaker 1Some people will have access to deferred comp plans. So that's another way to look at deferring money. If you're a highly paid person using the executive level at your company, you can take a section of your money and put it into a deferred comp plan. Now you have to really like your company, because if the company goes out of business, that's not your money anymore. Money goes to them. That's how the IRS set all that stuff up.
Speaker 2So you have to be so you're a creditor of the company? Yes, and if you already have, you know our issues or stock options or pension, then you're really a creditor of the company, correct?
Speaker 1And if the company is sold or merges with another company, then that account will be paid out to you. Welcome to a Wiser Time at Podcast, and we believe the best financial advice should always be conflict-free. I'm your host, Casey Smith, guiding you to financial freedom days. My co-host, Shana Stereolt.
Speaker 2Morning.
Speaker 1Good morning, how are you?
Speaker 2Awesome. How are you?
Speaker 1Great, so we've been really growing as a a firm. You're a regular now on the podcast I feel like I am episode. Is it three times in a row now? Something like that. Something um, yeah, we've got, uh, uh, see missy's out this week on vacation, but uh, we have all these new people in the office now. I think so. I guess what our listeners don't always know because forget, I'm talking on a podcast here. So on Mondays we typically don't have client meetings.
Speaker 1We start off with a marketing meeting with myself and Hadley and Alexa, and then we roll into a company-wide meeting which is about 45 minutes, and this is where Tiffany yells at us all for, uh, not doing not doing something, operation stuff so basically we have, uh, crm software that tracks all the open tasks and they have deadlines, yeah, so if you go over your deadline, then she sees that she's like, hey, why haven't you done this, why have you done that? So we go through this operational kind of a checks and balances.
Speaker 2I like it it.
Speaker 1Not really a standing meeting, we're all sitting, but the idea is that, hey, let's just get through our day and then we after that we go to lunch. So it used to be a long time ago. We'd go down to one of the restaurants on the square and it kind of got where.
Speaker 1You know, we kind of ate all the square food, and then this market opened up and people can get their own food and there's what probably 12 different restaurants in there, so we would sit at these really long benches, we would take up half a bench, and then yesterday when we went out for lunch, even with missy gone, we and rachel was out yesterday that's right, rachel was not with us yesterday. We we took up a whole bench plus two right, so two of us had to be, you know, set to the side. I volunteered for that because I know nobody else would feel like they're left out.
Speaker 1But no but yeah, we took up a whole bench like that. We have 13 people now. Isn't that crazy? Yeah, that is crazy from all various educational backgrounds. Now, yeah, so. So we have Missy from Wake Forest. We got well, grace just started. She came out of Georgia, southern she did. So we have, as you remember, Andrew's Georgia Tech. We've got.
Speaker 1UGA with William UGA with William, samford with Kayla, so we've got quite the SEC covered and private schools on top of that and, I guess, acc too. Um, yeah, and then after, after we finish lunch every monday, we we come back and we break up into groups and so alexa goes and talks with works, with operational people, about goals and things we're working on, and then all the advisors come in, pair and planning associates and we go over every single plan we're going to deliver that week.
Speaker 2Yep, Absolutely as a group as a group.
Speaker 1So it's a group, group effort as we, as we go through this. But anyway, I just reminiscing, because there was a time period when um, I'm not that long ago that there were maybe five here and at one point it was just me. Tiffany and Alexa for a couple years, yeah, a couple years. So it's, uh, it's exciting. It's exciting. A little anxiety, I guess. Uh, payroll looks a little different these days, but uh, but it's all, it's all good problems. We're probably adding probably four clients a week somewhere in there.
Speaker 1Three to four clients a week so yes growth, growth is good and, um, I love the love, the new people that are coming in. And then we have, uh, legacy clients that have been here for 20 plus years with a 99% client retention ratio. So I think what things that Wiser are really are really good.
Speaker 2Well, it allows allows us to help more people too.
Speaker 1Oh yeah, absolutely that's great. You know, absolutely it's a really good advice for them. And then my, my whole thing is just hire people that are smarter than me. So it's it's amazing how, uh, if you, if you take that approach, what kind of a team you can build. Where I feel like a lot of our business is a little, there's some egos in our industry.
Speaker 1Yeah, and I think that's in every industry probably, but a lot of people just want to be the top dog, and I'm not well, a good leader, you know, will entrust their people to you know.
Speaker 2Hire them for what they're, what they're good at, and allow them to do it yeah, you know. So it's surrounding yourself with people that have different, um, you know different skills than you do, potentially or enhanced, or you know or work well with them so yeah, absolutely, and being willing to let go.
Speaker 1I think, as a business owner, it's really hard to let go. I remember when I let go my finances, I was like I don't want to give this to you. This is. I feel like you're just like looking into my underwear drawer at this point, but I've been told, if I don't do this, I won't be successful, and that's true. I don't.
Speaker 2I don't open up QuickBooks other than I wonder if prospects feel like that, two clients coming in, it's like we're just, you know, taking over there, you know looking at sometimes it's you know you're nervous to show because it's like I know I spend too much. Yeah, you're gonna tell me that there's a couple families.
Speaker 1I know that, that I know they always carry credit card debt, debt, but yet they pay it off because they say savings hasn't really gone up much. I know you guys are working on building your savings and then I see, oh well, they paid off their credit card right before they came in because they didn't want me to see that. So, there are only a few families like that.
Speaker 2Yeah, well, it's more like a coach position, right, we're just trying to help them and ideas and inspire, and we've seen everything.
Speaker 1And I always tell people I was in my twenties one time. We all make mistakes.
Speaker 2We all do stupid stuff yeah.
Speaker 1Yeah, no judgment.
Speaker 2We all have a, and I don't care how we got here.
Speaker 1We're just, you're here and we're going to move forward. I don't care what's happening in the past, that doesn't matter.
Speaker 2No.
Speaker 1So people are.
Speaker 2Well, and that's where it's like objective and but also what I love about the firm is the heart of the firm and caring about people. It's really about the people and helping them versus growing the firm. You know, that's, it's, it's about.
Speaker 1Well, the firm grows because our heart's in the right place Exactly yeah. That's what I don't understand. You know, I've been asked a couple of times to. I've been asked a couple of times to there's a couple of other companies we're really close with and say hey, can you come in and take a look at this particular process? We're not succeeding like your firm is.
Speaker 3I was like sure.
Speaker 1And so I get on the phone and I have all these people in front of me and and I know within five minutes what the problem is it's the heart.
Speaker 2Yeah. People don't want to be sold anything.
Speaker 1People don't know that you care right and you can't. You have to hire. You have to hire people with the right heart. You can't really change someone's heart. Um, so much of our industry is like what can I sell them to make x amount of dollars for myself? And I learned a long time ago if you, if you put yourself before someone else, you're you. You will never be successful. It'll be a dead end after dead end after dead end. Now there'll be false success.
Speaker 1You'll, you'll succeed for a while yeah but you're going to realize that it's empty success and when you get the other end, you didn't change anybody's life. You didn't do anything to make them better. In the end, all you did was put a lot of money in your pocket at the expense of someone else, and I'm essentially talking about the annuity sales people and life insurance stuff. Now there's a place for all that, but not here yeah that's not the environment that I wanted. I wanted to build no um, and so it's, it's.
Speaker 1It took me a while to figure it out, though, because I kept why is this person not working? Why is this person not working here? It's like, oh, you got to figure out what the heart is you have to figure out how to do that over three interviews and the hiring process which you got to ask the right questions right and so that that's that's been. My journey is like how do I figure out what people I can?
Speaker 2tell you I have never had an employer or prospective employer. Ask me, what is your story ever?
Speaker 1yeah, I remember you had me at that.
Speaker 2I was like wow like he actually wants to know about me, not what are your skills, what are you know, what is you and I've. That was amazing.
Speaker 1That was amazing so I was like okay, well, I'll tell you what people listening if there's like an apocalypse or something like a zombie apocalypse, like I'm with Shauna because she's a bad ass- Thank you. I'm out guns blazing.
Speaker 3No if there's a problem, we'll have it handled. I don't know that I would hurt anybody.
Speaker 2I don't know, I'm definitely, I'm not about the violence, but I will definitely figure out a solution.
Speaker 1You have grit and that's what I saw and that's what we need. We need as a firm is is we've got to push through this next level of what we're going to have to do. We're going to need some grit and we're going to need, we're going to need to take some young people and and and teach them the ways and bring them along. And that's hard, you know anybody out there who's who's running a business right now. If you're hiring anybody in their twenties, just God bless you, it's. It's a whole different world.
Speaker 2They're so smart, though we there's some really smart. They really. They're smarter than us. They are.
Speaker 1If you can find that one, right, if you can find that one, I, I again. I've gone back to um. I think we've been successful in that, that, that phase, just because of um, uh, again finding people that um want to have a sense of purpose yeah so it's you know if we yeah, I've had so many people- I've had so many people and leaders and you know people that I've that have just jumped in and helped me over the years and taught me the ways.
Speaker 2And you know, starting an industry at 18, I just had so many people mentors that I mean I sought them out. It wasn't like they just came to me, it's like teach me how do I handle this and, um, I've had so many people help me along the way and that's what we do right. We learn and we grow and then you turn around and help the person behind you, always like that's that's what you should do. Yeah, absolutely what's the point of holding on to information and not helping other people come up to?
Speaker 1that well.
Speaker 2In a bad work environment, yes, where everything becomes very territorial yeah or very much of a silo that has never been who I well, some firms are built that way.
Speaker 1You, you have like a team of two and then that's that's it. You don't pass off any information, right? You versus them? Where we're trying to build environment here, it's always one big we're on the same team. We're in to build an environment here where it's always one big we're on the same team.
Speaker 2We're in the same boat. Exactly, exactly.
Tax Reduction Strategies for W-2 Workers
Speaker 4Are you curious why annuities keep coming up as a potential investment option? People are often told that annuities can effectively mitigate investment risks and help secure their financial future. Effectively mitigate investment risks and help secure their financial future. However, annuities often benefit the salesperson and might not be the best choice for you as a consumer. To learn more about the various types of annuities, the negatives of owning them and better investment alternatives, we have a free ebook on our website just for you To download our ebook. Buyer, beware, why Do they Keep Trying to Sell you that Annuity? Simply click the link in the episode notes or visit wiserinvestorcom slash guides. Now let's get back to the episode.
Speaker 1So let's go ahead and hop into our actual topic today how can I reduce my taxable income? So I think this is a question we get quite a bit from people and I have a little bit of bad news is if you're a business owner, we have a different podcast or not podcast, but we have a different episode that covers a lot of that from the past. But as a W-2 worker, there's not not a whole lot but we do have a checklist for you that you can kind of go down and work on.
Speaker 2Yeah, I'll let you hear the cpa, I'll let you well, there's really nothing exciting about it and we feel like we talk about all the time. It's, you know, deferring to your 401k yeah that's important. I mean, if you're doing a Roth, that's not going to give you a tax deduction now, but it just depends on meaning a Roth 401k.
Speaker 1So let's talk about that for a second. So there's a point where you have to decide pre-tax or Roth.
Speaker 4Right.
Speaker 1So I've always thought and you correct me if you think it's different but I've always thought that if you're younger, it's pretty much almost always going to be Roth.
Speaker 2So if you're under 30, almost always Roth, yeah.
Speaker 1Well, I think it's based on income. Yeah, well, okay, yeah, but I don't know. If you're 60 years old and making under $100,000, would you still do a Roth? You probably still do pre-tax.
Speaker 2I do pre-tax in that situation, probably so.
Speaker 1I think age is almost always Roth. But then there's a point at which you get over a household income of, I used to say, 300,000, and maybe it's still there. Then you don't put everything pre-tax, yeah, but whenever you hit the 34% tax bracket, yeah, and that depends if it's single or joint, obviously. Well, correct, yeah, yeah, yeah, yeah, I'm assuming, married yeah, exactly I don't.
Speaker 1If it's like 300, 400, I like to defer because it's saving the taxes now so there's other advisors out there uh, specifically, I'm talking about our airline people there's. There's two that put, want to put everything into roth, no matter how much money you make, and I keep running my excel spreadsheet on that. It doesn't work yeah, no right, it doesn't work.
Speaker 2Yeah, no right.
Speaker 3It doesn't work.
Speaker 1I'm like why are they recommending this? Because if you put money into the Roth and you have high income, then if you're in the 37% tax bracket you're taking a 37% hit on your dollar and then that means the Roth has to go make 37% to get back to break even. Then after that you're in the bonus. So if you're in the 12% tax bracket that's pretty easy hurdle to get over, but not at the 37% bracket. That's why you want to do everything pre-tax and if you're making that much money you should be able to do pre-tax. You should be able to save additional money into a brokerage account.
Speaker 2And the backdoor Roth probably and you could do a backdoor Roth.
Speaker 1You could do the mega debt mega backdoor Roth where you're putting money after tax money into the plan and then converting it into a Roth. You could do an individual back backdoor Roth by putting it into an IRA, not deducting it and then converting it to Roth. I'm talking really fast. People are like what is he talking about?
Speaker 2well, we just did a show on this missy and I did a couple weeks ago, so you can go back and look at that you can listen to that episode, but.
Speaker 1But the point is is that, um, if you put money to a bridge account when you retire at 65, you don't have a requirement of distributions until age 75 you can? You have a whole decade that you can figure out how to convert from ira to roth. In the meantime, for for um 20, 30, you've been able to defer that tax as long as possible to use that 37% that you would have paid in tax to then grow more money before you had to pay the income tax.
Speaker 3So anyway it does.
Speaker 1Just, I'm getting on my soapbox on that. But these, these, um, uh, again, I'd call them out if I could remember the guy's name. It's the pilot advisor, I think. Uh, is, is the? Is the company? I know that's the company, uh, but the whole, their whole thing is, um, don't pay tax, and they, they. He really pushes this whole. The government's going to get your money and this you know. I've always joke and say pilots are like borderline preppers, right, so they just buy into this stuff. And I'm like no guys, it's a math problem, just solve the math problem. And every family is going to be a little bit different than another family. There's not one piece of advice I could give you.
Speaker 2That fits for everybody.
Speaker 1That fits for the 400 people that are going to listen to this episode, right?
Speaker 2Yeah.
Speaker 1So it depends on your situation completely but yeah, if you're making a lot of money, max out your 401k pre-tax.
Speaker 2Yeah, and. And you can also do a health savings account if you have the high deductible healthcare plan. So that gives you a tax deferral. Now a lot of clients will use that for retirement expense. You know the healthcare and retirement, so allow that to grow tax deferred.
Speaker 1My only caveat there is if you're look at your, you'll look at your plans that are offered. It could be that if you're a high user of healthcare that the HSA is not the best for you. You really do need the PPO.
Speaker 2Yeah.
Speaker 1So just be careful. I would say tax is a secondary to your, to the health, so make that decision very, very carefully. But yes, an HSA, I have an HSA. I just know every time I go to the doctors it's going to cost me 500 bucks. Hsa I have an HSA. I just know every time I go to the doctors on cost me 500 bucks and I but I don't use my HSA to pay for it. Right, I let the HSA build, grow Right, and eventually I'll invest. You know the balance, cause I just started mine. But when, when I get to a certain point, I'll move that money over and invest it. But don't use the HSA, just use it for tax deferral. Let it grow to pay for your premiums in old age.
Speaker 2Yeah, yeah, that's a great strategy. Then, if you do have a PPO, your employer may offer an FSA.
Speaker 1Flexible Spending Account. That's the one that expires at the end of the year or near the end of the year.
Speaker 2Yeah, you have to use it within like a few months after for expenses for the year before. Right, that's up to 3,200.
Speaker 1So that's tax, that's tax deduction If you have kids in daycare, that's another one. Yeah, yeah, if your employer offers it.
Speaker 2Yeah, absolutely, absolutely. It's been a little while since I've had that. Then you're most clients don't even itemize anymore because the standard deductions are so high, but you still have those itemizations and so you have charitable contributions of cash and property. So that's a deduction that you can look at your interest on your home, the state and local taxes. So you know state taxes like Georgia, we're in Georgia, other states but there's that limitation now of 10,000 that they've really, you know, capped everyone out on that. Um, but you can still look at the timing of your deductions too, and this was, this was bigger. I feel like this was bigger when you could deduct all of your Georgia tax and you could deduct all of your real estate taxes when it was above the 10,000, you would look at the timing of that, you know, and maybe move some of those deductions.
Speaker 2You know not pay your.
Speaker 1That's not applicable anymore. It is. You can still do that.
Speaker 2But because of that $10,000 limitation I just feel like it doesn't come into play that much. So what she's?
Speaker 1talking about is if you know you're going to owe Georgia tax, you would prepay that in the current tax year and you could deduct that on your federal tax pay that in the current tax year and you could deduct that on your federal tax right exactly and itemize that.
Speaker 2And so after 2017, it's harder to do that it is just because of that 10 000 limit, because it looks at all of your state tax and your real estate taxes and any local taxes, and so you're just capped at 10 000 and most people are over, especially if you're higher income, you're, you're over that 10 000 threshold and you can't use it. So, um, medical expenses can fall under that as well for deduction. So you know, looking at that, uh and I know we recently did on capital gains, you know we did that whole show on capital gains and so harvesting those tax losses and having a brokerage account that is tax efficient, that's a way to save money on your taxes as well.
Speaker 1So you can write off $3,000 a year in capital losses.
Speaker 2Right.
Speaker 1And a brokerage account. With this much volatility that's happening in the market right now, especially if it's professionally managed, you should be taking advantage of these major swings. Yeah, and it doesn't mean you're timing the market. It just means you're selling out the S&P 500 by State Street and you're buying the S&P 500 by Vanguard. It's the exact same underlying holdings for the most part, and you can write off that loss in that transaction and then, if you have typically over $200,000 in your portfolio assigned to large caps, you can do what we call direct indexing and that you can really generate some taxable tax credits that way that that will carry forward to future years. So that that's very important. Unfortunately, most firms aren't doing any of that, which I don't understand. How can you be an asset manager and these firms don't even hardly do financial planning Right, and they just tell people oh, just invest for the longterm, yeah, and they're collecting a fee. I'm just like what are you doing for that fee? Like you, you should be tax loss hovering, seeing the account that that covers your fee, right.
Speaker 2Well, and that's why you do the direct indexing, cause if you're just owning, you know. Back to your example of owning the S&P 500 and selling it and buying another, it's not always down, but the other relying holdings in the index could be down and that's why you can do the direct indexing.
Speaker 1Correct, correct. But if you're putting money in every month, like the money I put in my brokerage account last month, right now, probably doesn't look so good, so you could sell that and then you could buy something similar, which you know we have.
Speaker 1we have a program we call uh, it's called flight path. It's an automated investment platform. So we use it for our hourly clients because it allows them to self-direct. But it helps them with exactly this in that, um, it does tax loss harvesting automatically for you and it does rebalancing automatically for you, and so I have an account there, just like everyone else does. And yeah, the computer just makes those trades when it sees the opportunity. You don't have to really think about it.
Speaker 2Right, so you're not having to manage it if you will.
Speaker 1Correct, and the savings account's 5.5% still, which was pretty exciting. So there's a lot of positive things there.
Speaker 2But anyway, I digress. Well, you know they took away a lot of the deductions that we used to be able to use on our tax return. Um, exemptions, personal exemptions, things like that. I mean there are still some tax credits depending on. You know, most of most of the individuals that ask us these questions are in a higher tax bracket. You know, how can I save money on my taxes?
Speaker 2Um, are in a higher tax bracket. You know how can I save money on my taxes? Yeah, you know, there are still, you know, the child tax credits. There's other credits out there that you can utilize, depending on what tax, if you're in a mid to lower tax bracket, but most individuals who are wanting to save money on taxes are in the higher tax bracket. There's just there's not a lot that you can do to offset your taxes, and the good news is is that you're making money, though.
Speaker 1Yeah.
Speaker 2So if you're paying taxes, you're usually making money, so that's good news.
Speaker 1So I would add a couple other things to our list. Some people will have access to deferred comp plans, so that's another way to look at deferring money. If you're a highly paid person using the executive level at your company, you can take a section of your money and put you're a highly paid person using the executive level at your company. You can take a section of your money and put it into a deferred company. Now you have to really like your company, because if the company goes out of business, that's not your money anymore. Money goes to them. That's how the IRS set all that stuff up, so you have to be so you're a creditor of the company?
Speaker 2Yes, and if you already have, you know, rsus or stock options or pension, then you're really a creditor of the company, correct?
Speaker 1And if the company is sold or merges with another company, then that account will be paid out to you. So I had this happen a long time ago with an insurance executive where they were doing deferred comp, putting a lot of money in there. It was just great. He was pretty high up in the company but he didn't know about a merger. That was quickly announced.
Speaker 1And so he had a $3 million payout from his from his deferred comp plan in one year and I did the math and he still came out slightly ahead, but it wasn't nearly as what we thought, Cause originally he's gonna put all this money in and he's gonna take it out over 10 years once he retired, so you could defer that right yeah, so you just there's some downsides to it, but that that is an option that sometimes people have.
Speaker 1They don't realize it, they have to ask about it, right, um, so, so, so that's, that's another thing, uh. And then, uh, non-working spouses uh, you could do a spousal ira. Yeah, you should be able to deduct that. Yes.
Speaker 2Yes, depending on if you have a 401k and if yours is deductible.
Speaker 1Correct, so that could be another avenue for non-working spouse putting money into an IRA.
Speaker 2Yeah.
Speaker 1Or if you don't have a 401k for some reason, you can put money into an IRA regardless of what your income is. Yeah, if you don't have access to a 401k.
Speaker 2Absolutely.
Speaker 1So that's another way I'm trying to think of.
Speaker 2I don't know there's. There's always options to. I've seen options, especially at smaller companies where and it just depends on the dynamics where if your bonus structure there, sometimes your employer will let you push bonuses to future years or, you know, delay bonuses to do that, you know. Obviously that depends on the company. If they, if they need the deduction, usually that's a planning for the owner right.
Speaker 1As a business owner, I would argue that that would hurt the business it depends, yes, so at any rate I've I've seen that before too.
Speaker 2I just know we've had clients mention it, even in bigger companies, where it's like, well, you can elect what year you want it.
Speaker 1So that may be an option as well. Right, true, in Georgia, it's still a thing. It's not as prominent as it was, but these movie credits.
Speaker 2Yes.
Speaker 1So that's a legitimate thing. You can purchase movie credits and basically, let's say you buy $10,000 with a movie credits, it might be worth 13 or $15,000 worth of credit, right. Towards your Georgia towards your Georgia tax return so you can lower your Georgia, your Georgia tax by doing that. These land conservation stuff Stay away from that.
Speaker 2Yeah, that's the, those conservation stuff. Stay away from that. Yeah, that's the. Those are under scrutiny and they're clawing back. I I know I've seen them before where, when you buy into these, uh they had insurance tied to them so that if they were ever audited and uh disallowed that, the insurance would cover the taxes that you owe and back. But they're all being my understanding is that a lot of them are blowing up there's some clawing back on the taxes on that.
Speaker 1Smaller accounting firms have managed to get every client audited because they put this in almost everybody's account and the firms probably won't exist anymore because of it. So it's just very dangerous. I wouldn't participate in anything like that. But I think the big thing is there's no, there's no smoking gun that's not going to get you audited. Most people say I want to start a business so I can write off these losses, and I translate that to mean I want to start a business to write off my life, so you have to be able to generate income. If you're running a legitimate business and it hasn't shown income yet, but you think it will, then that's, that's fine.
Speaker 2Yeah, well, you have hobby loss role there that can come into play.
Speaker 1Yeah, if you start a quote, start a business, but it never makes any money. Yeah, right. Yeah, exactly, and it's not really it's could be considered a hobby, correct, which means you'll have to go in the bass and redo those returns and get rid of that loss.
Speaker 2Yeah, well, and it's you know. It's like the whole goal here is to create wealth or, you know, create options and lifestyle and whatever. Whatever it is your goals you're trying to achieve. And so I don't know that I would start a business to try to save taxes, especially if it's going to cost you a lot. Like, what is it actually costing you? Does that make sense that you're pouring money into a business that you could be investing just to save tax? Like you, you don't want to make decisions just based on the tax ramifications. Yes, you want to understand the tax ramifications and make sure, is this the best use of this, based on the whole picture or the return of what I'm doing, whether it's real estate or this type of investment? You want to understand the taxes because that that is an important piece of the total return or reduction in the return. But I wouldn't make because is it still costing you and leaving you with less money to save tax? That doesn't make sense to me.
Speaker 1No, and sometimes you just got to pay the tax. And what happens is people make $100,000 a year and then all of a sudden they start climbing the corporate ladder or going up in their seniority at the airline or whatever, and now they're making 300, 400, 500,000. And they go oh my gosh, all this tax that I'm paying is ridiculous. And yeah, that's just that's how it works. It's a progressive tax system. So you're not. If you're in the 37% bracket, your whole thing's not getting taxed at 37. It's much less than that, but just your top dollars getting taxed at 37% and it's a good problem to have and I don't want to be nonchalant about it and say you shouldn't pay your tax, but at the same time, you can get really creative and try to save money on tax, and you're also gonna get yourself audited.
Speaker 2And that's gonna be hell. Yeah, that is hell. And then you know, are you really growing your overall network?
Speaker 1Because you probably don't have receipts for half that stuff. That's true, that's true, that's true.
Speaker 2And they have been understaffed for many years. But I feel like they're beefing that back up because I've heard of more and more audits happening.
Speaker 1Yeah, absolutely. So those are things that you just don't want to have to put your family through. So to me it's black and white. If it's in the gray area, I wouldn't, yeah, I wouldn't. I wouldn't do it. I wouldn't go invest in something for to write off losses on, meaning, you know these, these LLCs and business ideas and stuff like that. So now, if you want to go invest in a business and you want to grow that business and it'd be something, but you have losses for the first few years to write off, that's fine, yeah, but but not not as a purpose to lose money.
Speaker 2Agreed, completely agree.
Speaker 1All right, anything else?
Speaker 2I don't think so. I think, I think we covered it.
Speaker 1It's really that simple, y'all it's, it's, it's not. You can have a creative accountant, that's a thing, but you're asking for trouble. Um, you know people, every now and then I get questions like can I deduct my clothing, that I have to wear a certain type of clothing to work and I wouldn't normally wear that?
Speaker 1no, no no, no, no no no, I think if you have to wear a uniform that you'd be embarrassed to wear somewhere else, that's probably a tax deduction, but not your everyday. No, you can't write that off. Okay, so episode 229, how to avoid capital gains taxes. When we did recently the YouTube channel AY's Retirement, can donor advise, fund, reduce income, taxable income, that's the one we probably didn't cover as much. Being charitable, that would be a good, good, good tax deduction too, but you're giving it away, you're not building wealth with it. Obviously different, different, different type of gift different type of wealth.
Speaker 2right Right Exactly.
Speaker 1How to reduce taxable income as a business owner. I encourage a lot of people to listen to that one that's out there on the YouTube channel. Anyway, thanks for listening. If you're still learning more about Wiser Wealth Management or want to talk to one of our fiduciary financial advisors, you can do so by going to wiserinvestorcom, and please remember to like and subscribe anywhere you listen to this podcast. It really helps us grow our audience. Thanks so much. See you guys next week.
Speaker 3Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestorcom and reach out.
Speaker 3This episode was produced by Rachel Dotson. This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products, securities, digital assets or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities, digital assets or other investment. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities, digital assets or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients, listeners or similar interests. Investments involve risk and, unless otherwise stated or not guaranteed, be sure to first consult with a qualified financial advisor, tax professional, insurance professional and or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.