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Best Tax & Legal Strategies for Real Estate Investors (Ft. Mark Kohler)

investment financing irei summit market research Jan 01, 2021

"You are the captain of your own ship. You should know the top 10 strategies you should be implementing. If your accountant can't talk about them on the fly, you've got the wrong accountant. You should not know more than your accountant!

Today we're not going to talk about what form to put something in. I want to discuss big picture strategies that you can quiz your accountant on... and if they can't respond or they look like a deer in headlights, you got the wrong person."

What's in the Video?

  • The S-Corp Strategy (How & Why)
  • Top 5 Tax Strategies
  • Big picture ideas to quiz your accountant on (if they fail, fire them)
  • Power of Real Estate Professional Status
  • Health Care Strategies for Real Estate Professionals
  • Real Estate and Self-Directing IRAs

"The beauty of this class is: you don't have to go buy real estate or go do something to create savings and make money—in this class alone in the next two hours; if I don't save you 10 grand in taxes.. I screwed up."

Mark is a CPA and an Attorney—Partner in a Law Firm and a Partner in an Accounting Firm. Mark J. Kohler, M.Pr.A., C.P.A., J.D., is a best-selling author; national speaker; radio show host; writer and video personality for; real estate investor; senior partner in the law firm, Kyler, Kohler, Ostermiller & Sorensen, and the accounting firm of Kohler & Eyre, CPAs. Mark is a personal and small business tax and legal expert, who helps clients build and protect wealth through wealth management strategies, and business and tax remedies often overlooked in this challenging, ever-changing economic climate. His seminars have helped tens of thousands of individuals and small business owners navigate the maze of legal, regulatory, and financial laws to greater success and wealth.

Best Tax & Legal Strategies for Real Estate Investors

The tax and legal topics we're going to discuss here are going to pay off. The beauty of this class is you don't have to go buy real estate or go do something to create savings or make money. In the next two hours, if I don't save you 10k in taxes...I screwed up.

Quick intro so that you feel confident in what we're talking about today. I'm a CPA and an attorney. I'm a partner in a law firm and an accounting firm. I've got five or six books out on Amazon. There's no other tax lawyer in the country, specializing in small business and real estate that has as many books, podcast shows, and blog articles in the country.

In the next two months, I'll be on Fox and NBC in about five different locales. Hopefully out in New York again on MSNBC. I am trying to be an expert for you. I say all that because I'm going to get dorky, tell jokes, and have fun...and you're going to maybe think I'm a nut. I really am legit but I want you to have fun because this is a dry topic.


What You Should Know When It Comes to Tax Strategies

Yesterday, I had a phone call with one of my clients, when I was walking through the grocery store. I told her what to do at paychecks to change their stupid payroll situation from their accountant that didn't know what they're doing. We literally created a $7,500 refund with one click of the button yesterday because she had her kids on payroll the wrong way.

It's very, very common that there's just something wrong. And you guys know this! You know this, but you just don't want to believe it. You want to think..."my CPA, he's a really nice guy" or "I'm doing this on TurboTax and I freakin know what I'm doing." No! Not every CPA is the same, and if you don't specialize in tax, you're going to miss something.

You know, how did you go do a kitchen remodel, you're gonna get five different contractors that are gonna give you five different results, right? Accounts are the same way. They're going to be lazy, they're going to be conservative, they're going to be anal, they're going to be in their little zone... You're going to get five different results, if not more, by going to five different CPAs.

You are the captain of your own ship, you should know the top 10 strategies you should be implementing. If your accountant can't talk about them on the fly, you got the wrong accountant. You should not know more than your accountant

Today, we're not going to talk about what form to put something in. I want big picture strategies that you can quiz your accountant on. If they can't respond, or they look like a deer in headlights, you got the wrong person. That's the goal here.

Your first mate is your tax and legal person. And if they're not talking and working it, then you got the wrong group.

So you don't have to use me you don't have to use my firm. I do not care but you probably need to upgrade and we'll see today. There's always someone getting fired out in the hall after my class and I'm always really sad. You sock your fire or whatever.

Okay, so we're going to hit real estate professional status, health care strategies for real estate professionals. Yes, there's a strategy you don't even know you're going to freakin love it. Real estate and self-directing which Matt Sorenson is teaching in another class right now but we got to hit it together and he'll be bouncing over to my class after his mind's two hours his one so he'll join us for the second hour.

I've got three of my books here. "The Business Owner's Guide to Financial Freedom", "The Tax and Legal Playbook", "What Your CPA Isn't Telling You"

Info about Mark Kholer

A little bit more about my wife and four kids. I live up in Idaho. I know that sounds crazy. I'm distant from Provo, but I live in Idaho. So I know, you know. But we're in Southern California and I got sick of the traffic and the pop culture in the money in that state and you can't be a self-respecting tax lawyer and live in California. Can you? Can you pay 50% in taxes every year and say, I'm a tax planner. You can't.

It is literally over 50% on your next dollar once you hit a certain AGI is terrible. So I said screw it and we moved to Idaho where my wife's from taking care of some family relax, enjoy the outdoors. I still travel a couple of days a week the business is still booming. I live up in Idaho. I grew up in Washington State. Go Seahawks.

I'm from Washington State and I do believe in Sasquatch. I have my own Sasquatch experience. So now we are doing our workshop in Seattle. Randy Luebke, the co-author of my book, You're what your business owners guide to financial freedom. He was teaching a class next door.

The hour before he is my co-author, an awesome financial advisor. He lives in California do not know why but he lives in Newport Beach. This is really pretty and it's worth the money. I guess. Just joking. Tucked Randy after So we were doing our little hike in Washington, we were squatch. And we were looking, if you ever been squatting, you know, we were looking for Bigfoot couldn't find him. Didn't know where he was. Okay, this is a laughing portion of the show. Is that not funny?

I thought that was funny. And then we found him and apparently he's a Mark Kohler fan. He was watching my videos in his camp. So I was really excited about that. And then we saw him in Seattle later, and he was carrying my book. So I was pretty stoked on that.

Strategy number one, The Trifecta

If your accountant or lawyer does not get this, you're going to have to train them on it and hope they come up to speed but if not, this is the easiest way to do your tax and asset protection planning.

There are three pieces to the equation. I want on the left side your operations, this is going to be your entity if you're a realtor, you're getting commissions if you're a flipper or wholesaler. If you're a dentist, a doctor an engineer, you're a restaurant owner import-export, or internet marketer MLM that's the left side it does not own assets, that's going to be ultimately an S Corp.

When you're making more than 50 grand a year. I want to funnel it through an S Corp. It could be an LLC, taxed as an S Corp. You have an S Corp, don't say, Mark, I have an LLC and then five minutes later I find out taxes and escort. If you have an LLC taxes an S corp, it's a freakin S Corp.

LLCs are primarily for holding assets. Now I might have 10, LLCs and 10 properties I might have 10 properties in one LLC, everybody's situation is different. We set up LLC in the state where we have rental properties. We design the LLC structure based on how much net worth you have and what were your rentals are and all that good stuff. This is just a simple brother-sister structure. Now us LLC is in two other ways. Maybe we'll get into it.

But this is your basic trifecta S Corps, LLC on the right and then at the bottom is your revocable living trust. If you're an entrepreneur and you own a rental property, you will ultimately have these three structures if not already, you better get on it make it a goal for 2019. This is revocable living trust is your state plan that you will trust power of attorney pull the plug of I'm a vegetable, blah, blah, blah, the trust is going to own your S corp, your LLC and three other assets.

It's going to be beneficiary your life insurance, investment accounts, and it's gonna own your home. There's no tax with a trust, there's no public filing, you can modify it anytime you want. It's a revocable living trust. But if you die, you can just screw up your kids forever. It's awesome.

They get money, if they do this, they don't get money. If they do that, if they're still married to that bozo, you cut them off, it's sweet money at age 25 3035. In stages, they get a tattoo on drugs, cut them off, whatever it's called dead hand control, your hand comes out of the coffin and just screws around with your family.

Because you hold the money. It's an irrevocable trust, once you die, it's the sweet provision of mine is if you go to U of U you get all the money if you go to BYU, it's cut off. It's just a standard provision into this. This comes in your deal. I'm sorry. I know I'm being hard on my Utah County or sorry. Okay, so this is the trifecta. I can talk about this for an hour. And we can have multiple questions. Let me just set the table with what I want to focus on for a moment. And that is the S corp side of the equation. Let me get that on the table. And we'll do two-three questions.

So what we normally do and this is dial-in your S corp strategy, if you are generating ordinary income you are you need to know the strategy because there's a point where the escort makes sense. There's a point where it doesn't. If you have a W two-day job and buy rentals, you don't need an escort. If you're retired and just have rentals, you don't need an S Corp. But once you have an operational business of any sort of 1099 income, you'll pay self-employment tax on every dollar if you don't do some sort of strategy.

Let me just give an example. So on our board here, if I've got a realtor here, just or you're fixing, flipping, real estate, whatever, if you do more than three, fix and flips a year, it's subject to self-employment tax, good luck in an audit if you think otherwise. So you got your money coming in. Let's say you're bringing 100 Grand net, you're cranking that's on net sales on your fix and flips you bring in 100 grand you spend 25 on expenses, and you net 75 grand, pretty straightforward. You're taking home six grand a month, whatever.

You're gonna pay self-employment tax off the top of 15.3% that's 10 grand, then you're going to pay your state tax and your federal tax being being being you get hit three times. So this is a sole proprietor or an LLC. But Mark I thought LLC save taxes now LLC we do not save taxes, no way shape, or form. Why do we do LLC protection That's it, I want this warm blanket, I want this corporate veil, sole proprietorships. We're only going to be in those for a short period and then out.

But we're going to have our structure here. And once I start making over 50 grand, we're going to convert to the S corp strategy. And with the S corp strategy, instead of taking all of that net, we split it pink, and I might take 25 grand in salary and 50 grand in dividend. Now I only pay the F word, FICA.

I only pay FICA on 25. I just push the other 50 through the bottom. And I just saved 15.3% on 50. Grant, that's 7500 bucks, boom. And all I did was convert to an escort. Done that my friends and my 25 strategies are number one. We've got to have our escort foundation nailed down. Okay, hi. threw out a bunch there real quick thoughts and comments, questions? Yes. Yes, it does, my friend. So his question was, does this get the 20% pass-through deduction it does. So we drop another 10 grand off of this. And your net is only 40. So I just now that's the GOP Trump bill. When I had a chance to talk to a senator during the tax legislation last December, I was so excited about it.

This is December 2017. And I said you got to save the escort that was my sales pitch. We got to get the S corp here and freakin GOP and the Trump they threw gas on this, the S corp just got better. Because there's a synergy I want to take the right amount of salary and push the rest out to get my 199 a pass through. So that's another strategy in my list of 25. I got to make sure that I'm taking the right level of salary to keep the IRS happy and maximize this deduction. If you can swing to 10 grand like that, it council screw this up in a heartbeat. And you're like, Oh, my brother-in-law. He's a really nice accountant. We golf together. Did you talk about this? Did you push him? Did you have him explain why you're doing this?

Did you compare it to what Mark Kohler said in his last newsletter or YouTube video? And then also you realize my brother-in-law is way over here. And it's costing me 1000s of dollars. You got to be the captain of your ship on this. You got to know why. thoughts or comments more? Oh, we got Randy. I know it can't be a question. Well, you will get one of two answers. So if you heard Randy, he said you go to your CPA, and they kind of poopoo the idea. That's option one, they go now. It's too risky. Don't do it. Run Forrest Run, just run, run Forrest run, find like a bird.

Just get out of there. You've got the wrong accountant if they're not even willing to talk about this. Number two, they may say, Well, we're going to take a salary that's too high and your savings not good. So this, my friends are why I created a matrix where I put my money where my mouth is taking the country by storm. It is called the Kohler payroll matrix. So you know exactly what to take in this amazing. So excited. Thank you. Okay. Okay, let's see if I can. Can you guys see this one? Or? Let's see who can see which one's better with a stupid whiteboard here. Can you guys see over here? Barely. Can you see over here? We got this curtain thing going on. Okay, I'm going to try to do my best here.

I can't move the whiteboard. Oh, do this way. Okay, so you guys can see over here. I want to just show you can Oh, here's the trick. You look at your net income, not what you're not what your escort made. What did you take out? is a realtor, a dentist, a doctor, an engineer, whatever, whatever your business was, what did you net and you might have multiple sources of income flowing into one S corp, Mark Kohler, I only have one S corp in my life. If Randy calls me up and wants you to do deal with me, my escort partners with him, not me. So my S corp is my Microsoft, this is my parent, all my revenue goes into this ordinary income.

Then I take my net and I go across the bottom. And I go Okay, where's my net this year? Oh, I'm going to make 100 grand. So I go up and go, my salary better be in a $40,000 range. So if I net 40, I mean 100 I'm going to take 40 in salary, push the other 60 out, I just say 15% on 60 grand. For every 10 grand your accountant screws up and cost you 15 $100 a $20,000 swing is a cruise in the Caribbean. I mean, that's how fast your accountant can mess this up. So you want to find the right payroll allocation. I've interviewed ex IRS agents on my radio show for years, we've we've never had an audit for any client of ours doing their payroll in the last 20 years. If we do your payroll report and you get audited we'll pay the penalty. So when your accountant says this is too aggressive, you say well I'm gonna freak in go over Kohler then because he'll stand behind it. Now let me repeat that.

She goes Well Mark if I changed courses midstream is Iris going to notice this. You know how jacked up the IRS is right? Like, they, they're not as smart as you think. And even their computer system, it just shows you how to your different profit one year or whatever, what the IRS model where we see the most audits or all the audits is people taking too low of a salary period. If you're in a range, the computer just you just got it's an algorithm. It's like, not a big shift, they're looking for the wrong amount, you can shift people's net businesses make different profit every year. Who cares? It's that ratio between shareholder compensation line 13 and the K one. So I'll have a doctor come to my office, I'm coming your way. I have a doctor come to my office and goes work. I mean, 300 grand last year, and I took 10,000 in salary, rip, rip, it wasn't the shift. It was him being an idiot taking 10 grand, he's way off my matrix. So don't worry about changing it. It's where you're at in the ratio. So the computer doesn't see you as a red flag. This is the extreme.

They don't care if you take a big salary that's to their benefit. Okay. No, she said, Does the net number include your W two? No, you do the net, you estimate your net before you do your W two. Now you can say Well, Mark, I gotta live during the year and all this sounds like a headache. No, this is so easy. However, you're running your business now. Why am I realtors in the house? I mean, okay. Okay, realtor. Are you an S corp already? Okay. Now, I love this great example. I will see how this goes. So you got your S corp you have a separate bank account for your escort. Your Commission's go into the escort. Whenever do you want to make money?

Do you have to wait for a paycheck? Or do you just take it? That's okay. What do you do now? You just take your money, right? So you have your escort, you have a bank account, your Commission go in there, you pay your cell phone bill, buy some lunch, fill up your car. And if you've got money at the end of the day, the end of the week, the end of the month, you take it cool. It's called a draw as you just take a draw. And then what do we do quarterly? every three months someone calls you right and says it's time to do

on occasion on charges apart. every three months, you have to go do your payroll. So it's going to happen in April, July, October at the end of the year. And by accounts gonna call her up and go Hey, how'd you do? Just going? Oh, I took home 30k this month? I mean, this last three months, I took him 30k I had four closings I was killing it. Okay, sweet. You took home 30k. So we said look at the net. How much did you take out in profit after your expenses and you can ballpark it? throughout the year? It's gonna fluctuate. call me up in April.

Yeah, I took home about 30k after expenses. Okay, sweet. We got to the matrix, okay, if I do 30k times four, that's 120. Okay, let's do a payroll of 46. Let's do the math. That means payroll of 12 grand, okay, here's your payroll report, we do a payroll port of 12 grand, send her 941, she sends in a deposit for around 17 $100. FICA is paid, done. It's done. If she waits to the end of the year in a sole proprietorship or LLC, she pays FICA on the entire 30 grand, all you're doing is just changing the allocation of what that 30 grand is we're gonna do 10 grand and payroll 20k and pass through, get the 20% pass-through deduction. We're off to the races. Do you feel it? We feel it. So that's exciting. Okay. Okay. Let me see if I answered that fully. Yes. So it's easy. You just do it.

You don't ever get a paycheck. Do you ever get a paycheck? No. Call the police. Okay? No, she doesn't get the chat paycheck. She just does a payroll report quarterly. Now, after this class, you want to be a little more engaged in this. Do you want to say what's my payroll this year? How much am I gonna make? And also you find out what the freak my accountants jacking this up. Because I'm a salesman, I'm going to go out and be a realtor, I'm really good at sales. And I'll just let that take care of it. No, this is the yin and the yang of being a business owner, you may be able to make money, but you got to guard the henhouse. You don't want the IRS getting in there and being the number one cost in your life and taking too much. So just know enough to manage your professionals and say, I want to know what my frickin payroll is. Yes. If you do this once a year, let's just think about it.

Does the IRS want their check at the end of the year? Would they like it four times during the year? If you don't do it quarterly, and you'd wait till the end of the year, unless you have a seasonal business where you make all your money in December, the IRS is going to penalize you. And so I tell my clients, you want to wait till the end of the year. That's cool. But when you get the penalty, I don't guarantee that because you screwed up and you waited till the new year plus you got to do 09 40 in the first second third quarter, and then just pounded in on the fourth, which is cool. And you might get Was it for a year or two ago? a mortgage? That's all I've been doing. Just be aware, you get that nasty gram from the IRS. Yes.

And there are reasons why you wouldn't have to s corpse. The only time I have to s corpse generally is if I have a husband and wife, one's a realtor, one's a mortgage officer, one's a dentist, one's a doctor, one's a financial adviser, one's surgeon because they have different professional licensing requirements where they can't have non-professional licensed shareholders of the same entity.

But 98% of the time husband-wife, one S corp and we're, we're on strategy one, I'm going to talk about when do you put your spouse on the payroll when you put your kids on the payroll? Just talking about you? I mean, we're talking about 1000s of savings on step one. It's this exciting. Great, you're saving money. Okay? Yes.

So what he's saying is, well, Mark, if I'm in this and you sign it, and you're cool with it, should I worry about being audited? No, because you're okay. What I want you to do is I want to guide you through the areas where you might get audited, and then in blues, you know, like, if you're doing payroll once a year, you would lose. And so I don't want you to do that. And so I'm going to warn you on those things. Ooh, I love everything all Where did Randy go? The one time I had a good question from Randy, looky you're wandering in the office, Randy, looky. Okay.

If you see him, tell him to run back in here. Did you see him? There he is, you know, soon as you leave to go get a bottle of water. So when asked a question, I need your help run-up at random if you're fast. Okay, so the question, this is a classic. I did a whole radio show on this topic. And I had a phone call this week from a client that goes is Jim brave. I'm Jim Banneker. He's a radio show host out of Chicago. I was on his show two days ago, on the am commute.

He was saying, I take a huge salary because I want to contribute and get the most as I can out of my Social Security. Randy, what would you say about that? Should I pound as much money as I can into social security? Because I'm sure if I put more money in Social Security, I'm going to get more out.

It's all about the W-2, right? And Mark's point, and I think it's a really good one, you know, your your your, you can shift this money down to your K one, you can take that money, then put it into a 401k, or an IRA self-directed to all kinds of things that you control the money that goes into Social Security go into the federal government. And you know, it should be there.

It may be there, we don't know for sure. So certainly, some of it's going to go there because it has to do some of that you go there because maybe you want to, but you don't have to over you don't have to give them the whole $140,000. And especially this first for spouses, if you have you and a spouse in the same business, that's $280,000 getting taxed at 15.3%. Why would you do that? Right? If you've been married to somebody for 10 years, you're guaranteed to get a spousal benefit, no matter what, yeah, that's equal to the higher of the two of you, right? Who is the average paid in more than's already guaranteed? So once you've gotten past that, that 10-year window, then that spousal person shouldn't even be paying into social security at all.

I love it. I'll say it one other way, is called a law of diminishing returns. I wish I had a good example, like, you can only work out so much, oh, here's a good example. You can go to the gym every day and work out. But at some point, your body's going to do what it's going to do, right? If you work out an extra two hours every day, you're not gonna make much of a dent. You know, you're just not looking at Randy. I mean, he works out three hours a day, he could do this in an hour. Really? Okay, but right, there's a law of diminishing returns.

Now, there's a law of diminishing returns. It's the same thing with Social Security, you take off. Okay. So it was thanks, Randy. So with Social Security, the more you pay in, doesn't mean you get more in Social Security. So security is going to tap out at about 2400 for a typical person wage earner during their life, no matter what your salary was in the long run because it's based on your career earnings. So me and Warren Buffett, we're getting the same, we're getting the same social security.

So once you pay in your minimum level, under IRS requirements for an escort based on your income, you're going to get some social security as someone that's doubling down. So don't get confused and think that Oh, well. I'm screwing myself with social security down the road. I'd rather have you put more in your 401k than it would Security anyway, right? Just do the bare minimum get in and get the freakout. Okay, the last question, then we're gonna move on to a new topic, anybody? Scott? Isn't this fun? All right. So that's strategy number one, I want to give you just a couple of other updates. So under the new tax cuts and JOBS Act, remember entertainment is no longer a deduction. I was one of the ones we took it in the shorts on this.

Most of you know that in 2018, you can't write off the spa, the golf The, the theater tickets, the sporting events, we can still write off the dining. So if I go to Top Golf and do some entertainment, with one of my clients, I can write off the dining but I can't write off the top golf.

So I take my staff and 15 people I take with your spouse, and you're saying I can't write off that. So just take math. Okay, I'm gonna move on. I do not want to give her some bad news. I'm sorry, here's mine or theirs as well.

Both. I know this is Hey, you got me on camera. Thank you. So they are recording this. You don't want to get your arms tired. Okay, that's cool. You can do we stand like this. Okay, so anyway, I'm the Dodgers sea gas. Sorry. Now, let me say this for a bit. This is why I want you to get my newsletter every week. As soon as there's a new tax rate. You know, there were five regulations that came out after the tax cuts and JOBS Act. Each one rocked my world. I'm putting those in my newsletter for you.

One of the big ones that you would have gotten alerted to is in 2018. And until 2023, so it hat started last year. And it's now this year too. And I'm glad I brought it up. I thought I wouldn't do this because I yes, anyway, so entertainment is gone no longer right off until 2023. When that, because all these tax cuts and the 20% is temporary, is temporary till 2023. And then Congress has to revisit this that's how they punted it to the next Congress. So no entertainment, that's a spa, the golf, whatever.

So people are having to reevaluate this. I did a TV spot in LA, where the entertainment industry is freaking out. This is affecting golf memberships, it's affecting skyboxes and all the baseball games football games, because those skyboxes are no longer a write-off for the corporations and the theater tickets the company buys for succeeds at the theater and gives them to their employees can't write that off anymore. So be careful with that now dining is okay, do you know there's a golf course down in Alabama and this was a cool strategy.

You know how you pay annual fees to golf, the golf membership Well, that's no longer a write-off. So what they did is they said you can eat at the club as much as you want in the Golf is free. And they changed the golf this is serious the impact this law is having golf memberships are now being changed to all you can eat and the Golf is free. Is that smart? I was like oh my gosh, I freakin love that. So anyway, so now team-building events for employees are okay. But there has to be interaction.

A workshop a lecture a spa isn't going to cut it a football game a baseball game or Top Golf so you can so be careful with that you I have YouTube videos on this and articles and videos on my website and I've got a little flyer, you can get more info. Okay, let's move on. Okay, number two strategy. Now, this is easy stuff, I'm just going to hit a couple of easy ones. And then we'll come to more hard ones. But this is one that affects everybody in the room. Everybody in the room is going to save money on this. Some of you are like Mark, I don't need an escort. That's cool.

Auto versus travel. Travel is 100%. right off. Travel is airfare hotel rental cars, trains, subways, valet Uber taxis, that's all 100% as long as the trip is good, with a business purpose, you're going to write it off. So I want you to have a business purpose for the trip. And if you're there multiple days, you have to have a good reason while you're there for multiple days, or four hours or more qualifies as a workday. So if you're going to go travel somewhere and go work on one of your rental properties, you want to be there for hours a day. And then it's considered a business trip and the days of travel are considered business as well. question on this? Yes.

So if you take your business partner, someone on your board of directors, your board of advisors when your kids are on your board of advisors a topic I'm not even getting in today any of you that have kids over age 15 should be on your board of directors board of advisors and you travel with them or their visit my daughter's work in my book table out there. She's a complete tax write-off forever all of our school tuition. It's going to be why you know, and I have to write a check to freakin BYU but I don't I give her 1099, and then she pays her tuition. I get 100% write-off.

See what I'm saying? Okay, so anyway, any travel with another person that's business-related and you're flipping the bill for them. That's a write-off. So that's travel. But let me give you an example of travel days, which I love about this. So let's say you travel on Thursday. You're going to do business on Friday today. So you flew in yesterday. Darren Munson, one of my clients is here. He flew in from Minneapolis. Yesterday he flew in, that's a business day. Today's business because we were here, doing our workshop, you'll be someone, you'll be here tomorrow for business. Oh, but you got stuck here on Sunday.

Maybe you go on a hike, maybe you just enjoy the area, and you do business on Monday because you had to meet a client or go somewhere, do some business, then I travel back on Tuesday, 100% right off the whole six days. Because if you get stuck somewhere on a weekend, as long as you bookend it with business on Friday and Monday, the whole trips are right off. That includes your hotel, the food that 2% on the food, but 100% on all the other travel. So all of you here's why this is such a great little strategy. So many people I look at their tax returns. And travel is like a small item. I'm like, do you go anywhere? Do you ever go to Vegas?

Did you have your board of directors meeting this year? I just have one sheet of paper from Legal Zoom. Okay, that's part of the problem. We'll get back to that. But we need to have a real functioning company where you're doing meetings everywhere you go for travel. Oh my gosh, I have so many examples, but we'll move on. Now. Auto This is that this is the one that's sweet. Oh, my gosh, guys, you're gonna love this. Um, any questions on travel real quick. I'm sorry, I'm talking so fast because I want to get so much out to you in just two hours.

Okay, she's going to Jacksonville, Florida to look at another property. She said no, she's not going to Jacksonville property looking into the property. She's going to Jacksonville, and Jacksonville, Florida to check on her rental. She's going to go to Jacksonville, she has a rental down there, she's going to go meet with the property manager, go say hi to the tenant, go meet the pest control company, kind of check on things. Oh, and while you're there, you're going to go look at another property 100% right off, done.

So I'm saying now also, you cannot write off a trip to go shopping for property. You're like Mark we had to Hawaii and we looked at a bunch of rentals. Okay. shopping trips are not a write-off, you have to be checking on something you already own or making an offer that I can write off the trip. And if you're the 10 days in the Bahamas, I might write off 100% of the airfare. But I'm not going to write off every day you're there for your board of directors meeting you get one day. So this is why workshops meeting with clients meeting with customers checking on real estate making offers. My wife says mark, just show me you love me and take me on a trip.

That's not a tax write-off. No, I can't do it. On our 20th anniversary she goes I have to sell books in a lobby on our 20th anniversary. I go, honey, they're paying for the montage Come on. Thanks. Hey, it's the montage. So yes. But never made a bye-bye. I would not write that off. He's got to be legit offers he said he went to another state looked at some properties interviewed some property managers but never made an offer and kind of runoff my trip to Arkansas.

Would you make a legit offer after on one of the things you looked at, okay, where I'm in the money but it's got to be legit? And if you're in the regular practice of making offers like this, I'm gonna be cool too. But if you're buying your first rental and you went to go see grandma, in you know Kentucky and then you never bought anything, I can't write off that. Now on that last note on this to our board of directors is my family, you know on my own escort, even though having a law firm accounting firm and other board members are there, but on my escort, it's my family's board.

So it seems like when we were living in California every November, I'd load up the employees to kids. we'd fly to Salt Lake City get our rental car the minivan and drive to Idaho to go check on the duplex that I bought right next to my mother-in-law. We'd work on the duplex. We'd have turkey dinner on a Thursday. I don't know why. Then I'd load up all the employees get back in the rental car drive back to Salt Lake and fly out 100% right off everything because I was going to check out my rental I literally bought a duplex next to my mother law is that we're buying rentals were you freaking go okay. Oh, yeah. Yeah, yeah.

She's saying I'm making offers I have legal costs this and another. You're going to take a write-off for those and yada yada. Now due to time if people funnel in from the last class Come on in join us. I'm not going to take a break. We got to blaze through we're already behind schedule. Okay, now, auto guys, this is going to blow your mind. I'm not even kidding. You know, in Chinese culture this year is the year of what anybody knows. You're the pig. Okay. In the United States, it is the year of the auto.

The tax cuts and JOBS Act are freaking off the chart. So even though you can't write off your spot, pay attention. Look at me, okay? Even though you can't write us a spot. I'm just joking. Just like taking notes on your phone. I believe you. Whatever. But I would say even though you can't write off entertainment, the ATO got better. Why do you think they made the auto deduction better? What was Congress trying to do?

Encourage auto sales similarly stimulate the economy to make money for us with our GMP. So here's the deal. That that I want to show you this. There are two ways to do your auto and all of you have an auto deduction, and I can guarantee half of you your accountant scared of their own And not maximizing it. You got to look into this, make sure you're following this one. So number two, I'm sorry, the two items. Number one, you can do mileage. So you can do 58 cents a mile this year is the highest mileage deduction ever, per mile 58 cents.

Just to have fun with this. Oh, my phone's outside, who's got some aggregate and pull up your calculator on your phone? Just driving a Prius that will admit it, anybody can throw it out and be driving a Prius. Okay, I know. I'm sorry. It's, I know. I used to drive a leaf but I was sick again with beat-up truck shots. So okay, so Okay, you got a calculator. So let's say what do you get on your Prius? Hold it. Oh, she walked out. What do you get? What do you think? 40 miles per gallon.

Okay, so let's do 40 times point five 820 $3.20. So for every time I fill up a gallon of gas in my Prius, I get a $23 write-off. Even though the gallon of gas what 250 to 75. That's the power of a car with good gas mileage that did not don't even bring up the electricity. So now I've got the mileage deduction is off the chart, you literally get a $23.20 deduction for every gallon of gas you throw in your Prius. So that's mileage, and we got medical moving terrible, go there. But the other option is actual.

Now I'll tell you for the entire practice of my career last 20 years, if anybody had a car 99.9% of the time, we would go mileage because car actual sought because you got there were all these depreciation limits from 1970. In fact, let me give you an example. In 2017, a luxury vehicle was anything over 15,800. I mean, like, crazy, this is like really 1970 anything over 15 eight was a luxury car. So if I bought a 2017 $40,000 car and drove 100% for business, you know, my maximum depreciation for the first five years total prefer for five years would be $15,060, it would take me 19 years to depreciate that car. This is 2017. That was the rule.

So this is why your accountant had to do in mileage. So be it. Under the new so-called luxury automobile limit. It's now 50,000. And there's a bonus depreciation of $8,000. If you go out and buy new or used, which has never been allowed before, you always had to buy new. So if you buy newer used get an auto, and I can write off the first eight grand and the luxury limits up.

What that means is if I bought a $58,000 car, my depreciation in the first three years would be $43,000, I could write off 75% of that car in the first three years, plus fuel repairs, maintenance and insurance, and interest, I'd have to do 75,000 miles to just get a $40,000 write off, I'd have to put 100,000 miles on that car to get the same of actual. Now we knew this was sweet for SUVs and trucks right? But the auto is now freak in off the chart. And this is awesome.

So if you're in the market this year, you cannot change the actual unless you buy a newer used car. Hence we are stimulating the economy. go out and buy something new or used. But that's beautiful because you can go get the Pre Owned Beemer with a 20% off the sticker price and not have to pay. You know the brand new car even though you like the new smell. Don't do it. Be conservative, be careful. This is crazy. But it only gets better. ShamWow Okay, now let me throw this out first. It gets better with SUVs and trucks and big trucks and RVs. The bonus depreciation is unlimited.

This was a loophole in the tax cuts and JOBS Act. No one even got this until March. The first three months I didn't even see this. This is crazy. Do you remember the old rule with an SUV you can do to only do 25 grand? And then you had to depreciate the rest. Now I can go out and buy a new SUV or used this year and 100% right off. What are that nuts? Question? Or was it on the SUV and truck? Still, trying to put this together federal?

Yeah. because he'd been bucking for a new truck. Oh, no. Now we've got marriage counseling fees. Yeah. Those could be deductible as Yeah, marriage counseling isn't deductible in our medical expenses. So we can do that to buy a $50,000 truck hypothetically, what $1,000 down finance it's don't get all the write-off.

Don't let her hear this. Okay, so what he said was, I could put 1000 down, financed the whole rest of the freaking truck 50 grand used, and write off the whole thing this year $50,000 write-off. Huge.

Now that's assuming it's 100% business use, which means you better have another vehicle for personal use commuting, and personal. I tend to go with most of my clients at 90% business use because I know you're going to go to the mountains, you're going to go to the lake, you're going to go to the grocery store, you're going to go out to the movies. So it's really hard for me to look at the IRS in the face and go, yeah, they're 100% business use now. And that's unless it's a delivery truck. Okay, this is only a strategy to three. Okay, we're on four. Okay, anything else on auto real quick. All of you should be finding your strategy and dialing it in for the year on auto. Okay, family on the payroll. How many of you have kids under age 18? Anybody?

Okay, at least half? I'd say half the room. How many kids over age 18 act like they're underage? 18. That's good. There we go. Any grandparents out there? Oh, okay. This is good. So here's my concept. hang with me. Quit paying taxes, like millions of Americans, and giving your kids money. Quit paying taxes and paying for your kid's soccer, school, lunch, school clothes. Quit paying taxes and paying for your kid's tuition with your money. Put your kids on your payroll and take a tax write off and let them pay in their own bracket. That's it.

You don't have to be rich to do this. Just change the way you're already doing it. If you're spending a couple of grand a year on maintaining that little soccer kid baseball kid's school clothes, school lunch, which you know you are, quit paying for it. All my kids at age seven had their own debit cards, Mom and hold them in their purse. I have a 15-year-old now. In fact, Molly, a 15-year-old last week that I'm going rollerskating she got some new roller skates for Christmas kind of rolls canes thing right now. Whatever. So she's like, We're going roller skating, I need 20 bucks.

I'm like, Did you come by the office and do your paper shredding your thing? Yeah, I came by and I'll do I'm kind of Okay, cool. So she came by, I didn't give her 20 bucks. The company transferred $20 into our family management and down to her and she took we took a $20 tax write-off for her to go rollerskating. So I took the tech shout-out for that. See, I paid my kids for working in my business, they should be on the board. They should be having duties, and I'm just paying them. And now I'm taking a tax write-off and letting them play in their own bracket. So that's the concept.

Okay, now, how do we do this? By the way, you're going to save taxes, you're going to hopefully teach them to be a little more self-reliant, you're going to teach them small business skills, all my kids have their own small business, save money in the business without having to hire outside help, and teach them how to do a hard day's work. This is what we're trying to do, hopefully.

Okay, so, oh, here's a picture of Molly, this is her she got employee of the month. We're excited. I've kept that little piece of paper. And remember, this has hurt the bank, which we opened her bank account because all the kids have bank accounts with Wells Fargo. She fell asleep on the job here. Almost got fired for that, you know, this is my teenager getting paid.

They're not as grateful. But notice what she's doing on her computer. That's QuickBooks. All my kids know how to do QuickBooks to so we're doing QuickBooks and all that. So powerful. Now here's how we do it under the AJ team. We never pay our kids out of a sole proprietor out of an escort. So for those of you that have the escort thing going, what we want to do is set up a little sole proprietorship. So you can have an LLC, or you can have an S corp or an S corp, tax LLC taxes, an S corp, okay. And then over on this site, you've got your rental properties, right? And there's your rentals and everything's cool.

For your kids under age 18. You never pay them out of your escort, because then you have to withhold Sue to FICA and workers comp. So what we do is we set up a little sole proprietorship, or you can pay him out of your real estate business, you could pay him out of here, but we pay our kids under age 18 out of a little sole proprietorship. So I transfer money from my escort, then I transfer money to Molly done. I just got a tax write-off. And if I can push, how much can I do? Right?

I'd say I start putting kids on the payroll when they're about six years old. Then they can polish shell casings with their fingers. They can you know, work the paper shredder through can always get stuck in the paper shredder but it's okay. They'd grow back. But these are jokes. Can you guys get into this? Are you not having fun? I'm trying to throw it on my best jokes here. You're killing me.

Anyway, so what I want is the kids having little jobs in the business, and you might pay a six or seven-year-old 100 bucks a month to clean the office shred paper. a grandchild could be helping you out. Anybody that young, but then when they turn 910 1112, they're teenagers. This year, this is where the Trump GOP bill got better.

You can pay your kids up to 12 grand, you get a complete tax write-off, and they don't even have to pay taxes. They don't even file a tax return. That's their standard deduction. You do not 1099 them, you do not W to them. It's just called outside labor. So there's now two, there's no 1099. And I could pay him up to 12 grand. This is where I just yesterday, I told you at the beginning, I had that phone call with the client. And we moved to move their payroll from their S corp to their sole prop in one fell swoop. And we saved 7500 and FICA tax.

Anyway, so huge, yes. What is does the IRS justify that being a reasonable wage, okay, so you need to come up with a reasonable wage for your child, no matter what age there is, we're going to try to help you as your accountant. If we see it off the chart, we're going to warn you, but um, you know, it's cool to see a six or seven-year-old getting paid 1000 bucks a year. And then teenagers, it can range from five to 12 grand somewhere in there, depending on if they're working in the summers working to after school and all that. And they don't even file a tax return, you get a write-off. It doesn't matter. All of you. Let's back up.

She said What age do kids file tax returns? In the United States right now, all of you in the room? If you don't make more than $12,000 are you required to file? No, that's your standard deduction. It's not an age thing. It's your earned income. So none of you in this room if you make less than 12 grand, which I hope doesn't happen. But if you make less than 12 grand, you know, you're only required to file and that includes your kids. Okay, now, here are a couple of options. She's now I said, you don't have to, you might want to know that my kids have some earned income. I don't know what can I do with that if I file the tax return, all my kids could open a Roth IRA.

So now I pay Molly four grand, I actually paid her five grand this year, five grand, I paid her five grand, I got a $5,000 tax write-off, which I didn't have before. I can take her five grand put it into a Roth IRA and her Roth IRA can invest in my next LLC to buy rentals, and all the money that comes out tax-free, I can pull out all the contributions tax-free for college, and I'm building a Roth IRA for a 12-year-old. Now, I want to file a tax return. If I want to start funding Roth IRAs. Also my oldest son now that's 23, went in he this year, he has a fix and flips in his first home, purchase these 23. I'm so excited.

He went in and got his own credit in his own loans and did the whole thing on his own with some coaching. But on his own credit, because we've been filing tax returns for the last four years. So when you start filing tax returns for your kids, and getting some credit cards, and putting them in the drawer, you're not only building a tax deduction, you're also building credit for them in the future.

There are so many ancillary benefits here. My Sydney that's out there at the table. She's been on my payroll 1099 because she's over age 18, for Latin for years. last two years, she's filed tax returns. Now she gets Obamacare health care for $20 a month. I dropped her from mine. But Mark, you can keep your kids on your healthcare till they're 26. Why when she can go out and get her own plan for $20. And she can do it because she has a tax return. So there is a point where you might want to file a tax return.

But you don't have to if you don't want to keep this sweet? Yes. Well, he said the earliest age you can pay your kids. I've got a client that pays his kid 10 grand a year and she's two years old. He's in Maui. He's an artist. She is literally in paintings that are sold for 1000s of dollars. I've got a pediatrician that has these three and four-year-olds on and he pays them three or five grand and there are pictures on all of his social media, on his brochures, and on the walls of his pediatrician, law, or doctor's office. So if you can find a reason why it's legit. Now if you're going to use the modeling strategy for your kids, Don't show me your kid. I mean, I'm sure they're adorable. I've seen some of my clients, kids. I'm like, Don't bring them to the audit. I don't think it's gonna fly. Yeah, I just

that's rude. I know. But anyway, okay. Now grandparents would never say that about their grandchild, but Okay, now if they're over age 18 let me just say this once they're 18 or over. Once they're 18 or over, then we 1099 I just turned it on my kids. I'm done. So if they ever need money, I never give him money.

They always get a distribution from the S corporation. Yesterday was January 31. Any of you processed your 1099? Yes, you did. I process my three kids to do. I usually hold it until the end of the year because I love at Christmas time to put their 1099 in their Christmas stocking. They love it. It's really nice, they come out, they want to play and I'm like, hey, go play with that. 1099 It's a really neat thing. Now that's the older kids now. grandkids. Oh, yes. Go ahead before I do grandkids. Yes. Now she made a great point. And I have 3045-minute videos on each one of these topics. Today, I've actually got 60 videos and 32 hours of content that you can watch with a bowl of popcorn and Diet Coke. I'm just trying to hit the highlights in two hours. So I'll tell you how to get that if you want.

But she said to hold it, Mark. I don't have an escort. But I got a bunch of rental property and LLC. Sure your kids should be helping the property management 299 done. So you can pay him out of here. You can pay him out of here, or you can pay him out of here. It's the ones that are under age 18 that I have to funnel through this. Yes. So I sent over 18 my CPA told me that he has to pay self-employment tax. Yes. Take good comment. So once you pay your kids over, she said escort it's S Corp. I know some of you guys want to call them an escort. That's our Vegas strategy. But this is the Utah strategy to S corp as in p as in Paul. Okay. So, S Corp. So when you give them 1099, he is going to be subject to self-employment tax. But now what does my son have when I give him 1099? What does he have? What's our number one tax strategy? You know, he now has a small business. So now I write off his mileage.

He comes home for Thanksgiving. Now we're having a business meeting and Thanksgiving, all that mileage is a write-off. Oh, I helped him with his cell phone. Oh, that's a business write-up. He's got all of his own write-offs. So he is going to pay self-employment tax on the net. But is it cheaper than he pays tax and builds credit and starts a tax return or I pay tax at my bracket and give them money? Because you want a family plan your taxes? That's the whole point here. If you're helping out the grandkids somehow, or you want to give the grandkids a Roth IRA, you have to plan as a family.

So we sit around the table go Okay, which tax bracket Are you in? Okay, which bracket? No, but so with the grandkids, what we do is we 1099 the parents and then the parents, your children pay the grandkids Miss blossom, you get that sweet, right? So 1099 them, then they pay the grandkids because there's no withholding any FICA, and then you can give the kids grandkids a Roth IRA, and they're a partner in your next LLC. Whoo. Oh my gosh, we Craig Can you guys okay, Isn't this fun? Okay, now one side note before we get to the end to make sure you have a business card handy. Write down your name. And if you want, you're in the drawing and to go get on my newsletter. And you can unsubscribe if you want. But every week I give out tips and strategies. It's free been doing it for 10 plus years.

Your name, email, and phone number. And first name last name, if you don't mind. And then I'll come by in our last two minutes and we'll do a drawing for these three bucks. Welcome to the class. Glad to have you. Okay. Was there another hand over here? No. Oh, yes, you did. I love that. So she said my daughter said we can't forget that. $12,000 1099 because it's screwing up our FAFSA form. I have two comments. Great. Don't take the 12 grand, give it back.

This is classy because kids want help. And I'm just, you know, it's like, freaking when are we going to teach our kids financial and fiscal responsibility? We're going to give them these give them all this money we're paying at our tax bracket. If you want the money, you're gonna eat 1099 learn how to pay the freakin bill. You know, and it's funny. My 21-year-old last year was like this is after growing up with Mark Kohler and coming to my workshop selling books. Finally, after she got a 1099 and she owed taxes She goes, Dad, can you explain these taxes to me? Why am I paying this? Because that finally hurt. It finally hit home.

We've got to teach our kids and our grandkids even if they're 35 years old, or three years old, what $1 is worth and what it means to live in America and have a small business and pay our fair share. And the kids don't get it. Financial literacy is a joke. In high school and college. We have an opportunity with a business. It's an incubator to teach our kids and our family about business. It's so exciting. Second thing if kids are filling out a fast but that means they're getting student loans. If they're getting student loans, I want to have another conversation. Student loans are in a crisis in America over 1 trillion in student loan debt. You know in Wall Street Journal three months ago, they listed because it's a federally reported item how many student loans there are. There are now over 11 people this is crazy. It was in Wall Street Journal 11 people that have over a million dollars in student loans.

The average student debt of a kid coming out of a four-year university now is over 80,000 if it's a Master's it's over 130 you don't have a client that's a plastic surgeon in Orange County. He's been a surgeon for 20 years. He's still paying off student debt. It was Mark, I pack a lunch most days because I'm scared to death that if I get hurt, I can't pay my bills next month. He's a plastic surgeon making half a mil a year. Student debts are scary. They're a crisis. If you can do anything to keep your kids out of student debt, I don't care. They don't need to go to UCLA. They don't need to go to USC. I want to go to this big school you a better freak in get a damn scholarship because I ain't paying for it and you're not better not get a student loan. Sorry, don't get me started. Oh, anyway, so just a thought or two on FASFA Not a fan? Yes.

The number one thing we need to do is take care of children and grandchildren to have a business. Yes. I love it. Did you hear him he said the number one thing we need to do is teach our kids to have a small business. And if I could get Sydney to come in, I would have her come in here. And I'm not kidding. I asked her what is your requirement to graduate from college? See, I bought her a cool Jeep. It's a sweet Jeep Wrangler, three-inch lift with big old tires, guess who's holding the pink slip on that baby. When you graduate from college, you get your Jeep. But you also have to have a small business.

When you graduate from college, I don't care what your GPA is. But you better have a small business that makes money and you've got to have done your graduation, then you get your Jeep. And we have a co what's called the Kohler independence plan, where every year she gets a little more independent. We can't just throw these kids out the door and hope they're gonna figure it out. Either we got to transition and we got to teach them about small business. I've got a workbook called eight steps to start a small business. All my kids have their own copy and they're working through it. It's awesome. Get it on Amazon. It's excellent. Give it to all your kids for a Christmas gift eight steps to start a small business anyway. Oh, yeah, we can get on this topic for a while.

Anyway, I get on my high horse to forgive me. Okay, number five strategy, you're going to love this. Once you're making money, you're gonna say the mark, I want to save more taxes, I paid my kids, I did my salary dividends split. I've got my S corp here. So let's erase this here. Let's get this pretty. I'm going to build a master plan here, you're going to love this. We're going to try to make this good. We're going to divide your life in half. Now, this diagram may not apply to everybody married single kids, no kids, old young Be patient. But generally, this is going to be a very typical structure for my clients. We have your life split into two sides, your trust is at the bottom. Here.

If you're paying kids under age 18, you have a family management company. There's another reason I'll explain in a moment. You've got an LLC that you may have converted to an S Corp. All of you that think you're going to make 30 grand or more this year set up your LLC now later in the year, I can backdate it to an S Corp. So I love that don't call me in October and go Mark I made my 50 grand. Well, you're an S corp in October, you want to be an S Corp. Now I can backdate it. But you got to start with an LLC and it's cheap and easy. In Utah calls we set up LLC is simple or with an attorney console. There's a whole other story.

Okay, you can also have one S corp with multiple LLC. As you know, your escort might be a partner in or real estate development. It might be a partner in a hair salon, it might be a partner in a restaurant. So whenever you set up partnerships that are created ordinary income, your S corp as the owner, is your parent operational entity. This is your ordinary income. If you let it Kangana I've threatened highlights This is deep, got so much content here. But this S corp is owned not by you. But by your trust. You're going to take a salary out of this, and you're going to get a K one. And then you're going to take your 199 deduction which is a 20% deduction. We're going to find the balance between the salary and the K one, we're going to follow the Kohler payroll matrix.

Oh, you got kids, we're going to 1099 or older kids that are 18 and over. And we're also going to pay our kids under age 18. With our family management company, if you have an LLC, and you're just buying your rentals, which is going to be part of your strategy as a real estate professional, and you've got your rentals over here. I could pay my kids under age 18 here and I could also 1099 my kids 18 and over I'm going to buy rental properties creating passive losses who owns my LLC is my trust. What else does my trust own? My life insurance and my home my personal residence? I'm bringing together your picture where this is what I do in a console.

You may go Mark oh my gosh, I'm gonna pay you several $100 an hour to do this. Yes, once a year. This is your teeth cleaning. This is your physical once a year you meet with your tax and legal adviser and you put your year together What are my action items where am I jacked up. I want to save you 20 times. Whatever you Haney and an hour to put together your plan for the year. You got moving parts, you're counting know what's going on? What's your plan? Well, I'm gonna figure it out on TurboTax. Okay, good luck. Good luck with that. I hope it works out well. Okay, so we want to bring it together, you want an advisor that can understand your picture, then you say the mark, I want more write-offs. Okay? Let's say you're netting 200 grand. If we went back to the matrix, that might be a salary of 60, you're going to take a net of 140. You're going to get a tax write-off of 28,000 under the new Trump deal.

Then we're down here to Oh, my gosh, 118 I sorry, 112. Then with this 140 grand, you'll say Mark, I want some more write-offs, well, are we going to deploy it and buy some rental property? I hope so. Or we can take our w two and fund our own solo 401k. With a solo 401k, you may say, Well, Mark, I don't want to buy stocks, bonds, and mutual funds. This is ridiculous. I don't trust Wall Street. I don't trust Wall Street either. But we're going to set up a solo 401k that can buy bitcoin, it can buy racehorses, it can buy Super Bowl tickets, it can create an LLC and do fix and flips and rentals and real estate, it can do hard money loans, it can do financing, your solo 401k is controlled by you, the trustee, we got that service at our law firm to get your 401k going.

Now in this example, if your salary 60, this year, you can do a $19,000 deduction. So that's $41,000 w two, you've just carved out $19,000 of tax deduction, you can carve out 19 grand, and go drop it into your 401k. This is where it gets good. hang with me. Well, you're a hard worker, what should the company do for you, you just put 19 grand in your 401k? What should the company do? starts with an M should do match. And you don't have any other employees, you can discriminate all you want. You can do 25% of salary or 100% match whichever is greater. Well look at this 25% of 40 grand, that's 10,000, I can drop another 1010 grand Oh sorry, 25% of the 60. So that's 15, I can drop 15 grand in here. Holy crap, I just got a tax write-off for $34,000 a little better than an IRA. Right? This is how the rich get richer.

This is why small business owners can do better than the average American, I can only do six grand in an IRA. I could do 19 grand in a Roth, which is three times what an average American can do. And I can match it for 15. So now I've got 34 grand in my 401k to go do real estate. I got a tax write-off to go do more real estate. Oh, but mark, that's not enough. I need more. Oh, okay. You married? Anybody married out there? So with my spouse would be the perfect amount to pay. Jennifer, what do you think? I pay her 60 grand, five grand, what do you think would be the sweet spot in this? I don't care about social security. We've been married 10 years, she gets the same social security like me. I am not putting on our payroll for Social Security. She literally gets the spousal benefit, whatever I would get in Social Security. If I die, she gets it. If we get divorced, she gets it. So I don't need to put her on the payroll for that.

Why would I put her on the payroll? Why would I put Jennifer on the payroll? Anybody can? Someone who someone knows to yell it out? contribution? No, it's because she'd love me more if I did that. No. 401k. So I can in a solo 401k your spouse can be in it. It's not just solo the owner, it includes your spouse, so I could pay Jen 20 grand, exactly what she can put in her 401k I'll just do 19 Well, you actually have to gross it up by 15% for the FICA. So it'd be like 21 grand. So I could put her on the payroll for 21 grand, she would put all of it in the 401k which would be 19. That's zero, W two. So she gets zero w two, but we dropped 19 grand into the solo 401k by forgetting anything, one second, one second. I can match I got a match because I'm asking myself. So 25% of 20 grand is another five so I can drop another five in there that's 24 if we're 50 or over, I can add another 12 grand to this. So now I've got $58,000 sitting in a 401k I got a tax write-off to do it. And that 58 can be a deposit on my next LLC to buy another rental property or flip and all the profit goes to my 401k tax-free done.

So I'm self-directing my 401k and getting it Tax write-off to do it funded by 401k driven by my salary level with the 199. A, see how these moving parts work together? And it doesn't take much to understand it.

When you ask your accountant, what are we doing for payroll for me or my spouse to make maximize my 199? A and limit my FIC? In your account goes, What are you talking about? You're fired? They should know this. You should be sitting on a whiteboard once a year designing your payroll because you want to figure out what am I going to put my money? I'm gonna buy a rental.

Am I gonna put my kids on the payroll? I'm going to fund a 401k. What's my pasture going to be? What's my minimal salary? I've got to take. Oh my gosh, should I push that fixer flipper my commission to next year? Oh, I don't know what to do. Yes. You're so unkind. I'll give you that $5. Later, thanks for asking. So he said, Well, Mark, is the 401k. My only option? No, I built this little pyramid to kind of talk about different options that you can do. If some of you're like Mark, these numbers are not my world. That's cool. Can you do 50 a month? Can you do 100 a month? Could you do 500 a month? Let's start out with a traditional IRA.

Let's start saving because we as Americans suck at saving. So let's get into a habit of saving. We tithe we save we live, we save we try to push to the next. So we have some sort of savings account that we can rely on the future traditional Roth, I could do a Sep I literally have a video called I screwed up and data set. What do I do now but you could do a sap initially, then transition to a 401k. I could do a Roth 401k or a pension under a pension. I have clients this is you can do up to $230,000 in a pension. Okay, let me repeat that. The rich can get a ride off of up to $230,000 to fund their retirement account. You can do it is crazy. I had a broker in Heber city. This is about 10 years ago, he and his partner had a huge year in 2005, and six if you could walk and chew gum, where you're not making money as a realtor in this state, he was killing it. He was down in Heber, he made a ton of money and a couple of deals.

They said let's fund our pension plans. Together they put about 200 grand each got a tax write-off to do it dropped 400 grand combined into a pension with an LLC. And they bought a development property out there. And Heber. How do you think that worked out? Right? Awesome. So they got this development done before the 2008 crash. And they tripled their money. They put $1.2 million into their pension plan tax-free. The IRS said Well, you've exceeded your plan contributions for your life. So you can't put any more money into this pension. But you're done. It's growing. And you can take a salary out and you know, you can retire and pull your money. There are so many options. So as you start making more money, you want to ask your advisor What can I do besides an IRA? What can I do the same 401k how much money you make? And what about my HSA? What about my HRA? We're not even into health care yet. He said What is this change when you're 70? and a half? Um,

no, you can still contribute to the 401k after 70. What happens at 70 and a half as you have rmds Hey, sir, that's walking out. What do you guys, can you tell Matt Sorenson to come in here real quick? He said, my table, I appreciate it. Can you tell him say Matt Sorenson coming here? Thank you. Okay. Um, you can still contribute to a Roth, you can still contribute to a 401k and a regular IRA, even after age 70. The issue is, the IRS doesn't want you to die with a bunch of money in your retirement account. So they make you to start taking rmds those are your required minimum distributions.

So at the end of every year, in December, we're busy because clients are calling up going, here's how much money I've got in my IRAs and everything, what's the minimum amount I have to take out. And so we will literally deed them a piece of real estate, or some cash to meet the distribution. Here's a quick, cool strategy. I have clients that buy rental properties in the Roth IRAs, they may even get a Roth with a loan, and they're slowly buying that rental property. And then at age 5059, and a half, they can literally deed the rental property to themselves tax-free and live in it. So the Roth can own that rental property up to 59 and a half, and then you can just deed it out. Now we've got the man the myth, the legend Matt Sorenson. Sorry, I had to call you in I got stumped on a question.

This is Matt Sorenson, my law partner who taught the class on IRAs. Thank you for adding a law partner before that. Yeah, that's whenever we're on the radio show. This is my partner Matt Sorenson, we get some questions. So I'm trying to say law partner, okay, now, here, I'll give you this. Okay. So here's the question. So anyway, sorry, I didn't mean to be rude to anybody that has partners. I'm just saying we're trying to be clear on that. Okay. Now Even though we stand here close, okay, so are you just hold it like this and do this, or you're good to go? Okay, so here's the question with a 401k. Do you have to take rmds at 70 and a half?

If you own the business, yes, if you're not an owner in the business, and you're still working, you can avoid RMD. But if you own the business, there's a there's an exception that says, When you reach 70 and a half, you don't have to take RMD. If you're still working, unless you own the business, then you have to, okay, and can I contribute to my 401k, even after age 7070? and a half?

Can you contribute, if you're still working as the same rule applies as the r&d co-working, and I own the biz still working, but if you own the business now? Oh, once you're 70 and a half, you own the business, you have to start taking RMD you can no longer contribute from a 401k to a 401k. What happens if your spouse owns it? Also, I think you're screwed. Okay. Yeah, that's a technical term. That means you can't do it. I'm pretty sure you have the same problem because pensions have RMD. Also, then she got to start drawing it out at 70 and a half. You can still put it into a Roth IRA. The answer to everything? Yes.

All right. Okay, thank you. Can I be excused you can be excused? Thank you, Matt Sorenson, we love you. Okay, he's got the best selling but hold up your book. This is the self-directed IRA Handbook, the second edition, the best book in the country best-selling book on IRAs, and I don't want to take these home. Go visit. Um, one other thought, guys, I want to just say this real quick. And we've only got 20 minutes left. And I have a couple more points. In this little master diagram. One thing that I talked about in my business owner's guide to financial freedom, let me get deep for a minute.

One of the problems with a lot of small business owners, and I consult with, if I just do three consoles today, I'm going to meet with 1000 business owners a year, that's 300 business days a year times three from 900. I learned things from you, oftentimes, more than you may learn from me. I hope not, you're paying me. But I literally see patterns, I see patterns of success and patterns of failure, where clients just get screwed up. And I'm like, oh, and then I see other clients. Oh, my gosh, this is the best idea ever. So I wrote a book about the business owners' guide because Wall Street isn't telling you this.

They don't care. Wall Street is about employees and big fortune 500 companies, they are not about the small business owner is Wall Street versus Main Street in our tax legislation. Just last year, there was a whole carve-out for individuals, a whole carve-out for small businesses, and a carve-out for big corporations. That's how it works. Well, no one's in here saying, Well, my financial advisor, Merrill Lynch, that I should just buy more of this of their crap, right? We need Okay, so what do small business owners think of as their number one retirement? What do you think? What's what small business owners consider surveys that have been out there? Does their business owner see their business as their number one retirement? So they get into a fallacy?

Where do they put all their profit back into what? Mark my business is my best bet. I'm going to take all my profit and drive it back into my business. Well, maybe it's not their best bet. What happens if there's a problem in their business? Maybe the market shifts? Maybe their market changes? Do you think business owners are often really about what their business is really worth? Is it sometimes an emotional issue, my business is worth this and my kids should pay me for it. My farm is worth this and my kids are lucky to get it. Sorry, dad, we don't want the farm. We don't want the business. We see what it did to you. We don't want it and all sudden they're stuck with this business.

They think it's worth more than it really is. You see all these paradoxes that go on in a small business owner's mind. So with Randy, looky we wrote this book to say okay, in this landscape, what should I be doing as a business owner? And all I encourage you to do is take a little profit, I want you to drive money back into your business. If it's working, that's cool. But take some out every year to fund some other options. Why are we not buying more real estate and we're all here. We're here at the summit because we know the value of the good real estate, cash flow, and appreciation, we get tax write-offs.

I don't even get into that. But we can take some of our profit and deploy it into real estate so that when I turn 59 and a half, 67 years old, 4050 I can have cash flow from my real estate. I can have cash flow from retirement accounts that are completely asset protected from a lawsuit. There are only two people that can touch your 401k the IRS and your ex-husband or ex-wife, that's it in a divorce or an IRS audit. No one can touch OJ Simpson is still living on his 401k there's a whole chapter in my book be like oh, Jay, and I got because we got we're on. We're on the second edition. Now. He's on parole. It's so exciting. Okay, anyway, you can live like oj. So now if your business gets into a huge loss It's gone. But no one can touch your 401k. So peel some money out, invest in what you know best. Anyway, just get going on that. Thank you. I appreciate that, hopefully, that hit a chord with a few people appreciate it. Okay. Now I get into real estate because I want to just hit a couple of last points.

Everybody in this room, I would presume, is doing some sort of real estate in their life. As such, the IRS is going to define you as one of three types of investors. And on your tax return, you can check the wrong box very quickly. You can be a passive investor, if I buy real estate, and I'm a passive investor, where'd all my write-offs go? Do I get to write them off against my other income? No, they stay stuck over here. They're a passive loss. And they go into a bucket, they go into a passive loss carry forward bucket.

And I love this bucket. A lot of people go, you know, Mark, my accounts and I make too much money. And I don't get a write-off for all my rentals. So I don't write off my travel to check on my rentals. No, no, I want to write off the kids in the travel. Because all those losses go into a bucket. And someday you can pull them out. Anytime you sell a property, I can pour out your bucket on any property even if your day job is being a pharmacist. So even if you're just a passive investor, we want to build up this bucket of losses and carry them forward.

Now, an active investor gets to take a write-off of up to $25,000. So if we generate any losses here, sorry, any losses in my rental real estate, I can deduct it against my w two. But if I made too much money, if I make more than 150, grand AGI, I lose the write-offs, or do I lose them? Where do they go into my bucket? So every client of mine is at least category two active, I'm active. All you have to do is be a decision-maker. You don't have to be a realtor or a contractor hours requirement doesn't matter. Every one of you should be active in your accountant should be checking that box. I see tax returns all the time, rental losses for up to 12 $25,000. And their incomes around 100 grand and they're going in the bucket. They forgot to check the box. So you've got to say Where are my rental losses going?

How much money did I make? Third, if I'm a real estate professional, option three, how much of these losses from rental real estate, which all of you in this conference are looking at these rental losses, how much of them are deductible against my other income? All of them. This is huge. This is why realtors and contractors and real estate flippers real estate wholesalers investors, we love rentals because you get to deduct all these losses. You don't have a bucket, I have a bucket because I'm a tax lawyer. But you as real estate professionals should be taking these losses and write them off against all your other income. Now here's the beauty. You say well mark, I got a day job. I still buy real estate and I have rental losses but they go in the bucket because I don't do 750 hours and it's not my primary job. I have a different job.

You got to be both tests. Well, here's the beauty. If your spouse qualifies you both qualified. This is big. Okay, now I see this beautiful couple upfront. I'm just gonna pick on you. So both one of you has a day job one has a day job. Oh, god, he's a financial advisor w two and she's the real estate broker. You don't even know her street value. This is cute. I'm sorry then to come out right? Just this huge you know the tax deductions on their tax return. It's just like a match made in heaven. If he was a single guy w two financial advisors he'd be screwed. No write-offs now he marries her She's so pretty much. This is why I'm setting up a website called tax And, you know, you might enjoy long walks on a beach I the K one and I'm a real estate agent. Oh, you know,

you know, normally I would say you want to look for someone really boring. With a W two benefits, maybe a financial advisor, you know, a pharmacist, a dentist, you know, someone just day job, no goals or aspirations. You know, just keep it steady. And then but the beauty isn't funny you can see it all the time. I see a couple who both have these stale w two jobs with a glass ceiling, and they're frustrated to try to build wealth. They can breakthrough. They're just stuck to they're trying to get through that mentality. And I say, hey, it's not an all or nothing one of you can provide the stability and the other one can start to experiment the entrepreneurship and real estate. It's don't quit your job yet. Just get started.

I have a whole article on Google if you typically don't quit your day job Mark Kohler's article comes up because so many people call me Mark I quit my job. I'm an entrepreneur now. I'm like, No, no, no, we don't quit our job. Until the business can support you, let's make sure we're out there testing the waters and getting the real estate going. And so the beauty is if you can build synergy and have one of your partners, your spouse, whatever, building that real estate and the entrepreneurship that gives you no glass ceiling, you can break through and build retirement options. And the other one's got that stable stableness that we need. Because as entrepreneurs, we know, our incomes going to be up, down, up, down, if you were living on her, you'd be going crazy, right? But you have the best of both worlds. When I have two entrepreneurs that are married.

Oh, my gosh, buckle up. We're making money. We're losing money. We're making it. This is why when I got married to my wife, she was kind of excited. And she was attracted to me, not only for my looks but because I was I had all these traits, I had all these dreams, she grew up with two w two w two blue-collar workers. Her parents are wonderful. But they were just like the worker bees. And every year they get their one week of vacation, they get into truckster and go and then come back and everyone had a paycheck, it was week stable. She meets me in college, and it's like, I got dreams, I'm gonna do this, I'm gonna do that. And you know, she's like, well, it's kind of cool, you know, and it's got to get lucky, I'm gonna go with that. So about five years into our marriage of making money and lose a million. And a little bit of marriage counseling, I found out that my counselor said, women do want some stability to that we need to have stableness, we need to create some stableness so that we have security, and I was like, Oh, okay.

And so that lifestyle of stable stability was kind of a shock. And now we've had some real highs and we're doing okay, and but man building businesses hard. And so you want to, and I give like little classes, whoa, sorry. I do give classes on, you know, building a business in a relationship because it can be really challenging you communicating and all that. But from a tax standpoint, it's really exciting when you have that real estate and day job combination. It's really exciting. So anyway, real estate professionals, all you should be thinking any thoughts or questions on that? I got one last thing, one last strategy, and then we'll call it a day. We got 10 minutes left. Any thoughts or comments? Okay, now, this old now I could well, here's the thing. It's a two-part test. So here's the deal. I'm just going to use hers. What's your first name? Carrie. Okay, Kerry's got to meet two tests. First, her primary job is real estate done. She's a broker.

She has to do 750 hours a year being a realtor broker. That's 13 hours a week, if she's a realtor doing anything she's done by Monday night. Right, done. So she's got her seven or 50 hours. Now she buys real estate rental property. Can she on property managers? Can she buy a bunch of rentals in Tennessee and still get the write-off? Yes, there are seven tests that allow you to qualify as a material participant. And so we got to find out which one you are I once had a realtor broker who had 30 rental properties and IRS argued that he couldn't take the passive loss deduction. I literally had to go down to the IRS building and meet face to face with the agent fight through it. And I laid out the seven tests and I go, we qualify under two, five, and seven. He's like, Alright, you're done. But they don't want to you don't know it. You can get screwed on this. So anyway, but there are ways to qualify, you're good.

Health Care Strategies for Real Estate Investors

Last strategy. I just want to bring this up because it's so powerful to healthcare is such a burden. Health care expenses are again continuing to climb health insurers at dinner, whose health insurance didn't go on premiums this year, right.

It's terrible. And so I have this plan called Kohler care. It's not Obamacare. It's called Kohler care. And I have nine ways to help with your health care. Now the beauty of this is an item to now no longer applies to health insurance penalty is gone. So you don't have to do the health insurance penalty. But I want you to choose the right type of health insurance, deduct your health insurance, all of your health insurance premiums should be paid out of your escort. But there's so much I've got a chapter in my book on this and more. But the one thing I want to highlight just on this list for everybody here in our last few minutes is the Health Savings Account.

A lot of people forget how powerful these are or don't even know, an HSA. I'll just summarize it this way, is like a Roth IRA on steroids. for healthcare. That's what it is. Just let me repeat that. an HSA is like a Roth IRA on steroids for health care. The reason why is you get a tax deduction to put money in your health savings account. It grows tax-free, and it comes out tax-free for any medical expense. teeth, dental, teeth, dental, eyes, co-pays deductibles, prescription drugs, emergency room visits, massage, therapy, acupuncture, all of that's covered under your health savings account. So anybody who's got an HSA here, anybody already oh my gosh, half my room.

Okay, now this is good. How many of you that already have an HSA how many who's got their debit card with Anybody can you look at Can you just hold it up and show someone that's this gentleman right here. This is a debit card for his health savings account, and he can go through and pay for his prescriptions. Look at that. It's like a visa for health care. You love it. This year married or single? Single, any other single real estate professionals out there? Okay, ladies, okay. Let's see. Come on. Let me put your number here upon the board. Okay. I'm trying to get the tax match going you can be my first testimonial. Right now. Single this year he can put 30 $500.10 minutes left.

He's single, he can put 30 $500 in his HSA this year and get a tax write-off no matter what his income level is. Whether he owns a business or not, whether he has an S corp or not. Whether he has passive rental income or not, doesn't matter Singler, not 30 $500 right on the front page, your return, Mitt Romney can take a 30 $500 deduction on the front page of his return. Mitt Romney is old enough you could probably do 4500 get $1,000 makeup over age 50. So now that goes in his HSA and grows tax-free and comes out tax-free for healthcare. Now, here's where it gets good. If that wasn't good enough. You can self-direct your HSA. Let me throw this out. This is my HSA in Chicago. This little HSA of mine owns an LLC called Kohler Holdings LLC in that rental has been in my HSA for about eight years now. It cash flows about 225 a month and I can pull money out of the LLC anytime I want for health care expenses. It's never even filed a tax return. I don't even think IRS knows it exists. I have an HSA, and I could sell that property tomorrow.

The money goes back into my HSA and I could buy another property I could loan it to one of you doing a deal. So my HSA is out doing real estate like it's the cutest little meth lab. I mean, it's adorable. And it's I have a friend he tried to do a drive-by, not a drive-by your thinking maybe, but a drive-by tour with some other real estate investors. He's like, Oh, yeah, Mark Kohler, his HSA owns this one. And they turned down the street. And it was roped off for a drug bust. He's not today. And so. So it's a section eight rental, and it just its cash flows. Wonderful. It's great. But anyway, that's been sitting on my head. So you may go mark, how do you do that? an HSA. It was seller financing, it was 45 grand, it's low-income housing, that's cool. I put down 4500 to 10%. Down, got a mortgage on it. Seller carry back for about 39 grand, and I've had it eight years, I have a section eight tenant, the government sends me a rent every month. I've got a little grandma living in that and her kids are terrorizing the neighborhood.

But this is a little rental that's sitting in my HSA. I've got you can buy Superbowl tickets on it today, StubHub on three days later for the Superbowl. And that profit goes in your HSA? I mean, it's crazy. Okay, good question. You would pay you bit under an HSA for financing. Now, because of the depreciation on my property and my expenses, I'm able to, really I don't have a taxable event until I sell the property. At that point, if I have debt on the property, there'll be a proportional amount I would pay per unit. Tax.

That's right. Now, here's another tip. If I paid it off, before the one year before the data sale, I have to go a full year of being debt-free in the HSA. And then I can sell it with no unit. Now another thought for some of you that are deep on this mat clap master and were just teaching this class next door. So I'm going to get deep for a minute. So your IRA can borrow money and buy rentals. And but when you sell it, the IRS says, Well, we won't tax you on the profit, based on the prorated ownership, your IRA, but for the debt portion, you need to pay tax on that because you use leverage, but it does not apply in a 401k.

I have clients that bought rentals with debt in their IRA, we just transfer the IRA to the 401k and sell it on day two, no, you know, I can't transfer an HSA to a 401k. But for those out there with an IRA, it's very doable. So it's deep thoughts or comments on so that's just the HSA, you have to have a high deductible plan and you can get an HSA off to the races. Because it's okay, I don't have to file a tax return because I don't own it. The Health Savings Account owns it. And a 990 T is the required tax return for an HSA and I only have to file it if it has taxable income. And because of depreciation on the property literally off the $250 a month. I breakeven or less and so there's a carry forward loss inside my HSA, which is Another important point, when I go to sell it, I'll be able to dump out the bucket of losses within my HSA against any gain.

So I don't own this property. My HSA owns it. If it did make $1,000 a month of taxable income, I would have to file what's called a 990. t, if I had debt on the property, and then I have to pay the unit tax, but let's say there was no debt on the property, and I made 1000 a month, no tax returns required, if no taxes owed, no tax returns required. So what's really cool here, guys, is this the same concept for 401 K's HSA is an IRAs is every time you pass goes every January, you put more money in, like this example, I can put my 34 grand in every year. But then I can invest it and get unlimited returns. So I can turn that 34 grand into 60 grand, the next year, put another 3040 and now I'm at 90, then I can take that 90 and invest that and turn it into 180. And then next year, put it in another 334. And now I'm at 210. This is if you've watched the Dave Ramsey show, this is your homework, who's who has watched the Dave Ramsey power of compound interest on YouTube. Dave Ramsey's power of compound interest, raise your hand if you've watched. Or not even two hands, guys, put it on your to-do list go to YouTube.

It's a four-minute video, YouTube, the power of compound interest Ramsey, make your kids watch it make your spouse, your partner, your best friend, watch it with you, it'll blow your mind he only assumes a 12% rate of return and what the power of compound interest will do inside an IRA or 401k. It's exponential. It's an I just got chills saying it. And then you do it with a self-directed plan. Oh, hold on. Okay, sorry, get carried away. Okay. Any other credit now on healthcare? Again, I want to encourage you to check out more reading and study on this hrs is a Health Reimbursement Arrangement. My wife and I use that too. We use it in our law firm.

The study, okay, in my tax and legal playbook, I have a whole chapter on healthcare. If I'm sold out on books out there with Sydney, you just say Hey, I'll buy the books, it's at a deep discount includes the Kindle and audio. I'll mail them to you when I get back into the office on Monday. No cost for mailing this guy, I'm just gonna say I didn't come here to give a big sales pitch. I'll just tell you how you can get more info if you want it. If you don't want it. I don't care. I came here as a favorite Steve Olson. So I've got a little flyer out there, my daughter has it. I've got a little four-book combo for like 60 bucks, which includes all four books, plus some tat and some Kindles and audio. I also have my eight steps to start a small business workbook, which is 99 bucks on Amazon, I throw that in with these for 140. So you save more money there.

Then finally, I have my tax and legal library. For seven years, I've been shooting videos every year on all my topics. I've got 60 videos in there, with like 30 hours plus hours of content. For the next two weeks, I'm in the studio shooting this year's updates of 20 more videos. Once you buy this little video library, you get access to all the updates every year, as long as I'm alive is a lifetime membership. As long as I'm alive doing my practice. That's like 300 bucks. And it includes all the books too. So you get all the books plus the videos, you can start watching them immediately. On Monday, I'll email you the membership and the ID. Finally, for those of you that need an LLC or a corporation, let me just say this, if you're like Mark, I need an hour, I would love you to build me a little diagram to tell me what my checklist is for this year. Look at my tax return in an hour, I can knock out 99% of my clients, I looked at your tax return.

You tell me what entities you have what real estate you have married single kids boom, we make a plan a checklist. And I get your info if you need to set up an entity. So for we charge 800 bucks to set up an entity in any state and include an hour of a concert with me or one of my attorneys. So you may say well, I can do it on Legal Zoom for two or 300 bucks. That's cool, go do it. But you don't get the hand holding and the quality of the documents and the education. So I have this little package that gets all my education, all the books, yada yada, yadda an hour with one of my attorneys, and an entity in any state for 999.

So if you want to tax write off, the filing fee is your only extra fee depending on the state we set up the entity. So if you need an S Corp or LLC for this year, that's a little package take the flyer with you I'll honor it you don't have it's any pressure you have to buy today or you lose it. Take this fire you turn it in all honor it. Okay, that's the end of my sales pitch if you want. Okay, last topic. Let me see if we have anything else that changed my mind Roth, I don't want to go into that. Yeah, let's just do our last five minutes or four minutes on just some general questions on anything we covered. I'm all yours. First here and then I'll come over to you too. Yes. So okay, contributions you could do in this year for last year. This year, and plan your tax strategy the following year.

Yes, okay, everybody hears what he said this is deep. If he had a 401k set up last year by December 31, he can contribute to his 401k for last year, and get a tax write-off, up until September 15. You have all year to do it up until September 15. Now, if some of you're like, Well, Mark, I didn't have a 401k, setup darn it, then what I do is set up the Sep, I screwed up and did a Sep. So what we do is a Sep for last year, because you didn't have the 401k. As soon as we set up your 401k, you can roll it into the new 401k do your contribution this year, and you can double down on both years, and then start investing. So we have a plan to still grab last year through a sap, but then roll it into the 401k. Can you convert it to Roth in that year?

Yes, you can convert money to a Roth inside a 401k. But you cannot convert it and then roll it into the 401k. So you want to do it once it's in the 401k. And if you're going to be doing conversions to Roth with a 401k, go talk to Matt. He'll tell you the rules on it. He's really good. He has a whole chapter on that in his new book that you can get out there on the 401k conversion strategy. Yes, Ladies first. LLC for your rental property.

You would sit under the escort? No. Yes, I would not. Okay, let me explain this. By the way. Let's, let's get crazy here. I'm gonna try to spin this around without making a fall off the edge. Let's try this. Okay. Worked out. Okay. All right. Now, her questions a good one because I love to get asset protection. I have a book on asset protection. We've been focused on taxes a little too much tonight. Over on this side, we got our S corp and blah, blah, blah, right. Okay, the blues not looking good. Okay. So, over here, clients start buying a lot of rentals. Anybody in here will own more than two rentals. Okay, so what do we do? I have four options.

Option one is you set up one LLC, and you could have two or three rentals in it. And I could take that and say, Okay, here's my LLC. I've got my rentals in it. It's tight, it's clean. I got to clean LLC, I got a board of advisors, I got my operating agreement. I'm doing my minutes every year. And if your accountant or lawyer tells you Oh, an LLC is easier than a Corp, you don't have to do your annual minutes. bullcrap. Good luck, because when you get into a lawsuit, it's like an atheist in a foxhole, oh, I don't need to believe in God. And as soon as they're out in the war, and they're in the foxhole. They're praying. And so as soon as you get into a lawsuit, you'll be doing your annual minutes for your LLC. Trust me, Been there, done that. So make sure you're maintaining your LLC property.

We have a company maintenance program that's very affordable for our firm. Get your LLC clean, tight. You got your three or four rentals, maybe two or 300 grand of equity. I don't know couple 100 grand or what Mark I got a lot more equity in that. Ooh, okay, so let's maybe set up two or three LLC. Maybe this is my Arizona LLC this my Utah LLC in this my Texas LLC. So I can put my Texas properties in this LLC. Here, I can put my meth lab rentals in this one. And I can just kind of spread them out and you might spread them out based on the type of property type of risk. And these are going to be different right LLC is by the state it could depend but don't get sucked into the Nevada Wyoming crap that you're going to set up an entity in Wyoming and have it you know, that's a holder that comes down to option four, but you're going to keep it simple. Keep it affordable.

We are doing these on the LLC side because we have no transfer tax. We have a carryover basis, I can sell a property I can do a CRT, I can do 1031 tax-deferred exchange. I can bring on partners. Once you put any of these LLC and an S Corp. Your jacked-up s corps is not built for owning rentals. s corpse is built for flipping property and commissions and income and sales and services. They are not built for holding you never never never want your rentals in an escort. If they're in there, when you sell it we'll take the money and run but we're not going to put them back in there.

We want to get them out so s corpse does not own rentals. The trust owns these LLCs because if you die I want your trustee to take over and maintain them, sell them get them ready. And then dish out profit to your kids or your whoever you're going to give money to brother-sister husband. Whatever right? Okay, third option series LLC. We love the series LLC in the state where you can have a series LLC. Now luckily, Steve's doing a lot of work in Texas and Utah is a great fit. You can have a series LLC in Texas and Utah.

But there are only 14 states now that have series LLC This is a table in the back of my book. If you're not in a series state you can't have a series LLC it doesn't work. So here's our series LLC is right now Delaware, Washington DC, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada. North Dakota, Oklahoma, Tennessee, Texas, Utah, Wisconsin. So if you're buying rentals in those states, we use the series LLC, and we have baby subs. And the beauty is you still have one tax return. One setup, you can have as many subs as you want, you can set them up on your own, we give you a series LLC and the document to create as many subs as you want. So you don't have to call us every time, the only state that's charging for a sub-series filing in Illinois, it's 50 bucks. But I can set up you can set up as many subs as you want in Texas and Tennessee, and Utah.

Those are great. But if I've got rentals in Arizona, Idaho, or California, they're going to be over here, not in your parent LLC sub-series. Your third, your fourth option, and this is where I have clients that have a million dollars worth of real estate or more, you're really cranking maybe 10 properties or more, we set up a coke charging, holding company LLC, out of Wyoming, maybe Utah, since you guys are here in Utah, I like Wyoming because if you're trying to do privacy, I've got to give you a tip here. If you're trying to do privacy planning where you don't want your name on public record Wyoming is where I can hide you, Utah is not I have to disclose who the managers are. And you have to have a Registered Agent and a street address here in Utah. We do mail forwarding and privacy strategies. Wyoming to be the best fit for that if you're interested in it, but we anyway, have a parent LLC that provides coke charging order protection, and then this LLC owns all your other LLC. Even if it's a series LLC with baby subs.

This gives you two layers of asset protection for the textures and drivers and your teenage drivers and potential lawsuits inside outside. This is the maximum protection. Now there's a fly night companies out there that sell this to everybody even on the first rental that I could name their company, these company names, especially in Utah, if you've been sold this package and you have one rental property you were ripped off, we build-up to this you can start here, go here, go here, go here. Once we graduate you up to it. We want you to feel comfortable working with a firm like ours, where three years from now, we didn't mislead you from the beginning because you'll feel it, you'll know it.

Anyway, this is a more advanced strategy, but it's all owned by your trust. Now on this tip of privacy. In my book, I have a whole tip, a whole book chapter on privacy strategies. The father of privacy protection, come on up Steve to get me off stage is JJ Luna, who wrote the book How to disappear. He's coming to my radio show this coming Wednesday. I am so stoked. It was the most listened-to podcast in the history of my 10-year podcast when he came on last time. So he's gonna be on this Wednesday. If you want to listen to my podcast, go to Refresh Your Wealth on iTunes.

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