410: What I should Have Known Last Year!!! | Q&A Tax Questions

If I get a small office or co working space close to my current W2 job, could I then use my drive from home to the secondary office as a tax deductible event?

Can I allocate the excess contribution to 2023? If not, is there another option for correcting reallocating without penalties?

We need to know what's honest and legal in our tax deduction strategy.

Do you think it'd be better or makes sense for me be paid as a 1099 independent contractor?

Welcome everybody to this week's episode of the Main Street Business podcast. My name is Mark Kohler. Coming you from the tundra of the Arctic. If you're watching on YouTube, you can see the background. Matt Sorensen, apparently in the summer somewhere with his background. You look great, Matt.

Yeah, there's snow in the mountains back there. There's some frosted mountains back there. Maybe those are clouds, I don't know. But hey, this is the holiday edition of the Main Street Business Podcast. End of the year open forum. Lots of great tax and business questions that we have. Remember, you can go to mainstreetbusinesspodcast.com to put in questions for the episode. This is your show. We're talking about what you want. We got lots of great questions in here and we'll see if we got some good answers.

Yeah, we'll do our best. Okay, we're going to hit because year end tax strategies are the most critical typically we're going to jump right over there. We've had a number of questions fly in this week, so let's do it. We just covered a show on auto deduction, a live broadcast, but we've got one here on the website as well. So let's hit it. Let's kind of get the ball rolling here. The question is from Presto. Erickson says I am a W2 employee with a 1099 sole prop as a side hustle. Love it. Presto. Millions of Americans making it happen with a side hustle. My W2 job is an hour commute from my house. I see where this is going. We're good fast. If I have my home office as the primary business location, but get a home office or co working space close to my current W2 job or if I get a small office or co working space close to my current W2 job, could I then use my drive from home to the secondary office as a tax deductible event? Then my commute to my W2 is just to and from my secondary office. Regrettably, everybody commuting even to your own business office in your own side hustle is not a write off either. For example, let's say I've got an engineer, a dentist, a doctor, a lawyer, an accountant, someone that typically has a brick and mortar office and they have a home office which is a valid write off. Now it's called the administrative home office exception. So they're going at home, they've got their home office and they have an office for their business practice. Could be a brokerage, being a realtor. Be again a contractor with a warehouse. But you have an office location and a home office going in between those is still considered a commute. Now I know some accountants are going to say, well Mark, no, those are two offices you're going in between. I'm cool with that if it's not every freaking day. I've seen cases where that commuting between the home office and the primary main office is still going to be classified as a commute. So regrettably, I think you've got a problem trying to. I know, I love what you're trying to do. You're trying to shoehorn commute into a write off. But it's just not going to happen. It's all the other mileage that's going to be a write off. Working from the home or working from the secondary office and everywhere else. But the IRS just doesn't like the commuting thing.

Yeah, when you think of your office, you know you've got to be going from, from the office somewhere, you know, and then coming back is, is okay too. But like you're starting at your home or anything like that, going to the office, I don't care what it's not, it ain't gonna work. So great question. Okay, I got a good 401k solo 401k question from D. Bruce. So D. Bruce says we are an S corp with a solo 401k. Love that. By the way, for solo 401ks. Right now we're setting lots up. For those of you trying to get 2022 contributions in, make sure you get it set up. We're helping with that at our amazing law firm, KQS Lawyers. Now Bruce says After reviewing what our W2 should be for 22, I realized I've over contributed to my solo 401k. My projected W2 is 40,000, but my 2022 contributions are 43,000. Our conclusion is that the max contribution should be 37,000 for 2022. Can I allocate the excess contribution to 2023. If not, is there another option for correcting, reallocating without penalties? Thank you, Dennis. He says a happy directed IRA client. Okay, there's some, there's options here, Bruce. So now remember, on the contribution, if you had $40,000, you to do 20,500 as your employee contribution, you have 40,000 net income, you can do 20,500 employee contribution plus you get to do 25% of the 40,000, which would be 10 grand. So now that's putting you at 30,500. Now you might be over 50 or older here, which is what I'm guessing because you're adding in 6,500 bucks here to get you at 37,000. So I'm with you there. If you're 50 or older, you got the 37, you're right there on what you can contribute. So if you've put in 43, you've over contributed 6,000 bucks. Now, since this is the same year, we're still in 2022 and you actually have until April 15th of 2023 to correct an excess 401k contribution. All you gotta do is take back out six grand. Just take it back out right now. It's a correction. There's not a distribution or a penalty right now because you're doing it within before the tax filing. You can make sure your W2 is right because by the way, your employee contribution's gotta be on the W2. The employer is gonna be on the S Corp return as a retirement company contribution. But you're just take that 6k back. Now, the only caveat I'll say there, where you can have a tax or penalty, so to speak, is if you had earnings on that 6k. So if you just drop the 6k and haven't invested it yet, or we have 6,000 of any of that 43 that has not been invested yet. Let's just pull that back out. Don't worry about. But if that whole 43 has been invested and you have some investment returns, we got to attribute some earnings now. So you got to take out 6,000 plus a percent of whatever the earnings are here that you have and that little percent of earnings is taxable to you, you'll actually have to send yourself a 1099 R and you pick that up and pay some tax. So not all is lost. Bruce, you can fix it. Just if you got some earnings, you might have a little bit of tax headache, but it's not going to be much. It's just on the earnings that you've made. It's taxable to you.

All right, well, we've got another auto deduction. We're going to stay with this theme for a little bit. This is from Utah Doc says, hey, guys, love the show. Have a question about the home office and maximizing the auto deduction. So we're back to the same theme now. Utah Doc has kind of a twist on this, and I like it. He says, I have a 1099 consulting job, so side hustle and a home office. Great. And that is my main office location. Cool. On my way to my W2 job, I will stop at my business PO box to check my business mail. Okay, now that's not a commute so far. I'm good with that. I leave the home office. I go check on my mail at the local UPS Store, post office, wherever I go to pick up check on my P.O. box. That would be valid mileage. And then we get a little aggressive here. Since I am leaving my home office to do a business errand. Do these miles count? Yes. Do they still count if I'm driving to my W2 job after the post office visit? Sure. I'm kind of seeing where this is going, though. But I'm okay so far. Basically, I'm shortening my commute to my W2 by performing a 1099 errand to the PO Box first. Now the last question. I can't remember their handle. Preston or Presley? I apologize. I can't remember at the moment. Start with a P. I remember that he was like, well, I got a second office location that's different than going to a P.O. box. You may be thinking that I'm mincing words here, but words matter and court cases matter, and going to another office every day is considered commute. Checking on your business mail is not. So I like this. But then he says, are we. This is where I start to think, are we abusing the strategy? Basically, I'm shortening my commute to my W2 by performing a 1099 errand to the PO Box first. Also, with the distance from my home to the PO Box matter, I have my PO Box. Here's the big reveal. I have my PO Box close to the location of my W2 employment, which is about 50 miles from my home office. So, you know, the reveal here at the end tells us that we're. That Utah Doc is still trying to take advantage of the situation. Like our last caller here's. Let's all step back here for a minute. If we can get into the weeds and talk about technically, what is valid and not and we should. We need to know what's honest and legal in our tax deduction strategy. At the same token, the IRS and the IRS computer system looks at what's normal and reasonable for a tax return. They're comparing your tax return based on your NEICS code. Did I get that right? The code that you deter, you put on your wet on your tax return. What is my type of business? The computer system is going to compare your business with a million other businesses just like yours. And if your mileage or your auto deduction is way out of whack, that's what triggers the audit. That's, that's one issue. And number two, if your auto deduction is super high compared to the amount of money you brought in, that could be a problem. So, for example, let's say you're making 100 grand a year and you have a $10,000 auto deduction. I have no problem with that. You're making 20 grand a year and you've got a 10,000 auto deduction. That's not good. The computer system is going to go, whoa, whoa, whoa. Their auto deduction is 50% of their income. That's going to look weird, right? So with all these questions of trying to write off auto, you have to, at the end of the day, even ask yourself, well, I'm entitled to that deduction. I get to take that deduction. I'm technically accurate in taking that write off. Sure, but should you do it? Just because you can doesn't mean you should. Now that's a Matt Sorensen quote.

And so learn the hard way. Learn the hard way on that one.

Yeah. Is the squeeze really worth the juice? You know, that's another.

Is the juice worth the squeeze?

Is the juice worth the squeeze?

Is the juice worth the squeeze?

I don't know which way it works, but I just know it. You better be worth it. Oh my hell. Anyway, so, so be thinking about what you really trying to do with this auto thing. And if it looks out of whack, I almost like to work backwards. What's your total income? What's your industry? And then what's a good auto deduction? Let's come in about there, you know, let's see where that looks, you know, and I'm not. I don't want to cook the books and lie if your auto deduction really isn't there. Sometimes to tell clients, whittle down your auto and they'll go, well, I'm entitled to it. Yeah, but you know, doesn't look good. So is the PO Box a write off.

Sure.

Doing it every day on your way to your W2 job. You better be having a lot of hell of a lot of mail, you know, and if I was an IRS agent, I go, really? You're getting enough mail that you got to check it every day for your little side hustle. Yeah, show me and you're toast. I mean, if you really don't need to stop there every day. It's not going to be a write off. So anyway, any take, final takes on that, Matt? No.

I love the creativeness though, you know, I got to give you a star for that, that's for sure. The IRS doesn't give out stars though. They give out audits.

They do not. Oh. Oh my God.

Okay, we got a good question here. It's been on for a while actually, but I. We haven't answered it yet. I don't think. If you answer Gi Doc's question, it says, I'm a gastroenterology physician. I'm starting a new position in a few months. My salary will be 600k a year. The position I am employed on within a hospital system position has a 401 plan, health insurance, HSA. I get malpractice. Do you think it'd be better or make sense for me to be paid as a 1099 independent contractor and then get my own insurance malpractice? And if they agreed, should I ask for more than the 600k salary given that the employer would be saving by not providing me benefits? Basically's question is, am I better off being self employed doing an S corp or should I stay as a W2 employee? Now he does say as an aside, and this is actually important, I do already have my own solo cake because I have about 50k of income per year from another 1099 side hustle situation. Okay, let me hit a couple thoughts on this. There's a lot of things here. A lot of other people commented on this. But let me hit a couple a few important points.

I want to look at this too. Which category is that in?

This is in tax strategies, it's the number one.

Yeah.

It's called PI Doc.

Yep.

All right, so first, first consideration, you may not have the choice. Are you an employee? You don't get to necessarily say, well, I'm an independent contractor. Hospital treat me as that. Now I will say there are doctors in hospitals that are W2 and some of them are independently contracted for. So you, it might be you have this option. Now, I've been down this road with other Medical professionals before who are self employed Sometimes, sometimes they're W2 and they bounce between. So you'll want to see here I guess with the hospital if they're going to let you do it. Now remember you are an employee. If you have a set schedule, you have like all these things that are dictated to you. You're using all the hospitals equipment and stu like that. You know it's harder for you to be an independent contractor. So just know there's this issue of you might not actually have a choice but if you do and they have a style and arrangement and the hospital have a legit process for this if they'll let you go independent contractor

I

what I would do is I would go through an analytical. I would just do. This is going to take some math to know because malpractice is likely a lot. Sure you get an expense for it in your business if you're paying for it. But you got to pay for it. Okay. This is only an expense. You know they're covering this expense entirely. The health insurance. Again you could get a write off in the business but you gotta pay for it. They're covering this for you. All these other things are things you gotta add onto this that might be another hundred thousand at least of benefit you're getting. Plus they're paying the employer side of the self employment tax which is mitigating some of your tax savings you get from an S corp Anyways. The other thing I would note is if you didn't have a side hustle we'd be saying but on the positive side there's a lot of expenses now you can pick up that are personal that you may not get your home office, you know, some of your electronics equipment, laptops, stuff like that. You but you're probably picking that up already because you got a side hustle already and you've got a solo K you can use over there. So I would say and just my guesstimation here again this right do math. I don't know that the juice is worth the squeeze here. I love the S corp for you. If you are sole proprietor getting 1099 already. I love the S corp for you and going down that route being self employed but given all the considerations of things they're covering they'd really have to agree to be paying you that a hundred thousand whatever more you're coming out of pocket for the tax savings to work out. Maybe you can negotiate for that. I don't know.

Okay.

Tricky though.

Love it. Yeah, it's a tricky one. I have helped docs through that in the hospitals. It's iron. It's just weird. Some are very flexible with the 1099 strategy. Some are like, Nope, you're W2 the end. They just don't want to risk it. But do the math. I created W2, I'm sorry, a spreadsheet and compare the W2 to the 1099 and really take into account the tax savings. All right.

And what I would say is if you're like, yeah, but guys, I'm confused on the FICA thing. That's going to be tens of thousands in savings here by the way. Like the little S Corp, right? That's we're talking. You might have a hundred thousand plus in cost swings here between being self employed having to pay for this out of pocket versus your employer covering it. So that's where I'm like, I don't know that it's. I don't know. The juice is worth the squeeze there.

Yeah, there you go. Oh my gosh, I love it. Okay, we're now back to. I'm going to stick with the auto for a moment. This is another question by John Pride and it's. There's no home office in this, so everybody take a chill pill. All right, so hello. And Mark and Matt, big fan. I've heard you talk a lot about auto deductions, but not this topic. Okay. I own a mobile dog grooming business that operates out of a bus that travels from client to client. I know that. I take this as a write off because I need this in the pursuit of income. Love it. However, my question is, can I take a write off on my personal vehicle as well as it is used to travel to conventions, get supplies, meet with new clients, et cetera. Freak. Yeah. Yes, absolutely. No problem. I don't know how more adamantly to say that. Or am I limited to one auto deduction in my S Corp? Hell no. You can write off as many autos that are validly related to your business. Perhaps setting up a management company and writing off the other vehicle in that entity. Don't need to. Don't worry about it. John, you're great. Think about. I love how Matt on a live the other day said, hey, do you think UPS is limited by the number of trucks they own?

No.

Domino's?

No.

I don't know if Domino's own any cars. Those are the driver's cars. Napa Auto Parts, whatever. The thing is, if you have 10 cars that are related to your business, then they are all a write off. Jed Wood comments and says, I think you're limited up to four vehicles. I've never even heard of that. And I, I, I'd love to go to court and say I've got six vehicles and they're all used for businesses and I'm gonna business purposes and I'm gonna write off the mileage related to each one. And I got a mileage log. Freaking do it. I'll be the first one to defend you in court all day long. So I jedwood a limit of four vehicles. I can't understand why there would be a limit. The limit is are you validly using the cars for business, period. Now, if you're trying to do this on a schedule C, there may only be so many lines on the schedule C for this or whatever. You probably need to be moving into an S Corp method anyway. And the S Corp strategy is going to reduce your chances of an audit as well. But don't worry about it. Anybody out there? I've had a client that owned a truck, did actual, had a car, did mileage, had a motorcycle, did mileage, had an rv, did actual, and they were all related to the business. It's good you're going, you're golden. Don't worry about it. All right, Matt, your call. What question we got next?

This came in on my social media on the backdoor Roth ira, had a question about do I need to complete the backdoor Roth IRA by December 31st?

Okay.

No. The answer is no. The backdoor Roth IRA, remember, is two things. It's a non deductible traditional IRA contribution which you can make until April 15th, even for 2022. You can make your 60002022 contribution up until April 15th. And the second thing is, it's a conversion to Roth. Well, since it was non deductible traditional, which is what we're doing in the backdoor strategy, it's not taxable. The conversion is not taxable because you didn't take a deduction. So when I convert that to Roth, sure, it's a conversion, but there's no tax due. So it really doesn't matter whether you do it by December 31st. It's not going on your taxes for 2022 as taxable income anyways. You're going to put on your taxes on calling up form 8606 that you converted it, but it's not taxable. It's a zero because it was a non deductible contribution. So even if you're like, want to do a backdoor Roth IRA by, for 2022 to get your six grand in. You don't need to be hustling right now. You can, but you really technically have until April 15th. So and of course starting in January 2023 and really from January 1st until April 15th you have the ability to do a backdoor Roth IRA for 2022 of 6000 and you can do the 6500. That's the new amount for 2023 for Roth and traditional by the way, 6500. So you do 6500 non deductible for 2023 that you convert to Roth basically doing two years of backdoor Roth IRA getting you 12,500. If you wait until January 1st, 2023. So you could do a kind of A2 for there, get it all in at once, convert it at once, get two years of contributions. You get that little window January 1st, April 15th to do that.

Okay, love it. I'm good with that. Now here's another question. This is from D. Merson 15 says and the topic is business vehicle for personal use. So we're back to the business write off again and for vehicles and great topic, gotta love it, gotta eat it up. So he says, hi Mark and Matt, thanks for another year full of great advice. Thank you. He says, I'm 27 and I work a full time W2 job but also own a rental property, sell a bit online and drive for Uber. Love it. So he's got two or three side hustles. I had purchased a vehicle, a camry less than 6,000 pounds in the summer and this personal vehicle for Uber driving as well. I've always used the mileage deduction in the past, but I feel I should be doing actual this year. I've heard you speak to the section 179 rule and I was wondering if it might be possible to take advantage of bonus in 2022 even though the vehicle is part personal use. I would say the mixed is 60% business, 40% personal. If I can I could, if I could, if I can. Could the bonus depreciation if it be applied against the income from the rental property and the online sales as well? Or is it limited just to earnings from Uber driving? There are no LLC set up for any of these if that matters for answering the question. All right, well lots of opportunity here for planning with De Merson 15 Jedwood comments in a little later here I'll come back to Jedwood and some of you that are commenting on these comment questions. I think it's great. I want to talk about Our new certified tax advisor program. I think you're going to love it, Jed. So D. Merson, okay, let's think of all of you out there that have multiple side hustles. First, can you take a vehicle and divide up the use of the vehicle under multiple businesses? Yes, but it's tricky. If you're going to depreciate it and Bonus it and 179it, you're typically going to put the vehicle into one business and depreciate it there and take actual there. Now also keep in mind that De Merson bought the car this year, so in 2022. So the first year you have to choose am I going to go actual or mileage? If he would have said, oh, I've had this vehicle before, you know, in last year and now this year, I think actual is better. Too late. Whatever you choose the first year, you're stuck with it with that car. So he says, I bought it in the summer. What should I do now? If this is why being a certified tax advisor, where you get to understand the big picture is so important and for some of you that are fans of ours, that are listening, that are doing EA or CPA work or tax advising work, I've got a huge, huge pitch for you here in a minute. But here's the trick. Does D. Merson listen, everybody? Does D. Emerson get a bigger bang for his buck writing off the vehicle for Uber and his online business or for the rental property business? Which one gives him a bigger bang for his buck? I'll ask it another way. While you're thinking which income is taxed bigger or greater, Uber driving, online driving or rental property? Well, the income from Uber and online is going to get taxed with self employment tax rates. So we want to write off as much auto as we can with the online and Uber. The rental property business, if they're doing it right, should already have a loss anyway. And this is where as an advisor, I'm going to look at Dmerson's overall income. Because if they're getting, if they're being limited on the write offs on the rental property due to their income level, I don't want to write off over there at all. I'm going to try to milk it for everything I can with the online and Uber business. And then I'm also going to ask Merson, how many miles are you really driving for your rental property? So all of you out there, you may go, holy crap, I could literally do a one hour show on this issue of Demerson. That's what an hour consultation is for. I would really, really, really encourage you, Demerson, or anybody out there like this, please schedule an hour with one of our tax lawyers and go, hey, I've got this Uber business. I've got a rental business. I've got a day on line business. I'm making money here. I'm looking and you say, well, your attorneys are 400 bucks. You're damn straight. We're going to save you 10 times that. You can't rely on a freaking podcast to give you all the answers to dial in your tax life. Please spend an hour once a year on this. There's so much here. So. And he has no LLCs involved. You better get a freaking LLC for that rental property. Oh, but I'm in California and it cost me 800 doll. I don't care. You want to get sued and lose the rental. California is one of the worst litigious states and you've got to get an LLC for that thing. Now bottom. Here's one last strategy in Jedwood, you're going to appreciate this. I'm going to combine the Uber business and the online business probably onto one Schedule C. See what I'm doing? I don't need two schedule Cs and one schedule E. I'm going to combine those into one Schedule C freak. Depending on how much this guy is making, I might go with this S Corp and just peel it all off the personal return and then I can be even more aggressive and not have to worry about an audit. 15 times less chance of an audit. So, de Emerson, you kind of like don't even know what to ask in some ways and I'm so glad you did. So there's a lot of variables here that if we had you on the phone, married or single, does your spouse have other small business income? How much is the rental making? Where's it located? I mean there's so much here. Jed Wood says yes, you can have personal use and still do the bonus and 179. Totally agree with you. You just have to have greater than 50% business use and LLC or not. You I would try to combine your businesses and write off the vehicle in one combo. Schedule C to try to write off the actual in both the Schedule C and the Schedule E. I don't know how you'd pull it off. You might be able to do some mileage in the Schedule E on the rental. I probably go for that. Even though you're writing off the bulk of the vehicle on the Schedule C, you just can't double dip as long as you're not double dipping. Bring on the audit. I'll show the IRS agent. Yeah, damn right. Used it for business in my rental and I used it over here and I didn't double dip. And you got the records to back it up. You freaking go DE Emerson or D. Merson. So anyway, I love the question. You can see it opened up a Pandora's box. And last point, Jed Wood, any of you out there commenting on these questions and you're a tax advisor trying to do your best here, I love it. In your great comments, Jed and others, please look into my new certified Tax Advisor program. It's in the pre launch phase. It comes out January 1st. 80 topics, 12 modules, exams that aren't too bad. Don't stress on each section. Videos, white paper, a weekly training that starts January 5th, where I'm putting all of my certified advisors on a zoom call every week, multiple calls if I need it, to keep the class size reasonable. And you're going to be registered as a certified advisor on my website. A Main Street Certified Tax advisor. And anybody calling up looking for a tax advisor, they're going to my network. I want all you business owners out there come January, February, you start going to my website. You're going to find certified advisors that live, preach and teach what I do. And I'm going to be learning from them and they're going to be learning from me. They'll have the law firm directed IRA and Main street as their support system to provide legal work as needed. We're all going to be in this together. You're going to love it. So get over there. Long answer. Matt. I'm sorry, you take two questions.

I got this. Might could be my last one. I got a good one, though. This is about conservation easements. This is from Ben, Ben Jammin. This is conservation easement. Too easy Question mark. He said, are conservation easements, if done correctly, a good move, essentially I can pay 60k in and get a 300,000 write off. Too good to be true? Yeah. Okay. All right. The answer is yes, this one's too good to be true. But let's get into these. Okay, let me explain what the conservation easement concept is. Congress, I don't know, 10, 10 years or so ago, passed a new law basically saying, hey, if you want to conserve land that you own, property that you own from development for open space or wildlife preservation by putting an easement over it, to say, hey, this cannot be developed for 100 years or whatever, you put an easement this is an easement. So it's a restriction on your property that you can't pull back. Once you do that, it's done. So it's, and it's preserved for a conservation purpose. Then you can get a charitable deduction, actually. Okay, and, and, and this can go against the deduction that you can take. Now what happened was this started getting abused and, and promoters were starting to do this. Rather than go take the appraisal of what the property's worth and say, well, we can't develop it. So here's a value of what this easement, what I'm losing, what I'm giving up in value, essentially I can get a charitable deduction for instead. What promoters are going doing is you're buying a stake in a property essentially that you don't even own yet, that then is going to be used for conservation, that then you're somehow getting a $300,000 write off for. Well, how can you buy in at 60 and get a $300,000 write off? The only way you get the 300,000 write off is they can up the appraisal after you buy in. Well, how the heck is the thing worth 300 if you only pay in 60? So this is the too good to be true type conservation easement. And the IRS is all over this right now. This is the, this is actually, there's pending legislation to pull these back. The IRS has an alert on it, by the way, that they put out, basically telling people we are auditing these and the valuations that are going over what the real property is worth, which is a classic example. If you pay 60 in and get 300 out, I don't know how that works, how that math works. There's just definitely an appraisal in there. That's, that's off. But I'll add just another couple examples. President Trump is getting audited on this right now, apparently. And because he did some conservation easements up against one of his golf courses, which makes sense, you know, he wants to preserve the land next to it. It's probably good for his golf course too. And also against one of his estates in New York. And these are $20 million conservation easements. So, you know, now he doesn't just have some rinky dink accountant doing his tax return. Right. He's got obviously sophisticated tax plan. So these can be legit, I would think, about property you maybe already own, but buying into some type of syndication where you put in an amount and you actually get a deduction greater than that. Those are the Ones the IRS is out auditing and targeting right now. And I think your gut reaction, Benjamin, about too good to be true. I'm sticking with you on that. I'm feeling the same.

Okay, I want to say this too to get a little more specific. In order to take a tax loss in real estate and to take a tax write off on a conservation easement, you've got to have basis. And so there, here's. There could be another angle of this, Matt, that you, we may not be seeing is that you may put in 60, but you're also signing on debt of another 300 grand. And it also is sometimes put in a PPM, which is a private placement or some sort of LLC. So let's say the property is worth 3 million and you're looking to get a write off for 300 grand. So you're going to buy in 10% of this deal and you put in 60 grand and then you sign on debt for another 240. There's a mortgage on the place. Well, if you sign on the debt recourse and you put in 60 and you own 10% of a $3 million property and they throw in a conservation easement, you got a $300,000 write off. But just don't think you're not on the hook for that other 240,000 because you've got recourse. Now, in order to take the write off, you have to have debt. That's recourse. And if they go, yeah, but we're going to forgive the debt. But then you've got debt forgiveness income, so you just can't take a write off and mysteriously walk away not owing the debt that you got in order to get the write off. So be. So if Matt and I are just taking little stabs at this because we don't have all the facts, but if anybody's making you a promise that sounds too good to be true, it's got a tax angle on it. Get with one of our tax lawyers, call the law firm and go, hey, can you peel away the onion on this? And we would love to help it if it works. Freaking A. Sign me up. I'm all in. If you thought it worked, believe us, if we think it works, we're going to be talking about it.

So yeah, here's one thing I'll say on those. If there is debt involved is. But you're giving up the property for conservation. How do you earn income on it? So like who's paying that debt? Like I. So I don't want. How These things are going to work out. That's. I just, I don't know. We got to, there's got, there's more to learn there obviously. But I think it's a good flag for everybody. You know. These conservation easements are definitely on the IRS's target. There's pending legislation to peel them back. It's a charitable deduction type strategy. Yes, it can be legit. Yes, it's in the code. Yes, there's legitimate purposes for it. But I like to think of property you already own buying these syndications. Be careful. Those are actually the ones the IRS is specifically targeting.

Okay, well I'm going to hit one last easy question for everybody out there. This is from Leo Lang, super fun and easy and New Mexico, another one of our future tax advisors. I can see you out there joining the program because you're on here making comments and I love it. Leo Lang says. Hey guys, thanks for taking your time to look at my question. I'm getting my life insurance license. Not sure how I should go about setting up myself as an LLC or sole prop. A few people I've talked to are sole props but I feel like LLC should be a better way to go for tax purposes. I currently have a full time job in the car industry but always looked for a side hustle. This seems like the way I can generate some income, some tax write offs, solo 401ks, guards, gas, family, travel. Love it. I'm saying love it. My family, my wife is going to be helping with the business. Thanks for any advice you can give me. Now New Mexico, I want to give them props. Says I'm not an expert so confirm everything. But here you go. And so New Mexico chimes in and I, and I have no problem with that. Just be careful. People out there and we have to be careful with advice we're given to and I love what New Mexico says, single member LLC even with your spouse, which would be a two member llc by the way, New Mexico, a single member LLC gives you zero tax benefits. That's it. A single member LLC is a sole prop. Leo Lang. Now it gives you liability protection. That's great. You might, you're going to probably be getting some malpractice insurance that's going to be tied to you personally. Typically just like Matt and I have malpractice on us personally then we have an entity for the law firm or S Corps. But here's what I would say. Leo Lane. This is where consultation helps out because I don't know how much you expect to make in this and what your W2 day job is. But if you're going to exceed certain dollar amounts, we might want to start you out as an llc. So you can convert to an S corp. That's the end game. So let's get you into an S corp or at least the ability to get into an S corp with the llc. But don't think the LLC is going to save you taxes. Can you still do a solo 401k? You bet. I'd rather have you have an LLC if you're going to do that. Cars, gas, business travel with family, all that's a wonderful write off. Your wife's going to help you. That's great. I think an LLC makes sense to create some legitimacy and gives you the ability maybe for some corporate credit, convert to an S corp later, set up a Solo 401 easier. But is the LLC going to save you tax? No. So just go in with your eyes wide open. I'd still do the llc, but don't think it's going to save you taxes. Matt, any final words on that?

Yeah. Not save your taxes yet. Not yet.

Yeah, there you go. I like it. All right.

So cool.

All right.

I mean I, I think we hit most of the questions. Guys. Get over there if you got some great questions. Mainstreetbusinesspodcast.com if you're like, man, those are some questions. I got one too. Throw it in there. We got lots of different categories. You can see questions other people are asking as well because we're doing open forum at least once a month. We'll be coming in asking, answering your questions that you're asking. And we actually love it, Mark and I. It's the show we look forward to.

Well, yeah, that's good stuff. So happy holidays. We'll see you next week for another show before year end. So even while you're out in your holiday travels, be looking for our post for the show and appreciate you and travel, travel safe. See you soon.

Happy holidays.