Tax attorney Mark J. Kohler explains how to cut your tax bill by filing extensions, deducting side-business expenses like drones and smartwatches, and using an HSA to own rental property. He warns against skipping returns entirely and highlights billions in unclaimed refunds.
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Now at 3, it is tax season crunch time. We're talking about some quirky tax deductions that could save you some money. Joining us now is bestselling author and tax and legal playbook, Mark Kohler.
Good to see you.
Thanks for having me. I am so grateful that you're dedicated to an important topic like this.
It is.
Yeah. People are starving for good tips and
it's just around the Corner.
It is 20% of Americans file in the next two weeks, which is crazy. And I really just have a word of caution. I don't think people should be stressing about that they can file an extension. They can take time if they need to.
What does that look like? And what do you have to do to do an extension?
Well, it's one form. It's easy. But the thing is, you actually reduce your chances of an audit when you do extend. So many people rush and they stress out. And so that would be my first just thought is don't stress about it. You can certainly take your time, send in some money if you think you need to, but always at least file an extension.
Okay, let's talk about how to save on time.
Okay. All right.
You say a good thing to do is start a side business?
Yes. I mean, one in three Americans have a side job now or a side gig. It's the gig economy as we've heard people talk about. And it's a great way to save taxes because you've got all these deductions that you're not taking anyway. Cell phone, home office, auto travel. But if you have a side gig now, I can start to write off some of those expenses and it can create some tax free income. And you're doing what you love.
What justifies a side gig?
Well, you could be driving Uber. You might even have a little Airbnb vrbo rental. Having a rental property is a business selling on ebay, an affiliate program, online, little service business, all that good stuff.
Okay, so what are some of the more bizarre deductions that you know of or clients have come to you and say, hey, what about this?
Yeah, some people think it's bizarre, but I love talking about the smartwatch, the Apple watch. It's a Bluetooth device. And so I tell all my business owners, if you get a smart watch, let's make sure we're taking advantage of all those electronics. You might need a drone in your business, some cameras and videography. Now with YouTube and everybody's got a channel. The more video you can take, the better. And pets. A lot of people need a service animal and that's a medical expense that you can take a ride out for. And a lot of people are surprised that. But hey, pets are expensive.
What are some of the major mistakes people make, do you think? Like the top two mistakes?
I think a lot of people decide not to file. They get scared. And there's a cross section of people maybe even watching today that are nervous they're not going to be able to pay their tax bill. And my message is always at least file. The penalties for not filing are worse than just filing. The IRS wants to know what's going on. Don't leave them in the dark. And you can always get on a payment plan. You can do things to kind of stop the damage. 1.5 billion. Another interesting quote. $1.5 billion in unclaimed tax refunds people could have got if they just would have filed. They didn't even know.
Okay, let's talk California specifically. We're one of these high tax states. You got state and local taxes that you necessarily can't write off anymore.
It's brutal. Yeah. And I promised you a good tip. So I got two of them here. So one is if you can't take a write off against your W2, you don't want to take a pay cut. And the soma, it's hard to find a deduction against our day job. Start opportunity shifting. Shift some of your ideas into a tax free scenario like a Roth IRA or a health savings account. I have a health savings account that owns a rental property. I love to try to invest in things that I enjoy and I know we're going to make money outside of the stock market.
Health savings account that owns a rental property.
That's right. Well, you can self direct your retirement accounts and we love directed ira. It's a custodian, much like a stockbroker you would think of. It's a trust company where you can invest your IRAs, your 401ks, Coverdells, SEPs and a health savings account and what you know best. So if you know real estate, why not take your retirement account and invest it in real estate. And your stock broker doesn't tell you this. They don't want you to self direct.
Yeah.
But you can take control of your retirement and invest it in tax free ways. So a great way to save taxes is to create tax free income in the first place.
Mark Kohler, thank you. We appreciate that. Yeah, you have to come back to LA more often.
It's an exciting time.
And you do have a newsletter, right? A free newsletter that you put out?
Yeah. Our private firm does a newsletter every week and small business owners need to keep in tune. That's where things have gotten more complex. Start studying and look for those write offs.
And by the way, his visit to us because he lives in Washington state or Idaho is a write off for him.
That's right, it is.
And by the way, you can find Mark on Facebook, Twitter and his website. Mark J. Kohler.com Great picture, by the way.
