Must Know Year-End Tax Strategies LIVE Q&A

Buddy, it is that time of year, that special time of year where year end tax strategies can save you thousands. My name is Mark Kohler, CPA attorney, best selling author, YouTube influencer and partner in a real accounting firm and law firm. For you tax advisors out there, it's legit. I've been a CPA for 20 plus years, member of the AICPA, licensed in I think four states and work for the tax court, work for KPMG. I I want you tax advisors to know these are legit real practical tax strategies and I'm always searching for practical strategies to share with my clients. So I hope this helps you. This is live Q and A as well. I want questions down below. I'm here to help you. Two weeks ago I did a live webinar for an hour and a half on my 15 year end tax strategies. I thought I'd read them off again and then I'm just doing Q and A. I'm here for you. So if you have a question on mark some of these strategies you you talked about two weeks ago. I have a follow up question. Let's cover it. So I'm here on location in Park City, Utah and it's miserable I know but I'm doing it here, you know just making it happen. So no, I'm grateful. I love the holidays. Got a little fire here over my shoulder for you and thought I'd throw in the hat. Little John Dutton Yellowstone throwback here. So okay, here's my 15 year in tax strategies. Number one, get out of startup mode. Put your property in service by showing us for rent and it's available. That means you can start depreciating a rental property as soon as you have it available for rent. Even if you don't have a renter before year end. And if you have a small business, create some revenue. Get out of startup mode so we can take some write offs this year. Number two, set up or dissolve any entities by January 1st. Get with our law firm the links down below. James, make sure there's a link please in the description to the law firm KKOS lawyers. Our attorneys can meet with you right away. Dissolve entities, set up new entities. If you call in January they'll get us set up mid year. We want to have these ready to go January 1st. And why have an entity around where you'll pay the minimum tax for next year? Let's get it killed by just by December 31st. Number three, set up a retroactive S election for 2022. My accountants out there, if you didn't know this? Yes, there's a revenue ruling that allows you to go back more than 90 days. You can do a retroactive S election on an llc. If any of you had an LLC during this year and made more than 40 grand net, you benefit from an S election. Let's make it effective 1122 and get payroll going which is number four. Establish your payroll level. For 20 plus years we've been helping clients cram down a reasonable salary level that passes IRS scrutiny. We've never had a client audited for a non reasonable payroll level in an S Corp. S corps are around to stay people. This is not an audit risk. Make sure you're taking the right payroll for you accounting and tax advisors out there. You can be a little more aggressive. I've got a payroll matrix. Just google it, check it out. Number five hold your board meeting. I love taking a board meeting in a setting around Thanksgiving or Christmas. Have your family around the table, take a tax deduction for travel, auto dining and have a meeting and talk about your business for the next year. It could be under an llc, it could be under an S corp, it could be under a sole proprietorship. Whenever you set up an LLC at our office, we set up a Board of advisors. It creates a great tax write off at your end. Number six Pay your kids before year end. If you're going to pay your kids under age 18 or over age 18, there's a strategy on how to do it. I've got podcasts on this at Main Street Business Podcast. Get over to Main Street Business Podcast or get into YouTube and just type Kohler Pay youy Kids Kohler Pay youy Kids. I've got videos that explain it generally how in my book the Tax Legal Playbook you can get it on Amazon. I have a whole chapter on it. You have to do it before year end. Number seven Pay your spouse. A lot of people put their spouse on payroll just because they think they're supposed to. There are only two reasons. I put a spouse on payroll because I want to fund their solo 401k or safe harbor 401k or number two we got a medical expense under an HRA or 105 plan. Make sure you are not putting your spouse on payroll just because it's for Medicare or some stupid reason. Make sure it's only for retirement or a health care HHRA plan. Number 8 implement a solo 401k before year end. Any of you that have a side hustle, we are setting up solo 401ks for about the next 10 days and then it's too late for this year. The IRS service center closes to do their updates around Christmas time and I can't get you an EIN between Christmas and New Year's. If you want a solo 401k, you've got to call our office ASAP. And that's a self directed solo 401k with Roth provisions number nine, deducting health care expenses. Oh my gosh, the HSA. You got to have your health savings account qualified plan set up by December 15th. Just yesterday I was sitting over here at the kitchen table talking to my healthcare agent, my health insurance agent, making sure I was choosing a HSA qualified plan before year end so I can do an HSA next year. If you have an HRA, a 105 plan, you've got to do your reimbursements before year end. If you have a flexible spending account, that's the use it or lose it. You got to get your reimbursements done before year end. Yes, there's a grace period till March 15, but you don't want to worry about that. And your health insurance needs to be reported on your W2 people. There are like four different things that have to happen with health care before you're in. Make sure you're on this now. Let's take a breath. How many of you are like holy crap, Mark. My accountant may not know this. What do I do? You can call one of our tax lawyers, set up a one hour consult in the next two to three weeks and focus in on what you need. You might have to do some of this yourself. Getting an accountant engaged in the next three weeks to help you with this could almost be impossible. Now for you tax advisors out there, I. I am launching January 1st my tax certified Tax Advisor network. A certified tax advisor program to be certified with 12 modules, 80 videos, exams and white paper, weekly training calls. Please check it out@markj kohler.com I will have a network for all of you business owners. Listen, come January 1, I am training certified tax advisors around the country. I just got chills saying this. That will help you find a good accountant that knows what the freak's going on. Stay tuned. It's okay if you don't have your accountant right now. You can engage them in January, February or March. Stay tuned. Get on my website. There'll be a list of certified advisors around the country soon. Okay, and let's get back to our list. Five more things. Number 10, buy a vehicle before year end. Some of you that might need an SUV or a truck. It's a great write off. Before you're in. Number 11, purchase equipment. The bonus depreciation is 100%. So any of you that have a small business might need a tax write off. If there's equipment you can use, get it purchased. Even if you buy it on credit, you get the tax write off this year. Number 12, Roth conversions. Converting your traditional IRA to Roth must be done by 1231. Now, if you don't know what that's all about, get over to my podcast, the Directed IRA podcast dot com. In fact, James, would you make sure the link is there for that? I think it's directed ira.com podcast, people. It'll be down in the description. Number 13, shift income and expenses. Some of you want to say to people that you know are going to pay. You don't pay me till after January 1st. I don't want to pay taxes on it this year or push expenses to this year. Prepay for things that you want to this year that you know you're going to pay for in January. Get the write off now. Number 14, charitable deductions. Always a classic. Many of you that are not using the standard deduction, but you're itemizing, you can put charitable donations on a credit card and still take it right off this year. So I've got. There's a number of charitable deduction strategies between now and year end. And then finally, number 15, get your books in order. When your books are in order, you can make decisions on payroll write offs, things you may need to do before you're in. Pour some eggnog tonight, look at your books, see if you can get them organized, and you'll be good to go. Okay, so, James, there's my 15 strategies. James and Patrick in the studio are going to come.

Lost your sound mark. You hit the mute on the mic.

There we go. Okay, the time is yours, folks. James, what do you got there?

All right, so I got Tioga Costa has a question about hsa, and this is, this is a great one. Okay, so if my wife has an account, can I also use it?

Well, if you're married and I would just convert the account. Okay. Wow, Tioga, this is a tricky question because you can either have an individual HSA or a family hsa. Now, in order to contribute to a family hsa, you both have to be under a high deductible plan. Okay, that's point number one. But let's say Tioga. Now, Tioga is the husband or the wife. James, in that example, I think It's Tiago.

I apologize. Tiago. Tiago Costa. Husband, I believe.

Okay, so Tiago's the husband, and he says, can I use my wife's HSA for my medical, yes.

So I don't. He's not saying I'm on the hsa. He's just saying, can I use her account?

Yes. And the answer is yes, because, Tioga, you're going to be a dependent of your spouse. So your spouse's HSA can be used for the owner of the HSA and their dependents, which would be a spouse or children. So now I'd like you to get into a family HSA and both of you contribute and yada, yada, yada. But if you're just asking, my wife has an account. I want to go to the doctor, can I use her HSA debit card? Or turn in the receipt and get a reimbursement from her hsa? If you're married filing a joint return. Well, if you're a dependent of hers, the answer is yes. Go ahead and use it. Okay, next question.

All right, next question is going to be from Philip Luttrell. Luttrell. Maybe when you complete an operating agreement, corporate book, how soon can you have a board meeting?

Oh, you know what? That's interesting, Philip. You should have a board meeting upon organizing the llc. In fact, when we set up an LLC for our clients, there's an organizational board meeting, literally upon formation. So I'm going to give two answers here. The first one is, any of you setting up an LLC before year end, my team is going to ask you who's on your board, and you're going to have a initial board meeting. So that's going to happen immediately upon formation, and my paralegals and attorneys are going to ask you, who do you want on your board? Spouse, kids, mom, dad, brother, sister, friend. Now, if you already have an LLC and you're like, hey, Mark, we've never had a board meeting, we want to have one. Well, it'd be nice if you had my office do a cleanup, get you a new operating agreement in minutes. We can do that quite affordably. And you can call the office, talk to Christy Rice. Talk to Christy Rice, the link to the law firms down below, and Christy will clean up your documents and make sure you have that initial board meeting. Now, everybody out there, listen. Even if you're a sole proprietor, you can have a board meeting every week. Why not? You're going to have a meeting with the people that are helping you build your business. Now, if you're just a small business owner taking a write off every week for a meeting may not make sense, but any of you that have a substantive business, and you have an llc, you can have a meeting tomorrow. Get with my office. We have a company maintenance program where we give you the list of what to cover in the meeting and we document the meeting for you. We charge 150 bucks a year. It's so freaking affordable. So check it out, Philip. You. You can do it right away and do it during the holidays. All right, Looks like Patrick. We may have a question from Patrick here.

Yes, sir. This is from crypto Iceman. If you lost a lot of money on stocks, 30,000. How would you write that off if you make 60k from a normal job?

Well, the hard part here is everybody, you can only take your stock losses against other capital gains. So if you don't have any other capital gains from the sale of a rental property, from the sale of a business, from the sale of other stock, you can only take that loss up to other capital gains. And then they give you a. IRS gives you a $3,000 write off of those other losses. So the reality is, Philip, if you don't have. Was it Philip? I'm sorry, I think. Right. No. If you don't have.

That was crypto Iceman.

Oh, that's Crystal. Iceman. I'll go with Iceman. I'm a fan of, you know, Top Gun. So Iceman, if you don't have other capital gains, you're only going to be able to write off $3,000 of those capital losses against your $60,000 W2. It'll save you a little bit in tax, but not a lot. And I'm sorry, but now the rest of those losses will carry forward. You can use them next year, and whenever you have capital gains, boom, you can cash them in. Sell a rental property, sell other stock next year. But I'm sorry, you might be limited this year.

All right, so I got one from Telly Coleman. My tax advisor is against anyone claiming real estate professional. My wife is a doctor, right. And I manage my rental properties full time. Is there any disadvantages to being a real estate professional? Professional,

Very few. Telly, I am shocked by that. If your accountant is against you being a real estate professional, holy hell, are you kidding me? They should be trying to make you a real estate professional. If you're doing a lot of fix and flips, being a real estate professional means 1031 exchanges are going to be a little more. The rules for that are going to be a Little more rigid. I might want an S corp for your fix and flip rehab type projects. But Telly, if you're just managing rentals and you meet the test to be a real estate professional, freaking A. You have got to have your accountant watch some of my programs, get certified or you got to fire them. I mean, I mean that honestly. Now there's a two to three part test. You got to be full time in real estate. You manage rentals. Check number two, 750 hours a year. Now if you only have two rentals and you don't make 750 hours, if I was your accountant, I tell you to back off too. You got to make your. You got to show that you're doing 13 hours a week managing your rentals. And then number three, you got to materially participate. Now there's seven tests under that, but if you're putting in 750 hours managing rentals, you're going to easily qualify under the 500 hours rule for material participation. So Telly, you got to make a change with your professional. Unless. Get them certified under my program. Tell them you're going to fire them. If they don't, I will guarantee your professional will make more money and could charge more for their consult consultations. They will love it if you can talk them into it. All right, next question.

All right, I just have to make a statement real quick. If you would give a disclaimer about the fake accounts for the bitcoiners.

Oh, yes, yes, yes. Anybody out there, if you're seen in the Facebook comment section, typically not YouTube, but Facebook. Anybody out there saying, oh, Mark, you're the best for bitcoin or oh, I just saved a ton with bitcoin crap. People ignore it. I am not making comments in the comment section. And anybody saying, come check out my bitcoin crap. It is a bot. It is a scam. Stay away. Just focus on me. Bring in the questions and listen. Don't listen to those comments or reply to any comment that's not. Don't reply to any comments. Just make a comment. Thanks, Patrick.

Okay, and the question is, how much money should I be making before I started up an LLC and the trifecta and family payment accounts, it cost a pretty penny to set everything up.

First name of that person.

That is Blue Mustang.

Okay, Blue Mustang. I'm going to repeat that for everybody. Now listen to Blue Mustang's question. How much should I be making to form an LLC or do the trifecta and set up family management accounts? Okay, everybody remember this. An LLC does not save you taxes. An LLC does not save taxes. An LLC is for protection. And number two, to be able to convert it to an S corp down the road. Those are my two favorite reasons. Now you can build corporate credit, you can work on your branding, you can get a tax ID number. You can look more legitimate. There's four or five sub reasons that are decent. But number one, I need asset protection and I want the ability to claim S Corp status retroactively. So if Blue Mustang is saying, how much money do I need to make to be an llc? I would never ask that question. You'd say, mark, I might have liability exposure. Maybe should I set up an llc? What is good? You know, I might have liability exposure or would this create liability exposure? That should be your question on that point, Blue Mustang. Now, the second part of Blue Mustang's question is, should I set up a trifecta? People, the reason you can get a trifecta going with my staff in a variety of ways. We can review prior tax returns. We can set up your entity. Yeah, you might be out 1500 bucks, but here's the point. With the trifecta, everybody. And Blue Mustang, it sets forth your strategy for next year, giving you all the items to complete. What are those? Tax tip. Excuse me? The tax tips. You might be missing out on putting family on payroll, as you mentioned, paying kids. You don't need a family management company to pay kids if you're just an llc. See right there, a consult to do your trifecta. Blue Mustang. It's going to tell you what to worry about. If I don't save you five times to 10 times what you pay my office to build a plan for you, then we failed. We're not asking for 3, 4, 5, 10 or $15,000. We're not. Most of our trifecta consults around 1500 bucks. And you're going to get an entity out of that, a tax return review. And I want to save you five times that in taxes. So Blue Mustang, if things are tight, keeps. I want to say this to everybody. I know. When it's tight financially, it's the holidays too. If you're not making a bunch of money and need some tax tips right now, get through the year end. Make an appointment with our office in January or February. Blue Mustang, it's okay. We are not high pressure. Charge you out the butt. See you later. Bye. We want you to have a relationship with us for many years to come. So study. Get my book, study my podcast, study my YouTube channel. You're going to be okay, don't you just make the appointment with my lawyers when you're ready and we'll take care of you. It's okay.

That's awesome. Got a question from Nick. He's actually one of our customers. He says, hi, Mark.

Big fan.

I have a pending s Corp with KKOS questions. For 2022, I lived half in Colorado and half in Illinois. For 2023, I'll live half in Florida and half. I don't know yet. What state should the S corp be in?

Oh, Nick, Nick, Nick, Nick. This really is where a consultation matters. If you said you're in process of setting up an S corp with my office, then they should be discussing this with you. Now, I'm going to give some general rules for everybody here. But if you are already working with one of our consultants to set up one of my lawyers to set up an S corp, that's going to be your first question. Do I set it up in Illinois, Colorado or Florida? And they're going to talk to you about where you do in operations. Where are you sleeping at night? Where are your customers? Where's your office? Where is your driver's license? Those things are going to matter now for everybody out there. I would love Nick to be set up in Florida. No state tax. Could Nick make that his home base? I'd kind of like to lean that way next year. And then if we have to register the S corp in other states, we'll do it. So there are nine states that have no state tax. And if I can get my clients in one of those states, we're going to work on that. So, Nick, make another phone. Set up another 15 minutes with the tax lawyer you're working with at my office and say, I'm not sure what state we should be in because I might be in Florida next year. Make sure you have that conversation. All my tax lawyers can handle it. They'll work it out with you. Next question.

Guys, this is another question from Philip Latrell. If I'm already in the top tax bracket, should I do a backdoor Roth IRA transfer, separate our ira, or wait until next year in case I'm making less income?

Okay, so Philip, everybody listen. He says I'm in a high tax bracket, which means if he wants to contribute to a Roth, he's got to do it through the back door. Okay, now let's just talk about that for a minute. Then Philip talks about, I think, converting, and we're going to come back to that. I think that's what he's Alluding to. Okay, now everybody, everyone out there listening today can have a Roth ira. To have a Roth ira, you either go through the front door with a traditional. I'm sorry, not with a traditional. You go through the front door just making a regular Roth IRA and a contribution. If you're a high income and Philip says he's high tax bracket, you're going to go through the backdoor method. Now listen, Philip, will doing a backdoor Roth save you any tax? No, not right now. Will doing a backdoor Roth cost you in any tax? No, you're going to do a non deductible traditional contribution and then convert it to Roth. There you go. There's no tax, bad or good. All of you, everybody watching today, I would love you to contribute to a Roth IRA this year. My employees, my successful business owners, my rich clients, my poor clients, all of us should be contributing to a Roth every year. Now here's what I think Philip is alluding to. Well, Mark, I have a sep. Did he say that? Philip, in the comment that he has a SEP ira? Patrick, was that in.

I'm sorry, yes, he does.

I have a sep.

Okay, now if Philip has a SEP ira, he cannot do a backdoor Roth unless he does two things. One of two things. One, he could. He could convert that SEP to Roth. Now, if he does that, he's going to pay tax. And if he's in the highest bracket, I might tell him to hold off and let's do some converting next year or the year after. Do it in chunks. But you know what you can do, Philip? If you have a day job 401k or a solo 401k, you can move the SEP into a solo 401k. And now you're exempt from having to convert it to Roth. So all you do is move the SEP to 401k, do the backdoor Roth. It doesn't cost you anything in taxes. Now, we just recorded a podcast on that today. It will go out in two days. Everybody and Philip be subscribed to our directed IRA podcast. And when we go live on that, you can listen to that on the Roth conversion rules. It's a 30, 40 minute podcast. James, could you put that in the description as well? So that's the directed IRA podcast. Okay, next question, guys. What do you got?

Next question is from Robert Bo. With the large vehicle deduction ending this year, what will it be next year?

Oh, whoa, whoa, whoa. Now, Robert. Listen, everybody. Did you hear Robert? He says with the large vehicle deduction ending, it's not Ending it's just going from 100% of the purchase price to an 80% limitation on bonus. You still get the 179. Depending on what size of vehicle this is. I mean, we still may be able to write off 100% of that vehicle. Your accountant will be able to help you with it. So everybody, Robert, if you're not in the market to buy a large truck, SUV, 6,000 pound vehicle right now and you're being careful, I love it. Wait till next year to do it. Make a good economic decision and buy that truck or SUV next year. We still are going to be able to depreciate 80% of it and maybe 100% by going from bonus to 179. Now, some of you tax professionals know what I'm talking about. You do bonus first, then 179. We don't know Robert's full business situation, if he has a gain or a loss net, blah, blah, blah, blah, blah. But Robert, it is not going away. It's just being slightly limited. So hang in there, it'll be good. Patrick, next question.

All right, thoughts. This is from Scott Profit thoughts on filing jointly married versus filing mar. Filing separate and splitting right off with three kids. And also would you go over deferred compensation? I put away 250 a paycheck because if I don't, the same amount of taxes get taken out.

Okay, let's deal with the first one. The second one's a much, much harder question. So everybody Scott asks, should I do married filing joint or married filing separate? Now Congress in the Congress, IRS, whatever changed the laws on this in the last 10 years and took away what is called the marriage penalty years ago. Sometimes you would save to either be single or do married filing separate. Now, nine times out of ten you're better to just file married filing joint. It just, it just works out they took away the penalty that it because it was kind of weird, right? I'm married. Why am I paying more taxes if I'm married? Congress is like, we don't want that to motivate people to not be married. So Robert, is it Robert, who is that question from? I'm sorry, I'm embarrassed.

Yes, Robert.

Robert. So Robert and everyone out there, if you think you're going to save by doing married filing separate, just ask your accountant to run two versions of your tax return. They can check the box and just run a second version and see if it saves you at all. When they're in the middle of the software prep of your tax return, it's not hard to run a second version with that toggle, if you will. Now, yeah, you're going to spend maybe a couple hundred bucks or so to have them run the second version and they're going to tell you if there's even a chance. But I'm going to tell you, Robert and everybody out there, if you're married, nine times out of 10, it's buried. It's better to go married. Filing joint. Okay, now the second point was, can you talk about deferred comp? And I'm putting away 250 a paycheck or whatever that means. $250. I hope that didn't mean 250 grand. Okay, so here's the thing with deferred comp, everybody. What Robert's talking about is Roth 401ks. A mega backdoor Roth. Maybe a DB plan, a profit sharing plan, life insurance. Deferred comp can mean a lot of things, Robert. What I would love to do is have you meet with one of the tax lawyers at my office. I would recommend Katie Netwick. Katie, Just call up the law firm and talk to Katie. She was a licensed financial Advisor for over 10 years as a lawyer and then joined our firm. She can walk you through your options. She's phenomenal. Spend the hour. It'll be worth your every penny. And she'll help save you 10 times whatever you pay her. But call the law firm, meet with Katie. Any of you that are trying to find the perfect sweet spot for your deferred comp, the best way to do it is to have a consultation where it's tailored to you. I don't have a general answer on that. Sorry. Next question, Next question.

We got an aloha from Kanaka Maole or Maola Aloha.

Love it.

She says strategies. Question mark. Strategies for Hawaii real estate agents that don't want to be a sole prop.

Oh, well, first, Melee Kaliki Maca. And I would say this. Any of my agents, whether you're in Hawaii or not, if you're making more than 40 grand, you really need to look at the S corporation. Now, that means starting out as an LLC and making an S election or just coming right out of the gate and being an S corp. So get with one of our tax lawyers and look at that option. But don't think Hawaii. You may feel like you're out on an island. You may be out on an island, but when it comes to federal tax is the same damn rules. My realtors. You need to be an S corp. And I know you got the GST tax, I think it's what it's called over there. You're going to pay that whether you're sole prop or an S corp. So don't stress about it. Just get into the S corp position. That's critical as a realtor, whether you're near Hawaii or New Jersey or Texas. Next question, guys.

All right, this is from Carlos. Ivan Solis looking to set up an employer sponsored retirement account for our company. Any suggestions on when to set up a simple IRA or 401k? Is there a certain amount of cash flow admin expenses behind these?

Wow, Carlos, great question, but let me just say you had to be until you were comparing a simple to a 401k. Holy crap. There's about two or three other things I'd think about before I would consider a simple. For every 50 accounts we help clients with, one would be a Simple. They're quite rare and they only serve a sliver of clients that meet a specific kind of a cross section. So let me just say this to Carlos and everybody out there. If you have employees and you've had a full time employee for over a year, you're going to want to look, I'm telling you, dollar for dollar, keep it affordable. You want to look at the safe harbor 401k, Carlos, I would start there safe harbor 401k. You might want to look at the SEP or the SIMPLE. But I'd probably go to the simple before I'd go to the SEP and look at the 2 or 3% match rule. But cash flow wise you need to ask yourself how much do you want to put away yourself and how much you want to put away for your employees and do some analysis dollar wise between the simple and this and the Safe Harbor 401K. But here's the deal. It's too late to do for 2022. It's over. So what I would make a goal for Yourself is in first quarter Q1 next year. Get a consultation and look at the options and really put them out on a spreadsheet. How much you paying your employees? What's it going to cost you? What do you want to do again? Katie. I don't know why I brought up Katie's name. I've got senior attorneys that are phenomenal, been with us even longer than Katie, but she is kind of our financial advisory attorney on our team. She's fantastic. Make an appointment with Katie maybe in January and tell her what you're considering. We have a self Directed safe harbor 401k for employees that we hope to roll out this coming year. Other than that, we're certainly doing solos. But meet with Katie in January. Run the numbers between a simple and a safe harbor. That's. There's no threshold to say, I mean, you got to be making money and I want you putting away. You should be taking home over six figures if you're going to go down this route. But other than that, I just. You got to run the numbers between the two. Another question, guys, I'm not sure if,

if this is a great question, but flights with Shane, he's always here and he asks questions. I'm not sure if this is a Colorado question or not, but he says, what is high income?

Well, high income can be relative, everybody. It depends on what you're trying to do. If you're trying to get the earned income tax credit or take the child care tax credit or high income might be making more than 50,000 a year, you're going to phase out. If you're trying to do Roth chunking making or a backdoor Roth. High income could be around 200 grand. Married, well, probably 220 and 130 if you're single in that range. So it depends on what you're trying to do. High income for one person may be low income for another person. It depends on what you're looking to do. Maybe rephrase the question for me on why you're asking that or have a consultation with one of my tax lawyers for just an hour and say, here's what I'm trying to accomplish. Is my income too high or low? Talk about that.

Next question. Eric Gay. Hi, Mark. Section 179, which you might need to explain to everyone else what that is. Section 179, I know gets reduced at to 80% for 2023. If I bought a 6k pound vehicle for my business this month, what do I need to provide to show I use it for 50% business purposes?

All right, so everybody, Eric's throwing out two or three issues. Okay, first of all, 179 is. It's code section 179. It's a depreciation rule. 179 is not getting reduced. 179 is the same. It's great. What's changing is bonus depreciation. Now, everybody focus. Take a breath. When Donald Trump took office and passed with Congress the Tax Cuts and Jobs act, it was the biggest tax reduction legislation in 30 years. It was freaking phenomenal. Whether you hate Trump or love Trump, if you're a Small business owner, you got to go, I'm cashing in. What the hell's for me? I'm going to grab it. One of those provisions was called bonus depreciation. And what Trump and Congress said is if you buy a bunch of stuff, equipment or a truck or an SUV, you can bonus 100% of it. You can write off 100%. You don't even have to go look at 179, just use bonus. But we're going to phase it out and come 2023 way out in the future, everybody. This was back in 2018. He said in 2023 we're going to phase it back to 80% bonus and then 60 and then 4 and we're going to start reducing it. Well, 2023 is the year so they're going to reduce bonus. But then 179 can feel of the gap. 179 is not going away. Okay, so that. So everybody don't worry about 179. It's not changing. It's bonus depreciation that's going to slowly go down. Okay, now Eric's second question was, hey, I want to buy a frickin vehicle this year, a 6,000 pound or greater and I want to ride it off in 2022 by December 31st. Okay, sounds cool everybody. You're like, I'm all ears. I'd love to do that too. Now what Eric said is how do I show that I'm using the truck for 50% or more business use so that I can write it off this year? Because in order to depreciate it, you can only depreciate the business use. So. And it's got to be over 50% to do this actual method. So let's say he buys a truck for 50 grand. Newer use, weighs over 6,000 pounds. Let's say his personal use is 20%. So that means we have to take 20% off the 50 grand and we can't write that off. That's personal. So 20% of 50 grand is $10,000. So now we can depreciate 40 grand. Bam, 100. We can take 100% of 80%. Make sense? So Eric's like, how do I prove I'm 80% business use mileage? That's how you do it. You're going to take notes for the next three weeks. I bought it for business and, and I'm not driving it to the grocery store, I'm not driving it to the movies, I'm not driving it up to the ski resort. I'm using it for freaking business. For the next three weeks. I'm going to client meetings, I'm going to pick up supplies, I'm going to work places, I'm doing whatever. That's a whole other conversation. But you got to have a mileage log that shows you're using it for business at least 50% of the time. Now I know what Eric's thinking. Well, come next year, it's not going to be over 50%. It's only going to be 20% business. Well then what the IRS says is give us back our frickin tax deduction, Eric. You can't say it's over 50% in 2022 and then 2023, change the equation on us and make it 80% personal and 20% business. That's not fair. You cheated. I mean, that's being honest, right? You can't say it's one way and the next year change it. So Eric, whatever your freaking percentage is for this year, you want to maintain that going into next year. And if it's not greater than 50%, that's okay. Just own it. Just know I'm not 50% or more. Don't cook the books, Eric. Everybody out there, be honest. You're going to go through the pearly gates someday. Be honest. Don't cheat. So I don't know if that helps, Eric, but it's a mileage log. Make sure you're consistent. And it's the same for next year. All right, next question.

All right, this is from swapnashonda. What are the disadvantages or concerns if I sell my appreciated rental property to my S Corp to lock the 250,000 primary home exclusion?

Okay, first of all, Schwap. First name Schwab.

Schwapna.

Schwapna. Okay, Schwapna and everybody listening. You would never, ever, ever, ever sell your own house to an S Corporation? Hell no. We do not want your S corporation to own a rental property ever. S Corps are not billed to own rental property. Okay, that's point number one. Now if Schwapna is asking this question, it seems like he or she is moving out of their home and making it a rental and they're moving into a new place and turning their home into. And I bet you Swapna is saying, well, it's going to be an Airbnb short term rental, so I've got to put it into an S Corp. No, you don't. Go read my article on short term rentals. You do not put your short term rentals in an S Corp. You still put them in an llc. Okay, so there's the first issue. This S Corp thing. Schwabnet has you all turned around. And I hope and I pray that you're doing a consultation with one of my tax lawyers or some tax lawyer to help you do this. Do not be trying to freaking knock this out on TurboTax or LegalZoom. You're going to jack it up. If you're talking about saving on taxes and the thousands that I think you are, pay for a freaking consult for an hour. People don't worry that a tax lawyer is costing you 500 bucks. Worry that they're saving you five grand. Sorry. It's just. Don't worry about the hourly rate. Worry about what you're saving. All right, next.

Oh, we got time for one more?

Well, no, no. I got to finish. Schwartn. I gotta finish now. Schwattner says, can you even sell your own house to your own llc? That's a whole other issue. What I would rather you do is you contribute the house to the LLC and start depreciating it. Now, I want. I know you want that sale of home exemption, but I'll tell you, accountants are on both sides of the fence here. When you sell your own rental to your own business, that can be what's called a related party transaction. It's got to be fair market value. You've got to have it appraised. I'm a little nervous with that now. Some CPAs are cool with it. Sell it to your own LLC, take the sale of home exemption, ramp up your depreciation. I get that. But you gotta be careful with that, Schwapna. Make sure you're talking with your CPA and that you're good to go. Next question.

We got time for one more question or two, or what are you thinking?

I'm making two questions. Let's do it.

All right, well, let's. Let's go ahead and we'll hit up a local here. Connor McIntyre says, hey, Mark, I got my LLC set up here in Rexburg doing lending on real estate deals. I think I need to set up an S corp as soon as possible because sales took off this month, he says, which is great. So I have to meet with your guy here in Rexburg, question mark. Or can I do a zoom with someone else out of state from one of your offices?

Okay, well, first I want to make sure I didn't turn off my microphone here. You guys can still hear me? I feel like I want to sing a song here. I feel like little. You know, I'm here in front of the fireplace, I need a smoking jacket and just sing you a little Elton John or something. But we'll stick with this. Okay, first of all, Connor, thank you for using our law firm. You're being smart, you're being cautious, you're being careful, getting quality advice. Thank you. Now listen to everybody. What he said and correct me if I'm wrong, James, he said I'm an LLC doing lending, right?

He said he is. He got my. He's like, I got my LLC set up here in Rexburg doing lending on real estate.

Okay. Doing lending on real estate. Yes. Now everybody listen. Think about that when I lend money. So he's a hard money lender. Let's say he's getting points in interest. Is that ordinary income? Is that subject to self employment tax? No, that's just passive income. Now do I want Connor to have an LLC for asset protection and ein branding legitimacy? Sure.

But is.

Is he got a self employment tax problem just doing promissory notes? No, I love promissory notes and I wish I had enough time to start searching promissory notes and working on promissory notes myself. But that's not an S corp thing. You would not run short term lending through an S corp. So Connor, stay in llc. Business is good. That's cool. Keep doing your hard money lending promissory notes, long term, whatever the hell. But you don't need an S corp for that. Now his second question was everybody, do I have to meet with my lawyer face to face? Hell no. We're helping clients around the country on Zoom. Whether you're in Alaska or Miami, Florida or San Diego or Newport, Maine. Give us a call, we'll get on a phone call. We'll help you with federal tax planning. That's what we're doing. You don't have to meet with a lawyer and accountant down the street. Get on a zoom call and meet with a tax lawyer that can help you with universal federal tax strategy and asset protection. That's universal from state to state generally. I mean, and we. We help all 50 states and do it right. Okay, last question.

All right, this is with. Sorry. Flight from flights with Shane. Can I write off my whole family self? Oh, I'm sorry. That's not the one I wanted to ask. It's. Sorry, one second. Here we are. What are the limitations on what electronics I can write off Software company. Can I get Max Pro headphones for my daughter from my business?

Okay. And this flights from Shane as well.

Yes.

Okay, so flights from Shane says, oh, you're gonna love this, everybody. This is a great one to finish on because it's Christmas. Flights from Shane says he wants to buy some electronics. For who? Did he say? One of his board of directors employees for his business that's critical for the operations of his business that just happens to be his daughter. That's what I heard him ask. Isn't that what you heard, guys? I mean, many of you are business owners with critical employees 18 years or older or 16 years old or 15 years old, and you need to get a hold of them on a dime to come in and shred paper and clean the office or do social media or come work on the rental or helping the business. Right? Is that what you heard, James?

I would do. I would be on your board of directors for a nice pair of headphones for sure. Sure.

So everybody, I'm doing some Christmas shopping on my business card for some of my key employees that just happen to be wrapped and under the tree. I mean, if you're buying some headphones for your employee because they need to listen to your company training policies and procedures and podcasts that are critical for your business operations, sounds like critical equipment for your business operation. And one of your employees may just need to get that. Not during the work week, but on Christmas Eve, it might be nice to receive that company benefit wrapped in red paper. Just throwing that out there. Flights for Shane. I think you're on track. All right, anything else, guys? We're going to call it a wrap.

I second that. Meeting adjourned.

Meeting adjourned. All right, everybody, hey, I'll be back here next week, maybe a couple more times before Christmas doing some year end open Forum, Q&A's people, get with an advisor, do your tax planning before year end. I'm grateful to be here with you. Keep living the American dream. I know it's hard. I know some of you are trying to make ends meet and juggle your small business and still get through the holidays. It can be emotionally draining. But you know what, if you're having some hard feelings, some tough feelings, sit back, try to be grateful. Try to give yourself some grace. Try to be thinking about the things that made you start your business in the first place. What really is your long term goal here? Focus on that. Cut expenses where you need to and just be patient. It's going to come together. Keep working hard. I've had those holidays that are really hard and I'm trying to just pay the bills, keep your costs in check, be safe. Work hard and you know what you got next year to make it even better. I'm not going anywhere. And for you tax advisors out here that made it through this and you're trying to look for some strategies here, please get to my website@markjcoler.com click on the button. Get certified. I've got a new program. I'm offering a huge discount on the pre launch this month. Come January 1st prices are going up by 30% and I'm going to help you make more money, build your business and you're going to freaking love it. Get certified as a cta, a certified tax advisor. I'm going to be doing weekly trainings with you one on one with, well I should say one on one. All my certifiers are going to be on a group call every week and I'll be training you and working with you, collaborating with you. Check it out. Thanks everybody. Enjoy the holidays and I'll see you next week.