What To Know! |Vital Tax and Legal Questions, Answered!

Any recommendations for dirt cheap, high deductible health insurance plan? I can afford to max out my HSA every year, so I want to get high deductible health insurance plan with the lowest premiums possible.

Can I push this to four times a year rather than one a year? Yes, but you have to be able to justify that.

I think you got to look at your revenue. If you got a ton of expenses and you're making like 5,000 bucks a year on, you know, the sole proprietorship, and you got 20,000 of meeting expenses, you know that, that, that's not going to work. Okay.

You have really got on the same page with your tax advisor. Welcome, everybody, to this week's episode of the Main Street Business podcast. This is the open forum. Show the people. Show. Take our best shot at answering your questions. Don't rely on it. It's only worth what you pay for a show.

This is not legal advice. Yeah. This meant to be educational in nature. Yeah. Two lawyers here are going to give you a disclaimer right out of the gate.

Yeah. That's what lawyers did. They give disclaimers. We recommend you have a disclaimer, too, in your webpage.

Yeah. We are not responsible. Yeah.

You know, I love it when people aren't lawyers. I'm not a lawyer, so I can't give legal advice. I'm like, what the hell do I say?

Yeah, what do I say?

I'm a lawyer. But don't rely on this advice. No.

Well, we got a lot of great questions. You can get over to mainstreetbusinesspodcast.com there's some stuff going on with the URL, but this is a great opportunity to get your questions answered. And it's an opportunity for Mark and I to see what's out there. I have to say, some of you have some hard questions.

I avoided those. You actually read them.

You just skip them. Mark and I have a rule, though. Okay. I want to know. We had someone talking to us about this and we're like, if you read the question, you own it.

Okay.

You cannot pass it. If you read it, you can't be like, so, Mark, what do you think?

That ain't my question.

If you break it, you buy it.

That's right. You break it, you buy it. So we're going to try to keep this fun and jovial as well. We appreciate many of you that are new listeners here trying to find clear, concise, interesting answers to difficult tax legal questions. Wow, that sounded really good. We got to get AI on that. We Need AI to like create some sort of great little commercial for us. All right. Okay. Well, you've obviously been perusing here a little bit, all these great questions. Yeah, I'm ready. Okay. What are you breaking?

All right, this is from Jerome Bell. This is in general Q And a on HSAs says, Any recommendations for dirt cheap high deductible health insurance plan. I can afford to max out my HSA every year, so I want to get high deductible health insurance plan with the lowest premiums possible. Okay, so Jerome, that's a great question because in order to have a health savings account, remember, you have to have a high deductible health insurance plan that qualifies. Okay? Now sometimes you'll get high deductible plans, but they're not HSA qualifying. So you gotta be very careful on that to make sure it qualifies. Now HSAs just. I want to make sure everybody understands why HSAs are so cool. You get a tax deduction to put the money in. No matter the income. High income, middle income, doesn't matter. Everybody gets a tax deduction above the line. Doesn't matter. Whether you itemize or not, everybody gets the deduction on the hsa. It grows totally tax free. No taxes. You're investing it. You can even self direct it and then it comes out for your medical. No tax, none of this use it or lose it, like FSAs and stuff like this, some people may be familiar with. So HSA health saving accounts are an awesome strategy. I don't know, 3500 bucks approximately. If you're single, was it. What is it for 2023? 23 over seven grand.

So single. 2023.

38. 38.

50. Yep. And 7750 for married.

All right, 2023. Now on the question on dirt cheap, that's a technical term. I think dirt cheap. What I would do and what Mark and I have done in the past, we've actually worked with these guys a little bit. HSA for America. So if you go to HSA for America, you can shop and get quotes on HSA qualifying health insurance plans. Perfect for self employed people too. So jump over there. Hsa.

Excuse me?

HSA for America. That's a great place to shop.

I love it. Okay, I it. And one thing I would recommend too is involving a insurance broker and just tell them you're looking for just the basic qualifying insurance plan. And here's another point. A lot of insurance policies aren't based on the deductible. And this, it all comes down to network. If you're like, I'll take the crappiest network in town.

Yeah.

I mean, I'll go down to the clinic in downtown and stand in line. Insurance, that's the insurance I want. If that's what you want, that's what's going to drive your premium is really the network. So go in and tell them, I want you to dig the bottom of the barrel. I mean, someone that just literally came out of medical school, that's the person I want.

Yeah.

If that's your Jerome, that's up to you. All right. Okay. From Jason. Jason Brown. This is just a recent question. Today I kind of liked it, so I'm going to grab it real quick. I know we got questions in the hopper from a month ago and we're going to get back into those, but this is a good one. Jason says, hey, Simply love your YouTube every week and your show. Thank you, Jason. He says, I have a board of advisors for my single member llc. Now, for some of you that may have formed your LLC with an online service two years ago and have one sheet of paper in a drawer, it's time to clean it up. Get with the legal team, the paralegals, you don't have to talk to a lawyer and keep it very affordable. Get the LLC with all the pieces and parts and adopt a board of advisors. Companies don't do that. They don't ask you about that. When you're filling out your paperwork online, you're just trying to get out of there as cheap as possible, people. That's not really an llc. So, Jason, want to commend you. You obviously have a well organized llc. Hopefully you did it with our office. Appreciate you. And he says, with my single member llc. Now this is interesting. He says, I know I am allowed to have a meeting once a year and have that meeting written off, including travel and dining. Yes. Now, the word allowed I would play with. You're really suggested. In most states, the LLC is not required to do this, but it's really a good suggestion for asset protection. And you're allowed to have as many meetings as you need. His next question is, can I push this to four times a year rather than one a year? Yes, but you have to be able to justify that. I mean, if your business is selling jeans on ebay in the middle of the night and your three kids are ages 8, 10, and 12, one meeting a year may be all you really need, you know, but if your business is a little more active and your spouse is really involved and your kids are helping out and you can go to some business trainings, take them to a good business training course. I mean, what all. I mean good.

Yeah, just long as there's a business purpose. And so I think you gotta look at your revenue. If you got a ton of expenses and you're making like 5,000 bucks a year on this sole proprietorship and you got 20,000 of meeting expenses, you know that that's not gonna work. Okay. So however many meetings you want, as long as they're reasonably necessary for the business. So they have to have some business purpose to it.

Okay, I like it. Matt, you're next.

Okay.

Ooh, wow. I'm looking over Matt's shoulder. This one looks brutal. Look. You're gonna have to truncate that.

Yeah. This was GI Doc says questions about S Corp and FICA taxes and setting up high W2 earnings with a 1099 side hustle. Wondering what insight you might have. I have a relatively high W2 this year. 550k and a side hustle that brings in about 150k of 1099 income. I've came across an interesting point that suggests that would not be the best idea to use an S corp for my side hustle in this type of situation. If I understand the point correctly, the concern with forming an S corp in this situation is that I may actually increase my payroll tax for my side hustle as opposed to keeping the side hustle as a sole proprietorship. I believe the reasoning behind this is because my W2 I would pay half the payroll taxes up to the 2023 Social Security tax limit of 160,000 and my employer will cover the other half. Okay, well, let me get at what the real issue is going to be. GI Doc, in your situation, since you're already maxing out on portions of the FICA, I will say because you have 550k like Social Security. Once you get about 140k, Mark's got a handy dandy calculator for this. 160k by the way here. Single or married, by the way. 160k. Once you hit that, Social Security ends. Okay, but what is left? Medicare. Okay, so you're still paying Medicare, GI doc, even on that 550k that's coming out of your side of the paycheck, not the employer. When you're self employed, that Medicare is hitting too and it gets up to 3.8%. 200,000 single, 250,000 married. This is 2023 numbers. So you're already basically have a tax savings of about 3.8% because you're 550 already on your W2. So when we talk about an S corp, we're talking about sometimes saving 15.3%. But if you've already maxed out cause you have a really high W2, I get it. I get what you're saying. I'm not saving as much. But for every 100,000 you could avoid by pushing through as profit in an S Corp versus all 100% taxable on a sole proprietorship, every a hundred grand, you're saving 3,800 bucks. So in that 150k, that might be exactly what you do. That might be your tax savings. Right there is 3,800, but it's not 15% on 100,000. So it's true the value of the S corp goes down, but you have more income than someone making like 100 grand. So. So there's still a tax saving there. And obviously if that side hustle increases even some making a million bucks a year, you know, we're like, okay, well it's at least 4% of hundreds of thousands of dollars, huge tax savings still to do the S Corporation.

Okay.

And that, by the way, got a little bit into some of the other questions. Cheryl had a question on this. Kind of some people who are like, well, what if I'm really high income? Does the S corp still say, me, yes, I'm still doing the S Corp, Mark's still doing the S Corp. You know, it's not like we're making less than six figures, like, you know, like $100,000. Like still, I mean, not that you wanted everything Joe Biden does, but you know, remember his S Corp that like $8 million, you're doing the S Corp. Okay, you're still saving on this 3.8% on Medicare, even for you high income earners.

All right. Okay. Well, great comments, Matt. And it's a, it's a tricky one. And I would just say, if I can add to that is you have really got to be on the same page with your tax advisor because they're going to be very opinionated about the S Corp, the payroll level, your day job, they're going to be calculating scenarios for you and there's money to be saved here. But it is a very tactical, strategic procedure. And if you're the one telling your accountant what to do or guiding them or fighting with them, you got the wrong accountant. And this brings up, I got to just say it. My. The tax advisor network we're building and we are advising Matt's helping out and a lot of the education, all of our attorneys, and it's been really a good experience. We've got the certified Tax Advisor network. Get over to March Comm. You can sign up to be alerted when a tax advisor is available. And you can interview and find maybe a better advisor. If the one that you're working with on this is just fighting with you. You don't need a CPA like that. None of you. You want someone that knows what's going on. And so we're trying to get everybody on the same page with the strategies that we're trying to learn, too. I teach a class and I'm always learning something new from the people in the network. I think you're going to love it. Okay, Leonard, his quote is the hardest thing in the world to understand is the income tax. Now he puts that in quotes and he says, I know you guys are working hard to help us understand this tax thing, but this quote definitely reflects how I feel oftentimes. Well, I hate to tell you, Leonard, I'm just going to take issue with your quote. The hardest thing in the world to understand is the income tax. I thought it was our opposite sex, the ladies.

Yeah.

I mean, if you've got women mastered to the point, income tax is your problem. We need to have you on the show.

Yeah, because we have more valuable information, actually.

Totally. I mean, that's where we're really going with the show is if you crack,

you've got some trifecta strategy here we could implement, you know, to make it simple.

We love our ladies. We've got two wonderful women in our lives, but, you know, we're still trying to crack the code. So we're always doing the best we can. And they're so patient with us. All right, Okay. I recently. So he says. I recently consulted with a CPA for tax prep and was talking about losses in my short term rental put into service in 2022. Last year, the CPA brought to my attention that the losses I could use, I could use the losses to offset my W2, assuming I qualify under the material participation. That's a pretty cutting edge CPA right there. We are teaching short term rental strategies and they're very unique. There's a loophole in that.

Yeah.

So I want to commend you that you're onto something with the accountant. Then the accountant says, but you are capped by the money you've put into the rental, which is he described as the at risk rule and said, the figure, the cap is the Total cost of upgrades and renovations. Principal paid on mortgage prior to being put into service since it was my primary residence in 2018-22. Down payment and closing costs. I hate to say this too, but the at risk rule includes recourse debt. Which is really interesting that the accountant didn't refer to that. So if I buy a rental property and put down 20 grand and get a mortgage for 80 grand and buy a property for 100 grand, my at risk is 100 grand I'm on for the mortgage of 80 and I put down 20. So now I get to peel out the cost of land and depreciate the rest with cost seg or whatever. Same thing applies if you have a primary residence and you contribute to this project. So I just would take a little. Just as an aside, Leonard, make sure it is true. You've got all of us. We can't write off more than we're at risk. Can I tell a quick story? It'd be okay.

You're already going long on this question.

Oh, no, I am. You're feeling that. I'm sorry.

I'm enjoying it.

Okay. You're okay. Okay, I'm just gonna say. Any of you hear of the Savings Alone Crisis?

Snl.

SNL Crisis. Yeah, it was Saturday Night Live. No, no.

S and L. Yeah.

Yes. Savings and loan crisis. Now that was back in the 80s, kind of a big deal. 80s had it 70s, 80s, 90s. It was kind of going through that whole period. Here's what happened. Investors were going out and putting money down on big buildings. And savings and loans were funding the acquisitions of these buildings. This is when savings and loans were a big deal. And investors loved it because they could put down 100 grand on a million dollar building. And under the IRS rules back then, they could write off the whole million, minus the land. But they were able to write off these huge investments. They didn't even care if the building made money. What happened? The buildings didn't make money. What happened to the loans? They went into default. What happened to savings and loans? They're kind of like the dodo bird. They're gone. They don't exist anymore. They went under and the government had to come bail them out. And it was a big disaster. Well, it wasn't really the savings alone that were making the problem. It was the tax code. The tax code was letting investors write off more than they were at risk. They didn't care if they lost 100 grand because they got a write off for 2, 3, 400 grand or more. So the IRS and the Congress changed the law and said blah, blah, blah, blah, blah. You can take loss write offs on these short term rentals and these sorts of things, but you in any sort of rental, but you have to be at risk to be able to take that write off. And that includes the recourse debt. If you're on for the debt personally, you get to add that to your at risk. So anybody out there, you're like, well, I got a non recourse loan. Well, that means you're at risk is only what you put into it. Plus repairs and maintenance. Well, I shouldn't say repairs and maintenance, but improvements and things like this. So Leonard and everybody out there, kind of a digression, but I think that was a very important story to share.

Thank you.

Did you appreciate that?

Yeah. Way back to the SNL crisis.

Okay. Yeah, I don't know. I'm just gonna say, Leonard, I think you're on track. The short term rental strategy is excellent. You've got to materially participate. Matt and I have held a couple podcasts on the short term rental strategy. They're in our history. Please get back and listen to those in full. In the last six months, I think we've done a couple and I would really recommend you go listen to those. But that's where I would go, Leonard, is listen to our podcast on the short term rental strategy. You're on track. I'm liking what you're doing. But the at risk is in the comment here. Maybe not what you expected me to comment on, but that's the concern. Okay. Love it. All right.

All right. Dan asks. Hello, Mark and Matt, big client and big fan. Recommend you to others. Thanks for your expert help. Said, am I a candidate for the trifecta? Yes, Dan. I don't even need to read your question.

Everyone's a candidate for the trifecta.

But let me go through this because Dan's got a great question, good situation, a good situation, good situation here, and a phenomenal question. And a.

He's a candidate.

Phenomenal.

Yeah, yeah, he's a candidate. Slam dunk.

Let's go through it. I think we can learn something from this. Okay. He says now he owns a lot of stuff. This is a good thing. His right side of the trifecta is very heavy.

Which we want.

Which is what you want. You've done it right, Dan? His left side's a little empty. Okay, that's okay.

He's got some junk in the trunk on that one. Okay.

You're right side going, great Scott. I own a Fourplex in California on a 20 unit apartment building in Utah through an LLC with my spouse. Half of a 19 unit apartment building in Utah through a limited partnership. Not sure why you did that. I want to come back to that. LPs positions in 12 syndicated multifamily deals in multiple states. My wife retired and has a good pension. I'm a full time investor with IRIS designation as a real estate pro. Makes sense. Got a bunch of properties. We have Roth IRAs, traditional IRAs, a sizable 401k. My daughter 19 has been working for us and she already has a sizable Roth ira. All because you guys taught me about this. Thank you. Says I own about 40k a year as trustee of an estate. We have strong cash flow from our real estate properties and investment. And then you say I was told I do not have enough side gig income to make the trifecta worth it. Please give me your thoughts. Dan, don't worry about the left side and the side gig stuff. The trifecta would be very valuable to you to get it clear, concise on the right side and on the bottom. This is the three pieces of the trifecta. Left side operating businesses, right side assets. And then below we've got your estate plan.

Well, who would say I don't have enough side gig to make the trifecta worth it?

Nobody. I would like to know. You know.

Yeah, let me. Let's back up, some of you may be new listeners. What is the trifecta? The Trifecta is our trademark genius of trying to organize your tax, legal, wealth building, estate, planning, life where it just makes sense. And to be honest, it is hard for accountants and lawyers and financial advisors in general to explain what a client's big picture should look like. So clients come in, they take a stab at it. Some clients get it, some don't. They go to somewhere else and they get it. And then. But who brings it all together? So over the last 10 years we just kind of fell on this and it started to make more and more sense. We would create a little PowerPoint picture. Now it's Lucidchart. Apparently I'm old school PowerPoint. But you create a little PowerPoint picture that says at the bottom is your estate plan, on the left is your operations and all of the different things that you might be doing to create side gig or daily income or whatever. And then the right side is your investments and how it is all coordinated. How does it all come together? So if someone says, well, you don't have enough side gig to make the trifecta work. That's irrelevant. I build trifectas all the time with no side gig income. The whole theory is how do we bring your whole wealth picture together where you can take it to an insurance agent, a financial advisor, a CPA or lawyer and go, here's my picture.

Now here's an interesting thing though in Dan's situation, which is if you think of what Mark described there as the trifecta, on this left side we have operating businesses. Whether your main hustle side hustle, your W2, your spouse W, this is your working to go make income. The right side is where we're trying to build our assets. So we're taking this income over here that we're making and we're going over here to go buy properties, rentals, contribute to our retirement accounts, max amount investment accounts, whatever you're doing over here to build assets. What Dan has is he's got good assets, he's got cash flowing assets to make enough income. He doesn't need to be over here working. Dan, you got it figured out, don't worry. But you've got a lot of planning over here on this right side and also down here. If you're watching the video, if you're on the podcast, where's he going with this? You know, down here at the bottom of the trifecta, which is where you need to make sure your state plan is coordinated. Now even in your little description here, I can already tell a couple of things I'm going to poke at as an attorney and one of our tax lawyers on this right side, just between your investment holdings here, the different apartments you're in, like, why do you have an lp? Not sure why. We generally don't like limited partnerships for rental real estate loss limitations there. But so there's plenty of enough to dig in. And even on this right side, right, we kind of have the retirement account bucket separate from your non retirement account bucket. So. So lots of planning still to be done there and I think a trifecta would be very helpful for you in focusing those sides. But if your left side is empty, that's okay. Now for many clients, I'm like, you've got to start getting your right side, you've got to get the bottom your estate plan done. But if you don't need to work and you don't need anything on that left side. Bless you.

Yeah. And sometimes we have clients like this that we do push some income from the right over to the left to further fund a 401 or sometimes ordinary income is nice to play with. And you can create a side gig with your income from the passive side. Now you have to be very tactical on why you would do that. Funding a 401k. Further, if you're really trying to double down on that, we call that the side door. 401K. Very common. Another thought, last thing on his list. Did you comment on number one? I just want to say this. He said at the very top, I own a fourplex in California as a sole proprietor. All the other points he references an LLC or lp. I'm nervous here.

Yeah. In California.

Yeah. Dan. I know what Dan's thinking. Guys. You don't know an LLC in California is $800. Yeah. It's called insurance. It's called I don't wanna get my butt sued with all these other assets on your right side.

I thought you were gonna say all these other a holes.

Assets

in California.

There's all these a holes in California. Hey, I love my California clients. Okay. So excuse my partner, but no people. Dude, I know so many of you in California are like $800 a year. Yeah. You want to choose to invest in California or live in California, you got to play by the rules. And you do not want to be exposed in one of the most litigious states in the country. Pay the $800. Do the LLC in California the way you're supposed to.

And that's even a fourplex. Not even a single family. Yeah. That's a quadruple the risk, you know.

Yeah.

Any more tenants. So. And just think what happens. Something happens on that. By the way, you get a lawsuit on that. Tenant slips and falls in one of those units. Only can they go after that fourplex unit. They're going into this. Some of these LLC and some of these other assets. You know, this is a judgment that's going to hit your personal name.

Yeah. And Utah does not have a COPE statute. So you're. You've got to evaluate how much equity you have sitting around. And now the limited partnerships probably be protected from an outside lawsuit, but you got a lot of other assets you need to consider there. Okay. Question from Logan. This is. I'm going a little back. I'm going back a month on this question. Trying to get some of these older questions out of the hopper. He said, hey, guys. Oh, the question was. Or the standard mileage rate. That's our topic. Standard mileage rate. He said, hey, guys, is there any time when it is allowable or makes sense for a business owner to receive reimbursement for mileage Instead of taking the deduction on their returns, My understanding is that up to the SMR standard, mileage rate can be given tax free and the business can take a deduction for that amount. Is that correct? Does it make sense to do maybe only in a partnership? Thanks in advance. All right, well, Logan at the very last sentence nailed the issue. He said, does it make sense to do maybe only in a partnership? And that's right, Logan. So now let me unpack it for everyone else. Let's say I have an S corp, say I have a sole proprietor. Let's say I have a rental property like Dan, this last question. And I want to write off my mileage. Whether you reimburse yourself for the mileage and take a write off at the LLC or you write off the mileage with a journal entry in the llc, the result is the same. You get a write off in the business and it's tax free for you. So when it's a single owner or a couple spousal ownership of a business, we're not going to do a reimbursement of mileage because it's easier to just do a journal entry. Done, took the write off mileage, boom, done over, have a record, be good. In an S corp, it's going to be booked as if it was a reimbursement. You're going to write off the mileage in the form of a journal entry. But the accountants know, the IRS knows. You may have not actually written yourself a check, but it's as if you did. So it's the same thing. Now, let's say we're in a partnership now. The reimbursement makes total sense. Matt and I, we have a law partnership. And we may say, Matt may say, man, I've been driving around a lot, dammit. I've been going to conferences, I've been working here. I had to go over and deal with this. And I drove across town to help with this client and I drove across town for this. I want to get reimbursed for my mileage. Now, in just a plain old partnership, we may say, okay, we're going to reimburse that partner for a certain amount of mileage, take a write off at the partnership level, then split profit. So it's kind of like an expense off the top of the partnership. Now I may say, well, that's your own damn problem. You shouldn't have been driving around. I'll say, I'm not paying for that. Screw you. Or I want to get the same reimbursement you're like, well, you're never going. And we get into a fight. Who knows? Matt and I don't do that. We're great partners. But that could occur where one partner's like, I don't want it to go that route. So the fail safe is Matt could write off that mileage at the S Corp level, which is a partner of the llc, or he could write it off if he didn't have the S Corp as an unreimbursed partnership expense on schedule E, page two. So he's got some ways to write it off. But wouldn't it be better if it was reimbursed from the partnership? Because then I'm paying for half of his mileage. That's what he'd want. And he's going to try and trick me. He's going to try to, you know, make it sound all great.

I would never.

You never. You're such a good partner. So that's when it makes sense is at the partnership level, if you're going to do that sort of reimbursement thing, you're still going to get the write off nine every which way. And on Sunday it's just, are you wanting your partner to help flip the bill for that mileage in that situation? So I hope that makes sense for everybody. Don't get caught up in the mileage reimbursement. Just book it, take the write off, same damn thing. But if you're in a partnership and you want your partner to pay for half your mileage, that's when you do the reimbursement.

Okay, all right, all right. Okay. Lee Midland, Texas, Lee Richter.

How did he sneak in here?

You know, he's always got a good question. I know it's going to be about a solo 401k asked about the part time rule, which changed in Secure Act 2.0. That was, you know, passed by Congress like on Christmas Eve. So the part time rule now says that if you are a business with part time employees and you have a 401k plan, you must offer it to part time employees. That is they at least work 500 hours a year and they've been with you for two years. Now that changed the rule, which used to be three years. Even before the three year rule, there was no requirement for part time employees. So this is going from three now to two. But that does not go into effect until 2024. So I believe actually 2025, I think 20, but you know, starting after December 31, 2024. So for those of you with solo ks and part time employees. That 500 hour rule where then now they qualify. They've got to at least work for you for two years and don't worry about it until 2025.

I love it. Okay, good, good. I'll hit this one quick, too. I'm sticking with mileage for a minute. Got another question from Nathan. Said, hey, Mark and Matt, love everything you're trying to do to help small business owners. Wish there was a way to return the favor for all of you. Okay, at the end of the show, we're going to provide our address. You can send a package. Hopefully not anything white, powdery substance, you know, fruit. I love Harry and David. Those pears are really good.

They are very nice.

They're tasty. Okay. He says, my question is, my S corp took equity stake in a local business. The business location. This is curious. The business location has no office space, just a closet with a safe and a filing cabinet. Apparently. Kind of a Better Call Saul setup

this in the back of a nail salon?

Yeah, I'm thinking it's a nail salon operation. What Nathan's not saying is we're laundering money. And it's going quite well, apparently. Okay, that's good. So he has this money laundering location, and he says twice a week I drive there to pick up receipts, checks and cash, see which he's moving to a storage unit that's on a pallet somewhere. Breaking Bad fans. Yeah, there's a question here. Yeah, there's a real question. He says, is the drive to the local business considered a commute? Absolutely. Absolutely. That's a business errand. Your S corp owns part of a business it's running over there to pick up the laundry. I mean, the cash, and just run the operation. Maybe get your nails done. You're good mani pedi while you're there, you know.

Yeah, but wait a second. He says, is that a commute? We don't want it to be commuting.

Oh, yeah, yeah, sorry. I don't want business model. Yeah, Stay away from the word C word. We don't want the commute word. Yeah, it's bad. Dirty. Dirty word. Is the drive to the local business considered business mileage and a necessary business expense. Absolutely. So pack heat.

That's what would also be deductible.

Yeah, yeah. Now, guns. Very interesting question there. Of course, if you're in law enforcement, private security, a gun would be a necessary business piece of equipment.

And you're telling me Saul Goodman couldn't write off the gun? I mean, he, you know.

Oh, no, no, no, this is true. You know, a lot of people that are in business professions that have at risk clientele or operations, a lot of times can get a concealed permit in states where they're not too easy. Arizona, it's easy. You're breathing. You have a pulse. Okay. You can carry a gun into the 7 11. Have fun. But anyway, that's Arizona for you people. Come on out. I'm driving down the road and some guy's on a Harley with a, you know, big old.357 mag on the side. You're like, I'm not going to cut this guy off.

Yeah.

I'm going to give him as much space as he needs on the road. Okay. But anyway. But no, there's business owners that do need to go to another level of security. Security dogs. Yeah.

I had a client with a bike shop that had a security dog. And it's like I got like hundreds of thousands of inventory sitting this shop when I leave. And the dog actually slept there at night.

Yeah.

And was also kind of like the shop dog that was, you know, greeted people when they came and everybody like dog, but was like kind of the security there at night.

Yeah.

You don't want to be busting in a place where a dog's barking.

Total tax write off. And so there can. You have to be able to show that any weapon is necessary and has a purpose and a business use that's justifiable. So I can't say, Blake, and guns are a write off. You're saying, well, I'm selling jeans on ebay and I need a gun for protection.

Really?

You know, but. So it's not going to work for all business owners. But yeah, no, I don't know how we got our guns.

Is jeans on ebay? Is this the new thing? Is this the new way to make money now, selling jeans on ebay?

You don't know the connection there, why it comes to mind.

Alison Marie, alisonmarie.com sells other stuff on ebay.

Yeah. What she's buying now is jean jackets and she's got an embroidery system. That's so cool. She's putting Yellowstone on the back of these jean jackets and they're selling like hotcakes. So my daughter has kind of an online business that she literally goes to surplus stores and buys old military surplus jeans, drives over them with a car, puts them out there, and California kids buy them for thousands of dollars. It's called Urban Outfitters.

Yeah.

Anyway, she's killing it. Anyway, I call it Walmart, but apparently that's an urban strategy. Walmart, just. But go to Urban Outfitters. Get an old ACDC shirt for $120.

But why not?

Or go to my closet. You can have one.

Why not? Why not? Okay. All right, well, let's.

You got another question? What? Let's do one each more. Wrap it up.

One each more. Let me see.

We got a good one.

I had a good one, and I just missed.

See, I went with laundering money. I knew that's where we were going, so. Ooh, I like this. Simply business right off a pool. Ooh, that's good. That's enticing me. Okay, let's see.

All right, let me read this one here. This one is from Cheryl. And I'm gonna truncate this a little bit because it's a little long here. Okay. What?

Okay, keep going.

All right, so this is Cheryl's question. I love it. She says, I'm a. She's a customer of the law firm. Anxiously awaiting the new CPA program, by the way.

Ooh, nice.

Okay, great situation. Husband's licensed professional engineer, K1. Partner in an engineer construction company. But when he's offered ownership, a year ago, they were told him the ownership could not be in an LLC or an S Corp. It had to be in his personal name, and his compensation is guaranteed. Payments coming on a K1. This is typically over $2 million a year.

Okay, great.

Business is doing awesome. Says it sickens us to know all the taxes we could be avoiding by using your S Corp strategy. Last year we paid a million in taxes. She's all right. Now here's where the plot thickens. Cheryl says, now here's the rub. Our accountant does not see value in the S Corp. And he is the CPA that audits the company.

Oh, my gosh. Auditor.

What do you expect?

Auditor right there.

You know, he says we can change accounts. The senior partner, majority shareholders. Only partner in the entity. Sorry. Is the only other partner using an entity. The other four partners are all compensating their own names. No one in the group is aware of the strategy. Husband doesn't want to be the. You know, the guy that rocks the boat, so to speak, bringing up the senior partner strategy. Okay, let me. Let me say this. Let me reframe the way you're thinking about this, Cheryl, because I know you want to save taxes, and you guys would save taxes by doing the S Corp. Instead of thinking of your husband being, you know, the person rocking the boat, how about you think of him as being the champion that's gonna help his Business partner friends also save on taxes.

Wow, you are just pulling off the life coaching, marriage counseling. I love you.

Yeah.

I mean, we gotta reframe your mindset here.

Yeah.

Keep going with this. Keep growing. I'm liking it.

Yeah. So how about we think about it that way. And you know what? If they don't wanna do it, they don't have to. You know, Mark and I can be in a partnership. We are. And he can be doing an S corp and I can be like, I don't want to. I prefer to pay more taxes.

And that would be fine.

That would affect Mark. Not at all.

Yes.

It doesn't change it for him.

Yeah.

Okay. Now I'm not that I'm not a. So I'm. I just want to make sure you guys know that I am not.

That is not his position. I'm not a moron. Okay.

So I have an S corp. Okay. Mark has an S corp. But you know what? Me having an S corp doesn't save Mark taxes either. It's for me. Okay. So think about it that way and just say, hey, I want to do this. This is my tax and legal advice. It affects you not at all. If there is any audit on this. If they're like the auditor CPA you guys have for the company worries about, it's only on you. Yeah.

And so get over your frickin CPA trying to control the world.

And some of these other partners might be like, hey, what are you doing here? I could save taxes. Now, I think there is a little bit of a thing, you know, about like not wanting to rock the. But with a senior partner who might look dumb by not have having this structured themselves.

And that's why the CPA that's auditing is covered his ass.

Yes. The CPA is the one that's like, I should have been doing this years ago.

I know. I gotta, I gotta shoot this down or I'm gonna look at dumb. Yeah.

So maybe you can kind of couch it as like this is a new strategy that's kind of out there.

Until they looked at it and go, we should have been doing this. You know, I don't know. Whatever you got to do to sell

it, that works for you. But I would, I would think about it another way. I. I mean, again, your husband's your champion. Yeah. He's the one that's going to save them money too.

Yeah, I know. I love it.

They're going to owe you guys.

In our advisory program too, we have life coach every month. We have our Main Street Life coach that comes out and teaches our CPAs to talk about the mindset is you're working with clients, you're working with all these different people. You gotta, you gotta. I like how Matt just said you gotta sell it. You gotta be thinking, what, what is everybody's feelings involved? How are you going to politically pull this off? And I just, I just love it. So good stuff. Okay, now this. Oh my gosh, you're going to love this.

The pool, the pool question.

I thought I'd seen it all.

All right.

I mean, when Turo came out and people are Airbnb in their cars, I was like, man, that's ingenious. Airbnb in the pool, dude, I haven't even heard of this. Some of you are like, mark, where have you been? Your head in the ground. Okay, I started a side business doing swimpli.

I've heard of that.

Yeah, you've heard of this?

Uh huh.

I've never heard of it. Okay, swimply, somebody swim P L Y. Swimply. Think Airbnb for your pool. So basically a short term rental. He says, I specifically built a pool in my home yard at the beginning of the year in order to do this business. And it has done well, I have. So people can go on. I just googled it. Swimply, search for a pool to rent near you so you can rent someone's pool for the day.

Yeah.

You have a pool, Can I rent it? Yeah. Can I dig it?

Get on a swimply. I gotta get on a swimply.

I can't get a deal. I can't go straight to the owner. Oh my gosh. I gotta. Okay, I'll go to swimply. Matt Sorenson's pool. I'm gonna come over, my Uncle Eddie white wife beater, T shirt and some colorful shorts and get on your diving board and just whatever, it's yours for the day. Okay. All right. So the swimply, I've never heard of this. So he built the pool and he goes, this is my first year. So my question is, can I put all of the pool building maintenance cost into my swimpli business as a write off with the accounting records or 95% of the cost to allocate? Because he says we have 5% personal use, we track all the rental time. Da da da da da. If I have to use the home office method, I don't think I'll get very much deduction. Damn straight. And compared to being able to allocate the expenses for the pool and turn it swimply into a side gig, I love it now I will say, wow, is this rental of real property going on a schedule E versus a schedule C?

The problem is it's like daily rental. You think about it.

Yeah, right.

No one's renting at the pool for two days. Maybe they're going back to back, but they're not overnight. And there are services while they're there.

I can't see that. Bring it over. You can rent it by the hour even. Wow, sounds like a cheap hotel. Can I rent your pool by the hour? You have a camera on the pool?

The customers we want.

Well, I can send some people by. Do you have a camera on the pool? Because I want to make sure that this is not going to show up on social media somewhere. Okay, okay. All right, so.

So having it show on social media.

All right, first of all, let's answer the question. You're definitely not going to go with the home office deduction. This is a business. You're going to want to peel off the cost of building the pool into a set of books. Now, I will say when you go to sell the home, you've got a business property. This is like subdividing your property for tax purposes in a sense. I want to say that you're not going to go really subdivided. But what I'm saying is this is like a, think of it like a mother in law apartment or a bread bed and breakfast. So you've got home, personal use, business use. When you go to sell the home, you're not going to be able to take the sale of home exemption on everything. So be aware of that. Depending on how you approach this, you're going to have to claim the income. It is a business. But. And for some of you that are going to convert your pool into this type of business, and you didn't build the pool for this, this guy, he's got clear records of what the pool cost was. Some you might have to get appraisal. You know, how much is the pool worth and how much is in it? How much did you pay for improvements? Are you let him use the barbecue, the lawn? So anyway, let's just say you come up with the basis of what you're going to write off. Definitely not home office. Stay away from that. The question I'm grappling with, I guess you'd go schedule C because if you look at Airbnb rules, you're not going to have a seven day or greater rental period. So we know we're going to be under seven days, which means hotel, which means schedule C. So Okay, I'm kind of thinking through this at the moment. Leaning schedule C, material participation write off. Man. Could you bonus depreciate your pool?

I mean, yeah, you got cool equipment on there that. That does not last very long. I mean, the filters and stuff. And maybe there's a hot tub, you know, or, you know, spa, whatever you want to call it. Yeah, involved here too.

I love it. And here's the thing. This could be the. I'm leaning on it. It's the way this is written. As I read into it, it kind of sounds like the. The man of the house is writing this, so. But you know what your wife's gonna want? She's gonna want a pool guy, you know, kind of a Rico Suave kind of pool guy coming by.

Yeah.

And now that would be a write off. Yeah, you could write off the pool guy. Yeah.

I don't know how this is gonna go for you, but it could be

a disaster in the waiting. But yeah, man, I never thought I'd say on the podcast you could write off the pool guy.

Yeah.

Wow. Where this is evolved.

We're reaching new heights, new lows, whatever you want to call it. We're going places we've never gone before Here.

Today on the street business podcast, here's my disclaimer. I'm having fun with this, but I'm gonna have to get my head around swimply. And we may have to do a podcast on swimply.

You know what, let's do a podcast on all the other things. You can rent the Airbnb for your

pool, the Airbnb for RVs, your car,

the cars for your RV, the Airbnb for fill in the blank.

Love it. That sounded very inappropriate, but if you want to go there, you know, I'll go long.

It also includes hourly rates, rental times by the hour.

We're gonna get an E rating real quick here. Okay, well, everybody, hopefully we did. You know, tax and legal planning could be this fun. If you've enjoyed the show, please share it. Please give it a five star rating. Get it out there, let people know you can live the American dream. There's side hustles, there's. Oh, you said side hustle. I won't say that right off on the cusp of what we just covered, but build your trifecta. Get with the law firm and get a plan. Build some wealth, live the dream, get some better write offs. This country is great. Got to pay some taxes, but let's keep it as low as possible.

Great show.

Matt, you're amazing.

Love it had a great time. Thanks everyone. Thanks for the amazing questions, too. And remember, go over to mainstreetbusinesspodcast.com to submit questions for next Open Forum show, which we'll be doing in a couple weeks.

All right.

I keep saying.