Maximizing Tax Savings for High Income Earners: With David A.Perez

September 16

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Ever felt like you’re stuck in a game of Monopoly where everyone else is landing on Free Parking, but all your dice throws land you squarely on Income Tax? For many thinking tax savings for high income earners is only possible with a whole team of accounting wizards at a very hefty price, it can feel exactly that way.

We’ve all been there. The tax season arrives and we find ourselves staring at an overwhelming tax bill, thinking ‘there must be a better way’. What if I said there was an alternative to that daunting April 15th?

Imagine transforming your dreaded April 15th into just another day by leveraging the power of the US Tax Code. Yes! It’s not merely a tool to collect revenue but also one filled with hidden gems designed to encourage certain behaviors – from business investments to real estate purchases.

Thanks to David A.Perez, we can breakdown just how possible it is to hold onto as much of your hard earned income as possible as well as understanding some of those fantastic tax savings that Real Estate offers. 

Let’s dive into these golden strategies, specially crafted for those with a high income. Are you set? This isn’t just any guide.

Table Of Contents:

Leveraging the Tax Code as a High-Income Earner

High-income earners often face a heavy tax burden. But did you know that there are ways to strategically reduce your taxable income? It’s all about understanding how the tax code works.

Maximizing Business Owner Benefits in the Tax Code

If you’re a business owner, the tax code is packed with benefits designed just for you. For instance, certain deductions can help significantly reduce your federal income tax liability.

Are you curious what sorts of deductions are available? Think expenses like office supplies and equipment or even travel costs related to your business. They add up over time and can have quite an impact on lowering your taxable income. The IRS has detailed guidelines on what qualifies as deductible business expenses – it’s worth taking some time to familiarize yourself with them.

Understanding Investor Incentives in the Tax Code

Beyond being a high-income earner or owning a successful enterprise, if you’ve dipped into investing (or considering doing so), knowing investor-specific provisions in our nation’s complex ‘tax-scape’, becomes paramount.

Certain types of investments allow capital gains – profits from selling assets such as stocks or real estate – to be taxed at lower rates than ordinary income. Understanding these details will let investors smartly strategize their holdings to optimize their overall financial picture by staying within favorable tax brackets.

Now, this might seem overwhelming. But don’t worry. With a solid grasp of these principles and possibly some professional help, you can start crafting your own tailored strategies to reduce tax and increase wealth.

The Contrast with W-2 Employees

But hey, we can’t chat about taxes without giving a nod to our W-2 employees too, right?

Key Thought: 

If you’re earning a high income, there are clever ways to cut down your tax load by taking advantage of the benefits in the tax code. As a business owner, you can tap into specific deductions such as office expenses and travel costs to shrink your taxable income. Investors aren’t left out either – they can enjoy lower tax rates on capital gains compared to regular income. The trick is getting clued up about these principles and putting them into play.

Real Estate as a Powerful Tax Strategy

For high-income earners looking to optimize their taxes, becoming a real estate professional can be an effective strategy. This might seem surprising but let’s delve into why it makes perfect sense.

The Tax Advantages of Real Estate Investment

In the world of tax planning, property investments are often overlooked gems. By owning investment properties, you open up a plethora of opportunities for potential deductions on your taxable income. From property taxes and mortgage interest to maintenance costs and insurance premiums – all these expenses become deductible against rental income earned from the property.

But there’s more. One major advantage that is unique to real estate investing is depreciation deduction. Although your properties may actually appreciate in value over time, the IRS allows you to claim depreciation on them as if they were losing value – reducing even further your taxable rental income.

A little-known fact about being a real estate investor, however humorous it sounds: Uncle Sam gives you perks for using his money (aka taking out loans) to buy assets like real estate. Yes indeed; unlike other forms of borrowing where loan interest payments are not always deductible or capped at certain amounts such as with personal mortgages or student loans – when borrowed funds are used towards buying investment properties, then voila – those interests become part-and-parcel of your allowable business expense deductions too.

Key Stat: Becoming a real estate professional can be an especially powerful tax strategy for married individuals due to joint filing benefits available under federal law.

Moving beyond deductions though; another big draw lies in how capital gains from selling appreciated estates get treated differently than regular incomes under our current tax code rules which offer more lenient rates on long-term investment profits. Now, how about that for a winning combination?

But that’s not all; there are additional benefits to be had. With some careful planning and strategizing, it’s also possible to defer paying taxes on real estate gains indefinitely through what is known as a 1031 exchange – named after its respective IRS tax code section. This mechanism allows investors to reinvest proceeds from selling an appreciated property into another similar one within certain timelines without recognizing any taxable gain in the process.

Key Thought: 

Real estate can be a game-changer for high-income earners seeking tax optimization. From deductions on property expenses and mortgage interest to depreciation claims, the perks are abundant. Even better? The unique advantages of loan interests as business expense deductions, favorable capital gains treatment, and potential deferral of taxes via 1031 exchanges add up to create a powerful strategy.

The Journey of David A. Perez – From Adversity to Success

David A. Perez is a beacon of resilience, proving that adversity can indeed be the birthplace of success. Born with albinism, his childhood was restricted and sheltered.

David turned his adversity into a catalyst for self-reliance and independence at an early age.

David’s Emphasis on Finding Opportunity in Adversity

Facing challenges head-on, David realized the importance of being independent at just 16 years old. He made up his mind to build a successful life without depending on others – thus began his journey into entrepreneurship.

His belief system aligns with what we often refer to as an ‘opportunity zone.’ It’s this mindset where you don’t see problems or setbacks; instead, you find potential growth points — qualified opportunities waiting to be seized.

In essence, he personifies turning lemons into lemonade.

  • David Perez’s personal website
  • An inspiring podcast episode about overcoming adversity from Investor Mindset
  • A resourceful article explaining why being self-reliant leads to a successful life

David’s story is an inspirational testament to his determination and tenacity. It demonstrates that even when faced with significant obstacles, it’s possible to pave your own path towards financial independence.

Building Your Own Economy – A Book by David A. Perez

Drawing from his wealth of experience overcoming adversity and achieving success, David wrote “Building Your Own Economy.” The book aims to inspire readers on their journey towards financial freedom.

The Importance of Taking Control of One’s Financial Outcomes

David’s book underscores the need to grab hold of your financial future. He champions not just depending on one income stream, but spreading out – a strategy he’s personally put into play.

Key Thought: 

David A. Perez’s story: Born with albinism, David didn’t let his condition define him. Instead, he saw it as a springboard for independence and success in entrepreneurship.

Seeing Opportunities: David doesn’t see setbacks as obstacles. Instead, he views them as chances for growth and improvement.

Building Your Own Economy – A Book by David A. Perez

In his book “Building Your Own Economy”, David A. Perez recounts a motivational tale of conquering obstacles and establishing an effective life based on his own preferences.

The Importance of Taking Control of One’s Financial Outcomes

Born with albinism, which led to a restricted and sheltered childhood, David recognized the importance of independence at the age of 16. His drive for self-reliance propelled him towards entrepreneurship.

David realized that you can’t count on other people to decide your monetary destiny. Instead, he believes in taking control over one’s financial outcomes through strategic tax planning and investing wisely. “It is about building your own economy,” says Perez in his enlightening narrative.

A crucial part in crafting this personal economy lies within understanding taxes; particularly how they impact high-income earners like business owners or investors.This leads us into another core idea from “Building Your Own Economy”: maximizing potential benefits offered by tax plans crafted for these groups specifically.

To truly get ahead financially, according to David, it isn’t enough just making money; we also need strategies helping preserve what we’ve earned—strategies such as hiring competent financial advisors.

FAQs in Relation to Tax Savings for High Income Earners

Is there an additional tax for high income earners?

Yes, high-income earners face higher federal income tax rates. They might also need to pay the Net Investment Income Tax and Additional Medicare Tax.

What is the effective tax rate for high income earners?

The exact number varies but can reach up to 37% at a federal level. This doesn’t include state taxes or other levies like capital gains.

Would it be better save you more money to have a $100 tax deduction or a $100 tax credit?

A $100 tax credit saves you more money as it reduces your taxes dollar-for-dollar, while deductions only lower taxable income.

Does contributing to 401k reduce taxable income?

Absolutely. Your contributions to a traditional 401(k) are made pre-tax, which directly lowers your taxable wages.

Conclusion

Unlocking the tax code is like finding a secret treasure chest. It’s not just for revenue collection but also offers incentives to business owners, investors, and high-income earners.

Tax savings for high income earners are no myth – it’s about using strategies smartly. From maximizing your benefits as a business owner or investor to leveraging real estate investments – there’s much to explore. Hiring an expert like David A.Perez may sound like extra money being added onto a large pile of outgoing expenses but what you’ll find is you’ll save more money by hiring a tax expert. 

Inspiration can be found in stories like David A Perez who turned adversity into opportunity and took control of his financial future. He emphasizes the value of self-determination and a go-getting attitude.

Remember also you can move money from your roth ira and invest it into Real Estate for a more diversified approach to your retirement account.

Your takeaway? Be proactive, take charge of your finances and remember that you too can take advantage of tax deductions!

Maximizing Tax Savings for High Income Earners: With David A.Perez Transcription:

Steven Pesavento [00:00:00]:

The way the tax code is written is is an incentive program and business owners and investors. They receive the most incentives w two employees receive the least. They pay the most taxes. There's the least of these stops along the treasure map to use when your w two employee, but One thing you outlined that was really beautiful there is the example of if you're married, your spouse can then go and follow some of these strategies that can allow you to take advantage of one of the greatest tax strategies becoming a real estate professional. Welcome back to the name of your number show presented by the investor mindset. I'm Stephen Pessavent, and I'm excited. I got David Perez in the studio. How you doing today, David?

David A.Perez [00:00:41]:

Good, man. How are you?

Steven Pesavento [00:00:42]:

I'm doing great. I'm doing great. I'm excited to get into it with you. I know you've helped a lot of people save a ton of money on taxes. You've built a heck of a life, and we're gonna talk a lot about both of those things today. So, if you're ready to get into it, I'd love to start off by talking a little bit about What was one of the first things that you named? One of the first targets that you went after when it came to kind of creating this life and and going after doing something different than what most people are doing out in the world.

David A.Perez [00:01:14]:

Well, well, I think it all started back when I was a kid. For for the sake of the story is, you know, when I was born, I was born a little different. I was born to a a a mom who's seventeen years old, And, she had me. I was born a little different. Doctor said I was gonna be different, and, he was right. So I was born to to Hispanic's parents, but obviously don't look Hispanic. And that's because I was born with a condition called albinism, which means I lack pigmentation or in my eyes and my skin. And so The doctor literally told my parents or my mom at the time, Hey, this is gonna be a special kid and he meant it. And so they treated me all my life. In fact, I was in special ed classes. I was riding the little bus. I was, I was the kid that that that was taken, given extra I didn't go out on the playground when I was a kid because I'd get sunburned. I didn't play any sports. I was very coddled and sheltered. I was made a fun of by the kids. You know, it was a pretty I'm not gonna say I had a bad life. I would just say that I had a life that was very restricted and very, coddled. And so, you know, growing up, I didn't necessarily know what I was gonna do because I I I really didn't have a lot of aspirations. Yeah. Because, you know, when you're really taken care of, if you will, you really don't think big because the the truth is is there's no real reason if you know that you don't really have to worry about a lot of things. Life is not so hard, and even though my parents weren't rich, they couldn't give me everything. I didn't have a bad life, but I guess it was in my mid my mid teens, it was around sixteen years old, actually. I come home from school one day, and there is a, two men sitting down at at at the table. Now I didn't reference this, but my mom could not raise me. She was seventeen years old, so she actually asked grandparents, which are my parents, which I call my parents say who raised me. And so they were sitting down with my parents, 22 men in suits. And, there's 2 men's look over at me and they say, you know, my mom and dad say sit down and I sit down and they ask me a bunch of questions. And they're asking me a lot of questions as it relates to my my health and my medical condition and all these things. And so after they were done, I said, what's this all about? And they said, this is for life insurance. And so, you know, I didn't I had the time at sixteen years old, I'm like, What do I need life insurance for? Right? Like, am I gonna die is what I thought? And, you know, so I I just left it at that. I went to my bedroom later on. I go eventually dinner. And I look at my mom, and I said, mom, what's going on here? And she says, hey, son. I just want you to know, me and your dad wanna make sure that if anything ever happened to us, that somebody would be able to take care of you, and they would have something to rely on. And I, you know, at that time, you know, my mom wasn't trying to respect me, but what she was saying to me is that, you know, I was gonna need somebody to take care of me all my life. And it was a it was an eye opener for me because I never felt that I was, you know, incapable or that I was disabled. I never felt that in my life. But at that moment, what she was verifying for me is that maybe, that's not how I was seen. And so from that moment forward, like, literally that day forward, I said, that's not it. That's not gonna be me. I'm gonna have to be into pendant. Like, that is that is my goal independence. Now people may take it in so many ways, meaning the independence can mean a lot of things to a lot of people, but for me, It meant never having to rely on someone ever again. And ever since that day, all I've done is aspire to develop and build something my own. So it didn't matter in what way. I I kind of was a rebel after that in some respects. I did what I wanted when I wanted my parents. I mean, I wasn't to them, but I was just trying to become independent in every way I could. And and that eventually translated into business and translated into life. And today, my goal is to to think independently, to be independent, to never rely on anyone else for for the sake of money or or or anything. I mean, obviously, I rely on people by asking them to guide me in different directions, but I don't wanna be a dependent of that. I want to be able to make decisions on my own and design my own fate, my own my own way. So that that's really why I've got what I got today is because it stemmed from me not ever wanting to allow somebody to take care of me again.

Steven Pesavento [00:05:16]:

Well, it's amazing how, like, an experience like that. You get this message, and you receive that message and you could have easily received it and made a decision and a belief that you weren't enough. Nobody believed in you, and you could have gone down that path and become a victim. But in stead, you looked at that and you said, hey. Well, I'm going to take this into my own hands. I'm gonna find a way a path towards becoming somebody that I'm proud of, and it's clear that that was a really powerful moment because I think a lot of people they receive those kind of messages every day and you have that moment to decide, is this something that I'm going to use as an excuse, or am I gonna use this as the reason? That I'm going to have the life that I wanna have.

David A.Perez [00:06:01]:

Yeah. Because of. Right? That's that's what I like to think of. Because of that, this is what I've decided to do. And that I think that everybody, by the way, has those moments, and you're right. They have to make a decision. And the difference between those who do make that decision to make a change in those who don't It's hard to define. I would just say that if you if and I know your listeners are all the people who take the action. I get that. But for those who don't take the action, I I think it's it's just a lack of understanding that that every adversity comes with the seed of opportunity. And very few people get that. Right? They don't they think that the adversity is is the bad luck in life when when you just ask yourself, what can I learn from this? And like the whole frame of reference by which you take that adversity changes. And and I've always found that seed that little thing that comes out of this one bad tragedy, this one loss to change my whole life. Like, I have so many moments of epiphany in my of epiphanies today because I've always tried to find the good and the bad.

Steven Pesavento [00:07:07]:

Well, I I challenge anyone who's listening. Maybe you've already made that decision. You've gone and created the excuse of the reason you're not going to go and do the thing that you're capable of. I can't go and invest. I can't figure out my taxes. I can't be able to create this great life because of all of these reasons. Well, What's beautiful is you can essentially make a new decision right now. And you can use this as a great example of exactly why and why it's possible that you can do that. What I'm what I'm curious is, you know, you've you've gone down this path. You're an expert in tax. You've saved people 1,000,000 of dollars. You started out doing real estate. You've done a variety of different things along the way. What are you looking to create in your life right now? You've made it by many people's accounts, and then we're gonna get into exactly what that looks like. But what is it that you're trying to create and why is that so important for you to do?

David A.Perez [00:08:03]:

Well, you know, fostering this concept of of independence kinda led me down to the to to a road of of figuring it out you know, a lot of things. So I I've had to I've overcome so many things that we don't have to get into that, but there came a place in a time and place where I was challenged. This was about four, three and a half years ago. I was challenged by somebody I was looking for mentorship from. And the challenge was hey, it sounds like you have a story. Right? You've got a story in you. Like, everybody's got a, you know, a song to sing and a story to bring to the world. Right? Like, We all have something in our past that is could benefit the future people that you encounter. And so when I was challenged with that, it was like, what am I gonna do? And so I He he basically said, David, I think you should write a book and share your story. Share the journey. Have an impact on people. And I I didn't really realize it because I didn't see myself in this way. I never did. And, you know, with that challenge in mind, I really took it personally to figure out a way to to to impact people. And so that's that's kinda how I came to the first book, which is building your own economy, which was the concept of saying that I don't wanna be impacted by anything outside of me. I wanna be the person that impacts me. Right? Like, I wanna be the guy that impacts myself. I wanna take complete control and responsibility for whatever outcome comes my way, and I wanna make sure that I take that responsibility to the highest levels in every form. Now when I made that decision that I was gonna write this book, I didn't know I had the book in me. I wrote the book, and then it came to me to say, hey. What am I gonna do with this book and this concept and the idea of your own economy. And that's when I realized that my goal or my mission, which is getting clear every day, is is I wanna help and act the world in a positive way. Like, I wanna leave a mark on it. I don't wanna leave this world and just people forget who I was. I wanna say that I came into the world, and I left it better than I found it. And that god didn't decide to put me here for no reason. Right? So the goal today now is to to have an impact. Like, I have a goal to impact 5 million people keep and grow their money. Right? Keep and grow it. And that means really how do I keep it from Uncle Sam, from TAC, from lawsuits, from litigations, from the bad people, the bad partnerships, the bad relationships, the bad businesses. How do we do that? And then how do we then use that money their money. Right? They surrender their ability to actually build something for themselves to someone else. And by the way, that's that's not to say that we shouldn't have advisors or partners or people in our corner. However, I think that if you are gonna give or surrender or anything, to anyone else. You should at least know what they're doing. Right? It's kinda like, I like to analogize it this way. Like, I'm a big giver of of to charity. And I I believe in contribution. Right? If I have the means, I should be able to do that. And so whenever I contribute to something, my only ask is always to say, I wanna know where it goes. Right? Because the point is is I'm gonna be a steward of my own money. I'm gonna be a steward of my life. And that steward, I've gotta know you're gonna be a good steward with my money. You know? You've gotta show me in in expecting. So, like, for an example, I know you you do you you do big deals. Right? As an investor, if I was alongside you, I would say, hey, man. Here's, you know, 500 k. But I'm gonna expect some some, you know, reporting along the way. I'm gonna expect some things, which I know you do really well. And so I wanna an impact on people so that they can be that person and say, you know what? I wanna give my money or invest alongside Steven, and I want him to be able take care of me and help me get to the next level, but I have to understand it. So keeping that money from things that you don't want it to go to and then investing that money to something, and that could be yourself as well. And so my goal is to impact 5 million people. That's my journey, and I'm gonna continue to do that till I die.

Steven Pesavento [00:11:52]:

There there's three things that I think were really powerful. I wanna underline here. And it's something that you talked about when it comes to your vision and your mission, and that it's getting clear every single day. Because I know a lot of people are kind of in the dark. They're in the haze. They're not exactly sure what they're going after. They're not sure what purposes. They're not sure how to get there, and they feel lost. And even people who are making a ton of money, like a lot of the folks who are listening and our clients, and that lack of clarity leads to even more fear. And when you have that fear, you end up surrendering your decision to somebody else. But as you mentioned, the process of getting clear is it's a journey And and it's every single day you're asking yourself a new set of questions to start becoming more clear on what it is that you're going after. And then using strategies like investing, like investing in funds, like understanding how to save more money on your taxes. And as you gain more knowledge, you have less fear and you start being in a position to take control where you're not reliant on other people. Yes. You've got great advisors. It's critical. You have good people in your corner, but I think it's so it's so key to know how to get past that point of fear so that you know who to trust and you have enough knowledge to select the right people to have in your corner.

David A.Perez [00:13:13]:

That that's right, man. I think I think the the the key indicator of someone's success is their willingness to understand what it is that they're going to do, not willing to have to always do the work, not willing to always have to get your hands dirty, But you have to understand what's happening. Right? Like, I do real estate on a on a single family level or a multi family level. If I get into a fund, if I do a syndication, I'm not gonna blindly do it. Like, it does not make sense to me. I mean, I think we should all have some fundamental understanding of it, and then that's what my goal is to help people understand those things. Because if they understand them, then they make better decisions. They make more decisions. They hey. I can't guarantee success, but I could tell you that it's better than if you didn't know shit. Right? So -- Yeah.

Steven Pesavento [00:13:55]:

--

David A.Perez [00:13:55]:

that's my goal. Every single day.

Steven Pesavento [00:13:58]:

It it's so key. And I and it's surprising to me actually how many people have invested us who've invested with other people that I've met along the way. And they lack that knowledge and understanding, and they're really going on faith. And faith is a beautiful thing as long as your faith is in the right people. And, you know, we're holding a workshop, shortly here in Denver. We're gonna be kinda talking through some of this stuff. We do some training online. But the reason I took the time to put that information together is because so many people are lacking that knowledge. And once you have the knowledge, once you're clear on how these things work, you get so much more confidence. So I wanna kinda do a little side quest here because we're talking about advisors. We're talking about having the right people in your corner. And, obviously, you're one of those right people when it comes to tax. How do people go about getting enough knowledge to go and actually select the tax people because I'll give you an example. You know, I've been in business for, you know, over a decade. I've worked with some great CPAs. I've worked with some terrible ones, and I've learned along the way that somebody preparing your tax form is very different than a tax strategist. And yet, there is often a fear of taking advantage of this treasure map that the IRS and the the congress put together that indicates how you can actually do what the government wants you to do to save money on taxes, but there's a fear of following it because the consequences are so big. So, David, how do people go about knowing enough so they can select the right adviser when it comes to making these tax decisions so that they're not paying all the money, but they're also not in fear of what negative things could come from making a bad decision.

David A.Perez [00:15:41]:

Well, well, 1st 1st and foremost, knowing that delineation is very important. What you articulated really well, which is, a most people go to a tax preparer even though they may be designated a CPA or an enrolled agent or some sort of professional designation, the vast majority of professionals today are just data entry folks. By the way, there's there's nothing wrong with that, you know, but most of them report history. Right? They get documents that have made generated from a a year. Right? You get a w 2, a 1099, a k 1. These are forms that reported after a year is transpired. And they take that information, and they put it into a software because they're trained to do that, then they put out an outcome. Sometimes they can make adjustments along the way, but very seldom can they actually make that could actually impact anything at that point because it's already history. And that's that's just the majority of them. And typically when I look at somebody and I'm trying to grade if they're a good strategist or a tax preparer or CP, whatever they wanna label themselves. It's typically somebody who's proactive. In in measure. So if they ask them, like, for an example, if you called and wanted to speak to me or somebody on my team and you're like, hey. I wanna know for a good fit, we would ask you a set of questions and and right away if we could help you. Right? We would say things like, tell me about the type of structure. Are you an LLC single member sole proprietorship or a single member sold prop, or your partnership, or your nest corp, C corp, whatever you. And then we'll we'll, you know, what are your gross sales? What are your your net net revenue. And then, you know, there's there's a there's a complex set of questions, but with those answers to those questions will illustrate to me if we can proactively help you or not. If you go to somebody and they don't ask you a set of questions that could understand where you're currently at, and all they say is, oh, yeah, I can help you. That's probably not somebody who's thinking for you. That's just somebody who does. I I wanna think for you because that's my role. It's to think ahead. It's to think. And then asking you a set of questions. What's your goal? You know, how are you gonna exit this company? If you're gonna exit, Right? These are questions, or do you have investments? Are you investing in things? See, what I believe is a strategist wants to take a few what I call a 3 3 pillar approach. Number 1, they should be thinking about how your l LLCs are structured, which is entity structure. And if they don't understand that, I mean, on a shoot, that's probably not a strategist. That's probably somebody who who's just putting shit together. Right? That's it. Number 2, they have to have strategies. Now What I find most common when I get on a new client is, they'll say I was with a really good CPA. They were great. Beautiful people. But I was always going to them with strategies. Hey, I heard about this. Let me can we do this? And then they would be like, let me look it up. And then, oh, yeah. We could do that. Like, well, then you're you're being the the the the person that's pushing the needle forward. That's not you know, I had a I had a client yesterday for an example, goes to his CPA and says, hey. I just, you know, I inherited this this person inherited over $2,000,000. In an inheritance, which is, oh, wow. That's great. Well, he was not expecting really wasn't expecting $2,000,000. He goes to a CPA who he thinks can help him. And the CPA says, well, you know, I don't know. You inherited let's just pay the tax. And he's like, there's gotta be a way you know, and he's the CPA's like, let's just pay the tax. You know? And so he's reaching out, looking to somebody like me because what I'm saying is there are there may be a way, and let's try to find it. So somebody who's thinking proactively in a tax strategy. And last thing is somebody who wants to also look at your investments because investing has a lot to do with how you avoid taxes and how you mitigate them in the future, like today and tomorrow. See, if if if you're just gonna be told to go make money, that That's easy. Financial adviser can do that for you, by the way. Advisors don't understand tax. And most tax people don't understand financial advisors. So if you don't have somebody who understands both perspectives, the majority of the time, you're gonna be putting your money into deferred vehicle so that one day when you're sixty something freaking years old and you take out all the money and who knows what the tax rate will be at that point, you'll pay all those taxes. Or We can make investments now that may have tax benefits today that could offset your taxes or at least eliminate cash flow from things like real estate. And we can be a proactive in nature because the the time value of money is very important as you know. Right? We don't wanna in investing maybe we could say we want the returns in 20 years. That's cute, right, and everything? But if I've gotta invest money today, I have to make I have to make a decision that's going to impact my tax return today in most cases because if I could keep more of my money today, I can leverage that today as well versus leverage it in 20 when we're caught that we're supposed to. That makes sense. So those are the pillars I'd be looking for for somebody who is if I was trying to figure out if they're a good strategist for me.

Steven Pesavento [00:20:25]:

So what I heard from there is these are some key things that you should be looking for when you're talking to somebody about tax strategy. And yet a lot of people are really great at sales. So, David, how does somebody cut through the fluff to know that the strategies that are being suggested are going to get them to that outcome and that they're gonna be protected in the end.

David A.Perez [00:20:52]:

Well, I think I think the first thing to know is that if you go to somebody and they don't have a team, that's probably a good sign that not that they don't know what they're doing, that the execution might not have happened. That that's the first thing. Cause honest truth, I I've never met a a a a person in the tax industry that didn't wanna help their clients succeed. Right? Like, I really haven't. I mean, they're for the predominantly, everybody's a good person inherently. I believe that. I think that the the challenge that I see is if I were meeting somebody for the first time and I wanted to cut out all the fluff and see if they're just sales. I'd be looking do they have a team to support the success of myself as the client because it's not gonna be an individual gonna solve all your problems. If you did find an individual who could solve all your problems, that is not a real business. And that means that you're putting your fate in one person's hand. And god forbid that person gets hit by a bus or something. What are you gonna do? Right? There has to be there has to be a group of people, a team of people to support your success. Number 1, Secondly, I would I would actually just, you know, check them out. Look up credentials or ask for references. That can always be a good thing to think about. Right? But to be truthful, You don't really see a lot of people bragging about their tax people. So, I mean, it's kinda hard to say that. Right? Nobody's writing big reviews and blogs about their tax people, but I would I would say, you can tell. I mean, it's pretty easy, man. You know, like, for us, for ourselves. Right? Like, I'm very public. I'm very vocal. If you go look at anything we do, we don't have any negative anywhere because the truth is we stand behind what we're gonna do. We do the good job. We have a whole team that supports it. We know what we're doing at all times. It's hard for me to to articulate what somebody wouldn't be doing right. I just know I see a lot of professionals out there claiming to be strategist, but they have no team. And that that scares me because knowing what I have to do for our clients every single day, It's not a single man job or woman job. It's it's a whole team.

Steven Pesavento [00:22:46]:

Yeah. That is it's super, super key. You know, I've I've talked to folks on the investing side who are like, hey, Steven. I wanna be able to reach you at any given time. And the answer is you can't. Right? Because we've got a team, and the team is there to support, and everybody has a role. And that way, if I get hit by a bus or happen to be on vacation or why, or whatever it is that you know that there's not only one person, but there's a backup to that person and so on and so forth to make sure you're protected. So let's come off this advisor side quest and go into some specific examples. And, of course, everything we're talking about is just based on press experience. Nothing here is tax advice. But when it comes to somebody who is making a couple $100,000 a year, they're on track. Towards making 1,000,000 of dollars a year. Let's kind of give 2 different investment related examples of how people can make smart tax decisions to be able to save more and then how they can actually deploy that. And so I know everything is gonna be very specific to each person's individual taxes. You can't take this information and run with it on your own. However, think it's important that we get into some examples of what people could do and how they could be looking at this when they're making that decision of if I do this strategy, I'm gonna be able to save this money, and it's gonna end up being able to grow for me somewhere else. So let's start with with one example, and you can start with either somebody who's got know, a couple $100,000 of income or a couple million.

David A.Perez [00:24:15]:

Well, well, let's first start by saying that the the path that we would choose for the strategy would be dependent on type of income, not necessarily the amount. It's the type. Right? So if you look at an individual who's maybe a high high level C executive making $500,000 a year, the strategy for that particular person would come down to what is their level of opportunity to do anything outside of of war, which is rarely true or the case. Right? Number 1. And number 2, what's the liquid availability of cash? Cause that makes a big difference. Right? So I have to ask them, how much cash you got And what is your likelihood to do X? Let's say, let's use real estate for an example. Now if it's somebody who, let's say, has a quarter of a $1,000,000 ready to go into some sort of investment strategy, but they wanna make sure not only to get a return on their investment, but also to get some tax saving benefits. I would primarily say, okay. Let's start with real estate. Are you interested in real estate? And if they say yes, then it's like, okay. This is where we start. Now the next question I would ask that person is, are you married? And they would say, well, why why why does that really matter? Well, marital status gives me options. And I'm talking about as your strategist. I gotta know if you're married, it gives me options. They're like, what do you mean? What does your spouse do? Do they make a bunch of money too? Yes or no? Well, my spouse, you know, their stay at home mom, or they they work a lot, but it's not to make money. They take care of family. Perfect. That is the perfect scenario for me because you got $250,000 in savings that you wanna to deploy. You can't do anything in real estate because you've got a full time job, but maybe your wife can. And now because we of a spouse who's available to be able to be what I would deem as a real estate professional, and that that we can go into a rabbit hole with. There's some criteria that need to be met, but just know that real estate professionals get tax favored benefits when they invest in real estate. Typically, it means that they can offset income by losses generated from real estate. And those losses come from a few categories. Number 1, from normal everyday expenses, like, you know, taxes, insurance, maintenance, repairs, landscaping. But in addition to that, there's something called depreciation. Now depreciation is a kind of a phantom or paper deduction that comes to someone for owning an asset that has a useful life. And typically, like, you would normally see depreciation on things like a vehicle. Like, you buy a vehicle, if people say buy a 1000 pound or greater vehicle and you put it on your tax return, g wagon, or whatever, and that that what they do on the return is they put it on the return and then depreciate that asset so that it gives you a deduction. Well, we would just do that with real estate. Now it's not a 100% depreciable in year 1, but typically it's 20 to 40% in a given year. So for example, if we could get you a $100,000 asset and we can get a 24 a 20 to 40 percent, that could be possibly a 20,000 to $40,000 on your tax return. Right? Now that doesn't mean taxes. That means deduction and income. And you could do this for many assets. Right? We could do it for a $1,000,000 a $100,000 asset or $500,000 asset. But if I were talking to somebody who has a $500,000 income has 250 in savings has a spouse that isn't doing necessarily working in any business, particularly. This is a strategy I'd be talking to them about. Now doesn't mean that's the only strategy, right? But it means this is the main one because it gives me 4 things when I do this. It gives me number 1, when I buy a piece of real estate, I'm going to acquire it, and that is gonna build wealth because that is an asset that typically appreciates. Number 2, it's gonna give me equity. What I mean by equity is every time that tenant that I lease it to is gonna pay the mortgage for me, it builds equity number 3, could possibly distribute cash flow based on the number of dollars that I receive in addition or in excess of what I would actually make, from from mortgage payment and so on and so forth. And number 5 or number 4 rather is going to be the tax benefits, which is gonna offset my taxes. Now many people would say, well, David, I don't know if I wanna do real Hey. I understand that. There's also retirement accounts. There's defined benefits plans. There's all these other things that you can do. I just love real estate because it's the coolest one to me because you get the tax benefit. You get the appreciation. You get the tax deduction. You get the The appreciation, the equity, the tax benefit, and the cash flow. So I think about this all the time when I talk somebody. And and if it was a business owner, by the way, and what does that all make sense first before I continue?

Steven Pesavento [00:28:32]:

Yeah. Let's let's pause there before you go into the business owner because it's really important to understand that The way the tax code is written is is an incentive program and business owners and investors. They receive the most incentives w two employees receive the least. They pay the most taxes. There's the least of these stops along the treasure to use when you're a w 2 employee. But one thing you outlined that was really beautiful there is the example of if you're married, your spouse can then go and follow some of these strategies that can allow you to take advantage of 1 of the greatest tax strategies becoming a real estate professional. And so if you are a w 2, you've got that option. Now if you're a business owner or you have the ability to start a business, obviously, that opens up the floor plan for us to work with a lot more options.

David A.Perez [00:29:21]:

Correct. Now by the way, we even if you weren't even if your spouse was working and you were both working, you're both high income earners, there are there are still real estate investing strategies. And, well, guess, first off, and just -- Short term rental

Steven Pesavento [00:29:33]:

strategy and some of these.

David A.Perez [00:29:35]:

There there there's the short term, but, also, I think what most people neglect is Even when you invest in real estate, sometimes or actually, every time you invest in real estate, there are tax benefits. You may just not see them immediately. And and maybe you may not even see them or miss them because when you even even with normal depreciation without having to accelerated. That typically is in a single family 27a half. That includes multifamily and 39 on commercial. So what you do is you get the purchase price of the property that you purchased it at subtract the land value in either of its commercial divided by 39. If it's residential, you divide it by 27a half. And that could be for multifamily, even if it's a 150 units. So you just by 27a half. You that becomes a deduction every year if you just normally depreciate an asset, okay, in in, like, real estate. So if that number that you get to depreciate. Just normally, plus everyday expenses exceeds the cash flow from the property, the payments, then there is tax free cash flow. You don't pay taxes on the income from the property. It may not impact your return, meaning you may normally just pay with what you've always paid. You may, maybe even oh, Les, who knows? But the point being is that cash flow that came from there is tax free, which is a tax savings strategy because I don't have to pay taxes on the cash flow. Many people miss that. So when an example for you, for you, Steven, is that the The investors that may join into a fund, they sometimes are almost always going to a limited capacity, which means they are just generally coming into the fund to get a return. And if the asset that they're investing in primarily, if the fund's goal is to invest in real estate, there may be some tax favored benefits that come and apply to them because they're members of this fund. Now those tax benefits may not offset any income for them. They actually probably wouldn't, meaning they're gonna get $200,000 loss on a k 1. They're like, yeah. I'm gonna go put it on my tax return. They put it on the return, and nothing happens. And they're like, what the that happens all the time. That may may piss some people off, but when the fund or the investment, the syndication starts spitting out you know, let's call it 6, 8 percent annualized returns. Let's call it that. Or when the investment is sold and then there's an exit everybody in the in the transaction, the gain from that transaction can be offset by the depreciation the profits from the cash flow get offset by depreciation. So you don't actually pay any freaking taxes on the money you make. So even if you don't see the immediate tax benefits are still benefits that pure very people will talk about because they're like, uh-uh, I didn't get to lose all my money this year in taxes. Well, you know, not everybody gets to do that. You can always live with the tax free cash flow, which you'll never really think about unless you're really intentional about it. Does that make sense?

Steven Pesavento [00:32:29]:

Yeah. It makes a lot of sense. And just as we we kinda wrap up on this concept for the business owner who's making million bucks a year, They're not a real estate professional. They don't have the ability to be 1. What kind of strategies could they look at that would allow them to pay less in taxes and be able to make some more of those kind of investment decisions.

David A.Perez [00:32:49]:

Correct. So first things first, if they were if they wanted to get in real estate, there's always term rental loophole, which you can look up. It's very common. Buying a short term rental using it for the year that we're in like 2023, then having a change of opinion in 2024 and converting it into a long term or mid term rental that could happen and accelerate the depreciation just as if you were a real estate professional. But other than that, there are other strategies. Now I'd like to I can illustrate a few, but just so y'all know, in strategy in itself, We're not trying to to knock it out of the park with every strategy. The point is to have a bunch of base hits. The allow us to get on the field, to get on to the, you know, to a base to eventually score. The problem that most people face is that they wanna knock it out of the park with one strategy. It's a lot of little strategies. It's a lot of little things. It's forming an s corp so that you can avoid the the employment tax and then get ordinary tax. By the way, when you do that, you have to be careful because when you're an s corp, then there's other things that are sequential. Right? You've gotta get on payroll, and then you've gotta make sure that you have annual filings. And then there's a few things, but s corp's a great way to start start. Right? Then when you're an s corp you need to realize, do I have children? Sure. Okay. Then we start a family management company. And now do you have children? How old are they? Let's pay children through your family management company. Let's have a board of directors so that we can actually get compensated for our Disney trips by our company. Right? Then if I have a partnership for an example with another company. I just stayed true partnership, and I passed the savings by giving ownership of my new partnership for my AirScorp. So all my all my profits from my partnership flow to my s corp. But in addition to that, there's all the things that people talk about, right? The Augusta rule of running your house, the home office deduction, and accountable reimbursed plan, HSAs and HRAs and all these little things that equal, you know, 1000 here, 3000 there, 7000 here, 10,000 there. So, yes, if these things may be little to some people, if your bill if you're a millionaire, right, you're making $2,000,000 a year and your tax liability, $700,000 I may not be able to chop it down to 0, but what if I could chop it down to 500 versus 700? It may still sound like of money, but 200 k is a good amount of money to save. And it comes from a lot of little things, contributing to some retirement accounts, which I believe, And by the way, very, very few people talk about it because most entrepreneurs don't wanna be in retirement accounts. But when you can actually fund those things that maximum level. And after 1 or 2 years, have enough money in there to self direct, if you're not familiar with that term, self directing is a great way to get into real estate. It's a no brainer. You get the tax benefits. You get the cash into a savings account. You have to use the cash from the savings account to a buy real estate. It's a great benefit. Very few people talk about that. But so I can't I illustrate one strategy to knock it out of the park, but there's a lot of them that would work for somebody who makes a ton of money.

Steven Pesavento [00:35:43]:

Well, I think the key thing to understand and to really underline what you're talking about is that it's about these little small wins that add up to big wins. I think the other important thing to recognize is that it's not a January 1st decision. All of these tax strategy things, majority of them, they need to be done in advance. You need to be making these strategic decisions on your entity structure up front. You need to be working with the right type of experts to be able to do that. So We've got one last question to wrap up on here, David. How can people get in touch with you or, or follow along with some of the lessons that you're sharing?

David A.Perez [00:36:22]:

Awesome. Well, first off, I give a lot of free content away. You can follow me on any social media channel at I am. So I am David a, don't forget the a Perez. So you could find me on any social media channel. I give away a lot of content, even on YouTube or TikToks, all those things. So, I really, I'll be honest, it's completely free. You'll notice that I'm probably one of the only persons out there that doesn't say, hey. Call me. Get my, you know, DM me. Get on my calendar. I don't any of that. To be truthful, my goal is to impact 5,000,000 people. However, if you do feel like maybe we could work together and you feel like there's something here to be talked you can schedule a free discovery call by visiting our website, tax plan experts.com, tax plan experts.com, and you can schedule a free discovery call with some somebody on my team or or and and determine if we're a good fit to work together. We are still taking clients. We won't be taking them very much longer because as we get closer to the end of the year, I mean, it's harder to help somebody. People think I'm, you know, that I could, you know, that I'm some sort of magician when it comes to December 25th, you know, but I just can't help you at that point. So you you hit something very, very spot on. Tax planning is not a it's not a one time occurrence. It is an annual monthly recurring opportunity to find ways to mitigate your taxes.

Steven Pesavento [00:37:40]:

Yep. So powerful. And and I couldn't I couldn't recommend enough that you go out and find a tax strategist. If David sounds like the kind of guy you wanna work with I definitely believe that he's got strategies that can help you make a big difference in your life, in your business, and on your password financial freedom. So as we wrap up on this, it was great talking with you, David. We're gonna have to have you back to dive into some more specifics on a future episode. But what advice would you give to those folks who are on that path towards financial freedom? They're working towards creating their dream life. They've got the vision. They know they want to be, living that quality of life that they believe is possible, but yet they have this hesitation, this fear. What advice would you give to those folks as we wrap up?

David A.Perez [00:38:23]:

Well, a fear to be truthful, the fear most people fear things that they don't know or under 10. That's the biggest challenge. Right? We fear what we don't know. Because if we knew what the outcome would be, then we wouldn't have any fear. So the majority of times when I meet somebody who's fearful of taking action or moving forward is typically a lack of understanding that ties and couples with a lack of confidence. Confidence comes from your ability to to reproduce, to know the outcome, from your consistency. There's a lot of ways to build confidence, but here's the number one way to build is doing what you say you're gonna do. And anybody who's on the fence, the only way that I can share with somebody, like, today, if you just said, if you said David, how do I get confidence to go and take on the world would do it. I mean, that's how you get confidence. You do what you say you're gonna do. Most people won't And that's why they carry their head down. That's why they send the back office. That's why they don't show up because they're not willing to just put the step forward towards whatever it is that they said they're gonna do. And the more that you just do it, the more you step up, the more you put your foot forward and you say, I'm just gonna commit. The less fearful anything becomes. Right? I mean, we all hit a level. Don't get me wrong. It's not like I'm never scared. I would just tell you The only way to overcome that is by continuing to work on that confidence muscle that we gotta work every single freak a day. And if you knew that, promise you, you can do anything you want. You can build anything you want. You can have anything you want. You can go build out your own economy. Thanks, man. Appreciate the

Steven Pesavento [00:39:49]:

what what a beautiful way to wrap up a great episode. There's nothing more powerful than honoring yourself and showing yourself that you're worth that commitment. So go out there, decide you're gonna do something, show up every single day, and make that progress. Thanks so much, David, for joining us. Really appreciate. Thank you all for listening, and we'll see you on the next show. Thanks for seeing the investor mindset podcast, make sure to hit that subscribe button. And if you'd like to watch another, yours went up top. And here's another great video right down below.


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