Ep 175: 'Tis the Season for Taxes - More Knowledge, More Wealth
Listen as Gabriel Shahin CFP® as he lays out the things to do before the April 15th deadline, such as contributions, and what core items to focus on for tax season.
Transcript: This is more knowledge, more Wealth with your host, Gabriel Shaheen. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed are suitable for any investor.
Investors are advised not to rely on any information contained in the broadcast in the process of making a full informed investment decision, more knowledge, more wealth. Now, here's your host, Gabriel Shaheen. Good day. This is Gabriel Sheen, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.
Our goal is to give you the knowledge you. To increase your wealth now to the listener, you can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the Bird, or visit our website@falconwealthplanning.com.
That's falcon wp.com. First short. Now I'm a principal of Falcon Wealth Planning. We are a fee only. Registered investment advisory firm that is non-commissioned and our true fiduciaries. Folks, we are more than happy to help with anything that involves a dollar signed. Folks. We have offices all across and we help nationwide folks.
Our headquarters is here in Southern California, but we help with anything that involves a dollar signed. We are offering a free financial assessment. Well, we're giving you one to two hours, one to two meetings of our time at no cost. Folks, give us a call. We would love to help Our phone number eight five.
9 6 3 25 26. That's 8 5 5 96. Falcon like the bird. Folks, there are so many things to discuss. It doesn't matter where you are in life. It doesn't matter if you're renting right now looking to buy. It doesn't matter if you're looking to buy a car, lease a car. Doesn't matter how retirement's looking, whether social security, pension options, when to retire, where to save taxes, planning.
Big one folks. Tis the season for taxes, which we'll be talking about later. Investments, estate planning, assurance, folks, you name it. Anything that involves a dollar sign we can help with and really the big part of today's. Show is to focus on tax planning because it is truly this season. And one of the things I want to be focusing on is just the things to do prior to the deadline, the April 15th deadline for most of our personal tax filers.
Now, a lot of us do extensions, which is fine and great, but a lot of the contribution strategies have to be done by April 15th. So I do wanna go over some of the things that you could be doing. Okay. There are five to six core items that I think that should be. Today, and here's the thing, most of you do one of three things.
I'm gonna focus on the 99%. The first thing is some of you just do your own taxes, whether it's by hand, whether it's TurboTax, whether it's, whatever it is, the other segment of you just probably hire as a professional. Now that professional you meet with, most likely once or twice. . Now that's what you call a tax preparer, which is fine.
There's need for that part of the industry. Um, but the very few, the 1% out there are tax planners. These are the ones that you meet with multiple times throughout the year that does your tax projections from early in the year. trying to figure it out, what it would be at the end, factoring in the income that you have coming in and meeting with you throughout the year to see if that's on track.
That is extremely important for many reasons, obviously, but focusing on what you should be doing for taxes. So the second segment, I'm gonna talk about the things that you should have done late last year or anytime throughout the year that most people have not. And I'm gonna also explain to you why that.
Important. So right now, because that ship has sailed, because most likely you did not work with a tax planner, I'm gonna talk about the few items that could make sense for you. And no focus. This isn't just for the rich and this is for everybody. You have to do these things so you can become rich, and rich is arbitrary, right?
In my opinion, rich is just having enough to maintain your life. . So if you make under a certain dollar amount, whether you're uh, uh, married or you're single, you are able to get back up to 50% of what you save into a Roth or traditional ira. Now, I would just say Roth ira. Um, and the reason is because you're probably in such a low bracket anyway, it doesn't make sense for you to get a tax write off.
Okay, now, Purpose of this is to help motivate you to save. So if you were to save, and it's only up to $2,000 into a Roth ira, okay, you get back $1,000, not as a write off, but as a credit, you get a tax credit for that. This is something that's often overlooked because they're thinking you're in a low tax bracket.
It may be. Doesn't make sense, but this is something I would heavily recommend that you do and most people do not do it. So first and foremost, I would recommend this Tax Savers credit. For some of you that are lower income, yet again, you get 50 cents back on the dollar. Most tax professionals do not make this recommendation at all.
If you can't do 2000, do 1000, you get back half of it, and now you have saved towards retirement. Now, what you do when it's in there, I would just say invest in some index fund that's out there. That should be easy enough. But the point is you get 50 cents back on the dollar th this can be done until April 15th, folks, so you still have time to do this.
Now the other item you can do is do an IRA contribution. Now this is a little bit more tricky because if, depending on how much you make, depending if they offer a retirement account at work, you may or may not be eligible for this. So, but by saving into an ira, this can really help in many things and I'll talk about these next items.
Couple items is gonna be important, um, because it will. Save you on your adjusted gross income, which has effects on Medicare, uh, premiums, which has effects on taxation, on social security, which has effects on marketplace insurance that you might be getting a subsidy for. So you really wanna be careful of making sure that yes, you may be in a lower income and you may think Roth makes all the sense in the world, but there are much more.
Items that they have to take a look at, and that by the way, that Roth is also eligible for April 15th for you to save in there. This could be very helpful for you, especially if you have money in a brokerage account. I can't tell you how many times I see people in a brokerage account and they do not save money.
In a Roth. By the way, folks, if you're just joining me, you're listening to Gabriel Shaheen, certified financial Planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. And today we are talking about the simple items of what to do by April 15th, because some of you, most of you do not have a tax planner.
You have a tax preparer. So by saving money into an ira, whether it's. Or traditional, you are able to lower your tax burden in a traditional, the Roth makes sense of your saving. I was just talking about right now, if you have money in a brokerage account, even if it's just stocks, whatever the case, it's in a brokerage.
In that brokerage, you're gonna have to pay taxes on your capital gains, what you made on the money, on interest that you made, on dividends that you're making. But if it's at a Roth, you pay nothing. So I'm not saying spend money at your savings, I'm saying take out of the brokerage and move it into the Roth.
That may make sense for you. And it's crazy that most accountants do not. That recommendation. Now I wanna continue this conversation cuz I said something that I don't want you to discount and that item was the fact that you can save money into an IRA at traditional IRA and lower your taxable income.
Lower, lower your adjusted gross income. That is extremely crucial, especially like I said, if you're on Medicare, because depending on your income, you could lower your Medicare premiums. Most people aren't aware of that. You could do that through an IRA contribution. You could also do that through an HSA health savings account, assuming you're eligible contribution as well.
Yet again, this is something that people aren't aware of. They're not saving into that, and HSAs are fantastic because you can save in there, get the ride off on the federal side. , and then you can take it out tax free as long as it's for medical purposes. And if you're on Medicare, you have to be working to be eligible, but you're allowed to pay for your Medicare premiums from that HSA only on that supplemental.
And so, uh, yeah, excuse me. That's on the Part B. Okay. They changed the names. They used to be MEAP and supplemental, now I think they call it, uh, part B, the Medicare Advantage Program, which covers in part C. So there are AGI limitations to this and how HSA contributions and IRA contributions work on this.
In addition to self-employed people that save into a SEP or 401k, you're allowed to save into those. up until April 15th. Now the 401k has to be done by the end of the year. That's on the employee contribution. Well, if it's a simple schedule, uh, c well that's, you're gonna do the profit sharing side, so that is yet again, allowed for you to do it April 15th.
Um, but the profit sharing side on both the SEP and the solar 401k. Does allow you to wait until April 15th. So this is something you should figure out how much you should do. For example, if you made a hundred thousand dollars, you can put up to $25,000 in either the separate, uh, solo 401k on the company match side, the employer max side.
My point to you, of course, is making sure you're doing the right amount that gets you all the benefits or potentially your Medicare is taxed lower. Potentially you can get your situation where taxation on ordinary, or excuse me, qualified dividends and capital gains is potentially tax. To make sure taxation on social security could be lowered or tax free.
There are so many different things that's involved. I'll keep going. By the way, we talked earlier about Medicare premiums, and I wanna also talk about marketplace insurance. Marketplace insurance is another part of it where if you control your income over a certain amount, depending on how many in your household, you can go from paying a thousand dollars a month to maybe $250 a month or lower.
These are extremely crucial ideas, crucial recommendations that could save. Boatload. Sadly, I just don't see people. Why? Because they're entrusting of their accountant, who's a tax preparer. As our CPA says, who's a tax planner on staff is, uh, when he worked at Falcon Wealth Planning over five years ago, he said, man, I really lost a lot of respect for my profession, , but that's just because he learned so much working for a tax planning firm.
This can help on future taxation as well, especially if you're taking social security by potentially doing some of these items, right. by April 15th, you could really help with the long-term ramification of taxation on social security, which is, by the way, what we're gonna talk about the second part of the segment.
We're gonna talk about what you should have done last year. Now let's be positive. Okay? It's over and done with it's water under bread, but let's talk about what you should be doing this year. You have now till April 31st, you have, or excuse me, to December 31st to do it for all of 2023. This is the. Act folks, and if you need help with this, and what I'm saying makes sense, but you're just a little overwhelmed with the many different factors to it, which is probably why the company I work for Falcon Wealth Planning, the company I founded eight years ago.
It's important why we say planning made simple. We trademarked it. Planning made simple. You know what the irony is, by the way? It's very simple. The irony is it's not that simple. When you take 15 different things to try to mush it. It's really not. This is why we recommend you talk to a professional folks, and if you don't know and if you have an accountant that all you do is meet with them once or twice a year and you're needing help with the tax planner folks, give us a call.
That's what we do. We have offices all over our headquarters here in Southern California, but we help nationwide folks. Give us a call. We would love to help. Our phone number is eight five five and 9 6 3 25 26. That's 8 5 5 96. Falcon like the bird, or visit our website@falconwealthplanning.com. That's Falcon.
wp.com for short. Folks, we can help relate this show to your specific situation and make sure you are taking advantage of all aspects and everything you need to be doing. Cuz most of the time people are not. Folks, we're gonna go on a quick break. We're gonna come back, we're gonna talk more about what you should have done last year or be more positive of what you could do this year before the year's over.
We'll be right back. This is Gabriel Shaheen, certified Financial Planner, your host of More Knowledge, more Wealth. That's on every weekend. We're going over all important topics of personal finance. We're going over retirement planning, making sure you're prepared for retirement, social security. And strategies, real estate taxes, avoiding them now and in the future, investments, reducing fees, commissions, and so on.
Insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have offices all across Southern California, including the Inland Empire. Give us a call to take advantage. It's a $500 offer. Our phone numbers eight five five. 6 3 25 26. That's 8 5 5 96.
Falcon like the bird, or visit our website, falcon wealth planning.com. That's falcon wp.com for short. Enjoy the show. We look forward to serving you.
Welcome back folks. This is Gabriel Shane, certified financial planner and your host, more Knowledge from Wealth Here and every weekend talking about all important talks of personal finance. And today we're talking about the classic year tax planning. This is the season where, whether it's year end or by April 15th, this is the time that you should be always planning.
You should be planning. Why right when the year starts before you do your taxes, while you're doing your taxes, you need to be meeting prior to submitting it, obviously shortly after that for a mid-year review, and then a year end planning before the year's over, depending on making sure your projections of income were in fact accurate.
Most of the time, people do not do that, so that's why the first segment I talked about, April 15th, items that you should be doing and the ramifications of why it's important to speak with the tax. . Now let's talk about what you should have done at the end of last year, or let's be positive, what you should be doing this year.
Okay. I already talked about meeting with your accountant or financial professional multiple times throughout the year for tax planning purposes. Let's take it a step further. Let's discuss what should have done last year. And I think the first one that often gets overlooked is the simple concept.
Looking at if charity contribution makes sense. Now, if you're not charitable inclined, it doesn't matter, but if you are, you can cherry pick years that you're in a higher tax bracket to prefund your donations. This is extremely important to be able to prefund your donations because you could do it in a year that maybe you're 50 cents on the dollar.
Let's say you normally give a thousand a year to. . Okay. Now, if this year you're gonna be in a high tax bracket, maybe you do 10 years worth this year, you've put $10,000 into a donor revised fund. If you're in a high tax bracket, you can get back over 50% of what you put into it. So that $10,000 you put in, you get 5,000 back in tax savings versus you're putting in a thousand, maybe you're in a 50.
Bracket this year. Maybe you're 30% the year after, maybe you're 25% year after, so really you lose out on additional tax write offs. We see this often, especially for people that are soon to be retiring, why their income drops. Or big taxable events like selling something for a capital gain or a property or whatever the case may be.
So this, we heavily recommend taking advantage of charitable donations if that's something that makes sense for you. That also will help reduce your Medicare premiums will also help with, depending on how you give it, by the way. Uh, it'll help with taxation on social security, security, and marketplace insurance.
So these, yet again, there are multiple different ways you can save. Now I wanna take it a step further because this tax planning and tax savings strategy sometimes doesn't really sound like tax savings at all. It's something called a Roth conversion. This is where you take money outta your ira, your 401k, your 4 0 3 bk, your 4 57, whatever your tax.
Retirement account and you convert it to a Roth ira. Now you've heard this before, the only thing is you have to pay taxes on what you convert. So you have to be very careful on how that works. So my recommendation and comment to you is the following is to be able to take a look at what tax bracket you're in today and try to extrapolate what your future taxes will look like, especially if you have a large amount in in a 401K or ira.
This could make a lot of sense for two reasons, like we said. Is that your taxes are eventually, potentially could go up. Why? Cuz you'll be taking Social Security if you're lucky enough for a pension. Uh, if there is, uh, uh, required minimum distributions that are required from your retirement account, this can be an increase to your taxation.
And so you wanna be able to make sure you convert the right amount. And then the second part is, is that tax rates are gonna change come 2026 and they're gonna go. And just how higher? Well, the 15% bracket, or excuse me, the 12% bracket goes to 15. That's a 25% increase, right? Cuz it went up 3% on 12, just in that bracket alone.
And then it will continue to go up throughout all, almost all the brackets. So my point to you, of course, is to make sure that you understand that Roth convergence may in fact make sense for you. The reason I say it's one step back cuz you have to pay the taxes, but the focus is what if you're paying it at the lower?
unknown rate and plus all that future growth gets to grow tax free. And when markets are volatile, like hello, last year and this year, volatile, it could make a lot of sense to do that conversion cuz you get to convert more shares. If you're originally gonna convert 10,000 or a hundred thousand, well that could have been X amount of shares.
Well now if the share price dropped, Senator converting a thousand dollars or a thousand shares, , then maybe you can convert 1500 shares depending on how much it's dropped. So talk to a professional again. And that's, listen folks, and this is part of why we offer a free financial assessment to give you one to two hours, one to two meetings of our time at no cost.
Folks, where we could tell you what you need to do, put you on the right direction. We're not gonna withhold it and say, we're not gonna, we found all these ways to save you. But we're not gonna tell you unless you hire us. That's not what we're talking about here. We're gonna tell you exactly what you need to do.
We grow ridiculously off referrals. Okay? Look at our Google reviews. We have almost 105 star reviews and we're at a five star, uh, currently. So my point is, is we are blessed cuz how much we grow in reviews and the quality we get. We we're under the good guys in the industry, but folks give us a call.
We'll be happy to help relate the show to your specific situation. Our phone number is eight five. 9 6 3 25 26. That's 8 5 5 96. Falcon like the bird. We can help no matter where you are of your situation. Complimentary. . By the way, folks, if you're just joining us here, listening to Gabriel Sheen, certified Financial Planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.
And today we're talking about as tax time is right around the corner, the first segment we talked about things you should be doing by April 15th, and if you missed it, go to More Knowledge, more Wealth onto podcast Spotify, and you're able to read, listen to that first segment. Now if in fact, uh, you wanna do planning for 2023 or just wanna know what boat that you missed for 2022, we talked so far about charity, how you can prefund it when you're in a high tax year.
Conversions also Roth, UH, four contributions. On the employee side need to be done by December 31st, so it's very important to make sure, one of two things. Number one, you're maxing it out. I think it's very important to max it out. And so if you can afford to do that, and if you're in lower tax bracket and can't afford to, uh, max it out, maybe you do the Roth option.
But also if you Roth max it out too early, some of your employers will stop matching into your 401k. So you also have to be very careful on that as. You really gotta make sure you hold yourself accountable or whoever you're working with accountable to make sure you don't do that. Another thing is for business owners, some of you aren't aware that this section 1 79, which, what is that?
That sounds too fancy. It's something you can write off fully. for business purposes, the most famous one is a car, assuming it's over 6,000 pounds. If you had a car, let's just say you went crazy, my goodness, and bought a car for let's say a hundred thousand dollars, you're able to ride off that a hundred thousand all in one year.
Instantly. You can ride it off. That Bo a hundred percent bonus depreciation is gone. It drops to 80%. What does that mean? So if it's a hundred thousand dollars vehicle, and if you buy it in 2023, you get a write off 80% of it, which is 80,000, the remaining 20,000 you have to write off over five years. So this is something that should be known.
And depending on your tax situation, depending if you need a car, and depending on how much income you have, it could have made sense to purchase a car late last year, or. This year as well. Even though you don't get a hundred percent bonus, you get 80% bonus depreciation. Still, it could make sense. Another aspect is capital gains.
A lot of your mutual funds kicked out unnecessarily. Capital gain distributions. Why? Because the portfolio manager, what do people do when the market, uh, drops? They sell? So the portfolio manager had to sell some of the old investments they had. Maybe it was the Microsoft they bought in the eighties.
Maybe it was. apples, they or the apple they bought in the two thousands or nineties, or Walmarts or whatever, Amazons. You get my point in the two thousands, 2010. My point is it kicked out capital gain distributions. Well, you have to be able to analyze those, number one. Number two, depending on your tax situation, you could have got tax free capital gains if you're in the 12% bracket or lower, so it could have made sense to max out more in your four.
To contribute to an IRA or HSA to bring that down. So these are things, like I said, that often gets overlooked, which is why tax planning is crucial. Also, when you look at tax-free capital gains, that also works on ordinary dividends, or excuse me, on qualified dividends. Qualified dividends is tax-free depending on your tax bracket.
Well, some of you have investments that kick out ordinary dividends. Well, it could have been tax free, so you should have probably put those in the IRA or four. versus the brokerage account should have more of the stocks and qualified dividend investments yet again. So how much you make in your investments, it's how much you keep.
It's very easy to invest money. You can just go into an s and p 500 index fund. Very easy to do so. But the issue is, is the execution of it and the customization of it isn't there and you don't get that in a mutual fund. Why? Cuz your money is commingled with everybody else's. So this is. It's very important, especially if you have over 25, $50,000, that's a respectable amount and you deserve customizations with them.
And so my whole point is this, you have potentially a tax professional that you work with. We'll call 'em a tax prepare. You meet with them maybe once or twice a year, but after everything I discussed in the first segment, that should be doing by April 15th and the second segment. Are you in fact getting enough attention?
Are you getting the meetings that you need? Because what we haven't discussed is even if you're doing conversions, you can reduce the amount that IRA future require. Minimum of distribution will be, which, oh, by the way, We'll be able to reduce the future required minimum of distribution, which may make your social security less taxable or even tax free.
I'm telling you folks, no matter how simple you think your situation is, when it comes to money, nothing is simple. Don't feel this is only for the rich, especially when a high quality firm like Falcon Wealth Planning is offering a free financial assessment where we can give you one to two meetings, one to two hours of our time.
Folks at no cost to you. Give us a call. We have offices all over the place. Our headquarters is in Southern California. And folks, we help people all across the country. So whether it's you referring us to somebody, you will look great. You will look amazing by referring that to us. We would love to help.
Our phone number eight, five five. 9 6 3 25 26. That's 8 5 5 96. Falcon like the bird, or visit our website@falconwealthplanning.com. That's falcon wp.com. For short. Woo, that was a fast, fast show everybody. I want to thank you for tuning in with us at this weekend. Feel free to reach out to myself or any one of our colleagues here at Falcon Wealth Planning.
Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon. Like the bird, we'll have a confidential, customized assessment for you to help relate the show to your specific situation. Tune in, whether it's through Spotify or podcast for this podcast every weekend. Folks, have a great week. Have a great weekend and God bless.