How to Reduce Taxable Income through Tax Planning Strategies! with Sugey Piedra

Learn how to reduce taxable income through effective tax planning strategies. Learn valuable tips to maximize your tax savings and minimize your tax burden with this week's guest, Sugey Piedra, a certified tax preparer.

Tax planning and strategy are crucial for reducing taxable income, especially for those involved in real estate investing. Learn about the importance and benefits of implementing effective tax planning measures in this comprehensive guide. Unlock the doors to a future of financial stability and generational wealth with Sugey Piedra's expert guidance on tax planning.

This week's chisme, we get into the importance of learning how to use the tax code system to keep more of your money. Which is legal by the way!  Sugey, with her profound knowledge from co-founding Prominence Business and Wealth Management, joins us to shed light on the often intimidating world of taxes, sharing invaluable tips for keeping more of your hard-earned money in your pocket. We also go into the importance of separating  business and personal finances to safeguard your assets come tax season.

About the Guest:
Sugey Piedra is an enrolled agent and 20+ year certified tax preparer.  She is a co-founder of Prominence Business & Wealth Management, which supports high-earning, service-based business owners achieve long-term wealth through a holistic approach to
financial services, providing bookkeeping, tax preparation, financial planning and tax strategy under one roof.

She also hosts and produces Tax Talk with HeyHey Podcast, where they provide insights into business taxes, wealth building and what it means to really create financial freedom.

When she’s not helping service-based business owners to grow their income, Sugey enjoys traveling, horseback riding and working on her own growth mindset.

How to reach Sugey:
IG @ProminenceBMgmt
admin@prominencebusiness.com
www.prominencebusiness.com

Transcript

Speaker 1: 0:00

And you would be amazed at how many people say I didn't know I made that much money. Where did it all go? It gives me the, it opens up the opportunity to say where did it all go? You know, how come you're making X amount of money and you have really nothing to show for it? Right.

Speaker 3: 0:19

Welcome to the Money Cheese man Podcast, a fun and safe space for personal finance, investing and entrepreneurship tips, where we get the choose man on all things money, with SAS and humor. I am your host, violeta, a first generation Mexican immigrant, a real estate investor, entrepreneur, and I am here to help you kick ass in the financial game. Each week, I not only bring you expert tips, but also share the financial freedom and entrepreneurship journeys from our own community, because you know, representation is important. So grab un cafecito o, si quieres, an adult beverage and let's get into this week's Money Cheese man. Hola, welcome to another episode of the Money Cheese man Podcast, this week's Cheese man. Let's talk about building a sustainable legacy and building generational wealth, with a little bit of focus on the taxes aspect of it. Joining me today is Suhei Piedra, co-founder of Prominence Business and Wealth Management. Hola, thank you so much for joining me today, hi thank you, I'm excited to be here.

Speaker 1: 1:40

It's definitely a family affair. It's my sisters and I who started the business and you know we are five sisters and two of them are in the medical field, so I couldn't actually recruit them, even though they're partially involved, but the three oldest. We decided to open up a business where we do taxes, we do tax, tax planning, but we're really focused on helping clients really navigate what taxes are. Our goal is to keep more of our hard earned money and so we come from a very humble upbringing and I really thought that it was just like my parents, who didn't understand taxes because they didn't really speak English or because they were immigrants to this country or whatever. But as I started this career which I'm celebrating 22 years now in taxes, I realized that it has nothing to do with where you come from.

Speaker 1: 2:41

Taxes are just extremely complicated for people. People fear the IRS really not taught to us in school. All of a sudden you get your first job and you're like wait a minute, where did my money go? And then I think we all kind of navigate life where you know Uncle Sam just takes his portion before we even have a say. So Nobody ever educates us on how to keep more of our money and nobody even knows that you really can, and everybody thinks, well, that's just the way things are. And in reality, there's so many things that we could do to keep more of our money or to generate like passive income that could potentially be tax free, but no one really talks about it to us unless we run into like a TikTok video or you know. You hear like the wealthy are not playing taxes and you're like well, I'm not wealthy because I pay taxes. Or whatever.

Speaker 1: 3:37

And so we wanted to change that. So I took advantage of the fact that during tax season, everybody has to do their taxes, and so I would just take the time and block off extra time and tell the client OK, your tax return is done. But I want to go over the numbers, and they're like what numbers? And I'm like you do know numbers going your tax return right. People were so far into it. No one's ever done that. But I want to do it different, and so that required for me to you know, educate people on what's on the tax return. What is the saying about you? And you would be amazed at how many people say I didn't know I made that much money. Where did it all go? You know, that's like the number one response when did it all go? And so now I jump into it, gives me the. It opens up the opportunity to say where did it all go you?

Speaker 1: 4:31

know, how come you're making X amount of money and you have really nothing to show for it, right? So it allows us to open those conversations that really no one wants to have, and by doing so it imploded my business, because I was getting referral after referral after referral, because people were saying she's different, she's different, and I really had to dig down and figure out why am I different? And I started to realize that really no preparer out there was doing that, and so it made my business really stand out.

Speaker 3: 5:05

That is so true, which is what I'm excited to kind of talk about, because, like I'm, since I move around a lot, I always have to find, like a different tax preparer or whatever, and I've never had somebody like sit down and be like, well, this is what you could have done different or whatever. Matter of fact, I will say the only person that ever said anything or kind of educated me a little bit on taxes was when I was applying for a loan to buy a property and the loan officer was like you know, you didn't depreciate this property last year, and I was like what is that?

Speaker 3: 5:41

You know, and I didn't know, and even the one I have now. I mean, you know, I went back and checked up because I had just found about bonus depreciation or whatever. And I went back and I was like, wait, let me make sure. And she did it. I was like, but she is the same way and I've had someone do my taxes before, and it's just kind of like here, give me the documents and I'm going to file it for you, and then that's it. It's filed and then that's it. I don't get no feedback on what I could have done different, or just even kind of like a debrief of what the taxes mean I just see numbers and I had to go and look at it and be like what is this?

Speaker 3: 6:22

and switch back and like I'm just googling stuff and you know, and I this year I kind of want to get in front of it and actually like schedule some time and talk to a tax professional and kind of do my tax strategy, I guess.

Speaker 1: 6:40

Yes, how, tax planning, so you know how to strategize to beat Uncle Sam and so what. I've really been trying to tie in to people right now, because tax planning is really foreign to people and people are like, well, do I need it? Right, I'm making enough money, but it's not about how much money you make, ok, it's about what you do with your money that really matters. Ok, I've got wealthy clients who have made seventy thousand dollars a year but guess what? They knew how to manage and leverage their income so that they could get rental properties and they have passive income and now they have an amazing portfolio where they can retire early if they want. I've got families. I've got a couple who married another professional Right, it's a husband and wife that met themselves at work and they're both professionals. They both make about half a million. They both make 250. That's a half a million dollar couple a year. You would think that when you say I always say I used to say it all the time, man, if I make more money.

Speaker 1: 7:42

I would be better If you tell you right now it does not matter how much money you make, it's what you do with your money that really matters. Because I'll tell you that couple lives paycheck to paycheck just like anybody else would. That's making minimum wage, because they just increase their lifestyle. They have a bigger house, a car they can't afford. They've got all of these extravagant things that they got going on. And what are those? Those are just monthly expenses, not making money for them. So they're stuck in the rat race, like a lot of us are.

Speaker 1: 8:15

So I'm here to tell you right now that it does not matter how much money you make, it's what you do that matters with it. You know you can all really create wealth, and I talk about building generational wealth, changing the way things are. We're not gonna learn it at school because they're not. That in school doesn't wanna educate us and they don't want us to figure it out. They don't want you to figure out how you could pay less taxes, how you can leverage your income, and you have to figure it out on your own.

Speaker 1: 8:45

But our industry and the tax world is really broken because so many preparers out there. You go to H&R blocks, you go to the tax preparer in the corner, it doesn't really matter. They're there only to fill out a form for you and they're not supposed to be your advisors. Now you've gotta go find an advisor. So there's a disconnect in our industry.

Speaker 1: 9:07

Right, if you were to plan out your taxes like you plan out a vacation, or you plan out your goals, or you plan out your visions or whatever, right? Then you turn around the tax return to do what you wanted to do, not whatever spits out, and that's what you submit. But that's where the magic happens. So we have to do it during the calendar year Because, if you like, right now, 2024 started, right? Well, there's a handful of things I could do for you for 23. Very limited one, two, three different things. Right, I'm very limited on what I can do to help you for your 2023, because it's closed, but 2024, omg, I have 11 months to figure out how to do this, how to move that piece, how to you know, I could tell you what you could go do, I can tell you what you can set up, I can tell you all this cool stuff and now you have a little bit of homework to do, you know, and you do it before the calendar year is over.

Speaker 1: 10:08

And all of a sudden, the return starts to ship. You start to pay less taxes, you start to reinvest that money in yourself, in your family, in your wealth, whatever you want. And now the tax return is working for you. And that's what I'm about, that's the message I want to spread, because if we keep doing what we have been doing up to this point, then Uncle Sam wins and look we're in the US.

Speaker 1: 10:34

This country's made out of taxes, right, it's a country that we love, I love, I love being in it, and everything around us is paid by taxes. I get it. I want to pay my fair share. I don't want to pay any more than I have to, and that's what I tell people is you pay way too much taxes. You could have done something different, kept more in your pocket and created wealth that, yes, it's going to be taxed anyways right.

Speaker 1: 11:01

But at least you're creating more that you get to keep in your pocket, and that's it. Just takes a little bit of tweaks, a little bit of education. It's a whole different way of looking at your taxes.

Speaker 3: 11:12

And I'm so glad that you are trying to advocate for that, because I do see it being promoted like oh, everybody's chasing financial freedom and generational wealth, but I rarely see someone that's actually talking about OK, well, now you're getting financial freedom, or you're trying to build that generational wealth. Ok, now what? Because it's going to get taxed and even thinking about passing on the properties that I have. And now I'm like OK, so how do I pass it on to my stepson and my soon-to-be-daughter, where do I pass it on to them without all these taxes? And you hear the horror stories of these taxes.

Speaker 3: 11:54

So no one's really explaining that. And how you were just saying is now that I'm making more money. And it's crazy. It's like you thought, ok, making more money at this time, I'm going to be good, but then there's more taxes and it's like what do I do to keep more money with me and with all these investments and stuff like that? So I'm so glad that you are bringing that to light and actually helping people actually think about that. Like all right, you're paying too much, you've got to start planning for them too.

Speaker 1: 12:26

Right? No, a lot of the times, people, it amazes me how foreign taxes are to all of us, and I put myself in there because tax planning is something that evolved for me, starting to connect the dots For me, looking at hundreds of clients that would come in and just seeing the same pattern over and over and over, the same mistakes, the same, and then them leaving and doing them again next year, and it's because they don't know any better, right.

Speaker 1: 12:59

We don't know any better. And so I started to connect the dots and started to realize that, yeah, we're all afraid to look at our finances, we all really don't understand taxes and so what we don't understand, we don't know how to change, we don't know what to do. So when I take the time and I say clients, ok, look, I talk a lot about real estate, because real estate is still one of the strategies out there that you can create wealth and create a tax, and it could be potentially tax-free. What that allows you to do is for you to create even more wealth, right, because Uncle Sam's not taking that from you. Yeah, it has to be set up properly. It has to be done correctly. This is all legal stuff.

Speaker 1: 13:43

But, it has to be done correctly, and so I get people in here that sometimes will be like hey, I have a rental property but I don't want to report it, I don't want to show them money because Uncle Sam's is going to tax it and I don't want to pay tax.

Speaker 1: 13:56

And I'm like do you know how much money you're leaving on the table? Because you don't want to report it. And they're like what do you mean? I'm like, have you heard of depreciation? And they're like what is that? I'm like the majority of the rental properties out there will report losses. That will help offset your W2 income.

Speaker 1: 14:18

Depending on your every situation is different, how much money you make and your setup and all that. But potentially that could be an offset to your W2 income which will result in less taxes for you. And they're like what? Huh, I don't get it and so I literally have to do the return for them. Show them the magic happen. And they're like, omg, and I didn't want to report it. I said I know you don't want to report it because probably your name doesn't report it, or your coworker told you not to report it, or your coworker told you not to. Somebody told you something that made you fear reporting it when in reality, if you do it correctly, that puts on your tax return. Potentially you will owe less taxes If set up correctly.

Speaker 1: 15:05

Now. That's leverage. So when you can go get another property, the lender is going to be like, oh, this guy works and now he makes income on this rental property and it's actually cash flowing, which is more income for you. So it'll actually help you if your taxes correctly and everything lines up. So when I teach clients and I really take the time to explain this to them they start to understand them and it's like unleashing the potential in them and the opportunities open up. Because now they see, oh my god, if I go get another property, that means I'm going to get more losses. Yes, if you go get this type of property that's in this kind of situation, oh, I'm going to go do it. And so now they're proactively acquiring properties to help them offset income that they were trying to offset to pay less taxes.

Speaker 1: 15:56

So, it's a game. It really is a game. If you know how to play it, you will be set up. You're setting yourself up to win.

Speaker 3: 16:04

It's like, as soon as you say taxes and it's kind of similar with the financial, like personal finance and financial literacy you get that financial I mean it's part of that right and you hear taxes and people just don't want to touch it, they don't want to do anything. And early on I was the same way. It's like you know what? I'm just going to just do my taxes and that's it. But, like you said, I was leaving money. I started learning about depreciation and all this stuff and it's like people are so afraid of that. So you have on one side where they're kind of scared, and then you have the other side that are like, well, that's cheating, or they get this idea that, yeah, they get this idea that it's not legal. I've seen some people talk about, maybe mention something about taxes, like, oh, you're cheating the system, that's illegal, blah, blah, blah. No, it's not. It's like those rules are there for you to take advantage, but we just don't know the rules and there's like, and then we're scared to look for them.

Speaker 1: 17:07

It depends right. Sometimes people say, well, it's our culture, right.

Speaker 1: 17:11

Where people leave cash as king, stash all the cash in your mattress, kind of mentality, right? I'm here to tell you that hurts your purchasing power. Okay, we will have, sometimes, individuals that come in and be like, look, I run a business, but it's literally cash, I don't wanna report it. Do I have to report it? And I'm like, come on, you know you have to report it, right? Any earnings need to be reported and I'm here to tell anybody out there right now, with TikTok and social media and people making money on the internet, they're all worried about whether a 1099 is gonna be issued or not. Whether a 1099 is issued or not is irrelevant. You need to be reporting that income because it's earned income. And that's now that's where you're breaking the law. That's called fraud, right, and I always show the story. What did Al Capone go to jail for? He murdered, sold drugs, did all this crazy stuff, but that's not what he went to jail for. He went to jail for tax evasion.

Speaker 3: 18:18

Oh, yeah, that's true.

Speaker 1: 18:20

And so that's what I tell people. It's like very plain and simple Are you evading taxes? No, are you being strategic and minimizing your tax liability? Yes, legal right. And so it takes a little planning, and it's about really understanding how to use the IRS code to your benefit. And we see it with like Amazon, we see it with like you know, when they talk about, like you know, major Bill Gates, whoever, it doesn't matter, right, all these major gazillionaires, and they're like, oh, they only pay, like, or they pay zero taxes, or they pay 80,000 dollars in taxes, or their secretary pays more taxes than they do Guess what. Because they know how to utilize the freaking entire IRS code to your benefit. Yeah.

Speaker 1: 19:11

It's not that it's illegal, it's totally legal. You've got to change the way you do your financials in order for you to satisfy that, and it's totally something that you can do. Anybody can do. You don't have to be extremely wealthy, you just have to learn to know what to go after. And if I'm telling you real estate is one of the things that you don't have to pay a lot of taxes on, if you set it up correctly, guess what? Then go get that piece of real estate that I'm asking you to get, because you're able to do what I just the strategy we just displayed yeah, you know, yeah, you can do it backwards. What do you want to accomplish? And then going out and getting it so that you can accomplish that.

Speaker 3: 19:49

Yeah, I remember thinking the same with Amazon. I was like, how are these like companies like not paying anything and stuff? And then I started kind of like learning a little bit, more and more and reading. I was like, well, like, yeah, no wonder Cause. Now I'm kind of like, you know, with money, cheesemen and stuff like that, this year's gonna be the year where I actually make it into a business, right, like before it was just like the brand or whatever. And then this year I'm gonna try to go establish it. And then I'm learning about like the things that you could write off and all that stuff you know for startup costs and all that stuff.

Speaker 1: 20:25

I was like, well, no wonder, you know, that's why they're like deducting all this stuff, but do you see how, like you're mentioning, you're reading the books, you're going out and doing it and all of that stuff. What I like about what we've brought to the table is we introduce it to our clients, we start to open them up, to realize that there's more out there. One of the assignments I always give my clients is read Rich Dad Portac. It's one of the best books because it explains it in very plain English and it's able to, you know, demonstrate what a W2 employee is versus a self-employed individual.

Speaker 1: 21:04

And I like that book because, yes, it's a real estate book. But aside from that, what I like about it is that it just explains to you how our system is set up to tax all the W2 employees out there at a much higher rate and all their deductions are limited, right. And then you have your self-employed individual who can make money and write off all of its expenses, that it needs anything that's ordinary, necessary for its business to be able to go make that money and pay less taxes, right. And so understanding the two is something that, when clients figure it out, they start off with a W2, but that side hustle they have turns into their full-time job because they realize that they're paying less taxes as self-employed than it is to be a W2 employee.

Speaker 1: 21:59

So that connection right there I love you know that book for me, helps me, helps start to educate clients on what it is that I'm trying to help them with, and that's where we become a resource to our clients, right, we are here to help them answer any questions. Some of them will email or text or whatever, and the main thing I always tell them right is let's just keep it clean.

Speaker 1: 22:22

If starting a business, open its own bank account and create a separate box, a separate entity for it. It doesn't have to be incorporated right away or anything, but you wanna treat it as a separate individual right, as a separate box, so that there's no commingling. When people are afraid of the IRS and you really look at IRS audits, it's because things were commingled. The IRS can identify whether this is a personal expense or a business expense. But if you keep all your business expenses in the same account, then it's easier to prove that it was a business expense. But once you start to commingle, the IRS can easily disallow certain things because there's no clear transactions, because some of them are your hair and your nails and your patients or your kids' meals or whatever, and so they're like okay, what is business, what is personal?

Speaker 1: 23:13

And so keeping it clean and separate is the very first thing you wanna learn to do, so that you could learn more about how to take advantage of the business. I encourage my clients all the time make more money.

Speaker 1: 23:28

They're like the more money I make, the more taxes I pay, I said, because you're not strategizing, but go out and make more money and let's strategize and see what we could do for you to keep more of your money. So there's so many things out there and they're just underutilized by the common individual and my hope is that one day this whole industry changes. There's tax repairs at every corner. 99% of them just do preparation. Very little people do tax planning, and so I hope that that changes one day.

Speaker 3: 24:07

Because we do need it. It's ridiculous that like W-2 people are just getting like ran over by taxes because we just don't know what we can do and stuff and I know we kind of like touched a little bit on the real estate benefits as far as tax purposes that could help lower your taxes. What other things can like a W-2 person do to help lower their tax liability?

Speaker 1: 24:34

It is harder for the W-2 individuals right. Aside from doing your 401k contributions at work, making sure you're doing the match, because that reduces your income, which turns around and reduces your tax liability. Why I like real estate is because it's an asset that in history, over time over a long term, tends to appreciate over time, right. So now you've made an investment to purchase this property and it's growing over time. Yes, there's been stuff in history where it does. There's been crashes or adjustments or whatever.

Speaker 1: 25:15

But if you look at that point and look at today, it's still higher right.

Speaker 1: 25:20

It's still gone up and it's timeframe and someone else is making the mortgage payment for you, so that's a plus. It's reducing that balance on that mortgage, creating equity for you to be able to utilize it if you need it. And then you get cash flow, sometimes depending on the property that you acquire. So my whole thing was to when I would bring that up to people, because we're in California, I am federally licensed, so I work with clients across the US. Right, I'm talking to my client here in California and I'm letting them know hey, did you know that you could do this? They're like well, yeah, but the properties are 500,000 or 800,000. Where, how am I gonna come up with a down payment of $200,000 to be able to put this into play? Or.

Speaker 1: 26:14

I don't think I'll ever be able to own a primary residence because they're so darn expensive. I had to step out. I had to go out and look, and so what I did was I started to copy. I started to copy other clients. I'm like how come you have 20 properties and this client doesn't have any?

Speaker 1: 26:36

and it makes more money than you. And so I started to copy the successful clients that already were building these portfolios and it was like what are you doing different? And that's when I started to learn and copy it and then share it. And so now, when clients come in and they tell me how am I gonna do it, I'm gonna tell you how to do it because So-and-Soul's already doing it. Obviously I'm gonna give their name, but because someone else making X amount of money is doing it, or this is how they got started. And then I took it a step further. I wanted to learn more, so I did it myself. My first property was acquired in Ohio and my down payment was $17,000. Why? Because I was like that's pretty easy to save. I mean, yeah, it's gonna require I pinch here and there I can save 17 versus 100,000, right.

Speaker 1: 27:30

It's like a little more doable and I just saw it as a goal that was reachable, whether it was putting my refunds in that pile and saying, okay, I got a 4,000 more refund, I'm gonna save it towards my 17,000. I'm not gonna go out and eat here and there or whatever, or I'm gonna pick up an extra shift or whatever I have to do to save that money. And it was a lot easier for me to save it Once I had that down payment. I went ahead and I bought my first rental property and the rental property was in Ohio for $70,000. I never visited that property. That last month was the first time I went to visit that property. But I had to realize that I had to create a team that I can trust, that we're going to be my boots on the ground, that we're going to manage my property, that we're going to leave me alone because I'm growing my own business.

Speaker 1: 28:21

I don't even know that the doorknob fell. Fix it. So I had to become this person where I was like, if I could do it, I can teach it. And so. I wanted to learn how I want to be hands off. If you want to manage your property, more power to you. I don't, and I have properties and I want to go and I want to have doors in every single state as possible. I want to diversify my doors like I would diversify stocks, because you don't want to put all your money in Google, right? What about?

Speaker 3: 28:55

Exactly.

Speaker 1: 28:56

So I want to put all my money in Ohio or Arizona or wherever Right, I want to have doors all over the country if I can. And so I just started to build more teams. And then clients are like, well, I want to own one there. And I'm like, ok, here's my contact and this is what they do for me and this is how it works. And then, before you know it, clients are like, well, I want to do it too.

Speaker 1: 29:19

And then so there's a whole bunch of us now that invest in properties out of state, and it could be Alabama, mississippi, tennessee, kentucky, you know, and it's nice because we're building wealth and we are still doing what we do, we still work and we still do all that. But now we get to strategize and we get to play. We have rentals on a tax return. What are they doing? How do we create a tax free? Do we do a cost segregation? People are like what's that? I'm like, let me show you a cost segregation. Which is that bonus appreciation?

Speaker 1: 29:57

So many cool things that you could do based on whatever IRS rules are released or you know are going on in that time frame, but learning how to take advantage of that, before you know it, people's portfolios just started to grow and people were excited, people were sharing and they're like, without you being able to introduce this to us, we didn't know how all this was going to work.

Speaker 1: 30:23

So now you know, like I said, I had never visited my properties and clients have houses down the street. So I'm like, hey, take a picture in front of my house and they're like, okay, and they were. And so I can't believe you've never been out here. I'm like never been out there, but one day I'll go. You know, and an opportunity came up, or one of the properties is vacant and I wanted to go see it, and so I went last month. But it was like it was something that it just came up out of the blue. But I like the fact that I don't. I don't feel like I have to go visit those properties, but the cash flow is nice and then the fact that I think it tax free is nice.

Speaker 1: 31:03

The fact that now I have more money to invest in other properties when the opportunity arises and so that's how you continue to grow your wealth is you to and reinvest the extra money that you're making instead of spending it? I was the type I wanted new shoes. I wanted a new purse. I wanted to have a nice car. Now I'm like I'll drive a clunker. I'll have no purse. I'll wear my shoes till they're holding them.

Speaker 3: 31:35

That's so me. I got rid of one of my cars so I could buy land, because there's like a car land. And so now I'm driving this 2010 beat up Honda Civic, but I am driving it knowing I have some land and some properties, like happy, you know what I remember my mom being.

Speaker 1: 31:53

I want to be that now, before I saw it as a bad thing. And now I'm like I want to be that.

Speaker 3: 32:04

Yeah, yeah. Eventually I'll get up in her car, but right now I'm happy with this, right now. And so, yeah, same same way. And I haven't got to my properties either, like I just have never slept. I want to, I want to try to make a trip this, maybe this year, just to check up on them and kind of put eyes on it, just to say I have and see it. But yeah, so going back to the depreciation and the bonus depreciation, like can you explain both of them in, like the difference, of course?

Speaker 1: 32:40

So right now, in 2024. So in 2018, through now, there's accelerated depreciation, which means that your regular depreciation is for a single family home. You can divide the building value over 27 and a half years. So what people don't know is, typically people are like I bought a house and it's going up in value, right, I bought it for a hundred thousand and now it's worth 150. Like it's more taxes. I'm like no, it's the opposite. The IRS actually depreciates the actual, the purchasing price. So if you bought it for a hundred thousand, right, and let's just say the building is, I don't know, 70,000. That's what it's worth and 30,000 goes to land, well, that's 70,000. You can depreciate it over 27 and a half years, which means you divide it by 27 and a half years and every year you get a little write off for the building. The IRS says the building value is this and you get to take a little write off for it every single year.

Speaker 1: 33:46

Well, in 2018, when some IRS rules allowed for items to have accelerated depreciation, bonus depreciation, meaning that anything that had a life of under 20 years you could take it in year one. So people started saying well, you know, my toilets have a life of five years or seven years or whatever. Or the IRS says that the windows have a life of 15 years or has have a life of 15 years. Whatever the IRS rules, there's a whole list of them. So that means that those items, if you put a value to them, could be taken all up front in year one when you purchase it. So all of a sudden, all these people are doing cost segregations, which is accelerating those depreciate, those items and those depreciation and now they're having these huge losses on these tax return, on these rentals. They got to take an expense of the window or the doors or whatever. All in year one, creating you know 10, 20, 30,000. I think the most I've seen right now is about $130,000 loss. Rental when the money didn't come out of your pocket. Numbers on the tax return only Doesn't hurt your purchasing power. Your lender doesn't say, hey, you lost $130,000. It's only a number on the tax return. But depending on how you're set up, depending on you know what you do for a living and a whole other, a whole bunch of other factors, this loss could maybe be released on the tax return. Maybe you only get 25,000 this year because of how you're set up. Maybe you get a $5,000, or maybe it gets suspended to the following year. Mm-hmm.

Speaker 1: 35:45

It's about strategizing. That's an individual question. I'd have to look at your tax return, see how everything is set up to in order for me to To guide you on it. But know that there's things like this out there that you can utilize To, you know, create more strategies. So sometimes people are like, why make too much money? I won't be able to take it as a write-off. I go it doesn't mean you shouldn't Take it, and now you go make money somewhere else that will offset that loss, and now you don't pay taxes on those dollars. Mm-hmm. So people are like, wait, I could do that. I'm like, yes, you can, and so that's what planning and strategies about. Is about looking for things. It's not about can I write it off. It's about how can I write it off, how can I make this a write-off, when you ask me how? Now my job is to find, create a plan for you so that you do it.

Speaker 1: 36:42

If you ask me, can I write it off, I'll say no, you can't, they didn't simple, right. But if you change your structure, if you change your setup, if you change and tweak this and that, now it's a write-off. And so that's where people fail to make those changes in that planning and Really take advantage of their tax returns.

Speaker 3: 37:04

You know all the more reason to get into real estate investing, especially right now, before you say what year it was gonna end.

Speaker 1: 37:12

So it's supposed to kind of sunset in 2025.

Speaker 1: 37:16

Okay but you never know. I mean, right now there's a bill that they're trying to retroactive the 100%, because it's going from 100% depreciation to 80% and then it's supposed to vanish, right. Well, there's a bill right now that they're trying to go back and say make it a hundred percent for the, you know, for the remaining at a time or whatever. Hey, if it passes, that means you get more. So Learning to take advantage of stuff like that, having somebody that stays in the, in the you know, updated with all of those laws, is you want to have somebody like that in your back pocket for sure cuz, like, especially right now.

Speaker 3: 37:54

I think the number one thing that a lot of people that may be interested in getting into real estate investing is the interest and they're like, oh, interest, interest, interest. Like I Don't want to get into it or whatever, but they feel, to see the whole pictures, like you get tax benefits as well and the on top of the cash flow and all that stuff. It's like you have to think about all of that. Don't just get lost and just Hyperfixating in that it's a high interest rate because it's everything.

Speaker 1: 38:24

It's a high interest rate compared to what, though, right To the extremely low interest rates we had for a while. Yeah. Why don't you compare it to the 80s, when they were 15 percent, 19 percent, when people were buying houses?

Speaker 1: 38:38

My spot their first house and they paid 13 percent. They were paid 13 on their mortgage. So if I compare it to when my parents bought their house, guess what? They're cheap, mm-hmm, they're low. So it's what are you comparing it to? Plus, make a good comparison.

Speaker 1: 38:56

I have clients that'll be like well, you know, I wanted to pay it 3% interest. Okay, so you're paying 2 more percent in interest. It's costing you extra. Translate that that into dollars, mm-hmm, costing you an extra couple thousand dollars a year. Right, but you let go of four thousand dollars to save two thousand. Exactly, exactly.

Speaker 1: 39:19

Oh, I didn't look at it that way. Yes, I get it. You know, maybe over the long term, like it's gonna, I go, but even then there's appreciation in the building. You can refinance and put your interest rate lower if you need to like. Look at the big picture. Sometimes it does not make sense. Believe me, you have Calculators that'll show us whether you should buy or not. Yeah, sometimes it doesn't make sense. Look for another one. I'm not saying don't buy, I'm just saying don't buy that one. Yeah, exactly, you know. But there's so many tools out there, there's so many things, and I just want people to really, really Get the resources that they need get educated. There's so many cool things out there that can be done, and if you want change, you can make it happen.

Speaker 3: 40:05

You're really staying better and I am as well. And now I'm thinking about, like, okay, so how do I pass that on to you, my stepson and future kids or whatever I know you know a little bit about, like building that legacy and the taxes that go along with. Can you like expand a little bit on which we should be thinking about you know to you know like transfer that wealth onto our future generations?

Speaker 1: 40:34

Yeah, of course, and I mean, I see it a lot again. You know, in our Latin community, and you know we have to be careful. We have to be careful because our parents don't know any better, our grandparents don't know any better. Sometimes we don't know any better, right? But if you're out there listening and you have access to Google, you should be able to Google whether your parents should transfer title to you or not, right? So what ends up happening is, when you want to, when you acquire real estate whether it's your primary residence or rentals or anything like that you want to have trusts.

Speaker 1: 41:12

You want to have trusts in place. Maybe you have LLCs, all that other stuff. This is now going into your asset protection we have attorneys on our team, referral partners but it needs to go in the setup original. The original setup has to be like a trust. Trust becomes alive when you pass. So that trust needs to have instructions on what to do with these assets when you're no longer roaming this earth, right? So when you pass, the trust becomes alive and your trustee is supposed to be like okay, she wanted me to Give this to.

Speaker 1: 41:50

You know her grandma and her grandpa and her, you know sister and you know the neighbor or this charity or whatever. There's instructions on what your wishes are once you're no longer walking this earth. Maybe you say sell this property, maybe you say never sell this property. So even though you're no longer roaming this earth and me, you know you can still control your assets Even after you're gone, because that trust is your instruction on what you want to do. So I have. I have had clients who Build extreme wealth I mean, we're talking about shopping centers and just amazing commercial and assets but their kids are not good with money. Mm-hmm.

Speaker 1: 42:37

So they're like I don't want to leave any of this to my kids. They're gonna blow it the day I die. Mm-hmm. I'm like, okay, Well, what do you want to do? So we get together with the attorneys and they design a really cool trust where it skips the kids. Mm-hmm. It skips their kids and then it goes to their grandkids now the grandkids once they're 25 or whatever age that the parents decide, and they could sell the property if they want in the time, but they're their children and the grandchildren, when they're young, live off of the rental income, mm-hmm.

Speaker 1: 43:11

But guess what? You decided that before you left this earth, mm-hmm. It's really good instructions on what it is that you need to do. Yeah, now you hear even of extremely famous people movie stars, whatever that don't even have a trust in place and they pass. So now what that happens is all those assets and it could be your primary residents, rentals, money in the bank account, it doesn't matter, it goes to the state. And now the state. You have to go to court. You got to go, you know. Hire an attorney to represent you and try to get you your assets back, because you deserve. You know this is your family's money and you want it.

Speaker 1: 43:49

Mm-hmm, they're gonna charge you so much money that you lose a huge percentage of your Inherited wealth to the court system.

Speaker 1: 44:00

Mm-hmm because there was no trust left in place. Yeah, so the trust is gonna help Dictate where everything goes. And you want to title your houses in the trust, you want to title your assets in that trust, because if it's not titled to that trust then it's not in the box. So I always a trust is like a box. You want to make sure that everything, all the little assets you want, are in that box, because if they're not, then when you pass, that property stayed out of the box and then the trusty can't control it.

Speaker 1: 44:33

It goes, and then the state. You have to go to court to get it from the state.

Speaker 1: 44:36

So Inheriting something is definitely one of the ways you want to go, because taxes reset meaning if you let's just assume I bought a house for 100,000 and the day I die the house is now worth a million dollars. Well, when my son inherits that property from me, he inherits it at the million dollar value, so no taxes have to be paid by my son if he turns around and sells it. He could turn around and sell it and pretty much pay no taxes, right? So, depending on inheritance laws and everything changes, but typically that's what happens. So you wanna inherit, but sometimes parents are like you know what I don't want nobody to know.

Speaker 1: 45:21

I have this house or I'm gonna die one day and I just want you to have it now and they gift it to the child or they gift it to a brother or whoever, because that's what happens when you transfer the title, is, you're basically gifting them a title to an asset. Well, when that happens, you also give them your original price, so a gift comes with its original price. So if I gift you my house and I paid 100,000 for it, well, now you are receiving it with a hundred thousand dollar value. So if you sell it the day I die and it's worth a million dollars, guess what? You have to pay taxes on $900,000, which it's 50%, right off the bat here in California. So you'll lose $400,000 of your inheritance, in a sense, because it was gifted to you, versus you getting it the day after you know, the day I die or whatever.

Speaker 1: 46:20

People make big mistakes in that sense a lot of times. I see it all the time and I have to tell clients the sad news that Uncle Sam is gonna take a huge portion of your money because it wasn't done correctly, when you know whoever was still alive. So it's important that we get, we become very knowledgeable in those areas. We don't wanna talk about ever passing away, but there's other reasons why you wanna set up trusts and there's a lot of things that you wanna be aware of because if you don't, uncle Sam takes advantage of the fact that you were naive.

Speaker 1: 47:01

that you didn't know that you just did whatever, and the only person that benefits from that is Uncle Sam.

Speaker 3: 47:08

And that's how you hear like these stories of like that a son had to sell the house because if they keep it, it's like you gotta pay the taxes on it and you can't afford it. So now you have to sell it, and so it's always sad to hear when that happens. It's like they'll lose a house that's been in the family for generations and then all of a sudden they have to give it up because whoever they gifted it to can't pay the taxes on it.

Speaker 1: 47:36

Yes, I agree with it. It's so sad. It's just there's no planning and, like I said, I come from a very humble upbringing. You know my parents don't speak English very well and it's sad that you know.

Speaker 1: 47:50

If it wasn't because I know this stuff it they don't, there's not a lot of help and they'll always be like because I didn't know you know and and so on and so on, you know, and it's like, but when they're not educated and that's the hard part, because you come to this country they're worked a little behinds off, they make something and they create these assets just for Uncle Sam to benefit from them. So it really affects on all you know, in all ways. Yeah.

Speaker 3: 48:20

So I'm so glad that you're you're out here trying to make that change and not just like we always talk about, like, oh, we have to learn how to do, you know, invest and all that stuff, but we also have to learn how to keep more of our money and, when we pass, ensure that those few generations because we always talk about building generational wealth and all that stuff but you know, we have to make sure that they can get that generational wealth, you know, as much as possible without you know, uncle Sam, taking a huge chunk out of it For sure, for sure. So for those who are interested in working with you, where can they reach you?

Speaker 1: 49:00

I'm very active with our social media. You know we are on the Instagram is Prominence Services and our website is prominencebusinesscom, and I invite anybody that is interested in learning more about what we do. I have a webinar once a month. It's every first Wednesday of the month and you can always email us or text us and reach us through our social media. Like I said to ask for the link, you know it's a free webinar where I just kind of talk a little bit more about these things so that people really try to spread the message and know that there is help out there. We don't have to be extremely rich to have a team behind us. You know we've built an amazing referral partner team with attorneys that we only use them if we need them. We only pay them to answer our questions. So it's really neat that it's on an unneeded basis and you don't feel like you're being gouged. We want people to really feel like they have the resources that they need.

Speaker 1: 50:08

Any final thoughts. Well, I wanna really thank you for having me. It's when I saw money cheese mail I was like oh, I love it.

Speaker 1: 50:19

I believe you're trying to do the same thing right. You're trying to spread a message. You're trying to let others know that there is a better way, and that is truly my passion is to let people know that taxes are really more than you think that they are and that there is a better way. So just find the right professional that cares, find the right individual. Look for tax planning in your area. Reach out to us. I have a community of people If you want somebody local to you. But, like I said, I work with clients across the United States. It's a Zoom appointment. I share my screen with you. We go into detail, but again, it's because this is my passion. I love what I do.

Speaker 1: 51:06

I wanna help people. I want people to be able to keep more of their hard earned money. So reach out and I will connect you with someone in your town. If you want somebody local to you, okay.

Speaker 3: 51:18

Awesome, and I'll have all her information down in the show notes in the description, wherever you're listening from. But other than that, thank you so much for coming on here and spreading the message to make sure let's keep more of our money.

Speaker 1: 51:35

The cheese man going yes, let's get the pizza. This is the stuff we wanna be sharing. The cheese man.

Speaker 3: 51:40

Yes.

Speaker 1: 51:43

Well, thank you so much, had a great time.

Speaker 3: 51:46

Thank you, and thank you, and I will see everyone in the next episode. Bye. Thank you so much for listening. Don't forget to like and share this episode so others can also find this podcast. Don't forget to follow me on all my social medias listed in the show notes below, where you can also find resources to help you in your financial journey. If you're interested in becoming a guest on the podcast, you can find that information in the show notes. Other than that, thank you so much for your support and I will see you in the next episode. Bye, bye, I'll see you in the next episode.