← Armstrong & Getty On Demand
Loading summary
Transcript19 lines
- [00:01]
A
Because four hours simply isn't enough.
- [00:04]
B
This is Armstrong and Getty Extra large something we can all use. A conversation with longtime friend of the Armstrong and Getty show, Stephen Moskowitz, who has advised us on tax stuff forever. Founder and tax attorney for Moskowitz llp. Stephen joins us now. Steve, how are you?
- [00:22]
A
I'm fantastic. And you know, I'm happy because I get to talk about taxes. And you know, I mean that.
- [00:28]
B
You know what, it's funny. I was just gonna say I'm gonna embarrass and tell the folks this. I have known professional musicians, athletes, all walks of tech guys, all walks of life, and I've never known anybody who's more excited about their jobs than you are. Stephen, you love helping people deal with taxes.
- [00:50]
A
Sincerely, I love it. And there's so much in the tax law, there's so many hidden gems. I have everything from all walks of life, whether we can tell you how you can deduct your multimillion dollar yacht to your struggling and how the government will give you money to help you take care of your kids and everything in between. For example, I have a question for you. Suppose I told you that you could go on a two week vacation anywhere in the world you choose. Some stranger would pay for it and the money the stranger gives you is tax free. How would you like that?
- [01:28]
B
When can I leave?
- [01:30]
A
He said, oh my God, what is Steve talking about? And I'm talking about Internal revenue code, section 280ag, like Armstrong and Getty, also known as the Augusta Rule. And what happens with that? You can rent your home for up to 14 days a year and there's no tax on it. So, so the bottom line is in that home can be the mansion you live in, the studio apartment you rent, or a boat. And I'll explain that separately. But the bottom line is, suppose for example, you said, okay, I'm going to rent my place out for $1,000 a day. And now everything is. So many people like renting a home instead of a hotel. So the bottom line is you go ahead and let's assume that you rented your house for $1,000 a day. So it's $14,000. You go off to Hawaii, you spend 10,000 on your trip. That 14 grand that you got is tax free. It doesn't even go on your tax return. It's excluded from income. That's just an example of one of the many, many, many hidden gems in our tax law. And a lot of people say, well, why should there be such things? Because our legislators in their infinite wisdom, think this is good for the economy or the business or there's some special interest that pushed them. But the bottom line is this law is for everybody. All the laws are for everybody. We're all equal under the law. And the bottom line is that you just have to know where these gems are hidden. Because there's two reasons for the tax code. One is to get money from us, but the other one is to give us all kinds of incentives, like the Southern rule. What a deal. I mean, think about it. You're off on vacation anyway. The Airbnbs are so popular and you get 14 days tax free. So you can see why I get so excited over these things.
- [03:25]
B
Love it. So, hey, we are happy to have so many small business people, entrepreneurs, go getters listening to the show, also slackers like myself. But what do you see? Small business people either failing to take advantage of or getting wrong. What advice would you give them just right off the bat?
- [03:42]
A
Oh, the first one is retirement plans. There's over 20 different types of plans. You can have multiple plans in the same year and you can put away so much money, there's four benefits to that one, you pay less taxes. Usually when I'm talking to a client, people say, sign me up, Steve, you got me. Save taxes. Besides that, the money sits in your plan and the income doesn't get taxed while it's in the plan. So no brainer, everything grows faster and bigger if there's no taxes on it. Also, it's exempt from lawsuits. So take a look. Although I hate to mention his name, suppose you take a look at O.J. simpson, who had a multimillion dollar judgment against him for many, many years and he never lost a penny of his pension. So that's good when you're in business, so you don't have to worry something to take it away from you. And most tax planning, you have to write the check by 12-31-24 to deduct it in 24. But with most of the pensions, not all of them, but most of them, you have up to the time of filing the returns, including extension, which in English means depending on your business entity, you could have as late as 10-15-25 to set up the plan, fund it, and still deduct it from the previous year, 24. And there's all kinds of things in here. So, for example, if you're in a pension, there's no kind. Everybody knows about 401ks and IRAs and all that, but there's all kinds of additional plans. What I call the fancy plans, which you can put in much, much more money and they're based on your age, your earnings. There's an actuarial valuation ticket. But people can put away a tremendous way more than this. But when we talk about putting things away, everybody should have a pension plan. Everybody should put that away.
- [05:34]
B
I was just gonna say. And that includes if, like, I'm my, my only employee, I'm a sole proprietor, I can have a pension plan for myself, right?
- [05:41]
A
Absolutely, absolutely. And again, with retirement plans, there's so much in there. For example, suppose you say, well, you know what, I'm listening to the show today, but I'm a little bit older and, you know, I haven't had the money in there. Well, there's something called a catch up plan. If you're over 50, you can put in bigger deductions. And our legislators, in their infinite wisdom, and get this, if you're 60, 61, 62 or 63, only those ages, you have a super catch up plan that's beginning this year in 2025, where you put even more. The bottom line is there's so much here. And then what about taking money out of plans? You say, well, okay, you know, I need the money, but I don't want to get hit with that penalty. There's all kinds of exceptions to that. If you're a victim of domestic abuse, you can take money out without the penalties. If you need it for emergency purposes, you can take it out without penalties. If you take it out because of federally declared disasters, think about all the wildfires in California, not to mention Hawaii and other places, you can take it out without penalty. If someone's terminally ill. And also a nod to our firefighters, if they're age 50 or with 25 years of service, they can take it out without penalty. I could go on and on and on. But there's just so much here for everybody. And whether, you know, with being a small business owner, this is just a tremendous. I get so excited over this. But if you're in business, there are so many benefits to you, it's incredible. And there's all kinds of things. For example, suppose somebody says, you know, I'd like to have an electric vehicle. Well, guess what? You know, the government will give you 7,500 bucks. And you say, well, that's nice. I can go ahead and take $7,500 off my tax return. Right? You can. But even better, when you're at the dealer, you say, you know what, there's a special program where I can say to the dealer, I'll give the credit to you. You knock 7,500 bucks off the price so I never have to give you the money and ask for it back. You get the 7,500 from the government. There's so much, so much there. Then there's another thing that gets me really excited, something called opportunity zones. Suppose you have this situation. You sell something, anything, some gold coins, some stock, real property, anything, and you have capital gain. And you say, well, all right, you know, I realized that there's three capital gains rates. Zero. Nice one. But you have to be making less than 47 grand for that, or 15%, which is between 47 grand and over just half a mil. That is, you know, most people are making under half a mil, 15% in that, and it goes to 20% if you're over 518,000. But the bottom line is, you say, you know what? I don't want to pay that either. So you can go into an opportunity zone and you can defer the taxes until 26. But you say, when somebody gives you something nice, what do you say?
- [08:58]
B
Thank you, of course.
- [09:00]
A
No, you say, more, I want more. And what happens is, there's a provision with these opportunity zones. Suppose I do this. Suppose what is an opportunity zone? There are designated areas in our country where the government says, invest here and we'll give you special tax benefits. And there's a tremendous number of them. So you go ahead and do that. And let's assume that you buy a real property for a million bucks, 10 years later, you sell it for 100 million, you've made a gain of 99 million. You know, I can calculate the tax on that right now in my head. Know the taxes, zero. What, Steve, what are you talking about? There's a special provision that if you hold this property for more than 10 years, when you sell it, there's zero capital gain. There's no cap on it. So in my example, you made a profit of 99 million bucks. You pay zero taxes. Talk about an incentive. So you see, that's why I get so excited about this and our laws filled with these things.
- [10:04]
B
Stephen Moskowitz, Founder Tax Attorney Moskowitz LLP is online, longtime tax advisor of the show and our friends. So, Stephen, in the couple of minutes we have left, what notable changes to the tax code have happened recently or do you expect to happen as the Trump administration gets going?
- [10:22]
A
So I think there's going to be a lot with the Tax Cuts and Jobs act. When President Trump was president during the first term. He had a lot of stuff that was going to be basically he expected to be reelected and he had a lot of stuff in the tax law. It was expiring right after what was his second term. So it's expiring now. They're probably going to make changes and keep a lot of the things and also a lot of things that have changed are the numbers like the standard deduction went up a little bit for 20, 24 and little bit of numbers, for example the earned income credit. So we talked about the other end of the scale. For example, Suppose you have three kids and you're making under 66,819. The government will give you $7830. What do they give them? They'll give you the money so you have those things. There's also change to the kiddie tax. It's a small change for kids that are under age 19. The first 1300 bucks is tax free. The next 1300 bucks is taxed at the child's rate. So it's a little something. Then the amounts for the flexible spending accounts and the health savings accounts have gone up. So what are those things? Basically there are two different types of accounts where you can put some pre tax money in that is don't get taxed and then you use it for health care. Now there's differences between them. So with an exception, you can't have both. There's an exception, but we won't get into that right now on the show. But for the most part you say, well what's more important to me? And you look at these and basically the best way to do it is they're charts. And you say, okay, with the flexible spending account, here's the advantages, with the health savings account, here's the advantages. But basically the idea here is you get a tax deduction, you use the money for medical and isn't that nice? You don't have to pay tax on that amount of your earnings. And the bottom line, for example, with a health savings account, you get triple benefits. There's no taxes on the money you put in. It grows tax free and there's no taxes when you use it for medical bills. So again, I mean you look at this stuff and you say, well okay, why shouldn't I have it? There's so much in tax. Everybody complains about their taxes. My taxes are too much. They're this, they're that. But people overlook all these benefits. And again, I'm just throwing out a few samples and teasers. There's so much there if you're interested in this. To me, this has fascinated me my whole life. And it's here. It's available for everybody.
- [13:06]
B
Well, if you want to get in touch with Stephen, his number is one eight eight tax deal. That's one triple eight tax deal. Stephen, it's always a pleasure. Thanks for the time. Interesting and fun as always.
- [13:15]
A
Be well, thanks so much. I had a great time as always. Thanks for inviting me.
- [13:19]
B
All right. Thanks.
- [13:21]
A
Extra large.