517 | Maximize Your Wealth: Understanding Capital Gains Tax Strategies | With Cody Garrett

Summary

ChooseFI Episode 517 Summary: "Maximize Your Wealth: Understanding Capital Gains Tax Strategies | With Cody Garrett"

In Episode 517 of the ChooseFI podcast, hosts Jonathan and Brad Barrett delve deep into the intricacies of capital gains tax strategies with their guest, Cody Garrett, a Certified Financial Planner (CFP) from Measure Twice Money. This episode serves as an extensive guide for individuals seeking to optimize their financial independence journey through strategic tax planning.

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1. Introduction to Capital Gains Harvesting (00:00 - 06:53)

Brad Barrett opens the episode by revisiting the concept of capital gains harvesting, highlighting its significance within the Financial Independence (FI) community. He references a previously discussed topic from Episode 18R in April 2017, acknowledging that while it was popular, it lacked depth—a gap this episode aims to fill.

Notable Quote:

Brad Barrett [00:00]: "Capital gains harvesting... this is one of our most downloaded episodes of all time."

Cody Garrett emphasizes the importance of understanding income tax to grasp capital gains strategies effectively. He simplifies the taxation system by distinguishing between ordinary income and capital gains, setting the stage for a comprehensive discussion.

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2. Differentiating Ordinary Income and Capital Gains (01:40 - 11:22)

Cody breaks down the U.S. tax system into two primary income types:

• Ordinary Income: Includes wages, business income, interest, taxable IRA distributions, and portions of Social Security. Taxed at progressive marginal rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

• Capital Gains: Income from selling capital assets like stocks, bonds, or mutual funds. Long-term capital gains (assets held for over a year) receive preferential tax rates of 0%, 15%, or 20%, depending on the taxpayer's income bracket. Short-term gains are taxed as ordinary income.

Notable Quote:

Cody Garrett [01:48]: "There are two types of income... ordinary income and capital gains."

Brad reinforces that long-term capital gains are beneficial, clarifying misconceptions that they are punitive. He highlights that most taxpayers fall into the 0% or 15% capital gains tax brackets, which are significantly lower than ordinary income tax rates.

Notable Quote:

Brad Barrett [06:53]: "Capital gains, long term capital gains, it is preferential. It's wonderful. You should be doing cartwheels about it."

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3. The Allure of Capital Gains Harvesting for the FI Community (11:22 - 28:05)

The discussion pivots to why capital gains harvesting is particularly appealing to those pursuing financial independence. Cody presents a foundational example demonstrating how a retired individual with no ordinary income can realize substantial long-term capital gains taxed at 0%.

Case Study:

• Situation: Married filing jointly, no ordinary income.
• Action: Realizes $123,250 in long-term capital gains.
• Outcome: Entire gain taxed at 0%, effectively creating a "Roth IRA within a taxable brokerage account."

Notable Quote:

Brad Barrett [12:23]: "You've told the government, please tax me on this. But because you're in this preferential rate, you pay nothing."

Cody further explains the progressive nature of capital gains taxation, assuring listeners that even slight overages in realized gains don't severely impact tax liability due to the progressive tax system.

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4. Advanced Strategies: Gifting Appreciated Stocks and Charity (32:42 - 39:29)

Cody introduces sophisticated strategies involving gifting appreciated stocks to minimize tax liabilities:

• Gifting to Family Members: By transferring appreciated stocks to an adult child within a lower tax bracket, parents can help their children realize capital gains at a 0% rate, effectively saving on taxes.

• Charitable Donations: Donating appreciated stocks directly to charities or donor-advised funds can eliminate the capital gains tax entirely while providing tax deductions.

Notable Quote:

Cody Garrett [32:42]: "If you have something at a gain, say, can I give this directly to charity or give it to the person if they're at a lower tax rate than I am?"

Brad complements this by explaining the mechanics of carryover basis, ensuring that gifted stocks retain their original purchase price for the recipient, facilitating immediate capital gains realization without additional tax burdens.

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5. Case Study: Single Taxpayer in Early Retirement (40:21 - 48:29)

Focusing on a single individual, Cody presents another case study to illustrate capital gains harvesting in early retirement scenarios:

Case Study:

• Profile: Single, age 50, retired with $50,000 annual expenses.
• Challenge: Needs to secure affordable health insurance through the Marketplace.
• Solution: Combines Roth conversions with capital gains harvesting to optimize taxable income.

Strategy:

1. Roth Conversion: Converts $14,600 from a traditional IRA to a Roth IRA, aligning with the standard deduction to avoid tax.
2. Capital Gains Harvesting: Realizes $47,000 in long-term capital gains, taxed at 0%.
3. Outcome: Achieves a gross income of $61,600, resulting in taxable income of $47,000 (all taxed at 0% capital gains rate). Additionally, qualifies for a $3,000 premium tax credit on health insurance.

Notable Quote:

Cody Garrett [40:21]: "All 47,000 of the long term capital gains are taxed at 0%."

Brad highlights the delicate balance between maintaining low taxable income for tax benefits and ensuring sufficient income to qualify for essential subsidies like the premium tax credit.

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6. Key Takeaways and Final Advice (48:29 - End)

As the episode concludes, Cody and Brad offer strategic advice for listeners:

• Prioritize Lifestyle: Focus first on ensuring financial strategies support your desired lifestyle before delving into tax optimizations.

• Strategic Planning: Implement capital gains harvesting and Roth conversions as part of a broader financial plan, not as standalone objectives.

• State Taxes Consideration: Be mindful of state-level taxes, as some states may not offer the same preferential rates on capital gains as the federal government.

• Continuous Education: Encourage listeners to review their tax returns and understand their taxable income to identify opportunities for capital gains harvesting.

Notable Quote:

Cody Garrett [48:29]: "Prioritize living your best life. With that said, the implementation of how that happens, that's when you start looking at these opportunities."

Brad emphasizes the critical nature of these strategies, urging listeners not to overlook the "free gift" of preferential capital gains rates.

Final Remarks: Cody and Brad reiterate the importance of subscribing to additional resources, such as Cody's newsletter and the ChooseFI community groups, to stay informed and engaged with ongoing financial strategies.

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Conclusion

Episode 517 of ChooseFI offers a comprehensive exploration of capital gains tax strategies, tailored specifically for those on the path to financial independence. Through clear explanations, practical case studies, and actionable advice, Cody Garrett equips listeners with the knowledge to optimize their tax situations effectively. The episode underscores the value of strategic tax planning in reclaiming financial freedom and enhancing overall wealth management.

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Resources Mentioned:

• Measure Twice Money: measuretwicemoney.com
• Health Insurance Marketplace: healthcare.gov
• ChooseFI Local Groups: choosefi.com/local
• Financial Independence 101 Course: choosefi.com/fi101

**Listen to the full episode here.

Transcript

[Brad Barrett]

Hello and welcome to Choose a Fi. Today on the show we have another deep dive on a really fascinating topic which is capital gains harvesting. So tax gain harvesting, in essence. And we first talked about this way back in April of 2017 in episode 18R. And this is one of our most downloaded episodes of all time. And frankly we just covered it in passing. We didn't even give it our full in depth analysis. But that changes today. So I asked my good friend Cody Garrett, who's a CFP from the website Measure Twice Money. He was recently on in our first of these fun deep dives in episode 503 where we talked about the Roth IRA conversion ladder, which is yet another one of those fundamental financial independence strategies that can really help us. And I think capital gains harvesting that we're going to talk about today is one of the most fascinating things where there's this way to essentially get free money. So tax free capital gains. And it's actually much more significant than you would otherwise anticipate. I wrote about this in my newsletter in July and August and there was such interest that I knew I had to put an entire episode together. And that is today. So without further ado, you're really going to enjoy this. Get a pen and paper. And this one is really going to be valuable that I can assure you with that. Welcome to Choose Upfi. Cody. This is going to be fun. I've been looking forward to this since the second rescheduled it. This is going to be great.

[Cody Garrett]

Ready to continue nerding out? Let's go for it.

[Brad Barrett]

Oh, I love these deep dives. I love it. It speaks to my soul. So okay, let's just start capital gains harvesting. What is this?

[Cody Garrett]

So first we have to kind of, it's like, you know, before you get on the plane, like where are we going? What are we talking about? Where's the destination? So first we have to understand income tax. First of all, we're not going to spend like 30 minutes talking about like the income tax and income tax. Let's break out the IRC and go to town, right? But I do want to kind of start with this idea again without going into self employment and AMT and some of these, you know, QBI and all these really interesting things that you can Google, maybe future episodes. Sean Mulaney is an awesome friend of mine, really a tax nerd too. So we're all here to help. But I do want to, let's just break down very simply that there's two types of income that you're probably going to see on your tax return and you might not have realized that they're separate. One is called just ordinary income. Ordinary income, most of you are familiar. That might be your wages from a W2 job. That might be your net business income. If you're self employed, that might be your interest income from your bank account, from your CDs, from your taxable bonds. That might be your IRA distributions, you know, your taxable IRA distributions, maybe some pension income in retirement, the taxable portion of your Social Security, which we probably won't go into too much into detail there, but a portion potentially of your Social Security. Also, if you do a Roth conversion, all of those forms of income are considered ordinary income and they're taxed at what we usually look at, what are called marginal tax rates. The marginal tax rates for ordinary income, again, we're only looking at one side first, the ordinary income. Those marginal tax rates currently in 2024 are at 10%, 12%, 22%, 24%, 32, 35 and 37%. And again, most of our listeners, if you're working, you're most likely paying tax on that ordinary income. And we have a progressive tax system. Not all your income is taxed at whatever marginal rate your taxable income falls into. We'll talk about that definition in a minute. It's a progressive system where a portion is taxed at 10%, a portion taxed at 12, until you run out of ordinary income to tax. But usually people focus on kind of the last dollar earned. The last ordinary dollar earned and taxed is taxed in your marginal tax rate. So for example, if I'm crushing it, I'm making really good money in my business. Let's say I might be in the 37% tax bracket, but that doesn't mean that every dollar I make, an ordinary income is taxed at that rate. So I just want to quickly say, okay, there's the ordinary side. We probably won't go too far there, but there's the other side. So we talked about the ordinary income sources that most of us have in terms of working on the other side. There's a whole nother tax system specifically for two types of income. One is qualified dividends. And effectively, just to make us very simple, it's receiving a dividend as a shareholder from a U.S. corporation. We'll just keep it very simple there and say you own U.S. stock. Let's say that you own Apple stock and they pay a dividend. That's going to be a qualified dividend. And the other form besides dividends are called capital gains. This is when you sell what's called a capital asset. And we'll talk about short term versus long term. But effectively the government has actually given us favorable tax rates. If we invest in the US stock market, effectively helping boost the economy, they're going to kind of give us some. We're taking risk, right, by investing in other companies that we don't own. So they're going to give us some favorable tax rates if we hold on to those stocks and then sell them. But effectively the US has created a favorable tax system separate from the ordinary tax system, where instead of being taxed at 10, 12, 22, 24 and so on, there are three tax rates. And one of those tax rates is 0%. There's 0%, 15% or 20% what are called capital gains tax rates, specifically applying to qualified dividends and long term capital gains. And a quick thing there, before we kind of dive down a little bit, you might be wondering, well, what's considered a long term capital gain versus a short term capital gain. So if I went out and bought a stock and I held it for one year or less and sold it any gain or loss on that investment since purchasing it versus when I sold it one year or less, that's considered a short term capital gain or loss. A short term capital gain does not receive favorable tax treatment. It's taxed just the same as your ordinary income at those higher marginal rates I shared before. But if you hold a security, whether it's a stock, a bond or a fund of those in this example, for at least a year and a day, so longer than a year, and you sell it your gain or loss. And by the way, we're just talking about things owned within a taxable brokerage account, not within retirement accounts, just within taxable brokerage accounts. If you hold it for more than one year and sell it, it's considered a long term capital gain or loss. If it's a long term capital gain, long term is the big word there, then it will be taxed at favorable tax rates, either 0%, 15% or 20%. And we'll break down a little bit where those capital gains tax rates kind of align with where you are on the ordinary side.

[Brad Barrett]

Yeah, that is a great explanation. And it's funny because I think a lot of people. So, right. We're, we're obviously talking federal taxes here. Just wanted to specify that. And, and yeah, there are these two main sections, like you said, ordinary. And then there's this other side which in essence, especially with long term capital gains. Those rates are preferential, right? They're to benefit you. And I think what most people hear, because they hear some special term, oh, it's capital gains. And it just sounds nefarious. It sounds like there's something up with that, as if you're getting penalized. And I just want to, I want to scream from the top of a mountain, you are not being penalized at all. This is wonderful. The US Government, for whatever reason is showering benefits on people who invest or whatever. Like people like us. We are being showered with benefits because, and like you said, we'll talk the very specifics, but most people, the vast majority of people are paying either 0% or 15% on their long term capital gains, 15% being the most common. It's only at the superbly highest incomes, like we're talking well into the top 1 or 2% of incomes, do you even approach 20% on long term cap gains. And even still, that's preferential. So I just want to get this through to everybody. This is to benefit you. Capital gains, long term capital gains, it is preferential. It's wonderful. You should be doing cartwheels about it.

[Cody Garrett]

And I will share Brad in the show notes. You can also share this link to these nice little charts I've created with the nice tropical skittles colors looking at different including single head of household, married, filing jointly, depending on your individual filing status. But you'll notice that in these charts it's really cool. Just even if you don't see the visual, somebody who was in the 0% preferential, right, those favorable capital gains tax rates. So that 0% capital gains tax rate is kind of like aligned with somebody who's within effectively the 12% marginal tax bracket on the ordinary side. So somebody who's within the 12% marginal bracket is most likely receiving capital gains tax treatment of 0%. And then moving forward, moving a little bit higher in the tax rates, people who are in the ordinary marginal tax rates of 22, 24, 32%, they're going to be paying 15% on their long term capital gains. So you can see immediately, right? So somebody in the 32% tax bracket for ordinary income is paying, you know, only 15% on their long term capital gains. So that, I mean that's like half, right? So somebody, you know, 10 to 12 paying 0%, somebody in the 22, 24, 32 paying 15. And then only really only if you're in like the kind of the second half of the 35% and the 37% ordinary marginal brackets are you actually subject to the 20% long term capital gains tax rate? So of course zero is a nice number. But effectively you can kind of think of this as capital gains tax rates are taxed at about half the level as ordinary income. So definitely preferential.

[Brad Barrett]

Yeah. And it's great. And obviously, like you said, we have charts that you put together which are great. And one thing I think some people get usually a little perturbed with me about is like I usually talk just married filing joint on the tax return filing status. And it's just shorthand. It's not like I'm just leaning towards, oh, you have to be married. I mean, that's not the case at all. I can't go through every possible head of household. And like in this example and in this episode, we're going to talk single and married filing joint. But just very clearly this is a Google search away for, for everybody if you file something arbitrary like head of household. I mean, listen, we're not going to spend 20 minutes on the episode talking about that, but you can very quickly find the exact precise bracket. So all of this and literally every episode we've done prior to this, when I talk married filing join or if I talk single and you are a different filing status, you can just Google it and find the exact amount. But just understand that we couldn't possibly give five different redundant examples of. Okay, well if you're in this filing status. So I just wanted to be clear about that.

[Cody Garrett]

Yeah, I'll add to that that just note that the concepts, these concepts apply to every filing status. You know, whether single married filing jointly ahead of household, qualified surviving spouse. Right. So they have different levels of we'll talk about standard deductions and they also have their own brackets. If you click the link in the show notes, you'll see that I have a chart for every one of those filing statuses. So just know that the concept applies to you no matter who you are, what your marriage status or single status, or whether you have dependents or not. It all applies across the board.

[Brad Barrett]

Yep. Wonderful. So, okay, now that we have all the intro out of the way, let's talk about why there's such an allure for people in the FI community for capital gains harvesting. And I think when you talk about like the Mount Rushmore of amazing things that people in the FI community can do now we've touched on two of them with our deep dives. I think because there's that 0% potential long term cap gains rate, I think that's what really intrigues people talk to us at a high level like what that looks like. So let's just say we're married, filing joint for 2024. So I know I'm kind of getting ahead of myself here, Cody, because you have precise case studies and we are going to go into them. But I think just at the outset of this episode, give me like the base case for, oh, wow. Somebody in the fight community who's reached financial independence, has a lifestyle where their life Maybe only costs $40,000 or something. How can they maximize this? What does it look like?

[Cody Garrett]

So I think anytime we hear about preferential tax treatment, we think this is only for people with very low incomes. Maybe we kind of assume maybe like some other benefits, like, oh, like this doesn't apply if you make over $20,000. What's fascinating about these long term capital gains in the tax rates. I have an example here. I mean, not even an example, just the way it is maring filing jointly. If your only source of income was from selling securities, stocks, bonds, with long term capital gains, you could actually, with no other form of income, Right? Let's make it just a simple base case here. Actually. You'll start with your 40,000, by the way.

[Brad Barrett]

No, no, I like this. This is better. This is much better. Do it.

[Cody Garrett]

Okay, good, good. So let's say somebody just retired in 2023. They have no income. No, no, none of that ordinary income we talked about.

[Brad Barrett]

No wages, no interest, no nothing. This is a crazy case, but to.

[Cody Garrett]

Show the example, right, this person is just living off of their, like they've got savings in their savings account, checking in their checking account, and they're just like, you know, they can maintain their lifestyle just living off their cash. At least for this year. It's 2024, they have no income. What's fascinating about long term capital gains is that this person, you know, this household marrying, filing jointly, they could sell. There's a difference between realize and recognize. We'll talk a little bit about that. But effectively they can sell enough of their stock to realize a capital gain of up to $123,250. By the way, not only is that a lot of money for a lot of people in early retirement to like take out of their accounts, that's not the amount they took out of the account. That's actually the amount of gain that they kind of locked in from a tax perspective within their tax or brokerage account, $123,250. And all that was realized, which means you Know that money was sold, settled into cash, but it was recognized, meaning subject to income tax, all within the 0% capital gains tax rate. So this person just has adjusted gross income of $123,250. They get a standard deduction, which is married filing jointly, which is effectively like a 0% tax rate of 29,200 under age 65. And also on top of that, they have a long term capital gains tax rate completely tax free on the next $94,050. So the $94,050 plus the standard deduction of 29,200, all of that $123,250 of long term capital gains is completely free on the federal level, which is crazy to think about that somebody who has income over 100,000, pays no taxes, and it effectively feels like they just kind of created a Roth IRA within their taxable brokerage account.

[Brad Barrett]

What a cool way of putting it. That is interesting. A Roth IRA within their taxable record. So, okay, I want to just dive into a couple little specifics on this, because this is. People's eyes were just open, so.

[Cody Garrett]

Or closed.

[Brad Barrett]

Yeah. So the taxable income if it's under 94,050, long term capital gains under that amount are taxed at 0%. Now, Cody, if you messed up and you had $123,251.

[Cody Garrett]

Yeah.

[Brad Barrett]

It's not like all of the prior dollars now get taxed at 15%. It's just that one single dollar that's over that limit.

[Cody Garrett]

And that funny example, if you went over $1, that $1 is taxed at 15%, which is 15 cents, which actually won't even show up on the tax return.

[Brad Barrett]

You round down to zero. So you need $4.

[Cody Garrett]

So I guess technically, yeah, you, you could go over one or two dollars and still pay no taxes on it.

[Brad Barrett]

Okay, so. Right. That's an important thing that everybody realizes is even if you listen, if you mess this up by a couple bucks or even thousands of dollars, it's not that it screws up the entire calculation. All isn't lost. That's the beauty of our progressive tax system. It's just the amount over. So let's be clear, you're not gonna mess anything up. That's important.

[Cody Garrett]

Yeah. And just to simplify, you know, just, just kind of rolling back a little bit, let's say somebody did, you know, they actually realized 10,000 more than that. Like they realized 133,000. They're like, oh, no. Like, it's not taxed at zero. Now it's all gonna be taxed at 15. That's actually not the case. Only the 10,000 that was outside of the zero percent bracket will be taxed at 15%. So in that example, if somebody pulled the 133,250 instead of 123,000, that 10,000 would be taxed at 15%. So they'd pay $1,500 effectively. But again, paying $1,500 on total income of 133,000 is a pretty good deal.

[Brad Barrett]

Yeah, not too Chevy. So at a very high level, long term capital gains is just the sales price. So the proceeds, basically what you get in cash minus the basis, which is at a very simplistic term. We'll keep it at this, Cody, for this episode, is that's just what you purchase it for.

[Cody Garrett]

Right?

[Brad Barrett]

Okay, so in this case, we're talking about $123,250 of long term capital gains. But in most cases, the only way that's your proceeds is if you bought it for $0, which is not possible. Right. So this person might have sold $300,000 worth of stocks or mutual funds and gotten that amount of proceeds into their bank account. So they've just deposited 300 grand into their bank account. But let's say they bought it for whatever it is, $176,750. Well, that means the capital gain is only that 123,250. Right. So that's the beauty here, is there's a difference between the proceeds, the amount of cash that you've received, and that long term capital gain. So it's proceeds minus basis. That's the important part.

[Cody Garrett]

Right. And the government does not care how much money you spend on your life. They're not taxing you based on how much you take out of your taxable brokerage account or how much you spend each year. They care about how much income you realize and recognize. So in this case, just like you said, this person who realized 123,000 in long term capital gains, they can live off of 40 of that or they can live off of $1 million from other sources. Right. That aren't taxable. So again, just keep in mind that we're. We'll talk about how this affects your health insurance premiums in early retirement with that premium tax credit. But it's just. No, the government only is going to tax you on your income, not how much you actually spend.

[Brad Barrett]

So. Right. In this case, in my weird hypothetical, you could have $300,000 deposited into your bank account. It obviously doesn't mean you need to spend all that you don't have. Like, that's what Cody's trying to get out here.

[Cody Garrett]

Right.

[Brad Barrett]

Your life costs what your life costs. But now you've created this taxable event which is now recognized on your tax return. You've told the government, please tax me on this. But because you're in this preferential rate, you're in that 0% bracket, you pay a whopping $0 in federal tax, even though again, you've said, hey, here's a taxable event here. It's going on my tax return. But because of the rules, you pay nothing. So this is really wonderful, frankly, Cody. Right.

[Cody Garrett]

If you think about, I think a lot of us understand the concept of Roth conversions. This is very similar concept to Roth conversions, which is rather than being taxed on income in the future, I'm taking advantage of a low income year. I'm going to go ahead and just pull that income forward even though I don't need the money necessarily. You might, but if you don't need the money, you go ahead and just realize, recognize that income in this year. When you're in your lower earning year and with the long term capital gains. It's just this is your only opportunity really to have a zero percent tax rate. It's funny that the income is taxed but at 0%, so it's still included in your gross income and your taxable income, but it gets that preferential tax treatment of zero percent tax rate.

[Brad Barrett]

Yeah. This is absolutely awesome. Thanks for listening to Choose a FI and for all your support of our mission here. The absolute best way to support Choose a FI is when you sign up for your next rewards credit card to use our cards page at choose a buy.com cards. I keep this page constantly updated, so it should always be the top resource for you. Thanks for being part of our community and for your support. So, Cody, we set up this logical extreme just to explain the situation clearly of you have $0 of income. That's not realistic. Let's talk about your case study. We're going to keep now with the case study of Married filing joint. I know you have other case studies that we'll go into, but since we're already in the mental space of Married Filing joint, let's go with that. So I'm going to let you run with this.

[Cody Garrett]

Sure. So let's imagine, you know, married couple, they're age 50, they have two kids. So that might play a part in a little fun Area of credits, understanding how tax credits work for the child tax credit. But let's say there's two taxpayers, you know, married taxpayers age 50 with two kids under age 17. Let's say one spouse is working, makes $100,000 at their job, and that's on their W2 wages, by the way, the W2 wages that you see, that's after you've contributed to your retirement accounts to your HSA through your employer. So let's say again, maybe they make more than that, but net of their traditional 401k contributions, their HSA contributions, paying for medical and things like that, they have W2 wages of $100,000. So they're like, okay, this is really nice $100,000. Effectively, if we kind of go down the ordinary system on the 100,000, they'd have their standard deduction. So that $100,000 is reduced by $29,200, marrying, filing jointly, and now their taxable income is $70,800. So if that were their only form of income, just the ordinary W2 wages, they pay about $8,000 in taxes on that $100,000 of income. And by the way, in terms of terminology, that's an effective kind of average tax rate, they're effectively paying about 8%. So $8,000 into $100,000. Their effective tax rate before the tax credit is 8%. And.

[Brad Barrett]

Right. That 8%. There's no shenanigans. There's nothing interesting going on. That's just standard tax rate. Basically, just. That's right, a hundred thousand minus standard deduction multiplied by the tax brackets. So that's actually, I think a lot of people are under the misimpression that they're paying like way more in federal tax than they actually do. That's quite literally the standard for some married filing joint earning a hundred thousand of income.

[Cody Garrett]

Exactly. So that standard couple a percentage is taxed at zero because they get that standard deduction rate, that 29, 200 a portions tax at 10%. A portion is taxed at 12, even though they're in the 12% marginal tax. Like that's what they tell their friends, right? We're in the 12% bracket, but their effective average tax rate is 8%. But we just talk about that's a standard family, right? People listening to this podcast are not standard. So let's say this family household, they've been listening to the choose of a podcast. They listen to this episode and they're like, wait a minute, right? So we had that ordinary income that was taxed at 10% and 12%. But we looked at this fancy Dancy chart and we notice that we have some unrealized so things we haven't sold yet. Unrealized capital gains within our taxable brokerage account. And in this example, let's say there's a security. It's actually something we wanted to get rid of anyway. Like there's just, you know, I inherited something from my dad from his investment account, and it's been kind of sitting along the sidelines and we want to go ahead and sell that thing, but it has a $20,000 unrealized capital gain. When we look at the chart and notice that the long term capital gains tax rate for the married filing jointly, we actually have some additional space there. Right. Earlier we talked about they actually have space in their AGI adjusted gross income of about 123,000, and we only filled up 100,000 of it with their W2 wages. So we see that we actually have a little gap there of about 23,000 to fill up, which could actually be taxed at 0% if that income was sourced from realized capital gain. So this household is not standard. They listen to choose fi. What they do is they sell that stock. And just to simplify this example, they inherited stock from their dad, it was worth $100,000, and then it grew to $120,000. And they want to sell it. They sell all 120,000 worth of stock, they realize a long term capital gain of $20,000. But what we talked about earlier is that you have the ordinary side, you have the long term capital gains side, the ordinary again, they paid 8,000 on that ordinary income. But that $20,000 of long term capital gain all sits within the 0% capital gains tax bracket. So they just added $20,000 of taxable income to their life and paid 0% tax at the federal level. So that was effectively, you know, they weren't standard. They were, you know, a little bit optimized. They said, hey, let's take advantage of this quote unquote, low income year, and let's go ahead and unwind the security that either we don't want to hold or maybe everything in your investment account you still want to own. Like, you're like, I don't want to get rid of that total stock market fund. But let's say they had a $20,000 unrealized gain in something that they wanted to keep owning. They can simply recognize that gain, realize that gain of 20,000 when the cash settles, or even before the cash settle Just buy it right back. So, so they could actually buy back what they just sold immediately. There's no wash sale rules because they sold at a gain, not at a loss. And that $20,000 was effectively just. They just reset their cost basis and that security by repurchasing it, paying 0% of the capital gains. And they're a very happy family with resetting that back to zero.

[Brad Barrett]

Yeah. So they have permanently erased that tax liability on that gain by actually selling it and realizing that's what's so wild about this. So really the takeaway here is if you are somewhere in this taxable income range that you need to very strongly understand this concept that $94,050 is the taxable income threshold of the combination of this ordinary income, minus all your standard deductions, etcetera, plus the long term cap gains. If you're under that 94, 50 with the capital gains, all of those capital gains, the long term capital gains are taxed at zero. So in Cody's example here, before capital gains came in, their ordinary taxable income was 70,800. Now keep in mind, the magic number is 9450. So when you subtract 94,050 and take away that 70,800, there's 23,250 that the government is saying this is zero dollars in tax you will pay on realized long term cap gains. So you are literally throwing away a gift by not doing this, by just simply not knowing it. So you have to take advantage of this. You have to. It is critical and it's. It is your right to do this. And it's. Cody, it's not hard either. That's the other beautiful part about it.

[Cody Garrett]

Yeah, kind of two things that you mentioned that are really important. One is that the long term capital gains are still included in your taxable income. So the tax rate for long term capital gains that are realized, those capital gains tax rates are based on taxable income. The actual realized gain is included in that number. So if this person already had income of 123,000 of ordinary, the capital gains are stacked on top of that. It's funny, they're stacked on top of that from a tax perspective, but it's still included in the number. So to simplify that, I'll say it one more time. Your realized capital gains are still included in the taxable income number that you're using to measure which rate you are paying on those long term capital gains. And the second part that's really important that Brad mentioned is this is federal Income tax. So if you're living in California or New Jersey or another place that, you know, taxes their capital gains at the same rate as the state income tax, ordinary rates, you might actually get that free gift on the federal level, but still pay taxes on the state level. So determining whether that makes sense for you, depending on which state you're in. I'm in Texas, where we pay taxes in a lot of other places, but not on income. Uh, yeah, like if I were in Texas or Florida or Tennessee or Washington state, like, I would definitely take advantage of this opportunity.

[Brad Barrett]

Yeah, this is really, really important stuff. So let's just finish this case study because I think while we've said the $20,000 of realized long term capital gains are 0% tax liability, they still have their tax liability on the ordinary income tax.

[Cody Garrett]

Right, Right.

[Brad Barrett]

Which we talked about. You said It'd be about $8,000, a little bit more. But this couple also has some child tax credits, so that'll reduce it further still. So talk us through just the end of this, and then maybe let's extend this case study to somebody making slightly less money and we'll show how, again, there's this interesting interplay between the ordinary income plus the long term capital gains and how much tax you pay.

[Cody Garrett]

Yeah. So when you get, you know, on your 1040, if you want to break out your tax return from last year just to have fun with us, like, effectively, you can see that at the bottom of that 1040 on the bottom of page one says what your taxable income is. So if you're ever wondering, like, how do I determine my taxable income? You can actually look at an example. Look at your tax return from 2023 or the year before. The last line on the first page says taxable income. So that's actually an IRS definition, not just a word we're throwing around. So look for taxable income. When you turn the page, that's the section. You know, that first line on the next page is actually when you calculate what's called your tentative tax, this is kind of saying, okay, this is how much tax you owe before credits. Right. And there are refundable credits in all various sources. But in this case study, there's a reason I added, you know, two kids under age 17, which means that they're going to receive a $2,000 tax credit for each child, so they're receiving a $4,000 tax credit. And Brad and I have talked in the past about the difference between deductions and credits. I think an easy way to think about this is deduction is like the IRS giving you a coupon and a credit is like the IRS giving you a gift card. Right. So if we kind of think about it this way, a deduction reduces the amount of income that's taxable and a credit is a reduction of the taxes you actually owe. So I just want to share in this example we said, you know, their ordinary income, they paid about $8,000 in taxes on their ordinary W2 wages of $100,000. They pay zero on the $20,000 long term capital gains that were realized. So their tax, their tentative tax is 8,000, but they have a non refundable tax credit of $4,000, which is 2,000 times each child under age 17, which means, so 8,000 minus 4,000 their total tax. This family is $4,032 on total income of, you know, gross income of $120,000, which is a 3.4 effective tax rate. So they only pay 3.4% tax rate on all of their income. And this is a family making $120,000. So this is not a strategy just for people in like the lowest or like, you know, below the poverty level. Like, these are real deal families. Like a lot of people listening to this podcast.

[Brad Barrett]

Yeah, that's why this is so important. And like I said a couple of minutes ago, please don't let this pass you by. At least, at the very least, look at last year's tax return and just see roughly, like Cody said, what is your taxable income. You're going to have a sense, obviously if your taxable income is $300,000, you're not going to get the zero percent. But if you're roughly in range, you need to really think about this because again, you're just passing up a free gift. You're passing up a free gift and once it's gone, it's gone. You don't get to come, like, you need to do this this year. So you need to really strongly consider this. And Cody, just super quick, I'm going to put my CPA's hat on. I just again want to reiterate the deduction and the credit because you nailed it. But it's just so important. People use the term for deduction like, oh, it's a tax write off, as if, like it's free money and it's a. Oh, I get to write it off. It does. No, no, no, come on. If you're in the 12% tax bracket, which a lot of people frankly are, you're getting 12 cents on the dollar. So in some case, oh, I'm getting a tax write off, it's free, you're spending some expense and you're only getting $0.12 back on the dollar. That makes no sense. So let's be clear, most of us are in a dramatically lower tax bracket than we anticipate. And that's the value you're getting. So like Cody said, it's just this percentage. Whereas a tax credit, now that's where the money is. Okay? That is a dollar for dollar reduction in your tax liability. So like Cody said, this couple has roughly an $8,000 tax liability before credits, and they have a $4,000 credit. Well, 8,000 minus 4,000 equals 4,000. So they just lopped off $4,000 in money that they otherwise would have had to have written a check to the federal government for. So let's be clear, a tax credit is dramatically more valuable than a tax deduction.

[Cody Garrett]

And I want to add, we've been talking about this kind of as a gift that the government's giving us. Right? The federal government is giving us a gift. Like, take advantage of that gift. I do want to share just a brief story about how tax gain harvesting can actually be used to help gift money to somebody else.

[Brad Barrett]

Ooh, eyes closed on that one. That's impressive.

[Cody Garrett]

There you go. Right. So Brad, you just mentioned this idea of like, hey, if you make $300,000, like, you're not going to get 0% favorable tax treatment. You're in the 15% capital gains rate. But let's say you do make 300,000, but you have an adult child. Right? And let's say that, for example, this is a real story. I literally helped somebody with this today. This is a single woman, she has an adult child with student loans. Again, a lot of us listening, we have student loans and maybe our parents. I don't know if you might have had a parent reach out and say, hey, is there anything I can do to help? Can we help you pay all these off? If you're in that type of situation, there's an opportunity potentially for you, which is this person was in their highest earning years, they wanted to give money to their daughter. Their daughter is single with income of about $50,000. So kind of like those tax rates we looked at before, since she's single, rather than marrying, filing jointly, you kind of cut that number in half. So being single, her daughter, she has a 0% long term capital gains tax rate. If she can keep her adjusted gross income below or within 61,625. So her daughter has income of about $50,000 at work, so she has an additional $11,000 or so she can fill up and pay 0% on. So the parent, the thing is the daughter doesn't own the stock, though the daughter, again, the only way to give this gift, at least from the parents perspective, was hey, well, I want to help my daughter pay off her $30,000 student loan. And she actually asked me, hey Cody, like how can I get access to that 30,000 without having to pay 15% capital gains since I'm in a nice earning year and there's an awesome opportunity. Again, the IRS set this up that if you give a gift of appreciated, in this example, appreciated asset, appreciated security, it has what's called a carryover cost basis, which means that when you give a gift to somebody at a gain, it's effectively like that person you gave it to was the original purchaser of the stock. And then there's also a long term holding period, which means even though when she gives it to her daughter, her daughter might just have it in her account for one day, she still gets to claim the same holding period as the person as if she bought it when the person who gave it to her bought it. So in this example, she gave her daughter $30,000 worth of stock that had gains inside of it, let's say $5,000 worth of gain inside of it. Her daughter ended up selling the stock. So she realized a $5,000 capital gain, gained access to $30,000. And because the daughter was within the 0% capital gains tax rate, being single, she actually paid $0. She paid nothing in taxes to realize the gain rather than her mom taking on that gain. So if you're thinking to yourself, hey, if I have an adult child and I want to transfer stock to them, I say there's two different ways that you don't want to give a gift in cash. One is charity. So same thing. Rather than giving $30,000 to charity in cash, that same household I talked about, they can give $30,000 of appreciated stock directly to charity or to a donor advised fund, and again they just eliminated that future realized gain from their life. And the other is if you're going to give a gift to a family member who's within the 0% capital gains tax rate based on their income. So whether given to charity or a lower income family member or friend, again, you don't necessarily want to ask your family members, you know, how much money do you make? But most people are giving money to like their daughter or their son and they'll say, hey, can you just tell me kind of generally how much you make? And if they say, hey, I'm single, I make about $40,000, then there's an opportunity there. Whether you work, by the way, you don't have to work with a financial planner or advisor to do this stuff. And you can do it as a retail investor or do it yourself or. But yeah, just anytime you're going to give a gift, just pause and say, first of all, never give a gift at a loss. Sell, take the loss against your other gain and potentially up to 3,000 of ordinary income. Maybe another episode. But if you have something at a gain, say, can I give this directly to charity or give it to the person if they're at a lower tax rate than I am?

[Brad Barrett]

Okay, there was a lot there. Cutting, incredibly valuable episode. Yeah, no, no, no, that was fantastic. Just to summarize. So like you said, when a gift is given, let's forget the charity for a second. I'll come back to that. But when a gift is given, and this is any case, but in this case we're talking from a parent to their child, they gifted this stock and it happened to be appreciated and it happened to be long term.

[Cody Garrett]

Right.

[Brad Barrett]

Now you said there's a carryover. So what happens is when the child received the stock, they receive it as if they purchased it at the price and the date that the parent purchased it. So that's for when they eventually go to sell it, which might be tomorrow or might be five years from now. And obviously we're talking in this case.

[Cody Garrett]

About tomorrow and they're still selling out of gain. Exactly.

[Brad Barrett]

But right, it's at that carryover. So in this case, the strategy is, okay, the parent would be subject to 15% if they just wanted to give this in cash.

[Cody Garrett]

Right.

[Brad Barrett]

Like they would sell the stock, they could hand the cash to their kid, but they'd have to pay 15% on the long term cap gains. Now they can just hand the stock, they can transfer the stock to their kid, the kid can sell it, and then because of the fact that they're in this 0% long term cap gains, it essentially eliminates that tax permanently because the child pays zero. So that is absolutely wonderful and just a really cool way to do this. Just for anyone a little bit confused about the donating to charity, I think, Cody, that will be another episode. And I think we have talked about that in passing a little bit. But yeah, that's ever so slightly different in the sense that, let's say you wanted to make $1,000 donation to charity and you have long term appreciated stock, right. There's almost no instance you can come up with where you want to just give the thousand dollars in cash. You should donate the thousand dollars in appreciated stock to the charity. The charity doesn't have to pay any tax. Let's be clear, that's a total non issue. I actually had somebody question me in an email about that. I'm like, come on. Yeah, I'm gonna, I'm giving this advice so that the charity is gonna get stuck with it. No world, right? So the charity, that's a non issue and you have permanently eliminated the unrealized long term capital gain by donating it. And you get the deduction at the fair market value, the current price of what you donated. Now most people are not itemizing deductions, so they're not actually getting any tax benefit for charitable contributions. But nevertheless, if you were in a position where you were itemizing, you would get in this case a thousand dollar deduction. You would never pay tax on any of that long term capital gains. And the charity doesn't pay tax. So this is a win all around.

[Cody Garrett]

And on top of that, people say, well, I just gave my stock away, but like I wanted to own that stock, like what do I do now? And they go, well, the thousand dollars in cash you were going to give to charity, you can just buy more of that same stock with effectively a reset cost basis.

[Brad Barrett]

Right, because it's reset at today's higher or really the current, but higher than what you originally bought it. That's that permanent reduction in that unrealized capital gain because it doesn't exist anymore. You're buying it at today. So your new basis is today's purchase price. That's why this is so wonderful, because it's a win for everybody. So Cody, that actually kind of got a little bit into the single person example that we were talking about earlier. And I think it's important again, like we set up 20 minutes ago is really, at the end of the day, these are very similar examples. Regardless of your filing status, it's just the very specific standard deductions different, the tax bracket's different, but it's easily something you can find via Google. That said, I know you're interested in talking about an example of a single person who just retired early. So let's use that as kind of the landing place for the single example.

[Cody Garrett]

Yeah, so in this case study, let's take a single taxpayer, let's call her ann, she's age 50 she retired last year. She has no form of income this year. So one really important thing about, you know, before we talk about the tax opportunities, we have to talk about what is it like in early retirement. And one of Ann's biggest fears is healthcare. Like a lot of us are worried about our health coverage and early retirement and also the cost of that. So Anne has decided she's not working and she's not taking advantage of COBRA from her prior employers health insurance plan. So she enrolls in the health insurance marketplace. Some people call aca, some people call it Obamacare, the exchange, lots of words for it. But healthcare.gov is where you go find more information. But she needs coverage through the health insurance marketplace. And what's great about Ann is that she knew she was going to retire early, so she went ahead and set up. Let's say she lives off of $50,000 a year in early retirement. She actually has 50,000 set aside in cash. It's liquid, it's stable. She already has her money ready for her for her first year of retirement. But at the same time, she's worried. She wants to make sure that she doesn't have to pay a boatload of money for her health insurance early retirement. So she goes to the Health Insurance Marketplace. I actually have a video again, maybe we can link to the video on how to shop around on the website. But she actually finds out by being a single taxpayer age 50 in her area, to receive any premium tax credit for health insurance through the marketplace, her income, her modified adjusted gross income, which is practically her adjusted gross income, needs to be at least $20,000 to even receive a tax credit. So what's funny about tax credits, at least in terms of health insurance called the premium tax credit, is that it has a floor and effectively a ceiling, which is a lot of people say, hey, well, if I don't make any money, I'll get free health care. But there's a difference between getting free healthcare through Medicaid and free healthcare through the marketplace. So most people going to retirement, again, just the most people I talk to, they want a similar plan like they had before they retired. They want like an HMO or a PPO plan where they can go to different doctors in different areas within the network. So one common example is, let's say Ann finds a Blue Cross Blue Shield plan in this example that cost $6,500 per year if she didn't get any credits. So she'd pay about 540 bucks a month. But she notices on the healthcare.gov website that if she can bring up her income, intentionally bring up her income from some source somewhere to $20,000, her entire plan will be free. Like, all of her health coverage will be completely subsidized. So I shared an example where Anne goes on the marketplace. She chooses her high deductible health plan, $6,500 a year. WHO, again, the next example, Blue Cross Blue Shield. But she actually needs income to receive the credit. So she's like, where do I take my income from? And again, maybe she has a few options. She can say, I have a traditional IRA that I rolled over my 401k through a traditional IRA and I have an opportunity to do this tax gain harvesting. So she has an opportunity, like, which one should I choose? Should I do some Roth conversions and fill up those lower tax brackets, or should I do tax gain harvesting to fill up that 0% capital gains tax rate? Again, a lot of the feedback to me is like, which one should I prioritize? Earlier we talked about this standard deduction. So the standard deduction for a Single filer is $14,600 under age 65 in 2024. Gotta get the numbers right. But you can see, effectively the government's saying, hey, your first $14,600 of income is tax free. So I'll ask you, Brad, if somebody was giving you $14,600 in free income, would you rather that income be ordinary or long term capital gains?

[Brad Barrett]

I mean, standard terms. Ordinary.

[Cody Garrett]

Absolutely right. So the ordinary is taxed at a higher rate typically. So you want to go ahead and take advantage of that. You know what they're giving you the standard deduction. It's kind of like a 0% ordinary tax rate for you.

[Brad Barrett]

Right at your top marginal rate.

[Cody Garrett]

Exactly. So Ann is super strategic. She listens to the Choose a Five podcast. So what she does is she converts $14,600 from her traditional IRA to a Roth IRA, and she's like, wow, I just did a free Roth conversion. Like, I got a deduction upfront when I contributed to that traditional retirement account, and now I'm paying zero tax at the federal level. But she has some additional gross income. She can fill up with the long term capital gains. So she decides to realize, pretty much up to the cap, she realizes $47,000 of long term capital gain. So the 47,000 plus the 1,000 4,600 from the conversion, it makes her gross income $61,600. She removes back out the standard deduction, which is the same amount as her Roth conversion. So now her taxable income is the 47,000 that was long term capital gains. Since she's in the 0% capital gains tax bracket, all 47,000 of the long term capital gains are taxed at 0%. And as we just mentioned, her Roth conversion was completely unwound by the standard deduction. So it's amazing that her adjusted gross income of 61,600 is all taxed at zero on the federal level. And on top of that, her income is now high enough that she's going to get a premium tax credit in the example I have here. So by having income of around 60,000 modified adjusted gross income for health insurance purposes, she's going to receive $3,000 a year in the premium tax credit. So her health plan costs $6,500 and now it's going to cost $3,500 because the IRS just gave her an advance premium tax credit of $3,000 because she kept her income within the range.

[Brad Barrett]

Interesting.

[Cody Garrett]

Okay, that was pretty roundabout, but we made it there.

[Brad Barrett]

No, that's. It's important. Right. So there is a significant interplay. And interestingly, like you said, you don't want taxable income too low because then if you're under a certain threshold, and I suspect it's state by state, but if you're under a threshold, then you might be on Medicaid as opposed to getting a normal health insurance plan, that's that you get through the aca, but you get these subsidies. So interestingly, and Cody, I wouldn't have even known this necessarily was that these long term capital gains count towards that income for the thresholds for the premium tax credits. I think I would have realized that at the end of the day. But in terms of that floor, I think most people think, oh, this is just my income, my regular income. But it's not that. It's these sources of technical income on the tax return. And that's the important part.

[Cody Garrett]

And one little ad here in this example with Anne, she actually needed income to get to the floor of 20,000. She decided to do more. But keep in mind, it's really important to know that even if long term capital gains that are realized are taxed at 0%, it's still included in your adjusted gross income for purposes of the premium tax credit for health insurance. And the numbers I ran earlier, even though she's paying 0% taxes on her long term capital gains, the reduction, ironically, again, she needed income of at least 20,000 to get health insurance subsidies by having income higher than that. Even though Ann paid 0% taxes on her long term capital gains. Now on the flip side, the reduction of her premium tax credit was actually kind of, it's not really a tax, but the reduction of her credit actually is like she was taxed effectively 8 1/2% on her long term capital gains. You know, in her mind, she paid 0% tax on it, but by actually going over the minimum, she actually reduced her premium tax credit by adding taxable income. So it's this really fine balance. I have a video that I'll share in the show notes that effectively shows you how to look at If I realize 10,000 more, 20,000 more, 30,000 more, how will that affect premium tax credit? So this is a very common example. Most people in early retirement, they're going to take advantage of the health insurance marketplace. So just make sure that you understand that all forms of income, modified adjusted gross income, are used in the calculation for how much health insurance subsidy you receive.

[Brad Barrett]

So, Cody, that was great. That was really thorough as we kind of end out the episode here. So we've done our case studies. Is there anything just real quick that people should consider? I know we've touched on a lot of different topics, but just anything else that you didn't touch on that you just wanted to mention in passing?

[Cody Garrett]

Yeah, I think the most important thing here is to do things in the right order. So in terms of kind of figuring out what to buy, what to sell, and investments, I say that the most important part is your ability to maintain your desired lifestyle, especially if we're talking about early retirement here. So you probably heard the phrase don't let the tax tail wag the dog. I just want to make sure don't look at capital gain harvesting as a strategy to prioritize. It's kind of like tax gain harvesting is really in that, like that top 5 to 10% of optimizing your financial plan, but it shouldn't lead your financial plan. So in the example I share with Ann, again, we want to make sure that Anne maintains her desired lifestyle. Like if she wants to go on a Viking cruise with her friends, spend a ton of money on awesome vacations during the go go years of retirement, like, you know, assuming that she can afford it in terms of her total financial landscape. Yeah, Prioritize living your best life. With that said, the implementation of how that happens, that's when you start looking at these opportunities like, hey, do I do the Karath conversions or do I do tax gain harvesting or do I do tax loss harvesting? Which is kind of on the flip side of you know, do I try to take advantage of some lots of investments that can sell at a loss and use up to $3,000 against ordinary income? There's a lot of strategies here, but just know these are optimization strategies. These aren't really. You don't go into retirement being like, I'm going to do whatever it takes to take advantage of the 0% long term capital gains tax rate. The most important part is that you prioritize your ability to maintain your desired lifestyle. And only in an implementation do you start bringing up your spreadsheets and you know, all these websites and videos and more advanced strategies. I do think it's usually worth the hassle. We call it the roh. The return on hassle is large on some of these opportunities, especially for tax credits since it's that reduction of taxes owed. But just keep in mind, like always start with hey, how much money do I need to maintain my lifestyle? Figure out what sources are helping me gain access to that income. If you need to sell investments to gain access to that income, you'll sell those investments. If you need to take money out of pre tax retirement accounts or use Sepp or some of those early retirement strategies like do that, do whatever it takes to get your money that you need to live. And then only after that, right? Only after you maintain your desired lifestyle, look at those additional opportunities and strategies that we're talking about today.

[Brad Barrett]

That is great advice. Absolutely great advice, Cody. Thank you so much for being here. So as I mentioned at the outset, Measure Twice Money is your informational site where everybody can go and just get a wealth of resources. What's wonderful about you, I know you said repeatedly you are a cfp, but you're not looking for clients. So there's no conflict here at all. You're just a wealth of information and help to our community. And I really appreciate, I love doing these deep dives with you.

[Cody Garrett]

Absolutely. I'm so glad that you invite me back to try to give back more than I was given from you.

[Brad Barrett]

Well, I appreciate it my friend. And yeah, for everybody out there, if you're looking for more of these deep dives, send us topics in feedback at choose if I do com, let us know what you want us to talk about next and we'll. As you can see, Cody comes up with just these amazing case studies and really interesting examples. So we find a way to hopefully make it interesting even though it's a little difficult to do math on a podcast. But I think we did our best here, Cody. So until next time, thanks for Listening to Choose a VI and for being part of our community.

[Cody Garrett]

Thank you for listening to today's show and for being part of the choose of I community. If you haven't already, the best ways to get involved are first subscribe to the podcast. So you're listening to this on a podcast player and just hit subscribe and then subscribe to my weekly newsletter. I actually sit down every Monday and write this by hand and I send it out Tuesday morning.

[Brad Barrett]

So just head over to choose if.

[Cody Garrett]

I.com subscribe and it's really, really easy to get on the newsletter list right there and I would greatly appreciate it. It's the best way to get in touch with me. You can actually just hit reply to any of those emails and it comes directly to my inbox. So that's the way that I keep a pulse of the community and how we keep this the ultimate crowdsourced personal finance show. And finally, if you're looking to join an in real life community, we have choose a FAI local groups in 300 plus cities all around the world. So head to choose a vi.com local and you'll find a list of all of Those cities in 20 plus countries all across the world. And if you're just getting started with FI or you have a family member or a friend who you think would be interested, two easy ways choose a VI episode 100 is kind of our welcome to the FI community. And even though it's a couple years old at this point, it still stands up and it's a really great just starting point to get an understanding of what is financial independence. What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life? And then choose if I created a Financial Independence 101 course that's entirely free, just head to choose fi.comfi101 and again, thanks for listening.