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- [00:00]
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- [00:29]
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- [01:00]
Robert Croak
Hey everyone, Robert here. Before we get into this episode, I'm super excited and I wanted to announce our first ever Rich Habits event, the Rich Habits Retreat. It's coming up on May 1st and 2nd, the weekend in Austin, Texas. I couldn't be more excited about this event. You guys have been talking to us for two years now, telling us to get out there on the road and we're finally doing it. And this event is going to be special because because it's going to be all about venture capital, how to invest, how to build a portfolio, and all of the things that we do to build these portfolios. And we're going to have a ton of special guests. Chris Camillo, our friend, is going to be there. Zaydmani is going to be there from public, so it's going to be a blast. You're going to get some FaceTime with Austin and myself and just so much is happening. But here's the kicker. There's only about a dozen tickets left, so if you're interested, make sure you look in the show notes below. There is a link and it'll tell you all the good stuff about the weekend and the Rich Habits retreat May 1st and 2nd in Austin, Texas and I'd love to see you there.
- [02:05]
Austin Hankowitz
This is going to be an intimate event With Robert and myself, you all wanted intimacy. You wanted those one on one conversations. Like you have the opportunity to look us in the eyes and ask us a question, talk about your business, whatever you want to do. It's an intimate event with about 30 to 40 of you showing up with us in Austin, Texas from May 1st into in second, like Robert said. Chris Camillo from Dumb Money, he's going to be there. Zaded Moni from the Rundown with Publix podcast, he's going to be there. Brian Chambers, the co founder of Capital Factory, the largest seed fund in Texas, he'll be there. Colin west from Ensemble is going to be there. Christine Healey from Pre IPO Investing, she's going to be there. Like so many incredible speakers, we're going to be talking all things venture. And with the craziness we've seen with VCX lately, after fundrise listed it a week ago, like venture's pretty important and it's pretty obvious that people should have some sort of exposure to it in their portfolios. So if you wanted to get into venture, you want to learn about venture, anything about venture capital is interesting to you and you want some FaceTime with Robert and I. This event is for you. There's going to be a link in the show notes below to purchase tickets to attend the Rich Habits Retreat in Austin, Texas May 1st and 2nd. And the best part, 10 people who are purchasing tickets to the event will randomly be selected to join us the following Monday at the New York Stock Exchange for an event from 1 to 5pm with all of the biggest ETF issuers to learn about their global strategies, their market outlook for the rest of the year, everything with the macro and things like that. It's going to be an incredible event. These are the events that Robert and I get invited to to attend to Lear. And so what we've done is we figured out a way to have 10 people from the retreat meet us at the New York stock exchange on May 4th that following Monday for an awesome event on the floor of the New York Stock Exchange. Get to watch a bell ringing. It's going to be incredible. So go check out the Rich Habits Retreat link in the show notes below and maybe you're one of those 10 lucky ticket holders that will join us at the New York Stock Exchange the following Monday.
- [04:17]
Robert Croak
All right, Austin, great breakdown. So excited that we have some tickets left for all of you out there. And I'm read to jump into the episode.
- [04:24]
Austin Hankowitz
Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by public.com by the end of today's episode, you will learn Robert Nye's three favorite tax credits as well as have the entire playbook that you need to feel more prepared when it comes to filing your taxes in a very stress free manner. My name is Austin Hankowitz and I'm joined by my co host, Robert Croak. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million and I'm a multimillionaire in my late 20s with a background in finance and economics. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance and mindset. With that being said, Robert, what are we specifically talking about in today's episode?
- [05:12]
Robert Croak
In today's episode of the Rich Habits podcast, we're going to explain the cause of immense anxiety tied to filing your taxes. Demystify what's actually happening when you do file your taxes and number three, share your favorite tax credit credits you all should be taking advantage of right now. And number four, give you the knowledge to stop fearing a process that is a lot more manageable than it looks.
- [05:36]
Austin Hankowitz
And y' all gotta stick around for that fourth one, the playbook, the knowledge, everything you need to stop fearing the tax filing process. Robert and I think we do a pretty good job here near the end of this episode, really walking you all through how to think about taxes. Not just here in 2026, but every year going forward. I think a term that kind of goes synonymous with taxes is the word anxiety. So let's talk a little bit about what causes that anxiety for people during tax season.
- [06:05]
Robert Croak
Yeah, Austin, the number one source of tax season anxiety is fear of making a mistake and triggering an audit or incurring penalties. But here's the stat that should immediately take the edge off for everyone. The IRS audited less than a half percent of individual returns in recent years, which means your actual audit risk is extremely low, especially if you're a W2 employee and you have straightforward income. So I don't think everyone needs to be worrying about that. They hear it all the time. But rarely, rarely do people get audited as by the numbers I just shared.
- [06:40]
Austin Hankowitz
Yeah, another big stressor that causes a lot of anxiety, Robert, during tax season is the complexity of it all. About half of Americans report that they have little to no understanding on how to actually file their taxes and what the forms mean and things like that. Which makes sense because the US Tax code is enormous. It's full of acronyms and jargon and numbers that might not be completely transparent on the surface, but the thing is, the average person filing a standard tax return is not dealing with most of that complexity. If you have a normal W2 job, maybe you make some investment income and you take the standard deduction, which again, 90% of Americans fall into that bucket, your return should not be that complicated.
- [07:27]
Robert Croak
And let's not forget all of the uncertainty tied to taxes. People genuinely don't know whether they're getting a refund or writing a check. And I think that unknown creates anxiety that festers for months. And here's the truth about refunds that I wish everyone understood. A refund is not a bonus. It means the government held your money interest free all year and is finally giving it back. Your money giving it back to you. A tax bill doesn't mean you did something wrong. It means you got to use that money throughout the year. So understanding that distinction alone should take a lot of the emotional charge out of the outcome.
- [08:06]
Austin Hankowitz
So, Robert, we've talked about what really causes this anxiety, right? You mentioned fear of making a mistake, the audit, a penalty, things like that. I talked about the complexity of it all. And you kind of rounded off here with the uncertainty of, am I going to, oh, am I going to get a refund? I don't really know what's going on. So that's like what causes a lot of the anxiety for people. But let's now peel the curtain back on that anxiety, begin to demystify what actually is going on when you file your taxes and explain why you should not be scared, you should not be intimidated by tax season. So here's the process. When you file a tax return, all you're doing is reporting to the IRS what you earned, accounting for any deductions or credits that you're eligible for, and calculating what you've already paid throughout the year to say, do I owe more money or am I owed a refund? That's it. That's all you're doing, right? So you file your return. You're saying, here's the money I earned. Let's now figure out those deductions and credits I might qualify for. Let's calculate what that comes out to. And if I owe money, I got to pay that. If I'm owed a refund, I got to receive that. What people forget about is their employers have already sent that W2 income to the IRS. Your bank has already reported the interest you've earned in your high yield savings account to the IRS. Your broker, public.com, right. They've already reported what your gains and losses might be like. So in many cases, the IRS already has a rough picture of what your financial year is going to shape up as before you even file anything. So what you're doing is you're just largely confirming information that already exists. The filing process is more of a reconciliation, not really a build from scratch. Let me tell this story. It's like the story already exists. You have all the information. Let me just confirm it for you.
- [09:56]
Robert Croak
I love this episode already because I want everyone to take a deep breath and just really listen and take notes in this episode. Because I do feel like this is one of the biggest stressors of the year for most people. And it doesn't have to be. I know the forum looks intimidating, but most of them follow the same basic logic. The W2 tells you what your employer paid you and what was already withheld. The 1099 family of forms covers everything else. Freelance income, investment, dividends, interest, and so on and so on. And your job is to gather those documents, plug the numbers in whatever software preparer you use, and let the math happen. Most people find that once they actually start and sit down, it takes far less time than they feared. And if you remain organized throughout the year, tracking your income, investment, dividends, interest earned and other qualifying transactions, you will find that tax season is a lot less stressful because you're not doing it all at once in a couple weeks because you are prepared along the way.
- [10:57]
Austin Hankowitz
So if you're taking notes and taking action right now, write this down on your Notepad. There are three documents that are going to answer 90% of your questions before you even start your whole tax filing process. The first document is your W2. You have that. Your employer gave it to you. It's got all the details in it. The second document is your most recent pay stub. That's got a ton of information as it relates to retirement, contributions, healthcare, all that fun stuff, Right? It's all on there. And the third document, which is more. More of like a pile of documents, but it is last year's tax return because that old tax return, right, 2025 tax return in this situation is going to tell you all the different accounts and forms that, oh, I had mortgage interest, I reported. I reported a 1099 for interest I earned on a high yield savings account. I reported a 1099 for this brokerage account because I made some trades, right? Last year's tax return is going to have all that information. So it's your job to look at that tax return and say, okay, I now need to essentially go find all of the updated forms as it relates to these specific transactions that took place last year and likely took place again this year.
- [12:08]
Robert Croak
And if you're like us and you own multiple businesses, you own real estate, reach out to your CPA and file an extension. It's not illegal, it's not frowned upon, and it's actually encouraged. So you're giving yourself more time to comb through everything that you might have missed and ensure you file properly. So stop being afraid of filing an extension. I do it every year. I'm sure Austin does it most of the time, if not every year, because we need more time as your tax returns get more complex.
- [12:38]
Austin Hankowitz
Yeah, and let's be clear, right? An extension is different from procrastination.
- [12:43]
Robert Croak
That's right.
- [12:44]
Austin Hankowitz
An extension does not mean failure to file. It just means I'm going to file a couple of months after April. Failure to file means, oh, I just, I didn't even file my taxes for last year. Right. That comes with a penalty that's 5% of your unpaid taxes per month, up to a 25% penalty. Failure to pay is another 0.5% penalty per month. If you can't pay your full taxes by the deadline, that's fine. Just file them anyway. Because filing without paying is dramatically less expensive than just like not filing at all. Now, Robert, we alluded to it earlier in this episode. We're talking about our favorite tax credits that we think everyone should be taking advantage of. So here are some of those. Because this is the biggest way a lot of people leave money on the table, the tax credits and the deductions. Remember, the standard deduction for 2025 is $15,750 for single filers and 31,500 for married filing jointly. If you itemize your deductions and they do not exceed those numbers, you should take the standard deduction and move on. But if you are itemizing your deductions, think mortgage interest, state and local taxes, health care expenses, charitable contributions, things of that nature. And you itemize those deductions and it's above that 15, 750 or the 31500, then that's how you should proceed when it comes to filing your taxes. I itemize. I've unfortunately, my mortgage interest is every year beyond just the 15750 that's out the window, Robert. So, yeah, I'm item every single year. But y' all should consider doing the same if it's a larger deduction than just that 15, 750 or 31, 500 depending on single married, filing jointly.
- [14:33]
Robert Croak
And these credits are even more impactful than deductions because they reduce your tax bill dollar for dollar. So for instance, the earned income tax credit is a good example. If you're married, filing jointly and your adjusted gross income is $68,675 or below, and you have three children, you're likely eligible for an $8,046 credit. And this could even be straight up in your refund if you don't already owe taxes for some reason. Number two, for me, I really like this one as well. Super simple. The child tax credit, very popular. So if you're married, filing jointly and make under 400k a year, you can get up to $2200 per qualifying child under 17. This is major, this is easy money. You just have to know what you're looking for. And number three for us is the savers credit for retirement contributions. I know that's a mouthful, but let me explain. If you're married, filing jointly and make less than 79,000 a year and contribute to your retirement accounts, you can qualify for up to $2,000 in tax credits. This is so important to go out and find if you qualify for these credits and actually take advantage of them. You know, we're always trying to find you guys the free money, the tax credits and all the hacks to help you keep more money in your pockets. And this episode is a great example of that.
- [15:58]
Austin Hankowitz
Yeah, I'm going to call it that earned income tax credit. If your AGI is below that 68, 6, 75 and you have three children, that's a no brainer, $8,000 tax credit. And again, like Robert said, there's a difference because it's like, oh, you owe taxes and we're going to give you a credit down to zero. But no, like this is like zero and then also a refund. Right? So you like this will count toward a refund, not just like lowering your tax bill. And again, like go look up all this stuff, go do your own research, talk to a cpa. I'm not a cpa. Robert's not a cpa. We're just here trying to find the gems, share them with you all. So you're not as intimidated about taxes on an annualized basis.
- [16:37]
Robert Croak
Yeah, and I want to get into our next call out and that is the knowledge to make tax season work for you. That's what this entire episode is about. So let's round off this episode talking about how to make tax season manageable. The single most important thing you can do is start a folder. I don't care if it's a manila folder or a digital folder. Do that on January 1st of every year and label it for that tax year. Because every time a tax document arrives that could be tax related, it goes into the folder. I have one of these. So does Austin. You're going to put the W2s, the 1099s, the receipts for charitable donations, mortgage interest statements. Anything that is relatable to your taxes goes into this folder. It might seem old school. I have my folder sitting right here. Austin's got his big red folder there. But it is so important because everything that is related to these transactions needs to be there. So when April rolls around, you're not scrambling. You're just opening a folder, organizing it, and getting it sent off. Or if you're doing your own taxes, it's all right in front of you so there's no stress.
- [17:44]
Austin Hankowitz
Yeah, like, welcome to adulthood. Right? I mean, like, seriously, congrats. You have to file taxes. Go get yourself a folder from Office Max or Staples. Like, that's what I did. I got this red folder I showed Robert when we were making notes on this episode in my red folder. It's just that year, and it's got all the stuff. It's got the mortgage interest, the high Yield Savings Account, 1099, my. My broker stuff. Like, all of the things. It's all right there in the folder. So when I'm ready to say, hey, Mr. CPA that I work with, here's all the stuff. Robert's doing the same thing. He's got his folder right now on screen. You need to get a folder. And what you need to also do, because I know a lot of y' all are receiving these 1099 broker statements in email and digital. Go make a Google Drive. Go make a Dropbox folder. Go do something digitally as well. So you have everything. What I've done is I scanned using the Notes app on my iPhone, every single physical piece of paper that I get in the mail that has to do with these tax transactions, email it to myself, and then I upload it into that Google Drive folder that I use, and I have it for every single tax year. And that's how I organize everything. So, seriously, y' all gotta be doing this. It's so simple. It takes no time at all. Love this. Call out. The second thing you'll need to consider when it comes to having a manageable approach to filing taxes every single year is to understand how you want to file those taxes, right? And figuring that out before you actually have to file. So here's an example. You can file yourself with software, TurboTax, H&R block, stuff like that. It's going to cost maybe 100 bucks or so. You can use a CPA or some sort of tax professional, several hundred dollars, but really comb through all the all your stuff. Or you could take advantage of the IRS free file program. Assuming Your income's under $79,000 a year, you can do this on cash app and it's just no brainer. Super simple. Lily is free. It's really cool. So go do that if you want. We're also going to have a link in the show notes below for that IRS free file program. But understanding what you want to do before you even get started is going to help you a lot. Because if you're doing the CPA thing, Robert, your CPA is going to want to have all this stuff physical, maybe print it out, maybe it's going to want to, you know, oh, upload it to our specific software or share it with us digitally or whatever. Compared to maybe you want to use a TurboTax, you got to make an account, you got to make sure you've got the stuff figured out. There is a little nuances here and there, but have having them figured out ahead of time is how you're going to get in the game and stay in the game and not fall victim to anxiety along the way.
- [20:18]
Robert Croak
Yeah, I love that because each of these have their trade offs. But the more organized you are ahead of time, the less stress you're going to be having. And that is what this entire episode is about, is giving you the playbook. So you don't have stress around taxes and you don't leave money on the table because you weren't prepared. And software is inexpensive and works well for most returns for those of you that are W2 employees. But a CPA costs a little bit more in itself. But if you have more complexities, say you have freelance income, you have rental properties, significant investments, it's always good to get a CPA's eyes on that to make sure you're filing correctly. And free file is genuinely underused and it is genuinely free. So the worst approach here is making the decision under deadline pressure in April. That's why we want to stress to you guys to get ahead of it, get that folder started and get everything organized. And the next way to help your filing become more manageable is if your situation changed significantly in the past year, maybe you Got married, you had a child, started freelancing, bought a home, maybe you inherited some money. That's the year to spend at least an hour or two with a tax professional. Life changes are where people miss the most money. And a one time consultation oftentimes more than pays for itself five times over.
- [21:35]
Austin Hankowitz
And finally, Robert, this just goes without saying, right? But if you owe money to the IRS and you can't pay it all at once, the IRS has a payment plan option, an installment agreement that lets you pay it over time. It is far better, Robert, to owe the IRS money and be on this payment plan than not filing your taxes at all because you don't have the money. Money, right. Do not ignore the problem and watch those penalties compound on themselves. The IRS would much rather work with you and your situation than chase you down. Most people who engage with the process directly find it far more workable than they originally feared. Remember, Robert, it is illegal to not file your taxes. It's perfectly fine to file them and not have the money to pay the irs. There's a big difference between the two. One, one is a payment plan, the other is jail time. It's okay to be on a payment plan. It's not okay to go to jail.
- [22:37]
Robert Croak
Yeah, I just talked about this the other day with a friend, a dear friend actually, and he owns multiple businesses, he has two or three real estate properties. And he was telling me how he hasn't filed the last two years because he was behind. He didn't know what to do, he didn't have all the information. And I said this exact thing to him, what you just spelled out, out, get it filed. Doesn't matter if you don't have the money because you want to get it filed and then work out the payment plan. It's better than trying to dodge it because guess what? It's never going to go away. And then one day they're going to show up at your business or your home, they're going to start knocking and you're going to go to jail. That's why we want to make sure everyone gets ahead of this and stays organized as best as they can.
- [23:17]
Austin Hankowitz
Yeah, maybe we should talk about this for a second. So, personally, I've never been behind on my taxes, but I know a handful of entrepreneurs that I respect. I really respect that they simply didn't have the right tax guidance in the beginning to help them navigate how much money to set aside if it's sales tax or if it's, you know, federal income tax, like, and they had to go on a payment plan with the irs, like, it's okay. That's totally normal. It's. I would much rather have a payment plan owe a little bit of interest and have like this sort of loan with the IRS to get them their money paid than just, I'll figure it out. I'll figure it out. And it never gets figured out. Fast forward two, three, four years, Robert, and then you got this big mess staring at you in the face.
- [24:01]
Robert Croak
Yeah. A lot of people with successful businesses and careers end up in this boat because they feared what to do and they didn't have the right knowledge like you alluded to. So they do nothing. Don't run from this. Be organized. Get yourself a 50 cent folder. Get everything put together and give it to somebody. If you have to go to a CPA and say, hey, I'm sorry, this is where I'm at. Help me fix this and spend the money, because it's better now than being stuck with all the penalties like Austin's talking about.
- [24:30]
Austin Hankowitz
So here's what you need to do. You need to understand that every dollar that you recover through those credits that we talked about, every penalty that you avoid by filing on time, and every specific deduction you make along the way, that is actually, you know, real transaction. You can really, you know, claim this deduction. That's money that will be saved and put in your pocket and will compound for you in your favor over a decade. So take this tax stuff pretty seriously,
- [24:58]
Robert Croak
because building wealth isn't just about making more money. It's about keeping more of the money you already made. And understanding taxes is one of the most direct paths to doing that. Exactly. You guys hear us say that all the time on the Rich Habits podcast and in the Rich Habits network. It's not what you make make, it's what you keep. And that starts by filing your taxes and understanding how to get the most benefits from the tax code.
- [25:22]
Austin Hankowitz
And I will say this too. I literally had a date with Claude on my computer a couple weekends ago. I was trying to. I shared with it all of my tax situation. You know, here's my brokerage gains. Here's what I did in this here. Like, I just. I was way transparent with it. And I told it my whole situation. I said, help me optimize. How do I save? What can I do? What levers can I pull to optimize my tax? I used Opus 4.6, by the way, for those asking, and it laid out a path for me to make seven changes in my specific business to net positive, save or maybe add $220,000 to my net worth in 2026 that I was not planning on doing. This comes with solo 401k contributions, QBI deductions, putting Ireland on salary. We get married. Like all this stuff, right? Like it came up with a bunch of different ideas. So if you don or can't afford a CPA or a tax professional or tax strategist, congratulations. Artificial intelligence is here. It's in your pocket, it's on your iPhone, your, your laptop. It's everywhere right now. Go to Claude, go to Chat GPT, go to Gemini and just start talking with it and share your situation. And again, this is AI telling you stuff. So I took it, I screenshot it and I sent it to my CPA and said, hey, is this legit? Right? So that's what you need to do with it. Don't just go do it without figuring out if it's legit or not. All of the resources are available to you right now. It's never been easier to try and optimize and do everything you can to ensure that you are doing attack stuff as effectively as possible.
- [27:00]
Robert Croak
What an incredible episode. I feel like I could run through a wall right now because I just love putting together episodes like this where it can change the lives in the future finances of tens and tens of thousands of people that follow this podcast. So what an incredible episode. But let's get into the Q A now.
- [27:17]
Austin Hankowitz
Well, before we get into the Q A, Robert, gotta give a shout out to public.com the investing platform for those who take it seriously. Because on public you can build a multi asset portfolio of stocks, bonds, crypto options and now generated assets which allow you to turn any idea into an investable index using AI.
- [27:38]
Robert Croak
And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index, and even lets you back test against the S&P 500, all with just a few clicks.
- [27:59]
Austin Hankowitz
Generated assets can be thought of as ETFs with infinite possibilities. They're completely customizable based on your thesis, not someone else's. So when you're ready, go try it. Go to public.com rich habits and earn an uncapped 1% bonus when you transfer your existing portfolio through our affiliate link. 1% bonus, right? You got a hundred thousand dollars. Transfer it to public and get your free thousand dollars, right? One percent match. Robert, imagine you have a million dollar portfolio sitting, you transfer it to public and you get $10,000 completely for free. How cool is this that public.com rich habits go check them out.
- [28:38]
Robert Croak
Paid for by Public Investing and full disclosure in the podcast description.
- [28:42]
Austin Hankowitz
And as a reminder, if you have a question for the podcast, follow us on Instagram at Rich Habits Podcast and DM us. D All the questions from today came from Instagram DMS over the last seven days, right? So like we're, we're trying to get through them as, as often as we can. We also have questions asked to us via email that we answer all the time on the show. Rich habits podcastmail.com com let's dig in. First question coming from Rich on Instagram, Rich says, I work a W2 earning 107,000 a year while my wife earns $93,000 a year. We own two rental properties. One of them, cash flows $1600 a month at 2.75% interest and the second one, cash flows at $600 a month at a 4% interest rate. That one, we owe $103,000 still on the mortgage, our primary residence with $500,000 left on the mortgage. We each have Roth IRAs worth about $80,000 combined and a traditional IRA worth about 115,000. We have a Bridge account on public with $20,000 in it and a Schwab account with 40,000. Our 529s for our children each have $5,000 in it. My question is, do I pay off the mortgage on the 4% interest rate rental property? It's a loan of $103,000, effectively raising our cash flow from 600 to $1500 per month. Or do I take the 103,000 that I would have paid off with the mortgage and instead invest it into the markets. Our overall goal is a more passive income lifestyle, spending time with our children. Really love the show and would appreciate your feedback. Robert, what advice do you have for Rich?
- [30:26]
Robert Croak
I love this situation, Rich. You guys are crushing it it you're making a lot of money. You've really done a lot of things well. But I would prefer to see you take that $103,000, get it working into the markets, into one of these taxable brokerage accounts that you have versus paying off one of these low interest mortgages. Because even at 3.99%, I still think you're going to have the positive arbitrage of 2, 3, 4, 5% if you had the money working for you in the market markets versus paying off the Mortgage and then maybe look at it down the road after you've made more money and built more of this base we talk about and then maybe go back and look at paying off that mortgage. But right now I'd rather see that money going into the markets, dollar cost averaging over the next few months, rather than taking out a loan to pay off what I consider is a low interest mortgage.
- [31:19]
Austin Hankowitz
Yeah, I'm just kind of looking at it. And again, you guys have crushed it. You've got a cash flowing. Rental property at 1600amonth, you've got another one at $600. Sure, you're doing all the normal things as it relates to setting money aside for vacancy and maintenance and repairs and things like that. So you're doing just fine here. But you've only got about $250,000 in the markets. And I don't say only as if that's not great. That's a lot of money for anybody. 250,000 here at about 40 years old is incredible. However, I would love to see that be 350. I really would. I personally wouldn't pay off a 4% interest rate rate mortgage, especially if it's cash flowing. 600amonth like that just doesn't really make too much sense to me. And the thing is though, you mentioned, hey guys, I want passive income. That's my whole deal. Okay, cool. Take that $103,000. Build a portfolio of NEOs funds with that money. Spyi, QQQI, maybe a little bit of BTCI or IAUI for Bitcoin and Gold or IYRI, their Real Estate Income Index ETF there and start earning income on that $103,000. You play your cards right, you'll start getting paid between maybe a thousand and twelve hundred dollars per month from NEOS funds. All tax efficient income deposited to your brokerage account. So if you're looking for that passive income tax efficiency, I think a NEOS funds portfolio, assuming again you're optimizing for that passive income over growth, that NEOS funds portfolio could do wonders for your situation.
- [32:53]
Robert Croak
I love that takeaway. I'm so glad you added the NEOS funds portfolio. So smart. And it's just safer to me because if you're so overly leveraged in real estate especially, you guys did a great job with the low interest mortgages. I still like to have you more base like Austin alluded to going into your 40s than that $200,000.
- [33:13]
Austin Hankowitz
Well, I mean it kind of reminds me too of like, you know, the pandemic. I don't know what state riches in, but you know, I think it was in California, New York and a couple other states out there. It was like tenants don't have to pay their landlords rent. Right. For, for a little bit. Right. And so like as a landlord, what are you supposed to do? So Rich, I don't know your situation, but to Robert's point, it's like there's a lot of uncertainty sometimes when it comes to building a real estate portfolio around vacancies or around different laws and different things of that nature. You know, maintenance, repairs that, that normally pops out of nowhere, but something I think much more durable and predictable from a monthly income perspective because you're talking about this, this income that you want to have passive income income, neos funds. So again, go check those out. Love the situation. Rich, Congrats on all you've built and definitely check out some of these tax optimizations, credits and strategies that we've alluded to in this episode. Maybe you should go to Claude, talk about all the stuff you're doing with your rental stuff or ChatGPT or Gemini or whatever and ask it how do I optimize taxes in favor of my situation with these rental properties? Right. Maybe that's something to consider. So our next question on Instagram comes from EB. EB says, I'm 60 years old, I'm self employed and I have a 401k from a previous employer. I have an opportunity to purchase a property. I need to sell a property that I own, use some of my 401k and the gains from the property to qualify for a mortgage loan. Do you all know of any smart purchasing strategies or maybe even landmines I should be looking out for? I know you all own your own businesses, so how do you all go about qualifying for mortgages while being self employed? Good question, Robert. You want to kick it off. You've bought a lot of homes as a self employed individual throughout your life.
- [34:54]
Robert Croak
Yeah, this is a tough one because at 60 years old I hate to see money come out of 401k and have to sell another property to be able to buy this property. But if I'm understanding the question right, he could sell the current Property, do a 1031 exchange into the new property to get some benefits. There, there. But I would just be careful because we don't have the totality of the numbers of how much you're taking out of a 401k, even though it's an older one and it's probably been sitting for a while, which Helps, but I don't know the totality of the numbers. But I don't know of a smart purchasing strategy other than doing the 10:31 exchange into the new property and using as little funds as possible. But I also don't know your situation. Could you qualify for an FHA loan loan? Could you qualify for some of these other rural loans like a USDA loan? But without knowing more about where EB lives and the other situation with the numbers, it's tough to give too much of a strategy. But I hope that helps some to help you understand that you do have options. I just don't know what all options you have.
- [35:59]
Austin Hankowitz
Yeah, I think from a landmines to look out for perspective, there's a couple things that jump out. The first one's the tax impact, right? The 401k, the traditional 401k you're alluding to, all the money you take out of it is taxed at ordinary income. So if you're like, oh, I need to go take out, you know, a massive down payment for this house from my 401k and that down payment's $200,000 or $100,000, whatever it is, you owe ordinary income taxes on that money in that lump sum, right. So the more you take out, the higher your effective tax rate is going to be. Because of tax brackets, the other thing to look out for is that self employed sort of mortgage qualification. That one's pretty hard because normally when it comes to qualifying for a mortgage, you need a couple years of income and showing, you know, reputable, predictable income as a, as a business owner before a bank's going to want to underwrite you, you might have to pay a higher interest rate on this mortgage than what you might see online. So if you're seeing online an interest rate at 6 and a half percent, you might have to come around 7 or 7.5% depending on your situation because you're self employed and you don't have that normal W2 income. So just keep those two things in mind as you kind of budget and think about can you actually afford this home? Is it a good idea to tap in to the 401k things of that nature? And finally, I guess the good news is really depending on what type of property this could be, maybe you can qualify for a DSCR loan. So Robert, maybe talk about what a DSCR loan is and how to qualify for one of those. I know you've done those before as well.
- [37:34]
Robert Croak
Yeah, a DSCR loan, a debt service coverage ratio loan, could be a good, good option here because they're not basing the loan on your qualifications, they're basing the loan on the comparables of the property itself. What does it rent for if it's multi units? So if it works out that the numbers are in your favor based on the debt service, you could qualify for that. And I've used that many times. But one more that I want to mention before we move on is you could also look at a bank statement loan. Those have worked really well for me. But you will have to be prepared to pay around a half percent to 1% more than a traditional mortgage. But it helps you because they're not going directly off of your credit and your income, they're going off of the continuous deposits and what the average is over two years in your bank accounts. Those can work really well for people in your situation as well.
- [38:28]
Austin Hankowitz
Yeah, that's actually how I paid for the house I'm sitting in right now is a bank statement loan and unfortunately it was 1% higher than what the the 30 year mortgage was before we jump into our final question, gotta give a shout out NEOS Investments. Actually we just talked about them, but they are a sponsor of this episode too, which I didn't even realize. NEOs they offer ETFs that seek high levels of monthly income with a keen focus on that tax efficiency that I was alluding to earlier in that answer. They also provide core portfolio exposure across equities, fixed income, real estate, cryptocurrency, and cash alternatives like t bills. Their ETFs might be especially interesting for investors looking to generate tax efficiencies efficient monthly income inside of their portfolios. Their funds may serve as a compelling income focused alternative or complement to many of the investments already in portfolios.
- [39:19]
Robert Croak
And if you're looking to add passive income focused ETFs to your portfolio, consider learning more about NEOs ETFs@neosfunds.com and as with all investments, investors should carefully consider their investment objectives, risks, charges and expenses of NEOS Exchange Traded Funds funds before investing to obtain a prospectus containing this and other important information, please visit neosfunds.com Please read the prospectus carefully before you invest. An Investment in NEOs ETFs involves risk and including possible loss of principle. There is no guarantee that NEOs ETFs will make monthly distributions and those amounts may fluctuate from month to month. Cryptocurrency is relatively new and the market has its own specific risks. NEOs ETFs are distributed by Foreside Fund Services LLC.
- [40:09]
Austin Hankowitz
So our final question here is coming from Anna on Instagram. Anna says, hi, guys. I've been listening to your podcast for two years now and it is just awesome. Thank you, Anna. We appreciate that. Anna says, I'm 36 and I was trying to do some catch up on my retirement by maxing out my 401k for the last two years. But with all the uncertainty and fast AI developments I'm seeing in the world, I'm debating if I should even save for retirement. I'm concerned that in 30 years we might not even exist as a society. The dollar might not even exist as currency. And the banks, they just disappear. Should I save money, buy a farm in Italy that I've been dreaming about for years and go do that, or should I contribute to my 401k? Thank you. Wow, Robert, what a question from Anna. Anna's back. Been looking at the headlines a lot because I think Elon Musk did an interview or something where he said that you don't need to save money for retirement because everything's going to be free in the future because the cost to make a widget is going to go down so much because humanoid robots and autonomous this and AI that that, you know, widgets are going to be essentially free and we're going to run out of things to make and everyone's going to. Oh, Anna. So here's my perspective. Active. I am just as scared as you are. I am. I am just as scared as you are. I've got neighbors where they've got four little girls and they're between the ages of 2 and 12, and I don't know what their lives are going to look like when Those kids are 30, 40, 50 years old. I can't even predict it. I don't know, to your point, if society will exist at all if we're going to have a currency that's not the dollar, if it's going to be some, some AI agent thing or humanoid ro or, you know, Sam Altman was saying we would get universal basic income, but it will be in the form of token compute, right? Like, I don't know. I have absolutely no idea. And I'm just as scared as you are. It's very interesting to reflect upon Anna, because I've seen to your point, a lot of people talk about what you're talking about where people that understand artificial intelligence technology, they've been serial entrepreneurs, they're doing one of two things. Things. They're either going all in on AI and using this technology. To go make billions of dollars and build the next unicorn company, startup, or they're going to a farm in Italy and they're living off the land because they know what the future is going to be and it scares the crap out of them. And they want to be able to have some goats, a couple cows and chickens, and they're good to go, right? Like, there's no in between right now. Unfortunately, the people that are stuck in between are just, just asleep at the wheel. Robert, I don't think I have an answer for Anna here. Of course, Anna, max out your 401k. You know, do the things you're supposed to do. Be responsible with your money, right? Assume, you know, whatever. But, like, what's your take? Robert?
- [43:05]
Robert Croak
I think this question hits home to me so much because I love that I get to wake up every single day and try to educate people on what to do with the mindset, with their Money, with their 401ks, all of this stuff. Alongside you, Austin. But I love this question because I think it really opens the door for everyone watching this episode that's still here at the end of the episode to ask themselves this exact question. Where do I see my life in 10 or 20 years? And what do I care about the most? Because things are changing. If we end up in this abundance economy or we end up with no dollar and we're in this mess, and who knows what's going to happen? Owning a farm with goats and chickens and making your own cheeses and eggs and corn sounds pretty cool. But I think the number one takeaway is understanding what you need to do now. Until you buy the farm in Italy or you buy the farm in Nashville and have that land, because it will certainly feel good for all of you that own an asset, that dirt, that home, that barn, those things that if everything goes south and we do end up in this controlled government environment, when it comes to income, you know, you're still safe. And that's going to be the key thing, I think for most people thinking ahead for the next 10 or 20 years is how do I create safety? Because I do think the financial systems are going to change and we might be in this dystopian future where it is all, you know, tokens and through the government and who knows how on the blockchain. And I love the idea of someone owning a farm. So I really enjoyed this question and it was a great way to finish this episode.
- [44:50]
Austin Hankowitz
I completely agree, Robert. And the additional advice I'd give you, Anna, is not to think about it. As a say, black and white. I can either contribute to my 401k or I can go to Italy and own a farm. Why not both, right? Why not contribute up to the match in your 401k and get that free money, max out your Roth IRA? Because you want to make sure that if society doesn't crumble, you're not a Walmart Greeter at 80 years old and anything above that, you are now setting money aside for that farm in Italy. Maybe you're working a side hustle right now for that farm in Italy. Maybe working a second job right now to save for that farm in Italy.
- [45:26]
Home Depot Advertiser
Right.
- [45:26]
Austin Hankowitz
You have that, that goal. And that goes for anyone else. Right. It's like until there truly is a collapse of society and the dollar is not the, you know, all the, we could talk about this stuff. We've been talking about this, you know, Y2K, the Cold War, you know, Covid 2000. Everything was crazy in the past. We've always had these big hoo hum, rum drum, get all scared and crazy stuff with headlines. But it's the wall of worry. It's the wall of worry. And the stock market continues to climb the wall of wor. And I know no technology like AI has ever existed. So it's a little bit different this time when you kind of get over that and you realize maybe it's not. I need to still look out for myself, my future, my retirement, things of that nature. And I love Robert's point, right. Owning assets. It'd be really cool to own a paid for plot of land with a nice home on it and some chickens and a garden. Like I love that. That's, that's the end game for me certainly. Right. I really, I really think that's a great idea for you and anyone else listening. But I don't think it's black and white like you gave it to be. I think there's a lot of why not both in this question for you, Anna.
- [46:36]
Robert Croak
Yeah. And I think to put a bow on it, it's not about stopping your investing. It's not about one or the other because everyone needs to prepare for the future. But it's really digging deep and asking yourself, what do I really need as a person? What do I want to do for retirement? Do I need, need three cars in the driveway in my neighborhood with my high hoa? Or would a cool small farm be better for my kids to grow up on? Maybe on some water or whatever. Everyone's different. Personal finance is different. So everyone listening, figure out what works for you. We can't predict the future, we can only try to help you prepare for it.
- [47:17]
Austin Hankowitz
Everybody, thanks so much for tuning in to this week's episode of the Rich Habits Podcast, helping you demystify and approach your taxes in a very, very stress free, manageable way. Hope that you guys learned a ton. We are super grateful that so many of you come back every single week to listen to the show. If you've not yet signed up for the Rich Habits newsletter, go check that out. Every Thursday morning we publish a nice market update as to what happened, what Robert and I are thinking about the headlines or portfolios or ideas, things like that. Just Google Rich Habits newsletter. It'll pop right up. Or use the link in the show notes below. If you've not yet checked out the Rich Habits Network work, that is our community for our biggest fans. Those are people that want more FaceTime with Robert and I. Because every Tuesday evening Robert and I host a live stream on Zoom where we talk with everyone about their questions, our ideas, our portfolios. We open up the playbook and make sure everyone understands what we have our eyes on, what we're doing with our money. And we're also talking about investment opportunities. We just invested into Apptronic, a humanoid robotics company, secondary shares, which was really exciting. So we're doing stuff like that all the time in the Rich Habits Network 7 day free trial to join that you can join completely for free, join a live stream, figure out if it's right for you. If it's not, no hard feelings. Thanks for listening to the show and supporting us. And of course got to give a shout out to Wall Street Favorites.com the best way to understand what Wall street thinks about your own portfolio. It will rank your portfolio by highest upside according to Wall Street. You can then go in and see what the institutions are buying and sell the stocks in your own portfolio. It's got sector breakdowns, it's got technical analysis. Wall Street Favorites.com we built it for you all. A lot of it's free, a little bit of it's pay. Go check it out. It's awesome. We're so proud of it. Again, all the links to the Rich Habits Newsletter, Rich Habits Network and Wall Street Favorites will be in the show notes below.
- [49:19]
Robert Croak
And to be clear about the Rich Habits Network, if you've been on the fence with joining and you've heard about it over and over watching the podcast, there is a seven day free trial. But I want to make something very clear, very clear when we do these Tuesday live streams it is Austin and myself. I had a meeting last week with a company, and they have all these communities that they help run. And I was surprised at how many of these communities, the actual founders, the people that brought the. The people into the community, don't actually do their live streams. They pass them off to coaches and underlings, and they pop in for five minutes here and there. No, Austin and I do two hours usually, usually every single Tuesday with all of our best stuff. So if you've been on the fence, make sure you understand that we are there every single week sharing our best ideas, our best investment opportunities with each and every one of you in the Rich Habits Network.
- [50:11]
Austin Hankowitz
Absolutely I did. People suck. How could they? Come on now.
- [50:14]
Robert Croak
We're terrible. I couldn't believe when I heard it. I'm like, what do you mean you have this community and you don't do them? Oh, no. I have my coaches do them. I have my underlings do them. And I'm like, why would anyone want to pay for that? We're paying. And people want to be involved in. In communities where it's really a community and it's not about a paywall. So I just wanted to clear that up for people that might think we're these two big brains that aren't in the call ourselves. No, we run the call. We do every single call. So I wanted to clear that up because some people might not know.
- [50:46]
Austin Hankowitz
Well, we are in there every Tuesday night from. What is it, 8:30 to 10:30 Eastern Time. We have a zoom call. Ask your questions. Pop up on screen. It's. It's a good vibe. It's awes. Join us over there. Rich Habits newsletter. Rich Habits network. Wall Street Favorites.com. everybody. Thanks so much. And we'll see you on Thursday.