Rich Habits Podcast Episode 89: Our Favorite Tax-Saving Strategies for 2024
Release Date: November 4, 2024
Hosted by Austin Hankiewicz and Robert Croak, Episode 89 of the Rich Habits Podcast dives deep into effective tax-saving strategies tailored for the fiscal year 2024. This comprehensive discussion is designed to help listeners minimize their tax liabilities through actionable and diverse financial practices. Below is a detailed summary capturing all key points, insightful discussions, and practical conclusions from the episode.
1. Introduction
Austin Hankiewicz opens the episode by emphasizing the podcast's mission to uncover rich habits related to business, finance, and mindset from both seasoned entrepreneurs and emerging wealth builders. Robert Croak, a decamillionaire with over 30 years in business, sets the stage for the discussion on tax-saving strategies, highlighting the urgency to implement these strategies with only two months left in the year.
2. Tax Loss Harvesting
Timestamp: 01:47
Austin introduces the first strategy—Tax Loss Harvesting. This involves selling investments at a loss to offset capital gains from other investments, thereby reducing taxable income.
Notable Quote:
“So you made $20,000 with Bitcoin, you lost $5,000 with SMCI. And when you subtract that, you really only owe taxes on the $15,000.”
— Austin Hankiewicz [02:50]
Robert adds a pro tip:
“If you don't have capital gains to offset, you can still sell up to $3,000 of your losing stock and use those losses to offset your straight-up taxable income.”
— Robert Croak [03:43]
Key Takeaways:
- Essential for those with mixed investment portfolios.
- Timing is crucial; losses must be realized within the same calendar year.
- Even without capital gains, up to $3,000 can reduce taxable income.
3. Health Savings Accounts (HSA)
Timestamp: 05:14
Robert and Austin discuss the benefits of Health Savings Accounts, highlighting their triple tax advantages:
- Tax-Deductible Contributions: Up to $4,150 for individuals and $8,300 for families in 2024.
- Tax-Free Growth: Investments within the HSA grow without being taxed.
- Tax-Free Withdrawals: When used for qualified medical expenses.
Notable Quote:
“This $4,150 contribution is tax-deductible, which means if your effective tax rate is 25%, you're immediately saving $1,037 on your taxes.”
— Austin Hankiewicz [05:14]
Additional Insight: For those over 65, HSAs function similarly to traditional IRAs, allowing withdrawals for non-medical expenses, albeit taxed.
4. Donating Appreciated Stock
Timestamp: 06:58
In a special segment, Steve Latham, CEO of DonateStock.com, joins to explain the strategy of donating appreciated stocks directly to nonprofit organizations. This method offers significant tax benefits by avoiding capital gains taxes and allowing donors to write off the full market value of the stock.
Notable Quote:
“If you've owned it for more than 12 months, you can de-itemize your deduction, the full $200,000. In that case, that $190,000 gain...”
— Steve Latham [08:11]
Key Points:
- DonateStock.com simplifies the process, handling backend tasks to make stock donations accessible.
- Helps avoid capital gains taxes, allowing larger donations to nonprofits.
- Donors can align philanthropic goals with financial strategies effectively.
Steve's Insight:
“Stock gifting should be part of your arsenal. It’s a great way to say, hey, I got lucky, I bought this stock, it’s up 10x. I’m going to give some of that to you.”
— Steve Latham [10:38]
5. Maximizing Retirement Contributions
Timestamp: 15:07
Austin details retirement strategies for entrepreneurs, such as contributing to a Solo 401(k), which allows contributions up to $69,000 in 2024. This can result in substantial tax savings, especially for those in higher tax brackets.
Notable Quote:
“At a 25% effective tax rate that I pay, that is $17,250 dollars in tax savings.”
— Austin Hankiewicz [16:00]
Robert emphasizes the importance of understanding different retirement accounts (e.g., SEP IRA, Solo 401(k)) and consulting with a financial professional to maximize benefits without overcontributing.
6. Home Office Deduction
Timestamp: 19:46
For those working from home, Austin explains the Home Office Deduction. This allows for the deduction of a portion of home expenses based on the square footage dedicated to business use.
Notable Quote:
“Take up to 300 square feet and that would cap you at a $1,500 per year deduction.”
— Austin Hankiewicz [19:46]
Additional Tips:
- Detailed deductions can include internet, office equipment, and utility expenses.
- Proper documentation and professional advice can increase deductions beyond the simplified method.
7. Adjusting Federal Withholdings
Timestamp: 21:22
Austin advises listeners to review and potentially adjust their federal tax withholdings. Over-withholding results in large refunds but restricts access to monthly cash flow.
Notable Quote:
“You're not giving this loan to the government every year. You need to take that $2,000 and invest it in the markets.”
— Austin Hankiewicz [22:00]
Action Steps:
- Consult with HR or payroll departments to adjust withholding amounts.
- Redirect excess withheld funds into investments for potential growth.
8. Listener Questions and Expert Advice
a. Investing Extra Funds After a Layoff
Farah D. inquires about investing $50,000 intended for passive income during a planned career break.
Advice:
- Austin suggests diversifying investments, such as ETFs like SPY, while maintaining liquidity to manage potential market volatility.
- Robert recommends balancing investment risk with options like high-yield savings accounts to protect the principal.
b. Transitioning from Edward Jones to Vanguard
Keith asks whether to transfer funds from Edward Jones to manage investments independently with lower fees.
Advice:
- Robert highlights the importance of understanding personal risk tolerance and investment knowledge.
- Austin emphasizes the benefits of reducing fees and ensuring a well-diversified portfolio through index funds and ETFs.
c. Managing Credit Card Debt vs. Selling a Truck
Jay seeks advice on whether to sell his truck to pay off $6,500 in credit card debt.
Advice:
- Austin and Robert both advise against selling the truck, recommending instead to increase income through side hustles or selling high-risk investments to pay off the debt.
- Emphasize maintaining valuable assets while eliminating high-interest liabilities.
9. Additional Insights and Closing Remarks
Robert underscores the importance of viewing IRS regulations as tools for wealth building rather than obstacles. Both hosts encourage listeners to implement the discussed strategies promptly, given the time-sensitive nature of tax planning.
Austin wraps up by highlighting the importance of taking action on these strategies to maximize tax savings and enhance financial well-being. He also promotes DonateStock.com as a valuable resource for those interested in stock donations.
Final Quote:
“No one likes to pay extra money to Uncle Sam. And if you know a neighbor, a friend, a cousin, an uncle, an aunt, whatever, your parents send them this episode so they also now know how to bring down their tax bill.”
— Austin Hankiewicz [36:48]
Conclusion
Episode 89 of the Rich Habits Podcast offers a wealth of tax-saving strategies that listeners can implement before the year ends. From tax loss harvesting and HSAs to donating appreciated stock and adjusting federal withholdings, Austin Hankiewicz and Robert Croak provide actionable insights backed by real-world examples and expert guest contributions. By leveraging these strategies, listeners can optimize their financial health, reduce tax liabilities, and pave the way toward greater financial freedom.
Resources Mentioned:
- DonateStock.com: Simplifies the process of donating appreciated stocks.
- Masterworks: Platform for art investments.
- Caroline CPA: Recommended for professional financial advice.
- Public.com: Suggested for high-yield savings and bond accounts.
Action Steps for Listeners:
- Review and implement tax loss harvesting if applicable.
- Maximize contributions to Health Savings Accounts.
- Consider donating appreciated stocks through platforms like DonateStock.com.
- Evaluate and maximize retirement account contributions, especially for entrepreneurs.
- Utilize the home office deduction if working remotely.
- Adjust federal tax withholdings to better manage cash flow.
- Seek professional financial advice to tailor strategies to individual circumstances.
Stay Connected: Join the Rich Habits Network for ongoing support and community engagement to continue building wealth and implementing effective financial strategies.
Thank you for tuning into the Rich Habits Podcast. Implement these strategies today to secure a financially prosperous tomorrow!