898: Legally Eliminate Taxes?
The dental podcast. Okay doctor it's time to put down that hand piece. You're listening to the show dedicated to helping. Dentists get their lives back. It's time to decrease your stress increase your breath ability and regain your passion now introducing your host Dr Mark Costas. Hello everyone and welcome to another episode of the Dente podcast. I'm your host Dr Mark. Costa's hope you guys are doing awesome. Awesome awesome out there today. We are slipping into summer. And it's feeling like things are going to start going back to business as usual as close as we can find to business as usual arm super excited to get back to my dental practices to see my patients to to be able to see my team members that have had to say goodbye to over a month and a half ago now So I think optimism is in the air and I think that We are going to be going back to quote unquote business as usual pretty soon here. So hopefully you guys are feeling the same optimism that I'm feeling and I hope that You're still remaining safe and healthy out there This episode. I'm speaking to an old friend. His name is Tom Wheelwright. You guys might know Tom Wheelwright. Because he's the best selling author of the Book tax-free wealth. He's also the personal. Cpa and business partner to Robert Kiyosaki. Who is the author of Rich Dad? Poor Dad the number one bestselling business book of all time and he's just an incredible speaker. He's a great friend. He's been very loyal to me and our audience. He spoke enliven our summit before he's been on the podcast before but In this episode we talk about utilizing tax strategies to decrease your overall tax liability and increase the amount of money that you actually keep which is more important than ever right now going into a bear market going into a market contraction so his advice and his content has never been more applicable. has never been more timely than the situation that all small business owners are facing right now and are going to be facing for the next couple of years so. I hope you guys enjoy this episode. I hope you guys have a pen and paper handy. Because there is some really great stuff that he shares with our audience as usual. This episode is being brought to you by the dental success network dental success network dot com for us. Free Forty five will get you a forty five day free membership to the Donald Success Network. What I think is the most incredible network of like minded smart sophisticated business owners and dentists both clinically and from a practice management perspective. Forty full time faculty members which I won't say full-time Forty Faculty members that are actually manning and In charge of their own particular room anything from dental implants to ACLU's to pediatric dentistry to oral surgery to IV sedation. Anything you can think of from clinical perspective in Dentistry and additionally practice management perspective from finances to analytics to taxes etc. You can find right there inside. Dsm people willing to share a positive community unlike so many of the free facebook forums that have degraded to just a lot of negativity. A lot of snarky nece a Lotta cynicism and a lot of bullying and trolling. Unfortunately so that is the community part of things and then also we have one of the largest buying groups in the world because we have a membership of over seven hundred dentists with a collective revenue of nearly a billion dollars so we have a lot of bargaining power as far as dealing with vendors. And then there's also a really really great bank library Of continuing education resources and videos that you can access at all times as a member so actually go over there to dental success network dot com for slash free forty-five for your free membership. Check US out. Is it for everybody. I don't think it's for everybody but it's for a lot of dentists that are looking for this sort of support. But if it's not for you just check out or before forty five days And there's no obligation at all. Okay guys enjoy Tom and Make sure you have something to write with will talk to you very soon. Excellent excellent alright. So I have a great friend here at assassinating GONNA stay on for a bit. Well Yeah I was just GonNa say we've had a lot of people reach out on asking for their friends because obviously Tom. Your huge name People people see your name and mark can say I want to join the ascend so if you have anybody out there a friend looking to jump on. We're giving forty five days free Hopefully forty five days were all back to work for the next forty five days. You know you get the `send for free so It's if they go to the CODE DENTAL SUCCESS NETWORK DOT COM SLASH. Free Forty five No gets you can refer your friends. There they'll get forty five days free. Get all the everything for the next month and a half until we get back to work so yeah. That's those the only thing I am. Stick around I want. I want to get my notebook ready. I'm GonNa take some notes. Awesome taken us both of us all right guy. So we have an old fracture Tom Wheelwright Has Been a pass speaker at the dental success summit. He was one of our most popular speakers of all time and a little bit about Tom. He is a CPA. He's the CEO of wealth ability which is located in Tempe. Arizona is a bestselling author of the Book tax-free wealth. Tom Is also a contributor to more important than money and entrepreneurs entrepreneurs team in July of two thousand seventeen and why the rich are getting richer. July of two thousand seventeen. Tom is a leading wealth attacks. Expert a Global Speaker an entrepreneur magazine contributor. Tom Is best known for making taxes. Fun and easy and understandable and in helping entrepreneurs and investors build wealth through practical strategic ways that permanently reduce taxes as a rich dad advisor to Robert Kiyosaki from Rich Dad. Poor Dad talk. Frequently speaks at conferences worldwide to entrepreneurs on these topics. Tom Is an active member of his community. Who previously served as chairman of the Tempe Manufacturers Council in Arizona Chapter President at Tax Executives Institute Inc? His work has been featured on Wall Street Journal Washington Post Forbes Accounting today investor's business daily Fox and friends. Abc News Radio NPR marketplace. And many many more. Tom wheelwright how you doing my friend. I'm good how are you? It's great to see you? It's great to see you. I wish we were doing this person. And and live in front of seven hundred people again but this is the next best thing Boy At we have so much to talk to you about. I know that You know with everything that's happening right now. Goes without saying that people are a little uneasy about you? Know their own financial situation the financial situation of people that count on them not not just their families but the teams that they they employ And I thought it would be a great time to reconnect with you and to get you to give us a little pep talk and talk about our number. One is big business biggest expense which is taxes thought that I would. I would start off with just a few direct quotes and statistics from your book. Some are from From summer from Robert in summer from you so according to Robert Twenty five to thirty five percent of our life Income goes to paying taxes. two hours of every workday three to four months. A year is dedicated to just paying taxes. Which is thirteen years of our life. Thirteen years of our work life and twenty years of our lifetime. Average American is taxed Thirty to fifty percent so those are some crazy statistics. And when you think about that way when we're going to be saying we have a thirty year thirty to forty year dental career. We're going to be working thirty. Two thirteen to fifteen years of that just to pay uncle. Sam is depressing. It's depressing so we all need a friend. We all need an uncle. Tom Uncle Tom help us what we do to decrease our number one visit biggest defense so quick story. That's actually I got my name. My might my father had his favorite on Cole was named Tom and he said everybody needs an uncle. Tom Saw- I'm GONNA need my youngest top literally how I got my name of. It's cool school so so so taxes You know they're a big deal right now. I mean if you think about this twelve hundred dollar check. That's going out to people. That's actually a tax credit. That's being refunded There was a lot of tax benefits in the In the cares. Act that Hopefully we'll get a chance to talk about them because there's some really big ones Is actually some really big ones for dentists especially get you some money Put some money in your pocket but some money in your pocket now actually Not have to wait And then we have course July fifteenth where we have a body too now estimated payments due on July fifteenth of this year and on top of that we've got whatever we all still from two thousand nineteen so July fifteen best can be a fun day and so so taxes are their big hit so You know here's the thing that actual fastest way to put your money in your pocket is traditional taxes because what what most people don't understand and you've heard me say before mark. Is that the tax really a series of basically a series of stimulus packages right. It's like you take all the stimulus packages the government's done over the years and put them together. And would he have? You have the tax code so you have this. This huge series of incentives and the reality is is that they are very much intended most of them for business owners and investors and business owners. Get A lot. In fact I was joking. I I came up. The new tagline You know start a business safe taxes never get fired but yet the craziest boss you gotta think about this thing about it. You've got You know as a as a business owner. You have a you know as dentist. You've got hundreds of clients thousands of clients. If you're an employee you've got one client. I mean think of. Can you think of anything more risky than that in the tax cut doesn't support? Employees Supports the entrepreneurs support. The investor does not support employees at all employs always paid high taxes. But the problem is most Most small businesses like Dennis don't understand what the tax benefits are and so the end up paying much much higher taxes. The need to pay absolutely absolutely and you know as we come back to business. I think To business as usual which. I don't think it's ever going to be as usual. Has It was prior to this Crisis but when you start doing dentistry. That's what I WANNA know. Yeah I mean what we have done it to a certain degree. But I mean it's there it's got it's limitations obviously but doing we're starting to do screenings and we're starting to do liquid a triage via via tele dentistry so there. There was a a previous speaker that owns a company called Tele Dentistry dot cops up. It's possible but it's not like we're going to be reaching our hand pieces through the through the cyber webs and being able to to prep teeth that way. Some some of us are grateful for that. Frankly Yup so you know I think there's going to be the necessity for us to become more sophisticated business owners when we come back some of the things some of the flaws some of the inefficiencies that were hidden by this incredible market this incredible economy that we've experienced over the last eleven years With that flattens off and declines a little bit. I think we're a little bit susceptible to some of the the inefficiencies that were inherent in our businesses over the years so with that and becoming a in the interest of becoming more sophisticated. And what are some things right? Off The bat that we have to know about taxes as business owners and cert- certain things that we could do immediately to get to to understand the tax process more and to find some of those two to utilize some of those tax cuts. Well I I think the most important thing to recognize right from the beginning is that any expense can be deduction any expense can be a deduction so I I remember i. You know every once in a while do a Webinar like this with a particular industry like like Dennis. For example I've done it with pharmacists and other other industries and the question. They typically get his will what are the deductions for us? And the answer is the deductions are available to everybody and anything can be deductible so for example You know your home. Typically you know. You're you're cleaning your utilities typically not deductible but if you have a Home Office now that's deductible you know your car typically not deductible you have a Home Office and you use your car for business now is deductible if you travel typically not deductible but you can make travel deductible the key is that the kids to understand I think the the tax laws actually the best instruction guide on how to make money that was ever created and people. Don't really think about that ladies to take money but think about this. So here's the four the therefore tests for being deduction you tell me if this will make you more money mark. I know you're really into statistics. You really into making sure that things are efficient in your in your businesses right in your in your members businesses so thinking about this first of all an expense to be deductible has to have a business purpose. Well okay why? Why are you spending money and Your Business? If it doesn't have a business purpose right number two it needs to be ordinary which means it's typically your business. Well if you're going out and buying for example extravagant meals or you know Equipment that you really don't need. Guess what that's technically not deductible because it's not typical in the business okay and I would think that the more typical you can get the more likely you are to make money on that from that expense. The third one is it has to be necessary. Meaning that it's profitable okay. It's going to either expand your market or it's going to increase your bottom line okay. Well that's obviously an important one as far as making sure your expense is i. Oh and then and then the thing is it absolutely has to be documented. You have to have good documentation so you know I always say that. The purpose of expense is to create income. So if you follow those rules chances are your expenses are going to create income on top of that. They're going to be deductible so on one end you get a tax benefit on the other hand. You're making money so I don't know what could be better than that. But that really goes to the core in the heart of Internal Revenue Code The tax law. Is that the government is saying. Look if you do things to make money we will support you will help you make money will actually take some of that risk from you will help contribute to that expanse because we know that when the money comes in you're going to be paying taxes to us. Yeah excellent. Listen I don't want you to throw any of your colleagues under the bus or anything but I'll tell you that a common theme is that everybody wants a CPA that thinks like you everybody wants EPA. That's looking at the tax code as your ally in a way for you to legally decrease your tax liability and not as a potential red flag in an audit right so people are going to hear some of the strategies and and just your overall demeanor and your your point of view on taxes and that you can decrease significantly safely and legally we can go back to their CPA. And it's happened to me personally before and the CPA is GonNa go. Oh no no no. No that is a red flag. You're GONNA get audited. If you do that I wouldn't do that. I would suggest that. Go back and pay your thirty to fifty percent and we just WANNA pull our hair out because because we know that this is possible and it's legal if it's done correctly and we need guidance in that direction not somebody that we feel is working against against what we're trying to do and that's legally decrease our tax liability. What would you say what's your advice? Well so I'll I'm happy to throw my colleagues under the bus because I think that's where they belong frankly Well look let me put it this way. Okay so in fact. I haven't given you an update in a while. We now have thirty five members across the country in our network mark so that's very CPA firms. That I'm training on a basically a weekly basis to be able to do that. You're going to slow. I know I know seriously. We literally can't move fast enough and what's interesting is there's a lot of EPA's who will air dying for this. They just don't know where to get it. Okay so what I would encourage you to do as if you do. Run into this with your. Cpa say what? You should join. Toms network the wealth ability network. And you'll learn why this is okay. You'll learn how to do this. Here's the thing I always find. If if a professional is not willing to learn it's time to find a new professional right. I mean if I had a dentist that what I love about my dentist is every time I go into his office. There's something new in there he's looking at. He's got new equipment and he's got a new way of doing things and then going okay. Well that means he's constantly learning he's not relying on the old tried and true all the time. Well the same thing is true with any profession. It's particularly true in the CPA profession. Where you have a lot. I mean we're we're a profession of people that it's hard to change how we do things right. I mean this is not you guys are at the forefront of the met. I always think thought the dentist or the forefront of the medical industry absolutely forefront of the medical world. You guys are always adopting new things. You didn't let insurance take over your practice. I mean you did all sorts of you. I've always admired Dennis From a business standpoint and you know. Cpa's are like we're as a as a group were way behind so he here's a here's another way to look at this so you think about your Your best surgeons in your business. Okay and they do some pretty high. You know complicated surgery right all right. So is that risky? Well it would be for a dentist to hasn't learned anything the last thirty years. It would be extraordinarily risky. And you wouldn't want them touching your mouse would you okay? The same is true in my profession. So what happens is is that when you have a CPA or a tax prepare. Who doesn't understand very much of the law? Everything outside of what they understand is going to be risky to them. It's going to be very aggressive. And they shouldn't do it. Frankly they should stay within station. Stay within their wheelhouse as we were saying baseball right. And if you on the other hand if you have. Cpa's that no you know. A very controls ninety percent of the tax law then anything within that ninety percents going to be very conservative to them. So what is conservative to me is going to be aggressive to somebody else. And it's just because I spent so much time studying the tax. I mean for example. The cares act bill by the time anybody even gotten a Synopsis Salad. I'd read a four or five times and that's just the wet. That's what I do. Okay that's what we do is a network so you need to find somebody you know you need a good team member just like you need a good dentist. I mean I went. Trust my teeth to just anybody right. I mean I've I've changed. Ns before because of that right you want somebody who's on top of things who's in the forefront who's always learning and when you do that you get absolutely the best care and the best service so should we start with the cares act then since you're so familiar with that right now what are some of the. What are some things? What is one of the things we can do immediately to take advantage of this new legislation? Well so so. I think there's two big things that are going to that applied to a lot of Dennis first of all if you and this just came out today by the way they're constantly writing the irises constantly releasing new information about cures act. So in the cares act there was a change retroactively to to to the beginning of two thousand eighteen. Were any leasehold improvements. Now I know any dentist. That's open an office in the last couple of years and I know because we have a client that the dentist opening off as the last couple of years you should be. You have an opportunity to get some money back and here's how it works so there was a mistake made in the two thousand seventeen Act where they didn't include leasehold improvements in the bonus depreciation roles bonus depreciation means you get to write off one hundred percent first year so they left that out. That was a mistake but it was still it loved got left Wa. They corrected that mistake in the cares act and the corrected at retroactively. What does that mean? Let's say you spent two hundred thousand dollars on leasehold improvements you get you open a new office. You know you you fix it all out. You spend two hundred thousand dollars off you. Probably in two thousand eighteen took depreciation of roughly four thousand dollars. Will now you can actually go back to two thousand eighteen. Get your two hundred claim. Two hundred thousand dollar deduction or up to two hundred thousand and get a refund from two thousand eighteen now. Let's say that you go. I don't want you know two thousand eighteen. Not My best. I wanted to in two thousand eighteen. You can also do in two thousand nineteen you get to choose in fact you get to choose between two thousand eighteen nineteen and twenty which tax return. You put it on so that that to me is a huge opportunity on top of that. Let's say for example that you had this in two thousand nineteen and it creates a loss for you on your taxes and what we call a net operating loss while again in two thousand seventeen. They changed the law. You couldn't carry those losses back and get a refund the cares act change that now you can carry back five years so for a lot of people listening. This is going to be especially impactful this year. I know you guys. Are you know you're you're not allowed to go into words? You're you're not working right now. I suspect there's going to be a whole lot of Dennis. That don't have a profit this year. Okay they'RE GONNA. They'll they'll be lucky to break even and if you don't and that's actually the reason this is the reason for this change. You can file a claim five years back so if you had really good year four five years ago you get to get some of that money back by finally to carry back claiming it's it's like an amended return and it's really easy to do so if you have losses in eighteen nineteen twenty you can carry back five years will. Let's say that you had the leasehold improvements okay in eighteen and they created a loss for you will. You can carry that loss back. Not only do you get your money back from two thousand eighteen. You can carry that loss back five years before and and get money back two thousand thirteen fourteen fifteen so. I think these are two really big things for the dental profession. That probably not a lot of counts or talking to them about so. You're saying that if we had most of us are going to have a pretty flat or maybe even a loss year for two thousand twenty if if two thousand nineteen was our best year yet we can carry back the loss from two thousand twenty two two thousand nineteen. That's right so so here's something about what you may WanNa do. And we'll have to see what they do with regulations on this. You may want to hold off filing your two thousand nineteen return and paying your taxes and granted. You know you don't pay your taxes and you will them. You'RE GONNA pay some penalty but just remember that if they were to come out with regulations that said you could do a quick carry back claim to two thousand nineteen year taxes at all so at a minimum. If you ought to be able to get back money that you put in this year but it's possible even that you want to put the money in at all so I would I would kind of I kinda and encouraging people let us prepare the tax return. Get it all ready to go for July. But let's let's say maybe we get some new regulations from the IRS. Because they are literally coming out with regulations on a on a daily weekly basis and we might find something on this net operating loss that allows us to do a quicker carry back claim or an estimated carry back claim and actually get some money back even for two thousand eighteen. Wow those are biggies. Those are biggies they you. They just released that information. What the the the leasehold improvements little that was this morning. Okay I read the swearing. They released late Friday afternoon. I'm looking at it this morning and I want to make sure everybody gets on top of that one. It's a big deal. Excellent wow good stuff. Good stuff okay. So I'M GONNA go right into some of the meat and potatoes of what you and Robert Often talk about And Robert has I mean I think he has the number one business selling business book of all time correct number one bestselling personal finance book of all time. We're stead born at yet reached port at. Andt all of his off shoots which which is just an incredible media empire that he's been able to create yourself as well as being part a big part of the spoke big big spoken that wheel so you guys love real estate and this is a kind of a thing that that gets kicked around in our community a lot. Should I lease should I buy is real estate and better a better investment? 'cause we're talking to high income individuals here high net worth individuals here and people are constantly asking the question. Should I invest in the stock market shy best in mutual funds and 401K's? Should I go into real estate? In your opinion what is your favorite vehicle for investment. My favorite vehicle is actually whatever you really enjoy and can get really good at. I'm not I'm not a real estate guy. I'm not a stock guy. I'm not a business guy. I'm not a gold and silver guy. Non-oil Guy I'm a big believer. They get really good at one thing and you do that one thing. So if you're if you really love if you think you'd really love real estate get really a real estate and do real estate if And then figure out what kind of role say do multi my GonNa do commercial industrial. If I'M GONNA do I'm GONNA do multifamily. What kind of multifamily GONNA do? What kind of market am I going to be in? All of those are decisions that a professional investor looks at very carefully before before ever even looking at an investment the challenge that amador investors have is that they tend to look at every investment as a completely new decision and what it should be is what what the professional investors are doing is. They're saying look. I'M GONNA make my decision once I'm going to decide what type of real estate. What market what type of rants? What kind of what? Size? How many. How many tenants I'm looking for. What how how long the LISA's are? What kind of long value? I'm going to do you know what kind of debt I'm going on if I put any debt on it and I'm GonNa make all that. I'm going to make that decision first and then what I'm GonNa do is look for properties that meet my criteria. That's how I would invest in real estate. It's actually industrial state. Okay now there are things that we need to consider with this crisis going on The first is that multifamily. Of course we heard that a third of attendance did not pay the rent in April and another third and it probably two thirds won't pay their rent may okay so you got this. This potential opportunity in multifamily were down the road. You're going to see some really big bargains. And so now would be the time to get educated and become a professional investor. So that when those bargains calm in November December January next summer. Okay when those bargains come. Because the unsophisticated. Multifamily investors lost their properties. Back to the bank. When those become available you want to be ready for that. The only way to be ready for it is if you'd become a professional investor doesn't take a lot of time takes couple hours a week You know one things I love a about Denis's ten of a little more time than for example a a orthopedic surgeon or a heart surgeon. Somebody like that. So you're you're in in a in the same field but you. You tend to manage your time better. I think they do so because of that. You know taking a little time to become a professional investor can be really really be helpful the other thing in real estate. That is going to be really interesting to watch is what happens here. We are on a on a on a video conference right. Normally you would do this in a live ballroom. But we're on a video conference well. People are holding their their staff meetings. We hold SAF means every week this way. Everybody's getting used to video conferencing. So what's that GONNA do the commercial real estate market? I my personal. Life is real commercial real estate market in the next two or three years is going to crash heavily and it will never ever recover. You will never recover so I would be very careful about any commercial real estate. I was buying right now even for a even for your own practice because I think these prices are going come way way down and I think I I mean if I were doing it right now. I'd probably lease three years two or three years and then wait and see if I couldn't get a better deal when the whole market crashes Koso- commercial market is absolutely going to crash. I mean it's GonNa come tumbling down. So that's it's a whole different world than it was three months ago right three months ago by your own building absolutely makes all the sense in the world okay. Why would you pay rent when you can have your you know be be paying down a mortgage and amortizing your long not sure that's the case right now I? I'm really not sure that that's where I would go right this minute. Just because I think we're in for a big not a temporary correction but a permanent change to how people do business and particularly how how many How much square footage that. They that they decided that they want and that does affect Dennis because even though dentist have to have the same amount of square footage they had before. Remember there's just going to be a lot more buildings available and so there's there's GonNa be some opportunities that's why I always. I really encourage people right now. Now's the time to get educated. Now's the time to take time and become a professional investor so when those opportunities happen you're ready for them awesome. Awesome okay. So let's take this big hunk that we have this thirty to fifty percent that the average American is paying in taxes. What some of the low hanging fruit I mean. I hate to get to super elementary because this is a relatively sophisticated group. That's listening to you now. But from the from the civilised to even a little bit of the more sophisticated ways that we can almost immediately start digging into that thirty to fifty percent that were currently paying. You know the the first thing is is is what I started with was deductions. I mean first of all Home Office. I mean everybody should have a Home Office. There's there's specific rules on how you can have a Home Office and your dental office. Okay so you can have both you. Just follow the rules It does increase your automobile deduction so you've got big automobile deductions so deductions are a big one. And the reason is because this is money you're spending anyway and the government is willing to give you a forty percent discount on your car your home. Your meals your travel all of those things. The government's wanting to give you a forty percents discount. Why aren't you taking advantage of those discounts? Amounts to the government's going to give you forty cents back on the dollar. Why wouldn't you take that deduction so that first one another one? We've talked about this before. I think we talked about it when I was speaking. There is an. It's a really sensitive issue. Right now is the captive insurance company If you're making a lot of money okay. You're making six seven eight hundred thousand dollars a year Basically a captive insurance company is self insurance that you get a deduction for now. There's two things to be aware of first of all that the IRS has decided that anybody has a captive insurance. They're the eight hundred pound gorilla. And if you don't give up on that we're going to come sit on you okay. I mean it's a literally a threatening letter went out to everybody who has a captive insurance company. So many of your members had a captive insurance company. Got The threatening letter and said if you don't stop taking this deduction well that's ridiculous. It's it's specifically allowed by law so don't be afraid of the IRS. This is the number one rule if you're afraid of the IRS. It's probably because you're countless ready to the IRS. Which means you need a new count. Okay to your point earlier mark. And so the but the captive. Here's the here's what I wanNA talk about that. So that letter was sent just as everybody was having Being quarantined right sent on the day every all the states came out with quarantine orders at the same time. Guess what the captive covers. It covers loss of income due to acts of God Wyche the coronal buyers so the captive captive insurance is going to save a lot of businesses. This year it's going to absolutely save a lot of businesses. Because they have that money set aside and they're going to be able to put a claim on their captive insurance for for for loss of business for political unrest for all sorts of being shut down by the government like you guys have And so but it is. It is a huge chain because basically you're getting deduction for something that you still own and that's why the irs doesn't like it because obviously there's a lot of abuse right but if you do it right you have. You have a good company. You actually met. You actually follow all the rules again. These are all things where if you're not following the rules you should be afraid of the IRS. If you are following the rules you should not be afraid of the IRS. It's pretty simple. And it doesn't matter if you're talking about a deduction for a meal or whether you're talking about a three hundred thousand insurance deduction doesn't matter that's all. You always have to follow the rules You know the depreciation that I mentioned that would be a really big one. And here's what I hear so I was talking to a CPA the other day. And I know a lot of your members Mark Kevin Busted in real estate through syndications. And so this the CPA was telling me he so he's the CPA for one of the indications that my clients are invested in. And I said I don't understand this K. One that I'm seeing. It has almost no depreciation on it and he said said Tom I said then you do it. 'cause they're gay. She says we don't do cost there. Gatien's I said why not. He says well. Because you know most of our investors they can't take that depreciation. I'm going so first of all. That's not true because I know a good number year. Investors came for me and we can always take that depreciation. I mean it is so rare when we can't because they're if if you're not understanding the law then you're absolutely right. You'RE NOT GONNA be able to take that depreciation deduction and it's a big deduction you could put one hundred thousand dollars and get a nine hundred thousand dollar deduction or one hundred thousand one hundred twenty thousand dollar deduction so. It's a very big deduction on your tax return but if you're CPA has not set you up properly. You're going to. You're not going to get that deduction until you sell that property now. What ten years down the road whereas if you were set up properly you could get that deduction this year so a lot of it really is like you were saying earlier. Marc who do you go to do? You have somebody who looks at the law. As a way you know to serve you as opposed to a as a way to penalize you sure so can you can from a high of you. Can you just explain what a cost? Segregation analysis is from the perspective of of somebody. That's investing say in these syndications but also for our own our own commercial properties. Yeah so for example. Let's say you buy. Let's let's take your own commercial property. Make It really simple. You buy a building for a million dollars okay. I'm just a little condo office space right bay million dollars for all right. So what did you buy? Yes technically you bought the building. You bought the land you bought the contents of the building and then you bought everything that surrounds the bill called land improvements landscaping lighting parking lot etc. Okay so what? It costs. Her does goes. Is You hire a professional typically in junior but they need a CPA to help them with it and they go in and they evaluate what proportions that million dollars went to land building land improvements and the contents once they broken that out or segregated that out? That's where the cost segregation comes out. Then they go okay. Each of those four items classifications have different rates of deduction so land. Never wears out so it gets no deduction buildings where out over a long period of time so they get deducted at about two and a half percent. A year land improvements. Will they aware of a lot faster? So they get depreciated over fifteen years and the contents of the building they wear out really fast. You know these are like you're seeing fans and window coverings in your floors and all that kind of stuff so they typically get you get a deduction over five years now. Here's the key. The five year in the fifteen year property the contents and the land improvements under the current tax law. You don't get to deduct them over five or fifteen years you get dot com all in this year. So let's say you did that. Cost Gatien and what it came back with was thirty percent of what you paid for is land. Improvements is a combination of land improvements in content. That wouldn't be unusual. That means that that would mean the first year. You would have three hundred thousand dollar deduction on one building now. You might have only put down two hundred fifty thousand dollars on that building. The bank might have put down seven hundred fifty thousand. You put down turf fifty thousand dollars and got a three hundred thousand dollar deduction I don't know of any other asset that you can buy that you can get that kind of leverage on your on your tax penalty so okay this. This is great. I love this. This This discussion so say again. Eureka my my CPS really really conservative. He's never talked about Cossack radiation with me before. I have three practices with with three dental offices in there I've owned between five and twenty five years But Two thousand twenty is going to be a terrible year. I don't think I'm going to need any help with with cost segregation this year. Can we still do the study in two thousand twenty and go backwards? Yeah this is the thing so this is what I was talking about with the Cares Act. Right says gray. Here's what you do. You do cost segregated in twenty twenty you get catch up your depreciation a you'll get bonus depreciation but you will get to catch up. You've probably been taking it over forty years because you probably classified. Most of it is building thirty nine and a half years or whatever thirty nine thirty nine years. Okay instead you're gonNA classified as fifteen or five years and what you're going to do is you're going to catch up so that means that you're going to get a huge deduction this year. We'll let's say that you're just break even to begin with so. Let's say you end up with the deduction of one hundred and fifty thousand dollars. Well WITH CARROT. Now we can carry that back five years so we go back to nineteen eighteen. Seventeen Sixteen Fifteen. We GO TO ACT TWO THOUSAND FIFTEEN. You go okay in two thousand fifteen. Let's say you're in a forty percent tax bracket guess what now you're GonNa get back sixteen thousand dollars from the government because you did. That cost segregation. That's pretty nice. I think it's money we could all use. Yeah definitely definitely so let. Let's let's come back to the The the name of your book is Tax Free Wealth so the big question is the big question is is it possible to get zero taxes to to pay zero taxes? Year-over-year it's amazingly. It's not just possible. I have several clients who make millions of dollars and zero tax. I I was talking to one of my clients the other day and last year two thousand nineteen he made four and a half million dollars and guess what he's going to get in the mail a twelve hundred dollar check from the government because his his taxable income was under a hundred was under one hundred fifty thousand dollars he and his wife so he's got zero tax and he's getting this check from the government twelve hundred dollars for him twelve hundred dollars for his wife. Why because it's based on what your adjusted gross income is while he had so many deductions from real estate that he didn't have any taxable income and so he qualifies for two thousand four hundred dollar check from the government. It may not seem fair. But it's you know you. The government has to apply the rules to everybody. So you don't get to say well I'M GONNA give it to these people who don't show much money on their tax but I'm not gonNA give it to these people over here. It doesn't work that way so it's the same thing you know you you hear about these big real estate moguls who you know. Pay Very little tax right. I don't know like our president right. Who pay very little tax and so can you still see me mark? Yeah I gotcha good okay. I can't see anymore okay so anyway so you you know you hear well. The rich don't pay taxes but the reality is is that you don't have to either because whatever law applies to the rich can also apply to you as long as you know how to apply the law. The difference is the rich. Have much better tax advisers than you did? And that's the only difference. When when when trump was was running for president on people Reporters would ask me is. Is it really possible that he pay zero taxes without without? Jean said I don't know if he cheats or not. But what I do know is is that he'd have to have the dumbest tax advisor on Earth for him to pay any taxes with as much debt and real estate at that he has so. It's it's not only possible I out personally. I have half dozen clients and I have a very small practice but I have. I have many clients who pay absolutely zero taxes than they do it legally and guess what they're invested in assets that constantly make the more money so the government just willing to share the risk. They're willing to share with you if you do. If you do what the governor wants to do they will give you. Tax Benefits are the majority of your clients that pay zero tax real estate investors. Well I would say the majority of clients are actually real estate investors. They all have business besides okay. Very few of them are just real estate. I mean I have. I've doctors I have. I have a doctor client. Let me give you an example. I the doctor client that his practice brings in Costa million dollars a year and I think in two thousand eighteen. He'll pay like forty five thousand dollars tax nice so he doesn't have to be you don't have to be a professional real estate investor. You can be a dentist and still get the tax breaks. You just have to set it up right so that you have a strategy of action to reduce your taxes and a tax advisor. Who understands the law enough that they can actually help you do that? So somebody in your network. If if we're not seeing the light somebody in your network as somebody did ask what? How do we get connections to? Cpa's in your network so somebody in your network would be able to take save last five years and say you've you've overbid taxes. You've had a very conservative. Cpa would you be able to go back and see if you can recapture some of that with very very possibly so typically we have a three year statute of limitations which means we can go back three years taking carry a net operating loss back five years. But here's the thing. Yeah in In our network is the wealth ability network just go to wealth ability DOT COM and And you can schedule a call with us and we'll help you find somebody. Okay who really specializes in whatever your we have we have CPA's network. That's literally specialize in dentists. I mean that is their primary clientele are dentists and the dentists. And they do real estate or they've come to us and learn how to do this so you know what everybody can do this. Everybody can do this Arab Taxes you do have to have the advisor and so that's why we created our network Because we were finding Mark you and I talked about this just a couple years ago and you're telling me about your you know what you're doing with your network and how you were training other dentists than I thought you know what that is such a great idea. I need to train other. Cpa's how to do this. Because I kept running into this where people will say well yet at time. You don't take many clients. How do I find somebody like you and so I decided you know what I'm GonNa do that like work because I know how to find the people and then all I know how to train them? I mean that's all I've done. My whole career is train Cpa's and entrepreneurs how to reduce taxes. So that's what we did. We set that up a Jew minded. Why I say that we have a We actually have a special offer this month. A Kobe nineteenth special. Because we're very concerned about people not taking action right now when they have a three month window until July Fifteenth. And they're gonNA all bunch of taxes so what we've decided. Is that if you were to come to? Welt ability and we do get you set up with one of our members in the month of April. We're GONNA do your personal tax return for free though we're not gonNA charge that first personal tash through. We do whether it's two thousand. Nineteen or twenty twenty. We're GonNa do that absolutely free just because we we really are finding that people have a little more time right now. Men Now is the time to get the financial education and this is what we're we're good at we. We know we can help. We know we can reduce taxes and we just wanted Really give somebody in incentive to say. Look if you do it now. We're going to get you something for free on. That might otherwise cost you thousands of dollars. That's awesome thank you very generous of you guys. I'm going to take a couple of questions from from our audience right now. Dr Kavita says does a Home Office man. You have a dedicated space in your home. That must somehow be proven or is it a matter of logging in the time. Spent in the workspace in that particular workspace in your home. Technically all business owners are working from home at any given time right. It is a dedicated space. Okay so the dedicated room or dedicated part of room doesn't even have to be the whole room and what you do in that space matters as well. So let's say for example that you have a dental practice. You haven't office that you go to so what you doing your home it. Here's what's GonNa Happen. I'm GONNA tell you you're my typical day. Well the Typical Day of an entrepreneur that has a Home Office and another office speaking. Get up you're GONNA go have coffee and breakfast in the morning and then you're going to have a thirty foot commute to your Home Office and that thirty foot commute by the way non-deductible 'cause you're walking so there's no cost to it and then you're gonNA do your administrative tasks you're going to really do. You're you're gonNA spend do all of your administrative tasks from Your Home Office. You'RE GONNA use the dental practice dental office only to do dentistry. That's what you're gonNA use it for and then when you come back home at night you're gonNA come back to your Home Office and you're going to wrap up your day and then you're GonNa have a thirty foot commute back to your kitchen to have a little wine dinner gain now. It's important that you do this every single day. You're not logging your hours. You're just doing the same thing over and over again so that you can show the irs. Yes here's what I do. Here's what doing my Home Office. I think Dennis are exactly the right people for this. Because what what should you be doing when you're at when you're at your dental practice you should be doing dentistry? You should be making money. You shouldn't be spending your time doing administrative tasks do that in your Home Office. And there are very specific. Rules very detailed. Sit Down with your tax advisor. Make sure you go through all the rules. Okay there's a specific code section section. Two Eighty cafe specifically applies to home off says so there are very specific details on what you have to do. But they're not that hard. I mean we have lots of clients who Legally take advantage of this awesome. Awesome Sal. Asks I know that you and Robert Travel all over the world gather in Europe. You guys are a New Zealand and Australia. Canada sal asks. Do you have any contacts that you work with Canada? He's an Ontario. I'm I I actually do have one contact in Canada. I do For whatever reason that's been the hardest one is to find somebody. Can I do have a contact in Canada? And certainly if you call our office they will probably send me an email just no. They won't have the answer off the top of their head. They'll call me. You just need to tell them. Tom Said I was on on on Marquesa. Webinar and Tom said that he had a contact or somebody in Canada so Make sure that they kind of push them to to get back to me. And I'll I'll get that over to them awesome. Okay let's see. Dr Ron says discuss segregation work for Non Commercial Property. For instance a hobby farm that loses money for the grandkids. No so you've number one rule for a deduction there has to be a business purpose. Okay and a hobby is not a business purpose so it has to meet the regular deduction rules before he can do a cost there Gatien. Now you know it could be a doesn't have to be a commercial. Property can be a residential property that you rent to a tenant but it does have to be a profit making business and Hobby. Losses are not okay awesome. Thank you This is back to me. What my personal questions. At one of one of my favorite things is in the first chapter of your book. Tax-free wealth dreaded twice cover to cover by the way Is you do a comparison between income that you could derive from the stock market versus income. That you could derive from a real estate investment and due to a Depreciation you show the benefit of a real estate investment versus the Stock Market Investment which the Stock Market Investment at first blush. Looks like a probably a better deal with a higher percentage of profit. Can you kind of just explain? Allies always here. Here's the the challenge that have with particularly with financial planners they'll talk about. Oh well you know. Our Mutual Fund did ten percent. And my question always is ten percent for who ten percent for you or ten percent for the investor because because ten percent is. Let's say let's say you had a dividend bearing stock. You've spent a thousand dollars on and pays one hundred dollars a year. Okay so ten percent that would be a really good dividend paint stotka. Okay not too many of those out there. So a hundred dollars. About how much tax would you on that? Will you probably pay forty to fifty percent tax on that on that? Well excuse me. Twenty to thirty probably pay thirty percent tax on that. Don't pay thirty percent tax on that dividend which means you really only made seven hundred dollars so if you had a real estate investment I. I'm sorry yeah. Sorry thousand dollars in one hundred dollars you really mid seventy dollars okay. But let's you had a real estate investment. That made you sixty dollars okay. You're going okay. We'll seventy or sixty that that but let's say created a loss that offset taxable income for so that actually so so that loss was actually enough to add another twenty dollars into your pocket because of the tax reduction the money that you would otherwise have to pay will now that real estate investment even though it seems to make far last sixty dollars versus one hundred dollars is actually making you more eighty dollars versus seventy dollars because after tax. You have more money in your pocket. And what's what is the what matters anyway. All the matters is how much money you have in your pocket. It doesn't matter what rate of return is is worthless doesn't mean anything what really matters is. How much cash did you put in your pocket? Excellent excellent okay. So let's talk about this Just just really really quickly I think most people have read the book Cashflow quadrant so most of us are on the left side of the cashflow quadrant. The less the left side of the cashflow quadrant. If I get this correctly as employer and self employed on the right side is larger business the be quadrant and investor. So most of US dentists are in the Esquadra were specialists and were trying to get over to the right side of of the cashflow quadrant to bigger business and investor. So how do we do that? How do we go from the left side? A specialist to the right well first of all. Just remember that. You don't have to be big to get the tax benefits so you could be in the s quadrant and still get the same tax benefits as the B quadrant the challenges you have to behave like the de Quadra. So you can't be set up as a sole proprietor and being US put your put your Biz your dentist practice on schedule. C and hope to get the same tax benefits. That big business has that has a corporate tax return the other balance sheet and they have an income statement and they. Have you know everything that they're doing everything they're supposed to do? You have to behave like the big business. So that's the first thing is an S. quarter business while if they don't do anything you're going to pay really high taxes you don't have to pay any any more taxes in the squatter than they do in the quad. You just have to behave like the quadrant. Other thing to remember is that the I quarter is really the professional investor. So anybody can become a professional bester Somebody's full-time investing. Anybody can become a professor invent investor. I have a we have a client that owns a large manufacturing company and their professional real estate investor and they get all the tax benefits of the and on top of that. They make a lot of money because they're professionals they don't you know they. They don't make the mistakes that the amateur investors make they really have spent the time the effort to Get their financial education and such a way that they can make really much better investment decisions. Excellent they Q. Great answer okay Dr Davis says better to buy or lease a car. That's an interesting question and it it. It's very different now than it was a couple of years ago. The you know the the general always was. How long are you going on? How long are you going to keep the car? If you'RE GONNA keep it three years of last normally it's cheaper to lease it if you want to keep it you know or four to five years or longer than it's probably better to buy it that the what changed is in two thousand. The end of two thousand seventeen begin two thousand eighteen Now if you buy the right car in other words you buy like large SUV. Then you might be better off financially buying the car because we have basically zero are the rate of interest right now is basically zero and on top of that you get big tax benefits for buying that. You don't get for leasing so that's one where the standard the long-term rule of thumb was. It depends on how long you're going to drive your car. And he's still think there's some truth to that because remember that it's not just a tax question. It's what's the value after two or three years right. What's the value of the car? After when you've leased it but you know if you buy a new car every two to three years you may want to lease it otherwise I would definitely sit down with your tax advisor and just run numbers. You know. It's all in. The math is just in the math and You know maybe that it's depending on the type of vehicle that you're buying and may be far better off for you to buy it There's another a doctor. Dr Stan has asked asking of the clients that you've serviced with your aggressive strategies. How often have they been audited? So I swallow my. I find my strategy speed the least aggressive of any account November. Run into come just because I don't do anything that I'm not really comfortable with and frankly that I haven't done myself okay. So I'm not trying strategies on people that I haven't done myself and been doing for many many years. I have that's a number one rule a have. I will never do a strategy. I will never recommended strategy that I don't do myself So that's number one. I I actually find their their their aggressive for a lot of people but they're certainly not aggressive now from our our point of view so I it was the rest of the question. Now that was it. Oh how often are you guys audited? Oh you know what we are. Rarely audited and part of the reason is an important point to me. I'm glad you brought this up. Is that how you report things on your tax return is actually really important? Your chance of being audited now our auto rates go up in the next few years because we do have several clients with captive insurances companies. And the IRA said. They're going to audit every single one of them. Why why shouldn't that are auto rates can go up? I don't think it's an aggressive strategy. I think it's very conservative. It's right within the law however the IRS has a bug ear and they think they should audit them as a normal practice. We have very few people get audited and part of that is because we're much better tax return preparers than the average prepare. I mean we understand what raises a red flag. And what doesn't let me give you a simple example. The biggest thing I get when I travel is that all. I can't take home honesty action. It's a big red black. I'm going if your Home Office. Deduction is a red flag. It's because you have a schedule C. Which is a bigger red flag? You're if you're being taxed as an s corporation there is no place to report that you have all M- office on your tax return. There is no to report that the IRS does not want you reporting it. The IRS wants you to do it the way they are assessed to do it and if you do that it will not only as not a red flag. You'd have to be audited for them to even know you have a Home Office so you know what I hear. People go out and you know what what causes. Audits is an aggressive tax strategy. I would say yeah because an aggressive tax strategy means it's strategy by somebody who doesn't know what they're doing okay is a strategy from a tax advisor or tax repair. That doesn't know what they're doing. If you know what you're doing I would never recommend anything that I thought would be a red flag. Okay now. Capped insurance aside. Because I think that's just a mistake by the IRS. But for the for the most part we're just we're GONNA have very few audits and I rarely handle an audit from a client that I've prepared the Tash ranch. Now I've I'm in the middle of Hanley not right now but it's it's a client that is brand new to me and I did not prepare their tax return and let me tell you. Fight prepared their tax return. They would have a much lower chance of being audited and I can say that just because I've been doing this forty years and I probably handled less than a dozen iris audits. Wow crazy okay Dr Shawn Asks Have Two more questions. A DOCTOR SHAWN ASKS. What's the most advantageous entity selection in European it? It depends on the state you live in and it depends on the business. Okay so you know there's lots of different entities there's there's LLC's and that's a state law not Attack Slot entity LLC's are great a lot of states in California. They're not okay so in Florida. They may not be so there are some states that LLC's not a good entity now the tax entity which is not LLC. There's no such thing as in the tax law okay. It's a hard one for people to State Wise. You not attack sly shoe tax laws federal law. Okay If you're if you're a business owner you probably going to be taxes in US corporation if you're a If you're if you're a real investor you're probably going to be taxed as the partnership if If if you're doing estate planning you're probably going to have Some trusts set up. So all entities are good in the right situation and all entities are bad in the wrong situation K. Excellent and the last one is is kind of a big question but will close on this one Do you have any advice to business? Owners to survive and thrive during what we know is going to be market contraction for X. number of years. Oh absolutely roll number one get some financial education absolutely real number one. I love what mark you're doing because you don't just bring on people who do technical things at dentistry you're talking about the business of Dentistry and I love that and you talk about investments and you talk about real estate so I'm financial educated. That's that's number one number two is. I've been doing a lot of thought about this lately and Actually talked to my friend. Robert Gibbs ocoee almost daily about this. He calls me yesterday about Bowel. Ready Lunch. And he calls me. And he says Don Whitey. What do you think going on right now? And I said you know what his really benefiting right now or the innovators. The people who can adapt their business. Glad to hear Mark Lee saying that you're doing some tell dentistry I think that's going to be important. I think people are GONNA go. We'll look why don't have to go into the dentist man. That's Awesome I. I would hope that you're gonNA come up with some tools that are attachment to the computer that you can look at that that I can hold that you can say. Put it here in your mouth. Put it here in your mouth and I can look at that I would. I would hope that you might even at some point. Be Able to take your xrays rays by Tele Dentistry. I mean I think there's a seriously it's not that far out I think that the people who you know the big word right now pivot I liked the word. Innovate because you know pil. It just means turning around in a circle right. I'm not sure that's what you WANNA do is turn around in a circle running circles. I think what you really want to do is think about how do I what is going to happen. What am I doing differently? I'd start with? What am I doing differently than I did? Three months ago. And guess what probably there's hundreds of millions of people or billions of people that are also doing things the way you're doing them you know. They're doing video conferencing they're doing. They're having phone calls. They're going for walks the riding bicycles. And so think about you. Know how are people behaving differently? What what do you think? How do you project out? How do you think people will continue to behave are going to? Are THEY GONNA go right back to their cars. And eating fatty foods at restaurants or we continue to have a slowdown in heart attacks. Like we've had my one of my doctor client says says that Heart attacks have gone down fifty percent. Since we've been in quarantine not bad not a bad thing traffic accidents. I understand her down sixty percent. We all know that our people oil is at zero right now. Oil is zero today okay. Are we ever going to use oil again are we? Are we going to be driving? Are we going to be walking really riding bikes? What are we going to be doing? Okay so it's a really fascinating time but I think it's time to be innovative and educated. Awesome okay so last one for real. This is Charlotte and she says Dr Charlotte she says. How do you suggest we get our education On real estate investing or finances for that matter. She says There well I. While they're they're they're stunned snub online. I I would start with Rich Dad. Poor Dad frankly That is the book on a personal finance and the reason is because it's fundamentally and accounting book. I remind Robert. Without all the time. That's fundamentally accounting book. It talks about income statement balance sheet. So you really have to understand that second of all you really need to build a team and part of your team needs to be yourself. You need to be the head of that team. Okay don't delegate to some financial planner the say the another person young team. You must have a bookkeeper. You must have a bookkeeper. Okay and this is not your spouse or your aunt or your uncle or some relative okay. You need independent bookkeeper. Then you need to have a CPA if your dentist you need to have CPA. Not Not an enrolled agent. Not some tax preparer not some corner tax preparation service UNIDAS. Epa because the because the what CPA's are trained to do is analyze the numbers. Not just report the numbers but analyze the numbers. You need an attorney on your team. You need somebody. Who can you know? Decide should this. Llc or a corporation and then then what's really been clear with this cares act as she need a banker on your team. People who've had bankers. Guess what they already have their pcs loans in their pocket their money okay people without bankers. They don't have anything right. So the reason you know these big chains chain restaurants got their money's because guess what they had bankers ready to go and so you need that team that's why we get the financial education. I get it from your team so you go to wealth ability DOT COM. We have tons of free education. We have tons of a paid educations. While mark has tons of of Edgy. I Know Mark. You have a ton of education That that you deliver to your to your members so I'd go to people you trust and Of course I would certainly after you read. Port BE SUGARY TAX free. Well but your start with some good books you know there's some really you know seminal books out there and then I would go to. I would go to people that you trust and start building. The team. Excellent excellent stuff so wealth of wealth ability dot com. Is that the best way to contact you. Matt as the best way wealth-building dot com and just put slash scheduled call and we don't charge you anything for finding you a CPA internetwork. We charge them. But we don't charge you but we're happy to help you any way we can you know and if we can help you we'll tell you we can help you well. The great news is guys that we actually did get the big man himself. Robert Kiyosaki is going to be doing a Webinar with us on May First. We just got that confirmation. So yes. Thank for the introduction Tom and Irene. You guys were so awesome and setting that up. So hey man. I can't thank you enough time. You've been a great friend to us in this community over the years And I hope to stay in touch with you and I hope that people take your advice as far as how to kind of come out of this thing swing in and and And there is hope for those of us that take the time to educate ourselves and and really surround ourselves of the right with the right resources. Just remember that in any you know you never want to let a good crisis go to waste. I know that's a a tongue-in-cheek thing that was said back in two thousand eight but the reality is they're going to be opportunities and what I would hope is that you take the time now to prepare so when those opportunities come you're you're able to take advantage of them. Yes excellent excellent. Thanks again thom mcan. Thank you my friend and that wraps it up for another episode of the Dental Poor. Podcast look to reconnecting on the next episode. Thank you so much for joining us today on the dental for Noor podcast checkout true dental success dot com for full recap so every show a schedule of our live events free video tutorials and a whole host of practice building resources.