WEBVTT 00:00:06.030 --> 00:00:09.250 Hi, everyone. This is the How to Lower Your Tax 00:00:09.250 --> 00:00:12.429 Bill podcast. I'm your host, Terrence Hutchins. 00:00:12.949 --> 00:00:15.410 I'm a financial and tax advisor in the Dallas 00:00:15.410 --> 00:00:18.190 Fort Worth area. And the goal of this podcast 00:00:18.190 --> 00:00:20.809 is to help you listeners get educated on different 00:00:20.809 --> 00:00:23.589 tax strategies that you can implement to improve 00:00:23.589 --> 00:00:26.750 your tax situation immediately. Each episode 00:00:26.750 --> 00:00:29.769 will break down useful tax tips you can use to 00:00:29.769 --> 00:00:32.369 save money, no matter what your personal or business 00:00:32.369 --> 00:00:35.929 income situation. Because our motto is keep more 00:00:35.929 --> 00:00:39.490 of what you earn. So let's get into today's episode. 00:00:45.329 --> 00:00:47.969 So welcome back to another episode of how to 00:00:47.969 --> 00:00:51.469 lower your tax bill. I am accompanied by Tamiya 00:00:51.469 --> 00:00:56.689 Kelly once again by popular demand. And so we're 00:00:56.689 --> 00:00:59.369 going to talk about a an important topic whenever 00:00:59.369 --> 00:01:02.509 you are preparing your tax return on the importance 00:01:02.509 --> 00:01:05.390 of reviewing and understanding what happened 00:01:05.390 --> 00:01:08.450 in your prior year. So on this episode, we're 00:01:08.450 --> 00:01:10.769 going to talk about tax deductions and tax credits. 00:01:10.930 --> 00:01:12.890 We're going to talk about things that impact 00:01:12.890 --> 00:01:16.269 your taxes from the prior year. So things that 00:01:16.269 --> 00:01:18.829 might have happened that will impact what happens 00:01:18.829 --> 00:01:21.730 in your current year. We're going to hopefully 00:01:21.730 --> 00:01:24.129 help you look at maybe where you kind of find 00:01:24.129 --> 00:01:26.640 this information. then just give you some tips 00:01:26.640 --> 00:01:29.480 around how you can ultimately utilize this information 00:01:29.480 --> 00:01:33.299 to keep more money in your pocket and This isn't 00:01:33.299 --> 00:01:35.659 gonna be a segment I wouldn't say but Tamiya 00:01:35.659 --> 00:01:39.280 did have a history lesson She wanted to share 00:01:39.280 --> 00:01:41.680 on some of the things she had actually researched 00:01:41.680 --> 00:01:43.359 prior to our episodes I'm gonna give her the 00:01:43.359 --> 00:01:46.680 floor and let her talk about that. So get your 00:01:46.680 --> 00:01:50.239 notebooks out and I am very excited for this 00:01:50.239 --> 00:01:53.000 portion of the podcast Hey, well, listen, thank 00:01:53.000 --> 00:01:55.079 you so much for having me back. Hey, good people. 00:01:55.439 --> 00:01:58.819 I am back. I once was blind, but now I see is 00:01:58.819 --> 00:02:02.760 back. And this is another episode to share and 00:02:02.760 --> 00:02:04.379 put out my business out there about what I didn't 00:02:04.379 --> 00:02:07.819 know about taxes. Right. But I want to say last 00:02:07.819 --> 00:02:10.039 episode, we spent a lot of time saying when you 00:02:10.039 --> 00:02:11.539 look back at your tax return, when you look back 00:02:11.539 --> 00:02:14.810 at your tax return. And this is an important 00:02:14.810 --> 00:02:17.169 podcast for you to do just that, right? One of 00:02:17.169 --> 00:02:19.169 the things that I say I once was blind, but now 00:02:19.169 --> 00:02:22.210 I see. And I say that because I didn't know, 00:02:22.310 --> 00:02:24.050 right? I didn't know a lot of things. But if 00:02:24.050 --> 00:02:27.009 you listen to this podcast. Go back to all of 00:02:27.009 --> 00:02:29.909 the episodes, especially if you are a small business, 00:02:30.409 --> 00:02:33.009 use this podcast like you would use, like you 00:02:33.009 --> 00:02:34.789 study in a book or something, pull out your previous 00:02:34.789 --> 00:02:37.370 tax returns, literally go line by line. Terrence 00:02:37.370 --> 00:02:39.909 does an amazing job of knowing the line numbers 00:02:39.909 --> 00:02:42.090 off of the top of his head. Me, not so much, 00:02:42.550 --> 00:02:45.530 but you definitely can follow along. And one 00:02:45.530 --> 00:02:47.969 of the things that I researched in preparation 00:02:47.969 --> 00:02:51.090 for this particular podcast was the deductions 00:02:51.090 --> 00:02:53.229 and you know how we talk about standard deductions 00:02:53.229 --> 00:02:56.110 and itemized deductions. Listen, I didn't know 00:02:56.110 --> 00:02:58.610 anything about it. I just want a bigger refund. 00:02:58.789 --> 00:03:02.689 I told y 'all that last podcast. Okay. This particular 00:03:02.689 --> 00:03:04.969 fact, and it's not a new segment, it's kind of 00:03:04.969 --> 00:03:08.169 a play on what Terrence does on his other episodes 00:03:08.169 --> 00:03:10.550 at the end where he gives you that little nugget. 00:03:10.710 --> 00:03:13.550 We're just doing it at the beginning. And so 00:03:13.550 --> 00:03:17.490 just kind of a heads up, the Individual Income 00:03:17.490 --> 00:03:22.020 Act of 1944 was created by President Franklin 00:03:22.020 --> 00:03:26.900 D. Roosevelt. So back in the day, the 20th century, 00:03:27.300 --> 00:03:31.500 less than 10 Americans paid 2 % levied on income 00:03:31.500 --> 00:03:35.360 over $2 ,000. Can you imagine? $2 ,000. Income 00:03:35.360 --> 00:03:39.800 over $2 ,000, yes. Less than 10, one in 10 Americans 00:03:39.800 --> 00:03:45.500 paid 2 % of this tax. And so the tax code was 00:03:45.500 --> 00:03:47.840 crazy. It was chaotic. I believe at that time 00:03:47.840 --> 00:03:51.550 it was about 30. two different income brackets, 00:03:52.930 --> 00:03:57.409 32 different income tax brackets. So much so 00:03:57.409 --> 00:04:00.530 that President Roosevelt was like, listen, I 00:04:00.530 --> 00:04:02.909 don't know what's going on. It was said that 00:04:02.909 --> 00:04:05.050 he would just send in his tax return half done 00:04:05.050 --> 00:04:08.370 with a $15 ,000 check and just say, send me a 00:04:08.370 --> 00:04:11.710 invoice for the balance if there is one. Because 00:04:11.710 --> 00:04:15.360 it was so chaotic. And so they did a study. But 00:04:15.360 --> 00:04:18.319 when they did that study, they realized that 00:04:18.319 --> 00:04:20.199 what was complicated was the income brackets 00:04:20.199 --> 00:04:23.500 and the lengthy list of exemptions. And most 00:04:23.500 --> 00:04:25.980 of the time, consuming part of the tax filing 00:04:25.980 --> 00:04:29.220 process was clearly the adding of individual 00:04:29.220 --> 00:04:32.040 deductions. And so with that, the standard tax 00:04:32.040 --> 00:04:36.139 deduction was created to give Americans a relief 00:04:36.139 --> 00:04:39.459 on trying to figure out, taking a truckload of 00:04:39.459 --> 00:04:42.500 receipts to their tax preparer to do their taxes. 00:04:42.540 --> 00:04:45.019 And so they said to make it simple, let's give 00:04:45.019 --> 00:04:47.759 the people, I think at the time it was like 500, 00:04:47.959 --> 00:04:51.019 the standard deduction was like 500. Okay. For 00:04:51.019 --> 00:04:52.720 the people. So, you know, that's a little, little, 00:04:52.759 --> 00:04:55.699 did you know? Fun fact there. 1944 created the 00:04:55.699 --> 00:04:58.439 standard deductions. Interesting, interesting. 00:04:58.980 --> 00:05:02.060 So I affectionately call her Mother Kelly. She 00:05:02.060 --> 00:05:05.459 has the soul of someone who was born in 1944, 00:05:05.680 --> 00:05:09.620 even though she's much younger than that. But 00:05:09.620 --> 00:05:11.379 it's interesting, you were talking about Roosevelt 00:05:11.379 --> 00:05:16.069 and many times with law, It is based upon whoever 00:05:16.069 --> 00:05:19.670 is in charge and some of the pain points or some 00:05:19.670 --> 00:05:21.949 of the things they want to get done does impact 00:05:21.949 --> 00:05:24.550 what gets passed in the law and how that impacts 00:05:24.550 --> 00:05:27.009 us as taxpayers. And that's why the tax code 00:05:27.009 --> 00:05:30.029 is so long because there have been many leaders 00:05:30.029 --> 00:05:32.490 who have come into play, have their own agenda, 00:05:32.689 --> 00:05:34.870 and then they had to add things or change things 00:05:34.870 --> 00:05:37.610 so that it could actually get passed. In fact, 00:05:37.670 --> 00:05:40.329 the biggest tax overhaul prior to the most recent 00:05:40.329 --> 00:05:43.689 one here in 2018 was when Ronald Reagan was president. 00:05:43.920 --> 00:05:46.680 And if you recall, he was an actor prior to becoming 00:05:46.680 --> 00:05:49.699 president. And so the top tax rate when he got 00:05:49.699 --> 00:05:53.079 in office was 70 percent. So we complain about 00:05:53.079 --> 00:05:55.680 our top 37 and some people complain about paying 00:05:55.680 --> 00:05:58.319 20. Well, imagine paying 70 percent of your income 00:05:58.319 --> 00:06:02.279 in taxes. So he actually cut that by 25 percent 00:06:02.279 --> 00:06:04.079 because he felt like, well, you know, if we give 00:06:04.079 --> 00:06:06.600 more people money, then they'll spend more money. 00:06:06.600 --> 00:06:08.579 They'll inflate the economy more. So there's 00:06:08.579 --> 00:06:11.199 always a balance on. How much does the government 00:06:11.199 --> 00:06:13.639 get versus how much you should get and what you 00:06:13.639 --> 00:06:16.600 should do with it? And so one of the goals we 00:06:16.600 --> 00:06:18.220 always talk about with this podcast is making 00:06:18.220 --> 00:06:21.759 sure that the government get less legally based 00:06:21.759 --> 00:06:24.759 on the rules that they put in place. And so one 00:06:24.759 --> 00:06:26.360 of the ways that you can actually lower your 00:06:26.360 --> 00:06:29.079 tax bill is to look at what happened in the prior 00:06:29.079 --> 00:06:31.519 year. And through this, we have what are called 00:06:31.519 --> 00:06:35.160 tax carry forwards. So a carry forward is probably 00:06:35.160 --> 00:06:39.600 a deduction or credit that you had in a year. 00:06:39.740 --> 00:06:41.579 but you weren't able to use it because you didn't 00:06:41.579 --> 00:06:44.300 have enough tax liability to use it in that year. 00:06:44.639 --> 00:06:47.019 So we're going to talk about some examples there. 00:06:47.540 --> 00:06:50.060 And the difference between a tax credit and a 00:06:50.060 --> 00:06:52.259 tax deduction, I always compare it to, let's 00:06:52.259 --> 00:06:54.160 say you went to the store and you had a gift 00:06:54.160 --> 00:06:56.980 card where I could actually just buy something 00:06:56.980 --> 00:06:58.720 dollar for dollar. So if something costs a hundred 00:06:58.720 --> 00:07:01.120 dollars, I can use my hundred dollar gift card 00:07:01.120 --> 00:07:03.439 to pay for it a hundred percent. That's how a 00:07:03.439 --> 00:07:05.360 tax credit works. If you owe a thousand dollars 00:07:05.360 --> 00:07:07.579 in taxes, if you have a thousand hour tax credit, 00:07:07.639 --> 00:07:10.389 it will wipe out your tax bill. If you have a 00:07:10.389 --> 00:07:12.930 deduction though, that's like having a coupon. 00:07:13.410 --> 00:07:14.930 So if I have a hundred dollar purchase and I 00:07:14.930 --> 00:07:18.050 got a 30 % off coupon, then I'm still going to 00:07:18.050 --> 00:07:20.850 pay money, but I'm going to pay less. And so 00:07:20.850 --> 00:07:23.110 it's important when people are looking for how 00:07:23.110 --> 00:07:25.589 to lower their tax bill, they don't focus strictly 00:07:25.589 --> 00:07:28.649 on deductions because generally they're still 00:07:28.649 --> 00:07:30.769 paying something. And many times they're going 00:07:30.769 --> 00:07:33.009 to be worse out of pocket if they just go buy 00:07:33.009 --> 00:07:35.060 stuff, just get a tax deduction. That's what 00:07:35.060 --> 00:07:37.579 we have to get them aware of. But it's important 00:07:37.579 --> 00:07:40.420 that if they had a carry forward from the prior 00:07:40.420 --> 00:07:42.720 year, that they don't forget about it because 00:07:42.720 --> 00:07:46.000 it could allow you to lower your tax bill in 00:07:46.000 --> 00:07:48.060 the current year. So to me, tell me a little 00:07:48.060 --> 00:07:50.800 bit about, obviously you started filing taxes 00:07:50.800 --> 00:07:52.939 this year. What were some of the conversations 00:07:52.939 --> 00:07:54.899 or what were some of the things that maybe people 00:07:54.899 --> 00:07:57.220 didn't know about that happened the prior year 00:07:57.220 --> 00:08:00.300 that you discovered on their tax return? So one 00:08:00.300 --> 00:08:03.620 of the things that and I would put myself in 00:08:03.620 --> 00:08:07.139 here that we didn't know Was truly the difference 00:08:07.139 --> 00:08:10.220 between the two the language. That's a credit 00:08:10.220 --> 00:08:13.079 and a deduction Right the credit and a deduction 00:08:13.079 --> 00:08:15.379 Didn't know the difference between the two one 00:08:15.379 --> 00:08:17.519 of the things that you will often hear some of 00:08:17.519 --> 00:08:19.959 the people That are listening would probably 00:08:19.959 --> 00:08:23.139 say is I want to claim this on my taxes They 00:08:23.139 --> 00:08:25.420 said I could claim this on my taxes. So that's 00:08:25.420 --> 00:08:29.350 really the language that is centered around a 00:08:29.350 --> 00:08:31.569 credit or deduction. They don't typically come 00:08:31.569 --> 00:08:34.309 and say, hey, can I get this tax credit or hey, 00:08:34.389 --> 00:08:37.110 can I get this deduction? Usually the language 00:08:37.110 --> 00:08:41.769 is, can I claim this? And from a small business 00:08:41.769 --> 00:08:45.210 standpoint or people who are sole proprietors 00:08:45.210 --> 00:08:50.730 or LLCs with an S corp designation, they just 00:08:50.730 --> 00:08:55.320 want to avoid paying taxes. And what you're saying 00:08:55.320 --> 00:08:58.100 is that we need both. We need to understand our 00:08:58.100 --> 00:09:00.559 deductions, which lowers the income that I have 00:09:00.559 --> 00:09:03.559 to pay taxes on. And we also need that credit, 00:09:03.879 --> 00:09:06.919 which helps us subtract from the amount that 00:09:06.919 --> 00:09:10.360 we owe. And so that's what I've experienced myself 00:09:10.360 --> 00:09:13.320 as well as a sole proprietor LLC coming to me. 00:09:13.820 --> 00:09:17.759 They just say, I want to claim this or send me 00:09:17.759 --> 00:09:23.059 that box load of receipts. Right. Exactly. that 00:09:23.059 --> 00:09:26.200 and for me to figure it out what is deductible 00:09:26.200 --> 00:09:28.519 versus what is a credit that they could take 00:09:28.519 --> 00:09:31.220 advantage of. Gotcha, gotcha. Well, cool. So 00:09:31.220 --> 00:09:33.899 let's dive into a few deductions. So these are 00:09:33.899 --> 00:09:36.419 things that will reduce your income in the current 00:09:36.419 --> 00:09:39.360 year that happened in the prior year. So the 00:09:39.360 --> 00:09:43.139 first one is what is called a net operating loss 00:09:43.139 --> 00:09:46.720 or an NOL for short. And this is effectively 00:09:46.720 --> 00:09:50.179 if you own a business and you had a loss from 00:09:50.179 --> 00:09:53.360 that business. So you Spit more money than you 00:09:53.360 --> 00:09:56.980 made it create a tax loss now depending on the 00:09:56.980 --> 00:09:59.580 business and a type We've always we've been going 00:09:59.580 --> 00:10:02.259 over a series around real estate and we talked 00:10:02.259 --> 00:10:04.899 about how some of those losses can't be used 00:10:04.899 --> 00:10:08.059 That isn't gonna be this thing. We'll get into 00:10:08.059 --> 00:10:10.659 that later. This is gonna be more an active business 00:10:10.659 --> 00:10:13.159 So an active business that has a let's say a 00:10:13.159 --> 00:10:15.320 ten thousand our loss Well that ten thousand 00:10:15.320 --> 00:10:18.159 our loss because I actively worked in it. I can 00:10:18.159 --> 00:10:21.250 use that to offset my income. However, I If you 00:10:21.250 --> 00:10:23.570 spend a lot of money, let's say, and you have 00:10:23.570 --> 00:10:26.230 maybe 10, 15, 20, 30, a hundred thousand dollars 00:10:26.230 --> 00:10:28.750 in losses, sometimes you may not have enough 00:10:28.750 --> 00:10:31.889 income to utilize that against. In fact, this 00:10:31.889 --> 00:10:34.769 year, a business loss can only be used to offset 00:10:34.769 --> 00:10:38.409 80 % of your income. So if I had, let's say I 00:10:38.409 --> 00:10:41.029 made a hundred thousand and I invested in an 00:10:41.029 --> 00:10:44.830 oil and gas deal, right? And we'll get into maybe 00:10:44.830 --> 00:10:46.570 the dynamics of that in a future episode, but 00:10:46.570 --> 00:10:48.830 let's say I lost a hundred, $20 ,000 on paper 00:10:48.830 --> 00:10:51.960 on this deal. Well, 80 % of my income is $80 00:10:51.960 --> 00:10:55.419 ,000. So if I had a $120 ,000 loss, I can only 00:10:55.419 --> 00:10:58.659 use $80 ,000. The other $40 ,000 would carry 00:10:58.659 --> 00:11:01.440 forward to the next year. So you think about, 00:11:01.500 --> 00:11:05.299 all right, if I'm in 2025 and I got a $40 ,000 00:11:05.299 --> 00:11:08.740 deduction against my income, that would impact 00:11:08.740 --> 00:11:11.539 my planning, because I know that if I make another 00:11:11.539 --> 00:11:14.659 $100 ,000, I'm only going to pay tax on $60 ,000 00:11:14.659 --> 00:11:16.820 of it, if that's the only carry forward that 00:11:16.820 --> 00:11:19.519 I had. Okay. Now, as a matter of fact, I know 00:11:19.519 --> 00:11:22.700 many of you have talked about, you know, our 00:11:22.700 --> 00:11:25.159 current president and his tax situation. In fact, 00:11:25.279 --> 00:11:29.639 there was a rule between 2018 and 2020. So post 00:11:29.639 --> 00:11:31.539 COVID, there was a lot of stuff that's happened 00:11:31.539 --> 00:11:34.840 and COVID brought a lot of rules that were just 00:11:34.840 --> 00:11:37.059 shocked to the system. One of those came from 00:11:37.059 --> 00:11:40.100 the cares act. So in the cares act, it basically 00:11:40.100 --> 00:11:42.500 said, Hey, you have this net operating loss. 00:11:43.199 --> 00:11:45.379 Normally, you can just carry that forward until 00:11:45.379 --> 00:11:47.559 you use it. So if I can't use it this year, I 00:11:47.559 --> 00:11:49.200 can use it next year or the following year until 00:11:49.200 --> 00:11:51.919 it goes to zero. Well, in the CARES Act, they 00:11:51.919 --> 00:11:55.279 let you actually carry back your losses three 00:11:55.279 --> 00:11:58.399 years. So that just meant, hey, if I had a $50 00:11:58.399 --> 00:12:00.860 ,000 loss this year I wasn't able to use, I can 00:12:00.860 --> 00:12:03.519 go back and amend my tax return from the prior 00:12:03.519 --> 00:12:06.799 year or two years prior and reduce my income 00:12:06.799 --> 00:12:09.639 from then. So that basically said, hey, if I 00:12:09.639 --> 00:12:12.779 paid taxes in the past, I now can reduce my income 00:12:12.779 --> 00:12:15.039 from that year, which means I'll just get a refund 00:12:15.039 --> 00:12:17.480 for the amount of taxes that I paid. So that's 00:12:17.480 --> 00:12:18.919 actually something that President Trump took 00:12:18.919 --> 00:12:21.899 advantage of. And whenever he was paying a lot 00:12:21.899 --> 00:12:24.740 of taxes, because people say he didn't pay, which 00:12:24.740 --> 00:12:28.519 is half true. But he actually paid a lot of taxes 00:12:28.519 --> 00:12:31.340 at one point, but he had a big tax loss. He actually 00:12:31.340 --> 00:12:34.340 carried back and he actually got a seven plus 00:12:34.340 --> 00:12:37.460 figure refund from the government. So imagine 00:12:37.460 --> 00:12:40.440 you getting a seven plus figure check from the 00:12:40.440 --> 00:12:42.879 government. Right. How would that treat your 00:12:42.879 --> 00:12:45.460 Christmas there? But anyway, that's what you 00:12:45.460 --> 00:12:48.500 look at as far as a net operating loss. Next, 00:12:48.580 --> 00:12:51.059 we have what's called a capital loss. All right. 00:12:51.139 --> 00:12:53.259 So to me, are you familiar with the capital loss? 00:12:54.360 --> 00:12:59.120 So a capital loss is the what ordinary income 00:12:59.120 --> 00:13:01.019 or something, a deduction against the ordinary 00:13:01.019 --> 00:13:03.559 income that that carries forward. Is that what 00:13:03.559 --> 00:13:06.720 you're referring to? Kind of enlighten me, enlighten 00:13:06.720 --> 00:13:10.080 the people. Gotcha. Gotcha. Okay. So if you invest... 00:13:10.080 --> 00:13:13.059 Before you get into that, I will say about the 00:13:13.059 --> 00:13:16.860 net, the NOLs, the Net Operating Laws. One of 00:13:16.860 --> 00:13:18.879 the things, again, that you'll hear us say is 00:13:18.879 --> 00:13:21.019 you got to look at your previous tax return and 00:13:21.019 --> 00:13:23.120 you got to know your business. This is where 00:13:23.120 --> 00:13:25.779 you have to know what's going on in your business 00:13:25.779 --> 00:13:28.860 because people don't take advantage of that or 00:13:28.860 --> 00:13:30.919 don't know how it works or really don't even 00:13:30.919 --> 00:13:33.720 know the limitations of it. And this is why you 00:13:33.720 --> 00:13:35.559 use a tax preparer versus trying to do this on 00:13:35.559 --> 00:13:38.230 your own. because you really could be paying 00:13:38.230 --> 00:13:40.970 more taxes. What's the name of this podcast? 00:13:41.049 --> 00:13:43.129 How to lower your tax bill. You really could 00:13:43.129 --> 00:13:45.990 be paying more taxes than what you need to if 00:13:45.990 --> 00:13:48.750 you know about your NOLs and if you know what 00:13:48.750 --> 00:13:52.190 can carry forward. And if there's any tax bills 00:13:52.190 --> 00:13:55.350 that work in your favor, i .e. current administration, 00:13:56.370 --> 00:13:58.789 that you can go back and help you get a refund. 00:13:59.070 --> 00:14:02.149 First, it's just breaking even. For sure. So 00:14:02.149 --> 00:14:06.320 with the capital loss, if you invest in Generally 00:14:06.320 --> 00:14:08.179 stocks and bonds is where this normally will 00:14:08.179 --> 00:14:10.320 come from So if I invest in stocks and bonds 00:14:10.320 --> 00:14:13.679 that's considered a passive activity unless I'm 00:14:13.679 --> 00:14:16.179 a trader So we will get into that right now But 00:14:16.179 --> 00:14:18.759 if I go in I have a Robin Hood account and I 00:14:18.759 --> 00:14:21.279 go buy a stock in this year We've seen the stock 00:14:21.279 --> 00:14:24.799 market has taken a step back. So if I decide 00:14:24.799 --> 00:14:28.659 hey, I wouldn't bought a stock for $5 ,000 and 00:14:28.659 --> 00:14:32.440 It goes to zero hypothetically. I have a $5 ,000 00:14:32.440 --> 00:14:36.539 loss Now, if I go and I do no activity for the 00:14:36.539 --> 00:14:39.200 rest of the year, when I file my tax return, 00:14:39.639 --> 00:14:43.139 the IRS will only let me claim $3 ,000 of that 00:14:43.139 --> 00:14:45.899 loss. Even though I lost five, they'll only let 00:14:45.899 --> 00:14:49.059 me take three. The other $2 ,000 is going to 00:14:49.059 --> 00:14:53.220 get carried forward to the next year. Now, alternatively, 00:14:53.519 --> 00:14:56.620 if I had, let's say another stock that I had 00:14:56.620 --> 00:15:00.090 made, let's say $7 ,000, I could have used the 00:15:00.090 --> 00:15:02.269 $5 ,000 to offset the seven and I would have 00:15:02.269 --> 00:15:05.769 only paid tax on two. So you have to net out 00:15:05.769 --> 00:15:08.590 your losses against each other. And if you have 00:15:08.590 --> 00:15:11.990 a loss that can't be used, so more than $3 ,000 00:15:11.990 --> 00:15:14.210 in a year, then it'll actually care for it to 00:15:14.210 --> 00:15:16.889 the next year. So this is important because you 00:15:16.889 --> 00:15:18.669 really just have to look at your tax return because 00:15:18.669 --> 00:15:20.769 there's nothing on the tax return that will show 00:15:20.769 --> 00:15:24.409 this. In NOL, there's a form 1045 that will show, 00:15:24.529 --> 00:15:26.289 Hey, here's how much the NOL is going to happen 00:15:26.289 --> 00:15:29.340 for the next year. With this, There is nothing 00:15:29.340 --> 00:15:31.259 that suggests that it'll just show you Hey, what 00:15:31.259 --> 00:15:33.580 is your total loss and it'll show you the loss 00:15:33.580 --> 00:15:35.379 that you're allowed to use But there's nothing 00:15:35.379 --> 00:15:36.879 that will specifically say hey, you're gonna 00:15:36.879 --> 00:15:40.039 carry forward $20 ,000 to the next year so if 00:15:40.039 --> 00:15:42.559 you overlook this you actually will lose this 00:15:42.559 --> 00:15:46.399 deduction and it'll Create to where you're actually 00:15:46.399 --> 00:15:49.559 gonna be paying more taxes than you should Okay, 00:15:49.919 --> 00:15:52.059 so we have a few more we have passive activity 00:15:52.059 --> 00:15:54.440 losses So that's where we've been talking about 00:15:54.440 --> 00:15:57.379 real estate if you are not a real estate professional 00:15:57.450 --> 00:16:00.710 or you make more than $150 ,000 and you own real 00:16:00.710 --> 00:16:03.009 estate, you probably are going to have some kind 00:16:03.009 --> 00:16:05.669 of tax loss as a result of the real estate that 00:16:05.669 --> 00:16:07.909 you own. So if you earn that situation where 00:16:07.909 --> 00:16:10.090 on paper your real estate, your rental loses 00:16:10.090 --> 00:16:12.389 money, you're actually going to have what's called 00:16:12.389 --> 00:16:15.629 a passive activity loss. And that loss is going 00:16:15.629 --> 00:16:19.070 to be on form 8582. If you look at that form, 00:16:19.110 --> 00:16:22.049 it's going to show you, Hey, this is a loss that 00:16:22.049 --> 00:16:24.529 it let you use this year. Here's the loss that 00:16:24.529 --> 00:16:27.669 was considered unallowed. That unallowed loss 00:16:27.669 --> 00:16:29.909 is gonna need to be carried forward. And this 00:16:29.909 --> 00:16:31.809 is very important because if you own a rental 00:16:31.809 --> 00:16:34.149 and it's been losing money, let's say every year 00:16:34.149 --> 00:16:38.049 on paper, that loss doesn't go away, but it's 00:16:38.049 --> 00:16:41.690 gonna accrue. And that accrual of loss can then 00:16:41.690 --> 00:16:43.970 be used to offset once the rental starts making 00:16:43.970 --> 00:16:46.730 money. Or if you sell the property, you could 00:16:46.730 --> 00:16:50.009 use that entire loss to offset the gain that 00:16:50.009 --> 00:16:52.789 you had. So if you don't keep... Track of this. 00:16:52.870 --> 00:16:54.830 I mean, I've had other preparers that said, Hey, 00:16:54.909 --> 00:16:57.129 they found a client who had over a hundred thousand 00:16:57.129 --> 00:16:59.690 dollars of losses and his tax preparer the next 00:16:59.690 --> 00:17:01.990 year when they switched didn't really look at 00:17:01.990 --> 00:17:04.390 it. And so that hundred thousand loss was just 00:17:04.390 --> 00:17:07.309 forfeit it. Now you can go back and amend and 00:17:07.309 --> 00:17:08.410 all that, but you just don't want to have to 00:17:08.410 --> 00:17:11.390 do that. Um, and I just saw the IRS took another 00:17:11.390 --> 00:17:15.430 $20 billion budget cut. Uh, so it's going to 00:17:15.430 --> 00:17:17.029 take a long time. If you don't get it right the 00:17:17.029 --> 00:17:18.710 first time, just know it's going to take a long 00:17:18.710 --> 00:17:21.039 time to get it corrected. So we've been talking 00:17:21.039 --> 00:17:23.099 to we talk about NOLs. We talked about passive 00:17:23.099 --> 00:17:25.079 activity losses. We talked about capital losses. 00:17:25.220 --> 00:17:28.440 Okay. Now we have charitable contribution carry 00:17:28.440 --> 00:17:31.000 forwards. And so this one here, the charitable 00:17:31.000 --> 00:17:33.279 contribution carry forward is interesting for 00:17:33.279 --> 00:17:36.259 me because again, mother Kelly, I pay my ties. 00:17:36.420 --> 00:17:39.019 Right. So when you think of some of the soul 00:17:39.019 --> 00:17:41.880 or the LLCs or the S corporation, this is something 00:17:41.880 --> 00:17:44.279 that I've seen when they send me their taxes 00:17:44.279 --> 00:17:46.799 and their documentation is, hey, I've paid my 00:17:46.799 --> 00:17:52.400 ties or I've been the infamous $500 to Goodwill 00:17:52.400 --> 00:17:56.640 or some organization that doesn't require documentation. 00:17:57.339 --> 00:18:00.839 And usually their goal is to say, I've given 00:18:00.839 --> 00:18:05.119 as much as I can to, again, decrease their tax 00:18:05.119 --> 00:18:09.279 high ability, but really you only get to include 00:18:09.279 --> 00:18:13.759 so much of that charitable contribution. and 00:18:13.759 --> 00:18:18.180 60 % of your AGI can carry forward. I think you 00:18:18.180 --> 00:18:20.839 give the example of, say you donated 100K to 00:18:20.839 --> 00:18:24.119 charity, but only deduct 50K, and then you can 00:18:24.119 --> 00:18:26.720 carry forward the rest. And so this one here 00:18:26.720 --> 00:18:29.819 is important. I will also say, from the sole 00:18:29.819 --> 00:18:32.759 preparer standpoint, if you have paid tithes, 00:18:32.759 --> 00:18:36.019 which is a very popular charitable donation, 00:18:36.519 --> 00:18:39.400 you, from a strategy standpoint, it would be 00:18:39.400 --> 00:18:41.940 best to put that... not necessarily on schedule 00:18:41.940 --> 00:18:46.079 C, but on a, we talked about standard deductions, 00:18:46.259 --> 00:18:49.539 but on an itemized deduction standpoint to help 00:18:49.539 --> 00:18:52.960 you lower your tax liability. Because if you 00:18:52.960 --> 00:18:56.460 don't have enough from your C schedule, it's 00:18:56.460 --> 00:18:58.799 not going to be beneficial for you. So you want 00:18:58.799 --> 00:19:01.940 to put that on your 1040 itemized. So that's 00:19:01.940 --> 00:19:04.880 my low two cents on there. Terrence can clear 00:19:04.880 --> 00:19:08.000 up the rest of it. Gotcha. Gotcha. Yeah. So basically 00:19:08.000 --> 00:19:10.700 what she's saying, the standard deduction is 00:19:10.700 --> 00:19:13.400 what, as she educated us earlier, started back 00:19:13.400 --> 00:19:16.079 in the forties where you just had a $500. The 00:19:16.079 --> 00:19:18.180 IRS didn't tax you on the first 500 bucks that 00:19:18.180 --> 00:19:20.559 you make this year. If you're single, they don't 00:19:20.559 --> 00:19:22.519 tax you in the first 15 or if you're married, 00:19:22.640 --> 00:19:25.079 they don't tax you on the first 30. So your schedule 00:19:25.079 --> 00:19:27.900 A is going to add up all the potential deductions 00:19:27.900 --> 00:19:31.269 that might eclipse that standard deduction. So 00:19:31.269 --> 00:19:33.210 on your charitable deduction, let's say you make 00:19:33.210 --> 00:19:35.769 $100 ,000. The IRS is only going to allow you 00:19:35.769 --> 00:19:41.130 to deduct 60 % of your income. That would be 00:19:41.130 --> 00:19:43.009 a charitable giving. So sometimes people might 00:19:43.009 --> 00:19:45.069 just have like stock or stuff that they give 00:19:45.069 --> 00:19:47.529 away, or maybe they're just in a really low income 00:19:47.529 --> 00:19:49.589 year and maybe they have a lot of investments. 00:19:49.589 --> 00:19:51.349 And so they want to give away a lot of stuff 00:19:51.349 --> 00:19:53.470 in that year. Well, the IRS says, Hey, whatever 00:19:53.470 --> 00:19:55.710 your income is, we'll only let you deduct 60 00:19:55.710 --> 00:19:58.250 % of that income. So if you make a hundred, you 00:19:58.250 --> 00:20:00.930 can only deduct 60 ,000. anything over that is 00:20:00.930 --> 00:20:02.950 going to get carried forward to the next year, 00:20:02.990 --> 00:20:06.069 which is important because if your standard deduction 00:20:06.069 --> 00:20:09.029 exceeds your itemized deductions, then you might 00:20:09.029 --> 00:20:11.710 not want to give away all of that in one year. 00:20:12.109 --> 00:20:14.269 Okay. And so those are just things that will 00:20:14.269 --> 00:20:17.450 be important to evaluate to say, Hey, I don't, 00:20:17.650 --> 00:20:20.630 if you're, if you're planning and it has a tax 00:20:20.630 --> 00:20:22.670 implication, you want to try to get guidance 00:20:22.670 --> 00:20:24.430 ahead of time just to make sure that you don't 00:20:24.430 --> 00:20:27.410 do something. Cause it's, it's not that you can't 00:20:27.410 --> 00:20:29.839 undo certain things, but It's hard to put the 00:20:29.839 --> 00:20:31.960 toothpaste back in the tube, as they say, with 00:20:31.960 --> 00:20:34.140 certain tax situations. And so you'll actually 00:20:34.140 --> 00:20:37.099 cost yourself more money doing it without guidance 00:20:37.099 --> 00:20:39.880 versus maybe even paying somebody to help you 00:20:39.880 --> 00:20:42.920 structure things a little bit more judiciously 00:20:42.920 --> 00:20:45.700 for your pocketbook. So we have a few more deductions. 00:20:46.259 --> 00:20:50.119 So we have what's called the section 179. And 00:20:50.119 --> 00:20:52.119 I won't go too much into this, but effectively 00:20:52.119 --> 00:20:54.519 the government will give you a deduction up to 00:20:54.519 --> 00:20:57.640 about a million to five on equipment that you 00:20:57.640 --> 00:21:01.009 buy. So if you have equipment, they will let 00:21:01.009 --> 00:21:03.289 you spend a whole lot of money on equipment, 00:21:03.289 --> 00:21:04.970 but they'll tap you at how much you can deduct 00:21:04.970 --> 00:21:08.150 in a given year. Okay. You also have the interest 00:21:08.150 --> 00:21:11.049 or investment interest carry forward. So if I 00:21:11.049 --> 00:21:13.589 have investment interest, which Julie will come 00:21:13.589 --> 00:21:16.869 from things like if I borrowed money to invest 00:21:16.869 --> 00:21:20.269 in something, then I may have investment income 00:21:20.269 --> 00:21:22.750 that is generated. And if I have a deduction 00:21:22.750 --> 00:21:25.849 against that income, I can take that deduction 00:21:25.849 --> 00:21:29.230 to offset. So for example, let's just say I borrowed 00:21:29.230 --> 00:21:32.910 money to invest in a project. That project doesn't 00:21:32.910 --> 00:21:36.109 really net me any money yet, but I have interest 00:21:36.109 --> 00:21:38.430 that I paid as a result of this investment. If 00:21:38.430 --> 00:21:41.269 my interest exceeds the income I received, then 00:21:41.269 --> 00:21:43.069 that interest is going to get carried forward. 00:21:43.130 --> 00:21:45.410 So if I start making money from that investment, 00:21:45.710 --> 00:21:48.460 I'll be able to use that Interest deduction against 00:21:48.460 --> 00:21:51.779 it in future years now one point I will say on 00:21:51.779 --> 00:21:54.299 the last one here is the home office This is 00:21:54.299 --> 00:21:57.019 actually something I just had here recently that 00:21:57.019 --> 00:22:00.079 if you do operate your business from your house 00:22:00.079 --> 00:22:03.799 and You have two methods to deduct that you have 00:22:03.799 --> 00:22:05.400 what's called the simplified method I should 00:22:05.400 --> 00:22:07.740 say where you can actually take five dollars 00:22:07.740 --> 00:22:11.599 per square foot up to 300 square feet. So that's 00:22:11.599 --> 00:22:13.839 fifty hundred dollars So if I have a home office 00:22:13.839 --> 00:22:17.390 and my home office is 200 square feet I can stick 00:22:17.390 --> 00:22:20.069 a thousand dollars of a deduction without any 00:22:20.069 --> 00:22:24.450 documentation. Or I can compare the size of my 00:22:24.450 --> 00:22:27.329 office to my house in total, and I can take the 00:22:27.329 --> 00:22:30.690 percentage of the expenses that it takes to maintain 00:22:30.690 --> 00:22:33.750 my house. So if you think about, hey, what does 00:22:33.750 --> 00:22:35.750 it take to maintain your house? Well, you got 00:22:35.750 --> 00:22:38.509 your utilities, you got your interest on your 00:22:38.509 --> 00:22:40.869 loan, you got insurance, you got taxes. So I 00:22:40.869 --> 00:22:42.869 can take a percentage of those items and deduct 00:22:42.869 --> 00:22:45.059 them. Now, in this case, if you're operating 00:22:45.059 --> 00:22:46.839 a business and you got a little side hustle, 00:22:46.859 --> 00:22:50.279 like many of you might, and someone told you, 00:22:50.339 --> 00:22:52.099 hey, you need to start a business to save on 00:22:52.099 --> 00:22:54.359 taxes. Well, number one, you start a business 00:22:54.359 --> 00:22:57.619 to make money, but secondly, if you're not making 00:22:57.619 --> 00:23:00.200 money and you do have a tax loss and you do operate 00:23:00.200 --> 00:23:03.480 out of your house, you have to use the actual 00:23:03.480 --> 00:23:06.619 expense method to, in order to incur this carry 00:23:06.619 --> 00:23:09.180 for it. So if you have, let's say $3 ,000 of 00:23:09.180 --> 00:23:12.720 home expenses and you had a business loss, If 00:23:12.720 --> 00:23:15.299 you try to use the simplified method, you actually 00:23:15.299 --> 00:23:18.099 just are going to lose the deduction. If you 00:23:18.099 --> 00:23:21.220 use the actual expense method though, and you 00:23:21.220 --> 00:23:23.299 say, Hey, I have $3 ,000 of expenses, but my 00:23:23.299 --> 00:23:25.619 business took a loss last year. I can take that 00:23:25.619 --> 00:23:28.339 3000 and carry it forward to the next year. Okay. 00:23:28.579 --> 00:23:30.579 So any questions to me on that? Anything we prior 00:23:30.579 --> 00:23:32.940 to the clear up for the people? Um, let me see. 00:23:32.980 --> 00:23:36.200 So for the home office deduction, I would just 00:23:36.200 --> 00:23:38.660 kind of put a little note in there because to 00:23:38.660 --> 00:23:41.180 your point about the side businesses, the side 00:23:41.180 --> 00:23:44.720 households, when people are like, hey, I need 00:23:44.720 --> 00:23:48.000 to do this for tax purposes or whatever. I would 00:23:48.000 --> 00:23:52.720 just say you have to actually now we have no 00:23:52.720 --> 00:23:54.920 way of proving this or tax repairs. You can tell 00:23:54.920 --> 00:23:59.140 us anything, but it really means that you are 00:23:59.140 --> 00:24:03.180 using your home exclusively and regularly before 00:24:03.180 --> 00:24:07.480 this. Again, we can't prove that you don't use 00:24:07.480 --> 00:24:11.339 your home, but keep in mind that every once in 00:24:11.339 --> 00:24:13.670 a while you There isn't such thing as an audit. 00:24:13.950 --> 00:24:16.490 So I would say this is one of those deductions 00:24:16.490 --> 00:24:19.789 that a lot of people who are not business owners 00:24:19.789 --> 00:24:22.349 who don't have a real business, just more of 00:24:22.349 --> 00:24:25.569 a side hustle is the most common thing that I've 00:24:25.569 --> 00:24:28.630 ran up against this year doing taxes that people 00:24:28.630 --> 00:24:32.390 try to use as a tax strategy on their individual 00:24:32.390 --> 00:24:35.670 tax return. And it doesn't work like that. So 00:24:35.670 --> 00:24:37.990 just kind of put that out there. If you're thinking 00:24:37.990 --> 00:24:44.099 about a strategy, this is not one. Okay. So in 00:24:44.099 --> 00:24:45.700 other words, the minute says she's not going 00:24:45.700 --> 00:24:49.319 to go to your house to verify your office. However, 00:24:50.720 --> 00:24:53.440 if you were looking to document against an audit, 00:24:53.539 --> 00:24:55.019 you probably would just at least want to take 00:24:55.019 --> 00:24:58.359 a picture of the space and keep that on your 00:24:58.359 --> 00:25:01.279 record so that you have something to back up 00:25:01.279 --> 00:25:06.940 the stuff that you're doing. Okay. So we went 00:25:06.940 --> 00:25:09.440 over these seven tax deductions. Now we got some 00:25:09.440 --> 00:25:11.880 tax credits. So tax credits, as I mentioned, 00:25:12.200 --> 00:25:14.099 that's better than a deduction because it's going 00:25:14.099 --> 00:25:16.920 to reduce your tax bill dollar for dollar. All 00:25:16.920 --> 00:25:18.940 right. So I'm going to run through a few of these. 00:25:19.160 --> 00:25:22.079 On the business side, you have business credits. 00:25:22.140 --> 00:25:24.960 So that is going to go into form 3 ,800. And 00:25:24.960 --> 00:25:27.779 you have a few of those. You have the R &D credit. 00:25:27.980 --> 00:25:31.119 So if you have a product or a technology that 00:25:31.119 --> 00:25:33.880 you developed or improved upon another technology, 00:25:34.089 --> 00:25:36.809 you can actually get a tax credit for developing 00:25:36.809 --> 00:25:40.089 that for the cost of the materials or the labor 00:25:40.089 --> 00:25:42.430 that it took you to create the item that you 00:25:42.430 --> 00:25:44.630 did. If you don't have enough income though, 00:25:44.869 --> 00:25:47.609 that credit can get carried forward. You also 00:25:47.609 --> 00:25:50.829 have like the work opportunity tax credit. One 00:25:50.829 --> 00:25:53.329 of the things that I see a lot this year is like 00:25:53.329 --> 00:25:56.210 the retirement account credit. So basically if 00:25:56.210 --> 00:25:58.950 you set up a 401k account for your staff, there's 00:25:58.950 --> 00:26:01.069 really three types of tax credit you can get. 00:26:01.210 --> 00:26:03.450 a result of that and if you don't have enough 00:26:03.450 --> 00:26:06.150 income you can actually use that to carry forward 00:26:06.150 --> 00:26:09.029 to future years and Some of these credits you 00:26:09.029 --> 00:26:11.589 can carry them up to 20 years some of the other 00:26:11.589 --> 00:26:14.369 ones they will carry forward indefinitely So 00:26:14.369 --> 00:26:16.410 it's important that you kind of know I mean granted 00:26:16.410 --> 00:26:17.970 if you don't have enough income to offset after 00:26:17.970 --> 00:26:20.190 20 years You probably are doing something wrong 00:26:20.190 --> 00:26:23.730 But they do give you that period of time to do 00:26:23.730 --> 00:26:26.190 that. Now you also have credit on the personal 00:26:26.190 --> 00:26:30.450 side. Okay, and So you have one is the adoption 00:26:30.450 --> 00:26:34.309 credit So if you adopt a kid, you can actually 00:26:34.309 --> 00:26:37.289 deduct up to a certain level based on your income 00:26:37.289 --> 00:26:39.769 on the expenses for that adoption. Now this one 00:26:39.769 --> 00:26:43.450 only carries four for five years. Okay. Now you, 00:26:43.490 --> 00:26:45.890 if you adopt scruffy, these, these are only humans. 00:26:46.369 --> 00:26:48.329 Okay. I know. I don't know if Tamiya is a dog. 00:26:48.329 --> 00:26:51.390 Are you a dog person Tamiya? I am not a dog person. 00:26:52.769 --> 00:26:55.650 Do not come for me. Please don't come for me. 00:26:55.849 --> 00:26:59.029 I do have a quick question before you get into 00:26:59.029 --> 00:27:01.849 this one. I actually had a question about that. 00:27:01.910 --> 00:27:05.170 So with the adoption credit, we know that employers 00:27:05.170 --> 00:27:08.130 are now adoption savvy, are friendly, if you 00:27:08.130 --> 00:27:11.690 will, and they give credits, resources to support 00:27:11.690 --> 00:27:17.150 adoption. Are you aware if this plays into that? 00:27:17.170 --> 00:27:19.910 Because you know, for a W -2 employee, we can 00:27:19.910 --> 00:27:23.029 see if they've received any type of additional 00:27:23.029 --> 00:27:26.930 support. for this particular credit. So is it 00:27:26.930 --> 00:27:29.490 what we've been doing in terms of just need to 00:27:29.490 --> 00:27:32.410 ask the customer, the client, how much did you 00:27:32.410 --> 00:27:36.849 contribute towards your adoption? Is that correct? 00:27:36.849 --> 00:27:40.829 Yeah. So similar to Like childcare, for example, 00:27:40.829 --> 00:27:44.750 if your employer is giving you money towards 00:27:44.750 --> 00:27:47.410 an adoption or childcare or like your education 00:27:47.410 --> 00:27:50.309 expenses, then you'll need to reduce the amount 00:27:50.309 --> 00:27:53.650 that your employer gave you towards that amount. 00:27:53.769 --> 00:27:56.009 So let's just say in the adoption, the max credit 00:27:56.009 --> 00:27:59.309 is around 16 ,000. So let's just say your employer 00:27:59.309 --> 00:28:02.230 gave you $5 ,000 and then you ended up spending 00:28:02.230 --> 00:28:05.690 12 ,000 total. So you fit seven out of your pocket 00:28:05.690 --> 00:28:08.930 plus the five that the employer gave you. The 00:28:08.930 --> 00:28:12.930 max credit could be 16. Well, if they gave me 00:28:12.930 --> 00:28:14.750 five, the IRS isn't going to let me take a credit 00:28:14.750 --> 00:28:17.809 for that five. Right. The employer took a deduction 00:28:17.809 --> 00:28:19.569 for that five themselves. They're only going 00:28:19.569 --> 00:28:21.710 to allow me to count the seven that I actually 00:28:21.710 --> 00:28:24.509 put out of my own pocket. That's a good good 00:28:24.509 --> 00:28:26.329 question, because I know people will try to double 00:28:26.329 --> 00:28:31.690 dip. Yes, they will. And so the IRS isn't hip 00:28:31.690 --> 00:28:34.349 to giving you money and giving someone else a 00:28:34.349 --> 00:28:37.190 tax deduction at the same time. OK. So there's 00:28:37.190 --> 00:28:40.890 a few other credits that are important. So one, 00:28:40.990 --> 00:28:44.089 you have the foreign tax credit. That is if you 00:28:44.089 --> 00:28:46.210 had income overseas and you paid taxes there 00:28:46.210 --> 00:28:48.349 and you weren't able to use the entire credit, 00:28:48.390 --> 00:28:51.210 you can use that in future years to offset future 00:28:51.210 --> 00:28:54.390 income that you have. And then you have the residential 00:28:54.390 --> 00:28:56.509 clean energy credit. So I'll park here for a 00:28:56.509 --> 00:28:59.069 second because many people are looking at solar 00:28:59.069 --> 00:29:02.329 panels right now. And oftentimes if you're sold 00:29:02.329 --> 00:29:04.750 solar panels, the person that's selling them 00:29:04.750 --> 00:29:07.630 to you, is going to be giving you tax information. 00:29:08.049 --> 00:29:10.390 Let me set this up, Terrence. Okay. Hey, knock, 00:29:10.509 --> 00:29:12.730 knock. Hey, Terrence. Hey, I want to sell you 00:29:12.730 --> 00:29:16.029 these solar panels. They're amazing. They will 00:29:16.029 --> 00:29:19.109 save you so much money on your energy bill, yada, 00:29:19.210 --> 00:29:21.509 yada. All you need is just some sun and they 00:29:21.509 --> 00:29:24.309 work, right? Okay. Not to mention you get an 00:29:24.309 --> 00:29:28.190 amazing tax credit. I mean, like almost a refund 00:29:28.190 --> 00:29:30.650 if sometimes. So this is something you want to 00:29:30.650 --> 00:29:36.119 do. Wow I don't know but you will get one You 00:29:36.119 --> 00:29:39.559 will get a tax credit so so you're telling me 00:29:39.559 --> 00:29:43.319 I pay this high fee It might save on my bill 00:29:43.319 --> 00:29:46.240 and I definitely I'm gonna save on taxes. Okay. 00:29:46.240 --> 00:29:48.539 I just need to know where to find rebates Yeah, 00:29:48.539 --> 00:29:51.960 I'll tell you right now and then we'll come and 00:29:51.960 --> 00:29:53.660 you know all these hidden fees No worries about 00:29:53.660 --> 00:29:56.319 that, but you will be able to get this on your 00:29:56.319 --> 00:30:00.690 taxes get a huge refund huge so Great sales fits, 00:30:00.930 --> 00:30:03.130 by the way. Great sales fits. So just to give 00:30:03.130 --> 00:30:05.690 you some context on this credit, the credit is 00:30:05.690 --> 00:30:08.230 30 % of the cost of the solar panels, including 00:30:08.230 --> 00:30:11.349 installation. So if you spend $50 ,000 on solar 00:30:11.349 --> 00:30:13.910 panels that qualify, you can actually get a $50 00:30:13.910 --> 00:30:17.230 ,000 tax credit. However, if you're number one, 00:30:17.230 --> 00:30:19.750 I will tell you just a rule of thumb. If the 00:30:19.750 --> 00:30:22.130 amount of your credit is exceeding the amount 00:30:22.130 --> 00:30:24.309 of taxes you pay in a year, unless you've been 00:30:24.309 --> 00:30:27.539 working with someone like myself, and we've gotten 00:30:27.539 --> 00:30:29.680 your tax bill down really low, you probably need 00:30:29.680 --> 00:30:32.220 to really assess, is this something I can afford, 00:30:32.359 --> 00:30:35.240 okay? But if your tax bill, let's say in that 00:30:35.240 --> 00:30:37.579 case, if your tax bill is less than $15 ,000 00:30:37.579 --> 00:30:40.900 for the year, then what happens is, they will 00:30:40.900 --> 00:30:43.660 apply that 15 ,000 against your tax bill for 00:30:43.660 --> 00:30:45.279 the year. So let's say your tax bill for the 00:30:45.279 --> 00:30:48.119 year is 12 ,000, and they'll say, hey, the credit's 00:30:48.119 --> 00:30:51.640 15, we'll apply 12, and then you have 3 ,000 00:30:51.640 --> 00:30:54.259 that's gonna get carried forward to the next 00:30:54.259 --> 00:30:57.079 year, all right? That's important because the 00:30:57.079 --> 00:31:00.140 difference is between this and let's say an electric 00:31:00.140 --> 00:31:03.099 vehicle credit is that an electric vehicle, the 00:31:03.099 --> 00:31:05.640 credit does not carry forward. This one is actually 00:31:05.640 --> 00:31:08.980 better. It does carry forward, but you're going 00:31:08.980 --> 00:31:10.839 to be capped at what your actual tax bill is 00:31:10.839 --> 00:31:13.500 for the year. And so you have to be strategic 00:31:13.500 --> 00:31:15.900 with this because there may be multiple things 00:31:15.900 --> 00:31:18.079 you do in a year. And if you decide to get solar 00:31:18.079 --> 00:31:21.019 panels and it's December, November, whatever, 00:31:21.220 --> 00:31:23.839 it may make more sense to maybe carry it into 00:31:23.839 --> 00:31:26.089 the next year. Depending on what other things 00:31:26.089 --> 00:31:28.230 you had going on because you'll eventually get 00:31:28.230 --> 00:31:30.109 the money You just may have to wait a lot longer 00:31:30.109 --> 00:31:35.009 time to get it. Okay? So we've gone over seven 00:31:35.009 --> 00:31:36.910 different tax deductions. We've gone over some 00:31:36.910 --> 00:31:40.410 tax credits We talked about you know where you 00:31:40.410 --> 00:31:43.529 actually find that information. Okay, so what 00:31:43.529 --> 00:31:46.210 to me? Do you feel like we're a few great takeaways 00:31:46.210 --> 00:31:49.089 that the people should be aware of just from 00:31:49.089 --> 00:31:52.390 our conversation? So a few great takeaways is 00:31:52.390 --> 00:31:55.509 one if you are a business owner be very in touch 00:31:55.509 --> 00:31:59.490 with your losses one of the things Terrence mentioned 00:31:59.490 --> 00:32:01.769 was we mentioned a couple of different losses 00:32:01.769 --> 00:32:05.049 that Carry forward right your net operating losses 00:32:05.049 --> 00:32:08.349 your capital losses and then your passive activity 00:32:08.349 --> 00:32:11.349 losses So you've got to be very in touch with 00:32:11.349 --> 00:32:14.150 what you're making and anything that you've lost 00:32:14.150 --> 00:32:18.910 and understanding how much you're able to deduct 00:32:18.910 --> 00:32:23.150 from your current tax return, because everything 00:32:23.150 --> 00:32:26.750 that you can carry forward doesn't tell you in 00:32:26.750 --> 00:32:29.589 black and white on the actual tax return. And 00:32:29.589 --> 00:32:32.309 so you really need to have a sit down with your 00:32:32.309 --> 00:32:35.710 taxpayer. If you use someone like us, like parents, 00:32:35.829 --> 00:32:38.910 you would know, right? But if you don't and you 00:32:38.910 --> 00:32:41.549 use someone that's inferior, then I'm just teasing. 00:32:41.750 --> 00:32:44.369 No, no, I'm not talking about any other taxpayers 00:32:44.369 --> 00:32:48.880 out there. But if you, sincerely though, if you 00:32:48.880 --> 00:32:51.380 use someone who maybe doesn't communicate a lot 00:32:51.380 --> 00:32:54.079 with you, this is your responsibility, right, 00:32:54.079 --> 00:32:57.180 to go and look and see what they've deducted, 00:32:57.180 --> 00:33:00.680 the amount that they deducted, and also, again, 00:33:00.740 --> 00:33:03.359 what's going on with your losses and your carry 00:33:03.359 --> 00:33:05.740 forwards. And then the things that you can see, 00:33:06.000 --> 00:33:09.240 I think you mentioned Form 1045 or something 00:33:09.240 --> 00:33:12.400 like that. If you can see the loss, take note 00:33:12.400 --> 00:33:15.839 of that. and what you can get. The other thing 00:33:15.839 --> 00:33:19.799 that kind of stood out is the charitable contributions, 00:33:20.119 --> 00:33:23.799 of course, understanding how much you can carry 00:33:23.799 --> 00:33:26.140 forward, understanding how much you should be 00:33:26.140 --> 00:33:29.079 giving, right? At the end of the year, the last 00:33:29.079 --> 00:33:31.279 quarter of the year to make sure it makes sense. 00:33:31.400 --> 00:33:34.740 And then when you think about any tax credits, 00:33:34.900 --> 00:33:38.319 and again, when you think about the... Tax credits, 00:33:38.359 --> 00:33:41.200 the goal is to subtract from the taxes you owe, 00:33:41.380 --> 00:33:43.599 right? So when you get through with your deductions 00:33:43.599 --> 00:33:45.279 and you want to say less than that tax bill is 00:33:45.279 --> 00:33:48.339 too high, what tax credits can we get? You want 00:33:48.339 --> 00:33:51.779 to see if you do qualify for say the work opportunity 00:33:51.779 --> 00:33:55.740 tax credit or the general business credit, right? 00:33:56.119 --> 00:33:58.339 The last thing I will say to you is we mentioned 00:33:58.339 --> 00:34:01.960 at the top of the hour, our tax acts, bills, 00:34:02.299 --> 00:34:05.240 whatever. can change based on the administration 00:34:05.240 --> 00:34:09.699 that's in office. So we know that it may change. 00:34:10.039 --> 00:34:12.340 So be in the know. I think you mentioned that 00:34:12.340 --> 00:34:15.360 some of these expire. You gave an example of 00:34:15.360 --> 00:34:19.099 someone who lost money. Don't lose money, people. 00:34:19.400 --> 00:34:21.940 We're not in the business of losing money. Don't 00:34:21.940 --> 00:34:24.960 miss out on money. Don't pay too much. And make 00:34:24.960 --> 00:34:26.840 sure you can get your refund if you can. So with 00:34:26.840 --> 00:34:28.900 this current administration or with any administration, 00:34:29.320 --> 00:34:30.980 it's going to be important to be in a know -to 00:34:30.980 --> 00:34:34.230 -know. what tax credits or deduction are expiring 00:34:34.230 --> 00:34:36.730 and what's new that's coming in the pipeline 00:34:36.730 --> 00:34:38.750 that you can strategize and be able to take advantage 00:34:38.750 --> 00:34:42.670 of in your next return year. Awesome. And so, 00:34:42.809 --> 00:34:45.929 you know, I wouldn't say that any other prepare 00:34:45.929 --> 00:34:50.190 is inferior necessarily. OK. However, if your 00:34:50.190 --> 00:34:52.750 prepare is not asking you, especially if they're 00:34:52.750 --> 00:34:54.590 new, if they're not asking you for a copy of 00:34:54.590 --> 00:34:57.289 your prior year, then they're probably not someone 00:34:57.289 --> 00:35:00.989 that's really up to the task. And if you're doing 00:35:00.989 --> 00:35:02.849 your own taxes, it's important that you just 00:35:02.849 --> 00:35:05.570 do a quick review just to make sure that you 00:35:05.570 --> 00:35:08.369 are familiar with what happened. And because 00:35:08.369 --> 00:35:10.849 oftentimes you may even have forgotten stuff 00:35:10.849 --> 00:35:14.289 that maybe happens every year that the last year 00:35:14.289 --> 00:35:16.369 will show you, Hey, I actually did this. I did 00:35:16.369 --> 00:35:18.130 this this year. Hey, I got interest from this 00:35:18.130 --> 00:35:20.949 bank. Did I maybe have interest from that bank 00:35:20.949 --> 00:35:23.760 this year? Because If you leave something off 00:35:23.760 --> 00:35:26.039 your taxes, it's probably going to be 18 months 00:35:26.039 --> 00:35:28.199 later, the IRS is going to send you a notice 00:35:28.199 --> 00:35:30.440 and tell you what you left off your taxes. And 00:35:30.440 --> 00:35:32.219 they're going to want you to have paid them more 00:35:32.219 --> 00:35:34.960 money plus some interest in penalties. So it's 00:35:34.960 --> 00:35:36.679 important that you're aware of what happened 00:35:36.679 --> 00:35:39.159 in prior years. And especially if you have these 00:35:39.159 --> 00:35:41.480 deductions or credits that impact you, hopefully 00:35:41.480 --> 00:35:44.340 documenting that at the time when you file. so 00:35:44.340 --> 00:35:46.940 that you can go into the year knowing that you 00:35:46.940 --> 00:35:48.920 have, you know, something in your back pocket 00:35:48.920 --> 00:35:51.659 to utilize to ultimately help you save money 00:35:51.659 --> 00:35:53.860 when you're filing your taxes in the following 00:35:53.860 --> 00:35:56.519 year. OK, so hopefully you guys took away some 00:35:56.519 --> 00:35:58.920 good information to me and I'll be back on a 00:35:58.920 --> 00:36:00.800 future episode. We'll figure out what we're going 00:36:00.800 --> 00:36:03.039 to talk about and maybe we'll get another history 00:36:03.039 --> 00:36:06.420 lesson in there. So as we say, keep more of what 00:36:06.420 --> 00:36:08.199 you earn and we'll talk to you guys soon.