◆ Gems
Ep 67How the Rich Avoid Paying Taxes (and How You Can, Too)
1:23

Retirement & taxes · 1:23

In my nerdy head, HSAs are a superhero investment account

HSAs are a superhero investment account.

Elliot Pepper

Ep 67Feb 14, 2024

How the Rich Avoid Paying Taxes (and How You Can, Too)

with Elliot Pepper

I want to be concerned about my taxes before December 31st of the calendar year. That is the new paradigm.

Elliot Pepper

More moments · 4

1:22
Your single biggest expense in life isn't your house. It's income tax.
1:28
Why not keep your tax money in a high-yield account and pay at the end?
0:42
Give $10,000 to charity that only cost you $2,000
1:14
The first question to ask any accountant before you hire them

Try this · top 3

Quotes

“Personal income taxes are one of if not the single biggest expense that you will pay over the course of your lifetime.”

Elliot Pepper

“Imperfect action is better than perfect inaction.”

Elliot Pepper

“The IRS does not care if you have an LLC, a corporation or nothing at all. If you're making money, you're in business.”

Elliot Pepper

“HSAs are a superhero investment account.”

Elliot Pepper

“The IRS will never call you first to tell you that you're being audited, but scammers will.”

Elliot Pepper

“Make the most amount of money, pay Uncle Sam the least amount of money.”

Elliot Pepper (describing taxes as a game)

Takeaways

  1. 1 Taxes are a game with three legal tools: adjustments (lower your income), deductions (write-offs) and credits (cut the tax bill). Each person's 'board' depends on how they earn and their family situation.
  2. 2 Tax breaks exist because the government wants to encourage certain behaviors, like starting businesses, saving for retirement and giving charity. Understanding the intent shows you where the savings are.
  3. 3 A tax refund isn't a gift. It's your own money that was overwithheld. But withholding too little brings underpayment penalties.
  4. 4 The standard deduction (2023: $13,850 single, about $27,700 married) is compared to itemized deductions: state and local taxes (capped at $10,000), mortgage interest and charity. Use whichever is higher.
  5. 5 W-2 employees generally can't take the business write-offs friends brag about. Business owners can deduct ordinary and necessary expenses, plus gray-area items like a home office and car, within reason.
  6. 6 Traditional 401(k)/IRA means a deduction now and tax later. Roth means no deduction now and tax-free later. Favor Roth in low-income years and traditional in high-bracket years.
  7. 7 Roth IRA contributions (not earnings) can be withdrawn anytime without tax or penalty. That makes a Roth useful for big pre-59½ expenses like bar mitzvahs and weddings.
  8. 8 An HSA is the only account that is deductible going in and tax-free coming out for medical costs, even to reimburse expenses from years earlier.
  9. 9 529 plans grow tax-free for education, and up to $10,000 a year can go to K-12 private tuition. Some states (possibly New York) take back the state deduction for K-12 use. He would max retirement accounts first.
  10. 10 For money needed within 5-15 years, use a taxable account with some Treasury or municipal bonds, which get tax preferences.
  11. 11 Audits come by letter, not phone. They are stressful but usually resolvable if you followed the law and kept receipts.

Full episode

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