Financial Advice

people in our specific income bracket only really have one way to lower our taxes while increasing our net worth - real estate

mechanically, you incorporate an LLC (a legal entity which is treated the same as a person is financially) that absorbs your legal liability and through which you funnel your rental income/revenue and your real estate expenses (plumbing, travel, etc)

- it reduces your taxes in 2 ways:
1. you can write off your LLC's losses (your rental income MINUS your mortgage and other expenses) on your personal income if you are the primary owner of the LLC
2. you can write off the depreciation factor - the value of the unit divided by some constant (~27.5 years for rental properties, etc) for each unit you own

the losses are whatever, but the key is the depreciation factor - if you only own 1-2 units you are generally at a loss because you don't get enough cumulative depreciation to bring you to a lower tax bracket - but when you own 10+ units you really start to see it

when you start to own more and more units you generally hire a Property Management Company to handle all the tenant complaints / plumbing fixes / etc etc, and they might take a 10% chunk of your rental income for that service

real estate agents handle almost all of this for you so the best way to break into it is to find a good real estate agent that you like and trust and they'll do the work of scouting out properties, coming to you with potential deals, handling the buying/selling of mortgages, doing background checks on your tenants, etc

ALSO - my CFP told me about a tax loophole that is going away soon:
- there is a law currently being sunsetted that says that you can write off a portion of the cost of a rental property on your personal taxes
- "Being sunsetted" means legislators are phasing it out - it was 100% of the property value in 2022, 80% in 2023, 60% in 2024, etc. until it hits 0% in 2027
- So hypothetically, this year, if you bought a 1M property, and an engineer says the value of the building is 800k, you could write off 60% of 800k (480k) and pay 0 taxes

Obviously I don't have 1M lying around to invest in a property like that but you can see how rich people with big funds can save a stupid amount of money in taxes from this

and separately from all of the above advice ^ this diagram shows what we need to be doing now to reach a 0% tax bracket in retirement - i.e. the government isn't taking away any of our social security or income from our retirement accounts etc

there's 3 different types of retirement income sources:
1. taxable bucket - this is like stocks and shit, it gets taxed up the wazoo
2. tax-deferred bucket - this is like your 401k or any IRAs you open - you avoid paying taxes now (at X%) but you will pay them when you take money out at Y% (whatever the tax rate is then)
3. tax-free bucket - this is like a Roth IRA (we make too much money to open one...) or a LIRP (life insurance) - you pay taxes now at X% instead of in the future at Y%

right now taxes are actually at a historical low - this is guaranteed to change on Jan 1 2026 when the Tax Cuts and Jobs Act of 2017 expires - the book has a picture let me get it. basically the US will bankrupt unless they literally double taxes soon - mainly because there's too many old people going on social security

when the social security program was suggested the reasoning was "there are 37 workers contributing to the social security fund for every 1 retiree!" but now it's 3 workers to 1 retiree and it's going to be 2:1 in a few decades thanks to baby boomers. and politicians just keep saying "yeah more social security!" to get old people to vote for them while glazing over the financial reality. actually this will probably be a major issue for harris assuming she wins in 2024 and is more-or-less forced to raise taxes in 2026. unless she punts the problem to the next guy...

FOLLOW UPS
- Scott: realtor in JC
- Find out when bonuses are paid out
- Catch up LIRP to brokerage by doing 3k/2k out of 5k/month
- HENRY - High Earner Not Rich Yet
- Docusign for direct deposit into brokerage