WMMD9 - Tax Confessions & Strategies w_Bonus Guest Alexis Gallati
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[00:00:00] Ever wondered why you're stuck with a high tax bill while other people are able to find loopholes that decrease the amount they owe? Keep listening to get the inside scoop from one of our favorite money savvy tax professionals.
Hello, and welcome to the Wealth Minded MD podcast with your money best friends. I'm Dr. Leisha Taylor, and I'm Dr. Brittany Halford. And of course, we are here to help you build wealth and make good money decisions so you can create the life you desire with more control over your time. Before we get started, here's a word from our sponsor. Hey, Alicia, did you know that about one in four physicians experience some disability during their career? Yeah, you know what? It's so striking to me [00:01:00] the numbers of how common this is. In fact, that's what happened with Dr. Stephanie Pearson. She was this super passionate OBGYN physician at the height of her career, and then, you know, ended up having a shoulder injury during a precipitous delivery that basically shattered all of her dreams, prevented her from being able to practice medicine in the way that she wanted.
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All right, Brittany, this is our Life is Lifing segment. And it's, you know, one of the ones that we used to open the show and, you know, thinking about this, by the time this episode drops, your birthday will have passed because as we're recording this, your birthday is coming up. And so I am just curious and a little bit nosy [00:03:00] on what you have planned for your birthday.
So, Alesha, I'm looking forward to your reaction to this statement. I work almost every single birthday, at least for the past five years. You're someone who like has sort of control over your schedule. You can choose your shifts like you work part time. And so you choose to work on you. Help me understand.
Do we need to have a therapy session? Do we not like our birthdays? Like what's happening here? There's no therapy session needed.
You know, when I think about which holidays are most important for me. It is Christmas and Thanksgiving and Easter. And so I would prefer to take those holidays off.
I still do a celebration. It's just that I work. And so the celebration might be a little bit before a little bit after. Ironically, the Society of Hospital Medicine conference kind of falls around my birthday time. So one birthday, I actually presented on my birthday, which is really funny. And this year the conference.
It starts on April 11th. My birthday is April 9th. So I'll be working on my birthday and then on the [00:04:00] 10th, I'll actually be traveling to California to a conference. So are you going to do something special? Like, I'm just like, what is your husband throwing you a thing or y'all going to dinner? Are you hanging out with your kiddos?
Like what is after the work conference, after the work, are you, do you have anything planned? I don't, I don't have anything planned. I'm sure my husband will plan something. You know, they always Brooklyn. She loves parties, so, you know, she'll plan something or make sure that Kevin plans something and then he and I will likely go out to dinner, I'm not exactly sure where, but you know, I don't do the planning, it's my birthday, so I'm supposed to just enjoy, but yeah, usually I work, and there have been birthdays where I've just slept in, ate ice cream in the bed, and done absolutely nothing, but it was, It was a great treat to myself, you know, not to have to get up.
Gotcha. So, so Kevin, your husband will sometimes take you out to dinner, involve your kids. You said, Brooke really likes parties. And so is there anything that you want to happen this year? Like, do I need to call Kevin and be like, Kevin, this is what she wants. [00:05:00] Ooh, Lisa, I like the way you did that. I'm trying to help you out here.
I want you to have a happy birthday. Cause right now it just seems like you work. I don't know. You know, there is this restaurant, so I love Latin culture and Peruvian food is delicious. So there's this restaurant called Celeste that we haven't been to. So maybe, you know, I should plant that, that I wouldn't go to that restaurant around my birthday time and really enjoy eating there because it's been on my to do list for a while and I just haven't made the time for it.
Well, we are going to check back in, Brittany, and we are going to see if, uh, we're going Kevin took you to Celesto or Celeste, whatever it's called. And see if you ate a bucket of ice cream in your bed or what. And I know you said you're going to California. Are you planning to do anything fun when you're out there?
I have a friend who I will see and. Anytime I'm by myself, I find some store to go shopping at. So I'll spend a little money on that. Otherwise I've been to San Diego before and it's absolutely beautiful. So I might [00:06:00] find some type of excursion to get myself into. But usually when I go to conferences, for the most part, I take part in the, the conference and don't plan too many other things.
So. We'll have to see. I haven't actually thought about it. Like life is too complicated right now for me to think about what to do at the conference. I'll probably plan it out on the six hour plane ride that I have. Wow. Sounds like an enjoyable birthday week . week. Okay. Now that we know you have no fun, I'm just kidding.
We are going to move into our next segment, which is our money mishaps and confessions.
This episode, we are going to have one of the most tax savvy persons on pretty soon for our wealthy insight segment. But for this money mishaps and confessions, I thought it would be interesting to kind of tell the people about my money mishap. And so I. Underpaid on my taxes, which I think I talked about before.
So I've got the joy of having to pay back money to the IRS and the state of California, which is where I used to live. But the other thing was, okay, so it took me a long time to do this. [00:07:00] We mentioned on the other episode that you hire out your tax work and I do my own taxes, partly because I was. Taught how to do my own taxes.
I mean, my father's a tax professional and I just put in a bunch of stuff in H& R Block. I find it very easy. I've been using them for years. And so I had this plan in mind that I was going to do my taxes over the weekend. It was like, okay, I'm going to wake up on Saturday. I'm going to read my devotional, read, you know, a book and get myself in a good state of mind.
I'm going to grab some coffee and I'm going to do my taxes. And then, you know, somewhere around noon, I'm going to hang out with, you know, my brother, my nephew, my sister in law. We're going to have a good, fun day at the park. Right. So I have this plan in mind and, you know, the plan is starting to go fine.
Like I log on to H& R Block and I like, and put, you know, personal information's the same next, next, next. And then there, you know, I get to the screen where it's like, okay, import your W 2s, right. Which is the form that your job gives you about how much money you made and all that stuff. Right. And the very first one is about, you know, I was a fellow at the University of California.
And [00:08:00] so the, Remembered that from last year and they basically, it's asking me like, do you have a W2 from the University of California? And I did. And I, or at least I thought I did. And , I'm looking, where is it? My email? I'm like, exactly. So I'm looking at my email, I'm like, it's not there. And I go, okay, well I put all my tax documents in a certain drawer.
And so I'm like scrumming through that door and I'm like. It's not there. And then I'm like, okay, I did remember taking screenshots. Like there was a couple of ones that I saw on my phone because I downloaded some attachment, took a screenshot. And so I'm looking through my photos and I am like, it's not there.
Where, so then I'm like, this is not going well. I'm I've just wasted 45 minutes trying to find this W2 form. I could not find it. And so I then was like, okay. I can't be the only one who lost their W2. So I'm like, do I have an old pay stub? Like what? There's something I was like, Oh my God. So then I was like, okay, the university of California has this system called you path that all of the UCAL schools utilize.
And so if you [00:09:00] work there, you can access all of your stuff from you path. This is where you input anything, whether you work for the university of California, Los Angeles, or university of California, San Diego, or whatever, whatever. So I'm logging onto you path and I'm like, Hmm. It's asking me what my username is and asking me what a password is.
And unfortunately, I didn't press that button that said, would you like us to save your username and password? So I don't remember what my password is. I'm having to reset it. Of course, once I reset it, it reminds me that I no longer work there and says I have to use a different system. Anyway, my point is that I wasted about an hour and a half .
Finally trying to get my W2, which I was eventually able to download from the website, but that just tells you a little bit about how my tax experience went. And so I'm doing that and I'm like, wow, Leisha, that took way too long. And all it was, was a W2 that you just input the stuff. It's like very simple.
So I'm doing that for university of California where I work now, you know, where I worked in the summertime because I had other gigs. And then I'm like, oh shoot, business expenses. Hmm. I knew there was, I'm [00:10:00] like trying to think of like what I spent money on. I'm looking through credit card statements. I'm thinking about my charitable giving.
I'm like, I'm sure my church must've sent me a giving statement. It has to be in one of these emails and all this stuff. Then of course I did my backdoor Roth and I'm like, Did Fidelity send me all the forms? Did I do that? I rolled money from one job into a new jobs 401k or into my solo 401k. So I needed those forms.
So needless to say, my money mishap is not keeping track of all of my tax documents and not doing good enough bookkeeping. That took way too long. I had planned to spend time with my nephew starting at like 1 p. m. and it got to the point it was like And my brother was like, are you still coming? It's past naptime, Leisha.
And uh, listen, he's woken up, he's nothing and I'm like, Oh yeah, I'm coming. Let's go. And I didn't finish because I was like, you know, trying to spend time with my nephew. But so yes, that's my money mishap and confession that I apparently didn't keep track of my documents and that I need to do a better job with [00:11:00] that.
You know, I might actually think about hiring this out in the future, but you're still going to have to have all of those documents on hand. And as you were telling this story, Alicia, it just brought me back to us being in your living room and me opening up my laptop, trying to log onto the wifi and how you did not know your password.
So that is a, okay. Yeah. Well, to my defense, I will say this to my defense. I do not. Use my wifi password, like it stays logged in on all my devices. So I don't remember what way too long. So for our audience here, learn from Alicia's miss app. When you get a W two, like take a snapshot. I love using the Adobe app, especially for the business expenses, right?
Because when you go. On a business trip and you have to eat. That's an expense that you can deduct from your taxable income or that business income, but they want to know who was there. [00:12:00] Why were you there? Itemized list. So I just keep a screenshot of all of that stuff. I save it in an Adobe app under like business expenses for travel.
So that way, when I have to go to my accountant, I have most of it there. I make some mistakes. I don't have all of it there, but like If you could try to create these systems of organization, they help to propel you forward so that you're not scrambling. We still have to gather all of our documents and it's a little bit of a mess still on this end.
So, uh, I'm glad you can understand where I'm coming from. All right. And now for our next segment, it is our wealthy insights segment. Basically, this is where we get a chance to talk to some of the experts in different fields and get their take. On a financial topic. And this week we thought it would be cool to talk to a tax professional.
One, because Brittany and I basically pay way too much in taxes. And two, because I am selfishly thinking about hiring out my taxes because I am tired of doing them [00:13:00] myself. And so I thought, since I already wanted to talk to this person, because I am such a big fan of hers, that we would bring her onto the show.
And so we have on this segment, Alexis from Cerebral Tax Advisors. Hey guys. Thank you so much for having me. Thank you for being here. So Alexis, you and I know each other because she is my CPA. Her and her team, they do a fantastic job. So just putting that out there, but can you please share with us just a little bit about your background and how you got started in this space?
So a little bit of background is, you know, my husband and I met like the second week of college and, you know, he went off to medical school. I went off to graduate school. So I have my undergraduate in accounting and finance, and then I have my MBA and then my master's in tax. As well. And also during that time while he was in med school, I became an NTPI fellow, which basically means that I have a three year fellowship in IRS representation.
And I'm also an enrolled [00:14:00] agent and I'm a certified tax strategist. So really started Cerebral in 2014 when I saw the writing on the wall. My husband was about a year and a half to being. Out of his residency, I knew we were going to end up having much larger tax bracket. I really wanted to concentrate on the tax planning.
Why are the Warren Buffets and the Bill Gates of the world at that 15 percent tax bracket and I can't be, so let's investigate. And so that's when I became certified tax strategist and I learned all these strategies and really cerebral grew out of the crowd we were hanging with. Working with physicians and healthcare professionals, et cetera, just really happened organically.
And my husband, Chris and I are in the same situation as a lot of our clients. So a lot of our clients love that. We're looking at the same sort of investments. We're doing a lot of the same strategies. And so they know that we understand the physician lifestyle. We understand the plights and et cetera.
And so I've really enjoyed the [00:15:00] way that Cerebral has gone and the people that we work with. I just wanted to say, Alexis, that I'm glad that that question about why are the Warren Buffetts and the unnamed celebrities able to pay nothing in taxes, because that was the same question that I had. And that's what prompted me to seek you out.
I was like, we gotta be doing this better. So if you are A physician out there. You also wonder, then Alexis is going to spill the tea and Alicia, I'm sorry for interrupting. I know you have a question that you're burning to ask. No, it's fine. I was just curious. What got you interested in taxes in the first place?
I mean, obviously you're incredibly gifted and smart and qualified. Did you grow up wanting to do taxes or like what, like were you some guru who's like great in math? Like what got you interested in accounting in the first place? Well, if I was interested in taxes as a child, then I would have been a very interesting person.
You know, I wish my kids would get into it early on and that's what I'm trying to instill in them. But it's a little embarrassing to admit, but I wasn't the best math student in high school or undergrad. Interestingly enough, [00:16:00] I'm very law minded. And I understand and can interpret laws very well. And that's really what the majority of tax is like.
Yes, there's accounting, which is like the bookkeeping and you know, if you have to do audit and financial statements, et cetera, and there is math involved in that, but most of it really is just basic arithmetic and really the tax code is law based. It's knowing what you can do, what you can't do. I mean, it's very similar to medicine.
What can this prescription or this medication do for someone in this situation versus not? What are the symptoms? You know, things you got to look out for. And so it's very much, I'm an A type personality, organized sort of mind. And I love saving money. I don't want to have to pay more than I legally have to.
That's really where my love of tax came from is, you know, it was a little self serving. And then I just, I love, Telling other people about it and like, Hey, you guys can be doing this to save money. And it's very [00:17:00] exciting. It's like a high. Alexis, if I'm being honest, I sort of feel like tax professionals can get a bad rep.
Either I'm hearing about doctors who are complaining about their tax professional, right? Like, Oh my gosh, I can't believe my bill is this high. Why did they not tell me about this sooner? Or it's the opposite end of the spectrum where it's like the tax professional is painted like a loan shark or something.
And he or she is basically like preventing you from like having to pay your quote unquote fair share and taking advantage of loopholes that aren't supposed to be taken advantage of. And so it's like this spectrum of like, they're not doing enough for me or. They're doing too much for me. And now people think that they are somehow doing something wrong.
And so I wanted to ask you, what do you think are some common, like misconceptions when it comes to accountants, probably the biggest one is that all accountants are created equal. All tax advisors are created equal that even say someone is a CPA. That doesn't necessarily mean that. They're concentrating in tax.
You know, CPA is almost like a [00:18:00] generalist. You know, that's where you get, you know, your education's a bit of everything. It's taxes, business law, it's financial statements, et cetera. And, some may be generalists and being a little bit of all those pools, some way, just concentrate on some pools. So like for me, I concentrate on tax, but I have the education that's needed in the bookkeeping accounting space.
But I have a team that handles that because that's not my strong suit. The taxes. When someone is looking at different tax advisors, they have to understand that just like physicians, they're not all created equal. Some are generalists, some are specialists, some know what they're doing. Some don't know what they're doing.
You just have to do your due diligence when trying to look for somebody. Thank you for clarifying that because that honestly was my experience when we found you it was because our tax account in our CPA at the end of the year didn't do some things right and wasn't communicating very well and so I went on this hunt to interview tax professionals and I remember that we [00:19:00] actually had an interview before we hired you and so I know that Many of our physicians who are employed, they're wondering if it's actually worth it to hire a tax strategist and which is what you really emphasize in your business is a tax strategy, a tax plan.
Do you think that it's worthwhile for most physicians or who would you say is the person who would benefit most from hiring someone like you? That's a great question. It really depends on your situation. If you're just strictly W 2 and you really don't have much else going on, a TurboTax is going to be sufficient.
The really only thing you have to look out for is, you know, maybe sure that you maybe don't overwithheld or underwithheld, but the tax softwares nowadays do pretty good job if your situation is not complex. Now, if you start to get into doing real estate or you have a business, then that's really where you might want to talk to somebody and at least get a consultation.
And then [00:20:00] if you're just like, Ooh, you know, like if you have a business, for example, if you don't want to deal with the bookkeeping, if you don't know which deductions, which credits you can be taking, what strategies, like, you know, hiring your kids or retirement account, you should have, you have all those sort of questions, then.
You really should talk to a professional about it, or at least to try to do some research online initially. And so you have an idea of, well, maybe I want to go this route. I'm not sure. It just depends too on what they're comfortable with, with what they're doing, because you can really go down a rabbit hole on the Internet.
It's like going on WebMD, you know, you might say like, Hey, I have all these symptoms. Oh my gosh. I have this tumor in my head. And it's like, no, no, no. You just have a cold or something. So it just really depends on the person in your situation. But if you start to have more complexities like a business or you're getting into rental properties or you want to get into more alternative investments, then working with the professional is going to pay dividends.
What do you [00:21:00] think are some of the main advantages of hiring a professional? I know you just said that basically, if your situation is more complicated, or if you're interested in some of these alternative investments, then it may be worth considering, but like, let's take me, for example, let's just use me.
I'm not your client. Brittany is your client. And so I'm just curious about like, if you were speaking to someone like me and I was thinking about hiring somebody, should I look for a CPA? Should I look for, you An accountant versus an attorney. Like I don't necessarily know if I understand the difference.
Are there certain things like certification to look out for things to ask? Like, I'm just curious what you tell someone like me about hiring someone. You want to find somebody that can fill your needs. So do you have a business? Do you need bookkeeping? Are you able to take care of that yourself when it comes to preparing the taxes?
Do you want someone to Prepare the taxes. Are you needing financial planning? Are you needing contracts or business documents set up? Then you might look at an attorney. So you really have to know your needs in order to find the right person. Yes. Checking credentials is obviously going to [00:22:00] be very important.
You want to make sure that the person knows what they're doing. And don't get me wrong. There are some very qualified people out there that don't have like a CPA or an EA, or even a JD as an attorney. Okay. But they know what they're doing. They would just have to have a good track record and you'd probably be going off a more referral base off of something like that.
And that's a really powerful tool is, you know, talking to others that you work with and are in similar situations. It's like, Hey, who do you like, who have you worked with? And that's actually where a majority of accounting and tax advisors will get their business from is referrals. But yeah, you just want to make sure that you find somebody that you're compatible with.
I mean, that's a huge thing. What their experience in the industry is as well. So you mentioned some of the things that we should look for. What are some of the things that would raise red flags to watch out for, especially as someone's going on and they're maybe just perusing per internet before they actually [00:23:00] set up that consultation.
And what questions would you ask if you were in our shoes to a tax professional to really understand if they were in good standing, they would do what's best for you and that they know what they're talking about. Yep. Well, just like physicians, you're able to go and look at the credentials online. So like if they'd say they have a CPA or they'd say an EA, you can go online and check those with the appropriate organizations.
When you're talking with them, find out about their communication style. One of the biggest problems that I see in my industry is the lack of communication or clear guidance on, you know, when a client is going to have touch points during the year. And that can be extremely frustrating. I mean, that's why when I built Cerebral, like I wanted communication to be really on the forefront because I'm the type of person that.
If I'm left to my own devices and I don't like being left in the dark, basically. So I want [00:24:00] to know what's going on. Also looking at transparency, do they have pricing on their website? Do they have information about their processes on their website? A lot of accountants, they'll just have a very generic website, you know, from one of the many firms out there that will do it for accountants.
But it really doesn't show what they do or what their message is, et cetera. And that's why, you know, if you go to Cerebral's website, you see the pricing, you see, you know, how we work and any guarantees we have and things like that. So then that way we're being transparent. You know, you're able to see what you're getting, essentially.
And then obviously, you know, you're always welcome to do like any sort of background checks and look for like ethical concerns. But I mean, that's what is great about the internet nowadays. You can Google people, you can look at social media, you can look at for articles, like see what sort of web presence they have.
That would be a really great indicator of, are they legit for one thing? You know, have people given any reviews, things like that. Then that way [00:25:00] you can make a determination of whether or not maybe they have any ethical issues going on or that they're even a real person and they're going to be around for a long time.
No, Alexis. And that makes sense. I'm curious. I get asked this all the time from different doctors is like, what is a reasonable amount to pay someone who's going to help you do some tax planning? And then like, is there an optimal time to hire that person? When it comes to pricing, it's. Like medical procedures, it varies wildly.
So if you're just wanting a tax return done, again, it depends on your complexity. Do you just have a W 2 or do you have rental properties or business, things like that, or do you have a business tax return? So depending upon the complexity in the person's expertise, I mean, it's going to be a lot less expensive to go to someone that.
Doesn't have as much experience. They're trying to get their business up. They're willing to work for less, but for those that have a lot more experience and they have the credentials, they have the knowledge and the education, et cetera. [00:26:00] Then you're going to pay a bit more for those specialists. If you're looking for tax planning, for example, if you're looking for specific reduction strategies, then it's not even just the strategies.
You're wanting to find someone that knows the implementation as well, because that's really. 80 percent of the problem, you know, if you can diagnose, but if you don't know how to treat it properly, you're in trouble. I think that's a really good analogy, you know, and I totally agree with you. When you say all tax people are not created equal.
I've definitely heard some horror stories, but we brought you on one because you're Brittany's tax professional too, because I heard you on another podcast Thought you were fantastic. I thought it would be great for maybe our listeners to kind of hear about like what makes you so amazing. And I've heard from Brittany and that you've saved her thousands of dollars, which she very much loves.
I wonder, you know, because you're married to a physician and you have a lot of physician clients, are there certain tax deductions or strategies or loopholes that you are helping your clients utilize more often than not, [00:27:00] that's helping them save more money? Yes, again, it depends on their situation, but you know, we're always looking for the type of strategies that will allow them to take more of their personal expenses and write them off as legitimate business deductions.
You'd be surprised at the number of people that, you know, don't even just take the home office deduction. They're worried, Oh, I've heard from other accountants that can cause an audit, you know, things like that. You need to understand as long as you're properly documenting things, you can take those deductions.
If you have children and you have a business, you can hire them through the business. You know, if you have a big capital gain, let's say that you're building that, you know, your practice was in and you have a very large capital gain. Well, you're able to do like an opportunity zone to help go and mitigate those taxes.
There are just so many different strategies that can be done depending upon your situation. People really just miss out on those opportunities. Brittany, I think you told me that you rent your home out to your business. Is that true? Alexis, as [00:28:00] her tax professional, is that true? She rents her home to her business.
Wait, why are you asking? And then he was talking about investing in oil and gas. I was like, who, who's this Alexis person? Cause we got to bring her on. What is Alexis? How are you doing over there, Alexis, for the people? Is this true? Or is Brittany telling a fib here? So yes, the Augusta rule. I mean, this is a favor of like, Tick tock, Facebook reels, et cetera.
Yeah, you can go and rent your home to your business for 14 days or less. Those days do not have to be consecutive. And as the business gets a deduction and you as the individual do not have to pay tax on that income. This originated in Augusta, Georgia. So that's why it's called the Augusta rule or the 14 day rental rule, because they have the masters there, you know, the golf tournament and people there would go rent their homes.
for that two week period. I have actually some other clients that do this and they rent their home for like 30, 50, 000 for the two weeks. As [00:29:00] long as it's 14 days or less, they don't have to pay a lick of tax on that 30 to 50, 000. You don't get to write any expenses off from it, but you don't have to pay any tax on it.
So when you're a business owner, you are able to rent your home to your business. Yes. And usually it'll be for things like monthly board meetings, or you can do employee parties. If you have any other sort of events going on, you know, maybe you're trying to do patient or client welcome event, or, you know, just try to bring new clients in or patients, then you're able to do it for those various reasons.
And so you just have to obviously make sure that you have good documentation, that you have a rental agreement in place, and that you choose an appropriate. Reasonable rent for your home. And what you got to say now, Alisha? I was going to say, can you still do this if you have an apartment? Because not all of us are like Brittany and have two homes.
So I wonder if you're like me and you [00:30:00] don't have a home yet and you are renting, does this still apply? Can you rent your home? Apartment that you're already renting to your business. Yes. Yes, you can do it. It'll probably not be as fruitful because it might end up being smaller, but if it's your primary residence, then you're able to do it, even if it's rent, Even though you already have a reasonable rent because you're renting it yourself, you can go and I would still look for creating some more reasonable rent, determining whether that's really good amount, or if you're actually paying a really lower rate than you should be. And like, so either it's rent controlled or something and, you know, go from there.
I had a question about something that you had mentioned earlier, and I don't know how many of our listeners have a practice that they're selling, but you mentioned something about an opportunity zone and using that as a potential mechanism for tax savings. Do you mind just sharing a little bit more about what is an opportunity zone and how could someone really leverage that?
Yeah, definitely. So when you sell a property or you have any capital gains, [00:31:00] really, that you can use for an opportunity zone, but what's. Great is most cases, if you have a property, if you do like a 1031 exchange, that's where you can put all of the proceeds into the next rental and you don't have to pay tax on it.
But with an opportunity zone, you only have to invest the capital gains in that. So like if you sell a place for a million dollars. Your capital gains, let's say 250, 000. Then for a 1031 exchange, you'd have to put in the full million into that next property, but with an opportunity zone, all you have to do is invest the 250, 000.
So now you have another 750, 000 that you can continue to work with. Doing other things, what the opportunity zone does is there are certain areas of the country that are needing more revitalization. And so the government goes and says, Hey, this is those areas. There's companies that go in to put more money into the area to hopefully get it to be, to be nicer and uplift that economy.
These companies will then sell these opportunity zone funds that will put that money in [00:32:00] and that tax on the capital gains is deferred until 2026. And so then you have to pay the tax in 2027 when your return is due. So right now that's how they have it. And this started years ago. Back in, I believe it was in 2017 was the first year there was like a 10 year period where you could do this and you could actually get a reduction in the amount of capital gains tax you'd have to pay that unfortunately at the moment is not available anymore, just because it's too close to 2026, but what ends up happening is that money, it gets deferred.
So you get a deferment on that capital gains tax. And then any of the money that's in that account and it Grows any appreciation comes out tax free after 10 years. So it's really nice in terms of not only getting a nice little deferment of the tax, but then also going and getting that tax free growth as well.
Alexis, you know, one of the things that I've been thinking about for tax reduction is how I [00:33:00] do my giving, whether that's for me giving to my church, or maybe for Brittany giving to her child. And so for me giving to my church, one of the things I've been thinking about is should I be giving stock instead of cash?
And then when it comes to giving to a child, which I don't have children. I do not have children. Let me just put that out there. I'm not pregnant. I do not have kids. You're trying to tell us something, Leisha. I'm not trying to tell anything, which is why I was like, let me clear this up right now. Anyway, giving to a child, whether that is hiring a child through a business or using five to nine accounts for college expenses.
I just wondered if you could talk a little bit about some of the ways that you've advised clients to optimize their giving. Yeah, definitely. Again, it depends upon What you have laid out in front of you, let's say you do have some appreciated stock and you're like, Hey, this is really appreciated. I really don't want to pay the capital gains on it.
Well, great. You can put that into a donor advised fund or even a charitable trust, then get taxed on those gains and you get a nice, Charitable deduction for it, you know, when it [00:34:00] comes to wanting to shift money to children, there's a whole bunch of different things you can do. I mean, yes, hiring your kids, what you're essentially doing is taking that money from your higher tax bracket down to their zero tax bracket this year.
I believe it's about 14, 000, six 50 that you're able to pay a child without paying any taxes on any income tax. If you are a sole proprietorship or a partnership, you don't have to pay any Payroll taxes either, but if you're an S corporation or C corp, then you have to pay those payroll taxes, unfortunately.
With 529 plans, you know, it's the same sort of thing. You're putting money aside. Some states, you get a tax deduction. Some you don't. So like, I'm in Tennessee, so there's no state income tax. But in other states, like New York, for example, you get 10, 000 deduction for it. And then those funds grow tax free, and then you can use them for qualified educational expenses tax free when it comes to charitable giving as well.
I do have some clients that have wanted to start, like, private [00:35:00] foundations or other, like I said, charitable trust before, but charitable trust and private foundations are very complex. They are not always worth it for the cost. If you guys have some sort of charitable intent that you want to kind of take public, then that would be something you would definitely want to talk to an advisor on to make sure that things are done properly and charities and nonprofits in full disclosure are not our specialty because they have a whole different tax code, a whole different accounting, and it really does take a specialization.
That's really helpful for us to think about, especially how do we maximize some of these deductions? Because once we've. Done all the retirement stuff. We still have some taxes to pay. We want to try to minimize that and give it to somebody, not the IRS, if we can avoid it. So Alexis, I'm just wondering, you've been doing this for some time and I'm a money coach and I've had some of those clients that just are like near and dear to my heart where I've helped them do something that they thought that they weren't [00:36:00] going to do.
Do you have any of those? Really rewarding client experiences that you can share with us. Probably one of the biggest ones recently was very much around actually those opportunity zones. We had a client that sold a property for about a 5 million gain. By the end of it, once he's does this opportunity zone, he's He's probably going to be making back another five to 7 million, not only in tax savings, but also the appreciation on that money.
So you're good.
So, well, in full disclosure, when you have big dollars, we're saving millions for Lexus.
You sold me. I'm I'm you're, you're hired. You're hired. You're hired. I'd love to take full credit for it, but if you remember that we are working with big dollars, I mean, if you're working with 10, 000 and you put it in, then you're probably only going to. He's saving maybe another, you know, 10, 000 or so, but yeah, that one was really great because we were able to just having to do a lot of research too, because the gentleman had property into the wrong type of entity.
He put it in a C [00:37:00] corp versus just an LLC. And so that created its own challenges. But, you know, we're hoping that by the end, if he doesn't need to touch that money, which he doesn't, then his kids will get a step up in basis in that C Corp and then they're not going to have to pay any tax on the shares of that company.
So it's not only going to be saving him a lot of tax now, but his kids in the future will not have to pay tax on it either. So, I mean, that one was awesome. Those are a little more few and far between, but. Really, there's no specific client that I can think of off the top of my head, but just to see y'all go and take our advice to actually have us help you with that implementation, because we're a white glove service, so we're doing everything for you and trying to do as much as possible because y'all are busy.
With allowing us to do this and showing how to do the setups properly, doing the implementation and getting the numbers just correct. I mean, it opens up so many things where, I mean, I [00:38:00] had one client where they were able to pay off the rest of their student loans just based on that tax savings and be able to pay it off a year and a half earlier.
I mean, it's not a huge amount of time, but that's extra interest, you know, and to have that impact is. Heart.
I love it. You know, Alexis, I'm really fascinated by this because I think before I knew a decent amount about taxes. So my father actually is a tax professional. He works for the department of defense. And so it's more of like a, Auditor for like government contracts. But I say that to say that he kind of taught me a little bit about taxes as I was growing up.
And I think in the beginning, I thought you need to be a math whiz in order to be good at accounting. And as I started to mature and grow and have my own complex tax situation, I've realized it's really kind of what you said. About interpretation of the law and being able to say, all right, this is the information that they're giving me.
And now it's kind of like a puzzle to see, like, which things I can take advantage of and how I can utilize this tax deduction to my [00:39:00] favor or how I can view taxes and the tax code as a list of incentives. And which one am I going to take advantage of? And so, I'm really fascinated by this topic and even more fascinated by the thought of saving lots of money.
If other people who are listening to this are like, okay, Alicia, yeah, I agree with you. I also want to save a ton of money. Which kind of clients does your company take on and then how can they get in contact with you? Yeah, so we work primarily with healthcare professionals. We look for those that have at least 400, 000 of gross income.
So that's from all sources and have at least 50, 000 of income as a 1099 independent contractor. So that means coming from like expert witness locum work, just other side gigs, you know, maybe you have your own practice, et cetera. And so then that way I'm really focused on return on investment. I want to make sure that whatever you guys pay us, that I'm saving a lot more in tax than what you're paying us.
Having that criteria in place [00:40:00] will just basically guarantees that I'll be able to do that. And so that's for cerebral tax advisors, but we also have Cerebral Wealth Academy, which is a course for those that are more do it yourselfers, or maybe they don't earn enough to be cerebral clients. That really walks those through that have that side gig locum income, just any sort of 1099 income.
And walks them through what entity they should be retirement deductions and credits. We have lots of resources, work, papers, templates. You know, if you need that Augusta rental agreement between you and your business, then we got that in there, et cetera. And so then that way for those that just. Just aren't ready to be cerebral tax advisor clients.
They can go that route and I have content plan in place to even expand it even further. It's a great resource for my clients as well. So then that way everybody can try to save something. We definitely like that. And then how can they get in touch with you? Is it just cerebral tax advisors. com or. Yeah, if [00:41:00] you just go to cerebraltaxadvisors.
com, we have tons of information about our practice, you know, how, what we stand for our values, pricings on there, what services we have, you can go look at the team as well. And, you know, we only take on about four new clients. Per month. So that way we can have, maintain that white glove handholding type of service and amazing communication, as well as we're able to keep a lower client base so that we can have a very high staff to low client volumes and keep that great service.
Sounds good. Or we can just hit up Brittany and just say, be like, Brittany, give us Alexis's info.
That works too. Do not blow up my phone because I'm going to ignore you. No, I'm just kidding. Well, Alexis, I want to say, you know, it has been such a pleasure having you as our tax accountant and for. You to come on to the show so that we can share all of your wealth of knowledge with our audience. I'm sure that this has [00:42:00] generated a lot of thought, a lot of questions like, do I actually need a tax professional?
So if you meet that eligibility criteria, that Alexis talked about, or if you don't, maybe you want to open up a side hustle some of these tax benefits. So Alexis, again, just so much gratitude to you being here and sharing all that you know about taxes with us today. Thank you so much. The two of you had a great time.
So now we're going to move on very quickly to our next segment, which is our financial focus. And this one is going to be a little bit shorter than our usual ones, but I thought it would be interesting to maybe share with our audience some tax changes that we plan to make this year to lower our taxes and I'll go first.
I make money on the side, so I have my own business this year. One of my goals is to contribute more to my solo 401k. Yes, I have retirement accounts open to me through my job that I work at my doctor job. But because I make money on the side, I am able to open up another retirement [00:43:00] account for that income called a solo 401k.
And so my goal is to contribute more to the solo 401k this year. I set up my solo 401k to be able to do something called the mega backdoor Roth, which will allow me to stuff even more money into retirement accounts. And although I've had it set up this way for a couple of years, it wasn't until I guess this year that it really was applicable to me, given like my income status and how much money I was making from my business.
And so now this year in 2024, I'm like, okay, I really want to be diligent about doing that this year. Do you have any things that you want to change this year? As you're going into preparing things for 2024, I guess. So one of the things that we do is we use a cash balance plan. So we would like to put more money into our cash balance plans.
Also, we're in the process of purchasing a home and we're going to keep our current home. As a rental property. So we will have two, two homes. So now I have this additional burden [00:44:00] of how do I strategize against that passive income that's going to be coming in and demonstrate also passive losses to.
Offset that income. I haven't quite figured it out yet. I'm still working through the strategy, but that is something that will be an additional layer that we'll have this year. There's always some of the standard things like finding, you know, ways to increase my income in a tax free manner. So trying to negotiate more time off CME money.
Some of that stuff is harder to negotiate when you work for a larger health system, because those things are usually standard. But it's me looking into that. I'm considering enrolling in a high deductible health plan towards the end of this year so that I can contribute to an HSA. So that's an account that I may utilize.
Brittany, I'm curious. I know that one of the tax advantage accounts is something called a Dependent Care FSA. It allows you to basically pay for daycare in a tax free way. Are you utilizing that for your kiddos? Or is that something you're thinking about this year? We've always used it. When Brooke was born and it allows you to put away 5, 000 now here in Boston.
Childcare is like what? [00:45:00] It's it's so expensive. It's like one of the most expensive States to raise a child. So 5, 000 is literally one month Of daycare, uh, for our children. Thankfully, Brooke will be starting school in September. So that will wait, hold on timeout. You pay five grand like post tax dollars.
Brittany, there are people listening to this that may not make five grand in a month. Like what, like it's that your kids are not that there's not like you have a newborn, like, right. My brother said he pays two grand a month for my nephew and my nephew's almost two. And my other brother pays about two grand or so for my niece.
So I was thinking it's, this is my perspective from hearing them. It's like two grand a kid, but you're paying five grand for your two kids. Yeah, it's about five grand. So we have the daycare, childcare expenses, right? And my son, he just went to preschool. So that's going to give us. About a savings, I think of 200 a month.
So we pay about that. And then we also have those additional [00:46:00] days in which we need babysitters because I work on the weekends and my husband also works on the weekend. So taking all of that into account, we pay about 5, 000 a month, man. I see why some people are like, is it worth it for me to work? I mean, you're a physician, right?
And you're in a better position, let me say, to afford that. And this is two kids, right? It's not like you have four or five kids, man, this is getting expensive. So it's like, I mean, at some point, right, if you, if people listen to this, aren't physicians or maybe they are physicians and they, and they currently work part time, I can see why you can start to get to a point where you say, okay, do I want to work every day and bring home maybe 80 which after taxes is like 60 grand, and then all that money goes to childcare, or do I just want to stay at home with my kid?
And there may be different reasons why you choose one over the other. I mean, I think that intellectual stimulation and feeling like you have passion and purpose. It's important and a lot of people get that through their jobs, but man, wow, I am flabbergasted as someone who does not have kids. I'm [00:47:00] like, okay.
All right. I can see how that's a problem. You know, we also don't have any family in the area. So like every single minute of child care we have to pay for. It's all about that family planning piece and striking a balance. So if anyone is out here and you're listening and you're thinking about having children, it might be worthwhile for you to just Google what are the average child care costs.
And of course, we could go to a different daycare to minimize our expenses, but everything is walkable. And I really, really love the teachers and the education. They go on field trips, et cetera. So it's worth. The money that we pay, and I'm very grateful for the teachers who care for my children. But yes, it is very expensive.
Oh my gosh. All right. And now we are going to head into our fun money segment. All right, Brittany. We know that you are not spending money on your birthday, so we don't know if [00:48:00] you actually have fun with it. You know, as you were talking earlier about the ways that you are not spending money on your birthday, I have been brainstorming the ways I am going to spend money on my birthday.
So my birthday is in June and I am debating, am I going to try to do this all inclusive resort in like the Caribbean, or am I going to. Do something vastly different and go to Chicago. I have always loved the idea of summertime in Chicago. I don't know why Chicago is on my mind, but I was like, I haven't been there in a while.
And I thought, man, it might be cool to go to Chicago for a few days with some of my friends and, you know, do like some food and wine festival if that's going on or do like a little sunset cruise or something. And so I haven't decided yet, but that's something fun that I'm thinking about doing with my money.
Well, let me say, I love that you're putting all this thought into planning because clearly I don't do the same. So I need to learn from Lisa and, and Chicago is a great place. I love Chicago. I did medical [00:49:00] school there. So I think both of those are viable options. Gotcha. We will keep you guys posted on what, what I decided to do since I plan, I'm like, we're not leaving.
My good time to chance, we are going to plan it. People are going to be excited about it. I'm going to tell my girlfriends, Hey, make sure you get the time off work. We are gonna go. birthdays are serious business for me. So, yeah, yeah. I love that you celebrate yourself. It is important. And. I'm not spending money, but I do have a few gift cards that I need to use.
So maybe this will be a time for me to actually go and pamper myself and like get a massage or something like that. So that's how I'll let you know if I do it or not, because I haven't done it in a while. You deserve it. You deserve it. Well, thank you all so much for tuning in. Hopefully you learned some tidbits from us and also from Alexis in terms of things that you might want to consider as you.
Are interacting with your tax professional, or if you are thinking about hiring one, hope you enjoyed this episode as much as we did. And we cannot wait to see you again, or I guess [00:50:00] come to you again next week. Bye bye.
Hey, money, best friend, we want to buy you a drink on this show. We are all about spilling the tea on our finances and our personal lives, but we also want to share a little bit more tea with you. Basically, we're trying to give you a free drink on us. All you have to do in order to put your name in this drawing for a free drink.
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Cheers.
Hello everybody, it's me Brooke. I'm recording a little disclaimer for my mommy, Dr. Brittany Halford and her friend, Dr. Lisa Taylor. Just so you know, they're not financial advisors, tax professionals, lawyers. financial planners. [00:51:00] Everything you hear is for education and entertainment. It's not strict financial advice, you know.
So use your best judgment. Chat with a top professional. And all those other people that you need to talk to. Thanks for tuning in today. Keep cruising on your journey to wealth and wellness. Buh bye.
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