Wealth Well Done

In this exciting series of podcast episodes, we have the pleasure of hosting two remarkable CPAs from Hall CPA. Today, we kick off with none other than Brandon Hall, the brilliant founder, owner, and CEO of Hall CPA, as well as the mastermind behind the online community, Tax Smart Insiders. Join us as we delve deep into the intricacies of real estate taxation and accounting with Brandon, a visionary leader in the field. Get ready to uncover invaluable tax planning strategies and expert tips that will empower real estate investors to build wealth effectively.

Here are some topics from today’s discussion:

• About Tax Smart Insiders

Episode Highlights:

[08:00] Not All CPAs are the Same

When it comes to complex regulations like the passive activity loss rules, educating your accountant is crucial. Not all CPAs are familiar with specific code sections, leading to misunderstandings. Investors need to understand the basics to ask the right questions of their tax professionals. Tax Smart Insiders bridges the gap by providing expert content and access to a knowledgeable team for real estate investors. If accountants struggle with these complexities, investors often seek out specialized CPAs for guidance. Thinking creatively and combining expertise can lead to success. Tax Smart Insiders fills the niche of providing invaluable support to real estate investors.

[14:51] Understanding the Tax Laws

Understanding the fundamental workings of tax regulations is essential for clients. While extensive knowledge of code citations or tax court authority may not be necessary, comprehending how these regulations function is crucial. For instance, investors in real estate syndicates may receive an $80,000 tax loss on their K1 form after a $100,000 investment. However, their CPA may mistakenly claim that this tax loss cannot offset rental income from other properties generating passive income, which is incorrect. Familiarizing themselves with Section 469, including the passive activity loss rules, real estate professional status, and short-term rentals, is paramount for investors. Accountants, without day-to-day involvement in these matters, may lack comprehensive knowledge. Thus, investors must understand Section 469's fundamentals to confidently ask relevant questions and ensure accuracy.

[23:33] Why Real Estate Is A Great Way To Build Wealth

Real estate is an incredible avenue for wealth building, attracting a diverse range of investors. Over the years, I've come to realize that many real estate investors possess an entrepreneurial spirit. While they may not be full-blown business owners or willing to take on as much risk as someone starting and scaling a business, they exhibit a higher tolerance for risk than the average American who simply invests in ETFs. This understanding leads to the realization that entrepreneurs and like-minded individuals gravitate towards each other. In the real estate world, you have the opportunity to connect with fascinating people through various communities. These communities serve as platforms for collaboration, where investors share their experiences, seek advice, and discuss potential opportunities. Building these niche connections has proven to be more rewarding than I initially anticipated. Networking and meeting people from different parts of the country who share a passion for real estate has been an enriching experience.

Resources Mentioned:

Hall CPA

Tax Smart Insiders: www.taxsmartinvestors.com/free-trial

Taxes are one of the biggest expenses for business owners and investors. In this episode, we'll discuss strategies you can legally use to reduce your tax bill and keep more of the money you earn. We'll cover retirement accounts and how to maximize tax benefits, depreciation, and how real estate investors can lower their taxes, as well as tax credits and incentives for business owners. Learn how to partner with the IRS using legal tax loopholes and how to select a tax professional to help you implement strategies.

Here are some topics from today’s discussion:

• The compound impact of taxes on your wealth

Episode Highlights:

[02:46] The Compound Impact of Taxes on Your Wealth

Effective tax planning can have a significant impact on your wealth. For instance, by reducing your taxable income from $600,000 to $50,000 and owing $50,000 in taxes instead of $200,000, you would have an extra $150,000 available for investment. Over time, compounding this additional amount at a growth rate of 12% can significantly boost your long-term net worth. Smart tax strategies and strategic investments can make a massive difference in securing your financial future.

[06:07] Qualifying and Selecting a CPA: Strategies for Business Owners, Real Estate Investors, and Philanthropists

1. Determine the Expertise Quality: When considering hiring a Certified Public Accountant (CPA), it's important to recognize that the expertise level can greatly impact both the service quality and the overall cost. To ensure you find the right CPA for your needs, take the time to qualify them through an interview-like process.

Choosing the right CPA who understands your unique needs and can provide expert guidance on tax strategies specific to your situation is crucial for maximizing your financial outcomes. Make sure they are familiar with strategies specific to your situation, like S corps for business owners or opportunity zones for real estate investors. Finally, consider how up-to-date they are on the latest tax laws and incentives. An experienced CPA should stay on top of changes in the tax code.

[34:19] How to Use Bonus Depreciation to Offset Taxes

Bonus depreciation allows you to take upfront depreciation on passive income, potentially offsetting passive gains with large passive losses. If you can't fully utilize the passive loss in one year, it can be carried forward to future years. However, if you have real estate professional status, you can convert the passive loss into an active loss, offsetting active income instead. This allows you to reduce taxes at a higher rate compared to offsetting passive gains.

Resources Mentioned:

Nth Degree CPAs

Taxes got you stressed? Reducing your tax bill doesn't have to be complicated. Tune in to this podcast episode for tax strategies to help you keep more of the money you earn - legally. Join Eric Scovill as he walks you through the basics behind taxes since so much of your income goes there!

Here are some topics from today’s discussion:

• Eric’s role as a financial planner

Episode Highlights:

[04:50] Partnering with the IRS: Reducing Tax Liability and Keeping More of Your Money

The key is to understand that the intention behind the tax code is to create a partnership with the IRS. They place great emphasis on providing you with tools and strategies to help reduce your tax liability. By aligning with their objectives, they offer incentives to ensure you can keep a larger portion of your hard-earned money. 

[10:41] The Different Types of Taxes

• Income tax - This includes federal income tax based on tax brackets as well as state income tax. Income can be active income from employment or passive income from sources like rentals, dividends, and capital gains.

[26:05] How to Decide Which Tax Structure to Use

1. Income taxes - C corporations pay corporate income tax at a 21% rate while pass-through entities like S corps and LLCs avoid this double taxation. However, owners of pass-through entities pay self-employment tax on their income.

Overall, business owners should consider their goals, the number of owners, income tax implications, and legal protection needs when deciding between entity structures. Consulting with a tax professional can also help ensure the right structure is chosen.

This week, Eric Scovill continues the conversation with Jay Link as they discuss God, money and stewardship. Jay does a great job breaking down common misconceptions around tithing and offering practical tools for biblical giving and generosity. Check out this episode if you want to learn how to use your finances in a way that honors God!

Here are some topics from today’s discussion:

• How Christians should approach tithing today

Episode Highlights:

[02:47] How Christians Should Approach Tithing Today

According to Jay, Christians should move away from a legalistic approach of tithing 10% of their income and toward a more biblical concept of generous giving based on what they decide in their hearts. Some key points he mentions:

• Tithing can become an obligation instead of an expression of love.

[11:27] God Loves a Hilarious Giver

When our giving is motivated by obligation or guilt, it is not joyful or hilarious. But when we give freely and generously out of our love for God, from resources that ultimately belong to him, our giving can become a hilarious act of joy and worship. Giving in this way pleases God far more than begrudging tithes or reluctant offerings.

[14:34] What It Means To Give Everything You Have

When Jesus spoke of giving up all possessions to be His disciples, it may not imply that everyone must relinquish everything they own and live in extreme poverty. Rather, it could be understood as surrendering the ownership of our possessions and recognizing that they ultimately belong to Him. The essence of Jesus' message is about living with a mindset of stewardship, acknowledging that all that we have comes from Him. It's about shifting our perspective from possessing to stewarding. As disciples, we are called to live as if our possessions belong to Him, using them wisely and for His purposes. 

[19:19] How to Give Money Away And Have It Not Go to Taxes

Jay explains that estate taxes, capital gains taxes and gift taxes are optional for those who know how to minimize or avoid them through proper planning. The stewardship planning process he outlines helps families:

1. Identify God's purposes for the resources he has entrusted to them.

This usually involves a combination of giving while living, gifting assets, and setting up testamentary trusts and bequests. With proper planning, families can give far more to charity than they pay in taxes, while also providing for their heirs. However, it requires working with advisors who understand these strategies and are willing to implement them.

Resources:

https://stewardshiplibrary.com 

Jay Link’s 25 Questions about tithing

Jay Link’s article Giving As An Act Of Worship

In this episode, Jay Link from Stewardship Ministries joins host Eric Scovill to discuss the biblical concept of stewardship and how Christians should view and manage money and resources. They cover topics like the proper definition of stewardship, the role of money in faith, the biggest misconceptions around tithing, how affluenza affects our view of wealth, and how to pray to determine God's will for our lifestyle and giving. Listen in and walk away with practical tools to rethink your relationship with money through a biblical stewardship lens.

Here are some topics from today’s discussion:

• What is stewardship? 

Episode Highlights:

[08:17] The Instrumental Role of Money in Our Faith

As you accumulate more possessions, you may start relying on them for security instead of relying on the provider. This can lead to problems because your sense of security becomes tied to the stock market and other material possessions, rather than to God. When fear takes hold of your faith, it becomes difficult to make good spiritual decisions. Your finances, property, talents, relationships, and other aspects of your life should be brought under the Lordship of Jesus so that they can be used to advance His kingdom instead of being a hindrance to what God wants to do with the resources He has entrusted to you. 

[10:52] What is Stewardship?

Stewardship refers to the act of managing someone else's property as a caretaker or manager. While many people in churches associate stewardship with giving and money, the true meaning goes beyond just financial contributions. It involves recognizing that God owns everything in the universe, including our possessions, talents, time, and relationships. As stewards, we are entrusted with a small but strategic portion of these resources to be used for God's purposes and His glory. This mindset shifts our focus from being owners of our own little financial empires to being caretakers of the King of kings and the Lord of lords, allowing us to live a life that honors God and advances His kingdom.

[21:51] The Biggest Misconception Around Stewardship

The biggest misconception about stewardship is that we owe God 10%. This stems from an Old Testament law that required tithing for the Jewish community. However, this doesn't apply to modern-day Christians who should focus on managing all their resources for God's purposes. This perspective can lead to giving generously and joyfully rather than just fulfilling a legalistic obligation.

Resources:

https://stewardshiplibrary.com 

Joining us again is Mike Morawski, a highly experienced, decorated real estate investor. From a 100-million-dollar company to prison, Mike's story teaches valuable lessons on scaling responsibly and avoiding pitfalls. His journey is a testament to perseverance, and that success comes at a cost. Learn from Mike's story on the importance of listening to those around you and having an 'exit plan' for your investments.

Here are some topics from today’s discussion:

• How Mike built a 100-million dollar real estate company in just 30 months 

Episode Highlights:

[08:00] Maximizing Investment Opportunities in Unprecedented Market Conditions

Don't chase any false dreams or something that seems too good to be true. You have to watch the market because we're in unchartered times right now. But with that said, this is the greatest time to be investing, especially in multifamily. If you get positioned right now, and you’re in front of the next Bull Run, you're going to be successful. This is going to be the greatest redistribution of wealth the world's ever seen – again. 

[11:51] Mike's Shocking Experience with White-Collar Crime

Mike was shocked to discover that he had violated the law, trusting his accountant and attorney who advised him to create a paper trail. Though he lived a simple life, Mike's world was turned upside down when he was sentenced to prison in 2013. Living in fear for two years, his reputation was destroyed, and even family members accused him of wrongdoing. Mike admits that his ego had gotten out of control, leading to his downfall. Despite being a Christian, he lacked a strong connection with God and focused solely on achieving his goal of owning and operating 10,000 units. His experience serves as a cautionary tale about the high price of white-collar crime.

[24:08] A Journey of Faith and Humility

Mike believes that God's design around his experience was impactful, and he sees it as an opportunity for growth rather than a setback. Though he knows many others who have gone to in real estate, he is one of the few that openly talks about it. Mike credits his faith in Jesus as the reason he was able to get through each day. He hopes that by sharing his story, people can see him as a humble Christian who loves Jesus and serves others, rather than the arrogant and prideful person he once was. Though things don't always happen the way we want them to, Mike strives to move in a positive direction.

[25:48] The Importance of Listening and Paying Attention in Life

Mike reflects on the importance of listening and paying attention in life. He acknowledges that he didn't pay attention to details, nor did he listen to the important people in his life. His wife expressed concerns about his partner's lack of trustworthiness, but he dismissed her. He thought he had everything under control, but his world crumbled. Mike believes that God uses our experiences to teach others, reminding us to pay attention to the signs around us. He emphasizes the need to listen to the details and people around us since God or the universe sends warnings that we need to heed.

Resources:

Multifamily Unplugged

Mike’s book: Exit Plan: Your Complete Guide to Multi-Family Investing and Why You Need an Exit Plan Before You Buy

Mike Morawski, a longtime real estate professional with over 30 years of experience, shares his strategies for investing in real estate syndications. Mike started in the construction industry before transitioning to real estate. He built a large residential real estate team and property management business. Mike's syndications target a mid-teens return for investors through a combination of preferred returns, cash flow, and appreciation. Today, Mike stresses the importance of relationships, deal underwriting, and raising private capital as the key fundamentals of the multifamily syndication business.

Here are some topics from today’s discussion:

• Mike's background and transition to real estate 

Episode Highlights:

[12:00] The 3 Key Fundamentals of the Syndication Business

In the real estate syndication business, there are many moving parts to consider. Whether you're looking to scale a small multifamily portfolio or a larger one, there are three key fundamentals that remain the same regardless of the playground you choose. These include building relationships, underwriting deals, and raising private capital.

1. Building relationships is crucial, whether it's with brokers, lenders, insurance providers, vendors, passive investors, or key principals with more experience who can join your team. 

[17:19] When to Know It's Time to Hand Things Off

To delegate effectively, you need to know your strengths and become the best at them. Whether it's construction, finding deals, underwriting, or raising capital, everyone has unique talents to add value to a team. If you excel at building relationships, underwriting, and raising capital but lack attention to detail, find a partner who can handle those areas. Similarly, if you are a big-picture visionary, find a partner skilled in sourcing deals. By building teams with complementary skills, you can work together effectively on all fronts and achieve greater success than you ever thought possible.

[29:32] What to Look for in Syndication Deals

When considering syndication deals, market viability is crucial. Investors should look for markets with strong population growth, as this drives job growth and increases household income. Other important factors to consider are crime rates, quality of schools, demographics, employment diversification, and new units coming online. It's essential to check all these boxes before moving forward with a deal. For multifamily deals, investors should have a specific buying strategy that aligns with their goals. While there are various types of real estate deals to syndicate, multifamily properties offer attractive investment opportunities. Consider investing in senior housing, mobile home parks, self-storage, tax credit deals, or affordable housing within the multifamily space.

Resources:

Multifamily Unplugged

In this episode, Eric Scovill chats with Chuck Day about the fascinating world of donors, their mindset, and their philosophy. Last week Chuck shared some interesting insights on how they use intentional strategies to set themselves and their partnerships up for success not just in the present but also for future generations. Today, we're thrilled to dive deep into the International Justice Mission (IJM) and its mission to stop violent crimes against the poor and oppressed.

Here are some topics from today’s discussion:

• What is planned giving?

Episode Highlights:

[02:17] What is Planned Giving?

Giving appreciated stock, real estate, and IRA assets can offer significant tax and financial benefits. As a stewardship advisor, Chuck’s job is to guide families in making effective charitable contributions by assessing their goals and assets. He determines the optimal asset to donate, timing, and arrangement for maximum benefits to all parties involved.

[03:10] A Mission to Combat Human Trafficking and Protect the Poor

The International Justice Mission is a human rights nonprofit organization headquartered in Washington, DC, originally established in 1997. Their mission is to protect the world's poor people from violent crime, as they are by far the largest victims of violent crime of any group in the world. IJM operates worldwide in various forms, but its primary focus is tackling human trafficking and slavery, an issue that many remain unaware of despite its massive scale. It is IJM's most notable area of work, and they strive to combat these atrocities targeted toward the vulnerable and oppressed.

[09:04] How Slavery Evolved Into Modern-Day Slavery

High school taught us that slavery ended in the Civil War, but that's only partly true. Slavery has taken on new forms such as sex trafficking and labor trafficking, affecting more people than ever before. Only 2 billion of the 7 billion people on earth are protected under the law. What happens to the remaining 5 billion?

[13:55] The Devastating Reality of Sex Trafficking: How It Happens and How We Can Stop It

Sex trafficking amounts to a $150 billion industry worldwide. Children are often tricked into this trade after being offered job opportunities by representatives. They remain trapped until someone rescues them. Online sexual exploitation of children (OSEC) is a new form of trafficking that occurs primarily in the Philippines. Here, perpetrators use streaming services to direct children in front of webcams, typing in the sex acts they want the child to perform. Sadly, the only circumstance in which relatives knowingly engage their children in sex trafficking is through OSEC. The International Justice Mission (IJM) focuses on ending this egregious crime before it spreads to other parts of the world. To that end, IJM and the US Government work together to stop the crime in its tracks. Learn more about the devastating reality of sex trafficking and how we can put an end to it.

Resources:

https://legacy.ijm.org/  

The Ruthless Elimination of Hurry by John Mark Comer

Meet Chuck Day, a philanthropist with over 25 years of experience in the industry. With a law degree from Drake University, Chuck has dedicated his career to making a positive impact on the world through giving. In this two-part show, Chuck shares his insights on the mindset of a giver and the strategies he uses to approach giving at the highest level. Whether you're an individual looking to enhance your giving or a foundation seeking to optimize your impact, you won't want to miss this episode. Get ready to be inspired and motivated to take your giving to the next level.

Here are some topics from today’s discussion:

• The impact of dollars on the environment

Episode Highlights:

[08:47] Sustainability in Giving: Making a Lasting Impact in the Developing World and Beyond

Sustainability is crucial for generosity, particularly in the developing world. To avoid leaving communities feeling frustrated and disillusioned, it's essential to use sustainable business models that provide long-term investment and support. Success must be measured consistently throughout the process, with resources invested for the long haul. Prioritizing sustainability creates a positive impact that reinforces the idea of giving as a powerful force for change, locally and overseas. By prioritizing sustainability, we can ensure that our efforts make a lasting and meaningful impact on the world.

[10:08] A Hand-Up vs. a Handout

A "hand-up" approach is far superior to a "handout." Providing a hand-up offers a more effective and sustainable solution that affirms human dignity, utilizes individuals' innate talents, and engages local investment and involvement. Ultimately, this approach determines the long-term success of any giving effort. While handouts may be appropriate for short-term disaster relief efforts, anything more engaging requires careful consideration to ensure that it's a hand-up and not a handout. By using a hand-up approach, we can create an immeasurable positive impact that lasts far beyond the immediate present.

[11:54] How to Balance Your Giving: Locally vs. Abroad

Treat your charitable giving like for-profit investing. Create different "buckets" that offer both short and long-term results, just as you would for stocks or bonds. Assess what matters most to you, where you feel called to make a difference, and what tugs at your heartstrings. Create a bucket for each cause and allocate resources accordingly. Applying the same level of due diligence to your philanthropic giving as you would to for-profit investing is vital to ensure a solid plan and successful execution. This approach allows you to make a meaningful impact in areas that matter most while guaranteeing that your giving is strategic and effective.

[16:00] Characteristics of a Good Foundation

Giving should bring joy and fulfillment to individuals and families. Addressing significant problems in the world and making a positive impact should be something eagerly anticipated, rather than a chore. Having a strategic plan in place is vital for success and continued enjoyment of giving. With a plan, you can achieve better results and experience greater happiness while giving. By setting yourself up for success, you ensure that giving remains a source of joy for years to come.

Resources:

https://legacy.ijm.org/ 

Charity Navigator

As individuals with wealth, it's important to recognize our responsibility to use our resources for the greater good. Join us today for a conversation about cultivating humility and giving back through philanthropy and service. Let's work together to create a culture of generosity and gratitude. In today's session, we'll be providing an overview of estate planning. 

Please note that this program is solely meant for educational and informational purposes. It should not be considered investment advice, and we strongly recommend seeking the guidance of a financial advisor to assess the most suitable options based on your specific situation. Furthermore, please be advised that none of the statements made in the program should be taken as legal or tax advice.

Here are some topics from today’s discussion:

• The difference between a living trust and a will

Episode Highlights:

[02:57] A Will vs. a Living Trust

When it comes to estate planning, a will is a popular option as it outlines instructions for asset distribution, powers of attorney, and guardianship. However, the probate process that follows can be costly, with creditors making claims against the estate before assets are distributed according to the will's directives. In contrast, a trust may come with higher upfront costs, but long-term savings often justify the expense. A trust allows for immediate asset transfer without probate fees or delay and remains private and confidential. While a will may seem like an affordable option initially, the benefits of a trust may outweigh the costs in the long run. It's important to consider your individual needs and consult with a financial advisor when making estate planning decisions.

[12:31] How to Choose Your Beneficiaries

When choosing beneficiaries and a trustee for your estate plan, it's important to remember that charities can also be included. The trustee selection is vital and should be someone financially competent with high literacy or an entity with clear guidelines. It's crucial to discuss fees upfront, especially if naming an individual as the trustee, ensuring compensation for their legal work while considering dependents' guardianship.

[29:21] The Irrevocable and Revocable Aspect of Your Trust

Understanding the irrevocable and revocable aspects of your trust is crucial when dealing with state estate taxes. The current federal limit for 2023 is $12.92 million per individual, or $25.84 million per married couple, allowing for tax-free transfer of assets in and out of your estate. However, anything exceeding this limit is taxed at a graduated rate between 18% and 40%. The federal government receives the state tax rate for amounts above the $12.92 million threshold. In addition to federal estate taxes, 13 states have their own estate taxes based on limits varying from over a million dollars to over $13 million, with some states applying low tax rates.

[39:01] Controlling Your Children’s Wealth

Being born into a wealthy family brings many advantages, but it also carries an important responsibility. As stewards of the resources that we have been given, it is essential to approach our privilege with humility. For those who have grown up in immense wealth, this can be a difficult task. However, it is crucial to cultivate a sense of gratitude and recognize that our wealth is not just for personal gain, but also for the benefit of others. Through philanthropy and service, we can use our resources to make a positive impact on the world around us. Let's strive to create a culture of humility rather than entitlement among the children of the wealthy.