Tax Strategies For W-2 Earners

Mark J Kohler・2 minutes read

Mark Ker provides comprehensive tax-saving tips for W2 wage earners, focusing on investment options like Health Savings Accounts, traditional and Roth IRAs, 401(k) strategies, real estate, and small business ownership, all aimed at proactive wealth-building actions. He also emphasizes the importance of maximizing employer matches, considering alternative investment options like rental properties, and seeking expert advice for optimizing tax planning.

Insights

  • Health Savings Accounts (HSAs) offer tax savings and are accessible with a high deductible insurance plan, while Roth IRAs and 401(k)s provide tax-free growth and withdrawals, a strategy often favored by the wealthy.
  • Starting a small business, investing in rental properties, and maximizing employer 401(k) matches are key strategies for wealth-building and tax benefits, emphasizing the importance of proactive wealth-building actions beyond traditional retirement options like 401(k) and Social Security.

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Recent questions

  • What are some tax-saving tips for W2 wage earners?

    Mark Ker, a CPA and attorney, provides valuable tax-saving tips for W2 wage earners. He suggests utilizing Health Savings Accounts (HSAs) for tax savings, traditional IRAs and 401(k)s for tax deductions, and Roth IRAs and 401(k)s for tax-free growth and withdrawals. Additionally, he recommends investing in rental properties, maximizing employer 401(k) matches, and exploring personal tax credits like solar or energy credits for additional savings.

  • How can parents save for their children's college education?

    Mark Ker advises parents on various ways to save for their children's college education. He recommends utilizing 529 plans, Coverdales, and Roths for college savings. By strategically planning and investing in these accounts, parents can ensure financial security for their children's educational future.

  • What are some tax-saving strategies for individuals with LLCs?

    Individuals with LLCs can benefit from tax-saving strategies recommended by Mark Ker. He suggests filing partnership tax returns for LLCs with two owners to maximize deductions for expenses like cell phones, dining, travel, and home office supplies. Additionally, he advises individuals doing property flips to choose an S Corp over a C Corp for a more tax-efficient structure.

  • How can individuals maximize retirement savings beyond a 401(k)?

    Mark Ker highlights the importance of proactive wealth-building actions beyond a 401(k) for retirement savings. He recommends starting a small business for additional income, investing in rental properties, and exploring Roth IRAs for tax-free growth and withdrawals. By diversifying investment strategies, individuals can secure a more financially stable retirement.

  • What are some tax-efficient investment options for high-income earners?

    High-income earners can explore tax-efficient investment options recommended by Mark Ker. He suggests considering life insurance policies for tax-deferred or tax-free wealth accumulation, investing in rental properties for tax benefits, and utilizing backdoor Roth IRA methods for high earners. By strategically planning investments, high-income earners can optimize tax savings and wealth accumulation.

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Summary

00:00

Tax-Saving Tips for W2 Earners

  • Mark Ker, a CPA and attorney, offers tax-saving tips for W2 wage earners.
  • He emphasizes the benefits of Health Savings Accounts (HSAs) for tax savings, accessible to all with a high deductible insurance plan.
  • Explains the advantages of traditional IRAs and 401(k)s for tax deductions and tax-deferred growth until withdrawal.
  • Advocates for Roth IRAs and 401(k)s, highlighting tax-free growth and withdrawals, a strategy favored by the wealthy.
  • Advises parents on utilizing 529 plans, Coverdales, and Roths for college savings.
  • Recommends maximizing employer 401(k) matches, then focusing on HSAs and Roth IRAs for broader investment options.
  • Discusses the potential of life insurance policies for tax-deferred or tax-free wealth accumulation, cautioning against overcommitment.
  • Mentions personal tax credits like solar or energy credits, as well as Intangible Drilling Cost (IDC) tax credits for oil and gas investments.
  • Encourages investing in rental properties for wealth-building and tax benefits.
  • Invites questions for further tax-saving strategies and emphasizes the importance of proactive wealth-building actions.

15:11

Maximizing Tax Benefits Through Real Estate Investments

  • A man invests in rental properties in towns where his kids attend college, with his kids living in one home and renting out other rooms, leading to significant depreciation deductions and a 1015-20% ROI.
  • High income due to being an executive at a Fortune 500 company results in carry-forward write-offs and losses from the rental property until a potential sale or a 1031 exchange.
  • Real estate investment benefits individuals beyond real estate professionals, offering a 15% ROI, mortgage pay-down, appreciation, and cash flow, especially with a short-term rental strategy.
  • Relying solely on a 401k and Social Security for retirement is riskier than starting a small business, with 50% of working Americans having a side hustle for additional income.
  • Employees can enroll in a company's 401k program, with a Safe Harbor program matching around 3-4% of their salary contributions after one year of employment.
  • Parents can help their minor child with a lawn business by setting up an LLC for them, allowing the child to file their own taxes and build a Roth IRA for college savings.
  • Individuals with a W2 job and an LLC with two owners should consider filing partnership tax returns, ensuring they maximize deductions for expenses like cell phones, dining, travel, and home office supplies.
  • For individuals doing property flips, choosing an S Corp over a C Corp is advised to avoid self-employment tax, as S Corps allow for a more tax-efficient structure with similar write-offs.
  • Starting a small business in a field of expertise with a non-compete agreement from an employer requires careful consideration and potentially legal advice to navigate the restrictions.
  • Seeking advice from a tax advisor network or enrolling in a certification program for tax advisors can provide valuable insights and strategies for optimizing tax planning and business structures.

30:15

Tax and Legal 360 Workshop: Money-Back Guarantee

  • Non-compete agreements should be honored to avoid legal issues; consider starting a business under a family member's name.
  • Making over $200,000 in W2 income may limit Roth IRA contributions; utilize the backdoor Roth IRA method for high earners.
  • Life insurance policies as bonuses for employees may not be tax-deductible due to tax-free benefits upon receipt.
  • Health savings accounts (HSAs) can hold crypto assets without being affected by SEC rulings; consider setting up a self-directed IRA for this purpose.
  • Two options for holding cryptocurrency in a Roth IRA are through Gemini or a self-directed LLC with wallets like Metamask.
  • Government employees without high-deductible health insurance can obtain an HSA by purchasing an independent HSA-qualifying plan.
  • Partnering with a Roth IRA in an LLC to buy investment property is possible without using a non-recourse loan.
  • Starting as a sole proprietorship and transitioning to an LLC is a viable business strategy, especially for high-risk ventures.
  • Attend the Tax and Legal 360 workshop for tax-saving strategies; a money-back guarantee is offered if savings are not achieved.
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