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In episode 199 of the Teaching Tax Dlow podcast, co-hosts Chris Picciurro and John Tripolsky dive into strategic tax planning for W-2 wage earners who make over $600,000 annually.
Following up on their previous discussion focused on individuals earning $100,000 or less, they target strategies that high-income earners can use to minimize their tax liabilities. Chris sheds light on how these earners can optimize pre-tax benefits, take advantage of Health Savings Accounts (HSA), and leverage more sophisticated strategies, such as advanced charitable giving and bonus depreciation.
Throughout the episode, the discussion focuses on how high-income earners can make the most out of their taxable situation. Chris outlines five key strategies, including understanding employer-provided benefits, the power of Health Savings Accounts (HSAs), and the importance of a structured approach to itemized deductions and charitable giving.
Encouraging W-2 earners to partner with their tax professionals, the podcast episode emphasizes strategic planning to elevate one’s financial standing while effectively managing tax responsibilities. Each strategy is designed to ensure that individuals maximize their tax efficiency and safeguard their financial assets in a pragmatic, informed manner.
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👉 www.teachingtaxflow.com/studio
EPISODE SPONSOR
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Following up on their previous discussion focused on individuals earning $100,000 or less, they target strategies that high-income earners can use to minimize their tax liabilities. Chris sheds light on how these earners can optimize pre-tax benefits, take advantage of Health Savings Accounts (HSA), and leverage more sophisticated strategies, such as advanced charitable giving and bonus depreciation.
Throughout the episode, the discussion focuses on how high-income earners can make the most out of their taxable situation. Chris outlines five key strategies, including understanding employer-provided benefits, the power of Health Savings Accounts (HSAs), and the importance of a structured approach to itemized deductions and charitable giving.
Encouraging W-2 earners to partner with their tax professionals, the podcast episode emphasizes strategic planning to elevate one’s financial standing while effectively managing tax responsibilities. Each strategy is designed to ensure that individuals maximize their tax efficiency and safeguard their financial assets in a pragmatic, informed manner.
⸻
STUDIO SPONSOR
Strategic Associates
👉 www.teachingtaxflow.com/studio
EPISODE SPONSOR
REPStracker
👉 www.repstracker.com/affiliate/teachingtaxflow (CODE: IFG)
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- (00:01) - Tax Strategies for High-Income W2 Earners
- (04:01) - Maximize Tax Benefits Through Employer Plans and Health Savings
- (06:37) - Understanding HSAs and Their Importance for High Earners
- (08:39) - Advanced Tax Strategies for Maximizing Deductions
- (11:20) - Maximizing Tax Benefits Through Bonus Depreciation for W2 Earners
- (15:09) - The Importance of Tax Planning and Professional Guidance
- (16:58) - Educational Insights on Tax, Finance, and Legal Advice
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What is Teaching Tax Flow: The Podcast?
Welcome to “Teaching Tax Flow: The Podcast”, the show that’s all about demystifying taxes and helping you keep more of your hard-earned income in your pocket.
Hosted by tax experts from the Teaching Tax Flow team, this unfiltered (but clean) podcast is designed to empower you with the knowledge and tools you need to confidently navigate the world of taxes. We’ll cover everything from understanding tax laws and regulations to maximizing deductions and credits.
In each episode, we’ll break down a specific tax-related topic in a clear and accessible way, providing practical tips and strategies you can use to optimize your tax situation. We’ll also answer listener questions, share the mic with amazing guests, and share real-world examples to help illustrate key concepts.
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www.TeachingTaxFlow.com
Welcome back to the Teaching Tax Pro podcast, everybody, here at the Strategic Associates studio. This week, we're gonna dive into on episode one ninety nine. That's right. We're one away from 200. We are gonna carry out our conversation that we had last week as we look at W two Earners, but this time, those making over 600,000 a year or more.
John Tripolsky:So last week, looked at a 100,000 or less. This week, 600,000 or more. Might be wondering why there's a gap in there. However, we're gonna dive into that a little bit, but more importantly, those that are in that 600 plus, you're gonna walk away with some great stuff here. So as always, Chris Picciurro.
John Tripolsky:Welcome back to your own show, sir. Let's dive into it, brother.
Chris Picciurro, CPA:Thank you and excited to be back. The $600,000 or more wage earning families. For purposes of this podcast, we're gonna assume that the person or the taxpayer does not own any business or their spouse does not own any business or rental properties at this time, which I know we spoke about last episode is the vast majority of taxpayers are w two wage earners primarily. And in the Teaching Tax Flows community, we know that your marginal your tax bracket lies to marginal tax rate is what's important. And for people that are over $600,000 if they're a single filer or they're a married filing joint, typically they're going to be in the 35% or higher marginal tax rate on the federal return plus state.
Chris Picciurro, CPA:So we are talking they could be well into the 40%. So they're giving their business partners involuntary business partners 40% of their earnings if they don't do anything. So what do we do? What are my top five strategies for these type of taxpayers? So yeah, that
John Tripolsky:involuntary business partner, right? That's the IRS. IRS
Chris Picciurro, CPA:or your state or if you're lucky enough to live in the city of Detroit, the city of New York. City of Grand Rapids, Michigan, etcetera, etcetera. There are some cities that they want a piece of the pie also. So what do you do? Right?
Chris Picciurro, CPA:You've done well for yourself. And unfortunately, all the credits we talked about last episode, child tax credits. All the schedule one A deductions, right? That overtime, the tips, the senior deduction, the interest on the new vehicle. They're gone.
Chris Picciurro, CPA:They're not you're not eligible for that. And another issue with the one big beautiful bill act is we're all celebrating that the SALT tax reduction, state and local income tax reduction, went from $10,000 max for married joint to 40,000. However, at $500,000 of income of adjusted gross income, guess what happens? It starts to phase out. So for these people, they are really getting phased out of almost every deduction and credit available.
Chris Picciurro, CPA:So how do we fight back? Right?
John Tripolsky:And when we dive into this, Chris, I would I would wager about too. Like the last time, you know, we were talking to those making a 100,000 or less, that one was more or less introducing things to them. They might not have even taken advantage of tax planning. Majority, 600 plus, probably have in some regard whether they know it or not. So these and and honestly, everybody that's listening, I don't know what he's gonna say for these to be totally transparent, so I could be wrong.
John Tripolsky:Most of these are all of these, is this something that they're gonna wanna really engage their tax professional on? The most part. Okay.
Chris Picciurro, CPA:Absolutely. Most of these folk, but you'd be surprised sometimes on most of the people in this situation having have begin begun to build out what we call your personal board of directors. You know? So that's that's at this point. And if you haven't and if you're interested, just let us know.
Chris Picciurro, CPA:If you need help with something, jumping into feeding taxes, our private Facebook group, or leave a comment on this on our YouTube videos where we will reply. So, okay. What should you do? First thing you wanna do is understand that your main goal is to take any expenses that you have that ultimately you're paying you're paying after tax, you're so you're paying a 40% premium on and make them tax deductible or pretax. So, that starts with taking advantage of any type of employer provided benefits.
Chris Picciurro, CPA:So that means retirement plan contributions. So I'm very much pro tax free income and growth, but if you're paying a 40% tax, red diagnosis, most likely it would make sense to go pretax with your many of your much of your retirement plan contributions. Also, things like your dependent care benefit. Load that up for $5.00. So, those are things are called section one twenty five plan opportunities.
Chris Picciurro, CPA:So, anything that you're going to pay that you can do with your employer pretax, Deeply consider doing it. Like my two main ones are going to be a retirement plan and dependent care. So that would be that's number one. So definitely look at a look at your HR, Look at these things and try, you know, try to go pretax with as much as you can with your with your compensation. Number two, and this this was the the only common denominator between the 100 thought crowd and the 600 crowd, my tri star because I'm a proud resident of the state of Tennessee, tax planning implementation.
Chris Picciurro, CPA:You probably know what it is now, John, don't you?
John Tripolsky:Oh, I know exactly where you're going with this one.
Chris Picciurro, CPA:See. Whatever.
John Tripolsky:We are gonna talk about the HSA. Most likely, the health savings account. And why you need to no. I'm just kidding. You don't wanna hear me talk about this.
John Tripolsky:Chris, you've given the explanation. It's a powerful little beast, though. Let's be honest.
Chris Picciurro, CPA:Absolutely. Yep. The pie it's it's great. So the health savings account, you're gonna get a tax reduction for whatever you put into it today. The money's gonna go tax free or tax deferred, and then you're gonna take it out tax free down the road.
Chris Picciurro, CPA:So any medical expenses you have, if your w two wage is over 600,000, you're most likely not getting a deduction for. Why? Well, you might be itemizing your deduction, but only the amount of medical expenses that exceeds seven and a half percent of your income are deductible on the federal return. So just put the money in your HSA. That's Chris, it it amazes me.
Chris Picciurro, CPA:Now.
John Tripolsky:Exactly. And I would say it it really does amaze me. And, again, I am not the the tax pro here. I'm a tax. I'm above a novice.
John Tripolsky:Let's be honest. I'm a medium
Chris Picciurro, CPA:growing term. A lot.
John Tripolsky:We gotta think of a term for what I am because I'm kind of in I'm above the middle, but I'm now obviously where you guys are at. It really is amazing. Even friends that I have, business owners, higher income ers on w twos. I mean, they're into six, you know, some over $1,000,000 a year, and they still did not know about an HSA. You talk about me feeling like I really know what I'm talking about.
John Tripolsky:Here I am introducing something to them as simple as what that is. So it is interesting. Even my wife, you know, even on her, you know, they switch benefits packages, it's kind of hidden in their, their HR packets. It's not really something that's out there. So like you mentioned, you know, leaning on an HR department and knowing kind of what you're asking for, like what we're talking about here, is is super powerful.
John Tripolsky:It's a heck of a resource. Right?
Chris Picciurro, CPA:Ep and so you are I would consider you tax professional adjacent. You're you're you're you're on this yeah. You're you're close.
John Tripolsky:Yeah. You mean to tell me if I hang around a football field long enough, but can't play that I'm no. We're not gonna go down that route.
Chris Picciurro, CPA:Kinda like, well, the in the south here, they call it catty corner, but we know it's a kitty your kitty corner from a tax pro. You're you're you're right there.
John Tripolsky:There we go. That's my new title I'm giving myself.
Chris Picciurro, CPA:So the third one, my third one is going to be this concept of bunching itemized deductions. Now usually bunching is bad. Right? It could be an undergarment or something uncomfortable. So but bunching itemized deductions could be a really good strategy.
Chris Picciurro, CPA:What does that mean? That means that with the larger standard deduction, a lot of times, some of your taxes or charitable contributions or medical, you know, medical expenses. If you spread them out over two years, you know, if you then, you don't get as much of a tax benefit. Maybe you're you're right on the fringe of taking a the standard deduction or if you bunch them, maybe you basically load them up on every on even years and don't pay as many on odd years, then you get a better tax benefit. So it's a concept of bunching itemized deductions.
Chris Picciurro, CPA:And for people in this situation where you might be taking the standard deduction, you're barely over the standard deduction, you're better off bunching the deductions and moving some expenses from one year to the other. And then, so we know a lot of people that, for instance, property taxes or charitable contributions, they will intentionally load up one year and pay less the next year.
John Tripolsky:That makes sense.
Chris Picciurro, CPA:Same And with medical expenses. Although, you definitely wanna use HSA first. So that's my number three. Number four is going to be advanced giving strategies. So, obviously, people tithe, people give.
Chris Picciurro, CPA:That's an itemized deduction if you do, in fact, itemize your deductions. But for people in this income threshold, they probably want to be more advanced with their strategies. The advanced strategies that we come across most often, there are three, and we have additional content on this, but I'm gonna mention them. The use of private foundations for some some families. It it can be very powerful.
Chris Picciurro, CPA:The use of DAF sounds bad, doesn't it? Sounds like a a bureau of the government. You know? Federal
John Tripolsky:Department of Federal Auditing? No. They're It Department of Auditing. Yeah.
Chris Picciurro, CPA:Using donor advised funds is another charitable contribute. It's kind of bite bunching, but it's it's another advanced charitable contribution strategy. So when I say advanced, I'd like, you know, again, sometimes you just you just donate as you in a normal situation or tied. This is these are specific things you could do to maximize your donation deduction. So you've got private foundations, donor advised funds, and then leveraged giving opportunities.
Chris Picciurro, CPA:Leveraged charitable giving, which is a tax mitigation strategy. We have some additional we have a whole podcast episode just on that topic. So especially if you are in a state that allows for itemized deductions and allows for charitable contributions, doing some advanced giving makes a lot of sense. So think about that. My number five is the use of bonus depreciation.
Chris Picciurro, CPA:And you might say, well, how do I bonus depreciation if I'm a w two wage earner? You're right. You don't. But if you're in this situation, if you're in good for you. Like, congratulations.
Chris Picciurro, CPA:You're you're doing well. You have over $600,000 in the W-two wages. You might want to consider opportunities where you could take advantage of bonus depreciation. Now be very careful, right, because you have to be aware of so just going and buying a piece of equipment or going in entering into a syndication where you own a portion of an apartment building or a mobile home park or a multifamily doesn't necessarily allow you to offset your W two wages with bonus depreciation. You might receive what's called a K one with bonus depreciation on it, but you're not offsetting your W two wages.
Chris Picciurro, CPA:So you have to make sure that if you're going to take advantage of bonus depreciation, you are qualifying for nonpassive treatment of whatever business activity you consider getting into. And there, you know, there are common bonus depreciation strategies. Again, we're not saying go buy a short term rental property just to get the bonus depreciation, but many people get involved in the short term rental market, buy a short term rental property and take advantage of bonus depreciation. Many people get involved with housing of different types, equipment leasing, and that sort of stuff. So there are opportunities out there for people.
Chris Picciurro, CPA:There are there are other investments in, like, the oil and gas space or the wildlife space. So there are we are not advocating you jump into any type of investment at this point. But where we are saying is as a w two wage earner, there are opportunities with not having to put forth ridiculous amounts of hours to meet what we call that material participation threshold. By the way, there's more content on that.
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Chris Picciurro, CPA:To take advantage of bonus depreciation through investments that are outside of your normal four zero one k or brokerage account. And, but those are out there, and those are the things that w two wage earners are doing, but we have to do it the right way. Remember, ideas are cheap. Implementation is valuable. So if you have questions, comments, please leave a comment in the the YouTube on the YouTube video here or defeating taxes, private Facebook group, we are happy to help guide you in the right direction, but many, many W two age earners are taking advantage of bonus depreciation.
Chris Picciurro, CPA:And the good thing is is if you're married, your spouse, if your spouse meets the material participation threshold and can take bonus appreciation, a spouse can offset the bread or the the not the bread or whatever but the higher W two wage earning spouse says W two. So.
John Tripolsky:No. Are my
Chris Picciurro, CPA:top five. So, we got, yeah, those are my top five. We've got the you know, pretax employer employee benefits. We've got the health savings account. We've got bunching of itemized deductions, advanced charitable giving, and bonus appreciation.
John Tripolsky:Awesome. And, Chris, those were good ones. And now you know that we've identified that I am tax professional adjacent. You know, I feel like I know more about this. And and going back to what I asked really at the beginning, right, is are these something that really somebody needs to engage a tax pro specifically on?
John Tripolsky:I think you answered it yes just by really wrapping up even especially with number five. I think that last one was super important. And, you know, for somebody again that maybe has never even taken advantage or taken any advantage of tax planning or talking to a tax pro or maybe you have one and, you know, not, you know, to talk down on anybody. Maybe they're not too familiar with a lot of this stuff. Think about it and just pulling us off the cusp.
John Tripolsky:It's basically imagine a sports team and then a coach. Right? There's a reason that that sports team has a coach. It's somebody who's not playing the game. It's somebody that's watching it.
John Tripolsky:They're forecasting plays. They're, you know, looking back at previous plays and games, and they know what's going on, but they're not actually in it. I'm a hockey guy. Say they're not actually on the ice. Really, Chris, that's your role, and I've seen it, I've heard it.
John Tripolsky:I've been in meetings. I've I've been in a lot of these conversations where there's almost nothing more important than somebody not being in the game, but looking at it from the outside in because when little things are missed, big problems could occur or big opportunities are missed. So I'm glad that you you hit really all five of those, and that last one really brung it home.
Chris Picciurro, CPA:Good job. My pleasure. And look yeah. And I look forward to seeing everyone in the Teaching Tech Show community. Thanks for watching.
Chris Picciurro, CPA:Let us know if you have any questions. We are here to serve you. We're here to help, And I hope everyone has a great day.
John Tripolsky:Absolutely. Thank you again for joining me on your show. And everybody that's watching this, again, as Chris mentioned there, check out Defeating Taxes. You can go to defeatingtaxes.com. I'll put the link in the show notes.
John Tripolsky:Check it out. It opens up the floodgates to all of our resources. So there's no paywall. There's nothing in there. It's all yours for the taking.
John Tripolsky:Very easy to find stuff in there too. So check it out. I said it last episode. Don't be lazy. Get on there.
John Tripolsky:This is me pointing my finger as my grandmother used to do to me. They don't be lazy. Do it. Check it out. We'll see everybody next week here on the Teaching Flow podcast every week.
Disclosure:Information in this podcast is educational and general in nature. It reflects the opinions of teaching tax flow and does not take into consideration the viewer's personal circumstances. It is not intended to be a substitute for individualized financial, legal, or tax advice. Consult the appropriate qualified professional prior to making any decisions. Securities are offered and supervised through Cabin Securities Inc member, F I N R A S I P C.
Disclosure:Investment advisory services are offered and supervised through Cabin Advisors LLC, an SEC registered investment advisor. Chris Picciurro is a registered representative of Cabin Securities and an investment advisor representative with Cabin Advisors LLC, teaching Tax Flow as an independent entity and is not affiliated with Cabin Securities or Cabin Advisors.