Teaching Tax Flow: The Podcast

We are back with episode 184 of the Teaching Tax Flow Podcast, diving into another one of the real-world case studies from the Defeating Taxes book. This episode features an in-depth discussion about the practical application of tax strategies. We explore various aspects to help you navigate complex financial scenarios and offer valuable insights into effective tax planning.

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  • (00:02) - Tax Planning Benefits for Young Professionals in Low Tax Brackets
  • (05:36) - Maximizing Tax-Free Growth Through Roth Retirement Contributions
  • (08:31) - The Importance of Early Retirement Savings and Tax Strategies
  • (10:05) - Financial Planning Tips for Young Professionals
  • (14:18) - Empowering Young Adults for Long-Term Financial Success

Creators and Guests

Host
Chris Picciurro
Founder, Teaching Tax Flow
Host
John Tripolsky
VP of Marketing, Teaching Tax Flow

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.

Whether you’re a freelancer, small business owner, real estate investor, or just looking to understand your taxes better, this podcast is for you. So tune in, take notes, and start building your confidence in taxes today.

Produced and hosted by Teaching Tax Flow.
www.TeachingTaxFlow.com

John Tripolsky:

Hey everybody, and welcome back to the Teaching Tax Flow podcast, episode 184. We are gonna explore another case study from the Defeating Taxes book. So I would love to take credit for this. I can't at all. I'm not the one that wrote it.

John Tripolsky:

My esteemed, handsome cohost, Chris Picciurro, is back again on his own show, and we're gonna dive into this. So, Chris, give us a little background about this specific case study. I know this is the number two, the second one we're looking at.

Chris Picciurro, CPA:

Yeah. So thanks again for the warm introduction. We're looking at defeating taxes, this case study, and Sarah. We're gonna talk about Sarah today. Sarah was inspired by a couple of things.

Chris Picciurro, CPA:

One is that my wife, when I met her, she was in her mid twenties, and she's a she's a public school teacher. And and now she's not in her mid twenties even though she probably looks like it. And she doesn't even watch us anyway, so I should should have saved my compliment for later. But but she also works with a lot of teachers just getting out of school, college, in their mid twenties. They, a lot of times, have a modest income.

Chris Picciurro, CPA:

They're and and but when they start their job, they're told to to think about retirement, which is very smart. However, a lot of times they just go in and they start putting money into their retirement plan pre tax to get a tax reduction the year that go, that they they're in their mid 20s when many, many times in the teaching tax flow system, we realize they're in a lower marginal tax rate, what we call green. Green is a lower marginal tax rate instead of what we call a red diagnosis, which is higher marginal tax rate. So the point is you want to diagnose then prescribe. So this goes beyond just Sarah who we're going to talk about from the book.

Chris Picciurro, CPA:

This is going to be anyone that is in that lower marginal tax rate, especially if you have a lot of years to continue working because we're gonna talk through the power of gold, which is our tax free income and growth strategy as well. So, yeah, this case study is near and dear to our my heart, but it doesn't have to be a public school teacher. It could be, you know, it could be someone getting started in the building trades. It could be anyone. In fact, John, you know, just earlier the the season, it felt so good.

Chris Picciurro, CPA:

My my two older kids are now 17 and 16. They had w twos, and they worked at, they all they one of one of the kids have helped us out here, but also worked at other places. You know, my daughter's very ambitious, which is great, but we were able to my wife and I ended up contributing to their Roth IRAs, and I educated them about a Roth, they're probably thinking, that's cool. So, you know, in a long time from now, I'm gonna have a lot of money, but it felt good to do that. So why would I put money into a traditional IRA for my kids who are at a low marginal tax rate, actually a 0% tax rate, when there's no big benefit?

Chris Picciurro, CPA:

So let's think about Sarah. Right? So Sarah, and I think we know Sarah's in our life. So Sarah just represents that that, that taxpayer that's in a lower marginal tax rate. In our book, this defeating taxes book John, don't short don't don't sell yourself short.

Chris Picciurro, CPA:

You wrote a very nice forward to it, and, you know, that's what people read first. Right?

John Tripolsky:

Hey. I'll take it. And and and, honestly, with this case study oh, no. Go ahead. Go ahead.

Chris Picciurro, CPA:

No. I mean, hopefully, it's good enough where they keep going into the actual book. So but we'll see.

John Tripolsky:

Hey. If somebody stops at that, then you can just blame me. You know? Hey. You're missing out everything.

John Tripolsky:

But these case studies, I I do like how you position this in this book. Right? So, again, you mentioned this one. Really, it's, you know, kind of by default a little bit nature of the tax system. People that fall into that early career naturally are are usually a lot younger.

John Tripolsky:

So there's a lot of similarities, and I like that you mentioned too. It doesn't have to be a teacher. That's just the example we used. And then obviously, the other case studies, we're gonna do one at a time, you know, sprinkled out throughout these podcasts. We'll get all the way into people that are in retirement.

John Tripolsky:

But this one is great because I think it goes back to really like the root of teaching tax flow. Right? Where people might say, well, what the heck is tax planning and strategy? It's not for me. I'm I'm either at this stage or I'm too young or any of this stuff where you can see that the little activity, the little acts turn into something huge, you know, down the road too.

John Tripolsky:

It compounds itself. So this is this is great.

Chris Picciurro, CPA:

Well, great point. And one of the things we talk about and one of the reasons that I wanna create teaching tax flow is that tax planning and strategy is one of our myths that we talk about in the book too. It's not just for high income and high asset households. I truly believe the SARAs of the world, the lower to moderate or modest income households can benefit more from tax planning and strategy because the amount of disposable income we could free up as a percentage of their income could be higher. And the reason we put this in the book as a case study is that we want everyone to realize no matter what your income level, no matter what your asset level, there's opportunity for you.

Chris Picciurro, CPA:

So like Sarah, she's 25. She's a young young school teacher. She's single. She doesn't have a dependent. Back in the day, you know, she might have been able to deduct her dog.

Chris Picciurro, CPA:

She's got a cute dog, but unfortunately, that's not her dependent. Now, you know, but so she's got it and she lives in a tax state with no income tax. So her marginal tax rate's only 12%. So at this stage of her life, she doesn't really have meaningful savings or liquidity. She might be renting an apartment, maybe sharing a home with friends.

Chris Picciurro, CPA:

And each year she, you know, This the last couple years that she's gotten into the workforce, she's actually never really thought about taxes. She would have her taxes prepared. She probably actually might have used a self-service tax preparation, which is fine. And she got a refund of about $2,000. Now $2,000 to some is not a lot of money, to some is a lot of money, but that extra couple $100 a month approximately in Sarah's pocket could really help her out.

Chris Picciurro, CPA:

So she's she's thinking, alright. You know, I I have to start thinking about maybe saving for home down the road. So what is she here? Well, she's what we call, like I said, the green diagnosis, right? Which is a lower marginal tax rate and gold diagnosis.

Chris Picciurro, CPA:

Now, for tax free income and growth. Now Sarah's probably putting money in into or paying for some of her health insurance pretax, which is great. Sarah's probably covered with a, you know, through depending on, you know, depending on where she teaches or she could be part of a teaching union. She might not be a part of a teaching union. So she probably has some employee benefits, so she's putting money away pretax.

Chris Picciurro, CPA:

However, we I'm talking to Sarah, what I'm talking to her about is making sure, that she's putting money into retirement, but I would deeply, deeply consider a Roth retirement contribution because why? Well, because that's going to grow tax free over the course of her life. And two, a 12% tax benefit right now isn't that spectacular. So let's say Sarah puts, you know, dollars 3,000 into a retirement account. If it's that Roth and it doubles five times before she retires, and I got to do mental math, you know, that three becomes six, twelve, twenty four, forty eight, ninety six thousand dollars of tax free assets for Sarah when she retires by just changing it.

Chris Picciurro, CPA:

Now if she put it into a traditional retirement account, she would save 12% of the 3,000. So let's save her $400 ish, but wouldn't you rather have that $90,000 plus when you retire?

John Tripolsky:

And circling back just a little bit too if anybody kinda feels like, alright. Crap at this point. Yep. I see it. This is this is kinda trajectory.

John Tripolsky:

Okay. I wish I would have done this. I've I already haven't. But, you know, maybe I start now. Right?

John Tripolsky:

Like, a lot of these I wouldn't say the impact isn't there. You can start at any time, whether you're, you know, 20 or 55, 60. Right? It's just it doesn't do that. It doesn't compound as much.

John Tripolsky:

Like, it still grows. But back to what we were saying earlier, I think was super impactful and just make sure everybody understands this. Right? When you talk about that marginal tax rate, not a tax bracket, that's a whole another topic people can look at. It's actually a lie, Chris will talk about that a little bit more.

John Tripolsky:

But whatever that tax rate is when you're younger, naturally, you're not making as much, so you're not paying as much in taxes. We definitely won't get into, oh, I didn't owe anything in taxes, but I'm getting a refund, right? So technically you've overpaid, which is another topic, but putting that in when you're younger, you know, you you might have more flexibility in your life too to contribute to that than, you know, when you have three kids at home and, you know, diapers get super expensive and, you know, utilizing the time.

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Chris Picciurro, CPA:

I mean I mean, I get to speak, you know, with my wife when she she put money into her retirement when she was younger. Could she have a little bit of a nicer car with that extra $100 a month back, again, twenty years ago? Sure. But what do we have now? It's grown, and it and it's you know, and now I wish, Roths really weren't a big thing then.

Chris Picciurro, CPA:

I wish they were in Roths, not pretax accounts, but that's why we wrote this darn book, and that's why we're trying to help people out. So, yeah, absolutely. For someone like Sarah, putting money in, even if it's 2% of her income, 2% of interest into the Roth, at least put enough in to get the match from your employer. If you fill up your Roth, maybe do a Roth IRA. But here's the thing with Sarah and and anyone in this situation.

Chris Picciurro, CPA:

And I've learned this through athletics, through talking, to listening, and learning from very high achieving people. Practice does not make perfect. Practice makes habits. So with Sarah, that practice of, hey, maybe it's 2% of her income. Pick up a match.

Chris Picciurro, CPA:

It's okay. She's getting in the habit of putting money away for the future for her. If I'm Sarah, I'm thinking or someone like Sarah, I'm thinking about the putting money in a health savings account. Again, something I wish my wife and I did a long time ago. Now we use our HSA money all the time because our kids are you know?

Chris Picciurro, CPA:

Now we have three teenagers in the house, and we're always we're pretty active, so we're always hitting our head on something or, you know, sniffles and eyeglasses and braces. However, you know, when my wife and I were in our early mid twenties, even in our in our early thirties, in hindsight, we should have put even though we're in a lower marginal tax rate and we didn't really have a lot of expenses, we should have put money in the HSA. So for Sarah, she's healthy. She's in her mid twenties. It doesn't hurt to put money into that health savings account now even if she doesn't use it, and she'll have it down the road tax free to to grow.

Chris Picciurro, CPA:

So remember that health savings account said that TriStar, like the state of Tennessee. Right? You get that tax deduction when you put it in. Money grows tax deferred. The money comes out tax free if it's used for medical expenses.

John Tripolsky:

Basically, what Chris didn't mention is that he's extremely lucky that none of his children played hockey or what we called the hockey health savings account because, you know, it beats you up pretty bad. Speaking from a person's experience.

Chris Picciurro, CPA:

Some of these Miguel, that's an interesting some of these these these sports, especially the travel sports are very expensive, but then you run-in the legacy costs of your health. Right? You know? And I think hockey and and tackle football definitely are the ones that you see a lot more lingering injuries, around the body. But so, yeah, so for Sarah, you know, and especially at this stage, she might another thing she might be doing is she might, you know, she might pick up a second gig and, a lot of lot of times teachers might teach summer school.

Chris Picciurro, CPA:

Maybe they coach one of the sports teams. Maybe they coach a club sports team. Who knows? So she might have some income outside of her w two wages, and she might wanna put some more money into a Roth IRA. It's just the point is is, hey.

Chris Picciurro, CPA:

Let's take and this is tax planning one zero one. Let's take things that you're gonna spend money on and make it as tax efficient as possible. Medical insurance, out of pocket medical expenses. So let's make sure we're going pretax with our medical insurance. Let's make sure we're making HSA contributions for those medical expenses today or in the future.

Chris Picciurro, CPA:

And then the other thing, you know, retirement. Let's put money into retirement, And since you're in a lower marginal tax rate like a Sarah, let's look at those Roth type accounts and really, really start thinking about this. So, you know, and then with with Sarah as well as can she start taking some money and putting it into an emergency fund or maybe a savings account, for purchasing a home? Then maybe that's one of her next kind of, you know, her her next stage. Who knows?

Chris Picciurro, CPA:

She might she might be looking at going, continuing her continuing her education. We just don't know. But but the point is even someone like Sarah, like we talk about a lot of in in in our teaching textual community, You know, if you take a if you're trying to drive from one place to the other, and let's say it's a 600 mile trip, and let's say you kind of get off on the wrong exit, which we've all done it right, and you go a mile down the road and you realize it and you turn around, okay. Big deal. But if you go 200 miles down the road and realize that now you've got a problem.

Chris Picciurro, CPA:

So, Sarah, start these habits as you're, in your mid twenties, as you're younger, and, again, those habits or practice makes habits.

John Tripolsky:

Absolutely. And this and I know before we get to really that last stage because we're following that, the four steps with this example here is, you know, if anybody's at this stage, and this is a genuine, genuine question off for everybody, I think, from Chris, myself, anybody in teaching tax flow. Just ask the questions. There's the there's the whole defeating taxes, and it's not a pitch. Defeating taxes Facebook group, get on there, ask any questions.

John Tripolsky:

Don't feel dumb. Because if you ask these questions earlier on, there's a million I wish I would have asked. Even my parents, I didn't bother to ask them. There was no Facebook back then. It was before Myspace.

John Tripolsky:

You know, ask the questions and just know what you're getting into, even if you're not in a position to financially get into it now. At least you you're mentally ready, and you're prepared to do it, right, when you can. Because Chris, I know we were in a conversation the other day, and then I'll shut up and let you wrap here, you know, somebody had mentioned about employers, right? Like if you're getting a job somewhere, and this is even, you know, for a full career, I've never seen it. I've never heard about it.

John Tripolsky:

Somebody, you know, they're filling out their paperwork and their employers are walking in through all the benefits or anything to do with their tax forms, right? It's on the person, not the employer. So empower yourself. Ask the questions.

Chris Picciurro, CPA:

Absolutely. And and with with someone like Sarah, it it's it's about getting you know, even instead of getting a $22,000 refund at the end of the year, maybe she changes her withholdings just a touch, and she gets an extra $150 a month into her paycheck. And and you know what? Take a $100 a month and start start an account that you can start learning about investing in, mutual funds or electronically traded funds or stocks. You know?

Chris Picciurro, CPA:

And because at some point, you know, wouldn't you rather learn kind of putting a $100 a month in instead of you getting in your forties and fifties? And now, yeah, maybe you could afford to put a thousand, $2,000 a month into those accounts, and you're trying to play catch up, you're trying to and you don't understand the risks. So for her and someone like that, there are a lot of you know, does she need to sit down for five hours with a certified financial planner? Probably not at that point. But, hey.

Chris Picciurro, CPA:

Maybe we'll meet with the representative from her employer sponsored retirement account and say, look. I wanna start putting a $100 a month into a brokerage account that I could just again, it's about it's about creating habits.

John Tripolsky:

And It's so easy to do it now with tech I mean, you could there's apps out there that do it. I remember, Chris I mean, this is a long time ago. I used to have to first, I had to find my checks, write a check, drive it down the road to it was a Scottrade officer.

Chris Picciurro, CPA:

Scott Oh, yeah.

John Tripolsky:

Scott's trade. And physically give them the check and wait, like, twelve days or something for it to hit an investment account. Like, now you can get on one like Stash or anything like that, not a sponsor, so we won't mention them again. But you can do it in thirty seconds, and you're off and running. Play around with it.

John Tripolsky:

Right? Now it's not advice I'm giving. It's just an option, but, you know, technology is a beautiful thing.

Chris Picciurro, CPA:

Absolutely. And, you know, for her and, you know, yeah, to put a bow on it for Sarah, this is the time to maybe start looking at building what we call her personal board of directors. Right? Now she's single. She doesn't have dependents.

Chris Picciurro, CPA:

But, again, kind of align yourself with someone that could be her financial a confidant financial adviser down the road, isn't a bad idea as well. So enjoy this one. Again, this is this is our most vanilla, straightforward case that we could even imagine, but you can still see within this case opportunities because it's not about today for Sarah. It's also about the next fifty years of setting a path for her for financial success.

John Tripolsky:

You got it, man. That's a great quote right there. So anybody, make sure you remember that, what Chris just said too. And trust me, your future self will will appreciate the, you know, twenty minutes or so you just spent with us kind of bantering back and forth on this. But again, check out defeatingtaxes.com.

John Tripolsky:

You got the resource links in there. Don't be lazy. And if you're in that younger age, early earning years, take advantage of it. And again, even if you're not ready to financially dump into it, think about it as filling your bank account with knowledge, ask those questions. Trust me, trust me.

John Tripolsky:

We are happy to answer questions. People in the community are happy to answer questions. Take advantage of it. Bye. It's a great, great era to be alive.

John Tripolsky:

So check it out. Take advantage of it. We'll see everybody back here again next week. The Teaching Tax Flow podcast. Have a great week.

Disclosure:

The 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, FINRA SIPC.

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 is an independent entity and is not affiliated with Cabin Securities or Cabin Advisors.