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Today we have an exceptional guest, Shauna Wekherlien known as the “Tax Goddess”. Shauna 
is a leading mind in the realm of tax strategy, boasting an impressive record of over $1.68 billion in client tax savings. Tune in now for a deep, educational dive into advanced tax planning techniques.
Shauna, a former astrophysics professional turned tax strategist, shares her incredible journey and the profound experiences that led her to where she is today. Her expertise stretches far beyond traditional tax preparation, introducing listeners to a world where tax strategies can significantly enhance wealth-building efforts and financial stability.
In this episode, Shauna reveals the intricacies of 831B captives. These are small insurance companies owned by the insured, designed to cover niche risks and offer strategic tax benefits. With real-world examples, she illustrates how businesses have utilized 831B captives to recover substantial losses and navigate disruptions like the COVID-19 pandemic.
Beyond 831B captives, Shauna and Dave discuss the crucial difference between tax preparation and proactive tax strategy. They emphasize the need for specialized teams to handle complex tax planning, ensuring compliance and maximizing benefits.
In This Episode
- The role and benefits of 831B captives for businesses
- The difference between tax preparation and proactive tax strategy
- The importance of having a specialized team for complex tax planning
- Real-world applications and success stories in strategic tax planning
If you don’t have the right team, you will be paying 40, 50, 60% potentially, plus penalties. So you’ve got to have the right team. You have to.
Welcome to the Wealth Strategy Secrets of the Ultra Wealthy podcast where we help entrepreneurs like you exponentially build wealth through passive income to live a life of freedom and prosperity. Are you tired of paying too much in taxes, gambling your future on the stock market, and want to learn about hidden strategies for making your money work for you? And now your host, Dave Wolcott, serial entrepreneur and author of the best selling book, the Holistic Wealth Strategy.
Hey, everyone. Welcome back to Wealth Secrets of the Ultra Wealthy. I’m your host, Dave Wolcott, and today’s episode is packed with tax saving strategies that can transform your financial future. I’m thrilled to welcome the brilliant Shauna, also known as the tax goddess, to the show. Shawna is one of the top tax strategists in the country with over 1.68 billion in tax savings for her clients.
Her insights into strategic tax planning will help you see the tax code not as a burden, but as a roadmap for building wealth. In this episode, we’ll dive deep into the difference between tax preparation and proactive tax strategy. Explore cutting edge methods like 831 captives, tax credits and alternative investments, and discover how the right tax plan can slash your effective tax rate.
Whether you’re a high earning W2 employee or a business owner. And if you’re ready to start partnering with the IRS and start maximizing your wealth potential, this episode is a must. Listen. And guys, remember, if you’re enjoying these conversations, please subscribe to the show and share it with your friends and colleagues so that they can accelerate their own wealth trajectory. Let’s jump in. Shauna, welcome to the show.
Thank you so much for having me. I’m so excited to be here with you today.
Shauna, I am so stoked to have you on the show because this is the time of year when everyone is looking for tax offsets, sophisticated ways to reduce their taxes. And as we were just talking in the pre show, it’s fascinating because most people are always focused on what’s the ROI on an investment, you know, what can I get? But when you realize that, yeah, there’s, you know, you can make 40% if you reduce your taxes up to 40% or even on top of that, right.
With carry forward losses and tax credits and all kinds of amazing things. And I just love the creativity and innovation around, you know, creative or strategic, really tax planning. And I find that this is just an area that not enough, enough people are, you know, knowledgeable about. So they’re really missing some low hanging fruit. So really appreciate you being here today and why don’t we, you know, for the audience, you know, who’s not familiar with Shauna, the Tax goddess, talk to us a little bit about your origin story. And, and I specifically want to understand as well, right, because I think there’s such a gap in the marketplace that people just don’t understand, you know, strategic tax planning and what that is.
And being a proactive tax planner versus 99% of the industry seems to be tax preparers which are just looking in the rear view mirror, right, Filing your returns. So I think people don’t realize what they’re missing out on.
People don’t even know we exist. Let’s back up. Right, so the origin story of the goddess, I love it. I can do that. Right. So I actually started off in astrophysics of all things. So I’ve got a mind for numbers and problem solving. That’s always been what it was.
And very long story short, how did you get from astrophysics to tax? My mom, My goddess got an IRS notice and being any good redheaded German daughter went, that’s not right. We’re going to fix that here. Now, 25 something years later, when you look at the knowledge base that happens in the tax world, okay, so you have general people, right? Taxpayers, right? They know 1%, they know that TikTok video, they saw the YouTube video.
They saw like whatever it is, maybe they’ve had a couple of discussions with their CPA. You have 660,000 CPAs. And CPAs do all sorts of things, right? They could be auditors, they could be tax preparers, they could be CFOs, right? They can do all sorts of things. There are 60,000 of us that have masters in taxation. So we start getting really small really quickly when it comes to tax strategies specifically.
There are 807 certified tax coach coaches, CTC. We specialize specifically in tax strategy. There are 250 CTs, which is the next level up and there’s only 15, 1 5, 15 certified tax. Oh, I said that backwards. CTPs, there’s about 250 CTs. There’s only 15 of us that do specifically tax strategy and we’re the top of the top of the top of 660,000 CPAs. Okay, so when you say most CPAs don’t know taxes specifically, they don’t know strategy specifically, you hit the nail on the head, right? It’s a very, very small group that specializes in strategy. Now, they rank us every single year.
They rank us on how much money we save for people. This year and counting, we’re at 1.68 billion in savings for our clients. So we know we’re in the top three. They refuse every year to tell us who’s number one. But I’ve seen the other number. So all the bets. So the real question here is when you, as a taxpayer, when you are looking at what you have, what you’re about to pay, right? The year’s about to be over at this point, and you’re trying to figure out what you’re going to Pay, and your CPA comes back to you and says, you’ve got a $300,000 tax bill, a $500,000 tax bill, okay? You can, of course, hand that money over to the government. Highest current tax rate in the country is 63%.
Those are our lovely, poor, lovely people out in California. And when you work with a tax strategist, at least our average tax rate is 6.92%. For the high net worth, the ultra high net worth, right? For the people that are looking to reduce 100,000, 500,000, a million dollars in taxes. And it’s all based on and used through which strategies do we use in any given situation? So big, big, big picture, long story, astrophysics to tax. And now they call me a goddess. It’s good stuff.
So, yeah, well, that’s super, super helpful to understand that, right? Because again, we, I think we all look to our CPAs as. You’re the expert, right? We don’t have, we don’t have this sophistication to really understand what that means. And people ask for, you know, you’re submitting deductions and, you know, whatever it might be, ask for your income and things like that. But they’re not, you know, the preparers are not asking strategic questions, right, about creating an overall strategy for how is your income. Income being received, right?
How are you structured with, you know, different entities and all these kind of things? So it’s really great that you, I think, broke that down to really get. Give us a backdrop of how the industry functions, right? So now that we have that in place, I mean, why don’t we just jump right into it, right? Because, you know, this is where the gold is, right? So can you give us maybe some of, you know, a couple of your top strategies and maybe things that people aren’t necessarily familiar with? And that could be. I’d also, I’d like to review strategies on both the active income side for W2 earners as well as, you know, business owners.
Dave, you read my mind. I was about to say. So let me back up. There’s a couple of pieces to the process of determining which strategies somebody should use.
Okay.
The first one is, well, what do you do? Okay, so do you have an active business? Are you a passive real estate investor? Do you have active oil and gas or passive oil and gas. Okay, so what do you want to do in life? One of the, my favorite telephone calls that I’ve ever received. Pick up the phone having a meeting, this guy didn’t even introduce himself. He said, “I want to write off a million dollar yacht. Do you know how to do it?” And I said, “well, I do.”
“Hi, my name is Shauna. What’s your name? Right, so we know all the things. So what is it that you want to do? Are you trying to build a real estate empire? Are you trying to put away for your own retirement?” We have a client that travels the world six months a year. That’s what he wants.
So when we look at tax strategies, the very first thing we always ask is, well, we’re going to save you money. What do you want to do with the money? Right. Because what you choose to do with the money tells us which strategies are going to be right for you. Some people love oil and gas. Some people don’t want to be a part of the oil and gas complex and they want to go solar. Okay? Right. We just need to know what it is you want to do with your money. Now that’s question one.
Question two is we need to understand what we we’ve coined, called the aggression scale. 0 to 10. 0, meaning the IRS never calls you, Never ever, but you’re leaving money on the table. 10, meaning we’re all going to jail. So every single person has their own aggression scale.
Okay?
Now if 10 is going to jail, nine, we always call it the Al Capone level. Okay? You’re doing shady stuff, hoping you don’t get caught. Of course you probably got caught. And an 8 is the highest level that typically a professional will go to. All right? So tax Status is an 8. An 8 means we will give you all the strategies, everything that works for you. Okay? We’ll guide you, we’ll coach you through how to implement, how to do those things. You might get a call from the IRS, but if you do, we have all the legal backup, all the court cases.
T’s crossed, I’s dotted right and so some people are okay with that IRS call. Some people are not. Some people want to be a 7, some people want to be a 2. Most CPAs will come in. We always get the comment, oh, my CPA is a negative 4. Now, you brought up a little earlier, okay. That, you know, CPAs are not experts in strategy, you’re correct.
Right?
You really want a pair, right? In a perfect world, you want a CPA that you trust, that you’ve never been audited with, okay? And if they’re a negative two, you might want to find a CPA that’s like a level five or six. If you’re an eight, you know, you kind of want to get a little bit higher. Okay. Because sometimes the negative twos won’t sign off on strategies, and you need to find a new CPA, but you really want to have a pair.
You want to have two pairs of eyes. The tax strategist that comes in with the future, with the planning, with the creation, with the strategies themselves, and with the CPA who says, okay, great, I know how to implement that. I know which forms to file. I know which boxes to check.
And so before we get to the strategies themselves, let’s just take, for example, real estate professional.
Okay?
I have seen over and over and over again somebody who was a W2. Let’s say they’re making a million dollars on a W2, okay? They decide they’re going to get into real estate because they’ve heard of all these awesome, you know, we’re going to do cost seg, and you’re going to become a real estate professional. These are all these great tax strategies, right? They went to some seminars.
That was the big thing we hear. And they’re told, yep, go buy real estate. The CPA says they know real estate, but when you actually get to buying the real estate, if they don’t make the proper elections, if they don’t fill out the cost segregation forms correctly, there’s all these steps, right? So your strategist and your CPA have to work together to implement any of the above strategies. So there’s really these three. These three parts.
What do you want to do? What is your aggression skill? What’s your spouse’s aggression skill? Right? Because our entrepreneurs are typically like an 8, 9, 20, okay? We got to drag them back to this side of the law. Okay? We get spouses that are two. So does the family need to be at a six? Right? And then, of course, you got to have a good relationship between the client, the strategist, and the CPA, they have to work together.
Right.
So let’s get digging the strategies, Dave, or you tell me.
Yeah, no, no, that’s. That’s really a great distinction and really hadn’t thought of it that way. Right. Is actually coupling. Right. The strategist with the CPA to do the implementation. And the key point for the audience out there, you know, something that took me firing five CPAs along my journey and paying increased amounts every year and working with more and more prestigious firms.
You know, that was really frustrating to me. But I learned that there’s a big paradigm shift you have to make in your mind is really understanding that the tax code is actually a roadmap of incentives for business owners and entrepreneurs, rather than it being, you know, a penalty. Right. This is just something that we have to pay, right? But once you understand that’s what the tax code is, then we can kind of align with what the government wants us to do. The reason why government likes oil and gas or, you know, solar and other energy things.
Is because we’re providing energy for the country, which supports. Supports our GDP, it supports our national defense, it supports all these other things. And the more you can actually become a partner with the government. Then we can realize those benefits.
The tax code is actually a roadmap of incentives for business owners and entrepreneurs rather than it being a penalty.
You got it 100% and so this is where it all depends. The best answer I’ve ever heard and I use it all day, every day. It depends. Because what do you want to do? What does the government want to do? How much cash do we have? There are some strategies which you need cash, some strategies you don’t need cash.
There are some strategies you need cash for a year and a day, and then you get it back. There are some strategies where the cash needs to be gone for 15 years, and it’s like, locked up until you can get access to it again. So when we talk about tax strategy, and so I always like to lay this groundwork because this is not, you know, for all the listeners out there, do not take advice from Attack from a podcast, okay? Like, we’re going to give you tips and ideas and. But you have to look into these things for yourself in your custom situation, right?
You can’t take somebody else’s strategy and automatically assume it’s going to apply to you. Because when we talk about these rules, you know, they say that the IRS tax code printed on Bible paper is still 17,000 pages and something like £30 if it was physically printed on paper. The rules aren’t small. So you’ve got to have that team approach, approach and you know, when we look at it, that also means potentially your financial advisor, your insurance planner. A lot of people have an insurance guy or lady.
You know, they have an insurance person, but they don’t have a planner. And that is a huge piece of your tax portfolio, even though it’s not necessarily a tax deduction. Okay. It’s a huge piece of the planning for taxes portfolio, because if you don’t have access to cash flow, some of these strategies you just can’t do. So, yeah, so many options we have to look at all together.
Yeah. So how about giving us a couple of your favorite ones again, on the active side, and then for business owners.
You got it. So active side can be active real estate. It could be active oil and gas. It could be active business owners. One of the biggest ones, 831B captives. I’m in love with them. Absolutely in love with them.
Now, I always have to preface this by saying there’s bad actors and good actors. Okay. Make sure you’re working with somebody who knows the difference. There’s a big company out of California. They did one bad thing on one client, and every single one of their clients got audited. Almost every single client got a letter from the IRS saying, we’re removing your right to have a captive in the first place. So you got to make sure you’re working with the right people.
Okay, that you’ve got to work with vetted people. Now, what an 831B captive does, and I always use Covid as our example here. Okay? So I’ll give you two cases, an 831B captive. Sometimes you’ll hear it as a chip, a closely held insurance company. Sometimes you’ll hear it as a reinsurance company. There’s a lot of names for this, but the code section is 831B.
And really what it does is it allows you to buy insurance. You own the insurance. You are the insurance company. So you set up a separate C Corp. You are your own insurance company, but it allows you to buy insurance for things that a regular, traditional insurance company will not cover. And the reason why I use Covid as the perfect example of where an 841B would happen is because we saw claim after claim. People have been paying 20 years of insurance to State Farm and when Covid happened for business owners, State Farm said, “oh, act of God.”
We’re not paying for it. So two very strong examples here. We’ve got a client that caters for the major League baseball teams. He had purchased February, the end of February 2020, had purchased $600,000 worth of food. Nope. Right. All the ball games got shut down. He was, you can’t return food, basically.
And his insurance company said act of God, $600,000 worth of food spoilage. He went to his insurance company, his 831B captive. He has a policy that covers act of God. He was able to get the $600,000 back, kept his business alive during COVID because all of baseball was shut down. Like no business of any kind for quite some period of time. Really good example. Another really good example. We’ve got another client that builds the roofing for Amazon warehouses.
Okay. Huge project. They couldn’t get nails. Right. Supply chain issues. They couldn’t physically, you physically could not buy nails to put the roof on.
They also have a captive save them. Right? So having a captive is something that many people look at as, oh, it’s just a tax strategy. It’s not. And the IRS actually gets very cranky about, oh, it’s a tax strategy. That’s only a tax strategy.
So anytime you look at any strategy, all of them, it has to be ordinary, necessary and reasonable. It’s got to have a business purpose. Why are you doing what you’re doing? I’m protecting against supply chain issues. I’m protecting against terrorist threats. I’m protecting against acts of God, things the regular insurance won’t cover. Now, Shawna, I mean, that’s great, okay, but what’s the tax deduction? You can put up to 15%, 15% of your gross revenue, gross revenue up to in this year, $2.8 million into a captive. It is never taxed. Never ever.
Never ever again, ever. $2.8 million deduction immediately up to 15% of gross. Right? So it’s based on your gross rack. So if you’re looking for a one time shot, big dollar amount, okay, you do with captives, you do want to ensure that you’re going to do it three, four or five years in a row at least to really build up a good base. Right, because your insurance company needs to have capital to do what it needs to do. But that money can be used. We talked about timelines. That money can be used after a year and a day for any purpose that you want it used, anything.
So you get a full upfront deduction up to 15% of gross, 2.8 million this year. That money can be used for any purpose. You want to go buy real estate, you want to go buy investments. You Want to go put it into a US treasury at five and a quarter, whatever, right? Whatever makes you feel comfortable. You have flexibility to access the cash, and you never pay tax ever, ever, ever again. One of my theories. Absolutely.
Nice. I had heard that that has been coming under a lot of scrutiny in the past year.
And you’re right and so let’s back up. This is a level 8 strategy, right? You may get a call from the IRS, and so you want to make sure you’re working with the good actors, the people that know what they’re doing, that are properly managing. It’s a C corp. You have to have tax returns. You have to keep minimum reserves in your capital. I mean, you have to run the insurance company like a business, okay? This is not just moving money and taking it back out again, okay? It’s got to have a real business purpose, all of those things. And I think this, you know, Dave, this is one of the pieces that just really irks me when I see it is, you know, somebody will say, oh, this is the silver bullet.
This is the one strategy you need. You know, we hear this a lot, especially about trusts, okay? Own nothing, but control everything. A lot of those trusts, that particular phrasing, some of them are good, but it’s about 10%. There’s about 90% of them that are not properly formed. They’re not following the document, all those rules that. 17,000 pages, 30 pounds of Bible paper. If you’re not following the rules, the IRS will take it away, 100%.
They will take it away and not only will they take it away, they’ll also charge you penalties, interest, and depending on how big it is, you might have some jail time.
So I think that’s one of the biggest differences. You know, we hear a lot of people will come to us. You know, Shauna, I’ve heard of the captive. I can implement that myself. You can, you can. You can do whatever you’d like to do. We would never suggest it. Never. Not at that level.
Now, you know, there’s a lot of easier strategies that. Listen, you want to go do it yourself? You know, we. We sell what we like to call cookies, okay? Some people, when we talk about big strategies, big strategies need a team, okay? You’ve got to have the strategist, the CPA. You’ve got to have the insurance company people. There’s tax. I mean, there’s. There’s a team. It’s a big thing, okay? But sometimes people just need a cookie, right?
They just need a little thing they’re trying to write off that extra $10,000 of taxes. They’re trying to write off their kids private school. They’re trying to get the cost seg on the rental property or do the short term Airbnb rental to get that, the cost that go on the rental offset against their W2, right? These are, these are little. Earlier you mentioned the low hanging fruit, right? These are the little strategies that we work with people on what we call a cookie basis, okay. We look at your situation, we look at all of your numbers. How much are you making?
What strategies do you already have implemented? Right? Do you already have the kids on payroll? Are you already doing the master’s exemption? You know, like, are you, are you already writing off your dogs as security? You know, are you doing the basics, the low hanging fruit that most CPAs or you can find on TikTok or YouTube or whatever, right? Are you already doing those? But you’re looking for that, that one little extra, right? That maybe a basket of three cookies, right? Like what, what are you looking to do right, with those strategies? Most of the time you need a two hour consultation. This is how it works. This is what it is.
Here’s your checklist. Make sure you do every step. Cross those T’s, dot those I’s, right. Don’t leave anything out. But here’s your cookie. Go eat your cookie. Go do your cookie. It’ll save you 10 grand by the end of the year, 30 grand by the end of the year.
So, yeah, huge takeaway here for the audience. And again, I don’t think people really think about the magnitude of this, but one of the other value points that I see, and working with a top tax planner, right. In addition to seeing it as an investment. So every dollar I spend in tax planning, tax preparation, is going to yield me some type of exponential return on that.
But in part of my equation, there is actually, if I do get audited, I feel fully comfortable that my tax planner is going to support me throughout that process. Right and we’ve been doing everything the right way up until then because my biggest asset is my time and I don’t want to be in that time vortex of an audit, right, for a year or two or who knows how long. So really having someone that you’re prepared to go to battle with, I think is massive and probably overlooked, I think, by many because the probability.
Right, of being audited anyway. Right. Is what are the statistics even for a business owner.
Schedule C S Corp, you’re running about Five to right now, the IRS, very long story short, they ran out of money and they don’t have enough auditors. So those numbers are starting to come down a little bit, but they have a backlog, they’re looking. So it’s about 5 to 7%.
Yeah, yeah. Okay, so tell us about, how about if you’re, you know, a W2 earner out there making your income from active income and you know, what are some of your top strategies there?
Absolutely. So strategy number one when we’re talking about W2 folks versus people that own a business, okay, business, you’re right, the tax code is written for entrepreneurs. I mean 100%, the hands down. If you don’t have a business, you’re missing out, period. So the number one strategy for a business owner is can we make a business? Can we create something? Right.
Can we buy a rental property and follow the proper rules to make it an active rental property, an Airbnb short term, something like that? Can you set up a business for your 16 year old children to mow the lawns of all the neighbors? You own the business, you get all the write offs and you pay the kids a salary. Right. Which side note also pays for private schools, iPads, cars, whatever else.
Right? The expenses of these cute little 16 year olds that are very costly to my understanding. So, you know, step one is always, can we make business? Okay, now there are many, many W2s, especially our high earning W2s. When you, when you have a million dollars on a W2, you’re working 40, 50, 60 hours, right? You’re beholden to the company that you have the W2 from right off and you’re not allowed, you may have non competes, you’re not allowed to open other businesses, that kind of thing.
So generally that’s when we start looking into more of the investment side. Okay, now we call them alternatives generally because we’re not talking about stocks and bonds. I mean, you could become a day trader, I suppose, if you have time for that. But more typically we’re talking about alternative investments. So when you get into the world of alternative investments, the two main factors, one, do you like the investment? Okay, if you think solar is the way to go or you think oil and gas is the way to go, like you’ve got to go with what, you know, with what you like.
Do you like the return on investment, Dave, that you’re going to get from whatever investment is and as well, how much money do you have? Because typically when we talk about alternative investments, well, it’s $100,000 to get into this K1, this investment, that’s going to get you a 10 times return. So you’ve got to have the 100,000 to get the million dollar deduction.
Now the return on alternatives can range anywhere from typically 2.25%, which is the maximum allowable by the IRS on something called conservation easements. They have historic conservation easements, land conservation easements, lots of different types of conservation easements, but it’s much more real estate related. The IRS just recently, I think about six months ago, put a firm cap no more than 2.25% without an audit.
So if you’re okay with the audit, fine, do what you want, okay? But 2.25 without an audit, alternatives will range. The highest return on investment I’ve ever seen was 23 to 1. To me, that was like a nine and a half. Okay? There’s, there’s some stuff that’s kind of out there. All right, Your, your general range is going to be between 2.25 and 10, okay? And they range in, in what you’re investing in the range across the board.
As you said, the government is incenting what they want to see. So we’re seeing oil and gas, we’re seeing solar, we’re seeing film of all things, right? We’re seeing Hollywood, okay? We’re seeing medical devices, we’re seeing server farms, computer and server farms for the new AI, for the, for the coin trades, you know, these kinds of things. We’re seeing tribal credits, okay?
The First Nation tribes have put out tribal credits that you can do this with. So depending on, again, what kind of income you have. So if you have one spouse that is W2, and the other spouse, if you’re married and the other spouse has a business, you’re good most of the time. You won’t need to go the alternative investment path unless you want to. Right? If you want to be diversified into oil and gas, then of course we go. Look at that.
Now, on the other end of this, if you’re pure W2, you’re single, no kids, no dogs, you’re single, you’ve got a W2 for a million dollars a year, okay? Really, you’re looking at real estate, okay. You’re looking at alternative investments, or you’re looking at charity and future types of estate planning, okay? So if you’re single, but you know you’re going to get married, you know you’re going to have kids, you might want to be looking at setting up private foundations or, you know, a clat. Right? A Charitable lead annuity trust or a unified trust.
You know, these kinds of things. So, again, this all comes back to our very first question. What do you want in life? Right? If you have a bunch of money, what do you want to do with it? Instead of handing that 40, 50, 60% over to the government, where do you want to see your money? What do you believe is the future of your life?
If you have a bunch of money what do you want to do with it? Instead of handing that 40-60% over to the government, where do you want to see your investment? What do you believe is the future of your life?
So, yeah, I think that’s gold right there, Shauna. Right. Because it does really come down to, you know, what are people looking to do in life, right? What is your wealth vision? And it’s really important to have clarity over that because then you can subsequently build. Right. That tax planning around that. And, you know, I always tell people also that this is, you know, you need to. You need to be an active partner in this, right, with your planner. Because every time I think about, every time I make an investment, every time I travel somewhere, every time I spend money, no matter what it is, I want to think about tax, the tax implications of that.
And then does that really support where I’m going? And if it doesn’t support it, I may need to modify my plan or something. But, you know, to achieve. And I want to ask you this question as well in terms of, you know, tax rates and what people think they should have in terms of a target in terms of either minimum effective rates.
But I think that it’s. It’s been instrumental to me in being an active partner with my planner and learning these strategies so that I can always. Every time I make that decision, I’m lockstep with them. So getting to, you know, paying a low amount of taxes, it’s not just about what the planner’s doing. It’s also how you are working with them and the knowledge that you have there.
I think it’s one of the biggest questions that we get, right. Shauna, you’ve got Goddess in your name. So does that mean you get to wave a magic wand and poof, I saved 50% in taxes?
Oh, honey, I wish. Okay. You’d be paying me a hell of a lot more. That’s how this works. But unfortunately, you’re 100% right. You know, listen, when we.
As a strategy. So our firm, Tax Goddess, uses a little over 1800 strategies that we look at for every single case. Okay and we talked earlier about the silver bullet, right? It’s very typically, it is not one strategy, and it just wipes out all the income, right? It’s this one and this one and this one. And this is layers, right? And it Is a combination. Because I wish I could wave that magic wand. We, we’ve got to work together. We have to.
And the taxpayer, our client, has to be willing to put in some time. And I’ll tell you, you know, one of the biggest issues we see, especially with really successful business owners, is that they’re so used to, in which, in a normal business world, this is what you would do. Right? Is great. I bought this thing, I’m going to delegate it to my assistant. They’re going to answer all the questions. Not with this. I’m going to tell you right now, not with this. Because this is your life, your world, your money.
So unless that person has literally worked for you for 15 years and has crawled inside your head and knows every in and out of everything you want, not this, this is the one thing we recommend you do not delegate. Because every time we, you delegated, the assistant, whoever just keeps coming back to you with questions, you’re doing it yourself anyway, right? And they may be able to go do the work, go open that bank account, go set up this LLC, whatever the thinking and the partnership really has to be you.
Yeah. So let me ask you this question, right? I think this is a great, you know, guideline for people to think about, right? So I’d like to get your opinion on, you know, again, two categories. So if you’re an active income earner, what should be your target tax rate that you should strive to get to? And if you’re a business owner or an investor, what would be your target tax rate that you should work on?
I’m going to answer, I’m going to answer the business owner and you can give me a range is. Range is fine as well.
Well, I’m going to give you the business owner side first. Okay? The target should be zero. I mean, the target for. The target for both sides should be zero. Okay, now what do we actually see? Okay, if you’re a business owner, zero, no problem. Assuming you have the cash because you need to move money, you need to do things. Okay? So if you’re a business owner, you can get to zero. I don’t care if you’re paying 63%.
I don’t care if you’re making $10 million. There’s always a way. If you’re a business owner, straight up active business, business owner, you’re good. If you’re an investor, you get closer to about 7, 8%. Okay. There are still some things you can do, but not quite as Good. Generally as a pure business owner, as a W2 until you get over about $10 million. Right. You’re shooting for about 15.
Okay.
Now can we get you to zero? Yes. Are you going to sleep? Maybe not. Okay, It depends. The other side of this is how much work do you want to put in? Yeah, the average. What I can tell you is the average tax rate for tax status clients is 6.92% across the board. And you know, side note, I mean, I might as well bring it up.
That’s why I was smiling earlier. I was kind of shuffling to go get you this. That’s where the title of the book came from. Okay. This was the book I published last year. Business Personal Life. It’s got seven strategies for any business owner investor in here. Pitfalls, all the stuff.
Okay? Find it on Amazon. We actually beat out Think and Grow Rich for three weeks in a row, which was pretty darn cool as an Amazon bestseller. So that, that was fun. But yeah. So, you know, listen, the W2 guys, you just, you have it harder, okay? The, the world is not. The tax code is not written for W2 people. It just, it just isn’t. So, yeah, unless you can bring in that spouse or.
What we have seen some people do is convert their W2s into 1099 positions, which makes it a business. Yeah, done. Sold. Now you’re at zero percent. Okay. So it. Having that business is really, that, that’s the driver almost across the board. And really, real estate’s like next second best, so.
Totally appreciate that clarification. That’s a massive takeaway for the audience, right? So if you’re sitting out there, right, and you’re in one of those high tax states like California or New York, and you’re paying over 40%, 50% maybe in taxes, and you could target, say 10%. That’s huge. Right? And then also think about the compounding of this, because this isn’t just this year, right?
This is every subsequent year and if you take that capital, which is why I like to talk about it as low hanging fruit, that’s free capital you’re giving the IRS. But now if you take that and start to put that into some alternative assets, you start buying real estate, some other assets, right? That’s how you can really build legacy wealth.
100%, I mean, that’s how people build empires. It’s not about what you make, it’s about what you keep every single time, right? And if you want to pass something on, the kids if you want to do something with charity, right. I, you know, earlier you mentioned, you know, trying to make every expensive business expense. Some people will go a little bit crazy with it, and I’m a little bit more of a balanced lifestyle kind of girl. Okay.
Like, I’m. Of course, if I can write it off, I’m going to write it off. I’m going to figure out a way to do that.
But I’m also not going to track down the two dollar receipt. Like, I’m just not, right, and so the way I’ve always looked at it is, listen, if we can get you from 50% to 10% and you spend 1% of that on the fund stuff, that is no way going to be a tax deduction. But you wanted it. You wanted the yacht, you wanted the racehorse, you wanted the trip to Cabo, like, whatever, okay? It’s your money. Do what you want with it. If you want to invest it, do it.
If you want to go on a trip, do it. If you want to take you and your best friend to wherever, do it. It’s your money. You decide how you want to spend it. And for me, I, I like having a little bit of lifestyle because people work hard, hard, really hard. When you’re making that kind of money, you’re pulling the hours. It’s your blood, sweat and tear. You’ve grown it, you’ve built it, maybe you’ve sold it.
I mean, there’s specific strategies for selling, right? If you’re selling your business, a million, 2 million, 10 million. The largest business sale we’ve ever handled was 226 million in a single transaction. We saved them 112.4 million on that transaction. So, you know, we just want to get it to you. That’s the point of a strategist, is get it back and your hands. So you can decide, not the government, not anything. You get to decide what you get with your money.
Yeah, and that’s. That was actually going to be another question. Right. We have a lot of investors who are having liquidity events, whether that be through exiting their businesses or, you know, exiting some type of securities or something. So what are your thoughts around some top strategies for liquidity events?
I love it and of course, my answer is going to be my famous answer. It depends. What do you want? Okay, so listen, some of the big ones, okay, so you have ist, which is an installment sales trust, and there’s kind of a split here. Maybe I should start there. There’s kind of a Split here between real estate and non real estate sales.
Okay.
With real estate sales, if you’ve got an exit, you can 1031. If you want to stay in real estate, you can 7 21. Both of these are code sections. If you want to be in the real estate arena. Right. If you want to be in that market, but you don’t actually want to be the one that they’re calling with plumbing issues.
Okay.
So if you’re in real estate, you have two special codes that you can kind of, kind of do there.
Now if you’re selling anything else, you’re selling a business, you’re selling your classic car collection. We had one guy selling an emerald. They dug an emerald out of a mine and it was like $10 million emerald. I mean, you know, you’re selling some big. Okay, you have additional options. So you have the list, which is an installment sales trust.
A lot of these, you’ll notice they all end in the word trust. A lot of these relate to some sort of trust.
You can use a CLAT, CLUT, CRUT, CRT, see something T. Okay, which generally stands for we’re doing some sort of charitable C. Charitable donation. With a trust involved you can use at the moment, you can use opportunity zones, which would get you out of something else into real estate. Okay. But we’ll have to see what Trump does as far as keeping that, extending that. We don’t know at the moment whether that’s going to extend or not.
At the moment, It ends December 31, 2025. Opportunity Zones are over and then of course, if you don’t want to roll your money into something else, let’s go look at alternatives. Okay. Again, if you’re getting, let’s say you have a million dollar sale, million dollar gain on this sale. Okay. If I’m going to get a million dollars of cash from the sale and I need to invest 100,000 into a 10 to 1 alternative investment and I wipe out my million dollar capital gain with $100,000.
I now have $900,000 of cash, tax free. So, you know, there’s some pretty good, there’s some pretty good options. But it’s really about looking at what do you want to do with your money and how big is the sale. You know that the big, the 226 million dollar sale, we used an IST. It was five installment sales trust. Five different partners. Three of three, four of them took the installment sale trust. One of them just said, I just want my money.
Government can have what’s left he moved down to Mexico, living on a beach, like. Okay, so even in cases where you have joint partners, you don’t all have to do the same thing either, which is really nice.
So, yeah, yeah, excellent. How about tax credits? I think people don’t actually talk about tax credits that much, which is, again, another potential for unlocked opportunity.
100%, well, as I mentioned a little earlier, we’ve got tribal credits. Always a thing that’s kind of. This is new. This one’s new. It just came out this year. Right. It’s kind of sit.
Sitting on the edge. We’re all kind of checking it out. I’m still in the process of vetting it myself. Okay. But, yeah, they’re again, going back to incentives. All right. The government will give you now credits. Let me just explain to the audience really quickly.
Deductions and investments are generally against your taxable income. Okay. So it’s reducing your income. Reducing taxable income. It’s doing something with your income. Credits are against the tax itself. So if your taxable income is a million and you’ve got a 40% tax rate, your tax bill is 400,000. But if you do credits, those credits go against the tax bill themselves.
Okay, so again, we tend to see very similar to alternatives from that end. We see credits against the tax in solar, in oil, in film, in tribal credits. Now is a new one. So a lot of the planning that you’re doing here, and this is why we need the CPA with the strategist. Right. The tax preparer with the strategist is. We can give you.
Here are the 80 strategies. But depending on which combination of strategies you use, it will change how the tax bill is actually calculated. So, for example, with investments, in some cases, you can only go up to a maximum of a $500,000 loss. If you’re married, it’s about a $580,000 loss.
Okay.
If you do more investment than that, you can, but it’ll roll over to next year. It won’t help you this year.
Right.
We have other investments. One of the big ones that people miss consistently oil and gas. Okay. And I love oil and gas. If you find the right fund and the right thing, it’s fantastic. There’s alternative minimum tax consequences to investing in oil and gas. And so I’ll give you a perfect example. We had created a plan for a woman.
She looked at the plan and said, oh, the return on investment on oil and gas is the best of everything on this list. I’m going to take all of my money and Put it into oil and gas. She didn’t ask us. She got hit with an alternative minimum tax consequence. Okay. And that was very bad. And she wasn’t expecting it. We weren’t expecting it because we told her to diversify her investments.
So you have to have. It’s a. It’s a three way game. Right. You’ve got to have your strategist, your actual preparer to run the calculations. If we do this, it will impact this way. Right. And as strategists, we do that in house for people.
So that, you know, because some CPAs aren’t, as we said, they need a little bit of extra education, a little bit of extra love to get to that level. But it’s a three way. It’s a three way game. So.
Yeah, Shawna, now that the election has passed us, what do you think in terms of the incoming Trump administration, what is that going to do from a tax standpoint? You know, what are your projections at this standpoint?
100%, so you see in a big old smile on my face. Okay, now listen, he’s given us a lot of promises. I’ll believe it when I see it. Okay. Do I believe he’s going to make changes? Yes. Do I believe that he’s going to extend the TCGA or. I can never say it.
The Tax Jobs Cuts act thing, the act that happened. Okay. Never say that properly. Do I believe he’s going to extend those. Probably, do I believe we’re going to get back to 100% special bonus depreciation? Probably. Right. There’s quite a lot of things that I believe will go back or come back or be put back into place.
I am excited about some of the, even the smaller ones like you talked about, credits. He’s talking about putting in a homeschool credit.
Right.
If you teach your kids at home, this is what it’s going to, you know, we’re going to give you extra money for that. So I do. I’m excited about what I’m seeing. But the one thing I’ve told every client that has ever asked me. Right. Is. Oh. Is how do we change our planning? We don’t.
Because until the rules are made, it’s a lot of talk. Every, no offense, everything in politics is a lot of talk right now. I’m very happy that he got the Congress, the Senate and the presidency. That should make a lot of rules that he wants to pass pass more quickly. But it’s still politics. So what are we doing differently as strategists with this in mind? The One thing that many of us, myself, include, included, were concerned about was the drop in the estate exemption. If the Democrats had got in, we. We thoroughly believe that the estate exemption would have dropped to 5 million, 6 million, maybe even 4 million.
You know, a big. That’s. That’s a big drop. Right now, it’s at 13.6, 13.8. Somewhere in that range with Trump being in, we do not expect that kind of drop. I do always like to add a caveat here. Just because we’re not expecting it doesn’t mean you shouldn’t plan for. For it.
Okay. If you have assets and you’re growing an empire, which, if you’re listening to this podcast, I presume that’s a part of what you’re trying to do. Okay. If you’re trying to build an empire, estate and trust planning is. It’s got to be a part of the team, has to be a part of the plan. Okay. Because unfortunately for all of us, at some point, you’re done. Okay.
So you better plan for it and figure out how to use the current tax laws to your best outcome while you have them. Okay. Because things can change at any moment.
Yeah. No, we actually run a virtual family office, so we’re able to bring in all of those key layers. Right. And, you know, as you point out, the complexity of all of those different things with the. With all the moving parts. Right. And making sure you’re compliant with, you know, the tax plan. You set up, your estate plan, your risk management plan.
Right. It’s really paramount.
And so you hit on it. If you don’t have the right team, you will be paying 40, 50, 60% potentially, plus penalties. So you gotta have the right team. You have to.
Yeah. Shauna, I understand that you also help clients globally, is that correct?
Yeah. So let’s back up. Our team is global. We only focus on US Taxpayers from that standpoint. Yeah. But we do have quite a lot of US Taxpayers that live somewhere else, so we’ve got offices at this point in 20 countries. So, yeah, we help everybody everywhere. If you’re paying tax to the U.S. That’s what we do.
Yeah. Okay. Awesome. Well, this has been such a pleasure having you on the show. I’m constantly learning about taxes. I find it such a fascinating area and really the creativity with it and where you can go and again, I hope the listeners.
There’s just really a ton of value in here, really understanding those targets of, you know, where you can go and then working with the Right. Tax planner is really key to making success. So if people would like to check out your book, contact you, learn more about Shauna the Tax Goddess. What’s the best place, easiest place to.
Find us specifically is the website. So taxgoddess.com super easy to find. Just follow the name and then the book you can find on Amazon. So like I said, the book has got seven strategies, plus pitfalls, a checklist, that kind of thing. So if you’re looking for a place to start, I would start with the book if you want. You know, we talked about cookies. If you want the full package, the full basket of cookies, go, go to the website. We are of course, running out of timeline because anything you don’t do by December 31st is not done this year.
That’s it, right? There’s like two strategies that you can go retroactive with. Otherwise you’re kind of cooked. So if you’re looking for strategy this year, pick up the phone.
So awesome. We’ll make sure to have all the links in the show notes for everyone. So if you guys want to go back and check and we’ll actually have an entire article on this interview. So if you guys want to go back and get the notes and the transcription and everything we talked about today, make sure you go to the website to capture all that. Shauna, thanks so much for your time. Really appreciate it.
Thanks so much for having me. You and I will just geek out on taxes. It’s all worth it.
So awesome. Thanks.
Thanks for listening to this episode of Wealth Strategy Secrets. If you’d like to get a free copy of the book, go to holisticwealthstrategy.com that’s holisticwealthstrategy.com if you’d like to learn more about upcoming opportunities at Pantheon, please visit pantheoninvest.com that’s Pantheon Invest..