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Today’s episode features a powerhouse guest, Justin Maxwell, 
whose approach to wealth goes far beyond simply saving on taxes. Justin Maxwell is an entrepreneur and tax strategist who, after starting his career as a schoolteacher, discovered a passion for solving one of the biggest problems facing high earners: why do so many successful people overpay the IRS simply due to lack of proactive planning? Today, he’s co-owner of a specialized accounting firm focused on helping entrepreneurs and investors use the tax code as a tool to exponentially accelerate their wealth.
Dave Wolcott, our host and author of “The Holistic Wealth Strategy,” sits down with Justin Maxwell to break down the real differences between basic tax preparation and genuine tax strategy. They discuss why many business owners unknowingly outgrow their accountants, and how building simple systems can keep the money you save working for you–instead of fueling lifestyle creep.
This engaging conversation walks listeners through tangible strategies to minimize taxes at every stage of their wealth journey, from foundational basics for newer business owners to high-level options for seven-figure earners. Justin Maxwell also shares insights on building a proactive mindset and practical, repeatable systems for turning tax savings into long-term wealth.
In This Episode
- The crucial difference between tax preparation and real tax strategy
- Foundational and advanced tax-saving moves for business owners and investors
- How to build simple yet powerful systems that prevent wealth erosion
- Practical investment and tax planning tips for significant liquidity events
Saving the taxes isn’t enough. So like you’re going to find people that help you save taxes, but if you don’t have systems and structures behind like in your financial operating world, like you’re going to save taxes and it will disappear into the array of unconscious spending, like you’re just going to unconsciously spend money and it will be gone before you know it and it’ll just have been as if you had given it to the IRS.
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 guys. Welcome to another episode of Wealth Strategy Secrets of the Ultra Wealthy. Today we’re tackling one of the biggest wealth levers most investors and entrepreneurs overlook: tax strategy. My guest is Justin Maxwell and his story is anything but typical. He didn’t start as a career CPA. He started as a teacher, discovered entrepreneurship, and eventually became obsessed with a question that should bother every high earner: Why do so many successful people keep overpaying the IRS? Simply because no one is proactively planning.
Dave Wolcott: In this conversation, Justin breaks down the difference between tax preparation and real tax strategy, why most business owners outgrow their accountant without realizing it, and the foundational moves that can start saving real money right away. We also get into higher level strategies for seven figure earners and how to think about tax-smart investing and a simple system to make sure the money you save in taxes actually turns into long term wealth, not lifestyle creep. Let’s dive in. Justin, welcome to the show.
Dave, I’m really glad to be here. Thank you for allowing me to come on and talk about taxes with your audience.
You bet. It’s one of my favorite topics. And you know, I say this a lot because I think it really requires a rewiring of our brain. Right. Because as investors, you know, we’re always thinking about actually chasing yield on particular investments. But if you look at it like a good business owner would on your personal financial statement, it’s also ideal to be attacking your number one biggest expense or wealth eroder, which is taxes. So that’s why we spent a lot of time talking about it on our show. In our community, there’s also so much misunderstanding in terms of tax code, what’s available for people.
So trying to increase your financial IQ is huge. So I appreciate you coming on the show today, Justin, to really enlighten us with some more around strategies and how people can leverage that to really build their wealth. So why don’t we begin with really talking a little bit about your genesis. And I think it’s always really fascinating to figure out how people actually got to where they are. I mean, how did you evolve into taxes for entrepreneurs and investors today? What really led you here, Justin?
Yeah, so I don’t like my origin story is not “I went to school, became a CPA, became this person,” like the obvious, what people expect. I was a schoolteacher. In fact, I was a physical education school teacher. I wanted to be a college professor when I was going to do my master’s degree. I discovered that I hated the actual doing of research. And college professors do research.
That’s all they do. And so I had this like pretty earth shattering effect happen where something I was planning to do for a very long time—because I never once thought about being an entrepreneur, never once thought about being a business owner. It wasn’t in my—I never was like the kid at school that was selling stuff or was always driven to be this entrepreneur. So that was the path I was chosen to. That’s what I felt like I wanted to do. So when I had this discovery of “I don’t know if this is what I want to do,” it was fairly earth shattering for me. Right about at that time, a neighbor didn’t know that this was happening, but they invited me to an entrepreneurial event. And at this event there was a speaker who for the first time in my life, awakened me to this world of entrepreneurship.
It was just this idea that you don’t have to work for other people to deliver value. You can create your own value. And because you can create your own value, there is no ceiling on your potential when it comes to how much value and money you can earn in this world. And it wasn’t really the money that was driving me, but it was this idea of freedom and this idea that I can dictate the outcomes of my life, not let them be dictated by however much I get paid by whatever university or employer I get paid by. And for me, that was like groundbreakingly shocking. Like I had never—that was not a part of my worldview up to that point. So it was like a complete rock shaking of like “I can do this and I don’t know how to do it.”
So I started just doing all sorts of entrepreneurial things. So I was selling stuff, I was flipping real estate, I was trying to start little businesses and side hustles and things of that nature. But I never really resonated with any of that because it was always about trying to chase the money. I was trying to chase money by just doing those things. But I wasn’t—my heart wasn’t in any of those things. I didn’t like flipping houses. Like I hate doing construction. I hate the process of having to manage all these construction contractors and stuff.
And it wasn’t like that wasn’t what I was going to do. Even though those are some of the easy entry points into the entrepreneurship world. And I happened to meet my business partner at another event because now at this point, I’m just digesting information like a mad person because I’m obsessed with how do I get this right, how do I find the right thing, how can I do this? I happen to meet my business partner at an event and he is in the tax world. And so I was like intrigued by it because as you go to entrepreneur events and like you produce, Dave, taxes are frequently talked about and I was just like intrigued by it. And so I started doing things in his business. I wasn’t a partner, I wasn’t an employee, I was just doing things in his business. And eventually I just became fascinated by the idea that most business owners make all this money. They create all this profit, they do all this good and then they just unnecessarily allow huge percentages, huge amounts of dollars on an annual basis to leave their life for no reason.
And it really didn’t sit well with me because when you do math on this stuff and I think you mentioned frequently about how this is the number one eroder, this isn’t just $50,000 one year or $100,000 in one year—like that’s a lot of money. No one would say that’s not a lot of money. But when you compound that over the life of your business life, 20, 30, 35 years, you’re talking millions and millions of dollars that are outside of your control just because you chose not to tax plan and it went and you just let them disappear. So what my business partner and I did—as I’m not a CPA, he’s an accountant, a licensed tax professional is—we created a situation where: what is wrong with the accounting industry? Like, why is it that so many business owners have this problem? And then how can we build a firm that is in opposition to that so that we’re solving the problems that business owners aren’t getting solved by just going to their everyday normal accountant? And we built the firm in that manner so that the business owners could use the tax code to accelerate their wealth. Instead of them missing out on millions and millions of dollars over the course of their career, they now can take the savings, drive them back into their investments, drive them back into their businesses to accelerate their wealth outcomes faster so that they’re reaching their maximum potential instead of being short of it because you just gave away all this money to the IRS.
So that’s what we have built. It sounds weird that I—some people are like, “How are you not an accountant?” Because all the stuff that you—it’s because I have a—we have a firm. I’m an owner in an accounting firm. But it wasn’t like if you asked me 10, 12 years ago, this would never have ever been on my radar once. So I hope that that helps people get a glimpse into who I am and what has been built.
Take the savings – drive them back into investments to accelerate their wealth outcomes faster.
Yeah, no, it makes perfect sense, right? You came at this like a true entrepreneur trying to solve a problem. Right. And it’s a massive problem. And in fact, I mean, how would you define the biggest misunderstanding, myth, misconception—whatever you want to phrase it—around the accounting industry and why that is a problem?
So I think the biggest myth is our society. I think everyone can resonate with a statement. One of the first pieces of advice—I was told this advice—one of the first pieces of advice that business owners are told, they’re told to go find a good accountant. But then when you ask a business owner what does a good accountant look like, no one can define it. So no one actually even knows what it is. And so I think the biggest myth is that all accountants—I’m going to use the term CPA because CPAs will tout their name, their letters to get business—as people view CPA equals expert in all things tax, all things numbers. But the reality of it is, is that the vast majority of accountants are not great with the tax code.
And I know that sounds counterintuitive, but I like to look at this on a spectrum. So on the right side of the spectrum, you have accountants who have chosen to become CFO only accountants. You go to them, they’re doing your books, they’re doing your audits, they’re giving you financial advice around your business. But you don’t expect that person to save you taxes. On the other side of the spectrum is the tax strategist only. These are accountants you’re going to, they don’t file your taxes, but they will provide you and build you a tax plan. Most people have a hard time finding these people. I’m sure, Dave, you’ve—you’re exposed to many of those types of people.
But the vast majority of accountants, if you looked at this on a spectrum, because everything in between—these specialists don’t do any filing. Neither do CFO only or tax strategy only. You have a huge percentage of accountants that are heavily slanted towards the CFO skills that file taxes. So their skill set is budgets, their skill sets are P&L. Their skill sets are balance sheets and they file your taxes, but they don’t do anything in their work to actually save you taxes. The ironic paradox thing is, is that if you’re a business owner that’s growing your business, you actually need a great CFO. But a great CFO doesn’t necessarily mean you’re going to save taxes. And the vast majority of accountants are just really good CFOs who happen to file taxes. And because the perception of the myth in the world is that they’re all things, they do everything really well.
It causes people to think that they’re getting all the tax savings that they should be getting when the reality is they’re getting really good books done, they’re really good CFO level services. They’re getting taxes filed on time, they’re not getting audited, but they’re dramatically overpaying their taxes. And I think it’s the perception of who the professional is and not knowing that there’s a scale here of understanding tax strategy versus understanding CFO work.
Yeah, I think it’s really such an opaque world. And in my journey, right, it really started with, you know, when your business is young, you’re not really making any profits. Right. So it’s not become an issue. But then as you start bringing in profits and everything, you know, we started to basically escalate and seek higher level CPA firms. Right. That are more prestigious. Right. You’re writing a bigger check for fees and things like that, thinking, “Hey, we’re going to get kind of better tax advice.” And I talked about this in my book because I was literally like—I was so frustrated because first of all, I knew it was possible because of my financial IQ. And I learned, you know, after I read the Cashflow Quadrant, for me, I knew that being a business owner was the best place to be in terms of tax. I knew I could pay less in taxes, right? But I could not find anyone to help me actually implement that, right? So I actually kept firing firms. We kept going through more and more firms and like literally trying to figure that out. And I think it’s very challenging for people out there to find the right firm that can do it. But I think it must be also coupled with your financial IQ and actually knowing what’s possible so that you’re asking the right questions and you’re looking for the right partner.
And now I would simply explain it to listeners today with all that I’ve learned, very simplistically, is that—correct me if I’m wrong, Justin—but look, if you’re a business owner and you’re an entrepreneur, you can pay 20% or less in taxes, right? That simple. If you’re paying more, you have an opportunity. If you’re an investor, you can be paying zero in taxes, right? If that’s where the majority of your income is coming from with proper tax planning. And now knowing that that’s actually the target that you should be shooting for, I would also say that to me, 99% of the industry—I would kind of bifurcate it this way—which is that you have 99% that are actually just tax preparers, right? And all they’re doing is doing filings, and actually finding strategic tax planners would be very unique and very difficult to actually find who know these advanced strategies that family offices are using all the time and ultra high net worth, right? This is the space that they actually play in. But most people have outgrown their advisors and they don’t even know some of these possibilities exist.
You’ve nailed it right on the head. And I like to have people view it this way: like 95% of our country—the world, it’s even more in the world—higher percentage don’t need advanced tax strategy. So if the vast majority of people don’t need it because they don’t make enough money and their taxes are small, that on its own is going to drive the vast majority of the market of accountants out in the world to be servicing those people. So you have to realize that it’s a very small percentage of people that actually can help you because the amount of people that need that service is so much smaller. So it’s the same percentages all the way up. And you just have to realize that the person you started with might be one of these people, but the chances are it’s not. So you have to realize that you probably have to grow as your income, as your business grows, as your investments grow. Your sophistication of the team needs to grow just as much as your money. Otherwise you’ll just be giving money away unnecessarily.
Great point. And that’s the exact same parallel to Wall Street. Right. And really how most people are doing their investing. They’re following this cookie cutter plan of maybe a 60/40 split into the markets. And then they’ve really outgrown that, but they haven’t really realized it yet. So Justin, let’s jump into some real meat and potatoes here and why don’t we talk about some real tangible takeaways for people now that we have that as context. We know there’s opportunity for us there. That’s low hanging fruit. So, you know, what are maybe some of the top strategies that you would see? And I would also like to open this up for, you know, if you’re a W-2 out there, let’s talk about a couple W-2 strategies as well as maybe some of your top strategies for business owners.
Yeah, I want to just before I’ll get—we’ll talk about the strategies. I’m really going to hammer hone on those in just a second. But I want to actually set one pre-thing that I want everyone to look for first with their people and/or demand from their team is: all these strategies we’ll get to in just a second are all great. They’re all going to work. But what you actually need to consistently do this on an annual basis—you’re not just throwing Hail Marys at the end of the year because these strategies can work and work really well—is you want consistent rhythmic planning sessions. So my recommendation is if you have $250,000 a year or less of personal income, twice a year is the minimum issue with their accountant. It might even be demanding more. But at least twice a year and you’re not just talking about what you owe, you’re talking about, “Here’s what we owe. What are all the strategies that I can be implementing to bring that tax bill down?”
$250,000 or more I would demand from your tax professionals that needs to be four times a year so that you’re getting all of the options and can look at all these different strategies that I’m about to talk about and then choose the ones that are most aligned with your cash flow needs, with where you’re going with your exits that are coming in. Do you have capital gain? You’re going to sell a big asset that’s highly appreciated soon? All these things can be talked about and strategized if you’re frequently on a rhythmic motion with your tax strategist who’s going to file your taxes as well. So I would recommend that over—just because you can with the strategy I described, you can chase them so you can go find them on your own. But it’s my experience it’s much safer and you’ll feel less stress if you’re on this rhythmic quarterly or biannual schedule before you jump into the strategies 100%. So I just—I like to say that. Here’s how I would go about doing it. We like to phrase this in foundational things that we think everyone should be looking at, know of, exist, and have conversations with your tax professionals on. I also need to note that I’m not giving you any specific tax advice right now.
You need to make sure that you go talk about these things with licensed tax professionals. Talk with Dave around them because Dave has access to some that we’re going to talk about in a second as well. But don’t take this as personal advice to you. This is for education purposes only. The foundational pieces are things that a lot of people have thrown out, know nowadays, but there are some business owners that we see that still don’t do them. So these are things like taking advantage of the Augusta Rule or pairing it doing the home office deduction; making sure that you are—if you have children—you’re getting them to work in the business and you’re working them as much as you can to get them as high as pay possible. You’re taking advantage of all the states—not every state has it, but the states where it’s applicable—the Pass-Through Entity Tax election.
You’re making sure that you have the right salary structure. So you’re not paying yourself 100% salary. You’re having a larger and larger percentage of it be distributions. You’re looking into things like HSAs and making sure that you can fund—if you have a lot of medical expenses—it’s a great way to get your medical expenses paid for in a tax-free manner. You’re just making sure that you have the proper entity structures in place. So do I need a C-corp? Do I need an S-corp? Do I need those two? Do I need two entities? Do I need a management company and an S-corp so that they’re playing together? Those are the foundational things that we start with with everyone, and we make sure that everyone, if they’re able and capable and willing to do them, that they do them and they actually set them off. Those strategies alone, $10,000 to $30,000 a year off your taxes, depending on how well and how much you can do with them, and where you’re living in the country, how many kids you have, and so forth. But there’s no reason not to do the basics, in our opinion, to just hammer off those basic strategies.
I know that some of those words I said, some of the people might not know what they are, but you can replay them, you can plug them into Google, and Google or ChatGPT can explain them. And I’m sure you talk about them in your community.
Yeah, so let me just—that’s great, Justin. Let me just interject a little bit again for the audience out there: right, if you have a CPA that says the home office deduction is vague or on the fringe or in the gray area or something, or they think it’s too risky—I mean, you tell me, Justin, but to me that would be a sign, not that you’re infringing on something in the gray area, it’s that your CPA actually doesn’t really understand the code and it would be time to find a new one.
I agree with you. And I agree with you because of this. All of these things that we’re describing, they’re all not based on, “Is this gray area or not gray area?” It’s more on, “Are you doing it or not?” If you don’t have a home office and you never use a home office and you don’t have a spot where you work at home, then don’t claim that credit or don’t claim that deduction. But if you’re doing it, that’s the qualification. That’s black and white. I can prove I have an office here. Here’s how big of a space it is. Here’s how often I’m there.
Here’s what I’m doing there. Here’s the work. I’m—like, that’s—there’s no gray there. You’re doing it now. You can claim it. That’s not that. But if your accountant is saying what Dave just said, where they’re like, “Oh, that’s kind of on the gray area,” that just tells me they’re not willing to take it one step further and say, “Well, go do—if you want that, go do it. Put an office space, go to work there, go there in the morning, go there when you come home, go there for X amount of time.” They’re not telling you how to access it. They’re telling you it’s not possible. And if they’re telling you it’s not possible, they’re not thinking around tax strategy.
They’re just thinking around filing the taxes. And they’re not trying to preemptively help you reduce it. They’re just—they’re telling you—it’s a scarcity mindset. The taxes—is the easiest way to say it—it’s backwards. And that person, unless they’re going to change, is not going to help you reduce your taxes consistently.
Yeah. Awesome. So I like that. So you have kind of like some foundational things that you’d work with a client on in terms of getting set up. Right. You’d kind of get those in place and talk to us again a little bit more about like, you know, maybe some use cases or scenarios that people should be thinking about. Like, you know, maybe when is the right time to find a strategic tax planner? Right. Because I know for myself, right, so much of this has been—it evolves in terms of how you’re actually thinking and how you’re playing the game. So, like for me, right, I’m literally every move—every time I purchase something, I sell something, I’m thinking about moving things around on the chessboard. Like, tax is a major consideration. And I know that took kind of time to be able to, you know, change that paradigm shift. So how would you help people in terms of thinking about that construct with which to come at taxes versus just coming at it year end?
Yeah. I would say don’t be the person that says, “When I get to here, then I’ll worry about that.” Become that person right now. So you create the “I care about taxes. I want to know how to reduce taxes. I want to implement every strategy that’s available for me at my income level.” Even if I’m at 100 grand a year in personal income and I’m not going to—I can’t save massive amounts—there’s money I can save, but it’s not like huge amounts of money that can be saved.
I still want to be acting and behaving the way a person at 500,000 would act and behave. Because I want to become that person that becomes the person that makes 500 grand a year. And if you do that in your taxes, you do it in your business, you do it in your personal life—like, you’re now aligning lots of different factors up that increase the probability that you’re going to reach those levels. So create the “I care about taxes, I plan proactively, and I want to take advantage of every legal strategy at my fingertips on an annual basis.” Even if it gets repetitive for a few years because you keep doing the same thing over and over again, you’re still acting like the person that’s at your level, Dave, where it’s very strategic, it’s very thought out. Become—act like that person now. Don’t wait until you arrive at specific levels, because if you wait to arrive, that intermediary period, you overpay taxes that entire time. And that can be lots of money as well. So that’s how I’d recommend to handle that.
Yeah, great insight. Okay, and now how about like any other maybe top strategies you can think of, you like to deploy, and whether that’s for a liquidity event or just kind of in general, some type of investments or strategies that you like.
Yeah. So I am a big fan of knowing, like when I get to certain levels, I need to have more conversations. I need to know what conversations are available for me. So $250,000 to $300,000 of income, you need to start looking at tax-smart investments. So these are things like oil and gas investments; these are things like real estate syndications. These are things that are only available to accredited investors. Where I’m making an investment that will provide cash flow, appreciate, grow my wealth—but at the same time that I make that investment, there’s some sort of tax component tied to it.
So now I’m not just thinking around reduction taxes. I’m thinking grow wealth and save taxes at the same time. And that is unlocked to you at the accredited investor threshold. And that depends on if you’re single or married on what that is. But that’s one thing that I would consider people to look at. And I know that you have opportunities in that space, Dave, but that’s a great place to start thinking more strategically because now you’re being exposed to an entirely new world of alternative investments that you do due diligence on. These are different than just buying stocks. And you’re learning more expertise, and the process of going through it inevitably makes you a more financially sophisticated person, which makes you a more tax financially sophisticated person as well.
So on the low end, that’s what I like to see people starting to explore once they get to 300,000 to 400,000. We’re also going to look at things like—is there any Section 179 bonus depreciation things that we can do where we put—we start leveraging equipment or start buying things that we get bonus depreciation on? So that can be things like—you can do like short-term rental equipment, you can do tiny homes, you can do Bitcoin mining machines. All of these things are equipment and you can depreciate them fully in the given year. And oftentimes they have some wealth components to them as well. But it really is centered on Section 179 and the equipment bonus depreciation and being able to offset them all in one year. At that level of income, you can take advantage of those and really make a massive, significant difference on your tax bill if it ends up being the right fit.
And how about for folks in the seven-figure range of income?
Yeah. So the seven-figure range of income. I’m going to look at things like captive and/or reinsurance companies if they have a business. If you’re not a business owner, you can’t do that one. But that’s for captive and reinsurance. I’m going to look at things like: can I start a private family foundation, make donations to myself, grow the money on my own? I get a deduction when I put things in. That can be great for—if you have a high-value asset, you can put portions of it in there.
Every dollar you put in gives you a tax deduction plus then grows tax-free from then on. I’m going to look at things like private placement life insurance, getting my business inside of there, getting my assets and my investments inside of there. Those are really good ones for the seven-figure range. And they can make significant impact on both the income tax and also capital gains tax exposure with both of those things.
Got it. And anything that you’re preferential to in terms of liquidity events or some type of big capital gains exit?
Yeah. So with those—I’m sorry, if you have a long runway and you are—what’s it? I’ll just give an example. So we have a client right now that has a business that—there was some things that went on that made the business less valuable. It’s probably valued at about $4 million right now. But he has a runway and a fairly clear path to hitting about a $200 million valuation relatively quickly with how much volume he has, with how many clients he has. But he’s not at 200 million right now.
So his current valuation is 4 million. If you have that big runway and you’re not going to sell in six months—it’s a couple years out or at least a year out—private placement life insurance is astronomically extraordinary in that space because I can put shares of my business into the policy. So I’m selling it at 4 million in the policy. And then now all the growth that occurs to 200 million is now protected from capital gains because it sits inside of the policy. If you have planned really well for those types of opportunities, you can really—that’s—you save income tax over that and you save the tens of millions of dollars in capital gains that you would have had to pay had you not done it.
So if you are on that scaling cycle and you can catch it before it really takes off, that’s really good. But not everyone can do that and not everyone has the—it’s just a very complicated process to set up and you get a lot of the estate planning built in and it’s just a completely—it’s a lot more than a lot of people want to take on. So more simple things are things like looking at opportunity zones, looking at things like the captives can be great for liquidity events. The oil and gas at times can be great for liquidity events in some situations, specifically from real estate, because oil is considered a piece of real estate. So you can 1031 into oil.
Those are some of the things that I would say. But here’s what I would kind of just wrap it back up with: this is why it’s so vital to have that rhythmic quarterly planning. Because now you can be talking about these things really organically in the moment versus just throwing out hypotheticals. You can run scenarios on: if we wait to do it, then how much are we going to save? If we do X, Y, and Z, what does that produce for us in tax savings? Or if we did this one instead, what does that produce and how liquid am I? And like, what do I actually want when I get there? My experience is that so many people just walk into their exit and they’re like, “Well, crap, I have a huge tax bill. What do I do?” There’s things to be done—like opportunity zones are really good for those type of folks. But if you plan ahead, you can save millions and millions more than those that don’t.
Yeah, I couldn’t emphasize your point enough around having the frequent planning sessions and really know this because it is really crazy. I’ve had years like that where, you know, all of a sudden you’re in November, December, find out your tax liability if you’re lucky and you know, you kind of feel like—it’s almost like that government “use it or lose it” type of scenario and then you’re not really thinking with the proper investor hat on. You know, you’re just more forced into something. Same with like a 1031; you’ve got a certain time commitment that you have to translate into. And I’ve seen actually more people make mistakes with things like—and this is such an important takeaway—which is like we say, “Okay, I’m going to get into short-term rentals because this is going to be a great tax benefit. I’m going to slam this in in December.”
And so they’re looking for a property—that might find a property and like underwrite it in a couple of weeks. I mean, you could have actually all the tax savings you could potentially mitigate because you didn’t buy well at the time. And then secondly, the other thing I think that’s just such an important consideration most people overlook is your time. I mean, if you’re going to have an STR strategy, you’re going to be involved with that. Even if you sign up with a co-host and stuff, there’s going to be some work that needs to be done, like getting the note, the mortgage all structured from the beginning, all your due diligence on that on the front end, and then going into the management of that. And is that something that you really want to spend your time doing? So really to your point, I think it’s so key to really understand: what are some of your options? What does your growth path look like? And now where am I going to get smarter? And maybe STR is a great opportunity, but I’d love to probably spend nine months like getting smarter on it, learning the right markets. Where would I even want to invest? What types of properties would I even like? You know, would I like something in Utah in the mountains or something? All different characteristics—like you can’t figure that out in 30 days.
I agree with you 100% because that’s like the—I don’t know if it’s just—it’s like that’s like the bulletproof strategy that’s thrown out as like this last hanging fruit. Oftentimes it’s not the only one, but it’s one of those ones. And I always want people to align: how much time do I want to spend, how much money do I have, and then what is the actual risk once I’ve done this? Like, can I go bankrupt? That’s the thing that people—you have a mortgage on that thing. You have to run that like a business. Is that going to distract you from your normal business? Are you still going to be as profitable with your other business? Because now you’re distracted by this thing that saved you some money in taxes, but you could have done other things that didn’t require so much time and energy that would have been more aligned with what you were actually doing. And so many people—that’s why I hate the Hail Mary strategies—is because you get into those and you don’t realize this isn’t just a short term, this is like a long-term commitment that I’m now in this thing and I don’t like this world. It’s like when I didn’t like flipping. If I had to do flipping instead of taxes, I wouldn’t—if that was a tax strategy, I wouldn’t do it because I don’t like that world. And so many people do get into that world and they don’t realize they don’t like it until they’re knee-deep in it and already have mortgages and they’re not renting out as much and there’s cash flow burn and it’s stressful. And so I really want to reiterate your reiteration that it’s really important that you plan.
Yeah. Any multipliers that you like? Obviously, STR is probably a really nice one, or Section 179, but any others where we can get more than a one-to-one type deduction?
Yeah, I like the Section 179 ones, but that’s another one very similar to the STR. Like, what happens when I buy that equipment? What is my obligation? What’s the risk? Am I going to get the note paid off? Because that’s where those come in—I put 20% down, I buy $300,000 of equipment, and I write $300,000 off my tax bill. But now I have a $250,000 note that hopefully the equipment is paying for and I don’t have to worry about it. That’s what everyone that sells those things will tell you is going to happen. But what happens if something goes wrong? Can I trust this operator? Can I trust the equipment to produce it? Those are the types of questions I would make sure you ask. I like them as long as you understand the risk and as long as it’s in alignment with what you want. Don’t go into it blind and then you get caught up and now you have to operate it. If it doesn’t operate, you are on the hook for a note that you have to pay capital out of or lose cash flow. So I like those ones a lot; they are really powerful as long as people like them.
I do like leveraged donations as long as they’re done well. The world of leveraged donations, though, is very shaky. There are lots of different people that have things that I don’t think should be considered. I would make sure that you really get to know whoever—usually, they’re going to come from a tax attorney firm—get to know the tax attorneys. What’s their history? Do they have audit defense? Have they done this before? Have they been audited as a producer? But I like those as well. And just so people understand what that means, I’ll describe it through the means of art, because art’s the easiest way to describe it.
So we have a connection with an art collector in New York. He has art that he wants to end up at a museum because the general public doesn’t take care of art well in the long term. Even if I bought art, if I die and my kids throw it in an attic or donate it to a random thrift store not knowing it has value, then it gets destroyed. So a lot of art collectors want their art to end up in museums because it’s preserved. What this art collector will do is sell portions of his art collection to just everyday people, but he’s going to sell it to them at wholesale value. You buy that wholesale—say $100,000, for example. I buy $100,000 worth of wholesale art. I own it after one year and one day—we actually recommend it to be 18 months in the future—but after that timeframe, I can donate that art not at the price I paid for it, but at the actual retail value.
What happens is a third-party, unaffiliated appraiser will come in and appraise it. In most situations with the art that’s being sold to people and the clients that we have, you’re going to have a four-to-six times multiplier on that. So that’s $100,000 bought, but I created a $400,000 to $600,000 tax deduction because that’s actually what it was worth. I can write that off on my taxes, the art gets donated to the museum, and now I saved a whole bunch of money in taxes. There are people who do this with land, with products, or with medical supplies. I would just really get dialed in on who is the person telling me this. Have they been through audits before? Is this their first shebang? Really get into the nitty-gritty detail, but they work really well because you are actually giving money away—just be really cautious with them.
Yeah. What about on the trust side of things? There’s a lot of people out there talking about “bulletproof” type trust structures to avoid all taxes. What are your thoughts there?
Yeah, we are not a big fan of those, mainly because we believe the claim is that if you get into a trust, you own nothing and control everything. But the reason we have seen them fall apart is that the IRS actually sent a memorandum about a year ago warning law firms about this very thing—just because you say “I own nothing, control everything” doesn’t mean you’re not treating it like a personal asset. If you still have all the access and you’re treating it like normal, it fails. My experience is the vast majority of people that operate with those types of trust structures are still living the exact same way they were before. They just thought this trust thing would change everything, but you have to change the way you behave and how you access the money.
Our firm’s opinion, because of what the IRS has said, is that we choose not to engage in those strategies and we encourage clients to exit them if they come to us with them. We view estate planning through the means of protecting assets from lawsuits and avoiding estate tax. That’s the primary benefit of trusts on our side. If you’re over that estate tax threshold and you don’t have an irrevocable dynastical trust, every dollar over $30 million, you’re paying 40% to the government; that can be avoided. But when people shift it to be income-tax centered, our firm chooses not to deal with it. Could it be done right? I think it could. But do most people do it right? Our opinion, based on how the IRS is reacting, is no. We’d rather not be caught up in that fray and instead do things that we know we can defend and be compliant with.
Yeah, got it. And let’s talk about tax credits for a moment. I know you guys have some good expertise in this area. Any way that people can really be thinking about tax credits and how they really work?
Yeah, so there’s a few different tax credits that we really like. We really like the ADA credit. If you’re buying equipment and you purposely buy it in a means that is driven towards the Americans with Disabilities Act—for example, if you’re a chiropractor and you buy tables that are ADA certified. You were going to buy a table anyway, but you bought the one that’s ADA certified. Now you can get a credit for it with the purchase and you get to depreciate it just like you do normal equipment. You get the double dip. It’s not a massive credit, but again, why not? If you have a brick-and-mortar and people coming in, why not buy the one that gets you the credit as well?
The other one is the R&D tax credit (Section 41) of the tax code. This is a credit that most business owners in the low-to-mid market often miss. It goes back to the fact that most accountants aren’t tax specialists; they just file the taxes. So you are the one that misses out on it. Essentially, if you’re in medicine, automotive, engineering, software, manufacturing, or anything tech-related—like AI automations—and you’re spending significant amounts of money on it, you have the ability to claim it. When you spend money on something, it’s always a deduction in your business, but now you also get to pair the deduction with a credit. We find that, in broad strokes, a business might get between $7,000 to $10,000 in R&D credits per million of revenue annually. It can be significant; for a business doing $3 million to $5 million, you can have $10,000 to $30,000 in tax savings just from the R&D credit, and that’s on top of the other stuff we’ve been talking about.
Yeah. Awesome. Really glad that you shared some insights on that one; I think that’s another one that’s often overlooked. Again, a lot of this comes from you actually seeking—you have to have the knowledge to talk to your CPA about this. And definitely, you need the right CPA on your dream team to make all this happen and implement it. Can’t thank you enough for all the insights today, Justin. Like I said, I never thought I’d actually be saying this, but tax is literally one of my favorite topics because I love the creativity with it and how you can overlay that on your own wealth strategy to truly accelerate your wealth. Again, many of these things are just not common knowledge; it’s very opaque. So, kudos to you for coming in today and helping people, and also for the business model that you set up. If you could give just one piece of advice to the audience about how they could accelerate their wealth, what would it be?
Yeah, I think it would be this: saving on taxes isn’t enough. You’re going to find people to help you save taxes, but if you don’t have systems and structures behind your financial operating world, you’re going to save that money and it will disappear into the array of unconscious spending. It will be gone before you know it, and it will be as if you had just given it to the IRS. Maybe you got a vacation or a car, but it didn’t actually accelerate your wealth. So, create a system where the cash automatically flows. “I save money here, it lands here, it automatically goes there.” Now from here, I distribute it into different assets—my business, other investments. If you don’t have that piece, you have to rely on discipline, and most people aren’t disciplined enough not to spend money that’s available to them.
Okay, I love that, but let’s break that down a little bit. How do we really quantify that? Because if we take an oil and gas opportunity and you put in $100,000, easy math, you get a $100,000 tax offset that year, which saves you $45,000 in taxes. Are you recommending that you basically earmark that $45,000—rather than cutting that check to the IRS—and put that into another investment versus just letting it sit there?
Correct. I recommend everyone has a tax savings account and they just automatically fuel it up. Meet with your accountant and ask: “What is my worst-case scenario for my tax bill this year?” Then, every paycheck or every time revenue comes in, you can peel off a percentage that mimics as if you were going to pay that worst-case scenario. Then at year-end, if you want to do an oil investment, you pull from that account to pay for the investment instead of pulling from other money. Any money left over in that account is how much you actually saved in taxes at the end of the year. Now you can deploy that into other assets.
There are automated tools out there that can do this. There’s a technology called GetSequence.io, and there’s a bank—I can’t remember the name, but Mike Michalowicz, the guy who wrote Profit First, really likes this bank (Relay)—they can set up automations that pull money into that tax account for you. The reason I like this is you get to see exactly how much your accountant saved you in taxes because you already moved the “worst-case” amount. It’s separate and distinct from your personal spending. Now you can deliberately choose to deploy it to other assets, which gets you more cash flow and faster growth.
Yeah. Wow, I love that one. That is so great. So you can really quantify it, and I think it really sinks in more—where focus goes, energy flows. I would actually throw another “impact stack” on there: I would take that tax savings account and allocate it into my infinite banking whole life insurance policy. Therefore, you’ve got it growing tax-free and you have access to roll it into the next deal.Yeah, I love that philosophy too. Every step we’ve been describing is just getting more and more efficient. And the cool thing is you start creating more and more money for your future self. By adding these layers like the infinite banking policies, you just get more efficient with every dollar you make.
Yeah, that’s really great, Justin. It’s funny because I’ve been talking to my kids about this too. We’re all trying to teach these principles. While the dollar amount sometimes seems small when people are younger, you’re building that muscle. You’re building a system. Wealth building is exactly that: building a system. The numbers will grow if you’re successful and focused, so having that discipline and the system in place is key.
Wealth building – that’s exactly what it is: building a system.
I agree 100%. All of this is deliberate. You’re not letting things just happen to you or hoping you hit wealth levels. You’re deliberately choosing to create the outcome that’s most probable. You can’t control every outcome, but you can use systems to create a more probable one. And I think that’s a great way to wrap up what we’ve been talking about around taxes.
Yeah. Awesome. If people would like to reach out and learn more about you guys or your firm, what’s the best place?
The easiest way is to schedule a call. You can go to offer.biglifefinancial.com/jm-meeting and you can schedule a complimentary call. We can do a free three-year tax review for you at no cost. We can show you where your accountant is missing things and what you should do going forward. You can interview us to see if we’re the right fit; we know we aren’t the right fit for everyone, but we can show you what you’re missing and help you find someone who is aligned with you.
Okay, we’ll make sure to put that in the email to everyone. Really appreciate it, Justin.
Yeah, thank you, Dave. I appreciate it, too.
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. If you’d like to learn more about upcoming opportunities at Pantheon, please visit pantheoninvest.com.