Episode 773: Small Tweaks For Major Tax Breaks

 Derick Van Ness of Big Life Financial is spilling more tax-related secrets, and just in time for the end of the year. He talks with Kiera about tax strategies you have and haven’t heard about, including tax-smart investments, when tax planning should start, and how to make dollars productive instead of consumptive.

Episode resources:

Learn more about Big Life Financial

Download for free: Tax Strategies Your CPA Isn’t Telling You

Get in touch with Derick directly: [email protected] 

Listen to episode 693, Strategically Prepare for Economic Downfall

Listen to episode 511, Tax Time: Getting the Most Bang For Your Buck

Listen to episode 462, Get Tax Savvy

Reach out to Kiera: [email protected] 

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Transcript:

Kiera Dent (00:00.682)

Hello, Dental A Team listeners, this is Kira. And today I'm so excited. I have a dear friend on the podcast today. We've podcasted a few times, we've gone on so many different fun conversations and I'm excited to bring him back. We're gonna talk all things taxes. Let me get this like a sexy podcast for you. But I've got Derek Van Ness with Big Life Financial. Derek, how are you today?

 

Derick Van Ness - Tax & Wealth Strategist (00:17.964)

Hahaha

 

Derick Van Ness - Tax & Wealth Strategist (00:22.346)

I'm great, Kara. Just excited to be back and talking about a topic that I don't know if I ever thought I'd be passionate about until I realized taxes are such a big impact on people's finances that I've actually become passionate about them. I don't admit that in public that often, but yes. That's it.

 

Kiera Dent (00:38.253)

I love it. Well, I don't like taxes. So someone gave me a different mindset on taxes. Amanda Francis, are you familiar with her? She's an author, she wrote Rich as F. And she's like sitting in a bathtub of money. It's like kind of a funny one. It was a really interesting book for me to read. And she, she talked about how like taxes are like

 

Derick Van Ness - Tax & Wealth Strategist (00:45.108)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (00:56.227)

Okay.

 

Kiera Dent (01:01.558)

the benefit of living in a country that allows us to have businesses and to grow businesses and to evolve. And it really changed my perspective of just like the gratitude for the country I do get to live in that allows me to have a business. But with that said, I also don't like being dumb and paying more taxes than I need to. Like I'm obviously going to pay them. I'm never going to do tax evasion because that terrifies me. Like my rules are nothing shady and nothing that's going to put me in jail. Like those are my rules. So beyond that, I'm willing to play in the gray zone. But.

 

Derick Van Ness - Tax & Wealth Strategist (01:11.546)

Sure.

 

Derick Van Ness - Tax & Wealth Strategist (01:21.026)

Yeah.

 

Derick Van Ness - Tax & Wealth Strategist (01:27.299)

Yeah.

 

Kiera Dent (01:30.058)

I just think the more we can educate ourselves on taxes, the more we can play the game. And I feel like the game of taxes is like worse than the Monopoly handbook. Like there's so many rules to Monopoly. There's so many rules to like risk and those two board games. And yet I feel like taxes are a board game that we just need to learn the rules. So the more I can learn about taxes and be grateful for the country I live in, then here we go. So let's talk about taxes, Jerrick. Let's like dive deep into taxes. It's end of year and this will be released before the end of the year. So.

 

Let's give some people, some listeners, what they can do for taxes, whether they do it this year or if they just prepare for next year.

 

Derick Van Ness - Tax & Wealth Strategist (02:03.882)

Right, right. I mean, the first thing people can do is, of course, tax planning all year, right? Like you don't do business planning just in one quarter of the year and then the rest of the year not think about it. People forget taxes are the biggest cost in your life. Even if you have kids in college, like most of the people listening to this are dentists, right, and most of our clients are dentists. And most of them are in the top tax brackets. So if you're in those, you're somewhere between, if you have no state tax, maybe 35 to 40 cents on the dollar.

 

And if you do have state tax, maybe 40 to 45 cents, some even in California or whatever, can push the 50% mark, that's 50% of everything you make or 40% of everything you make. It's huge, right? And I think people don't think of it as part of their business, right? But if you had something else that was sucking up 50% of your profit, you think you'd pay attention to it, right? So mindset wise, right? Like I agree with you that we need taxes. We need to pay for roads.

 

Kiera Dent (02:40.235)

Yeah.

 

Kiera Dent (02:56.289)

Yes, absolutely.

 

Derick Van Ness - Tax & Wealth Strategist (03:03.194)

schools and all the different things that need to be done. However, I'm not a fan of people overpaying taxes due to ignorance, right? So what we wanna do is help you understand what's possible and then you decide what's right for you, right? Work with your tax pro to figure out the things that do or don't apply for you and like you said, we don't go into the gray area, either we really stick with black and white tax code, we read the language and a lot of tax stuff just so people know.

 

Kiera Dent (03:10.894)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (03:31.862)

It's not about like people will say, oh, you have a home office, that's a red flag. Well, here's the thing. If you actually have an office at home, this is my home and it is exclusively office space, writing that off is not a red flag if it's real. What is the red flag is if you have a laptop in your bedroom and you call it a home office and that's not a red flag, it's just lying, right? So let's be really clear that the rules allow you to do things.

 

Kiera Dent (03:54.29)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (03:59.618)

you just need to document them and do them in the way that the tax code says you can. If you go to Hawaii with your family and you meet with one real estate agent to like say, what would it cost me to buy a time share? You can't write that off as a business trip saying, well, we were looking at the second location. Like it's just lying, right? So I wanna be honest about that. Cause a lot of stuff that people say is shady is people writing off stuff they're not really doing or saying they're doing things they're not or exaggerating what they're doing.

 

Kiera Dent (04:16.364)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (04:28.878)

Just be honest about it. It's okay. As a dentist, you make enough money. If you're not doing these things, you can pay the taxes. But there are a lot of things that you're already doing that you can be writing off. And there are a lot of things that you want to do and that you can get tax breaks for. So that's where we wanna focus is behavior modification a little bit. I mean, truly, I believe that that's what the government uses taxes for, is to get you to do stuff they want you to do, you know?

 

Kiera Dent (04:57.056)

Right?

 

Derick Van Ness - Tax & Wealth Strategist (04:58.37)

You get tax breaks for having kids. Well, why does the government want you to have kids? More people, more prosperity, more stability. When people are parents, they're not so wild and crazy out there doing crazy things, driving too fast or whatever other vices people have. So let's focus on that. Buying a house, they give you a tax break for buying a house, although with the standard deduction, some of that's gone away, but because people who own houses have pride of ownership and they...

 

you know, take care of their neighborhood and they look out for crime. Those are all good things for our country. And there's a ton of other things that they allow you to do that people just, you know, they think it's too good to be true, but they forget. You get to write off your house, you get to write off your kids, you get to write a ton of stuff off for your business. It just seems too good to be true because you didn't know about it, right? So we wanna be clear on those kinds of things. And maybe we can dive into a couple of, there's some really easy strategies.

 

Kiera Dent (05:40.302)

Thank you.

 

Kiera Dent (05:46.487)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (05:54.51)

Some of these people have definitely heard about, but they're the things that apply to almost everybody. And then there's a whole nother category of stuff that's higher level. And I actually recently published a PDF that we give away on our website called, Tax Strategies Your CPA Is Not Telling You About, right?

 

Kiera Dent (06:11.563)

I want to hear it all. So let's do the easy ones. And then, because again, I don't know, Derek, I love podcasting and I've done hundreds. Like we are almost pushing 800 podcasts now. And I just think about like, I do this to learn selfishly for myself. Like, yes, thank you listeners for having a place for me. But like, shoot, if I can learn tech strategies, I'm going to. So let's do the basic ones. And then let's do the ones that people aren't learning because I found...

 

Derick Van Ness - Tax & Wealth Strategist (06:14.32)

Yeah, yeah.

 

Derick Van Ness - Tax & Wealth Strategist (06:20.718)

Yeah.

 

Derick Van Ness - Tax & Wealth Strategist (06:28.186)

Sir?

 

Kiera Dent (06:38.782)

I put it on my goal board because I got so sick. Like Derek, I got so angry at paying stupid tax bills. I was like, screw that, I'm going to become a tax expert. Like, I don't care what I got to do, but I'm so done with this. And I still feel like there's like layer upon layer upon layer upon layer. I think I'm getting smarter and I don't have to surprise bills, but anytime I can learn. So let's talk about the basics, especially geared towards dentists. And then let's dive into the ones that people aren't telling you about.

 

Derick Van Ness - Tax & Wealth Strategist (06:54.073)

Yes.

 

Derick Van Ness - Tax & Wealth Strategist (07:00.455)

Okay.

 

Okay, so let's start with the super basic stuff. If you've heard this before, hang with me and we'll get to the stuff you probably haven't heard of. First one is, yes, you can pay your kids, right? And paying your kids allows you to pay them, the number changes every year, but right now it's pushing $13,000. So let's call it $12,000 a year. But if you're gonna pay your kids, and this is where everybody, once again, are you lying or are you telling the truth? Your kids have to do something. So...

 

If your kids are old enough, I mean, kids are great at video production, they're good at marketing, they're good at social media, they're good at all kinds of things they can do to help you in your business. They can also sweep up and file and do all kinds of things that way. And if you have young kids in the digital world today, your brand, most dentists, their brand is a family brand. So use your kids in YouTube videos, use your kids on your website, use their likeness and pay them.

 

just like you would pay any other spokesmodel or actor, actress, but you have to use them, right? One picture on your website probably doesn't justify that. Make them an active part of what you're doing. Let people know who you are, because listen, like what I do, dentistry is a high trust industry. People need to trust you. It's very intimate to have somebody poking around in your mouth that you don't know or trust, right? Just like people poking around in your finances. They wanna know that we're like trustworthy.

 

Kiera Dent (08:17.768)

Mm-hmm.

 

Kiera Dent (08:24.862)

Right?

 

Kiera Dent (08:29.935)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (08:30.094)

So same kind of thing there. Use your family that way and allow them to be involved in the business anyway. And then as they grow and their skillset changes, you can pay them for different things. But let that money, it needs to go into an account with their name on it. It needs to be their money. Your name of course can be on it, but they can pay for their own schooling. They can pay for their own dance or football or whatever they're doing with money. But allows you, instead of paying 40% in taxes and then you paying for the stuff.

 

they can pay for some of their own stuff, right? Or put it toward a college fund or other kinds of things that they have control of. So it's really their money, but you're just helping them just like you would as a parent to be a good steward of that money, right? So that's an easy one, yeah.

 

Kiera Dent (09:01.655)

Mm-hmm.

 

Kiera Dent (09:13.502)

I like that. Well, and I like that you also brought up the ideas about kids are really good with social media, they're good with video editing. And I hadn't thought about that for kids. Like that's I mean, I've heard about people like having them shred the papers at the job. I've heard them, you know, like mow the lawn at the office. But I mean, that's a great idea because they are good with social media, they're good with bringing people in. That's a skill set that I think the younger generation is really, really talented at. And they could definitely help out with I think that's a brilliant idea that I hadn't thought of, especially for those like

 

Derick Van Ness - Tax & Wealth Strategist (09:38.33)

Yeah.

 

Kiera Dent (09:42.826)

middle school, teenage years, kiddos that really could actually benefit your practice for you.

 

Derick Van Ness - Tax & Wealth Strategist (09:44.91)

For sure.

 

Derick Van Ness - Tax & Wealth Strategist (09:48.418)

Yeah, yeah, they can help you do a lot of things that, you know, you're practicing dentistry, right? You're not practicing social media. Kids spend so much time doing this stuff that they figure it out, most of them, right? So definitely play to those skillsets or those interests. So, yep, second one is something called the Augusta Rule. It's a home rental rule, right? What's that? Yep. Yeah, especially for like what you do.

 

Kiera Dent (10:01.238)

Yeah.

 

smart. Okay, next thing pair kids, give them a real job.

 

Kiera Dent (10:12.586)

I love this one. Yes, I said I love this one.

 

Derick Van Ness - Tax & Wealth Strategist (10:18.106)

here, you know, dealing with teams, right? So you do retreats, you do planning sessions, you do meetings with your top leaders in your office and all of those things. Usually, if you wanna do that offsite, you've gotta rent a hotel room or like a conference room or an event center or a place in the back of a restaurant. Instead of paying those places, you can use your home for it and your business can pay you for the rental of your home. And the first 14 days a year that you rent out your home,

 

you can take income tax free. So it's a way to get money out of the business, into your home. These are things you're doing anyway, at least most offices, right? Team meetings, retreats, team building, all kinds of stuff. Holiday parties, we're at that time of year. Beginning of your planning, quarterly planning, all that stuff. Anything you would normally go and rent another facility, you can do it. And you wanna have a real lease between your business and you personally, just like you would with a hotel or anything else.

 

And if you want to really be airtight, take pictures of what you're doing and go in and like, let's say you're using 400 square feet in your home. Go and find what would it cost me to get a 400 square foot conference room for the day, right? At a local hotel that is as nice as your home is because most dentists have pretty nice homes, right? What's that gonna cost you? A thousand, 1500, $2,000 a day? I don't know. It's different if you're in New York City than if you're in small town somewhere. But...

 

Kiera Dent (11:36.302)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (11:46.042)

figure it out and print out a copy or two of comparable rental spaces, right? Now you know you're charging market rent, but the money's coming out of the business into your home personally. Once again, that's something you can do up to 14 days a year, and you're getting money out of the business into your personal life without having to pay taxes on it. So 40 cents on every dollar that you pay there. It's not gonna change your life, but it's probably for a lot of people worth three to $10,000 a year.

 

Kiera Dent (12:08.2)

Mm-hmm.

 

Kiera Dent (12:15.134)

Mm-hmm. It's tax-free money. Like, why not? Something I did, Derek, because I get scared about this. And so every year in January, I have a reminder task in it is I go and I do Airbnbs in my area. I take screenshots of them. I keep them in a folder. I make invoices every single time. I send them to my CPA when I complete my meeting at my house. And then I also have it in my calendar because I feel like if the IRS were to ever audit me on it,

 

Derick Van Ness - Tax & Wealth Strategist (12:15.519)

First off, you're already going to do. Yeah.

 

Derick Van Ness - Tax & Wealth Strategist (12:29.978)

Mm-hmm. Yep.

 

Kiera Dent (12:42.742)

I want to have multiple places. I love the idea of taking pictures because we could definitely start snagging those in there. But just having it to where, like I think if you just cover your bases, it's very easy to do and why not? And to me that takes literally, I kid you not, it's about five minutes every single month when I make the invoice. It's me taking about 30 minutes at the beginning of every year to go look at comparable properties to my own and then utilizing it that way. So very, very simple ways to do it that you can then make sure you're covered on. It's awesome.

 

Derick Van Ness - Tax & Wealth Strategist (13:04.93)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (13:11.822)

Yeah, and the reality here is, are you doing it, right? If you're really doing it and you just document it, it's a no-brainer. So.

 

Kiera Dent (13:20.65)

And I think for some offices, I felt weird about, well, I don't have my whole team here, but you can have leadership meetings at your house, you can have different things, you could do breakfast. So it doesn't have to be a big extravagant party that you would do. It can even just be your leadership team meeting at your house every single month. You have it offsite, which I would actually recommend for leadership teams, get them offsite. You'll probably get more talked about in confidential spaces than you would in the office anyway.

 

Derick Van Ness - Tax & Wealth Strategist (13:27.258)

For sure.

 

Derick Van Ness - Tax & Wealth Strategist (13:39.842)

Yep, 100%.

 

Derick Van Ness - Tax & Wealth Strategist (13:47.034)

Well, there's a lot of value in just changing the environment. When people are in an environment, they're thinking a certain way, acting a certain way. When you can get people off site, it changes the vibe. It changes the energy. It changes the way that they react. So yeah, I think the psychology behind it's really important. Whether you decide to use a hotel or use your home, offsite meetings are really, really valuable. So I agree with that 100%. Okay.

 

Kiera Dent (13:49.877)

Mm-hmm.

 

Kiera Dent (14:08.694)

Mm-hmm. And I did feel weird. I'll just put it out there. Like I did feel weird having my team come to my house for a while, which is why I think also you can have it smaller so it's not your whole team. Cause it was weird for me when I had teammates working in my house, like, cause it is still my personal living space. And then my husband lives here and we have, you know, some of you have kids. So I also think some of those more intimate like leadership teams doesn't feel as daunting to have a whole team over if that feels weird to you. So just, there are ways to get around it if that feels maybe a little scary to you.

 

Derick Van Ness - Tax & Wealth Strategist (14:15.234)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (14:25.338)

Sure.

 

Kiera Dent (14:38.542)

Because I know for me, especially as a female, it felt weird to have team members come over. So I just kept it very small to my leadership team and that feels much more doable to me just as my two cents on that.

 

Derick Van Ness - Tax & Wealth Strategist (14:50.498)

Yeah, and like I said, you know, I'm not a CPA giving tax advice. That's, you know, not what I do. But what we're doing here is saying, Hey, this is a possibility. Think about what's right for you. Think about how you want to use your home. Think about tax wise, what works for you work with your tax pro to determine, you know, how to document that. But, you know, at the end of the day, these are things you can be doing, but you're already doing anyway. So if you make a small tweak now, all of a sudden you get tax breaks for those. Third one here that is.

 

Kiera Dent (15:17.885)

I love it.

 

Derick Van Ness - Tax & Wealth Strategist (15:21.018)

pretty important and a little less known is cost segregation. So if you own the building that your practice is in, or if you own any commercial real estate, there's a way to accelerate the depreciation on that building through cost segregation. So this is really well known, but cost segregation is basically the idea of you have the building, and then you have all the stuff inside the building, the build out, the electrical, the AC units, the plumbing, all of that stuff. And you can actually separate the two of those.

 

Normally commercial real estate is depreciated over 39 and a half years. So it's a long time, right? You don't get a lot of, a lot of write-offs over time. You do, but not each year. If you take and do a cost segregation study and engineer comes in and they come in and they separate what's the physical building and what could be classified as equipment, all that build out stuff we talked about, uh, and equipment can be depreciated much more rapidly, five, seven, 10, 15 years.

 

Kiera Dent (15:59.985)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (16:19.918)

So you're getting double, triple type of depreciation. Or if you do new build outs, you can do that as well. Like if you remodel the whole thing and strip a building down, all of that. And the first year that you do depreciation on new build out stuff, you can also get bonus depreciation, which is 80% in the first year right now. It was 100% for a couple of years. Now it's phasing out. It's 80% this year. 24 will be 60, forwarding 20 and then it'll be gone.

 

So you can take advantage of that as well. But if you own commercial real estate, this is a really nice opportunity if you have passive income. The big thing about real estate is that it gives you passive losses and passive losses can only offset passive income. Now there is a way, if you're building a new building, and this is something you'll want to talk to your tax pro, there is a way because for an owner occupied building where you have your practice inside your building and you own it,

 

Kiera Dent (16:58.03)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (17:17.337)

there is a way to be able to do that so that it can offset active income because it's part of the same business. It needs to be done right away and there's some nuance to it. So make sure you talk to your tax pro about how to do that and if it applies to you. But if you're doing a new building or a new build out, that's a possibility. If you've had a building for five years, it's probably not gonna work. You could still get the advantage of cost segregation. But for you as a dentist, if you can get...

 

Kiera Dent (17:39.991)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (17:45.31)

massive depreciation to offset your active income. That's like the Holy Grail. So definitely something to look into. There are companies that do cost segregation. We can make recommendations or maybe Kira can. It looks like you're not in your head, so maybe you're very familiar with this. But...

 

Kiera Dent (17:49.831)

Yeah.

 

Kiera Dent (17:59.806)

I'm just familiar with like real estate. I didn't realize you could do it with dental practices. Like that's so clever and I had not thought about it in that realm. And there are people who know when you're doing a cost seg what you're trying to do it for. And so like getting good recommendations, Derek, you're going to know way better than I will. So I would say if you're interested in that, definitely chat with Derek on that. But yeah, the cost seg is done in real estate gurus across the nation and the bonus depreciation. If you can take advantage of that now, because it is going away. And that's something where it's like,

 

Derick Van Ness - Tax & Wealth Strategist (18:11.438)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (18:22.957)

Yeah.

 

Kiera Dent (18:28.618)

That is a huge benefit to get the bonus depreciation if you can. Um, so even if you're thinking like, Hey, I might build a new building next year, or we might do something next year. And it doesn't have to correct me if I'm wrong, Derek, but I don't, it doesn't have to be a new building, right? Like I could just buy another building because it could be a new, or I think you'd actually do better if it was a purchase building than a brand new one. Cause you probably would get more depreciation off of it, but I'm guessing for both, you can get it. Is that correct?

 

Derick Van Ness - Tax & Wealth Strategist (18:42.921)

No. Yep.

 

Derick Van Ness - Tax & Wealth Strategist (18:52.954)

Well, they take the value of the building when you buy it. So when you're a new owner, you start over with the value of the building, right? And so then you get to depreciate that, but you can go in. I mean, if the last guy did cost segregation and then he sells it to you, that does not impact you. A new building, obviously the value is gonna be higher. And the big thing with the new building is you can show that that's part of your existing business. Like it's an integral part, they do the same thing. And so you can get that active income offset.

 

Kiera Dent (18:58.441)

Mm-hmm. Right.

 

Kiera Dent (19:20.926)

Nice.

 

Derick Van Ness - Tax & Wealth Strategist (19:21.186)

I'm going to be honest with you, I understand that it can be done, but I don't do the nuance of that. I have my tax guy do it. So definitely, I don't want to give too much detail on that other than if you own a commercial building and you've had it less than 10 years and it's worth over a quarter million dollars, I think it's worth looking into. If your building is really small and not worth very much or you've had it for a really long time so most of your depreciation is gone, it may not be the strategy for you.

 

Kiera Dent (19:29.611)

Yeah, you and me both.

 

Derick Van Ness - Tax & Wealth Strategist (19:50.67)

For most of my dental clients, their buildings are worth a pretty penny and they're relatively new. So definitely worth checking out. Yeah, so if that one applies, it's a big deal. And then the last one that's really obvious is balancing what you take as your W-2 with what you take as your dividends or your, I call it owner's income versus W-2 income or employee income. And so how you wanna balance that is

 

Kiera Dent (19:56.046)

Mm-hmm. Brilliant.

 

Kiera Dent (20:14.574)

Thanks for watching!

 

Derick Van Ness - Tax & Wealth Strategist (20:20.77)

your W-2 should be consistent with what would you pay another employee to do your job? Like if you had to hire someone to do your job, a lot of associates make, let's say $150,000 a year, right? You as a dentist, let's say you make 500, then you can take the other 350 as owner's equity or dividends, right? And it's taxed differently than the W-2 is. The big difference is when you're taking the money as dividends, you are not paying the seven and a half self-employment tax, seven and a half percent.

 

Kiera Dent (20:43.069)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (20:50.266)

self-employment tax. And there is a point where that 7.5% deduction like goes away, but you can take a really nice chunk, you know, six figures plus that way, and it'll save you 7.5% on each of those dollars. So it's a more efficient way to pay yourself. You can talk to your CPA or your tax pro about how to set that up. But basically, if you're paying yourself all W-2, like a lot, I see this a lot with newer dentists who have.

 

Kiera Dent (21:06.714)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (21:17.866)

Maybe you don't have an S corporation or anything yet. They're paying themselves as a sole proprietor. And so everything is taxed as ordinary income. I would say as soon as you get to the point where you're making, and most dentists clip this very quickly, 75 to $100,000, you really need to be looking at this because you're gonna be getting to the point where you can start taking some of that, the money that's made from hygiene, the money that's made from things that you're not doing, you can take that as dividends. So...

 

Kiera Dent (21:41.102)

Mm-hmm.

 

Kiera Dent (21:45.802)

Smart.

 

Derick Van Ness - Tax & Wealth Strategist (21:47.062)

Yeah, so once again, just a way to be more efficient. And we found that if people just do, if they have a couple of kids and pay their kids, if they do the Augusta rule at a reasonable rate, and they not even counting cost segregation, but if they just do this owner's draw versus W-2 balancing, another rule that the CPA gave me if you're looking for a general idea is.

 

about a third of your overall income, you should probably pay yourself as a W-2, at least that much. Once again, talk to your tax throw about that. But between those three things, we find that for most people, it's worth 20 to $30,000 a year in tax savings. And that's the stuff, honestly, a lot of people talk about, right? It's pretty common, it's out there. So we're not like changing the world here, but if you don't know about these things, then they're things you wanna probably explore.

 

Kiera Dent (22:17.89)

Smart.

 

Kiera Dent (22:25.186)

Mm-hmm.

 

Kiera Dent (22:29.919)

Yeah.

 

Kiera Dent (22:40.37)

I think it's brilliant, Derek. And I'm just gonna chime in on that. I don't know, I feel like as business owners, there are opportunities that we have and I love to get a good ROI for my time. These things are so simple. It's a very simple conversation with your CPA and if it can save you 20 to 30,000, I feel like I'm on a Geico commercial. One hour with your CPA could save you 30,000. I think, I don't know many dentists that produce 30,000 an hour. So.

 

Derick Van Ness - Tax & Wealth Strategist (22:59.394)

Hahaha.

 

Kiera Dent (23:05.942)

just looking at that cost to benefit ratio, I think it'd definitely be a smart idea. So I'm dying to know Derek, tell me all the non things.

 

Derick Van Ness - Tax & Wealth Strategist (23:14.922)

Okay, so we're gonna get a little bit more general here because a lot of the tax codes that are out there, once again, the government is incentivizing you to do certain things, right? They want you to put your money in certain places or spend it certain places or do different types of things. So they encourage that. So there's a category of things out there that we call tax smart investments. So these are investments that when you put money into them, you get big tax breaks. An example would be opportunity zones.

 

That's something that came about after the 2017 tax rewrite. The government wants to redevelop areas of the country that aren't doing so well. Inner cities, rundown areas, they want to inject new money. They want investors to come in. You can use dividend income, income that you get as passive income, to invest in those things. You can do that tax-free. You don't pay taxes on the money that came out of the K1s. So

 

If you have that type of income, that's an example of the government incentivizing you. Just so you know, opportunity zones, they're pretty nuanced. You need a good team. This isn't something to just try and do on your own. You need to talk to people who do that kind of thing. But that's an example. Another example is we're in an energy crisis in the world, right? Especially with the whole Russia-Ukraine thing, kind of exacerbated that. But oil and gas, a lot of oil and gas types investments offer really good tax breaks.

 

Kiera Dent (24:25.96)

Agreed.

 

Derick Van Ness - Tax & Wealth Strategist (24:44.642)

Some of them as much as 90% or more you get to write off as a tax break, which is pretty cool And can save you can city considerable amount of money. So if you're looking to invest In a different asset class outside of the stock market or something That might be something worth considering as an investment that also has tax advantages and there's lots of different things out there But energy is like a real hotbed for that kind of stuff right now

 

Kiera Dent (24:50.331)

Mm-hmm.

 

Kiera Dent (25:00.334)

Thank you.

 

Derick Van Ness - Tax & Wealth Strategist (25:11.174)

We've seen other types of investments out there that do that. So just know, without me getting into specifics or being giving tax or investment advice, that there are tax advantage investments. So you could talk to your investment advisor, you could talk to your CPA or tax pro about that, and they could probably point you in a direction of things that they think are worth considering, right? So that's another group of things that people don't even realize are out there.

 

Kiera Dent (25:33.692)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (25:41.678)

There's a whole group of things we call leveraged donations. And these are a little tricky to find sometimes. Once again, investment advisory groups and other kinds of tax groups might know about them. But they're essentially things where you are able to buy something at wholesale and then donate it at retail, right? So we've worked with groups that have done this with medical supplies, where they buy it, buy all the different components at wholesale.

 

they get assembled and put together and then donated at retail. Some of these ended up in Ukraine and other war torn areas last year, where you can, for every dollar you put into it, you might get a $5 write off, right? Could be four, could be five, could be six, just depending. We've seen ways to do this with other types of things, art, real estate, land, other kinds of things. So what these allow you to do is make donations and do good in the world, or a lot of them,

 

are investment opportunities and you could buy them wholesale and turn around and you could make money on it as an investment or you can decide to donate it, right? So there's opportunities there, we're getting a really good deal on something and that's the trick, right? Where do you buy something that you can buy it at 20 cents on the dollar or get access to it at 20 cents on the dollar? But these are things and there are groups out there that find and put together these types of things either as investments or potentially as...

 

Kiera Dent (26:58.634)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (27:11.702)

as donations. So they can be really powerful either to grow wealth or to get a nice tax break depending on what your focus is and the group you're working with. So I think that's something a lot of people don't know and understand and I don't get into the specifics because honestly what is out there and available from different groups changes from your year, right? It depends on what are they getting access to and what are they able to make the numbers work for the investor, for you as the investor.

 

Kiera Dent (27:12.999)

Mm-hmm.

 

Kiera Dent (27:31.19)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (27:41.262)

Pretty significant when you get on the donation side, if that's the direction it ends up going, you can offset between 30 and 50% of your adjusted gross income, which is a lot of money. And we have some clients looking at these types of things with their tax pros to see if they're appropriate, but could be hundreds of thousands of dollars of savings for some of these guys with really big practices. So it's pretty significant stuff.

 

Kiera Dent (28:02.026)

Mm-hmm. Well, and I like that because it doesn't hurt your cashflow per se. You're spending a dollar and saving $5, because a lot of times with these deductions and the different things we have to put into play, it does require the cash. So yes, it does save you, but to have it completely written off or to, I mean, one to five, I was like, sweet, I'm gonna definitely wrote it down there, Derek. Gonna ask about that, that's a great idea.

 

Derick Van Ness - Tax & Wealth Strategist (28:26.894)

Well, on the one to five, how it works is this. $1 donated is like $5 write-off. If you're in a 40% tax break, or 40% tax bracket, a dollar to offset $5 of income is like 20%. Does that make sense? So it sort of works out to almost be double your money as far as how much you save in tax versus how much you donate. So it's not a five to one that way, but close to a two to one, depending on your tax bracket and the situation.

 

Kiera Dent (28:40.653)

Mm-hmm.

 

Kiera Dent (28:47.139)

Totally.

 

Kiera Dent (28:52.79)

But the fact that it's not a one-to-one, like $1 gives me $1 here, which is 40% or whatever your tax bracket is, the fact that I get to leverage that money with less cash, I think is the clever thing on that one.

 

Derick Van Ness - Tax & Wealth Strategist (28:59.766)

Yeah, yeah, yeah.

 

Derick Van Ness - Tax & Wealth Strategist (29:07.374)

For sure, yeah, well the first time I saw that, I was like, this sounds too good to be true. Yeah, yeah, and there are things out there that had gone under scrutiny, but most of these are pretty well known now, like by the IRS, and have been figured out, they've restructured like people were familiar in the past with conservation easements. Those have been restructured, the government has said, well, here's a way we can do it that everybody agrees on, they're not red flags anymore, as long as they're done right.

 

Kiera Dent (29:11.472)

Right?

 

Derick Van Ness - Tax & Wealth Strategist (29:35.618)

but you can't offset 50% of your adjusted gross income. They're gonna do it through a different tax code as a fee simple land donation, and it's more like 30% of your adjusted gross income. So there's some limitations that have happened there where it was a compromise, right? Between what the freewheeling entrepreneurs are out there putting together versus what the government really wants to see happen. So there's some middle ground that's happening there.

 

Kiera Dent (29:44.383)

Interesting.

 

Kiera Dent (29:49.014)

Mm-hmm.

 

Kiera Dent (30:00.534)

Very cool.

 

Derick Van Ness - Tax & Wealth Strategist (30:01.074)

Another one, and I know you and I have talked about this a lot, Kira, is research and development credits. We work with so many dentists and dentistry is changing so fast with technology and new equipment and new diagnostics and new materials and all the different things that if you're not taking advantage of research and development credits and you're bringing new stuff into your practice, you're just, you're leaving dollars on the table, right? So I won't go too deep into that one other than

 

Kiera Dent (30:24.556)

Right.

 

Derick Van Ness - Tax & Wealth Strategist (30:29.082)

to say if you're doing new stuff in your practice, bring in new technology or equipment, it's definitely worth the conversation. For a lot of our dentists, this is super, super broad strokes, but they're seeing maybe a 1% credit, right? So if you have a million dollars going through the practice, it's probably 10 to $15,000 a year. If you've got a bigger practice, two or 3 million, it's probably pushing double that. It can be a significant chunk of money, in and of itself, not a total game changer, but...

 

Kiera Dent (30:52.243)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (30:58.09)

an extra 10 to 20 grand a year goes a long ways for paying toward college for your kids, right? Or whatever you're saving for. So, so you can see as you start to stack all of these and not everything's for everybody, it gets really powerful. And where this stuff really gets good here, and this is something I think most people don't think about is you wanna start thinking about taxes, A, as part of your business, but B, multi-year. Most people, and I joke about this, there's something in the turkey.

 

Kiera Dent (31:03.21)

Totally. Right.

 

Derick Van Ness - Tax & Wealth Strategist (31:26.626)

that at Thanksgiving, everybody eats their turkey sandwich or their turkey dinner, and then they call me the next day and they're like, I gotta think about taxes. And it's like, it's almost too late, right? A lot of the big things you can do to take a little education, you gotta move some money around or you gotta do some things, or things like the August rule, paying your kids, whatever, you wanna do that throughout the year. Writing a check for this stuff on December 31st, it doesn't smell quite right, right? So these are things where...

 

Kiera Dent (31:33.601)

Ha!

 

Kiera Dent (31:37.102)

Mm-hmm.

 

Kiera Dent (31:48.813)

Right.

 

Kiera Dent (31:53.584)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (31:56.226)

You start with the plan in the beginning of the year, and we're a big, big believer in like calendar-based planning beginning of the year, setting some targets and objectives, putting an action plan in place, saving the money, putting it aside, knowing that I'm gonna need money for taxes, I'm gonna need money for investments, I'm gonna wanna do different things throughout the year, and having that stuff systematized and automated as much as you can. Then, when you start doing tax planning, and we think you should start in August or September, you've got, you know, you're like,

 

Kiera Dent (32:23.981)

Agreed.

 

Derick Van Ness - Tax & Wealth Strategist (32:26.378)

eight or nine months through the year, we kind of know how's the year shaping up? Where do we think we're gonna end up income wise? What types of the strategies are appropriate and starting to put those things into play, but you've saved the money all year. Now you've got a chunk of money you're not saying, well, golly, I just wrote last year's tax check on October 15th, now I'm broke and I don't know what to do this year. You've been putting money aside. You've been planning throughout the year so that you're prepared. And that's just, that's what you would do with your business.

 

Kiera Dent (32:52.898)

Mm-hmm.

 

Derick Van Ness - Tax & Wealth Strategist (32:55.554)

Right? You look at your cash flow, you look at your projections, you save up for things that you want to buy. It's the same thing. It's just for some reason, people don't do it with their finances personally or tax or financial planning stuff. It's crazy to me. So that's the idea.

 

Kiera Dent (33:08.734)

Mm hmm. Yeah, I love it. Because I think that when I used to feel like it was like some mystery on taxes, like, okay, I just wait and you guys tell me how much I owe. And when I realize like, no, Kira, it's gonna be like 35, I go 40. I'm always a more saver than not of my profit every single month. And what I love, I just I don't know, Derek, I love a good deal.

 

Derick Van Ness - Tax & Wealth Strategist (33:22.66)

Ha ha.

 

Derick Van Ness - Tax & Wealth Strategist (33:31.022)

Yep, yep.

 

Kiera Dent (33:38.366)

And so I love to throw it over in a high yield savings account. And so that money is making me money throughout the year and I'm saving it. And then I don't have to be scared at the end of the year for that tax conversation. So I agree. I meet with my CPA in July and then we have another conversation in October, but I'm saving January, February, March, April, May, June, July. And I feel like, like less crying, more smiling, and it's just simple. Like, but that I agree. It's

 

Derick Van Ness - Tax & Wealth Strategist (33:38.65)

Hahaha

 

Derick Van Ness - Tax & Wealth Strategist (33:45.154)

Yep.

 

Derick Van Ness - Tax & Wealth Strategist (33:59.033)

Yeah.

 

Derick Van Ness - Tax & Wealth Strategist (34:03.226)

Hahaha.

 

Kiera Dent (34:06.666)

we think that we have all this money, but when I realized like, no, I actually don't have all this money. And if I put it away, then I can make smarter decisions with the money I actually can spend. And then when I look at my tax bill, I have the money. So like, what was really cool this year was I wanted to make a pretty big investment. And because I had already saved the money for taxes, we knew how much that investment would reduce my tax bill. So I didn't have to go find that money. I was able to use that money from money I've already saved. And I only had to put forth the additional like 60%, technically 65%.

 

because I was able to reduce my tax bill that much. So I don't know, Derek, I'm with you. Get organized, start saving, save every single month. You know it's going to come. You know it's gonna come. So you might as well put that money there and make money off of it while it's sitting over in a bank account. And then for me, I put it in a third party account just so I don't see it all the time. So that way at a cruise, I can check in on it. Then when I have my meeting, I can see did I save enough for it? But that's how I stopped crying in December because I used to like...

 

Derick Van Ness - Tax & Wealth Strategist (35:04.494)

Ha ha.

 

Kiera Dent (35:04.938)

Alligator tears cry when my CPA would call me and I'm like this has got to stop. I hate the call I don't like having Thanksgiving be ruined and then Christmas is ruined and the New Year's is ruined and I'm ticked off until April And I don't want to write this dang check Just just have it prepared the more smiling less crying

 

Derick Van Ness - Tax & Wealth Strategist (35:18.905)

Yeah.

 

Derick Van Ness - Tax & Wealth Strategist (35:22.934)

Yeah, yeah, and that's it. You know, I think of it as dealing in reality. You know, you're gonna have to pay them to save form. And then when you have to write the check, you just write the check, right? Like you said, and obviously there's a ton of things you can do strategically along the way to minimize that check, but you wanna be writing checks. It means you're making money, right? So yeah, I agree with you 100%. And we're just, we're really pushing for two things. One, for people to proactively plan for taxes and for their financial well-being and...

 

Kiera Dent (35:26.616)

Mm-hmm.

 

Kiera Dent (35:32.333)

Right?

 

Derick Van Ness - Tax & Wealth Strategist (35:52.286)

We think, and this is just my own personal belief, take the money you saved in taxes this year and put that toward building wealth next year. Instead of buying a pool or a fancy or car or whatever, take that money, put it to work where it's gonna build more money for you next year, and then save all year, of course, doing your normal thing. But if you can take 10% off your tax bill, right? Go from 40% to 30%. Take that extra 10% on top of what you'd normally save and start putting it to work.

 

the difference in how quickly you build wealth outside your practice is gonna be massive. Like the shift is pretty remarkable. And so I think that's a big thing is when you save the money, not just spending it, but really putting it to work effectively. And that could be reinvesting in your business and equipment or other things. But if you've got that part squared away, putting it to work elsewhere, make those dollars productive instead of consumptive. I'm not saying to not like live a better life, but...

 

Kiera Dent (36:24.93)

Mm-hmm.

 

Kiera Dent (36:49.198)

Thanks for watching!

 

Derick Van Ness - Tax & Wealth Strategist (36:49.966)

But I am saying that, you know, if you're planning to give it to the government anyway, you may as well give it to yourself. I jokingly call it a government sponsored retirement plan, right, just being good at taxes. And it makes such a difference, it cuts that down. Helps a lot of dentists when you get a little bit older and you don't wanna have your foot on the gas so hard, you can step back a little bit. You don't have to be like crushing those numbers every single month. You can enjoy your work. You can spend more time with your team and your patients.

 

Kiera Dent (36:59.634)

Yeah.

 

Derick Van Ness - Tax & Wealth Strategist (37:20.719)

And you're not so worried about it because you've done the other things all along the way that make a difference, right? It's the whole by an inch. It's a cinch by the yard. It's hard so

 

Kiera Dent (37:27.026)

Mm-hmm.

 

Kiera Dent (37:30.478)

Hmm. I like that Derek. I'm gonna use that one by the inch. It's a cinch it by the yard. It's hard. That's clever I've never heard that one Really

 

Derick Van Ness - Tax & Wealth Strategist (37:36.602)

Yeah. I didn't make it up. My dad used to say it to me, cause he's like, by the interest of cinch, by the art it's hard, but Derek likes to do things by the mile.

 

Kiera Dent (37:49.49)

I love it. I love it. Well, Derek, these were so helpful. And I love that you talked about the simple ones and then the not so noticed ones. If people are interested, you guys, Derek does a ton of things. He does the ERC. They do R&D credits. We've had several clients work with you guys. You guys have tax strategy. I love that you're a tax and wealth strategy. So Derek, if people are interested, they want to just contact you. I've chatted with your team. You and I have had many conversations about this. I think you're very...

 

Derick Van Ness - Tax & Wealth Strategist (37:49.69)

So, yeah.

 

Derick Van Ness - Tax & Wealth Strategist (37:55.322)

Thank you.

 

Derick Van Ness - Tax & Wealth Strategist (38:04.167)

Mm-hmm.

 

Kiera Dent (38:14.622)

I love that you educate as opposed to push. And like if it's right, it's right. And if it's not, it's not. But if people are interested and wanna connect with you, how can they get connected with you?

 

Derick Van Ness - Tax & Wealth Strategist (38:17.661)

Ha ha.

 

Derick Van Ness - Tax & Wealth Strategist (38:24.238)

You know, the easiest thing is just go to biglifefinancial.com. There's a link up in the corner that says work with us that you can click. We are also giving away the book, at least right now it's free for the tax strategies your CPA is not telling you about. There's a bunch more things listed in there that we didn't cover today. I just kind of hit some of the highlights, but you can always download that and check it out. But yeah, that's a great way to get started. And then from there, you can look around or whatever makes sense, but the website's the best way.

 

Kiera Dent (38:54.254)

Cool, it's a biglifepinancial.com. I would go snag that resource, I'm definitely going to. So Derek, I appreciate you today, I appreciate you always. You have taught me so many things about emotional ROI and about R&D, ERC, about building wealth, about how to look at my dollars differently. I think you've taught me a lot of mindset shifts. And so I just appreciate you in my life and for a lot of our clients' lives. So thanks for being on the podcast today, I super appreciate it.

 

Derick Van Ness - Tax & Wealth Strategist (39:23.926)

Loved it, Kira. Thanks for having me.

 

Kiera Dent (39:25.586)

Of course. And for all of you listening, stop crying, do more smiling. Let's commit to like paying less taxes and being less stressed in a legal ethical way. But for all of you truly, it's a great way for you to invest in your future self and to make life easier. More smiles, less crying. And as always, thanks for listening. I'll catch you next time on the Dumbly Teen Podcast.