Mark Kohler's Tax Strategies Presentation

Jul 8, 2024

Mark Kohler's Tax Strategies Presentation

Introduction

  • Presenter: Mark Kohler—CPA, Attorney, Entrepreneur
  • Platforms: Facebook, YouTube
  • Key Points:
    • Focus on business, investment, and tax strategies
    • The complexity of tax law
    • Websites mislead about passive income

Main Topics

  • Types of Income and Tax Implications
    • Passive Income Misconceptions
      • Passive income isn't simply low-tax
      • Elon Musk, Warren Buffett, Jeff Bezos—Inequivalent tax rates
      • For individual investors, saving taxes is crucial
    • Ordinary Income (Highest Tax Rate)
      • Includes W-2 and side hustles
    • Passive Income (IRS Definition)
      • Rent, dividends, short/long-term capital gains, interest

Common Passive Income Types (With Self-Employment Tax Issues)

  • MLM (multi-level marketing)
  • Selling online (Etsy, YouTube ad revenue)
  • Crypto mining and staking
  • Affiliate income (Amazon, Walmart)
  • Royalties from books, audiobooks, and other content

IRS Classification of Passive Income

  • Income types not treated as passive: MLM, selling online, etc.
  • These are subject to self-employment tax (FICA)
    • Self-employment tax rate: 15.3%
    • Combined taxes can reach up to 45%
  • Strategies to reduce tax impact
    • Use of S Corporation structure
    • Convert LLC to S Corp for tax savings

Trifecta Approach

  • Three-Part Structure
    1. 1040 tax return at the base
    2. Revocable Living Trust—includes personal assets, home, vehicles, etc.
    3. Divide operations into two boxes:
    • Operations (Ordinary Income):
      • Businesses, W-2, side hustles
      • Important to use S Corp here to avoid high SE tax
    • Investments (Passive Income):
      • Real estate rentals, dividends, long-term investments
      • Held within LLC for protection

Real-Life Trifecta Implementation

  • Example:
    • Gross income from side business: $50K
    • Expenses: $10K
    • Net income: $40K
    • Without S Corp: Full SE tax on $40K
    • With S Corp: W-2 of $20K, only SE tax on $20K
  • S Corp saves significant money by allocating income correctly

Case Studies and Q&A

  • Involvement of other professionals:
    • Devin Munson (Senior Attorney)
    • Darren Charrington (Answering questions)
    • Corey (Producer)
    • Ashlynn (Marketing Director)
  • Audience participation through questions

Specific Scenarios Addressed

  • Transferring properties to LLC without triggering due-on-sale clause
  • Harvesting crypto and stock losses
  • Use of Wy oming LLCs for privacy and protection
  • Contributions to Roth IRAs and Solo 401ks

Conclusion

  • Importance of understanding tax implications of different income types
  • Strategies to structure income to minimize SE tax
  • Encouragement to integrate learning into personal financial plans
  • Weekly sessions for ongoing learning and Q&A