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Pilot Money Guys

Flight #15: Changing Your Domicile to Avoid State Taxes

Pilot Money Guys:

Changing Your Domicile to Avoid State Taxes!

Your domicile is defined as your permanent home where you pay your state income taxes.
 
For most people, your domicile is straightforward, however, for those with multiple residences domicile can be hard to establish. And maybe even a little tempting to lean toward the lower tax state. Our goal in this podcast is to help you understand how to have multiple homes and stay out of trouble with Uncle Sam!
 
Furthermore, the IRS says your domicile is based on your intent, which can be tricky to prove. A famous example is from a New York corporate executive moving to Texas. Even after getting a Texas driver's license and registering to vote there, the New York Division of Tax Appeals performed an audit and found the man to be liable for thousands of dollars in New York state income taxes. The man had to use the veterinary records of his dog in Texas to prove that he was intending to stay in Texas for the long haul!
 

Thank you for listening! If you’d like to have a conversation with us about tax domicile questions you may have, please email info@leadingedgeplanning.com or call 865-240-2292.

www.LeadingEdgePlanning.com

 

CHANGING DOMICILE CHECKLIST:
 

 

 

 

Podcast Transcription:

Rob: tip of the cap to you.

Welcome to the pilot money guys, podcast flight 15 already today. We're going to be talking about changing domiciles, changing where you live, and I'm your host. Rob Eklund, a wealth manager, financial planner, whatever you want to call. And with me, we kicked off Charlie. He's not, the godfather is not with us today.

Instead we have the professor CPA and certified financial planner. Kevin Gormley. Welcome Kevin. Yes. Thank

Kevin: you so much. It's great to be back. Oh, great. To be back. It's good

Rob: to have you here. The fans wanted more Kevin. They did. And of course we have the wonder boy, Ben Dickinson. Wonder man. You're a man cow bell.

What? I'm the cowbell? You're a man of many faces. That's for sure. That's true. Welcome. We're going to kick it off here with the little aviation news. Kevin, you were just talking about some movies. What do you got on the movie front for AVS?

Kevin: Yeah. So I'm a big movie fan and I was one of the people that did like top gun, so please don't judge me.

But so I was excited that the new movie was coming out. It's been delayed again until may of 2022. So say it. You can watch those trailers over and over again, but it's just not the same, but also two other things I learned is that jackass forever has also been delayed until the February of 22 and a mission impossible seven has been moved to September of next year.

Now the only other fun fact I'll tell you about jackass is I actually came across an article and those guys have spent like $38 million in medical costs. Oh,

Rob: are you serious? Yeah.

Kevin: Those people abused themselves, get paid for it. But they also have to pay all those medical bills. So anyway, wow.

That was just something that was Johnny Knox is from Knoxville

Rob: that's a Tennessee thing. Ben, were you ever thinking about. Oh, yeah.

Ben: W there's some videos out there of me and my friends doing some of our own our own stunts but I think one broken arm, then it really made a stop stop worrying about it.

And that's actually true. That's true, but that that's the other day, but but yeah I, my guess is why this is delayed is probably goes back to the Suez canal being blocked. That's my theories on supply

Rob: chain, hurricane Ida. Ranch and everything. Yeah. Excellent. Aviation wise, we got a pilot shortage that has been around and we knew it.

We'd known it's been coming for quite a while. And now they're just talking about, Hey, we just have 5,000 pilots taking early out from the airlines because of COVID. They, the companies were in dire straits. They offered pilots to get out a little early and 5,000 of us took it to include the gods.

Charlie and now, with air travel ramping back up and getting back to 2000, 19 levels or close to, we'll see what happens with the Delta Varian obviously. But, we have a bigger shortage now because 5,000 of us are gone. So it's interesting. No new shortage, new, old shortage here.

Ben: Yeah.

Yeah. That'd be interesting. A lot of they'll have to be bringing us some young folks in there,

Rob: training them up.

Kevin: Doing so Rob, let me ask you what, how much does it cost to become a pilot today and what are the different ways to become a pilot? That's because sometimes people will ask me.

Yeah, that sounds like a good good life, which it's not always, but it is hard to get into.

Rob: Yeah, no, that's a great question, Kevin. And it's a moving target back when I, way back when and the 2000 timeframe, when I got in, obviously I went to the military, so they paid. But then that's a significant cost buried by the by the taxpayers there.

As far as the commercial side of things, you bear a lot of the costs. You have to really, you're betting on yourself for a lot of years there and, you pay for all the training teacher ratings, your instrument ratings and whatnot. And then you have to accrue time and hopefully get hired by somebody to do that.

So they're paying for the gas and the plane. As you're accruing time once you've got the ratings, but the ratings are substantial now, though you've got a situation where airlines are seeing the shortage so that they've gone out and done different programs. So they're starting to take guys off the street and gals off the street and teach them right from the get go and start with some of the costs there.

They're providing the cost upfront for those pilots. So they're covering some of that. There's still a heavy burden, I think, on the individual. And you've got to bet on yourself for a long time before it pays off before you get to a major. For sure. So does that answer your question, Kevin?

Kevin: Yes, it does. And I think that's the interesting part to me is are there programs that are out there that if somebody wants to do it, that a company could take an equity position in that individual and say, we're gonna, we're gonna help pay for it.

Training and then you have to, give us three or four years or whatever the case may be.

Rob: Yeah. And it used to be that the military, I think, was producing more pots than in a, maybe the military has to ramp up their pilot production if you will. But I think right now with a lot of UAVs and unmanned aircraft out there, it's not going to be as organic as it used to be as not as seamless as hail was finding the KC 10 and.

Just move right over the airlines. So it'll be interesting how this all shakes out, but there'll definitely be different programs coming out. United has got one. I know Southwest has some things in the works and I'm sure Delta and American do as well. So we'll have to cover that on a different episode.

Maybe like what exactly are the avenues that the majors are looking at to bring guys on.

Ben: Yeah. And if you're a new pilot check out our last series, because we got some good info on some benefits stuff especially for some younger folks or people getting into it, because there's a a lot of nuances I've learned from

Rob: you all.

Absolutely. And then once you get to the majors you're gonna probably have enough money. You might have to give us a call. So that's true. That leads right perfectly into our next set. Which is exciting stuff. We're going to be talking about changing domiciles, which military folks, airline pilots, everyone deals with at some point in their lives, usually.

And but before that, this podcast is brought to you by leading edge financial planning, we're fiduciary fee, only advisors who strive to do what's right for you. What keeps you up at night? What questions do you have about retirement savings? Life insurance policies. Long-term care options. State planning or why we call Ben Kalba give us a jingle

it's up to you to get these facets of your life in order or not. If you decide to get a handle on these issues, we can help. Okay. Now for that, let's kick it off with domiciled change, Kevin, over to you.

Kevin: Yeah. First of all, as the Eagles wrote in the song hotel, California, you can check out any time, but you can never leave.

And that's a good quote to discuss the fact that when you move from one state to another or even when you're working in multiple states states love to get tax money from. And even though you've checked out of a state and you think you're gone, they may not think you're gone and they will track you and and they have the power to tax you.

That's really what this is all about. And this has come about for me, Rob, because a number of clients have said, Hey, I'm moving out of one of the high tax states, California. Illinois New Jersey, New York, and one of the things I need to be cognizant of as I moved to the promised land, which there are nine states out there that are a part of what I would call the tax promised land, the sunshine states, including Florida Texas, Tennessee.

And then there's a Alaska Rob, which you grew up in Nevada, South Dakota. Washington, Wyoming, and then New Hampshire up there on the east coast. So these are all no tax states. And so people can get really excited even to retire to one of these states and what we're finding, what we see online all the time is that even though you've checked out of a state and you've left the state continues to tax you and then you have to fight it.

And so that's really what this is all about.

Rob: That's tough too, Kevin. Cause if you get in a situation, as we're doing some of the readings here for the show prep, some of the states, can, you move from one state, they taxed you and you moved to the new state and they can tax you.

And it's not exactly clear. Who's going to win that battle. And I guess the federal government, in some cases, won't even step in and say, okay, you're going to, or the court system will step in and say, okay, California, you got the tax. Whoever Colorado, you got the taxes. Which was very interesting to me.

I thought that at some point, they'd say, okay, you're not going to be double taxed, but it's it's a tough situation. So what do you want to do in that case, Kevin, to make sure you're not getting double taxed. I might be getting ahead of myself.

Kevin: No, I think that's a good place to start. And there was a Supreme court case a few years ago where taxpayer said, Hey, this is not fair.

And the Supreme court voted, I think it was. I think it was five to four. I don't know how many circles Supreme court justices there are, but anyway, it was a okay good. There was a very narrow victory in favor of the taxpayer that you can not be taxed by more than one state. And so I've heard people say to me before, Hey, I can't be taxed by two states.

That's true, but you still have to file two tax returns and take a credit. And it costs money to file tax returns. That's not fun. And also if you brush up against one of the high tax states, Rob, let's say that you end up paying tax in California and you get a credit for Tennessee.

Guess what, there is no income tax in Tennessee. So that's really where the devil's in the details with this. And it's just something you want to be cognizant of. Now, I will say as well, that we've, since we live in Tennessee Ben and I we've had people that have been Tennessee clients who have moved to other states.

Such as Colorado. And that tax is not the only reason to leave a state obviously. But when people leave Tennessee, they say, what do I need to do? And I said not really much because the new state is going to be happy to have you and Tennessee doesn't get any income tax anyway.

So they're not going to be fighting over you. So that's one of the dynamics that, that happens.

Rob: Yeah. And like you mentioned, Hotel California lyrics, California is one of those states that has obviously high tax, New York, probably New Jersey, those types of states. They're going to want to hold on to you as much as they can.

Kevin: That's a, that's one of the most fascinating things in my reading is that, in California, you could have a domicile. And the word that we're going to get into in a second is domiciled versus. But if you're a domicile in California, that is, you have a place there, you return there and you don't live in the state of California even one day of the year and you work in another state and you live in another state.

You, you're actually physically out of the state, California will still tax you and they have a right to tax. And you will pay California tax or you can, fight them for years. So these rules are very complicated and convoluted but it can be a very painful experience in California and New York.

Ben and I were talking about this earlier when there's a lot of money on the line, they're obviously going to hire a lot of people to come out.

Ben: Yeah. Yeah, there's a bigger reward on the end of that that battle and Kevin, you were telling me it's the burden of proof is on the taxpayer.

These states will come after you, like you're guilty and you have to prove otherwise. And we'll get into later, maybe more details on some of the things to avoid doing that. But I just thought that was really crazy that they actually basically can say, you're, we're taking this money and good luck telling us otherwise,

Rob: pretty much I've heard, I heard one.

One Pandit was talking about states being like pit bull. He compared to the states to pit bulls and they just don't want to let go. And you gotta practice.

Kevin: I think that's, I think that's great, Rob, and yeah innocent until proven guilty does not apply. And, like one person recently said that's not fair.

And I said, no, it's not fair, but fairness. Doesn't have anything to do with it because taxing authorities have the ability to garnish wages and, if they rule in favor of their state and you lose the case, guess what. You're either going to have to pay or maybe flee the country and, fleeing the country.

I don't think there's a good financial strategy although some do.

Ben: Yeah, that's true. But I think they still, Hey California in New York, they may still come after you never.

Rob: Yeah,

Kevin: Ben, that's a, that's an excellent point. And so I got into the idea of, ex-pat and I followed some people on podcasts and YouTube.

And so one of the things I learned as an ex-pat, if you want to be an ex-pat and you live in California, is that you absolutely need to not just move to the foreign country. You need to move somewhere else. First, you actually need to change your domicile because there's people that are over in Costa Rica.

Europe and other places that California is still taxing them because the person moved directly from California to these other states and California argues that when you come back to the country, you're coming back to us. And so a lot of ex-pats I've said you actually have to move to a state like Texas establish established domicile, which I think we're ready to get into what domicile is, but established domiciles and then move overseas or California will continue to reach out to you across the world.

Rob: I love it. Love it. Let's get into it. What's what is the domiciles?

Kevin: I'm gonna, I'm going to try to explain this and then help me. You've done a lot of research on this as well, but domiciles, you really only have one domicile. So domiciles is the state, which you live and expect to return to, and that expect to return to that's intent, right?

And intent. Is very hard to know like what's your intention, Rob? I don't know your intention, . But I can, if I'm a taxing authority, I can tell you what I think your intention is. And that's where we come back to. You need to prove your intention. So at domiciles, you really only have one domicile.

That's the place that you. That you are, and you expect to return to, whereas you may have multiple residents what do we call someone with multiple residents, Rob,

Rob: a rich person. Snowbird

Kevin: or a snowbird? Yeah. Yeah. Snowbird is good. So yeah, if you have multiple residences there's let me find the verbiage here.

There's something that states will do, and they will try to say that you are a statutory, and they in any state in which an individual has a residence has a right to tax individuals, worldwide income. I always love that worldwide income. That sounds like you're making money all over the world.

But if you are in a state for a certain period of time and every state has their own rules, They can try to say that you are a statutory resident and they can say that your domicile is in their state. So although there's only one Dom domiciles more than one state can say you have a dominant style in their state and start tackling.

Domiciles is one thing. Residents, you may have multiple residents, but again, the issue is that multiple states will say that your domicile is in their state, then help me.

Ben: One, one thing that I was reading is that it basically, it does change to the definition of what domiciles is from different states.

And so maybe that's why California has maybe more strict rules, but I've got here two concepts that these states generally agree on. And the first one is that a domicile is a person's fixed permanent and principle home that they reside in. And then there's number two that they intend to return to or remain.

 I guess if you intend to be there for long term, and you also have a home there that you live in, even if you have multiple residences they can still say you intend to return back to this. So this is your home.

Rob: I think it's important for folks that are thinking about changing their domicile or moving that they think, there's some things that they can do.

To help make sure that their domiciles established in that new state, right? Yep. Yep. Absolutely. If you sell a house, if you move from, for our airline pilots who move from Oakland to Denver or Oakland to Dallas or wherever, if you're moving from California or wherever you sell the house that you have there, and you buy a new one, that's obviously going to go a long way towards establishing your domicile.

It gets a little trickier. If you keep that. And you have a house in Colorado and in, in California, then that's where it gets a little tougher, but they get, I even heard one example where a guy moving from New Jersey to Texas, he was a big hedge fund guy. And he, I think he had $400 million of income that year in a huge tax bill.

And New Jersey obviously didn't want that. And the judge. I think if if I heard this correctly, the judge actually used where his pet was, where his dog was to establish what was his domicile. It went that far as the, his intent was established because his pet was intact.

Ben: Yep. Yeah. Moving is not just enough.

We've we've seen and learned that you've got to, you've got to basically prove that you're in it for the long haul, many different ways. And we have a pretty robust checklist that we we got that it goes through kind of some of those things that you should go into.

And it's pretty funny how many different things they, they talk about in here? Are we ready to maybe jump in. I think so, guys. Perfect. All right. Let me let me pull this up because I think it's worth showing if you're on the, if you're on the YouTube check this out, but if not, you can check out our website.

We'll post this on here, but first of all, it talks about taking residents. Obviously owning a place in a different state and having your physical presence. So this is a, having six. At least six months in a day or the majority of your time in that new state. So if you do keep

Kevin: 183 days spend

Rob: 183

Ben: days, magic number was 365 divided by two plus one.

Perfect. Yeah, file for tax benefits. There's a, I guess you can declare that this is my domicile. I didn't know about that one. Do you any idea what that is? Is that some type of fancy form.

Kevin: No I don't have any idea. The big D I'm trying to figure out ways to remember that domicile is really the key.

It's not just residents. Declaration of domicile, that really sounds that your intent is to be in a new place. So I would definitely do that.

Ben: Yep. Yep. And like you said, it is the intent, that seems to be what really matters, but maybe it's like in the office where you just say, I declare domicidal Michael Scott, but yeah, I think maybe that's what that is.

I don't know.

Kevin: Michael Scott. Yeah.

Ben: Yeah, but this goes into things, things that you may not think about, your voter's registration, if you have a, if you're trying to establish residency in Texas, but, and you also have a home in California and you're registered to vote in California, it's not, that's not gonna fly just because you have that home.

Even if you, even, if you lived in Texas for the majority of the time, , you gotta have all of these little things in place. Your estate planning documents is a big one. Make sure that those are changed with the new addresses. Insurance a big, that's another big one that, that this goes into detail on your banking accounts your checks, making sure the checks, there's little things like that.

And this is all just building that evidence to prove that your intent is to not only just be there, but be there for the longterm and stay there and be able to prove that,

Rob: That, that estate planning one is huge too, because different, obviously the death taxes that we talked about in a previous episode, Go back and look at that.

And our I'm dead now. What series? That's great. Great series, I think. Yes. And

Kevin: No. Ben, let me make a comment here with all of this. Because people will say it's very obvious. I. Okay. It's very obvious. And I've heard that quite a bit. The problem is not that some of the people we're working with are not actually leaving a state.

The problem is there, there are some people, just a few, maybe in New York that will buy second homes elsewhere. And of course, where do you want to be domiciled? You want to be domiciled in the low tax state. And these auditors, again, we always think of these auditors as either. Devious not good people, but they are dealing with some people that actually are skirting tax loss.

So I think that's always something to remember. So they are going to look for ways to, to nail you. And this is the good get caught up in the bad sometimes. And the thing that I really like is that pilot pilots, like checking. And here's the cool thing where you can actually use your check, not a checklist knowledge to to just make sure you do all of these checklists

Rob: discipline.

Kevin: Yes. That's it?

Ben: Yeah. We'll give some access to this. . This goes as far as saying, even your memberships, join a club, just join a club in your new state charitable giving the chair give to charities in your state.

So this really goes into to a lot of detail. I won't go through all of it here, but it really goes through all the different details and it shows just to the extent of how you have to prove that you intend to not only live there but stay there and be there for the long haul.

And, yeah, it's not just about being there.

Kevin: Yeah. So what you just said is not just about 183 days. New York, actually, I saw some statistics online. They when greater than 50% of the cases against people, so greater than 50% of the time they win, they also have five years on average that these audits last, or I shouldn't say on average up to five years, these audits will.

So this is not just about money. It's also about annoyance and frustration and all these other issues. So one of the things that I think is extremely important is for you to is for you to have a a divorce date or a date that you are gonna be actually have left the state and come to a new state.

So picking a date of divorce and that's actually what they say in a number of the articles is that you need to treat the state like. Where you severed everything. So I even think, like people will say I'm going to buy another house in Tennessee. I've heard this recently and I'm going to move to Tennessee, but I'm going to keep my old place in my other state.

Again, it's very easy for that state to argue that's a second home in Tennessee or Florida or wherever. So I actually think selling your old home, although you don't have to do that, selling your old home might actually be a good one. Selling all real estate and then some of the other gotchas, you mentioned the dog, Rob social media is a very powerful tool when you're standing next to a New York building with your dog.

 And all your friends and you just got out of the cigar bar or whatever. And the auditor shows you a picture of yourself from your Facebook page. They are going to use cell phone records. They're going to use social media. So again just be careful with that. And if you really have left the area, you, and I would say that she shouldn't have problems, but multiple states right now,

Rob: Yeah.

And that's a a key point too. When you talk about, if you're there in the social media aspect, a state, I believe most states treat you as being there. If you're there for one second of the day. So for the pilots that bounce around, have their own airplanes and bounce around. If you're there for one second, you could be considered.

That could be one. 183 days as far as they're concerned. And so if you have credit card receipts and that kind of thing from that state, that's gonna be used against you for that. Potentially if you are an airline pilot, maybe using cash again, not trying to skirt the rules, but just making sure you've established that domiciled correctly.

Ben: Yeah, I wish it was as easy as, you could live in California and buy just like a apartment Tennessee and say that's where you live, but it's just. Yeah, they've got to figure it out and they know that people do that. And so they're looking out for people doing that and that's why it's, they've made it very difficult for you to do stuff like that.

So definitely something to be aware of when you're trying to trick them tricked system,

Rob: And I've heard there's now, with the social media and all the apps that are out there, that there are apps out there that you can actually buy to help you establish that you were in a state. For a certain amount of time.

So some, sometimes the states will be like you said you were there 185 days. We don't believe you, but there are apps, one it's called tax bird. It tracks your GPS location. And you can use that as, Hey, I was in this state for 190 days or whatever you were. Very interesting. Kind of mind blowing to me.

Yeah. That is

Kevin: As long as your app says that you've moved around a little bit and you didn't stay in one location for 183 days straight, Rob that is something that I read is that people have lost, caught court cases because they left their app and their phone. At one location and we're traveling all over the place.

Rob: So

Ben: God, it's amazing what these people people are doing. They're trying everything, but making it more difficult for those that are maybe if you're trying to do it the right way too. So

Kevin: for sure final thing I have Rob concerning. This whole issue is. I will tell you there's a, and you might not know this Rob there's 50 states in the U S and there's 50 different and there's 50 different taxing authorities and there's 50 different set of rules.

And even as a tax person when we have to look at different states it's even challenging for us. So you have to know the rules of an individual state and never asked soon. That, what the rules are going to be because they do change.

And sometimes like the 183 days, that's not the rule. So maybe seeking some, somebody that, that knows interstate tax and all the rules around tax in this case, I really think it's money well spent because if you wait until tax time and you've already been hit on the radar it might be too late.

Rob: Yeah. That's a good point. And if you're married, And you leave your, you may be moving to a new state and you leave your wife behind to fix things up or whatever. But of course the state's going to try the higher tax state is going to try to use that is, Hey, you're not really leaving you after wife here for crying out loud.

You didn't move. So just something to think about

Kevin: everybody laughs at that. Sorry.

Rob: Awesome. Awesome guys. We've got anything else?

Ben: I th I think this is this is good. We don't want to bore anybody too much about this stuff,

Rob: but yeah. Yeah. Something to think about for sure. Check out the checklist.

That'll be in the show notes, the link for sure. Leading edge planning.com. You can find it there as well. And that's it. We have reached our final destination on this special domiciles changing episode with the professor and Mr. Kelly. Thanks for joining us. I'll leave you with a couple of quotes by Robert Scheller famous.

Robert Schiller, the ability to focus attention on important things is a defining characteristic of intelligence. Think about that for a second. It amazes me. And the second one, it amazes me how people are often more willing to act based on little or no data than to use data. That is a challenge to assemble Robert Shiller brainiac.

That's it. That's all I've got. If you like what you heard, hit the subscribe button and let us know what you think by emailing me, robert@leadingedgeplanning.com or info@leadingedgeplanning.com. Give us good compliments bad suggestions, whatever you want to say to us, we're willing to hear you and make the show better.

So that's what we're here for. Remember, as Emerson said, the world makes way for those who know where they're going. So make so plan accordingly. We're out of here. Thanks Kevin. Thanks Ben.

 

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this Podcast will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 09/07/2021 and are subject to change at any time due to the changes in market or economic conditions.

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Pilot Money Guys

2021 Child Tax Credit Payment: How Much Is Your Kid Worth?

Stitcher Button
We apologize for interrupting your regularly scheduled podcast program. We have BREAKING NEWS! What is up with the new American Rescue Plan (ARP) CHILD TAX CREDIT payment?

There is a new increased Child Tax Credit Payment via the American Rescue Plan (ARP) that's paying out right now. Like many of us, you may have received a payment that you weren't expecting.

  • Will you have to pay it back?

  • Will it cause your tax bill to be higher in April?

  • Should you spend it now?

  • What's the difference between the new increased ARP Child Tax Credit and the previous version of the Child Tax Credit?
Typically, taxpayers with income under $400,000 MAGI, married filing jointly, received a $2,000 tax credit per child under the age of 17 to offset your tax bill. This year, instead of getting the credit on your taxes, a portion of the credit will be paid out in advance over the next 6 months. If you count on the tax credit to offset your tax bill, you could be in for a big surprise!

In this podcast, Leading Edge's Co-Founder and CFO, Kevin Gormley CFP®,CPA aka "The Professor" covers all the details of the new increased Child Tax Credit as well as the existing credit. Plus, everything you need know to NOT be surprised at tax time!

Check out this Wall Street Journal article on the Child Tax Credit!

Check out our recent post on Tax Deductions

Podcast Transcription:

Voice: ladies and gentlemen, welcome aboard the pilot money guys podcast, where our mission is to help clients build and protect wealth to achieve their dreams. And. This podcast is brought to you by leading edge financial planning without further ado, here is your host Robert equity

Rob Eklund: tip of the cap, Tia and welcome to the pilot money guys. Ad hoc special edition podcast regarding child tax credits. I'm your host, Rob Macklin. Joining me today. We are lucky enough to have certified financial planner and CPA. Kevin Gormley, nicknamed the professor. Which isn't too original as he used to be a professor, but still he's known to pontificate around the leading edge campus.

And he looks like a young Jim Gaffigan lives in Tennessee, loves long walks on the beach and usually has a good bourbon with it. Welcome Kevin.

Kevin Gormley: Hey Robin. Yeah. It's, it's great to be here with you guys. A big, big fan boy of the pilot money guys. First time, long time and all that other crap.

Rob Eklund: Perfect. Perfect.

We got a, of course we've got anchoring. The podcast is our financial wonder. Boy, Ben Dickinson. Welcome Ben. Good to be

Ben: here. Anchoring it down. Like keeping it anchored. I like it. Charlie is out. Charlie's out. Charlie's out. Kevin's in. And this is a good time.

Rob Eklund: Good crew the crew. Yeah. Yeah. Uh, let's jump into it.

We've got a little airline news. This is an ad hoc, uh, podcast. We just brought it out because the child tax credits, if you're getting payments from the IRS, or if you make less than $400,000, you might want to tune in. But first we're going to jump into airline news. Ben, what do you got?

Ben: Airline news. So I, this, this one might not, might be debatable whether this is airline news, but this is, this is sort of aviation news.

Uh, maybe more rocket. Our man rocket, the myth, the legend, Jeff Bezos, rocketed into space, debatable. Whether he actually made it to space. I think there's been some debate on that. I know he went fat farther than Branson. Well, what are you guys saying, Nick? Did he make a space?

Rob Eklund: I don't know. Did he? Well, I can tell you it's not an astronaut.

At least the FAA says he can't wear the wings. No, can't

Ben: agree.

Kevin Gormley: He's like, why not? Why not Rob? Why can't he wear the wings? He

Rob Eklund: says, uh, passengers can't can't wear the wings. And unless you've demonstrate activities during the flight that were essential to public safety or contributing, attributed to human space, flight safety, he wasn't a pilot.

He wasn't commanding it. He wasn't working on it. Really. He was just passenger. So no wings for him,

Ben: man. No rings for you also just couldn't. It had one button that they had to press just to get the wings. I mean, they could have, he really should've thought of that. If he's this genius, billionaire, come on, just add one button in there,

Rob Eklund: cowboy hat for crying out loud, you should get the wings.

Kevin Gormley: You should get the wings at the blue, the cowboy.

, Rob, I do have a question for you. Um, has he, has he been up higher?

Oh, yeah, it's a little it's a little bit. Yeah.

Rob Eklund: Yeah. Tap out about 41,000 for myself.

Ben: He, how high did he go? I mean,

Rob Eklund: I was able to make it Branson. That's always a good thing,

Ben: right? Yes. Yes. Um, the billionaires like to get after each other, which I appreciate as a, as a simpleton, uh, here, I, I, I don't mind, I don't mind doing this, this.

I dunno exactly.

Rob Eklund: Did he really get the space Branson that is? Did he really make it? I don't know.

Ben: W we, we were debating before this, about the Karman line, uh, that Kevin was talking about to us. Uh, the Karman line apparently is a unofficially official line of S of, uh, where space begins. Yeah. I'm not sure.

Kevin Gormley: Yeah. Ben, it's a, it's a little known fact. That Theodore Von Karman actually established the Karman line. And it's, it's somewhat, yes, it's somewhat of a nebulous, uh, amount, but it's 50 miles up or roughly 80 kilometers. I don't know, 80 kilometers. That doesn't sound like very much, but, uh, that's, that's where the space line allegedly begins.

And I know, uh, Bezos was making fun of Brandon. And, uh, you know, look, I'm afraid to go, uh, even 30,000 feet. So I'm not making fun of any of these guys. The interesting part for me though, is a lot of people are like, well, how does this space flight solve world hunger? Like, you know, how does this solve world hunger?

How does this solve other problems? And I'm like, I don't really care. It was pretty cool to watch.

Ben: Yeah. Yeah. I go hungry and watch the show.

Kevin Gormley: I mean, what are the aviators think? Rob? What's been the, what's been the scuttlebutt around, uh, aviators, as far as all this. Do you even care?

Rob Eklund: I don't think we care too much, but maybe I'm wrong. I have, I've only flown a few, a few, uh, flights, uh, since it's happened, but I don't think we care too much other than we like to make fun of.

Maybe the shape of the rocket and whatnot, but

Kevin Gormley: yeah,

Ben: it was a little Dr. Evil, Alaska, no one, but

Rob Eklund: he's got some big windows like it. Excellent. Anything else? Any other aviation S news. I know United bots and planes, or is it planning to buy a lot of planes? Like 200 Max's

Ben: yeah. So that's exciting. I mean, hopefully it happens.

There's always, always some risks around. I'm not even gonna say the name of the plane. I don't want to jinx anything, but don't say, but yeah. Yeah, besides that, I mean, we, we, uh, luckily we, we recorded, uh, our, our last podcast here. What last was it? Last week? I think it was last what? Yeah. And so, yeah. Yeah. I mean, uh, not too much going on since then, maybe some, some different, uh, different fuel shortage, potential issues I saw on the west coast, but, uh, for the most part, it looks like things are going pretty smooth.

Um, how are the flights in Southwest? So you're,

Rob Eklund: they're, they're busy. Things are crazy right now. Uh, you know, I think the airlines are hopping, so hopefully that continues, uh, through the, through the Delta variant and all that good stuff, but we'll see. Absolutely. We'll see. Absolutely awesome. Sounds good.

Let's move it along. Uh, before we get to the exciting stuff, let us remind you. This podcast is brought to you by leading edge financial planning. We are fiduciary fee only advisors, and we want to know what keeps you up. When you were thinking about your finances, what questions do you have about your retirement savings?

Life insurance policies long-term care options, or estate planning, or why we call it? Ben Caldwell, give us a jingle 8 6 5 2 4 0 2 2 2 9 2 2 8 6 5 2 4 0 2 9 2 2. It's up to you to get these facets of your life in order or not. You decide to get a handle on these issues. We can help that's enough of that.

Mr. Professor. Kevin Gormley let's get into the child tax credits.

Kevin Gormley: Yes, sir. Um, so I think I'll just start out by saying I had more conversations during this tax season about people's kids and basically what their kids were worth to them. Um, because we talked a little bit about if a kid's a, you know, when I say kids 17, 18, 19 years old should be claimed as dependence and or should file themselves.

All the kids want. That money that was out there. So when we talk about taxes, we talk about tax credits and everybody goes to sleep. Uh, if somebody mentions that you might get some of that free money, all of a sudden everyone wakes up and that's really what this is about. This is about, uh, either that free money or maybe having to pay back money if you are a high income person.

So, so that's really how I would frame this discussion. If you're high income, you may not be getting some of these, uh, these friends.

Rob Eklund: Yeah. I feel like Ben should insert the little clip from Jerry Maguire. Show me the money right there

Ben: to meet the money. I just cause we met just because you make a lot of money.

It doesn't mean you shouldn't get any free money. I mean, come on. Right? Right. Well basis to get some free money to

Rob Eklund: you probably don't well, I don't mean to sidetrack you here, but for our listeners, um, who don't know that much about taxes, can you just explain real quick, the difference between a tax credit and a tax deduction kind of different.

Kevin Gormley: Well, uh, I'll give it a shot. I hope I can explain it. Uh, but a tax deduction lowers your taxable income. So if you have a hundred thousand dollars of tax in taxable income, you have a $2,000 deduction, a hundred minus two is 98,000. And so you still have to pay taxes on that income, but a tax credit. Wow. A tax credit is if you have a hundred thousand dollars of income and you're going to pay $20,000 of tax.

The credit actually will reduce your tax dollar for dollar. So the credits is really where we come in and we say, uh, you owe a $20,000, no check that you owe $16,000. And so it can be like a four, $5,000 difference when you have credits.

Rob Eklund: Very nice. Excellent. Awesome.

Ben: So the tax credit, I've got a letter here that was sent by none other than the president directly.

Not me. That's a Charlie handwritten from what I can tell. Very good to handwriting, very clear, almost looks at times new Roman. Um, it kind of goes over some of these details, estimate some stuff. What's going on with this child. I don't have a kid, so this doesn't, this doesn't help me at all. But unfortunately, yet I'm thinking now though, I should start having a bunch of kids just so I can get these, these credits.

Rob Eklund: Well, I'm absolutely be

Kevin Gormley: a bad idea. I'm absolutely not going to touch that one. Cause that sounds like a political hot potato. But, um, but yeah, the thing is, is, uh, you know, I don't know how much children crock cost to raise. Uh, Costa rays, but, um, you know, I've heard, I've heard a million dollars over your lifetime.

I've heard other numbers as well. And so at tax time, we actually might get something for having children and that's really what these tax credits are about. So, so Ben, when, uh, the tax law changed, I think it was in 2017 or 18. Uh, they changed things where people even making up to $400,000, married, filing jointly could now get child tax credits.

Now other things were lost, but I'm not going to go into that. But, uh, so it's $2,000 per child that are under the age of 17 or 16 or less at the end of the year. So, uh, when the kids are over, then set older than 17. Uh, you only get $500. So what ends up happening with a lot of our clients who are high income is one year, uh, they don't know much tax the next year they owe a lot of tax and then they say, I think our CPA did something wrong here, Kevin.

Yeah. And they call me and they say, uh, are you sure this is right? And I say, let's take a look at it. And then we find, well, uh, you have two children that are now over the age, so you're no longer getting all these calls. So, uh, so anyway, that's really, there is a great benefit to having the child tax credits you, you saved money.

Rob Eklund: And I think that was a, the tax cuts and jobs act of 2017. They raised it from a thousand to 2000. So we're already moving the right direction,

Kevin Gormley: right? I am. Yeah, that's good, man. I love when people pull out that, uh, uh, legislative language there. Thank you, Rob.

Rob Eklund: My brother's

Kevin Gormley: a lawyer. Yeah. Yeah. So, so really what's happened in, in 2021.

Um, and this, this sounds like I'm an infomercial here, but for one year only for just one year only, uh, you get, yeah, you get extra, you get extra money. So, um, but, but there's lots of caveats as always. So if you, if you are a single and you make $75,000 or less adjusted, gross income, Uh, head of household 112,500 or less, uh, again, just a gross income.

We won't go into what that is or married, filing jointly 150,000 or less. Uh, you will get per child. Now you'll get $3,000 if they are 17 and below in 2021. So for one year only, it's not 16. It's now 17. And then if the kids are five or younger, You would get $3,600 in a child tax credit. So, um, now that caveat of $150,000 married, filing jointly and single 75 or less, um, I don't know what you guys think about how many clients we have that actually, uh, make less than that.

But it ain't many.

Rob Eklund: No, not, not a lot for us. Uh, but you know, those younger pilots out there, they're hitting that. They're below that 150 in, in, during COVID times, you know, some of our other clients, I think might've been a hundred below, 150. And depending on what the IRS is looking at there, they might've thought, oh, well, they make less than 150 based on their 20, 20, uh, income and or their two.

Yeah. Or 2020, income. So we're gonna give them this, tax credit, something

Kevin Gormley: like that. Right. Yeah, Rob. So, uh, what was really interesting last year? Interesting to a tax geek that is so take that with a grain of salt, is that sometimes like 2000, right now it's 2020 tax return. If he didn't file a 2020 tax return, it's the 2019 tax.

Yeah. So for people that actually made more in 20, sometimes it's better to not file your tax return. And we did a lot of that. Um, I don't really want to call it gaming the system. I like to call it a tax smart planning, but, uh, some could perceive it to be gaming the system, but it's based on 2020 tax return.

If you did not file one, which I did not file my own tax return yet it then is based on 2009.

Rob Eklund: Gotcha. So just kind of to summarize a little bit the American recovery act, which is in 2021, raised it from that 2000 to 3000. If we're just talking, uh, 17 and under now.

So you can, uh, you got the tax credit of $3,000. If you're 1700, unless you're under six and it's 3,600. Is that per child? Is that.

Kevin Gormley: Yeah, exactly. So let me, let me take it a different way here. Uh, frame it a different way. You still get your $2,000 per child. If they're 17 or younger, you then get that super bonus 2021, a APA, extra thousand dollars.

So, and the reason why I say this and it's called an enhanced credit, Rob is because if you make over $150,000, that enhanced part starts to go away. If you're married, filing joint, But you need to make over $400,000 before that $2,000 starts to phase out. Gotcha.

Rob Eklund: Okay. Fantastic. Now for those people that did make under 150 or maybe didn't file in 2020, and they saw, uh, an IRS, payment in July, how in the heck did they calculate it?

Kevin Gormley: Yeah, I'm going to, I'm going to make fun of myself as I always do. And mentioned that on July 16th, I looked at my own bank account and said, what's this $167. And so, um, I, I didn't, I didn't expect it, but what the IRS ended up doing is they said, all right, you're going to get this amount of tax credit.

We're going to divide that amount by, of tax credit by 12. And then we're going to pay it over six weeks. So Ben, I don't know if there's an easier way to say it than that, but boy, that sure is confusing. How would you, how would you say that? Only the IRS.

Rob Eklund: Yeah.

Ben: Maybe I'm just trying to ask a question with this, but so you're you get, you get half of essentially what you should be getting as the credit, if you, if over the next six months and then at tax time, is that going to come in the form of a refund or, or potentially reduce the amount you owe?

Is that right? Based on half of what you should be

Kevin Gormley: getting well, that that's, that's sorta correct, but I'm not really sure what you said. Uh, Rob, where you, where are you tracking that? Um, yeah,

Rob Eklund: , I think I tracked it. You get 50% of the credit that you would've got when you filed your taxes the next year during April, or whenever you file, but you're going to get that over the last thing.

You're going to get a prepaid over the next six months from July to December, you're getting that 50% broken up. Six payments is that Kevin,

Kevin Gormley: is that what you're tracking? That, that that's perfect. So let's, let's give an example. Examples are always easy. So let's say that you're going to get $2,000. You're you're over the $150,000 in whatever tax return.

So you're going to get $2,000. They will pay you a thousand dollars from July till December, and then next year, when you file your tax return, you get the other thing.

Ben: But what is the cause I was hearing that there is the major confusion point with these are the big challenge for some people is you may be getting these payments and then not expect that you're going to owe more in taxes or, or get more money back. Can you explain that part of the confusion there?

Yeah.

Kevin Gormley: Yeah. So the, uh, the most evil words in taxes is claw-back claw-back is always things that, uh, make, uh, everybody upset. And it, it particularly makes people that prepare taxes upset because we always get blamed. So if you were to get that thousand dollars extra, or let's say it's 1500, let's say, let's say you made a hundred thousand dollars in 2020.

And now you joined Southwest airlines and you're flying a lot of premium trips. And so now all of a sudden your income is I'm just going to make this up 450,000. So, so you went from making a hundred thousand to 450,000. So that, that thousand $500 that you got an advance.

You got to pay all that back when you do your 2021 tax return. So not only do you not get that 3000, you have to pay back 1500 when you arrive at your final destination of filing your tax return.

Ben: Yeah. What about you think there would be any penalties or anything on that if, if you have to pay it back.

Kevin Gormley: So I told you the most evil words and tax, I'll tell you the most friendly words in tax and that's safe. And so there is actually a safe Harbor where you'll not have any penalties on that you're doing, unless, unless you're, uh, unless you're cheating the IRS and you lie about something. But no, there's, there's no, there's no issues with that.

It's again, it's going to be when you file your taxes, uh, the, if you're married, the spouses are going to look at each other and say, uh, oh man, we all, all this money.

Rob Eklund: If I'm, if I'm, uh, thinking of this correctly, Kevin and Ben, uh, if I'm gonna make, if the last year I made less than 150,000, and this year I'm going to make over 150,000 and I'm getting those IRS payments, then I better be real careful what I do with that money.

I might want to, you can go, there's a couple things you can do, right, Kevin, and you could go on and go onto the IRS website and register and do all that, uh, get through that process. And then. Or you can probably put that money aside and make sure you don't touch it. Maybe make a little interest on it and then get ready to pay that come tax time next year.

Kevin Gormley: Yeah. So my, my advice to everybody is not to do anything, not to go cancel it, especially now that it's after July 15th, because you know, people will say, well, I got to check in the mail. I'm going to send it back. Please. Don't do any of that. Just to just accept the money as an interest free loan. If you get them.

And then at tax time, you, you basically end up settling up at tax time. So, uh, but, but yes, to answer your question, if you're, if you're getting, uh, you know, too much money, quote unquote, you could save that money and be prepared to pay some taxes next year. But of course, Rob, no one does that. Everybody gets the money and spends it.

And that's the whole reason why we, uh, we are getting this free money, which is not at all free because it's going to be on our taxes next year. Yeah.

Rob Eklund: Well little savings account, then what would you do with

Ben: it? What would I do with it? You know what I would do, I would throw it all into

Rob Eklund: not dose

Ben: on the rise, but,, I wouldn't do that.

I don't know. I think maybe a person that would, that likes you to refund back and this is just behavioral, but, and this is another thing just to think about, some people just. Hate owing on th on their taxes. And I agree the interest free loan , is exactly what you probably should do.

Um, you know, really take it, take advantage of it. But, um, if you're a person that hates to have to owe money, I would definitely consider turning that off. Or, I mean, is it worth it maybe up in any sort of withholding at all, just in case, uh, if you are getting that, would that be smart at all?

Rob Eklund: That could be a tactic.

Kevin Gormley: Yeah. So the more money you withhold, the less money you pay a tax time. Uh, so, um, that is absolutely a tactic and for certain people, uh, if they, if they get, if they don't get a refund, they're very upset. So, uh, But, you know, like you said, Ben, you should never overpay your taxes. You know, you can never be too thin.

You can never be too rich and, uh, you should never overpay your taxes. I think I just made up a third one. Yeah.

Rob Eklund: Nice. So, uh, again, not too many people listening probably are in this category, but if you do fall into that category where you're making really close to that 150,000, you should probably think to get to take advantage of these child tax credits.

So you want to get your ink. Lower than that 150,000. If you're close, if you're within, you know, maybe 10,000, maybe you've got a better number there, Kevin. Right.

Kevin Gormley: So Rob, the phase out starts, uh, at 150,000 and I think, I think that's just a great point for tax planning. Is, uh, you know, you don't always need to know their tax rules, but find yourself a tax geek that knows the tax rules.

And there are times that by, you know, and maybe you put a little bit more, more money in your 401k, or maybe you do something, maybe you give away a little bit more money in that year to lower your adjusted gross income. So you can be eligible for certain things. I think that's always a good thing.

Strategy.

Rob Eklund: Yeah. Things like IRA contributions, health savings accounts, those kinds of things. Yeah. Key. And that's where professor Gormley can really help all your tax for bedroom. Like it. Awesome. You haven't what else you got on this topic? Yeah, I know. It's really dense and there's a ton we could talk about, but uh, what

Kevin Gormley: else you have?

Yeah. So just a few things, maybe the top five things to know about this is, uh, if you're, if your kids are older than 18, Uh, you're out of luck. They're only worth $500 to you. Uh, maybe, maybe they're worth a little bit more, but if they're 18 or over in 2021, it goes back to 17 and 22, they're only worth $500.

, if, if children are claimed by another person, Sometimes we have mixed families. Well, obviously you're not going to be getting the tax credit in advance, but you would still get it. If you're going to claim that child, if you yourself are dependent on someone else, I would love to be a dependent on Jeff Bezos if he's listening.

But if you're a dependent on someone else, Yeah. Uh, if you have a brand new baby, uh, you're not going to get the advanced tax credit because the IRS is not aware. Congratulations on your brand new baby. Uh, you do, as they say in the tax business, you have a new deduction and in this case, a new child tax credit.

Um, and then the other thing is if your children are five or younger in 2021, you could get this, uh, you know, $3,600. You know, some of the websites where I've read, they talk about winning the lottery. If you have a really young child and you could get that 3,600, but for the most part, and here's the final takeaway point is most of our clients that we work with, Rob, this will not affect, right?

Because they make too much money and I'd love to discuss in another podcast, what making too much money means, because I sure say it a lot and nobody ever knows what the heck I'm saying. When I say it, you make too much money. They're like, Yeah, put it on the

Rob Eklund: books. Gavin, I like it. Ben, any, any final thoughts?

Ben: Just, just rethinking, uh, the new kids situation now. Um, I'm really seeing the dollar value in them. Um, you know, feed them cheap. That's what I'm going to say. And that way you can really, really make some money off of this tax credit. Um, but, uh, but no, no. It's good, great information.

It's that? And the fact that it's automated is definitely something to be aware of. You're getting it whether you want to or not, you have to pay it back.

Rob Eklund: So, yeah. Kevin, did you finish your, finish your thoughts there? You got some more,

Kevin Gormley: well, I have 16 more cards to go through, but I think, um, I think I'm good, Rob.

Rob Eklund: Perfect. All right. That's it. We're going to leave you with an anti quote today because we've been doing a lot of, uh, regular quotes, financial. This, one's not so much of a financial quilt, but it could be. And it's this from Mario Andretti. If everything seems under control, you're just not going fast enough.

Anyways, anything, any thoughts on that? Ben,

Ben: you know, just, I guess I, maybe I just don't get it. Maybe I'm not smart enough, but I'd rather be in control than going too fast where I'm out of

Rob Eklund: control. Definitely not a way to fly a plane.

Kevin Gormley: I don't think. Yeah. For, for our younger viewers, um, Mario Andretti was a race card. Yeah.

Ben: Yeah,

Kevin Gormley: I've used, I've used quotes from Mario Andretti and people have said, ah, what the hell is he talking about?

Ben: . That's it? We've reached our final destination on this ad hoc special edition of the pilot money guys podcast.

Rob Eklund: If you like, what you do. Hit the subscribe button. If you have any topics you want us to cover, you can contact me@robertleadingedgeplanning.com or info@leadingedgeplanning.com. Remember, as Emerson said, the world makes way for those to know where they're going. So you may want to plan accordingly. Thank you for listening.


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this Podcast will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 08/02/2021 and are subject to change at any time due to the changes in market or economic conditions.
Categories
Charlie Retirement

Don’t spend a lot, to save a little on taxes!

Tax Aversion Bias

By Charlie Mattingly

We often talk about behavioral biases, and we are constantly trying to better understand behavioral finance and behavioral economics to make better decisions. We think it’s fascinating because it can have a huge impact on our investment returns, saving habits and therefore our success in retirement.

Another one of the things that it affects tremendously, believe it or not, is taxes. So how does paying taxes drive our behavior?

First, let me talk about behavioral biases. What do we mean by behavioral biases? Certain parts of our brains are wired to make snap decisions to help save our lives, and sometimes this quick thinking really does save your life. What I’m referring to is the limbic system. This system is the emotional center of the brain that takes over under stress. The limbic system is the part of the brain involved in our behavioral and emotional responses, especially as it pertains to behaviors we need for survival, feeding, reproduction, caring for our young, and fight or flight responses.

This system has no doubt led to our advancement and survival as a species, however it often fails when tasked with evaluating certain complex scenarios we face in modern society, especially those that are highly emotional such as our finances.

So, what I wanted to do is address some of the weird things we do as taxpayers to avoid paying taxes.

Of course, there’s nothing wrong with minimizing your taxes. We don’t want to pay one cent more than we’re legally required to, on the other hand, we don’t want to reduce our net worth just to minimize taxes. Unfortunately, that’s what happens a lot of the time.

My father-in-law owns a lake house here in the Knoxville, Tennessee area. The house is paid off and it has appreciated significantly in value over the years. It’s a beautiful place, but they don’t want it anymore. It’s a lot of work for them to properly maintain. So, maybe selling the property would bring them more peace of mind and less stress in retirement. However, he won’t sell it. The primary reason is because he’ll have to pay taxes.

What other ways has the tax aversion bias changed our behavior? Taxfoundation.org has a great article on some of these examples of tax aversion bias.

Have you been to Charleston, South Carolina and noticed that the buildings are narrow and close together? That design started in Amsterdam and was copied around the world. The buildings were intentionally built to be narrow because… you guessed it, taxes. In the 16th century, buildings in Amsterdam were taxed by the width of the property’s façade and how much street frontage they took up.

Real Estate Investing
Another fascinating example from Paris, is the design of the Mansard-style roofs. Architects actually created rooms above the roof line because taxes were levied on the number of floors below the roof line.
Mansard Roof
One of these behaviors that I struggle with and think about a lot is farm equipment. I’d like to buy a new tractor and I know a lot of you probably would too. Tractors are fun! That’s why towards the end of the year I hear folks say, “Hey, I need to reduce my taxes, so I’m going to go buy a tractor. Maybe even a bigger tractor!”
Again, if you need the tractor or farm equipment, that’s a different story, but don’t do things simply because it’s a tax savings. As my business partner, Kevin Gormley will tell you that’s the “tax tail wagging the dog”.

In summary, taxes are a very emotional issue, and this can affect our behaviors. Sometimes we let our emotions make decisions for us, such as the example where I’m not going to pay taxes no matter what or as little as possible no matter what. Just be aware that even though its painful, sometimes it might be smarter to just pay that tax.
Thank you for reading. Please reach out to us anytime. Leadingedgeplanning.com, My email is Charli@leadingedgeplanning.com. We’d love to hear from you!

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 09/06/2019 and are subject to change at any time due to the changes in market or economic conditions.