Smart Tax Moves: Maximizing Efficiency Before You File

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Amber Posthauer: Hello, everyone! Thank you for joining us today. We're gonna get started here in 60 seconds to allow for everyone to get connected. We'll get started shortly.

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Amber Posthauer: Welcome, everyone, to Smart Tax Moves, Maximizing Efficiency Before You File. Thank you all so much for joining us.

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Amber Posthauer: Please send questions through the Q&A located on your Zoom menu bar. We'll try our best to answer all of your questions, but if for whatever reason, we're unable to get to your question today, please email learning at nfp.com.

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Amber Posthauer: Today's presentation is being recorded, and we'll be sharing the recording in the coming days. At this time, I'd like to hand over the call to our speaker. Rizik, the floor is yours.

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Rizek Housari: Thanks, Amber. I'm excited to chat with you today about what I think is one of the most fun topics that exist, which is

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Rizek Housari: tax planning, and connecting the dots between your own personal finances and tax strategies that you can take advantage of. Now, listen, I'll confess, I started my career as a CPA, but I've since transitioned to becoming a financial advisor as well as a CPA.

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Rizek Housari: And so, hopefully, the things that I'll share with you will be impactful, because at the end of the day, it's kind of two pieces to the puzzle here.

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Rizek Housari: We definitely want to reduce and minimize tax as much as legally possible, but at the same time, it's also about achieving your financial goals, and sometimes that means making more money, or investing, putting your savings to work to achieve your goals, whatever that may be.

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Rizek Housari: As we go throughout today, if I say anything that you're unfamiliar with, please let me know in the Q&A. I'm happy to dive deep. The last thing I want to do is confuse you. So, here we go. Without further ado, what do you say we dive in? Here's kind of the breakdown. We're going to do Tax Planning 101.

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Rizek Housari: We're gonna talk about deduction strategies and what's the difference between a tax deduction and a tax credit. I'm reminded of one of my favorite sitcoms of all time.

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Rizek Housari: Seinfeld. You may remember, for those of you who are Seinfeld fans, where Kramer's just…

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Rizek Housari: Telling Jerry, hey, you just write it off. That's what everyone does, right? They just write things off.

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Rizek Housari: We're going to explain exactly what that means, and some common write-offs, or deductions that you should be familiar with.

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Rizek Housari: We'll look at the difference between deferral and shifting. And when you understand that, kind of the key principles here, then the strategies really start to make sense. And honestly, when it comes to tax planning and investment strategy, the way that I look at it is like a game.

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Rizek Housari: As long as you know some of the basic rules and strategies, you can win. You don't have to know every single strategy that exists to win.

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Rizek Housari: To win a game. And then we'll look at a planning checklist.

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Rizek Housari: to end it. So… Let's jump into Tax Playing 101. So, first off, some key terms. What's tax avoidance?

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Rizek Housari: It's essentially avoiding tax through certain strategies. Now, we want to comply with the tax law. We want to stay as much as possible on the black and in the white. The gray areas are where people

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Rizek Housari: you know, get… get kind of kicked in the teeth a little bit here. That's where you get in trouble. And that's tax evasion. So tax evasion, that is legal.

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Rizek Housari: But avoidance, that's us either acting in a certain way, transacting in a certain manner, so as to minimize the tax. Tax management.

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Rizek Housari: Kind of just…

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Rizek Housari: you know, minimizing the amount of tax you pay over your lifetime, and it goes hand-in-hand with planning. So it's knowing what the law is currently.

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Rizek Housari: knowing what the law will be in the future, and I say that kind of tongue-in-cheek, because nobody knows exactly what tax law will look like. Even this year, it could change. Last year, it changed mid-year with the One Big Beautiful Bill Act that was passed.

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Rizek Housari: So, typically, there are some things that kind of remain from year to year, or some principles at least, but it's not uncommon for every few years to get a major tax legislation that kind of overhauls the system. And tax planning is kind of an ongoing thing.

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Rizek Housari: The more you have, In terms of assets or income.

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Rizek Housari: or different transactions taking place, the more this matters. But I will tell you, in reality.

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Rizek Housari: probably tax planning matters, I think, the most.

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Rizek Housari: when you're in your accumulation phase and your deaccumulation phase. In other words, where you're saving and investing your money right now for retirement, or for the future, and then the manner in which you take money out in retirement matters.

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Rizek Housari: Probably the most. You know, I primarily work with clients who are in their 50s or early 60s when they begin working with me, and that is a critical time because there's a lot of things you can do to control your income from a tax perspective at that point in time.

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Rizek Housari: Now…

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Rizek Housari: The objective of tax planning here, minimize liability, that's one, and postpone the liability. So, minimize, of course, that makes sense, just reduce the amount of tax that you're paying over your lifetime.

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Rizek Housari: Postponement, that's a little bit different.

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Rizek Housari: That's deferring the tax liability until a future day down the road. So let me give you a classic example of postponing a tax liability. That would be putting money into a 401 , a 403 , a thrift savings plan.

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Rizek Housari: 457, these are employer-sponsored retirement plans, where you put some of your income in, you put some of the cash in.

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Rizek Housari: the government, the IRS, cuts a deal with you at that point and says, alright, we won't tax you on that money that you've put in.

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Rizek Housari: So that tax liability is now being deferred or postponed until the future. However, when you pull that money out in retirement, or when they force that money out with required minimum distributions, at that point is when you will face the tax liability, the postponement of liability. That's an example.

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Rizek Housari: If you own a business, and you buy some property, or you buy some equipment.

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Rizek Housari: You can accelerate tax deductions today.

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Rizek Housari: Which will reduce your tax liability now, but then down the road in the future, you'll be on the hook for that tax. We call those depreciation deductions.

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Rizek Housari: That just gives you an example, and the same thing would apply if you own rental property as well.

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Rizek Housari: Okay.

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Rizek Housari: You can kind of see the breakdown there.

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Rizek Housari: That's good. We'll continue on.

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Rizek Housari: If you have questions, put them down below. I got one question here. Anna Maria asks, what if you have CDs? So, CDs are Certificates of depreciation. Just kidding. That's what Dave Ramsey calls them. So, they're certificates of deposit. What it is, is that's where you put money into a bank account, or a bank product.

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Rizek Housari: and then the bank will pay you interest over time. Now, normally, CDs

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Rizek Housari: have varying interest rates, so the timing of when you get that CD matters. Like, if you got a CD 2 years ago, and it was a 6-month CD, then for that 6-month period of time, you'd be paid an interest rate. It wasn't uncommon 2 years ago for us to see 5% interest rates on CDs.

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Rizek Housari: Today, if you go out and get a CD, you're probably looking in the 3% to 3.5% range, maybe a little bit higher, depending on the product or the bank or credit union that you're using.

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Rizek Housari: And it's just a place to store some cash. These are what we call cash or cash equivalents.

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Rizek Housari: So, it really doesn't change anything from a tax perspective. The interest that you earn is taxable as ordinary income when you receive it. So, that's how CDs work. They're similar to money markets, similar to high-yield savings accounts, if you're familiar with them.

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Rizek Housari: Personally, I don't own CDs, I never have. It's very rare that I recommend them, except in those situations in which the yield makes sense. And, you know, if you're gonna park some money for an emergency or for a short-term purchase, then, you know, maybe there's a place for CDs.

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Rizek Housari: But…

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Rizek Housari: sometimes I've seen too many people holding onto too large chunks of cash inside of a CD. So, it's a good question! Alright, so with… we're gonna skip this, but anyways, the whole goal of tax playing, let's just…

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Rizek Housari: kind of know it's to minimize the tax liability and maximize the amount of money you have growing and working for you in the future. So, let's talk about some… let's get into the meat of it. I'm just so excited to jump into it with you here. A tax deduction is reducing the amount of taxable income

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Rizek Housari: That you have. That's just plain and simple, right? So you work, you have a job, you have investment income, whatever it is, that's income up here.

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Rizek Housari: And then a deduction reduces the amount that's taxable.

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Rizek Housari: Plain and simple. So, if you can pretty much fog a mirror in the United States today, then you can take advantage of what's called a standard deduction, which allows you to reduce the amount of taxable income you have.

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Rizek Housari: Or maybe you take advantage of…

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Rizek Housari: Putting money into a retirement account, that's a tax deduction. Maybe you put some money into a health savings account, that's a deduction. All it is is just reducing the amount of taxable income you have today. It doesn't mean that's permanent.

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Rizek Housari: Some tax deductions are temporary, meaning that you might get a tax deduction out, but you may have to recognize that taxable income later. Others are permanent.

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Rizek Housari: So it… it kind of just varies, but at the end of the day, all you need to know is it reduces the amount of income that's subject to tax.

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Rizek Housari: Tax deferral? That's kicking the can down the road.

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Rizek Housari: Tax shifting is a very interesting idea. That's us shifting that tax burden to another entity, or to another person, ideally at a lower tax rate than we are. So let me give you an example, just initially, and we'll dive a little bit deeper in a moment, of tax shifting.

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Rizek Housari: Tax shifting would be… Let's say you have a little side business.

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Rizek Housari: and you decide to employ your teenager in the business, and you pay them a couple thousand bucks. Maybe they're filing, or they're mowing the lawn, they're taking care of their landscaping, they're painting, cleaning, whatever it is. Like, they're doing a legitimate job, and you're paying a fair wage to your teenager.

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Rizek Housari: It can be beneficial, because at the business level, which we'll just assume is your own personal business, you own the whole thing.

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Rizek Housari: then you can shift it from your higher income tax situation, that income that you'd be on the hook for, and move it to your child at a much lower tax rate than where you're at. That's an example of shifting income.

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Rizek Housari: There's many examples of this. Now, if you don't want to give your teenager money because they're going to blow it on a stupid boyfriend or something, listen, I get it. Don't do this strategy. We never want to let the tax tail wag the dog, as they say. I don't know…

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Rizek Housari: which tax professional came up with that example, but it's kind of a common saying, don't let the tax tail wag the dog. In other words.

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Rizek Housari: We want to do something because we want to do it, and then if the tax law offers us an incentive to continue doing that, awesome, let's take full advantage of that incentive.

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Rizek Housari: But very rarely does it make sense to do this if you don't really give the kid money. The same thing could be said for charitable giving. I've got a number of clients, probably a majority of the clients I work with, who tithe or donate to a church or a charity on a regular basis. It doesn't make sense to donate for the tax deduction

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Rizek Housari: If you don't have a desire to donate in the first place. Let's just be clear on that one.

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Rizek Housari: Tax shifting across periods.

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Rizek Housari: That's moving income.

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Rizek Housari: To, generally, a later period of time.

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Rizek Housari: So, an example of that would be putting money into a 401K, taking it out in retirement.

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Rizek Housari: However, sometimes it makes sense to actually accelerate income, to actually increase the amount of taxable income that you have at a given period of time.

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Rizek Housari: An example of that would be a Roth conversion.

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Rizek Housari: A Roth conversion is moving money that you already have in a retirement account, that's pre-tax, to a Roth IRA. Now, when you do that, you have to recognize income.

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Rizek Housari: If you have $100,000 in an IRA, and you want to get it into a Roth, and you move that $100,000 all at once, well, now all of a sudden, you're going to have $100,000 of additional taxable income that you would not have faced

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Rizek Housari: Had you done nothing.

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Rizek Housari: I do this with dozens of clients each year, who are just recently retired, or are in a low-income tax situation that year.

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Rizek Housari: Or maybe they're in between jobs, or they're taking a sabbatical, whatever the case may be, their income is lower than it was in the previous years, or is lower than it's expected to be in the future.

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Rizek Housari: and we can accelerate that income, convert it, get it into a Roth account.

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Rizek Housari: while they're in a low tax rate, and now the money can grow and compound completely tax-free. That is the power

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Rizek Housari: of Roth conversions. We'll talk more about that in just a minute. If you've got questions.

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Rizek Housari: Let me know, put them in the Q&A, I'm happy to answer them. Okay, so, when we look at tax planning, here's some deadlines for you. April 15th is when you gotta have them in, so you got about a month.

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Rizek Housari: A little less than that, to file. Of course, you can file an extension. You have until October 15th, 2026, to file an extension. Just be aware, though, that if you owe the IRS any money.

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Rizek Housari: The extension is just you extending the paperwork deadline. The money? It's gotta be in by April 15th.

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Rizek Housari: So.

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Rizek Housari: You gotta pay it, and if you think you're gonna owe some money, it's better to make an estimated payment now, so you're not hit with potential underpayment penalties or interest on the tax that you owe.

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Rizek Housari: That's a key consideration a lot of people forget. Listen, if you're gonna get a refund.

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Rizek Housari: from federal and state, if you're in a state that has income tax. If you're gonna get a refund, that doesn't matter. You can delay, file the October 15th and get your money later. I mean, that's up to you.

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Rizek Housari: I will tell you that many business owners, or people that invest in partnerships, private equity, stuff like that, where you get what's called a K1 document.

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Rizek Housari: Those K1 documents, they may not be distributed by April. They may take, you know, June, July, or August in some cases for you to get those tax documents, and it's not uncommon in those situations for you to delay filing and do an extension.

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Rizek Housari: Other than that, if you're getting a W-2 from an employer, if you're getting a 1099 because you've got some interest, or some investments, or something like that, maybe a little side hustle going on, and they give you a 1099, those have… you should have already received those by now, but…

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Rizek Housari: That's where you're at.

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Rizek Housari: Okay, here's the tax brackets. Now, this is what I think is the fun part. Here's the… kind of the meat and potatoes, as it were, of…

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Rizek Housari: actual tax and how it works in the United States. You'll see on your screen here, on the top left.

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Rizek Housari: These are the tax rates that apply for 2025, so if you're filing your taxes now, then we're looking at 2025's numbers.

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Rizek Housari: And…

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Rizek Housari: if you're… there's not a lot you can do now by the end of the year. I mean, you can make a contribution to an IRA or an HSA and code it for 2025's tax year, that's fine.

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Rizek Housari: But a lot of the tax planning that we're doing right now with the clients that we work with is for 2026, and for future years. And so I wanted to show you the tax rates that apply for this year.

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Rizek Housari: for 2026 and compare.

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Rizek Housari: They're very similar. For the most part, it's really just increasing the range of income.

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Rizek Housari: for inflation. That's in every bracket. So, let's walk you through this, just very simply. Let's look at the tax rates. It's that first column. In that first column, you'll notice the tax rates start at 10%,

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Rizek Housari: Then they increase to 12.

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Rizek Housari: What this means… Is that, for every filer.

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Rizek Housari: The first, we'll look at married filing jointly.

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Rizek Housari: And we'll look at 2026's numbers, so the bottom right.

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Rizek Housari: Married filing jointly, the first $24,800 that you earn

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Rizek Housari: as in married, filing, jointly taxpayer in the United States, is taxed at 10%. It doesn't matter if you're a multi-billionaire, or you're barely scraping by. The first $24,800

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Rizek Housari: is all taxed at 10%. Now, if you have additional income, the next amount of money that you earn from $24,801

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Rizek Housari: To $100,000, $800 is taxed at 12%. If you're married, finally joining.

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Rizek Housari: So… Let's say someone makes 100 grand.

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Rizek Housari: What's their tax rate?

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Rizek Housari: That's a great question. It could be a number of things. Their tax rate could be…

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Rizek Housari: We could say their marginal tax rate. Okay, that's to say every additional dollar they earn is taxed at 12% for the next 800, but then after that, it jumps, and every additional dollar past $100,800 is taxed at 22%.

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Rizek Housari: Marginal tax rates are important because it tells us what we're doing for the very next dollar that we earn, or what we have to pay for the very next dollar.

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Rizek Housari: Another very important tax measure that I would want to understand is your effective tax rate. Your effective tax rate essentially says how much do you pay in taxes based on your overall income.

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Rizek Housari: The effective tax rate is never a tax bracket.

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Rizek Housari: It's…

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Rizek Housari: It's a range, so it might be, in this situation, could be 7.5%, or 11.5%, or something like that, that tells you, kind of, your average or effective rate. So, anyways, something just to know.

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Rizek Housari: You'll notice there's a huge jump from 12% to 22%. That's a 10% increase.

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Rizek Housari: Again, it's not retroactive, it doesn't cause all that income

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Rizek Housari: that you've already earned to be taxed at 22%. It's just saying for that range, between $100,800 and $211,000, I'm just gonna round now, we're gonna round to the thousands.

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Rizek Housari: Between 100 grand and 211 grand, you're taxed at 22% at that level.

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Rizek Housari: Then it goes to 24, small, small increase, but then a huge jump from 24 to 32.

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Rizek Housari: So I want you to notice those two jobs. They used to not be that way, but it's been that way for a number of years now.

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Rizek Housari: Where we had those big jumps.

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Rizek Housari: From 10 to 12, that's a small jump. From 12 to 22, that's big. From 22 to 24, that's a small jump. From 24 to 32, that's an 8% increase. And then 32 to 35, and 37.

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Rizek Housari: Now you know.

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Rizek Housari: how taxes work in the United States, from a tax rate system.

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Rizek Housari: I will always want to be in the highest tax rate, and I think you should too, okay? Because that means you're making a lot of money.

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Rizek Housari: But in practice, I've found that most human beings, at least most Americans.

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Rizek Housari: They hate to pay more in taxes than they like to make more income. And I kind of find that interesting.

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Rizek Housari: I'd rather make more income, personally.

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Rizek Housari: Because, hey, I'm gonna pay taxes, that's fine, but you never want to make less income just to pay less tax.

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Rizek Housari: Now you understand it. Mark asks a great question. When is it a good time to move 401K money to a Roth plan for tax reasons? Okay, Mark, let's break this one down for just a moment. When you've got money in a 401 ,

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Rizek Housari: That's money that you or your employer has set aside, and it's pre-tax.

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Rizek Housari: And by the way, if you put money into a 401 , if you put it in pre-tax or Roth, you're still going to get the match from your employer, and that matching contribution goes in pre-tax. So, don't think you have to put the money into a pre-tax 401K in order to get the match.

00:20:49.990 - 00:21:03.820
Rizek Housari: You can go all Roth on your own contributions, and you can still get the full match from your employer. I got that question the other day. Okay, so back to your question. When's a good time to do a Roth conversion, to move money from your 401K to a Roth account?

00:21:04.190 - 00:21:10.850
Rizek Housari: A good time would be… I'll give you a few. One, if you've recently retired, your income is low.

00:21:11.060 - 00:21:14.129
Rizek Housari: You find yourself in a lower tax bracket now.

00:21:14.250 - 00:21:15.540
Rizek Housari: Because you're retired.

00:21:15.750 - 00:21:21.840
Rizek Housari: And you move chunks. Now, we don't move everything to Roth all at once. We chunk it up.

00:21:22.050 - 00:21:28.739
Rizek Housari: You can move as much or as low as you want to Roth whenever you want. You get that flexibility right now under the current legislation.

00:21:28.930 - 00:21:32.670
Rizek Housari: You can move money to Roth when you're working, when you're retired.

00:21:32.920 - 00:21:34.519
Rizek Housari: When you're on a cruise.

00:21:34.670 - 00:21:40.709
Rizek Housari: Whenever. There's no limit on who can convert, when they can convert, how much they can convert.

00:21:41.320 - 00:21:45.000
Rizek Housari: But generally speaking, you want to convert when you're in a lower tax rate.

00:21:45.840 - 00:21:47.100
Rizek Housari: Another example.

00:21:47.330 - 00:21:52.969
Rizek Housari: If you've set aside so much money in your 401Ks and IRAs, and you're looking at your retirement savings.

00:21:53.300 - 00:22:03.310
Rizek Housari: And most of it is pre-tax, or all of it is pre-tax. Then you realize that when you retire and start taking money out, every penny you pull out is taxable as ordinary income.

00:22:03.680 - 00:22:05.829
Rizek Housari: That doesn't give you a lot of flexibility.

00:22:06.250 - 00:22:17.200
Rizek Housari: And what happens is, when you hit your RMD age, your required minimum distribution age, which right now is 73, but will eventually become when you turn 75 years old.

00:22:17.400 - 00:22:26.719
Rizek Housari: the government actually starts to force money out of these pre-tax retirement accounts, regardless if you need the money or not. And if you've been investing and saving wisely over the years.

00:22:26.720 - 00:22:39.240
Rizek Housari: It's not uncommon for many people to reach their mid-70s and all of a sudden recognize these RMDs are actually forcing them to have more taxable income than they ever thought they would.

00:22:39.750 - 00:22:56.879
Rizek Housari: That's a problem, and those RMDs never end. They are required minimum distributions from now until the end of your life. And if you pass away and leave that money to a spouse, they continue. And if you pass away and leave that money to your kids, your kids who get these inherited IRAs.

00:22:57.070 - 00:23:04.609
Rizek Housari: Generally, now have to take that money out within a 10-year period of time, and it's all taxable as ordinary income to your kids.

00:23:04.860 - 00:23:16.790
Rizek Housari: So, here's a few examples. One, if required minimum distributions will force you in the future to be in a higher income tax position than you are today, then you should convert to Roth.

00:23:17.020 - 00:23:18.179
Rizek Housari: Another example.

00:23:18.330 - 00:23:33.679
Rizek Housari: If you plan on leaving money behind to kids or heirs, and your kids will be in a lower tax situation than you are today, you shouldn't convert. But if they're going to be in a higher income tax situation, or there's risk that they're going to be in a higher income tax situation in the future.

00:23:33.750 - 00:23:51.629
Rizek Housari: and you're in a lower tax situation than they are, then it'd be wise to consider Roth conversions. There's a ticking time bomb. When you give an IRA to kids, you're passing on an asset and a liability at the same time. The liability is the unpaid tax that you never paid, that you're now pushing onto your kids.

00:23:51.630 - 00:23:58.249
Rizek Housari: when they inherit an IRA. And they passed this law at the end of 2019, by the way, called the SECURE Act.

00:23:58.660 - 00:24:01.430
Rizek Housari: And it really was a tax grab.

00:24:01.660 - 00:24:13.540
Rizek Housari: By your government, by your congressional leaders that you voted into office, who passed the CURE Act to squeeze those inherited IRAs to now force out distributions to people who inherit.

00:24:13.580 - 00:24:22.640
Rizek Housari: Another good time to consider off conversion is if you're married, and you're nervous that you may pass away significantly earlier than your spouse.

00:24:22.770 - 00:24:29.479
Rizek Housari: Why is that the case? We call this the widow penalty, by the way. Well, if you now go from married filing jointly to single.

00:24:29.480 - 00:24:46.790
Rizek Housari: you're now passing on this retirement account that you and your wife have saved, or you and your husband have saved, and you're passing that on to a spouse, a widow. They're going to be able to file married filing jointly for one year after you've passed, but then they're going to go from married filing jointly to a single tax filer.

00:24:46.820 - 00:24:51.110
Rizek Housari: Look at those tax brackets. You can very quickly see that

00:24:51.420 - 00:24:57.319
Rizek Housari: You jump brackets with much less income as a single filer than you do married filing jointly.

00:24:57.450 - 00:25:14.110
Rizek Housari: And that can cause your… your spouse, your widow or widower, if you're gone… excuse me, if you're gone and no longer in the picture, to be on the hook for paying taxes on the same retirement assets that you'd saved, just because one of you passes away sooner than you'd expect.

00:25:18.390 - 00:25:29.240
Rizek Housari: I could go on and on. I've actually written a book on the topic, I published it a year and a half ago, it's on Amazon, called Finance on the Fly, Simple Strategies to Build Lasting Wealth.

00:25:29.630 - 00:25:44.360
Rizek Housari: And I've got multiple chapters dedicated to helping you understand when is the right time to do a Roth conversion, and when is the wrong time to do a Roth conversion. But I will tell you, if you look at your retirement savings today, odds are.

00:25:44.470 - 00:25:49.780
Rizek Housari: 80 or 90% of everything you have saved for retirement is pre-tax.

00:25:50.350 - 00:25:57.070
Rizek Housari: That's just kind of the reality for most people who have $2 million or less saved for retirement.

00:25:57.350 - 00:26:16.760
Rizek Housari: If you have more than $2 million, then you probably have investments outside of retirement accounts, as well as inside retirement accounts. But if you're kind of less than $2 million, odds are the majority of the money you have saved for retirement is pre-tax, whether that's from a pension, which is taxable income, Social Security, in large cases is taxable as income.

00:26:16.760 - 00:26:31.489
Rizek Housari: Even though I know they passed the Triple B, the One Big Beautiful Bill Act, recently that gives seniors an extra deduction. It really has nothing to do with Social Security, by the way. It's just if you're 65 or older, you get this extra deduction of 6 grand.

00:26:31.740 - 00:26:39.020
Rizek Housari: You could be on Social Security, you could not be on Social Security, you could still get the deduction, as long as you meet those requirements. But anyways, I digress.

00:26:41.650 - 00:26:45.719
Rizek Housari: You guys got me going here today. I just… I mean, I could go on and on about…

00:26:45.880 - 00:26:57.660
Rizek Housari: tax planning and retirement planning and kind of the blend that exists. But, kind of to recap what I was saying there, if you've got 80 or 90% of your retirement savings and it's all pre-tax.

00:26:57.660 - 00:27:09.279
Rizek Housari: it might be wise to consider a little bit of tax diversification. I mean, you've heard financial advisors go on and on about investment diversification. It's an important topic.

00:27:09.310 - 00:27:13.700
Rizek Housari: I'll confess, I'm not downplaying it at all, but what a lot of…

00:27:13.760 - 00:27:20.029
Rizek Housari: A lot of you fail to recognize is that tax diversification matters just as much.

00:27:21.060 - 00:27:26.760
Rizek Housari: who knows what Congress is going to do with future tax legislation over your lifetime, or over your kid's lifetime?

00:27:26.920 - 00:27:34.979
Rizek Housari: It could certainly change. You just should just expect it to evolve and change every couple of years. Who knows who's gonna get elected, and what kind of poll…

00:27:35.800 - 00:27:38.849
Rizek Housari: And what kind of new tax policies are going to be enacted.

00:27:39.120 - 00:27:51.609
Rizek Housari: But you want to be able to bob and weave and adjust, and you want to be able to have flexibility and control and peace of mind that whatever happens in the world, you'll be alright when you retire, because…

00:27:52.230 - 00:27:55.369
Rizek Housari: Place in connection with your retirement plan.

00:27:55.940 - 00:28:03.120
Rizek Housari: Just like, you know, the markets are changing and evolving as we speak right now. The conflict in Iran…

00:28:03.660 - 00:28:17.890
Rizek Housari: The oil situation at the Strait of Hormuz, the issues that are being faced with trade tariffs, Ukraine, I mean, the list goes on. Venezuela, Cuba, there's a hundred things we could discuss.

00:28:18.010 - 00:28:25.310
Rizek Housari: That can cause you fear around your investments, and do you have enough to retire, and, you know, do you have a plan in place that's going to support your lifestyle?

00:28:25.760 - 00:28:32.620
Rizek Housari: The tax planning can… more peace of mind. It can provide greater comfort.

00:28:33.020 - 00:28:39.339
Rizek Housari: Because you're able to take assets out of different accounts, When you want to.

00:28:39.710 - 00:28:41.120
Rizek Housari: we talk about…

00:28:41.660 - 00:28:51.460
Rizek Housari: asset allocated to stocks and bonds and private equity, and private credit, and real estate, and other things. Like, there's multiple places

00:28:51.670 - 00:28:54.019
Rizek Housari: You want to be efficient from

00:28:54.360 - 00:28:59.769
Rizek Housari: Allocating your assets, but tax location or asset location matters just as much.

00:29:00.060 - 00:29:04.070
Rizek Housari: For example, in most cases, if you've got a bunch of Roth money.

00:29:04.520 - 00:29:19.569
Rizek Housari: and it's holding bonds, that's probably unwise. I mean, Roth accounts, that's tax-free. You want more of your aggressive, growth-oriented investments holding those accounts, because they're growing tax-free. The same could be said for a health savings account. We'll talk about that in just a sec.

00:29:19.890 - 00:29:32.729
Rizek Housari: Whereas, you might want more of your bond positions, the more fixed income, conservative stuff of the portfolio, held inside of an IRA, because that's tax-deferred, and when you actually pull the money out, it's taxed as ordinary income.

00:29:34.160 - 00:29:36.690
Rizek Housari: Let's answer some questions. Han, what do you say?

00:29:37.270 - 00:29:42.330
Rizek Housari: Heidi asks, I have a question about profit from a home sell. If I…

00:29:42.710 - 00:30:01.819
Rizek Housari: If a home is sold, and the profits are 100% invested into another property, then 2 years later, the second property is sold for the exact original amount of the purchase price, is there a tax burden on the sale of the second transaction? Okay, let's talk about it, Heidi. When you sell a home, if it's a home you've lived in as your primary residence for 2 out of the last 5 years.

00:30:01.900 - 00:30:06.040
Rizek Housari: And you're single, you can exclude up to a quarter million of gain.

00:30:06.990 - 00:30:14.779
Rizek Housari: If you're married filing jointly, it's half a million of gain, or appreciation. So let me give you an example. You buy a home for 100 grand.

00:30:15.130 - 00:30:17.149
Rizek Housari: You sell it for 500 grand.

00:30:17.470 - 00:30:28.090
Rizek Housari: And you're married filing jointly. So you've got $400,000 of appreciation. If you've lived in it for 2 out of the last 5 years, you don't recognize any of the gains or profits. It's exempt.

00:30:28.640 - 00:30:35.250
Rizek Housari: If it's an investment property, it's different. If it's an investment property, and you haven't lived in it for 2 of the last 5 years.

00:30:35.360 - 00:30:37.040
Rizek Housari: As your primary residence.

00:30:37.320 - 00:30:53.380
Rizek Housari: then all that gain is taxable when you sell it. Unless you do something called a 1031 exchange, which is a special tax provision that allows you to exchange one property for another. It's a like-kind exchange specific to real estate.

00:30:53.970 - 00:30:59.930
Rizek Housari: When you do that, you've got to identify and close on a property within a specific period of time.

00:31:00.490 - 00:31:13.859
Rizek Housari: And if you do that, any profit, or any gain, or any depreciation that hasn't been recaptured, you can continue to defer into the second property. So it's a way to avoid that current tax liability, you're just kicking a can down the road.

00:31:14.170 - 00:31:16.879
Rizek Housari: When the day comes that you sell that second property.

00:31:17.630 - 00:31:22.099
Rizek Housari: Let's say you sell it for exactly what you bought it for, which I think is how you worded your question.

00:31:22.570 - 00:31:36.279
Rizek Housari: You are going to have to now recognize the gain from the first property when you sell the second, if you do a 1031 exchange, and any depreciation that you've written off as well. You're going to get with both depreciation recapture and gain recognition.

00:31:36.770 - 00:31:37.780
Rizek Housari: If it's a rental.

00:31:38.740 - 00:31:48.219
Rizek Housari: 1031 exchanges are good, because you defer the tax, but just realize you're going to pick it all up eventually in the future, unless, of course, you give that property to a child.

00:31:48.700 - 00:31:59.359
Rizek Housari: If you die, and you give that property to a child, let's say through a trust, just a basic living trust, or you've deeded it to them in a deed you've recorded with the county, whatever.

00:32:00.310 - 00:32:17.649
Rizek Housari: They inherit that property, it gets a step up in basis. Very, very powerful. So, let me give you an example now. Same scenario. You bought the home for 100 grand, it's now worth $500,000. You did the 1031 exchange, that's fine. Let's say the property's now worth a million dollars. I mean, you've been holding onto it for decades.

00:32:19.010 - 00:32:25.109
Rizek Housari: If you were to… Pass away, and then give the property to your daughter.

00:32:25.290 - 00:32:30.370
Rizek Housari: Your daughter gets the property, and it's as if she bought it for a million.

00:32:30.390 - 00:32:46.570
Rizek Housari: So if she turns around and sells it, there's no gain. She bought it for a million, in the eyes of the IRS, because of the step-up in basis. She sells it for a million, there's no gain. So that's a great strategy a number of our clients use who are big on real estate. Now, listen, I like real estate as much as the next person.

00:32:46.570 - 00:32:56.020
Rizek Housari: I think it's great diversification and the benefits of being able to leverage a mortgage to make the returns look a little bit better, but it's not the end-all, be-all.

00:32:56.380 - 00:33:11.670
Rizek Housari: I don't get… you know, I like investing in stocks and businesses and private equity, privately held companies, and loaning money, private credit. There's a number of things that I think are wise to invest in. Again, it's going to be dependent on your situation and your goals, but good tax question.

00:33:11.700 - 00:33:21.380
Rizek Housari: It's not always wise to do a 1031 exchange, but that is an option. We'll take two more here, and then we'll move along. Deanna asks, I always owe money to the IRS every year.

00:33:21.450 - 00:33:28.040
Rizek Housari: This year, I owe several thousands. Is it financially smart to have more money taken out from my workplace.

00:33:28.480 - 00:33:31.849
Rizek Housari: put more money in an HSA or another suggestion.

00:33:32.080 - 00:33:55.030
Rizek Housari: Well, Deanna, you know, I've owed the IRS money ever since I started working. That's kind of part of it, but maybe what you mean is your withholdings throughout the year that your employer's done, or if you've made an estimated tax payment to the IRS directly, haven't been enough to match the liability that you have, the amount of money you owe the IRS. In that case, you owe money, and that's typically what you're thinking of.

00:33:55.160 - 00:34:06.970
Rizek Housari: If you put money into an HSA, that will reduce the amount of taxable income you owe and have a direct impact over the amount of tax you pay. It will certainly reduce your taxes the more money you put into a health savings account.

00:34:08.440 - 00:34:23.820
Rizek Housari: If you don't want to do that, or you've already maxed out an HSA that's available to you, then you can tell your employer by updating a W-4 form. A W-4 is the form that you give your employer that tells them how much to withhold, and then at the end of the year, you get a W-2.

00:34:23.820 - 00:34:31.739
Rizek Housari: That's the tax form you probably got in the mail a month or two ago. The W-2 is what's used to fill out your taxes, or you give to an accountant to do for you.

00:34:32.409 - 00:34:41.079
Rizek Housari: The W-4 form can be changed, you can update it. If you want to increase deductions, or increase withholdings, you can do it on W-4.

00:34:43.159 - 00:34:57.059
Rizek Housari: Michelle asks, how is the annual retired minimum distribution amount figured? Is it a percentage of your retirement account that you have to take out annually? Michelle, what a lovely question! This is one of my favorites as a financial advisor to answer.

00:34:57.060 - 00:35:04.430
Rizek Housari: Required minimum distributions are based on the previous year's ending account balance. So, let's say you've hit your RMD age.

00:35:04.500 - 00:35:05.360
Rizek Housari: Today.

00:35:05.500 - 00:35:10.300
Rizek Housari: They will look at your balance as of December 31st, 2025.

00:35:10.620 - 00:35:15.540
Rizek Housari: And then divide it, based on a factor from your age.

00:35:15.970 - 00:35:27.010
Rizek Housari: So, essentially, it's a percentage, if you don't want to know all the math, it's a percentage of your previous year's earning account balance. As you get older, the percentage that they start to force out increases.

00:35:28.070 - 00:35:31.670
Rizek Housari: Also, As your IRA gets bigger.

00:35:32.080 - 00:35:39.499
Rizek Housari: The dollar amount, the amount of income that you're forced to pick up as income on a tax return, also gets bigger.

00:35:39.620 - 00:35:50.029
Rizek Housari: So that's what happens. RMDs change from year to year, depending on how your IRA grew, or didn't grow, or how much you pulled out, and

00:35:50.520 - 00:35:56.299
Rizek Housari: how old you are. That's how it works. Good question. Required minimum distributions. All right.

00:35:56.620 - 00:36:00.160
Rizek Housari: Let's keep cooking here. Tax deduction strategies.

00:36:00.890 - 00:36:06.410
Rizek Housari: Who knew how much fun tax planning and financial planning could be? Isn't this awesome? You know, I,

00:36:06.720 - 00:36:24.550
Rizek Housari: I chatted with a… I work with clients all over the country. I live here in Utah. Lake Powell is one of my favorite places to visit, if you've ever been. It's just incredible, but most of my clients don't live in Utah. California, Florida, New York, Texas, all over. Hawaii, even one in Alaska, believe it or not.

00:36:24.860 - 00:36:37.900
Rizek Housari: And when you do tax planning, a lot of the tax planning happens at the federal level. I mean, for most people, that's where the big dollars and taxes are of. But your state impacts it as much.

00:36:37.900 - 00:36:46.330
Rizek Housari: you know, can have a big impact as well. Not as much, but certainly a big impact. You know, I spoke with a client, just the other day. They live in California.

00:36:46.700 - 00:36:52.849
Rizek Housari: In the Bay Area, they're gonna move to Virginia. So a high income tax state to a moderate income tax state.

00:36:53.160 - 00:37:00.959
Rizek Housari: Would it make sense for them to do a Roth conversion while they live in California? The answer is no. In fact, they're both still working, husband and wife.

00:37:01.080 - 00:37:04.410
Rizek Housari: When they retire, their income's gonna drop, and…

00:37:04.600 - 00:37:22.000
Rizek Housari: they're going to immediately move to Virginia. Well, we would delay for two reasons. One, if we do the Roth conversion in California, we're going to have to pay federal income tax on the conversion and state income tax on the conversion at the high California rates. So, we want to delay and do that in Virginia. That's going to save them

00:37:22.050 - 00:37:26.780
Rizek Housari: A couple of thousand bucks. From year to year, for every year, they do the conversion.

00:37:27.230 - 00:37:32.850
Rizek Housari: Not to mention the compounded growth on that Roth money once it's in the account. That's huge, let's not understate that.

00:37:32.960 - 00:37:35.340
Rizek Housari: The second reason is they're both still working.

00:37:35.800 - 00:37:42.319
Rizek Housari: Once they retire, their income now drops, and it's gonna make more sense to do it then. So, two reasons there.

00:37:42.800 - 00:37:54.049
Rizek Housari: to consider a Roth conversion. That's based on the previous question. So, above-the-line deductions, below-the-line deductions… I'm not going to help you sit for the CPA exam this week, but just know this.

00:37:54.050 - 00:38:04.649
Rizek Housari: Ideally, in most situations, you want above-the-line deductions more than you want below-the-line deductions, but let me just give you an example of some that are above the line.

00:38:04.740 - 00:38:06.430
Rizek Housari: Putting money into a 401K.

00:38:06.600 - 00:38:09.640
Rizek Housari: Making pre-tax contributions to an IRA.

00:38:09.830 - 00:38:11.930
Rizek Housari: Putting money into a health savings account.

00:38:12.730 - 00:38:17.079
Rizek Housari: These are all tax deductions that happen before your

00:38:17.350 - 00:38:21.270
Rizek Housari: Line, which is adjusted gross income, by the way, before the line.

00:38:21.980 - 00:38:34.169
Rizek Housari: tax loss harvesting. That's, you know, managing your investments outside of a retirement account in a way that reduces the amount of tax. So if you have an investment… let's say, just an example here, you own Home Depot stock.

00:38:34.450 - 00:38:53.760
Rizek Housari: Home Depot and Lowe's, you and I could have a conversation, but I'm sure we could come to an agreement, they're pretty much the same company. They're gonna have a little bit of variances, but they operate in the same industry, it's the same kind of stores, you and I understand. Let's say you own Home Depot stock, and it's gone down in value. I don't know the price of it today, I haven't been watching it.

00:38:53.790 - 00:39:07.250
Rizek Housari: because I personally really don't invest in individual companies, I'm all about low-cost index funds, for the most part, a little bit of, you know, active management on the fixed income side, or in private equity or private credit. But for the most part.

00:39:08.150 - 00:39:21.199
Rizek Housari: I just like investing in a lot of different things. I think it's a great way to make money. Back to the Home Depot illustration. You own Home Depot stock, let's say it's dropped in value. You can sell it and buy low stock.

00:39:21.460 - 00:39:38.719
Rizek Housari: If you do that, the loss that you recognize can offset your ordinary income. This can be a tax deduction for you, up to $3,000. Of course, it can offset other gains you have in your stock portfolio there, no limit on that, but it can offset your day job's income up to $3,000 each year.

00:39:38.890 - 00:39:56.799
Rizek Housari: and you're still owning low stock, and as long as you assume they're pretty much the same thing, they're gonna come back up eventually, awesome. You're no better or worse off than you were before. In fact, you're a little bit better off because you've harvested the loss at a strategic time. That's a simple example. There's tax gain harvesting.

00:39:57.120 - 00:40:17.000
Rizek Housari: that goes in connection with tax loss harvesting. Just the reverse, it's recognizing gains at strategic times. If you're in a low-income year, selling certain positions to minimize the tax liability on your investments. Listen, I'm not going to sugarcoat it with you. I think a lot of the value a financial advisor can provide is in the tax planning

00:40:17.000 - 00:40:31.920
Rizek Housari: tax strategy, tax management of the assets. I think gone are the days where financial advisors could just pitch to you, you know, a life insurance product or some mutual fund, and kind of get away with it, and not providing much more value beyond that.

00:40:32.180 - 00:40:38.590
Rizek Housari: So there's my two cents for you, for what it's worth. Student loan interest could be a deduction, tuition and fees.

00:40:38.740 - 00:40:42.960
Rizek Housari: For schooling, college, things like that, that can also be a deduction.

00:40:44.750 - 00:40:52.840
Rizek Housari: All right, below the line deduction. So, this is what you hear of when you think of, standardized deduction or itemized deduction.

00:40:53.080 - 00:40:59.129
Rizek Housari: The standard deduction is if you can essentially fog a mirror, you get this deduction. So, married, filing and jointly.

00:40:59.690 - 00:41:00.860
Rizek Housari: 2025.

00:41:01.800 - 00:41:07.900
Rizek Housari: What this is saying is the first $31,500 that you earn is not taxable at the federal level.

00:41:08.460 - 00:41:13.629
Rizek Housari: It's not in the 10% bracket, it's the 0% bracket. It's just not even showing up.

00:41:14.340 - 00:41:20.159
Rizek Housari: Then everything beyond that is subject to tax. And single, you can see that there, it's half. So…

00:41:22.700 - 00:41:37.240
Rizek Housari: For the most part, you know, if we were to poll Americans today, about 9 out of 10 Americans are taking the standard deduction. That wasn't always the case. Years ago, before they changed the tax law, remember how I've emphasized to you the tax law changes and evolves?

00:41:37.240 - 00:41:45.140
Rizek Housari: Throughout your lifetime. Years ago, you used to be able to get a little bit of tax benefit for the interest you pay on your mortgage. You used to be able to get a little tax benefit.

00:41:45.140 - 00:41:57.739
Rizek Housari: for the property tax you pay, for the state tax you pay. You used to be able to get a little bit of tax benefit for health insurance, or not health insurance, excuse me. Well, yeah, that too, but for healthcare-related medical expenses.

00:41:57.920 - 00:42:00.470
Rizek Housari: Well, now, they have these limits.

00:42:00.950 - 00:42:06.390
Rizek Housari: that exists, and the standard reduction is much higher. So most people aren't doing the standard deduction.

00:42:07.580 - 00:42:19.939
Rizek Housari: What's itemized deductions? You add up some very specific things, and if your itemized deductions are greater than the standard deduction, you itemize. If the itemized deductions are lower than the standard deduction, you take the standard.

00:42:20.050 - 00:42:30.820
Rizek Housari: deductions. You do whichever one's bigger of the two. You add them all up, you compare it to the standard one, and you choose whichever one's higher. What's included in itemized deductions? A number of things.

00:42:31.400 - 00:42:48.549
Rizek Housari: One of the least common that I see is out-of-pocket medical expenses, because they have to exceed 7.5% of your AGI, of your adjusted gross income. That's a pretty high threshold. That means if you made $200,000 in income.

00:42:48.840 - 00:42:55.129
Rizek Housari: Then you're able to deduct medical expenses, potentially, that are greater than $15,000.

00:42:55.320 - 00:42:57.989
Rizek Housari: So, if you had $200,000 of income.

00:42:58.190 - 00:43:08.199
Rizek Housari: And you had $20,000 in medical expenses. Only $5,000, the amount greater than 7.5%, only $5,000 would be able to add

00:43:08.440 - 00:43:25.630
Rizek Housari: onto the itemized deduction, and then we add them all up and see if it's correct. Almost no one's doing it. HSA is awesome, though, because when you put money in an HSA, it's tax-deductible right out of the gate, bada-bing, bada-boom, and the money in HSA can grow and compound. Please, ladies and gentlemen, do not ignore the fact

00:43:25.680 - 00:43:42.639
Rizek Housari: that you can invest your money in a health savings account. It is the creme de la creme of investment accounts that exist. If you're not investing it, I don't know what you're doing. Now listen, if you're living paycheck to paycheck, or you don't have an emergency fund built up, okay, you gotta get your ducks in a row, get out of the credit card debt, blah blah blah.

00:43:42.850 - 00:43:56.939
Rizek Housari: When you're ready to take things to the next level, consider investing in your health savings account, because it grows tax-free. Not only do you get a tax deduction on the front end, not only does it come out for qualifying medical expenses tax-free on the back end, but it grows tax-free.

00:43:57.040 - 00:44:05.529
Rizek Housari: And I will tell you that those people, with the best financial advisors helping them out, are investing their HSA as much as they can.

00:44:06.020 - 00:44:07.640
Rizek Housari: They're investing all of it.

00:44:07.860 - 00:44:19.839
Rizek Housari: And then, when they have medical expenses come up, which certainly they will, it's life, we're all human, as they have medical expenses come up, they can do one of two things. One, they can take the money out of their HSA, you know, swipe the debit card, get reimbursed, whatever.

00:44:20.610 - 00:44:34.180
Rizek Housari: But if they wait and delay the instant gratification, and they give their HSA a couple of decades to grow and compound tax-free, they can take the money out and reimburse themselves for prior year medical expenses tax-free, and the best part is…

00:44:34.550 - 00:44:39.700
Rizek Housari: There's no timeline on this. You can go back until the first day that you put a dollar into the HSA.

00:44:39.880 - 00:44:43.120
Rizek Housari: So if you put money into an HSA 5 years ago.

00:44:44.050 - 00:44:48.249
Rizek Housari: And you're gonna retire in 20 years, or 10 years, or 5 years.

00:44:48.680 - 00:44:59.139
Rizek Housari: You just delay taking money out, you pay cash for those medical expenses, or you put it on a credit card and pay it off in full every month to get your points, whatever makes sense for you.

00:44:59.260 - 00:45:06.740
Rizek Housari: You can only go back and reimburse yourself completely tax-free whenever you want. The whole time, money's growing conked tax-free. Listen, if you take one thing away.

00:45:07.270 - 00:45:10.799
Rizek Housari: Let that be one. I just love it. I have a whole chapter in my book.

00:45:10.920 - 00:45:13.349
Rizek Housari: called The Holy Grail of Investing.

00:45:13.720 - 00:45:16.950
Rizek Housari: Okay, back to itemized deductions.

00:45:20.570 - 00:45:35.070
Rizek Housari: up to $10,000 of combined state and local taxes. Now, they changed that law for 2026, so now it's kind of phased out there, but we don't have that in here, but just know for 2026, the law's changed. And you can actually go up to $40,000, which is nice. Interest paid on a home.

00:45:35.070 - 00:45:48.909
Rizek Housari: Okay, we do that. Charitable contributions that you make to a 501c3 organization, those qualify. That include tithings, offerings, things like that. And then casualty losses due to a federally declared disaster. Hopefully that's not you. So you add up all those things.

00:45:49.070 - 00:45:59.329
Rizek Housari: If the sum of all those things is greater than standard deduction, welcome, you're part of the 10% that's itemizing. But for most of you, it's not going to add up, so just know that…

00:45:59.460 - 00:46:12.199
Rizek Housari: You used to be able to get a little bit of tax benefit for the interest you're paying on your primary mortgage. Odds are you're not getting any. Now, if you have rental property, stuff like that, you still get that. That's different. This is primary residence. Okay.

00:46:12.500 - 00:46:13.479
Rizek Housari: tax credits.

00:46:13.860 - 00:46:15.900
Rizek Housari: Boy, what a party! Isn't this fun?

00:46:16.340 - 00:46:34.570
Rizek Housari: This is what real financial planning looks like, by the way. When you work with a real financial advisor, this is what it looks like. And not everyone needs to work with a financial advisor. This isn't a pitch, but I just want you to understand that financial planning is more than just making sure you have the right investments.

00:46:35.530 - 00:46:52.560
Rizek Housari: It's putting it all together in a plan that makes sense for your goals, and then making it happen. Okay, tax credits. They're better than deductions. If you… if I ask you, do you want a $1,000 tax deduction or a $1,000 credit? All of you need to say credit. Okay, it's better. It's just…

00:46:52.800 - 00:46:57.040
Rizek Housari: It's better. Because it reduces the amount of tax you owe.

00:46:57.160 - 00:46:59.110
Rizek Housari: A $1,000 deduction

00:46:59.300 - 00:47:12.339
Rizek Housari: just reduces the amount of income that's subject to tax, but tax credit, that's like getting a gift card that you can use and say, hey, I got it. I got a $1,000 gift card here, IRS, and they say, great, you don't have to pay us $1,000.

00:47:12.910 - 00:47:16.669
Rizek Housari: That's the difference. There's some common tax credits there.

00:47:17.240 - 00:47:18.530
Rizek Housari: We're gonna keep cooking.

00:47:19.940 - 00:47:24.290
Rizek Housari: Tax loss harvesting. This is the example I gave you earlier about the Home Depot stock and the

00:47:24.290 - 00:47:42.630
Rizek Housari: and the Lowe's stock, just as an example, but you can do this with ETFs, mutual funds, index funds, there's a lot of option here, and I'll tell you, most do-it-yourself investors miss out on tax loss harvesting. It's one of those things that you should be doing from year to year, and evaluating your investment portfolio.

00:47:43.090 - 00:47:53.280
Rizek Housari: I'm a huge fan… listen, for the first, like, 100 grand that you're saving and investing in a 401K plan of work, if you've got a good, performing, low-cost target date fund, I'm all about it.

00:47:53.510 - 00:48:06.939
Rizek Housari: Like, that's a great option. You'll probably graduate once you've got about 100 grand in your 401K or IRA, it's probably time for you to consider other options. But if you're investing outside of a retirement account, in a brokerage account.

00:48:07.280 - 00:48:24.240
Rizek Housari: then… please, target date funds are probably not the right… I can… there probably is no probably that. They're not the right fit for you. This isn't personalized investment advice. They're not the right fit for you, though, because it limits your ability to do tax harvesting massively.

00:48:24.390 - 00:48:31.070
Rizek Housari: If you can own some in small companies, and medium-sized, and international, and large, and tech, and whatever else you've got.

00:48:31.450 - 00:48:51.369
Rizek Housari: the markets are going to move different amounts at different times. Shoot, just take a look at the market in the last couple weeks. Not all sectors of the market have moved in the same way. And it might make sense now, even, to consider doing a little bit of tax loss harvesting in your portfolio to maximize the amount of assets that you have growing and continuing to work.

00:48:51.380 - 00:48:52.260
Rizek Housari: for you.

00:48:53.540 - 00:48:54.739
Rizek Housari: Don't miss out on it.

00:48:55.550 - 00:49:10.759
Rizek Housari: Alright, here's an example of how to calculate tax. So, if you're going to sit for the CPA exam, here it is. But we'll just go over it simply here. Gross income, you get some deductions, they put in $20,000 to the 401K, $6,000 to an HSA, awesome.

00:49:10.870 - 00:49:14.199
Rizek Housari: They're definitely on a family plan, I know that. Oop, let's go back.

00:49:15.610 - 00:49:27.899
Rizek Housari: You can actually put more than that, you can put a, you know, just over $8,500, and by the way, if you're over 55, you get an extra catch-up contribution to the HSA. Don't sleep on the health savings account, ladies and gentlemen, don't sleep on it.

00:49:27.900 - 00:49:36.230
Rizek Housari: Here's your total amount of income. You can see $200 minus this, you get to $174. They took the standard deduction, $31,500,

00:49:36.430 - 00:49:41.239
Rizek Housari: Taxable income $142. So they made $200, but they're only taxed on $142.

00:49:41.880 - 00:49:54.600
Rizek Housari: How are they taxed? You can see the first $23,000 and some change, taxed at 10%, the next $73,000 taxed at 12, and then $47,000 taxed at 22%. So, total tax

00:49:54.860 - 00:49:57.769
Rizek Housari: 21 and some change, $1,000.

00:49:58.570 - 00:50:00.190
Rizek Housari: Pretty cool stuff.

00:50:02.040 - 00:50:10.769
Rizek Housari: Alright, I got a question here. If the spouse owns investment property together, and one spouse dies, does the surviving spouse get the value reset on the property? Judy.

00:50:11.970 - 00:50:23.610
Rizek Housari: That's a great question. It's a simple question. It could be a complicated answer, depending on if it was held in a specific type of trust or not. So it's a great question.

00:50:23.660 - 00:50:35.409
Rizek Housari: But I need a little bit more information on the facts and circumstances to give you a good answer on it, Judy. It's a good question, though. Typically, you include… you get the spousal benefit, generally speaking.

00:50:35.740 - 00:50:44.979
Rizek Housari: Okay, tax deferral and shifting. Here we are. You can see here's the limits for how much you can put into 401Ks, IRAs, and health savings accounts.

00:50:46.220 - 00:50:56.540
Rizek Housari: Generally, here's how I do it. Assuming you have your ducks in a row, we're gonna go to take advantage of your 401K and contribute as much to get the match. You don't want to be leaving money on the table.

00:50:56.890 - 00:51:05.229
Rizek Housari: Then, we go HSA, and oftentimes, I'm telling my clients, if they're on a high-deductible health insurance plan, let's max that puppy out next.

00:51:05.710 - 00:51:11.160
Rizek Housari: And then we might go to a Roth IRA, and then we might go to a 401 .

00:51:11.350 - 00:51:20.920
Rizek Housari: That would kind of be the order. Now, depending on how much you have saved and where, we may do a brokerage account in the mix, you know, money outside of a retirement account, there's pros to that.

00:51:21.540 - 00:51:36.899
Rizek Housari: If you have an employee stock purchase plan made available to you, or stock options, or something, you know, it's going to depend on the situation, the goals. Are you going to retire before 59 and a half, or before 55? If that's the case, we may want to have assets held outside of a retirement account.

00:51:36.900 - 00:51:45.220
Rizek Housari: that you can get access to, while avoiding a 10% early distribution penalty. So it's really based on your situation. No one-size-fits-all.

00:51:45.380 - 00:51:58.480
Rizek Housari: It's all about taking advantage, but I'll say this, the more tax benefits you get with an account, the more restrictive the IRS is going to be with how much money you can put in, and the better the account is. I mean, shoot, just take a look at this HSA.

00:51:59.310 - 00:52:01.220
Rizek Housari: 4,300 if you're single.

00:52:01.930 - 00:52:04.409
Rizek Housari: That's about half what you can put in.

00:52:05.410 - 00:52:15.339
Rizek Housari: To an IRA, and significantly lower than what you could put into a 401 . That tells me the HSA is awesome, and it is, because it's triple tax advantaged.

00:52:15.630 - 00:52:22.280
Rizek Housari: With the IRAs, you're getting either tax benefits on the front end, when you put the money in, or the tax benefits when you take the money out.

00:52:22.530 - 00:52:26.180
Rizek Housari: Depending on the situation. Alright, Roth conversions.

00:52:26.320 - 00:52:28.439
Rizek Housari: This is something a lot of people miss.

00:52:29.290 - 00:52:36.170
Rizek Housari: It's not right for you every single year. It's not right for everyone. For some individuals, we never do a Roth conversion. It's never wise.

00:52:36.530 - 00:52:40.909
Rizek Housari: But for many of the clients I work with, probably the majority.

00:52:41.320 - 00:52:53.670
Rizek Housari: We're doing Roth conversions like it's crazy when they're… when either one spouse stops working, or both spouses stop working, depending on the situation. Income drops, really wise to consider.

00:52:54.330 - 00:53:07.899
Rizek Housari: We want to be cognizant of health insurance premiums, right? Because the amount you pay for Medicare, or if you go on a health insurance plan, no longer sponsored by your employer, and you shop for it on the marketplace, the amount of ACA premium you get is dependent on income.

00:53:08.030 - 00:53:12.250
Rizek Housari: So we want to be aware of that before we just go hog wild and convert to the hilt.

00:53:13.610 - 00:53:23.650
Rizek Housari: If you're gifting money to children, or loved ones, we want to be strategic about how much we gift, and what type of assets we gift, and when we gift.

00:53:24.710 - 00:53:25.989
Rizek Housari: Let me give you an example.

00:53:26.480 - 00:53:27.599
Rizek Housari: I have a client.

00:53:28.400 - 00:53:37.289
Rizek Housari: They wanted to give some money to their son. Their son's in a much lower tax situation than they are. He's a student at dental school, or he's got no income, effectively.

00:53:37.680 - 00:53:41.370
Rizek Housari: They can give him cash, Which is fine.

00:53:41.690 - 00:53:46.839
Rizek Housari: Or they can give him appreciated stock, he can sell it, he's at a much lower tax.

00:53:47.010 - 00:53:49.669
Rizek Housari: Bracket than the parents are.

00:53:49.820 - 00:54:00.539
Rizek Housari: In his situation, he's going to pay 0%, actually, because he's going to get long-term capital gains treatment. So you can pay 0% tax on that appreciated stock, take the cash, and use it to pay tuition.

00:54:00.540 - 00:54:12.689
Rizek Housari: And then his parents can take the cash that they would have otherwise given him, and buy that same stock right back, and they've now stepped up their basis. It's so important. The same thing when you gift assets. If you're gonna give money to charity.

00:54:13.280 - 00:54:14.210
Rizek Housari: Please.

00:54:14.420 - 00:54:23.639
Rizek Housari: Give appreciated assets, give them stock or mutual funds or investments that have gone up in value. Let them sell it, because… I'll give you an example, perfect example.

00:54:23.940 - 00:54:28.169
Rizek Housari: There's a church down the street here in Salt Lake City, a large church.

00:54:28.810 - 00:54:41.510
Rizek Housari: I happen to belong to it, and a number of my clients do as well. They donate stock as part of their tithes, as part of their offering, my clients do, because they can avoid the tax on the appreciation and

00:54:42.240 - 00:54:54.500
Rizek Housari: they can deduct the full fair market value, as opposed to what they bought it for, their basis, if they itemize on their taxes. It's a great way to give more than you otherwise would have been able to.

00:54:54.780 - 00:55:06.599
Rizek Housari: And do it in a very tax-efficient manner. So, something you ought to consider if you donate or tithe, you know, is donating highly appreciated assets. It can be stocks, bonds, real estate, cash.

00:55:06.820 - 00:55:09.650
Rizek Housari: Artwork, there's a number of things.

00:55:09.810 - 00:55:20.499
Rizek Housari: 529s, UGMAs, or UTMAs, and let's talk about these Trump accounts. They're brand new, they're coming out in July, fresh off the press, these new Trump accounts.

00:55:20.910 - 00:55:35.639
Rizek Housari: Let me just say this. Depending on what you're trying to do with the money, at the end of the day, should drive where you put the money. If you want to help your kids save for retirement, I think a Trump account's a great way to do that, and you can start doing Roth conversions when they turn 18.

00:55:36.210 - 00:55:52.630
Rizek Housari: 529 is ideal for education, because the growth in it grows tax-free. There's a lot of flexibility. A brokerage account, let's not ignore that one. That gives you, the parent, a lot of control over what the money is used for and when the kid gets it.

00:55:53.000 - 00:55:58.899
Rizek Housari: go on and on. And what kind of assets you use. We've talked about the charitable giving strategies.

00:55:59.310 - 00:56:07.590
Rizek Housari: Let me just say one other thing. If you're on required minimum distributions, where the government's forcing money out of your IRS or 401Ks.

00:56:07.670 - 00:56:26.000
Rizek Housari: You can satisfy the RMD by doing what's called a qualified charitable distribution, and you never pick up the RMD as taxable income in the first place. Awesome strategy you ought to consider as part of your long-term retirement plan. So, what's a few things you can do right now if you haven't yet filed?

00:56:26.060 - 00:56:29.509
Rizek Housari: Well, you can, do a little bit of

00:56:29.660 - 00:56:38.709
Rizek Housari: contributions to an IRA, you could still do that. HSA, you can still contribute to an HSA for 2025, you have until April 15.

00:56:38.890 - 00:56:41.389
Rizek Housari: But if we're now looking at 2026,

00:56:42.950 - 00:56:48.439
Rizek Housari: Roth conversions is something to think about, putting money into a Roth. They're not gonna save you on taxes now.

00:56:48.800 - 00:56:57.460
Rizek Housari: But it's gonna save you down the road. And sometimes it's better to pony up, pay the tax today, and not have to worry about what's gonna happen with tax rates down the road.

00:56:57.610 - 00:57:02.810
Rizek Housari: Of course, tax loss harvesting, alright, that's prime. That couldn't be more impactful right now.

00:57:03.060 - 00:57:08.650
Rizek Housari: I mean, if you've got some losses in your investment account because of what's going on in Iran and oil and everything else.

00:57:09.220 - 00:57:13.110
Rizek Housari: consider it. My name is Rizik. It's been a pleasure to be with you today.

00:57:13.520 - 00:57:26.189
Rizek Housari: There's my contact information down there below. If it makes sense to chat, if you're at the point where you think it makes sense to connect and consider working with an advisor, happy to chat with you there. If you've enjoyed this educational forum.

00:57:26.450 - 00:57:29.429
Rizek Housari: Awesome, send us some feedback, use the QR link there.

00:57:29.830 - 00:57:37.799
Rizek Housari: I've got one last question here. If I'm in a lower tax bracket, is it better to invest in an IRA or 401K?

00:57:38.030 - 00:57:45.949
Rizek Housari: It's not going to make a difference. When you put money in an IRA or a 401K and you're in a low tax bracket, it's going to reduce the amount of taxable income you have today.

00:57:46.510 - 00:57:49.219
Rizek Housari: And you're gonna get the same tax impact coming out.

00:57:49.410 - 00:58:01.599
Rizek Housari: If it's a Roth IRA or a 401 , now that's different. Remember, a Roth, you're putting the money in after tax, and boom, it grows tax-free from that point forward. Generally speaking, if you're in a low tax bracket.

00:58:02.010 - 00:58:07.850
Rizek Housari: We like the Roth better, because now the money grows tax-free. If you're in a higher tax bracket.

00:58:08.050 - 00:58:14.930
Rizek Housari: All else being equal, we generally like to pre-tax, assuming you're going to be in a lower tax bracket when you take the money out.

00:58:15.190 - 00:58:19.479
Rizek Housari: All right, thank you very much. It's been my pleasure. We will pass it back to you, Amber.

00:58:20.690 - 00:58:30.690
Amber Posthauer: All right. Thank you, Rizik, for sharing your valuable time and expertise with us today. To reiterate, today's presentation was recorded. We'll be sharing the recording in the coming days.

00:58:31.320 - 00:58:47.849
Amber Posthauer: At the end of this call, a survey will populate in a new window. Please take a brief moment to complete the survey, as it lets us know what topics are important to our listeners, and helps make our education program as current and relevant as possible. That concludes our webinar for today. Thank you, everyone, for joining us, and have a great day!