Subscribe via:
Show Summary
In this conversation, Adam Kintigh discusses the advantages of the tax code for business owners and entrepreneurs compared to regular W-2 employees. He emphasizes the importance of understanding tax strategies to maximize earnings and keep more money in one’s pocket.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Adam Kintigh (00:00)
It was across the board. Like you said, when you get to a point where you think I should have done this a while ago, the way I see it is accidents happen all the time. And especially nowadays, any social media or drive through any city and you see all the signs, interact, need a check. If we don’t win, you don’t pay. So just remember that the poorest people in this country can hire the best attorneys. It costs them nothing. And you can’t set these things up after the fact.So it’s being proactive and getting these things started immediately is so important.
Dylan Silver (02:05)
Hey folks, welcome back to the show. Today’s guest, Adam Kintigh, has spoken at real estate investing seminars over the past 15 years and has been involved in tax strategy, estate planning, setting up businesses, self-directed retirement accounts, and much, much more over the last 20 or so years. Adam, welcome to the show.Adam Kintigh (02:25)
Thanks for having me.Dylan Silver (02:26)
It’s great to have you on here. I always like to start off at the top of the show by asking guests how they got into real estate space and in your case, the real estate services space and working with investors.Adam Kintigh (02:38)
Yeah, it was a dumb luck. had a friend that had referred me into the business and previously I was a licensed insurance agent and was licensed in 43 states and ⁓ looking for a change and a friend referred me to work for a company. I’m not an attorney. I’m not a CPA. said, well, how am going to do that? So when talked to a guy, gave me a stack of books and I started, ⁓ got very fortunate in working with the top attorneys and CPAs and financial planners and estate planners andand just helping business owners and real estate investors with their asset protection, tax planning and strategies and all the fun stuff that comes along with that.
Dylan Silver (03:15)
I have recently discovered, and my own growing business as a real estate agent, but also as a podcaster, how important this is because I think most people, newer entrepreneurs, start thinking about these things maybe when they’re maybe a little bit behind the eight ball. They’re like, I probably should have done this a little bit earlier. But then of course you’ve got medium and large sized businesses that have been doing this for years.Is there like an avatar of someone that comes to you like a more established business someone starting out or is it across the board?
Adam Kintigh (03:45)
It was across the board. Like you said, when you get to a point where you think I should have done this a while ago, the way I see it is accidents happen all the time. And especially nowadays, any social media or drive through any city and you see all the signs, interact, need a check. If we don’t win, you don’t pay. So just remember that the poorest people in this country can hire the best attorneys. It costs them nothing. And you can’t set these things up after the fact.So it’s being proactive and getting these things started immediately is so important.
If you have one rental property, the question becomes, what would it cost you just to file a response if there was an accident? And of course, your insurance, everybody keep good insurance. Just remember, there’s so many things that happen that insurance won’t pay or won’t pay enough. And that’s why having that LLC set up and operating properly is so important. In the event that this were to happen, there was an accident that the insurance didn’t cover.
you want to make sure that you’re not the person with these massive legal bills. And that’s why it’s being proactive is so important. And also from a tax standpoint, depending on the type of investing you’re doing, if you’re doing wholesaling rehabbing, or if you’re a general partner in a syndication, you have active income, thousands of dollars in tax savings, just to have your LLC set up and tax properly and documenting things properly. So whether you’re looking for tax savings or
asset protection. Again, I can’t go backward for things that have already happened. So getting these things set up and established immediately is always important.
Dylan Silver (05:16)
Mm-hmm. Mm-hmm. Do you you mentioned a couple different? niches that you’re involved in tax strategy, know ⁓ asset management and planning you mentioned, know when something happens you want to make sure that you’re set up properly I Want to ask a couple granular questions about you know where folks can potentially utilize your services, you know tax preparation Is that something that you do?Adam Kintigh (06:27)
Yeah, we have a ⁓ we’re partnered with some of the greatest CPA firms. So we have a ⁓ used to be in house where we have these our CPA firm is in our office. And as that grew, they moved into a different location. So they’re a couple of miles down the road now. But we’re really fortunate that we get to work hand in hand with all these top tax professionals. In any any questions that pop up and in being proactive and doing tax planning is something we love to do.Dylan Silver (06:52)
Anything involved in the bookkeeping space or is that separate entirely?Adam Kintigh (06:56)
We have people that do bookkeeping. My recommendation usually is to find a local bookkeeper. You you can work with a CPA firm to do bookkeeping. What I found is they’d normally charge three times the amount that would cost you to hire a local bookkeeper. And depending on the size and scope of what you’re doing, if you have a few rental properties, that may not even be worth it to have a bookkeeper. If you could keep a, if you have a property manager, they’re going to provide you with all of your ⁓ capital maintenance and, and, or ⁓improvements or repairs that you do. ⁓ So depending on what you’re doing, Excel spreadsheet, spiral notebook, whatever system you can use to keep things organized is fine with me. But again, bookkeepers, they’re, I think, very valuable. If you’re one of those people that you really just, ⁓ you cringe when you hear bookkeeping, see if you can hire a local bookkeeper for a hundred, couple hundred hours a month to keep you organized on those things.
Dylan Silver (07:50)
That was definitely me when I was thinking about that. said, well, I don’t know how much I’m gonna have to be spending on this, but I wanna pivot a little bit here and ask you about the vertical integration. When we talk about tax strategy, when we talk about tax preparation, also setting up your business properly, I’m actually surprised that there’s folks like yourself that are vertically integrated in this stack because in many…I’ve seen this myself, you when I’ve gone to, you know, ask folks for tax preparation, they say, no, we just do this, we don’t do all these other things. So it is very convenient to be able to go to you for all these services.
Adam Kintigh (08:30)
Yeah, it’s important. And most people don’t know, I work with people that have been operating for 20, 30 years and their tax professional literally plugs in information, says, here’s what you owe. And really do they take time to explain to people all these things that are available, uh, that they can do a little bit different, uh, to help save money in taxes. And I think the tax code is really written for, uh, business owners and entrepreneurs in the U S and investors.to be able to keep more of the money they make. So when you’re just a regular W-2 employee, you make the money, they take taxes out as you make it, and you use what’s left to pay the bills. When you have a business, you’re gonna make the money, spend the money first, and then pay taxes on what’s left. Your dollars go a lot further when you have a business. Or even as an investor, you have passive income, it automatically gets offset by passive losses.
And even though you’re putting money in your pocket every month, you pay little or no tax on that money that comes in. So tremendous benefits to owning real estate or having a business of any kind. The tax code is written for you to be able to keep more of that money. You just need to be working with professionals that will let you in on those secrets of how you can keep more of that money in your pocket.
Dylan Silver (09:43)
When I think about not just seasoned investors but also newer investors and also folks who may be on the service providing side, whether that’s as a broker, an agent, ⁓ mortgage broker, there’s a lot of mistakes that can get made very early on thinking like, I’m not a business owner, when in actuality you are. If you’re starting out in any of these ⁓ niches, you are a business owner, you’re working for yourself.Is there a point in time where you think it’s right to reach out to someone like yourself? Is it maybe ever too early or when is a good time, right?
Adam Kintigh (10:54)
Yeah. If you are starting a business in your ⁓ SOP, immediately reach out to ⁓ professionals and get your entity set up right away. It’s the date of incorporation when you’re forming the LLC, that date of incorporation is what matters most. So as you’re, you’re planning a business, oftentimes I hear people say, well, I talked to my CPA and he said, I don’t make enough money for me to be incorporated.And that’s a big fat question mark. And I remember that the highest, your highest audit risk is when you file a schedule C and that’s where you’re itemizing out your business expenses. It goes on a schedule C. You are 900 % more likely to be audited when you file a schedule C versus an S corp or an LLC taxed as an S corp. The audit risk is almost zero. It’s less than one quarter of 1%.
So you keep that in mind. And additionally, there’s things that an S-Corp or an LLC taxed as an S-Corporation get to write off that you as an individual sole proprietorship do not. So there’s a lot of advantages to getting these things started immediately. And again, I can’t go backward for money I’ve already made. We’re very limited on expenses for things that you have spent money on prior to the date of incorporation. The IRS limits you to $5,000 of startup cost and $5,000 of education.
for an expense prior to the data incorporation. So it’s really important getting that set up and hopefully you’re starting to see why I say that data incorporation is so important and also from a protection standpoint as well.
Dylan Silver (12:28)
I want to ask you about the investing space, you know, because folks may be coming to you for a number of different things, getting set up as a business for tax strategy, but they may also be wondering, hey, I’d like to do real estate investing or maybe I am a real estate investor, but I’m not too familiar with the tax strategy side. How much guidance are you able to give folks as far as, this is maybe an asset class that you should look into or you should be looking at these types of deals? Is that something that you do?Adam Kintigh (12:56)
That’s a good question. No, we are not investment advisors I wish I was smart enough to tell you what to buy when to buy and where to buy that is not our area of expertise ⁓ Plenty of other people that may help you with that We will help you on the tax and legal side of things in the protections estate planning ⁓ self-directed retirement accounts ⁓ Tax planning and strategies. Those are the things that we specialize in that we can help you withDylan Silver (13:23)
Got it. I want to ask you a follow up question to that. Cost segregation. This is to my knowledge a part of tax strategy, but there’s also people that specifically do cost seg. Do you do cost seg and then also what’s your opinion of cost segregation in general?Adam Kintigh (13:39)
Yeah, so it is a amazing strategy for a lot of people in doing these cost seg studies. ⁓ We don’t do the cost segs. ⁓ Our CPAs will take those cost segs and make that part of your tax planning and tax strategies. And I always just remind people that doing a cost seg ⁓ creates these massive depreciation losses that can then blow back to your personal tax return and offset your W-2 income.So I work with a lot of people that are high W-2 income wage earners and either you are a real estate professional and you have your, the qualifications to be a real estate professional. What that allows you to do is for all these passive losses that can only be offset by passive income. It allows those passive losses to offset your other sources of income. So you have to, you or your spouse have to be a real estate professional to qualify for that.
Unless there’s the short-term loophole where if you have an Airbnb or a VRBO short-term property that you’re managing yourself, you can meet the material participation requirements. Plenty of people do that as well. for 100 hours in managing the property, your hours are greater than that of anybody else involved in the management of that property. Or the 500 hours rule where
you or you and your spouse meet the 500 hours for material participation in the management of the property. But yeah, this, this creates these massive losses that can be tremendous value. Does it work for everyone? No, it does not work for everyone. I, I would recommend that you absolutely reach out to your CPA, reach out to a professional and talk to them about that as a strategy to help you keep more of your money.
Dylan Silver (15:05)
Mm-hmm.When we’re talking about, you mentioned ⁓ offsetting a W-2 income, high earners. I have a question for maybe folks who wouldn’t consider themselves high earners, know, maybe teachers, maybe work in local government, any number of jobs and professions, but maybe they’re getting into real estate or maybe they have a business that they’re starting aside from this. Is it possible for them as well to potentially offset some of their W-2 income taxes?
Adam Kintigh (16:32)
Absolutely.Yeah. And if you’re not a high income wage earner, the way that they’ve got the tax code set up is if you make a hundred thousand dollars or less, then your passive losses will offset your active income. So if you were a teacher or you had a ⁓ W two day job and you also have rental properties, those rental properties are most likely creating passive losses. And when you make less than a hundred thousand dollars a year, those passive losses will offset your other income.
If however, you make more than $100,000, that’s your modified adjusted gross income, and this is whether it’s just you or as married filing jointly or more than $100,000 for every $2 above $100,000, you lose a dollar in passive losses. So by the time you’ve made $150,000 as your modified adjusted gross income, those passive losses will no longer offset your active income.
That’s where the tax planning comes into play, working with good CPAs, good tax professionals to help you with those strategies.
Dylan Silver (17:34)
For folks who may be listening to this, including I’ll throw myself in this batch, thinking, well, that sounds complicated. How do I even know what questions to ask? I already maybe have this business or this investment. How do I make sure that I’m going about this the right way? Will you guide folks along the path, say, hey, you have this. This is actually how you can take advantage of this. We see that you have this investment property, this Airbnb or what have you. This is how you can offset this income using this property.Adam Kintigh (18:03)
Yeah, we have a team of professionals like myself that will take the time to go through what you’re doing and how you’re doing it, gather up some information of what you’re doing, have a consultation. There’s no cost for that. And we can plan out then the things that you can and should be doing to protect yourself and your family, cover your estate planning and make sure that you’re documenting things properly for tax purpose as well. So yeah, we’d love to do that.Dylan Silver (18:31)
Adam, we are coming up on time here. Where can folks go to reach out to you? Maybe they’ve got tax questions, maybe they’re starting a business and wanna make sure it’s structured properly. How can folks get in contact?Adam Kintigh (18:42)
Yeah, go to if you just sent an email to [email protected] then we can schedule a time and one of our professionals can have a talk and we can figure out what it is that we can help you with. Again, it’s just [email protected].Dylan Silver (19:05)
Adam, thank you so much for coming on the show here today.Adam Kintigh (19:08)
Thank you so much for having me.
