Tax Strategy Beats Tax Prep: How Real Estate Investors Can Keep More Profit

Ryan Otto (00:00)
there are so many opportunities. you know, I might say when you think about how to save money on taxes, many people think, OK, well, what can I buy that’s going to be a tax write off so I can save money on this? And, you know, just looking at things from that perspective, there’s there’s a zillion other things out there that might

just need you to rearrange a couple of things in your life where you don’t have to go spend a bunch of cash in order to get write-offs on things. Now, if you do have a bunch of cash and you’re like, listen, I want to use this money to create something else, to create write-offs, buying something isn’t necessarily always the thing either.

Scott Bursey (02:18)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host, Scott Bursey. And today we are firing up the engine with some serious high octane wealth building fuel. Every pro knows that making money is only half the battle. Keeping it is the two path to building an empire. Our guest, Ryan Otto of Accent Financial Services is the creator of Tax Smithing. And he is the pro who is specializing in simplifying complex tax strategies.

for your financial opportunities. Get ready to fill your Tate Pros. This session is going to be epic. Ryan, welcome to the show.

Ryan Otto (02:54)
Scott, thank you so much for having me. I’m excited to be here today.

Scott Bursey (02:57)
It’s just wonderful to have you here today. And for our listeners who may not be familiar with your journey, please tell us how your career at and where are you pouring your fuel now?

Ryan Otto (03:08)
know, I started in accounting 26 years ago now, which is absolutely insane. And yeah, I bought Accent about four years ago and I have been working on bringing a small tax firm from the north suburbs of Dallas into a big major tax and accounting firm that can help people with

strategy and business and consulting and all kinds of things. And we’ve made some good progress over the last four years and we’re excited to keep helping as many people as we can.

Scott Bursey (03:43)
That’s awesome, Ryan. And what really caught my attention about you was the way that you’ve been able to simplify complex tax strategies into financial opportunities for business owners and high income earners, climaxing in the creation of your system. Tax Smithing. That focuses on clarity and profit assurance is just pure Investor Fuel.

Ryan Otto (03:59)
Yeah.

Yeah, I Tax Smithing is fantastic and we continue to build it up. ⁓ Right now we have sit down strategies where we help people design their lives. We talk about prior taxes and strategies that could have been done. Our biggest focus right now is helping small business owners pay their kids legally and strategically in order to

not only provide some generational wealth building for kids, but also provide an education, which is something that, you know, financial education is not necessarily that thorough of a subject in schools these days.

Scott Bursey (05:39)
Ryan, now that we’ve covered your amazing background, let’s drop this conversation into overdrive and jump straight into your strategic insights. You know, and on the note of tax smithing, what is one unique advantage of a proactive planning approach like tax smithing over traditional reactive tax preparation?

Ryan Otto (05:59)
Yeah, you know, so the thing to think about and you know, if you know anything about accounting, we do our fair share of time traveling. But one of the things that you can’t do is go back to prior years and make things happen that didn’t happen that you wish they could. And so so for us, the the focus on let’s at least get stuff in place so that we can go back and use that again.

⁓ It’s a huge thing and the benefit there is every strategy that you put in place now can serve you now and forever into the future and it really is all about saving money. There’s so much money on the table that you don’t need to be giving to the IRS.

Scott Bursey (06:44)
Ryan, I’m hearing you correctly, turning a tax liability into a financial weapon, if you will.

Ryan Otto (06:50)
Yeah, that’s what we like. Yeah, we and we have, you know, people will come in and just say, I don’t want to pay taxes anymore. We say, yeah, well, if you’re up for it, we’ll come up with some strategies for that.

Scott Bursey (07:00)
And let’s, let’s shift gears here just a little bit. What is the biggest documentation or compliance mistake real estate pros make that, ⁓ unintentionally jeopardizes an otherwise solid tax strategy.

Ryan Otto (07:13)
Yeah, well, know, so real estate professional status is that’s one of the things that comes up all the time. Like, okay, well, what do I need to do to be to stay qualified for that? know, documenting your hours, documenting your travel time counts towards this stuff. Document your travel. It’s not just, you know, I drove 37 miles today. It’s I spent four hours in the car working on real estate stuff.

So that’s a pretty big one, I think. Just make sure you write it all down so you can prove that you’ve spent the number of hours that you’re supposed to.

Scott Bursey (07:50)
Yeah, documentation, it always comes down to discipline. know, sloppy paperwork means you’re leaving cash on the table. And that’s a profit leak we need to plug immediately, bros.

Ryan Otto (08:01)
Yeah, definitely.

Scott Bursey (08:03)
Let me ask you this, ⁓ Ryan, beyond depreciation, what’s the most underutilized tax opportunity for active real estate investors right now in your view?

Ryan Otto (08:12)
S corporation. Yeah, the the whole strategy of doing your work through an S corporation and in Texas, it’s fairly new. Real estate professionals weren’t able to do that until about a year and a half ago, but it’s huge. And when you really start making money in real estate as an active real estate professional, man, that.

15.3 % self-employment tax is a big bite to have come out of your income. And the S-Corporation strategy can help mitigate that by a significant amount.

Scott Bursey (08:52)
Absolutely. And where do you come into play? How can you help our pros with that very same philosophy?

Ryan Otto (08:57)
Yeah, definitely. So I have a bunch of tools that will tell you exactly how to do it. actually, I’m learning how to ⁓ vibe code with AI right now. So I might even get this launched as an app or something at some point. But I’ve built some real cool calculation things to help people make decisions about this. And.

You know for us, we also help people set up their businesses and do their bookkeeping.

So if somebody is like, hey, I want to do this. I don’t know how to do this. That’s something that we help people with all the time. Getting your business, you know, get registered with the state, get registered with the IRS, have all of your paperwork put together in the right way and take that stuff seriously.

We consult with people on all of those things all the time and we would love to, you know, help more people take advantage of that.

Scott Bursey (10:27)
That’s awesome. That’s the type of fuel that ignites a fire right there. And now as far as tax smithing, where do you see this going? What’s the biggest opportunity out there right now?

Ryan Otto (10:38)
there are so many opportunities. you know, I might say when you think about how to save money on taxes, many people think, OK, well, what can I buy that’s going to be a tax write off so I can save money on this? And, you know, just looking at things from that perspective, there’s there’s a zillion other things out there that might

just need you to rearrange a couple of things in your life where you don’t have to go spend a bunch of cash in order to get write-offs on things. Now, if you do have a bunch of cash and you’re like, listen, I want to use this money to create something else, to create write-offs, buying something isn’t necessarily always the thing either.

mean, there are some fascinating things that you can put money into. You know, obviously in Texas,

Energy is a big thing for us and there’s ways of putting money into energy as as an investor Where you can get a pretty significant amount of that back as as tax credits and tax deductions ⁓ It’s the same thing there. There’s some real wild things out there. You can invest in a movie There’s a there’s a credit for movies where you get back It’s like four point three times the amount of money that you put in as far as tax

Inductions like that’s wild and nope like most people would never think about that stuff So so when you start to think about like, okay, what do I what can I do? Just know There’s so many things out there that you would never even think about Talk to somebody who knows this stuff

Scott Bursey (12:15)
That’s some huge rocket fuel right there. And Ryan, what key financial or operational metric do you coach entrepreneurs to track monthly to ensure they are maximizing their tax-efficient income?

Ryan Otto (12:28)
Yeah, well, so I’ll say as part of our tax-smithing program, we like to sit down with people quarterly. And at the very least, let’s talk about where you are so far and what you might need to do as far as like, hey, you’re having an awesome first half of the year. Let’s start working on some strategies now so that it’s in place and we can pull something off before the end of the year. Like, you know, we’re talking about real estate.

The short term rental stuff, the best time to do that is right towards the end of the year. It gives you the biggest opportunity to use all of that and you add it to a cost seg and okay, we can trigger a big tax event in this year knowing that you made a whole bunch of money. Or maybe it’s a slower year and you’re like, listen, normally I would contribute to a 401k, but this year I wanted all to go Roth.

because it’s just not gonna be that much in taxes for this year. So let me go deal with that. Yeah, it’s, you know, your life changes ⁓ more than you might think sometimes. And just having regular conversations, I think is a ⁓ very good way of keeping on top of things that you’ll realize later were actually more important than you thought.

Scott Bursey (13:48)
Clarity leads to cash flow. Effective communication, if I’m hearing you correctly, is everything.

Ryan Otto (13:55)
Yeah, yeah, absolutely. And stay on top of your bookkeeping because it’s important,

Scott Bursey (14:43)
documentation, like Ryan said. And Ryan, you’ve given us so much valuable information thus far. Is there any other words of wisdom that you’d like to leave with our audience today?

Ryan Otto (14:54)
Yeah, I just said it. Stay on top of your bookkeeping. It is so difficult to make good decisions if you don’t have your information right. And when it comes to your money, even if you’re talking about your personal finances, have your stuff in order so that when an opportunity comes your way, you know if you can do it or not.

You’re going to plan for doing investing in something like, listen, next year I want to go buy a property. Great. What does it take to do that? you have everything in place so that you can do that? And is that what your life looks like? Is that a realistic thing? But man, it really is so much about, know, sometimes it takes a little bit of ⁓ personal honesty to sit down and confront some of those things.

And it can be tough, but it’s so worth it because making better decisions, it’s the key to everything you’re investing in.

Scott Bursey (15:58)
spot on. Ryan, that insight is priceless for our pros and for our pros that would like to follow your journey or collaborate with you to get more insight. What’s the best way for them to reach you?

Ryan Otto (16:09)
Yeah, so our website is accentfinance.net or you can find us on taxsmithing.com which is it is a work in progress, but it’s going to be absolutely amazing. And we’re actually we’re going to have all kinds of tools and stuff for for people to just use out on the website as well.

Scott Bursey (16:29)
Awesome. Thank you for joining us today, Ryan.

Ryan Otto (16:31)
It was my pleasure, Scott.

Scott Bursey (16:33)
It was just awesome having you here. And to our listeners, we appreciate you. If you got value from today’s episode, please subscribe. We’ll be filling your tanks with a lineup of elite guests, just like Ryan Otto, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.