Tax Strategies to Grow & Protect Your Wealth with Jeff Socha – EP 167

Interview with Jeff Socha

Tax Strategies to Grow & Protect Your Wealth with Jeff Socha

Featured on This Episode: Jeff Socha

✅ What he does: Jeff Socha is a financial consultant and the Founder of Socha Capital Wealth Strategies. Jeff’s specialization in business and personal financial planning is in his family’s roots – he spent years working in the family business, founded by his grandfather in 1950, before taking a position as a member agent at the Nautilus Group, later founding Ark Financial. Jeff has extensive experience developing intricate financial solutions for business owners and executives. He has been involved in two political action committees through which he lobbied the United States Congress on finance and tax regulations. His innovative solutions for lowering the risk of business ownership and increasing his client’s profitability have been nationally recognized.

💬 Words of wisdom: “Our country is really hooked on get-rich-quick, shortcut, easy button, instant gratification. If you want to improve your health, eat less and move around more. But that doesn’t sell anything. It doesn’t make anybody money. I think it’s the same way in the financial world. And so, people are looking for the shortcut or the easy button or the hidden secret. And the secret is, put in the work. That’s the secret.” – Jeff Socha

🔎 Where to find Jeff Socha: LinkedIn | Instagram | X

Key Takeaways with Jeff Socha

• Hiring a financial advisor at age 15
• Lessons from lobbying Congress
• Individual indexing vs. Index funds
• The greatest investment is your tax strategy
• Difference between a CPA and a tax strategist
• The IRS Dirty Dozen list
• Tax strategies done poorly
• It rarely pays off to fight the US Federal Tax Court
• Playing the long game
• Paying the tax has to stay on the table
• The five key areas for financial freedom
• Red flags to watch for when hiring a financial advisor

Jeff Socha | The True Secret to Success — No Shortcuts!

Free Strategy Session 

The Lifestyle Investor Insider

Jeff Socha Tweetables

Resources

• Socha Capital
• Jeff Socha on LinkedIn | Instagram | X
• Talk Tax with Jeff
• 23 Overlooked Tax Strategies for Entrepreneurs to Create Financial Freedom
• Garrett Gunderson
• Warren Buffett

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Read the Full Transcript with Jeff Socha

Justin Donald: What’s up, Jeff? So good to have you on the show.

Jeff Socha: Thanks, Justin. Happy to be here.

Justin Donald: Yeah, this is fun. Well, we’ve been talking about doing this for a while. And by the way, we have connected on some other content because you come and speak to the Lifestyle Investor Mastermind all the time. We’ve had you on, I don’t know, three or four times to talk tax strategy. And I built out a tax strategy master class that we’re going to be launching here at the beginning of the year and one of the bonus pieces is a video from you. So, I mean, we’ve talked tax a ton but we’ve never had you on the podcast. And so, I’m excited to have you on the show so we can dig in a little bit more both philosophically and also tactically. So, welcome.

Jeff Socha: Yeah. Thanks. Happy to be here. And I’ll just say that your tax database if you will, is about the most exhaustive I’ve seen of any group I’ve ever interacted with.

Justin Donald: Well, I appreciate that. It’s a super kind compliment knowing that you interact with tons of the who’s who and I know that we met through our good friend, our mutual friend Garrett Gunderson, who was actually just at our Lifestyle Investor retreat that we had this last week, which was such a fun time. And he talked tax strategy and we did a little panel on it, which was fun. But, yeah, what a great compliment to be paid to have the most exhaustive list of tax strategies that you’ve seen anywhere because that was our goal. We wanted to create a one-stop shop where people could join our community. And in one quick strategy, maybe, I mean, they can use more but the goal is in one strategy, they can more than cover their annual membership tuition.

Jeff Socha: The possibility is 100% there and the database that I’ve seen and, I don’t know, maybe we’ve added to it since I last looked at it but that’s definitely possible if somebody is willing to do their homework.

Justin Donald: Yeah. Well, we’ve loved having you. You’ve brought all kinds of value and content to our community. It’s been wonderful. You know, I love making you work. When you look at the list and you’re like, “Oh, shoot, you guys have a lot of stuff. I’ve got to really have to get creative.” And I love that. And the best part is you did get creative and you came up with some more awesome strategies, and I want to be able to showcase you and highlight you and even talk about some of the specific strategies that we’ve taught to our community.

Jeff Socha: Yeah. I’m happy to open it up. Let’s get the word out.

Justin Donald: So, how on earth did you get into tax strategy? I mean, I don’t think anyone like wakes up like, “Ooh, I can’t wait to change the world by learning to be better at taxes and like read this thousand, I don’t know, a couple of thousand page IRS code.” Like, that doesn’t seem interesting. That seems really boring. So, how on earth did you have this idea to become an elite and premier tax strategist?

Jeff Socha: So, have you heard the saying that there’s two reasons somebody does something, the one that sounds good and the real one? So, I’m sitting here debating if I give you the one that sounds good or the real one. I feel like I should give you the real one but there’s a lot of vulnerability for all the who knows how many people are going to listen to this. So, I mean, I think if you go back to my childhood, I grew up in a family-owned business that my grandfather started as a construction company. And this is like your millionaire next door kind of deal like manual labor, physical work, really hard, there’s nothing glamorous about it. And I heard complaints about taxes and it wasn’t just taxes. It was more broad than taxes but it was sort of it usually started with something like the really wealthy this or the really rich this or the people that really are in the know this, whether it’s about investing or taxes or whatever. And so, I was always into finance and investing. I had my first financial advisor when I was 15. That was great.

Justin Donald: Wow.

Jeff Socha: I had saved up money working in the summers. I think I had like $20,000. I was like, “I’m so rich.” So, I told my dad, I was like, “I need your financial advisor to come over.” It was like this Amex had like a financial advisor service or something. This dude came to the house and told me like, “Put it in mutual funds.” So, fast forward, I find my way out of construction and into financial services that I am just more passionate about finance. In financial services, most people in financial services basically make their money as like financial salespeople, like financial product salespeople. I’m trying to sell you this insurance. I’m trying to sell you this portfolio. I’m trying to sell this and that. And so, what I found is that most of the people that had the money had been through a number of those financial sales meetings and weren’t very interested in another one. So, I thought, “Okay. How am I supposed to make it in this industry?” And so, I thought, “Geez, I’ve got to find some like unique value add beyond just let me tell you why our thing is better, faster, cheaper, or whatever. So, I got this great opportunity to lobby Congress on tax legislation for a political action committee, and that led to getting hooked up with a second political action committee and I spent about five years doing that, going up to DC, meeting with legislative aids and members and talking about tax things. And that was really eye-opening.

Justin Donald: I’m sure it was.

Jeff Socha: Yeah. That’s a whole different episode. So, yeah, that one’s going to be called our Country’s Run by 24-year-olds.

Justin Donald: Yeah. And are we allowed to say that the whole art of lobbying is, I don’t know, legalized corruption? I mean, it’s to a certain degree.

Jeff Socha: The short of it is I’m talking to a 23-year-old who doesn’t pay tax. You know, they’re all like minimum wage welfare supported by their parents. And so, if I’m trying to talk to them about tax, they don’t understand. So, it always comes back to the common denominator that everybody up there understands, which is votes and constituents and reelection. So, it basically comes down to I represent a big PR machine and we’re going to put out good or bad PR for you. And based on all of our research, I’m going to try to convince you of this one-pager that there’s this many voters, constituents, that are going to be impacted and our PR machine is going to target those people. And if you’re my competing lobbyists, you’re trying to convince them your pool of voters is bigger and your PR machine is better. And so, then they just go, “Oh, jeez, which one is going to help us or hurt us the most and go that way.” That’s my 62nd summary. So, during that time…

Justin Donald: Versus what’s in the country’s best interest.

Jeff Socha: Yeah. Yeah, sure. So, during that time, what I also saw in Congress is that all the members tend to have or at least their families have businesses and real estate and charitable interests. And wouldn’t you know that all of the tax advantages lie in business, real estate, and charitable endeavors? So, you could say back to the two reasons for doing something, one that sounds good is, well, you’re providing jobs and housing and lessening the burden on the state or perhaps the real one is because that’s what all their families have. So, I’ll leave that up to you to wonder. So, starting to uncover, go, “Geez, okay. There are big things that people do but how do I bring that down to somebody like my dad who’s an electrician? How do I do that now?” Just like this dude and a local economy doing something to make a living makes more than the average person nailed by taxes. How do I help somebody like that? And so, that’s sort of how all that started and I realized, “Okay. The people who do have some money are tired of those financial sales meetings. And so, if I want to have a successful career in finance, I need a unique value.” And so, all of that sort of came together and I realized, “Wow. They all want to talk about how can they improve their tax situation.” So, that’s sort of become like a game of just figuring that out.

Justin Donald: And that’s exactly what it is. It’s a total game and there’s a blueprint and there’s a way that you can partner with the government to help them get what they want. And by proxy, as a natural byproduct, you get some sort of tax incentive or something that is a win for you. And so, it’s funny, I do a bunch of keynotes. I don’t keynote as much as I used to but I still do a handful a year, maybe 4 to 6 a year. And I always start off with, “Hey, audience, do you want to hear about the best deal that I have ever done? Like, the single greatest return I’ve ever had on any investment?” And everyone wants to know it. And I followed up with saying, “Hey, did you know that this deal that I did, you can do it, too? All right. The same investment, you can do it, too. Is anyone even more excited?” And everyone’s excited and I say, you know, I pull up a slide and I say, “The greatest investment you can make is into your tax strategy because a great tax strategy is going to save you more money than anything else.” And the compounding of those dollars, which would be a lost opportunity cost, right, but by capturing them, even if it’s just $30,000 a year for let’s just say 30 years, somewhere between 10% and 15% interest, you’re talking about $10 million to $13 million. It’s incredible. So, it’s such a massive opportunity.

Jeff Socha: Yeah, it’s not insignificant. And now we’re even finding more sophisticated ways of tackling that. Like, in the investing world, for example, a lot of people don’t realize this exists but like in the investing world, most people go out if they have a portfolio in the market, they buy index funds like S&P 500. Well, now there’s technology that allows us to do what’s called individual indexing, where imagine S&P 500 but instead of buying like brand name index fund, we buy all 500 stocks individually. And then you do daily tax loss harvesting because those stocks move every day. So, let’s just say like today, Coca-Cola goes down. So, we’re going to sell it and we’re going to buy the closest thing to it, like Pepsi, right? So, like Coke goes down today, we sell it, we buy Pepsi, and then everything’s moving. Then Pepsi goes down, we sell it, we buy Coke. And we’re just playing this game with daily tax loss harvesting. You can generate an extra 2% or 3% of tax alpha even on your investment portfolio. So, like it’s getting really sophisticated for people who care to try to capture that tax benefit, whether it’s on income, capital gains sale, your investment portfolio, estate planning, whatever arena it’s in.

Justin Donald: Yeah. And on the crypto side of things, for those that do anything in that arena and most of that is super speculative, super risky, but you’ve got a few projects and a few specifics that are standouts such as Bitcoin or Ethereum. And there are no wash rules currently as we sit today. So, that’s another way you can tax loss harvest on those where you can literally sell them and buy them back immediately and clock that loss.

Jeff Socha: Which is amazing.

Justin Donald: It’s unbelievable. Yeah, tons of opportunity there. One of the things that I’d love to talk to you about just to get things kicked off is the difference between a CPA and a tax strategist because most people think that their CPA or their tax planner is a strategist. And that is a horrible assumption to make because most of them do not know how to do strategy. Most of them do not even know how to do our onboarding document when someone joins our mastermind has over 50 unique tax strategies that virtually most CPAs do not even know and do not even use, though it’s all in the tax code. So, I’d love for you to kind of distinguish there because for years I’ve had a tax strategist. You and I have worked together here for a while but a tax strategist is going to kind of direct and teach a CPA and help them to make some of the moves that they otherwise wouldn’t know. And I’d love you to elaborate.

Jeff Socha: Yeah. You know, a probably really common complaint that I hear is people getting frustrated with their CPA. I don’t necessarily think that the CPAs aren’t capable of it. I think it’s more about the business model that they have. You know, in effect, they have a seasonal business model. Hey, we have this busy season in the spring and a busy season again in the fall, and we work like 100 hours a week during the busy season and don’t want to do as much in between. And most people engage with their CPA sort of in a last-minute way anyways. Hey, last minute, I’m going to dump everything on you. You know, maybe used to as a physical shoebox. Now, it’s a digital shoebox so to speak of dumping on them and going, “Oh geez, can you get my extensions or can you get this file or whatever?” And it’s a very transactional relationship. Seasonal. You know, we only talk to them in the craziest time of year for them. And then to sit back and go, “Oh, I’m so frustrated. My CPA is not creating tax strategy.” It’s like, well, the relationship wasn’t really set up for that in the first place. Tax strategy is not about filling out the form better. It’s about taking a look proactively. And most of the time when we talk with our CPAs, they’re always working on last year. So, like when I’m working on clients right now, we’re trying to work on this year, not last year.

And so, when we look at that and we say, “Okay. First of all, we have to spend a lot of time to really deeply understand your situation.” I’m a big believer that unless you want to engage one of those sort of financial product sales people who’s just going to sling answers at you, we take more of an engineering approach. We’ve got to understand all the facts and variables and resources. What do we have to work with, what can be done, what can’t be done? And so, once we have this really good understanding of where the starting point is, what we’re working with currently, then we can start to tear it apart and say, “Well, what can we change that would change the outcome without simultaneously creating some other adverse effect to your goals or to your life? So, then it’s sort of this engineering approach of going, “Well, now we sort of have to engineer and come up with which solution in which design and what combination helps change your specific outcome that doesn’t disrupt anything else to the point of making it not worth it and sort of craft that and then get all of that executed and implemented before the end of the year proactively so that then next year, when you meet with that CPA, the data that you’re giving them to fill out the forms, is different.” And then with that different information, you end up with a different result, right? And so, that’s very labor intensive, very time-consuming. And if you want a high-quality job and you’ve got a lot at stake, even more so time-consuming and labor intensive. There are some simple, easy things that just like everybody should do if you can and we can talk about some of those.

Justin Donald: Yeah. We should.

Jeff Socha: When you go beyond that, I’m a big fan of really making careful decisions there so we don’t end up with regret.

Justin Donald: Yeah, no doubt. And by the way, the options that exist, I used to look at the tax code is, “Here’s all the things you can’t do, and if you do these, you’re going to get in trouble and the IRS is coming after you.” But the reality is it’s more like a blueprint. Follow these rules. Do what the government wants you to do, truly look at them as a partner, and you’re going to get some great tax advantages. And so, I think since America is built on small business, small and medium business, what ends up happening is a lot of this code is designed to help these entrepreneurs. Now, there are definitely strategies that can help W-2s, people in corporate America, but there are so many more that really exist that business owners can take advantage of. And I’d love to hear some of your thoughts on that.

Jeff Socha: Yeah. I mean, there’s so much. If you are self-employed, have Schedule C income, 1099 income, side hustle income, even if you have maybe the majority of your income from W-2, we’ve worked with some professional athletes, for example, and all of their income from the team is W-2. And then they might have some sponsorship income that can come through as self-employment income, right, so we can tackle that. So, W-2 income is about the hardest one to tackle. There are a few things that you can do there but your options are limited. So, if you have any sort of self-employed business income, you’ve got so many options. So, then the challenge is, like you said in your onboarding, you’ve got like 50 things you try to teach people about tax. The challenge becomes you’re not going to do all of them and all of them are not appropriate. I mean, you’re talking about the IRS list. You’ve got IRS Dirty Dozen list, for example. And the interesting thing about the Dirty Dozen list is usually the Dirty Dozen list is a list of things that are all in the tax code. The reason they’re on this list is because it’s kind of like the most abused parts of the tax code. People that are basically saying, “Hey, I’m going to take like deductions that are not legitimate and not done properly.” And so, the IRS is like, “Hey, we’re aware there’s a lot of people abusing these parts of the tax code.” So, it’s sort of a warning of like, “If you go down one of these roads that shoe better fit, otherwise, we are coming for you.”

Justin Donald: That’s right. You bastardize some of the programs. You have a group of people that are just too aggressive and take things out of context. And it really hurts for those that are actually doing it the right way. But if you’re doing it clean, you’re going to pass audit. And something we talked about at our event is you don’t need to be afraid of an audit. Have great people. The IRS has already said they want to audit everyone, right, the 80 billion that they have. So, I mean, it’s coming. It’s just a matter of time. But you want to hire people that can fight the audit and win the audit and you don’t have to touch a thing. And really, the goal is not to get away with something. The goal is to follow the tax code as it is laid out and in the spirit of how it’s laid out. And if you do that, you’re going to be fine.

Jeff Socha: Exactly. Being in this line of work, I get pitched constantly new tax strategies, right? Somebody, some tax attorney, some person out there saying, “Hey, check out this thing. It’s so great and you should get all your clients to do it.” And so, I used to try to filter all that stuff out myself and then I thought, you know, this would be a better way to go about it. I went and I put this big name, white collar criminal defense attorney on retainer, and I said, “You know what? All this stuff people are throwing at me, I’d rather you vet it and tell me upfront if this is going to cause problems rather than get into it, cause problems, have to call you, and pay you a lot more to get me out of it.” So, I started paying this guy on the front end to be like, “Hey, when I get pitched new stuff, take a look at this for me.” And what’s interesting is this year, just in the last few months, I’ve been pitched some stuff that it just stinks to high heaven. And so, what I’ve been telling some people recently is what are some markers like if you’re getting pitched a tax strategy, how do you know if it’s sort of maybe a little like too far into the gray fringe that maybe you shouldn’t go there?

And there are some things that really stand out that you made me think of. Like, one of them is if people start talking about we’re using a law that people don’t know about or I’m one of only a few people that can do this or almost like it’s this like secret thing. And I’m like, “Look, I’m not into experimental tax strategy.” If we can’t put it on a Super Bowl commercial and on the billboards and you can’t point to like a thousand professionals that have done this transaction for people, I don’t want anything to do with it.

Justin Donald: Exactly.

Jeff Socha: Because like it’s just not worth it. I don’t need the client. I don’t need the money. The tax savings can’t be that big. And then I tell people, “Look, if you engage in a really, really high-risk transaction, just know if you want to go fight the U.S. federal tax court, you probably need to reserve $5 million to $10 million in legal fees.”

Justin Donald: Yeah. They have unlimited money, as we know.

Jeff Socha: So, if this savings is enough that if you had to take $5 million or $10 million of the savings and throw it in the trash and you still thought it was a good deal, I don’t know, maybe you do it because you go, “Hey, I got $10 million. This deal is going to save me $100 million so I can just put 10 million over here in a bucket and go, ‘This is my tax court money.'” Okay. But most people aren’t in that situation. Most people are, “Hey, I’m going to go get into this extreme, super high, risky, aggressive tax reporting position to save me like $900,000.” I’m like, “The risk-reward there isn’t worth it. There’s so much down the fairway.” And so, what I’ve found is that the same way I had a hard time talking to people with money and figuring out how to add value in a way that would be a good business relationship for me. There are people that I guess are struggling even more so. So, what they want to do is find this exotic tax strategy of this like too good to be true, have your cake and eat it too, there’s no downside and only upside. I’m sure you’ve seen that in real estate.

Justin Donald: Seen a ton of them. Yeah. I’ve seen them in real estate. I’ve seen them on the tax side. I mean, yeah, we’ve dealt with a ton of these.

Jeff Socha: Yeah, it comes in all flavors. And when somebody is doing that, you’re like, “Here’s this person slinging me something that’s just like, you know, they just are coming from a place I think of high need like I need to make a fee. I need to make a commission, I need to make something, and you’re going, “Why don’t we just start with the exhaust all the basics, exhaust all the easy stuff, exhaust all those straightforward down the fairway, tried and true stuff. And if we’ve exhausted everything in those arenas and we still need a lot more, then maybe we really carefully examine what might else be out there.” But what I find far too often people will go from, “I’m not writing off my car,” to like, “Why don’t we just super crazy, exotic, high-risk tax strategy?” You’re like, “Why don’t we just go back to like writing off your home office or something?”.

Justin Donald: Yeah. It’s so funny to me, the strategies and the risk that people will take when there’s so much right down the fairway that’s easy to use, that there’s no disputing it. You can’t contest it. It is written very plainly, very clearly in the tax code. And so, like on our onboarding document, our goal is so someone comes in, they get accepted, they pay 55K as membership dues to be part of the mastermind. Most of these people are saving hundreds of thousands of dollars if not millions of dollars in taxes. And by the way, some of these people that have worked with you that have done a session and you’ve walked them through, you’ve actually been able to help them find ways that they can save and amend on past tax returns for their CPAs that didn’t do a good job. I’d love to hear some thoughts there because that’s a great strategy. When you don’t actually have a strategist, you can go back a few years and amend those if there are opportunities.

Jeff Socha: Yes, I would say most of the time we don’t find anything in the past. Occasionally, we do. And that is usually I don’t want to say that somebody made a mistake or an error, but.

Justin Donald: They happen. We know it. We see it all the time in our community.

Jeff Socha: Maybe a miscommunication or misunderstanding of the facts.

Justin Donald: You’re putting it very politely.

Jeff Socha: And so, sometimes there are big things in the past worth going and fixing. Most of the work is on a go-forward basis. But I will say, though, that oftentimes we can do an hour-long call with somebody, the Talk Tax with Jeff calls, and they in an hour it’s not uncommon we find $10,000, $20,000, $50,000 at least identified, hey, here’s things you could do that are in that basic category that you could go take advantage of.

Justin Donald: This is what you get when you go to business school at Harvard. You know, the people like me that can’t get in that have no shot of attendance at a school like that, we’ve got to hire people like you that have the big brain and can hack it at a school like that.

Jeff Socha: You know, they put out a lot of big consultants like the big firms. And so, some of my friends from there, one of them, he would sort of make fun of me. I’d be like, “Oh, what are you working on?” He’s like, “Oh, I’m working on this like Disney merger or something like big, humongous deal.” And so, he’d sort of nickname our clients. He’d be like, “So, you working on Concrete Roger and Big Fan Dan and all these people?” I’m like, “Yeah, Concrete Roger’s doing pretty good right now, you know.” So, yeah, I don’t know if they’re really big on going to work for average American entrepreneur or somebody trying to make it in the world. Yeah, there’s a lot of opportunity. And what I find probably the biggest thing that people need to do and this isn’t just hacks. I mean, I think so much of this you might say the same thing about investing or real estate or whatever is you have to carve out the time and make it a priority and go after it in sort of a proactive, intentional way. But that’s how you accomplish anything in life.

Justin Donald: That’s right. And don’t outsource it. I mean, you’ve got to partner with people, right? I don’t want you or anyone else that I work with on tax strategy to do it for me. I want to know why you’re doing it. Educate me along the process. I’m not just investing my dollars into this. I’m investing my time and I want a return on both. Right? That’s my goal.

Jeff Socha: Yeah. And so. I think that’s the hardest part because people are somewhat trained in this reactive mode of dealing with their taxes. I don’t know. I go the following year and dump all this information and get the bill that I owed for last year. And so, you’re going, “Okay. Well, at least one year you’re going to have to suck it up and like get caught up to the present day so you can deal with this year versus always being stuck in the rearview. And so, that’s probably the hardest part and making progress. And then I think our country is really hooked on get rich quick like shortcut, easy button, instant gratification. It’s like if you want to improve your health, eat less and move around more. But that doesn’t sell anything. It doesn’t make anybody money. It’s not really popular. So, it’s like, “Well, no, I need this program, I need this six-minute thing, I need this pill, I need this supplement, I need this whatever because eat less and move around more just is too boring.” And I think it’s the same way in the financial world. And so, people are looking for the shortcut or the easy button or the hidden secret. And the secret is put in the work. That’s the secret.

Justin Donald: Yep. Put in the work, educate yourself. It’s not someone else’s job but you can hire the best to help cut that learning curve down. And one of the reasons that I like you is not only do you know the tax code like the back of your hand but you’re actually an entrepreneur as well. You know, you started a financial firm, a boutique business and financial planning company that you sold a couple of years ago, had a multi-million dollar exit on that. So, you’re looking at tax code from the standpoint of an entrepreneur because you use this yourself.

Jeff Socha: Yeah. One of the things about tax planning too that I think there are a couple of myths that aren’t really talked about much. One myth is people think the goal is to pay no taxes. And when you understand how marginal brackets work and you realize, “Okay. There’s a first chunk of income I’m going to make that I actually pay zero tax on.” And then the next chunk is that 10% and the next chunk is at 12%. And then we get up to like 20 and 22 and 24 and these sort of inexpensive brackets, okay? And so, I tell people like, yeah, you’re probably going to pay tax on $300,000, $400,000, $500,000 depending on your income because that might be efficient, right? Like, we’re going to pay tax on that so whatever that comes out to. And then all this stuff in these 35, 37, we might go back to 39.6 or whatever, all these high-end brackets, that’s what we really want to tackle. Because when you start thinking about deductions and you think, “Okay. I have a dollar of a deduction,” and depending on if you have state income tax, to save this dollar is worth $0.40. Okay. So, I have this thing, it’s worth $0.40. And if I’m trying to get down to zero, I’m going to trade in something worth 40 for 20.

So, like, if you think that kind of math makes sense, then we probably do a lot of deals together. I take all your stuff at half price, you know what I mean? So, why would you give away something that’s worth two times as much, like save it, and maybe we use it next year, right? So, that’s something to think about. And then the other thing about tax planning is oftentimes people think that I can’t do it or I don’t know how to go about it. They just feel just sort of defeated. And I love that you’re launching a course because I don’t know how to do that and I think that’s great because there seems to be this like epidemic in our country around financial literacy. You don’t learn it at school. You don’t learn in college. To me, I only think people learn it one of two ways. You either learn it because your parents happen to be great at it and they taught it to you or you learn it through hard knocks, just finding your way. And there needs to be better education on like real life practical tangible financial education I can use. How do I do this? And a lot of people have the desire and they literally don’t know where to go and nobody’s packaged it up to make it easy. So, I love that you’re doing that.

Justin Donald: Well, thank you. Yeah. I just want to educate people that there are ways to reduce your taxable income, especially like let’s just get out of the top tax brackets. Let’s try and get down to an effective tax rate of 10% or 12%, 20%, right? Yeah. And maybe you have some years where you don’t pay anything and you do that legally but to consistently do that, that’s probably unreasonable. And it’s all about having a game plan, meeting with your strategist, like you should meet with your team at least quarterly. Most people wait until the end of the year. They gather up their info. They don’t even have good books and good records. And so, everything’s a surprise and there’s just no time to strategize but we want to be doing it on a quarterly basis so that we know where we’re at and we know where we’re projected to go. And that has been such a huge key for me, for our family, for our community, the Lifestyle Investor Mastermind, you know, that is of the utmost importance to us is making the time.

Jeff Socha: And you have to consider all options. You know, one of the things I’ve tried to do in my career is always maintain sort of a radical independence. We’re not beholden to any company, strategy, product, anything. So, to me, all too often advisors and consultants have a strong bias, which is okay but where it goes awry is when they’re projecting that bias onto their client. Like, I might be really conservative. You might have a high-risk tolerance. Well, I shouldn’t have to project my conservative nature onto you or whatever it is. And so, people project this bias, and that really bothers me. So, I try really hard when we’re talking to clients to just be really agnostic around and give the benefit of the doubt that every financial tool, assuming it’s legal and legit like has a place and it has a purpose. So, I like to think about it like a pharmacy. I like to believe that all those drugs have a positive use but in the wrong combination, in the wrong dose, and the wrong timing, the wrong application, it can have terrible effect. And so, it’s really about going, “Okay. Like, what works for your situation? How do we figure that out in your situation?” And oftentimes, I think people make bad decisions when they procrastinate because then they’re going, “I’ve let the tax tail wag the dog. I’ve got this big looming tax bill. And now I’m terrified about what’s looming and I’m going to go try to hit the easy button.”

Justin Donald: Yeah, 100%. You know, it’s interesting. I’ve seen this a lot in a lot of the circles, a lot of communities that I spend time in. And I see people all the time that they focus on the tax strategy. They invest in these deals that are actually not good deals. They wouldn’t do the deals otherwise but they’re doing them because there’s a good tax strategy built into it, a lot of depreciation, or an opportunity zone, and they’re doing this because they need the tax strategy of it, even though the deal doesn’t stand on its own. And I’m just emphatic about the point that you only do those if you would have done them even if there was no good tax strategy. So, if it is a good deal and it stands on its own, then great, do it and get the tax strategy but don’t do a deal to get tax strategy because nine times out of ten, that will not work out.

Jeff Socha: And so, too oftentimes these financial like product salespeople are trying to sell a strategy. So, they’re trying to push a strategy. When they approach a situation that way, that takes off of the table the option of paying the tax and paying the tax is one of the options that has to stay on the table.

Justin Donald: And it’s probably the least amount of taxes right now that will ever pay. In the future, I am very confident that taxes will go up because our debt burden continues to go up because the irresponsibility at the top of just printing money to solve any problem, whatever the problem is, seems to be the going rate.

Jeff Socha: You know, why do they need taxes when they can just print money and think they just, you know, they could do away with taxes if we’re just going to print it?

Justin Donald: But why not do both?

Jeff Socha: Let’s have them do both.

Justin Donald: I feel like my mind is always boggled with the decisions of instead of running a balanced budget, let’s just print more money. Let’s just solve it by overspending and we’ll figure it out when we get there.

Jeff Socha: I like when Buffett said, “Hey, I can fix that in five minutes.” If we have more than a 3% deficit, every sitting member of Congress is booted out and eligible for reelection. He’s like, “That would fix it. We’d never have a deficit after that.”

Justin Donald: Hundred percent. Now, one of the things you spend a lot of time talking about is your financial freedom threshold. And I’d love for you to just touch on that real quick as we kind of round things out here today.

Jeff Socha: Sure. Yeah. You know, what became apparent to me over the years is that most people have this deep core, similar desire, which was to get to a place where they felt confident that what they had accumulated, their balance sheet, their net worth, would support their family on an ongoing basis without their time and energy and effort and labor and earned income. And it used to I think people would talk about retirement and it just seems like that is not really a concept that I find anyone really excited about because it seems like when people have a real sense of purpose in their work and you take that away, if they don’t have something else to deploy that energy into, they end up in like the state of depression. And so, most of the people who have good earnings are creators. They’re doers. And I don’t think you take someone like that and just have them stop like, “Okay. Hey, just stop. Like, Justin, just don’t do anything productive the rest of your life.” You’re like, “I don’t know how to turn that off.” However, I do want to cross this threshold where my peace and joys starts to go up, realizing that my need has come down.

When you have low need, you have high power, and that changes how you approach relationships, decisions, work, time, all of this. But when you have high need, this sense of, “Oh my gosh, I got to make money, I got to save money. We’re not there. Like, oh, this whole thing could fall apart,” you’re approaching life from this place of low need and stress, right? And so, people want to cross that threshold of going, “Okay. I think I can make decisions from this new place.” And so, I think there’s five key areas people have to really pay attention to when trying to get across that threshold. And the first is easy. It’s cash flow. You mentioned organizing earlier. You know, every client we work for, we start by just getting organized. You’d be surprised how organization can create just so much productive results and how disorganization just prevents so much forward progress. So, getting work…

Justin Donald: And even shifting some of the structures and the way that entities flow together can do it, too.

Jeff Socha: Yeah. So, like, it’s not hard. Just get organized around it and then think about risk management. Okay. Like, let’s just look around in our life and think, “Okay. What risk do we want to transfer to an insurance company? What risk should we isolate through legal planning? What risk should we try to mitigate and how?” And then investing. Okay. I need to save some money. And I think there’s a big fallacy that’s been promoted way too long that somehow you can save 10% of your income and it’s going to get you there. I like to tell people, “Hey, if you were going to live three years and only work for one, how much money would you spend the first year?” Some people might say, “All of it because I don’t know if I’ll live three years.” Some people might say, “Well, none of it because I’m afraid or whatever.” You know, I’m more just like why don’t I just spend a third, and then I have the same amount for all three years? But in our society, this idea of I’m going to make money for about half of my adult life and then I’m going to have about another half where I might not make money, okay, well, then we probably need to save about half. Like, that’s crazy and you’re like, “Okay. Well, then I plan on making money longer. I don’t know.” But then you have to invest it and you have to be smart with it and you’ve got so much content on that. So, investing is a big deal.

And then the fourth thing is legal. It took me a long time to get to this place. I still don’t like paying legal bills, but I’ve at least come to the place of realizing, okay, paying attorneys to me is like paying insurance. Nobody likes paying insurance either. But you pay insurance because I’m going to pay the small bill and that company will pay the big bill. And my thought with attorneys is, “It’s not realistic for me to not pay attorneys in my life. So, I get to choose do I pay them a little bit on the front end to get me set up right or do I pay them a lot on the back end for all the problems that I’m going to encounter by not being set up right?” So, I’m like I’ll just choose to pay them on the front end, kind of like I would insurance. It’s a smaller dollar amount on the front end.

Justin Donald: Well said.

Jeff Socha: And then the last, the fifth area is tax. And so, cash flow, risk, investment, legal, and tax. You know, put some effort into those areas.

Justin Donald: Yeah, I love that. I think that’s great. And I love that you’re sharing with us the 23 Overlooked Tax Strategies for Entrepreneurs to Create Financial Freedom. What a cool handout. And we’ll include this info in the show notes and give you guys access to it but super cool. I’ve just been blown away by your knowledge, your understanding, the thinking outside the box but making sure that it really checks all the boxes, which is so cool. I mean, there’s a million things we could get into. We could talk about strategies, we could talk about the difference between deductions and credits. You know, tax credits are amazing. So, anytime you can get those and there’s a ton with like solar strategies that are out there. Think about what the government needs the most of. They’re willing to incentivize what they want. So, they want housing, affordable housing, specifically, but housing in general. They want agriculture. They want energy, renewable energy right now. So, it’s like figure out what they want and then do those things and you’re going to get rewarded for partnering with them. And so, you’re just a wealth of knowledge. Where can we find out more about you? And for people that want to spend more time, maybe set up a call with you to dissect their taxes and even looking forward or looking back, where do they do that?

Jeff Socha: I think the best page to go to is TalkTaxWithJeff.com. Go there. There’ll be some links that take you to some more content but start at TalkTaxWithJeff.com and hopefully, we get to talk to you soon.

Justin Donald: I love it. I love it. Well, you’ve done a lot of great work for a lot of people. We appreciate you. You’ve educated, you’ve helped set up a lot of things for people in the Lifestyle Investor Mastermind community. And so, we just want to thank you and get the word out that other people can utilize you and your skill set and your expertise.

Jeff Socha: Thanks for having me. I guess, one final thought is when you’re talking to I don’t care any sort of advisor or consultant, if you’re talking to someone and you’re going, “Okay. I’m fired up. I’m going to go work on this,” and you just get the sense that they’re not being forthcoming and transparent and sharing information with you, that should be a huge red flag because I don’t really feel like, you know, the magic really isn’t in the information. The information is out there.

Justin Donald: Everyone’s got it.

Jeff Socha: I’ll give it to you. Anyone with it should be willing to share it. It’s kind of like open-source stuff. Nothing is proprietary about it. So, if somebody tries to make you feel that way, run away.

Justin Donald: Yeah. Tax code is not proprietary. It’s given out to everyone. It is one set of rules that everyone plays by.

Jeff Socha: So, if you hire someone, you really just hire them to help you navigate that and put it together for you, not because they have a secret. Okay. Because the secret’s out.

Justin Donald: Yeah, that’s awesome. Great advice. I appreciate you sharing your wisdom. It’s always so fun to connect. I like wrapping up every episode asking our audience a question. And so, my question for you is this: What is one step that you can take right now towards financial freedom and towards living a life by design, one that you truly desire, not one by default? And what is one step you can take that you learned from Jeff today that can help you get your house in order with regards to taxes or the overall picture of the financial freedom threshold, you know, one of those five categories? But pick a step. What’s one step? Be proactive, not reactive. And we’ll catch you next week.