025 | The Wealthy Accountant

Keith from The Wealthy Accountant makes an appearance on the show to discuss tax optimization for individuals and small businesses with plenty of tax tips for your FI tool chest.

In Today’s Podcast we cover:

  • Keith from the Wealthy Accountant presents his tax optimization strategies for individuals and small business owners
  • Keith is the most knowledgeable accountant we have ever met. We met him in Florida at Camp Mustache and his exuberance for tax optimization was infectious
  • Keith became the official accountant of Mr. Money Mustache after a presentation at Camp Mustache in Seattle
  • A discussion of how to save FICA taxes by being taxed as an S-Corporation instead of as a pass through entity such as an LLC
  • Keith’s discussion of potential tax law change based on the President’s proposal
  • For people starting a business, where would Keith start? Business structure, getting kids and spouses involved, etc.
  • Keith believes when you have business income over $50,000 that you should be an LLC taxed as an S-Corp
  • Is there value for someone over the FICA cap in their ‘day job’ for their business to be treated as an S-Corp?
  • Home office deductions vs. renting part of your home to your business entity and how to make it official with a formal contract
  • What Keith recommends for retirement savings and the rules you need to understand whether you are an employee or if you own a business
  • Keith’s recommendation to speak with your HR department to max out your 401k if they only seemingly offer a certain percentage of your income
  • Tax optimization strategies for real estate investors including the tangible property rules and how to benefit from expensing items that would have otherwise needed to be depreciated
  • Cost segregation studies and how that can save you money on depreciation
  • Healthcare for small business owners and the lack of options
  • Discussion of Keith’s writing at The Wealthy Accountant. The goal was for people to “think like an accountant” and to live your life ‘right.’
  • He believes in saving half your income and investing in broad-based index funds. If you do those 2 things you’ll be successful
  • Hot Seat Questions
  • Keith believes the mega backdoor Roth and the Roth IRA conversion ladder will go away with tax reform
  • Favorite Blogs and Blog Posts of all time
  • Favorite life hack: Credit Card travel rewards
  • Biggest financial mistake: Trying to get into the stockbroker business
  • Advice you’d give your younger self: Don’t worry so much about money and enjoy yourself

Listen to Brad and Jonathan's thoughts about this episode here.

Links from the show:

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18 thoughts on “025 | The Wealthy Accountant”

  1. Great Show! You touched on it at the end but I’m curious when you should form an LLC if you are just starting your side hustle such as a a new blog and it is not yet making money or just making very little? And what are the tax implications for something making so little?

    • Gawayne, for tax purposes an LLC is not required from Day 1 of a side gig. (There might be legal reasons to do so.) A small side gig LLC will default to a disregarded entity (sole proprietorship for individuals and partnership for multiple owners). The tax consequences are nil since tax matters are handled as if there were no LLC, hence the “disregarded” title.

  2. Great podcast with a great guest who happens to be a friend of mine.

    But, I’m miffed. To do more he’s getting a bottle of Jack from you while I’m getting jack-squat. 😉

  3. I loved Keith’s solid advice to save 50% of your income and simply invest it in low-cost index funds. That’s an almost automatic path to wealth. It’s also good to know that I’m not the only crazy blogger who cashes out his travel rewards. Great podcast and I look forward to meeting Keith in person. Will he be at FinCon 2017? Ed

  4. Fantastic episode, Brad and Jonathan! Keith peppered me with so many ideas I immediately replayed the episode and so far it is just as good if not better the second time around. I only wish the episode was longer so we could all benefit from the experience and insight he brings, so looking forward to the future episodes you have planned. I really appreciate how you plan to bring out his advice on specific examples or case studies in the future, that level of specificity is so valuable and all-too rare in the FIRE space and in general. Congratulations on your hard work and thank you for all you’re doing for the FIRE community.

  5. Great episode for sure! I’m sad to hear the opportunity to do a Roth IRA conversion ladder may be going away.
    In what form do you see this happening? Penalizing traditional to Roth conversions? Disallowing them altogether?

  6. Clarification on the backdoor Roth and Ladder Roth. Where I see this going is that the backdoor and ladder Roth are out as that is not what Congress intended. Circumventing the income limitations are what will go away.

    That said, Congress and the White House are in more turmoil by the day which means less and less chance of any meaningful tax law changes.

    Remember, this is all speculative. There has been some movement on the Roth recently but it has stalled for now. Use while you can and deal with tax law changes when they happen.

    • In the end, whenever the state and feds’ backs are against the wall due to massive public pensions (think Roman Empire), more than the Roth ladder will be taken away. To have all one’s savings in govt controlled accounts is very short sighted.

  7. Hey guys great podcast! I’ve listened to most of the podcasts and although I’m not on the hardcore FIRE path, it certainly resonates a bit with me. Keep up the good work! It seems more and more people are appreciating your efforts as the community grows.
    I have a question regarding the comments of a small business renting space in a home vs taking the home office deduction. As a small business owner who does his own taxes, I played with this idea in the past and after consulting with two accountants I thought it was not possible. Your insight has me excited but I’m wondering what are the tax implications on the homeowner side as it seems you are becoming a landlord and would need to claim this rental income? I converted from a sole-prop to an S Corp as of 2017 and moved the office out of my home due to hiring an employee and needing the space but I’m always looking for ways to optimize and I may move the office back to my home after the 1 year lease expires
    Thanks in advance for the feedback.

  8. Can you expand a little on “Keith’s recommendation to speak with your HR department to max out your 401k if they only seemingly offer a certain percentage of your income”.

    I have reread this a few times and played that segment of the podcast a few times and I am not getting the advice here.

    I currently max my 401k and get 100% match to 4% of pay
    Mrs TSR maxes 457 but doesn’t get a match
    Mrs TSR does not yet max 403b again with no match

    Are we missing an opportunity?

  9. Hey Keith,
    Awesome info! I have an S corp and work out of my home office. I spoke to my accountant about ‘renting my office to myself’ and he said “When you rent from yourself, you deduct the rent expense on your S corporation return. You then have to report the income on your personal return creating a wash. They have challenged it and argued that you cannot offset the rental income with the home expenses.” Any thoughts on this?

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