I don't like taxes purely for 1 reason, the government makes you calculate your own tax and penalises heavily for doing it wrong. I have no issues paying taxes as a US citizen, however I hate that I have to do the paperwork when the government already has all the info they need. Always struck me as odd.
I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.
Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.
“ Melissa Terri Swayne is the coach that guides me, She has years of financial market experience, you can use something else but for me her strategy works hence my result. She provides entry and exit point for the securities I focus on.
I located her through google, sent her an email, and scheduled a call; hopefully, she will reply because I want to start the new year off financially strong.
The problem is that in order to have "permanent roof" with amenities like electricity, gas and water, either the tenant or the owner must somehow pay insurance and property taxes. As a result, a lot of people live in tents, at least in California, where I presently dwell. Not a single mortgage, tax, rent, or insurance. It amazes me how many folks I meet who tell me they live in their cars. This place is insane!
It's becoming more and more insane by the day. Mortgage rates have been rising steadily (already over 7%). I often wonder if I should put my extra money into the stock market and wait for a housing crash, or if I should just buy a house regardless.
Such concerns also come to me. After 50, I'm retiring early. I'm already concerned about the direction the future is taking, particularly with regard to finances and making ends meet. I'm thinking about investing in the stock market for the first time as well, but how can I accomplish so considering that the market has been in disarray for much of the year?
For my part, I can relate to that. My benefits were clear when I started working with a fiduciary financial counsellor. I would always suggest seeking expert assistance in these situations so they can guide you through bumpy markets and simply provide you with indicators and tactics for knowing when to enter and exit the market.
Biggest lesson i learnt in `2024 in the stock market is that nobody knows what is going to happen next so practice some humility and low a strategy with a long term edge..
Nobody knows anything; You need to create your own process, manage risk, and stick to the plan, through thick or thin, While also continuously learning from mistakes and improving.
Uncertainty... it took me 5 years to stop trying to predict what’s about to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Julianne Iwersen-Niemann” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Wrong!!!!! That why you will take twice the time to be financially free! The SBLOC is a great tool to build wealth. The key to SBLOC is not to get over leverage! Never do more than 25% of the credit available and you can weather any market swings.
This is called leveraging and it is great when times are good and every asset is appreciating. Also if you are rich enough and diversified enough to handle downturns. But this creates a house of cards that will destroy your financial security when value of assets plummet and you are faced with a mountain of leveraged debt, upside down, and zero liquidity. People doing this really need to understand the risks. The “die” part is when they jump off a building because they’ve lost everything and more in a market crash or extended recession. It has happened before. It will happen again. Good times don’t last forever.
That's exactly what I thought... Great Depression?? People borrowing mo ey to buy stocks because 'they'll just keep going up." That us, until they don't, and you still owe the loan and have no money. This practice, if done by enough people, will also cause a bubble, thus increasing the chances of a downturn/recession/depression.
Yes. You can take advantage of owning assets and not selling stock funds with huge unrealized capital gains -- WITHOUT taking on risky leverage. At some point leverage is going to get UGLY, like it did during the great recession.
With any financial transaction, you have to do the math. You also want to ensure that other areas (reserves, etc are set). You don't go for home runs, you take singles. For example if you have a stock portfolio worth 100,000 then you borrow 10,000 to start, if the numbers work.
for anyone asking how do you pay back the debt. thats whole point of having and investing in assets that generate cashflow; real estate rentals, businesses, and securities that pay dividends
@@meibing4912 There's gonna be some form of payment needed. Do you service the debt by taking out more debt? Or do you service the debt with income of some form?
Paying property taxes on your home , autos etc is like paying taxes on Unrealized capital gains especially since the inflation that has been stimulated during/after Covid. The PVA says my house jumped ~$200k in the last three years… I now pay taxes on that “Unrealized gain”.
@@rogergeyer9851inflation works the same way as compound interest, look again, ignore the propaganda, prices have gone up (never to come down) by at least 30% 🤔
@DickonCider And if somebody could explain what the value (municipality-assessed) of your home has to do with the cost of providing services (road maintainance, water and sewage removal). I don’t drink more water, wear down the roads or flush the toilet more as the “value” of my house increases. 😮 Why am I paying higher property taxes? What a scam!
A guy asked if he should take a HELOC for a home renovation. I said, "I wouldn't," and suggested saving instead. He didn't reply. Many homeowners are surprised by the idea of saving money instead of using home equity for projects like a backyard deck. I chose to save and invest in the stock market instead, which has helped me build long-term financial stability without taking on additional debt.
I believe a healthy portfolio has 3 things, at the bare minimum: Exposure to ETFs for increased diversification, Exposure to assets that generate cash flow like dividend stocks, Exposure to market-leading tech.
I started at age 42 with about $18,800 which is now worth about $1.2M at age 50. Would be happy to share how, and it was definitely not index funds (pablum advice for the masses), but by partnering with a financial advisor. I've been with mine for the past 8 years and have seen why esteemed investors highly seek their expertise.
I'm cautious about giving specific recommendations since this is an online forum and everyone situation is unique, but I've worked with "Melissa Elise Robinson" for years and highly recommend her. Look her up to see if she meets your criteria.
thank you for making these videos so straightforward to understand. I'm a medicare sales agent on 1099 and I am projected to hit about 120k a year of income for the 1st time in my life I've been searching left and right on how to avoid taxes lol. Im not trying to give the government my money lmao. I think ill start off with tax exempt accounts and work toward the "Buy,Borrow,Die" method.
In terms of a SBLOC please note the following important details: 1. Typically, clients pledge a minimum of $500,000 in assets as collateral. 2. Line of credit funds cannot be used to purchase securities such as stocks, bonds, or mutual funds. 3. Loans are subject to variable interest rates. In general, this type of leverage should be used when you're confident you can repay the loan quickly.
I work in the financial industry and there was a client that had 20000 shares of XOM and he borrowed 500k against that stock and the dividend payments of XOM were able to pay the annual interest and some of the principal on the loan so if this client did nothing else the stock would eventually pay off that loan and the client could just borrow the 500k again once the loan was paid or the money was spent. It was really interesting to see.
A bit misleading His XOM shares is worth $2 million. His loan is only $500k. So the interest he was paying was only for a portion of his shares. Yes he was making $80k in dividends a year but that was on $2 million not $500k
This is a personal preference. Some people: - Never pay it off - Use income from assets to pay it off over time - Pay it as quickly or slowly as they’d like to Also, it is very important to fully understand the 4 benefits of borrowing listed from 3:58 and summarized at 6:45 - let me know your thoughts on this.
You don’t. If you avoid over leveraging yourself you’ll never have to sell shares or interrupt your compounding interest. Because depending on how wealthy you are you’re going to incur a big tax bill right now and the interest on the loan will take far longer to eat that same amount of money because loans backed by assets are cheap debt compared to a 40% tax bracket. While that debt is slowly eating away at your total value your money is locked away snowballing in value… and as the biggest part of compound interest REALLY goes bananas after 30 years… using debt to avoid having to sell can result in millions of dollars of difference every single year depending on your portfolio value. The interest is part of the investment, and that expense reduces your taxes now allowing you to keep more money and borrow less. If you really think about this, we see a lot of financial philosophy’s at play. The saying “time is money” is sort of the core of this principle. Inflation eats away at the dollar value you owe over time so you’ll pay a larger number on the debts in the future but bought more assets at lower prices with yesterdays dollar strength and stuck Uncle Sam with the bill and you’ve profited the difference. In real estate investing you seldom see people pay things off early because you used someone else’s money to buy assets… and you’d leverage those to buy more houses and the renter pays the mortgage… if you think about it this is just doing that on a basket of assets and not just real estate. Remember, your dollar is just worthless paper 👍 hopefully this rant makes things clearer.
I need a way to draw up a plan to set up for retirement while still earning passive income to meet my day to day need and also get charged lesser taxes even while in a higher tax bracket.
Don't put all your eggs in one basket; instead, diversify into different asset classes to mitigate risk. If you lack extensive knowledge, consult a financial advisor.
Accurate asset allocation is crucial with an Experts guidance. I have 850k in equity, 300K cash earning 5.25 interest, 685k in 401k, 250k cash account, 120k in car assets ( paid off cars) Gold and silver bars. age is 48. My advisor helped me realign my portfolio to my risk tolerance and it boomed overtime.
How can I maximize my investment portfolio without having to be taxed to the teeth whenever I liquidate my assets? I currently have about 80k in stocks and some more in the crypto market.
Haha but you could actually make a lot of profit and not worry too much about taxes. It's all about playing the game well. I work with a financial advisor and I make sizeable profit north of 300k every quarter without even doing much.
That's great, you can borrow against your assets but how do you pay those loans back? do you take out and pay the loans with long-term capital gains? I don't understand eventually you have income somewhere to pay the loans back
You don't repay the loan. That's the whole idea of this strategy. You just keep paying the interest payments from the original loan amount. You borrow more once you're low on cash. Wash rinse and repeat. Works great as long as you have enough assets to survive market downturns and your assets go up in value over time.
@@chrisj699 could you please let me know who your lender is? You know.. the one that doesn't expect the principal to ever be paid back? Don't worry, I'll wait.
You could work an income still like a regular job. Then, your interest on the loan you borrowed will write off taxes on your job or at least a portion which will help pay off the loan on the assets, as well as using some dividends if need be to pay off the loan. The example in the video with Jeff Bezos involved him making money but offsetting his taxes because of the interest on his loan and other capital losses in that year.
@@gunner8226 so save your money , when things go wrong (housing downturn/market crash) then invest? Or invest , be smart , don’t build a house of cards , see who has more freedom in 10 years, it isn’t going to be a savings account
max out on that 120k in long-term capital gains first with co ownership in a shared residence. Most people don't even have this yet, a shared residence no debt plus 120k income with no capital gains taxes. Then once ready to buy a bigger house (in excess of the 120k pull down), then this strategy becomes the move, to continue accessing more tax free money 💰💰💰❤❤❤ Super great presentation.
@@killerrush77 just buy assets, only. Then sell up to 60k yearly per person with zero federal taxes. 8 kids and 2 parents? That's potentially 600k income with zero federal taxes. At this rate, it's too costly not to make babies!!
With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
I agree, having a financial - advisor for investing is genius! Not long ago amidst the pandemic crash in March 2020, I was really having investing nightmare prior touching base with advisor. In a nutshell, i've accrued over $550k with the help of my advisor from an initial $120k investment thus far.
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
You can collect dividends or interest on your assets and live on that. It's not zero income, but it's a HELL of a lot less with low dividend stocks, for example, than selling stocks with significant unrealized income (turning ALL the profit into income).
I do have one question that I still cannot figure out. For client A at the video section 4:33 how did 7 million turn into $483,000? Which math contributed to that amount?
This example was pulled from JP Morgan. I’d assume there is a standard rate of return in both scenarios. You can view it here: privatebank.jpmorgan.com/nam/en/services/lending/securities-based-lending
Yes and no - sure, they’re reducing their tax bill, but they’re also reducing their income. It’s better to earn $100 in income and pay $30 in taxes on it (leaving you with $70) than to get no income at all (leaving you with $0). And even if they earned an income, they could _still_ take a loan against their assets to get even more “income”, tax free, so the $1 salary doesn’t really affect that part. They do it symbolically, to virtue signal that they’re not just in it for the money.
@@thegzak Ah, no. These CEO's are not *compensated* a single $1 for their labor. They are instead taking a $1 cash renumeration and the rest in stock options. Executive compensation is its own Byzantine structure specifically to to maximize corporate tax deductions while minimizing taxable income to the executive. Usually the CEOs that do this already have cash or an income stream from other sources. They then exercise the options once they vest. They then have the chance of either selling the appreciated stock and pay the capital gains, or follow the Sherman plan and borrow against the stock. When you look at their total compensation, these $1 CEOs can be some of the most highly compensated individuals out there. If you want to see an example of this, either look at the former Steve Jobs with Apple Computer, or currently Markus Limonis with Beyond, Inc. as Executive Chairman.
They get paid hundreds of millions in stock options instead. Then sell after you a year and pay capital gains taxes that is a lower tax rate than what a school teacher pays
this is the second video i've seen on this topic and i still don't understand where the money comes from to service the loan payment. what am i missing?
That’s the mystery. Apparently you’re supposed to buy assets with the loans and those assets provide money that you use to pay back the loans. Sounds like a house of cards waiting to fall.
I have a margin account that holds stocks. You can keep a negative cash balance basically indefinitely while just paying interest only monthly payments. For a normal dude like me I pay that with W2 wages and I try to not keep it negative. But in the terms of these billionares...they have plenty of revenue streams to pick up such a relatively small payment. They can even borrow more than they need to spend if they wanted so they have excess cash to make payments. Or they can just never pay it - the interest accrues so their cash balance gets more negative but if you have the underlying assets where you are nowhere near your borowing limits it really doesn't matter.
@@primetimeedgetwitch3274it is. For example you could buy $50k in metal, like silver, but only pay $20k and keep $30k in cash. So you put in 20 and got 30 out, you’re up $10k. If the asset’s interest and storage fees are, say, 4% but its value climbs at 6%, you’re golden. Never pay that $10k back. However as that debt grows if the value falls when the value equals your debt the account will be liquidated and you lose it all. That happened to me during Covid because the market tanked so fast overnight I couldn’t inject enough to cover the margin call and poof… $50k vaporized.
I just model my income to be tax free... 1. Build myself a house. 2. Live in it as my primary residence for 2 years. 3. Build another house while living in the first 1. 4. Sell the first house. Leverage the section 121 cap gains tax exclusion (250k single, 500k married) to avoid paying taxes on the profits. $500k tax free every 2 years is the equivalent of $390k a year as a w2 employee. If I make a profit over $500k it is taxed as capital gains at 15-20% depending on my wife's income that year. No taxes. No debt. Building wealth like crazy.
If the wife can offload enough of her income out of taxable income status, there is a pretty sizeable threshold of taxable income a couple can earn and pay 0% on capital gains. Including the standard deduction I think the total is over 50,000 for the year iirc That's ordinary income+ nonexempt capital Gains of course.
there is a flaw in this. Any appreciation you gained in your primary residence, you will end up using it purchase the next house since that would also have increased in price
@@smithwill5849 you missed the fact that he isn't buying houses. He is buying land and building houses. He might have bought land once and subdivided it into buildable lots before he ever started.
@SurferRC , you don't need to start with a big house. $250k will get you a huge house doing the work yourself. I can build for 30-40% the cost to buy in my market... that's only 2x a 15-20% deposit. Want to start cheap. Build a post frame garage with an apartment in the front for less than $100k. Sell it for more than 2x what you put into it. Slowly scale up.
As an investment enthusiast, I often wonder how top level investors are able to become financially stable, I do have a significant amount of capital that is required to start up but I have no idea what strategies and direction I need to approach to help me make over $400k like some people are this season.
I believe the safest approach is to diversify investments especially under professional; guide. You can mitigate the effects of a market meltdown by diversifying their investments across different asset classes such as stocks, ETFs etc It is important to seek the advice of an expert.
On the contrary, even if you’re not skilled, it is still possible to hire one. I am a project manager and my personal port-folio of approximately $750k took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect and profit from my port-folio this red season. I’ve made over $350k since then
‘Grace Adams Cook’ is the licensed advisor I use. Just research the name, you’d find necessary details to work with a correspondence to set up an appointment.
Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
Wow, very informative! I am not getting the deductions I should have been getting now that I watched this video. I have two reantal condos and based on this video, I should now have paid taxes. I need to checkout the website!
Ok, I am not sure I understand how this works. Say I incorporate my business and use your strategy. I would use the profits the company makes to purchase assets, say for simplicity's sake I buy ETFs in S&O, DOW, GOLD, SILVER and other markets such as food, tech and pharma. Now, who borrows the money? Me or my company? If it's me, how do I repay the loan if I have no income? If it's the company, how do I take the money out for my own use without it being considered a salary? The plan sounds very interesting but the details are missing.
You don't repay the loan. That's the whole idea of this strategy. You just keep paying the interest payments from the original loan amount. You borrow more once you're low on cash. Wash rinse and repeat. Works great as long as you have enough assets to survive market downturns and your assets go up in value over time.
Thanks, if you had an unused heloc, you could use it to buy equities in a down market, or could use it to live on and to pay for Roth Roll overs post retirement pre SS and RMDs.
I Have a question. If I trade options on my Robin-hood Acct and make 50K in a year. What is that taxed at? It’s not really owning a stock,yet it is more so owning the contract for a set period of time.
Congrats on your channel. I just followed you. You do a great job explaining, and did so with great knowledge and shared excellent tips. Can I give you a suggestion, to grow. your channel faster? It would be to not wear a t-shirt for the videos. You are really good at what you do, but when I first saw the thumbnail, with the t-shirt, I thought, I wonder if he's a professional. I love t-shirts, haha, just would suggest a little more formal wear for the videos. Once I clicked on your video, and started watching, I was immediately impressed with your professionalism. Anyway, just wanting to help you grow a lot more. Have a great day, and thanks again for doing such a great job.
Hi Sherman, one question. How does one go about paying back the loan ? If assets need to be sold to pay back the loan, then it will incur taxes isn't it ?
Im not sure if i missed something, just overthinking, or you went over it in another video but how do you get a loan, even if using a Heloc if you are showing minimal income due to deducting as much expenses as possible. Even with equity wouldnt a poan be harder to obtain with minimal net income? Thanks!!
The securities are pledged as collateral for a collateralized loan. With a stock brokerage account approved for margin, it's automatic. The borrowing can be 50% - 90% of the security's value, depending on the type.
So does this mean if I buy securities (stocks) that yields dividends (money 💵) if I hold on to the security and I don’t sell it but receive dividend payments I don’t have to pay taxes on the dividends???! 🤔
Okay, you take out a loan against your assets, but you now have to pay back that loan, which means you need an income stream. Once you get the income stream you're back to paying taxes. Any questions? Class dismissed.🤨🤨🤨🤨
The best way for the “regular working person” that isn’t broke or rich to execute this strategy is a whole life insurance policy designed for maximum cash value and minimum premiums.
Interesting BUT you should give additional examples, working with an excel file, to show the real numbers. How are the interest payments offset?etc…. I understand what you are saying but something is missing.
I have about 50k saved up no debt besides my home and truck make around 100k a year in south Ga so cost of living much lower down here i wont to redo my rental property i inhented from my grandma i was trying to keep working OT and do it all cash out of pocket or would it be wiser to borrow from the equity in my current home i live in or what would you advise
Could you please elaborate on how we can use cash value life insurance to implement your Buy, Borrow, Die strategy? You mentioned it at the beginning but did not go into detail. Thanks for doing these videos for us, Sherman. I'm benefitting from them a lot.
Normally, a portion of your life insurance premium is allocated to a "cash value" component. Once you build your cash value to a certain level, some policies will allow you take a loan against it. In that event, the proceeds are not taxable.
@@mycpacoach do you pay back at the interest rate of the year you borrowed or the rate of when you pay it back? I'm thinking this a question for the insurance company.
@@mycpacoach Thanks for this response. Would you be able to to please consider doing a video going in depth into this? In particular, could you please let us know if the gains from using a whole life insurance policy loan will be taxed? Can an individual deduct interest paid to the insurance company?
I have been telling black folk to do this for years. We have 2 CPAs in the family. You appear to be well-versed. How can I reach out to you for a consultation?
Problem with leveraging is you payback creditors. Which means you have to pull cash out which means you get income which means you get taxed. If your businesses or assets don’t appreciate you screwed. Only RE is worthwhile then but there is limited supply so price is already out of reach get into this strategy.
I don't understand the part where they loan money ($5000)to buy more stock; how do they repay the loan? Do we expect the person to have tons of cash in the first place?
What if you can't obtain a loan based on your credit score? Or what if you have good credit but too many hard inquiries? (ex. I have good credit but a stupid car dealership did 17 hard inquiries when I bought a vehicle.)
This still doesn't make sense to me. I borrow money to avoid paying taxes, but to pay it back, i need income. So wont that income be taxed? Can you write off PERSONAL loan payments? If it is to say,buy a property to do Airbnb, and I register and AirBnB company, then the proceeds from that business repay the loan, but what do I do with the profits, wont that be taxed?
And in the UK inheritance tax kicks in at around 250k lol.. Passing on a mountain of debt and a huge tax burden to my kids would be great if I hated my kicks lol. Seriously though it's an eye opener to me how using debt to get richer and not pay tax works. I was brought up with the attitude that debt is bad " if you can't buy it in cash you can't have it " mentality .... So I learned to save for what I wanted from a very early age and it's stuck with me but I have seen others around me use debt to get rich and feel annoyed but I've also seen others lose everything when crashes come along.. Gotta good whatever lets you sleep at night.
In the UK your parents pay 0 tax and pass 0 debt for unlimited inheritance if they continue living for 7 years after they make a gift. Fairer and better system than in US by far
Can your personal home be considered as your asset to borrow against? Can I use this step up basis when I die and bequeath my personal home to my heir?😊
Debt- my 2cents Good Debt is buying assets. Bad Debt is consumption spending Find a sweet spot where you use good debt to acquire assets that will service the debt And Cover the consumption spending. Have a reserve cushion to reduce risk of getting burned. Did I get it right?
I don't see how this could work in Kanadistan. - There will be interest and likely principal repayments on the debt. The only way to finance thes are through a hamster wheel of more and more debt. - Using cash flow from the asset itself to pay off personal debt is either income itself first, or a taxable benefit if paid directly by an asset that is a seperate legal entity. - If debt was borrowed from such an entity in the first place, rather than arms-length lender, it will either have to report & pay extra high tax on the interest income, or the debt will be treated as dividend income to the individual and taxed.
Doesn't the loan interest amount payable every year dwarf the amount of taxes paid after a while (once the loan balance becomes significant)? If I pay 30% of a 100K income every year, that is 30K. But if I need to pay 5% interest on a 1 mln $ loan (after widthrawing 100K for 10 years), that would be 50K per year... Doesn't this strategy only work while the loan balance is low, but then becomes too expensive to pay off in terms of loan interest costs?
This is why I bought variable universal life insurance. I don’t remember why but we needed cash fast for something and I was able to grab $10k from my policy and pay it back at 4%… or not. It just would have reduced my payoff when I died. I’m also a fan of real estate equity for loans etc but, like you, I also don’t like debt so I pay those off quickly if needed.
Does this apply to business owners only? If I am just a regular guy with a 100k/year job, can i take a personal loan of 10k with a 5% interest, knowing/assuming i can make more than 5% with stock investments. Can I offset my 100k income tax with the 5% interest from the 10k loan, effectively making my taxable income 99500? These numbers are just an example. Trying to understand how this works
This strategy doesn’t really work unless interest rates are at all time lows. Today those loans would be at 8% rates or higher. Basically destroying any value from those investments
id be scared of a market crash. So i would not take a loan on stocks but i like the ideal of portafolios that can be passed to heirs wihtout taxes... will try to work that onto my plan
Who's left holding the debt bill when you die though from all the leveraged loans? I understand debt doesn't pass on, but seems immoral to borrow against assets and then die without selling to pay that back
I think if one begins to make over a certain dollar amount, lets say 3Million, it may be "less riskier" to do this. But i dont think it makes sense for the average person. Too much debt.
So you keep borrowing to make the payments on the loans? And to pay all your other expenses? Seems like a risky method. And you do all of this to pass your fortune on to your heirs?
I do not understand this logic, I need more explanation and clarity. If you are not paying tax, are you not going to pay interest on the money borrowed? Depending on the interest rate and the return from your investment that would determine whether it is a worthwhile venture. Moreover how do you return the borrowed money without selling the investment at some point.
You don't pay taxes because loans are not taxable, but they still have interest. You would pay the interest and the loan principal down with the assets you own, assuming they are gaining in value over time. Since billionaires have such high stock and company share values, banks are more than happy to lend to them to pay for cheaper mortgage rates, other business investment, cars even, etc.
I don't like taxes purely for 1 reason, the government makes you calculate your own tax and penalises heavily for doing it wrong. I have no issues paying taxes as a US citizen, however I hate that I have to do the paperwork when the government already has all the info they need. Always struck me as odd.
I don't regret the numerous financial mistakes I've made in the past since I've learnt from them. But the biggest one was planning my finances without consulting with a licensed financial counsel.
Indeed, I did make use of a financial counselor. As I get closer to retirement, their advice has been really helpful. I thought compound interest on index funds wouldn't be sufficient because I started late. It's amusing how I've done better than colleagues who have more years of investment experience. I've profited more than $886k tax free.
Please can you leave the info of your investment advisor here? I’m in dire need for one
“ Melissa Terri Swayne is the coach that guides me, She has years of financial market experience, you can use something else but for me her strategy works hence my result. She provides entry and exit point for the securities I focus on.
I located her through google, sent her an email, and scheduled a call; hopefully, she will reply because I want to start the new year off financially strong.
The problem is that in order to have "permanent roof" with amenities like electricity, gas and water, either the tenant or the owner must somehow pay insurance and property taxes. As a result, a lot of people live in tents, at least in California, where I presently dwell. Not a single mortgage, tax, rent, or insurance. It amazes me how many folks I meet who tell me they live in their cars. This place is insane!
It's becoming more and more insane by the day. Mortgage rates have been rising steadily (already over 7%). I often wonder if I should put my extra money into the stock market and wait for a housing crash, or if I should just buy a house regardless.
Such concerns also come to me. After 50, I'm retiring early. I'm already concerned about the direction the future is taking, particularly with regard to finances and making ends meet. I'm thinking about investing in the stock market for the first time as well, but how can I accomplish so considering that the market has been in disarray for much of the year?
For my part, I can relate to that. My benefits were clear when I started working with a fiduciary financial counsellor. I would always suggest seeking expert assistance in these situations so they can guide you through bumpy markets and simply provide you with indicators and tactics for knowing when to enter and exit the market.
That's really interesting. My portfolio is getting smaller; how can I get in touch with your asset-coach?
Her name is “Melissa Terri Swayne” can't divulge much. Most likely, the internet should have her basic info, you can research if you like
Biggest lesson i learnt in `2024 in the stock market is that nobody knows what is going to happen next so practice some humility and low a strategy with a long term edge..
Nobody knows anything; You need to create your own process, manage risk, and stick to the plan, through thick or thin, While also continuously learning from mistakes and improving.
Uncertainty... it took me 5 years to stop trying to predict what’s about to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Julianne Iwersen-Niemann” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Wrong!!!!! That why you will take twice the time to be financially free! The SBLOC is a great tool to build wealth. The key to SBLOC is not to get over leverage! Never do more than 25% of the credit available and you can weather any market swings.
This is called leveraging and it is great when times are good and every asset is appreciating. Also if you are rich enough and diversified enough to handle downturns. But this creates a house of cards that will destroy your financial security when value of assets plummet and you are faced with a mountain of leveraged debt, upside down, and zero liquidity. People doing this really need to understand the risks. The “die” part is when they jump off a building because they’ve lost everything and more in a market crash or extended recession. It has happened before. It will happen again. Good times don’t last forever.
That's exactly what I thought... Great Depression?? People borrowing mo ey to buy stocks because 'they'll just keep going up." That us, until they don't, and you still owe the loan and have no money.
This practice, if done by enough people, will also cause a bubble, thus increasing the chances of a downturn/recession/depression.
Yes. You can take advantage of owning assets and not selling stock funds with huge unrealized capital gains -- WITHOUT taking on risky leverage.
At some point leverage is going to get UGLY, like it did during the great recession.
With any financial transaction, you have to do the math. You also want to ensure that other areas (reserves, etc are set). You don't go for home runs, you take singles. For example if you have a stock portfolio worth 100,000 then you borrow 10,000 to start, if the numbers work.
Before you jump. Cash the gold coins you earned on the side while leveraging.
Buy a cabin, live free.
Can not say any better
for anyone asking how do you pay back the debt. thats whole point of having and investing in assets that generate cashflow; real estate rentals, businesses, and securities that pay dividends
You never - ever - pay back. That's the whole idea.
@@meibing4912don’t the lenders know this? Why would they lend?
@@meibing4912 There's gonna be some form of payment needed. Do you service the debt by taking out more debt? Or do you service the debt with income of some form?
Paying property taxes on your home , autos etc is like paying taxes on Unrealized capital gains especially since the inflation that has been stimulated during/after Covid. The PVA says my house jumped ~$200k in the last three years… I now pay taxes on that “Unrealized gain”.
Inflation of roughly 3 percent is NOT hyperinflation to ANY extent.
@@rogergeyer9851 We had a 9% inflation in 2022, did you lost your memory?
@@rogergeyer9851inflation works the same way as compound interest, look again, ignore the propaganda, prices have gone up (never to come down) by at least 30% 🤔
@rogergeyer9851 I know right!? Tell Venezuela about our 3% inflation and get laughed outta the room
@DickonCider And if somebody could explain what the value (municipality-assessed) of your home has to do with the cost of providing services (road maintainance, water and sewage removal). I don’t drink more water, wear down the roads or flush the toilet more as the “value” of my house increases. 😮 Why am I paying higher property taxes? What a scam!
A guy asked if he should take a HELOC for a home renovation. I said, "I wouldn't," and suggested saving instead. He didn't reply. Many homeowners are surprised by the idea of saving money instead of using home equity for projects like a backyard deck. I chose to save and invest in the stock market instead, which has helped me build long-term financial stability without taking on additional debt.
What advice would you give to someone new to investing with around $80,000 to begin with?
I believe a healthy portfolio has 3 things, at the bare minimum: Exposure to ETFs for increased diversification, Exposure to assets that generate cash flow like dividend stocks, Exposure to market-leading tech.
I started at age 42 with about $18,800 which is now worth about $1.2M at age 50. Would be happy to share how, and it was definitely not index funds (pablum advice for the masses), but by partnering with a financial advisor. I've been with mine for the past 8 years and have seen why esteemed investors highly seek their expertise.
Hello, I'm interested in trying this out. Who is your advisor, and how can I contact them?
I'm cautious about giving specific recommendations since this is an online forum and everyone situation is unique, but I've worked with "Melissa Elise Robinson" for years and highly recommend her. Look her up to see if she meets your criteria.
thank you for making these videos so straightforward to understand. I'm a medicare sales agent on 1099 and I am projected to hit about 120k a year of income for the 1st time in my life I've been searching left and right on how to avoid taxes lol. Im not trying to give the government my money lmao. I think ill start off with tax exempt accounts and work toward the "Buy,Borrow,Die" method.
one major component is missing, your income, you should only leverage where you can handle the debt comfortably in line with your income.
Thanks!
Excellent video, clear, concise, right to the point and very easy to understand!
In terms of a SBLOC please note the following important details:
1. Typically, clients pledge a minimum of $500,000 in assets as collateral.
2. Line of credit funds cannot be used to purchase securities such as stocks, bonds, or mutual funds.
3. Loans are subject to variable interest rates.
In general, this type of leverage should be used when you're confident you can repay the loan quickly.
I work in the financial industry and there was a client that had 20000 shares of XOM and he borrowed 500k against that stock and the dividend payments of XOM were able to pay the annual interest and some of the principal on the loan so if this client did nothing else the stock would eventually pay off that loan and the client could just borrow the 500k again once the loan was paid or the money was spent. It was really interesting to see.
Won’t work today. Interest rates at 8% for borrowing is WAY HIGHER than XOM dividend yield. It did work when you could borrow money at 3-4%
A bit misleading
His XOM shares is worth $2 million. His loan is only $500k. So the interest he was paying was only for a portion of his shares. Yes he was making $80k in dividends a year but that was on $2 million not $500k
the one thing they never discuss is how you pay back the borrowed money. guess that part is still a secret.
Use ur income producing assets to pay it back
That’s where the die part comes in
This is a personal preference. Some people:
- Never pay it off
- Use income from assets to pay it off over time
- Pay it as quickly or slowly as they’d like to
Also, it is very important to fully understand the 4 benefits of borrowing listed from 3:58 and summarized at 6:45 - let me know your thoughts on this.
You don’t. If you avoid over leveraging yourself you’ll never have to sell shares or interrupt your compounding interest.
Because depending on how wealthy you are you’re going to incur a big tax bill right now and the interest on the loan will take far longer to eat that same amount of money because loans backed by assets are cheap debt compared to a 40% tax bracket.
While that debt is slowly eating away at your total value your money is locked away snowballing in value… and as the biggest part of compound interest REALLY goes bananas after 30 years… using debt to avoid having to sell can result in millions of dollars of difference every single year depending on your portfolio value.
The interest is part of the investment, and that expense reduces your taxes now allowing you to keep more money and borrow less.
If you really think about this, we see a lot of financial philosophy’s at play. The saying “time is money” is sort of the core of this principle. Inflation eats away at the dollar value you owe over time so you’ll pay a larger number on the debts in the future but bought more assets at lower prices with yesterdays dollar strength and stuck Uncle Sam with the bill and you’ve profited the difference.
In real estate investing you seldom see people pay things off early because you used someone else’s money to buy assets… and you’d leverage those to buy more houses and the renter pays the mortgage… if you think about it this is just doing that on a basket of assets and not just real estate.
Remember, your dollar is just worthless paper 👍 hopefully this rant makes things clearer.
@mycpacoach here's my thoughts - Never pay it off?? Please make a video on that strategy because it seems pretty lucrative.
Lines of credit have monthly payments paid with taxed income.
I need a way to draw up a plan to set up for retirement while still earning passive income to meet my day to day need and also get charged lesser taxes even while in a higher tax bracket.
Don't put all your eggs in one basket; instead, diversify into different asset classes to mitigate risk. If you lack extensive knowledge, consult a financial advisor.
Accurate asset allocation is crucial with an Experts guidance. I have 850k in equity, 300K cash earning 5.25 interest, 685k in 401k, 250k cash account, 120k in car assets ( paid off cars) Gold and silver bars. age is 48. My advisor helped me realign my portfolio to my risk tolerance and it boomed overtime.
pls how can I reach this expert, I need someone to help me manage my portfolio
*Jennifer Leigh Hickman* is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
How can I maximize my investment portfolio without having to be taxed to the teeth whenever I liquidate my assets? I currently have about 80k in stocks and some more in the crypto market.
True, the tax codes can be unfavourable. I can definitely relate with this.
Haha but you could actually make a lot of profit and not worry too much about taxes. It's all about playing the game well. I work with a financial advisor and I make sizeable profit north of 300k every quarter without even doing much.
This sounds like incredible profit. Could you recommend who you work with so I could check them out?
I work with *Marissa Lynn Babula.* She's not hard to find. Just check her out on her website and you can contact her.
Thanks a lot for the recommendation. I'll send her an email and I hope I'm able to connect with her.
That's great, you can borrow against your assets but how do you pay those loans back? do you take out and pay the loans with long-term capital gains? I don't understand eventually you have income somewhere to pay the loans back
That's the secret. You have to join the paid members section to find out.
If your assets are income-producing, like rental real estate, the rent pays for your loans.
@@Barnstable11unless your tenants dont pay. All the while you pay property tax, rental income tax, maintenance, insurance, hoa dues and more!
You don't repay the loan. That's the whole idea of this strategy. You just keep paying the interest payments from the original loan amount. You borrow more once you're low on cash. Wash rinse and repeat. Works great as long as you have enough assets to survive market downturns and your assets go up in value over time.
@@chrisj699 could you please let me know who your lender is? You know.. the one that doesn't expect the principal to ever be paid back? Don't worry, I'll wait.
This is great video but how would you repay the loan if you are not selling the assets?
You could work an income still like a regular job. Then, your interest on the loan you borrowed will write off taxes on your job or at least a portion which will help pay off the loan on the assets, as well as using some dividends if need be to pay off the loan. The example in the video with Jeff Bezos involved him making money but offsetting his taxes because of the interest on his loan and other capital losses in that year.
By using the loan to increase cash flow…. Rental, additional unit, dividends, things like this
The word borrow should bother anyone. There's a stone age theory of if something can go wrong it will
@@gunner8226 so save your money , when things go wrong (housing downturn/market crash) then invest? Or invest , be smart , don’t build a house of cards , see who has more freedom in 10 years, it isn’t going to be a savings account
max out on that 120k in long-term capital gains first with co ownership in a shared residence. Most people don't even have this yet, a shared residence no debt plus 120k income with no capital gains taxes.
Then once ready to buy a bigger house (in excess of the 120k pull down), then this strategy becomes the move, to continue accessing more tax free money 💰💰💰❤❤❤
Super great presentation.
Wait... say more 🤔
wait, what?
@@killerrush77 just buy assets, only. Then sell up to 60k yearly per person with zero federal taxes. 8 kids and 2 parents? That's potentially 600k income with zero federal taxes.
At this rate, it's too costly not to make babies!!
You pay your monthly loan payments via taxed income anyway, and pay lots more over time..
With Roth IRA, the money you are contributing has already been taxed. At any time for any reason, you can withdraw your contributions tax-free and penalty-free. Additionally, any earnings on investments can also be withdrawn tax-free and penalty-free, Not sure how much to contribute, I'm still at a crossroads deciding if to liquidate my $338k stock portfolio.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
I agree, having a financial - advisor for investing is genius! Not long ago amidst the pandemic crash in March 2020, I was really having investing nightmare prior touching base with advisor. In a nutshell, i've accrued over $550k with the help of my advisor from an initial $120k investment thus far.
please who is the consultant that assist you with your investment and if you don't mind, how do I get in touch with them?
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
You can collect dividends or interest on your assets and live on that. It's not zero income, but it's a HELL of a lot less with low dividend stocks, for example, than selling stocks with significant unrealized income (turning ALL the profit into income).
You have the clearest explanation I heard so far. Exce llent job. Thank you, Sir. :)
Thank you very much! This is extremely valuable information presented in easy to digest bite-sized nuggets!
I do have one question that I still cannot figure out. For client A at the video section 4:33 how did 7 million turn into $483,000? Which math contributed to that amount?
Great Question. I asked my self the same thing
This example was pulled from JP Morgan. I’d assume there is a standard rate of return in both scenarios. You can view it here: privatebank.jpmorgan.com/nam/en/services/lending/securities-based-lending
We recently received some inheritance that is being used to purchase property. But you opened my eyes to other appreciable assets... THANKS!
Thank you for the video. Don't you have to use taxible income to pay back the loans? How do the wealthy do it without using taxible income?
Great video. I didn't know that the CEOs taking $1 salary was a tax avoidance strategy.
Yes and no - sure, they’re reducing their tax bill, but they’re also reducing their income. It’s better to earn $100 in income and pay $30 in taxes on it (leaving you with $70) than to get no income at all (leaving you with $0).
And even if they earned an income, they could _still_ take a loan against their assets to get even more “income”, tax free, so the $1 salary doesn’t really affect that part.
They do it symbolically, to virtue signal that they’re not just in it for the money.
@@thegzak Ah, no. These CEO's are not *compensated* a single $1 for their labor. They are instead taking a $1 cash renumeration and the rest in stock options. Executive compensation is its own Byzantine structure specifically to to maximize corporate tax deductions while minimizing taxable income to the executive.
Usually the CEOs that do this already have cash or an income stream from other sources. They then exercise the options once they vest. They then have the chance of either selling the appreciated stock and pay the capital gains, or follow the Sherman plan and borrow against the stock. When you look at their total compensation, these $1 CEOs can be some of the most highly compensated individuals out there.
If you want to see an example of this, either look at the former Steve Jobs with Apple Computer, or currently Markus Limonis with Beyond, Inc. as Executive Chairman.
They get paid hundreds of millions in stock options instead. Then sell after you a year and pay capital gains taxes that is a lower tax rate than what a school teacher pays
@@steveno7058bingo! You hit the nail on the head👏🏾
this is the second video i've seen on this topic and i still don't understand where the money comes from to service the loan payment. what am i missing?
Nothing. It’s BS.
That’s the mystery. Apparently you’re supposed to buy assets with the loans and those assets provide money that you use to pay back the loans. Sounds like a house of cards waiting to fall.
I have a margin account that holds stocks. You can keep a negative cash balance basically indefinitely while just paying interest only monthly payments. For a normal dude like me I pay that with W2 wages and I try to not keep it negative. But in the terms of these billionares...they have plenty of revenue streams to pick up such a relatively small payment. They can even borrow more than they need to spend if they wanted so they have excess cash to make payments. Or they can just never pay it - the interest accrues so their cash balance gets more negative but if you have the underlying assets where you are nowhere near your borowing limits it really doesn't matter.
@@primetimeedgetwitch3274it is. For example you could buy $50k in metal, like silver, but only pay $20k and keep $30k in cash. So you put in 20 and got 30 out, you’re up $10k. If the asset’s interest and storage fees are, say, 4% but its value climbs at 6%, you’re golden. Never pay that $10k back. However as that debt grows if the value falls when the value equals your debt the account will be liquidated and you lose it all. That happened to me during Covid because the market tanked so fast overnight I couldn’t inject enough to cover the margin call and poof… $50k vaporized.
Either you use loan money to service the loan. But as he says you should tax plan. Live from interest, dividends, company dividends or rental income.
I just model my income to be tax free...
1. Build myself a house.
2. Live in it as my primary residence for 2 years.
3. Build another house while living in the first 1.
4. Sell the first house. Leverage the section 121 cap gains tax exclusion (250k single, 500k married) to avoid paying taxes on the profits.
$500k tax free every 2 years is the equivalent of $390k a year as a w2 employee.
If I make a profit over $500k it is taxed as capital gains at 15-20% depending on my wife's income that year.
No taxes. No debt. Building wealth like crazy.
If the wife can offload enough of her income out of taxable income status, there is a pretty sizeable threshold of taxable income a couple can earn and pay 0% on capital gains.
Including the standard deduction I think the total is over 50,000 for the year iirc
That's ordinary income+ nonexempt capital Gains of course.
there is a flaw in this. Any appreciation you gained in your primary residence, you will end up using it purchase the next house since that would also have increased in price
@@smithwill5849 you missed the fact that he isn't buying houses.
He is buying land and building houses.
He might have bought land once and subdivided it into buildable lots before he ever started.
So start off with 250k-400k to build multiple houses! Simple
@SurferRC , you don't need to start with a big house. $250k will get you a huge house doing the work yourself.
I can build for 30-40% the cost to buy in my market... that's only 2x a 15-20% deposit.
Want to start cheap. Build a post frame garage with an apartment in the front for less than $100k.
Sell it for more than 2x what you put into it. Slowly scale up.
As an investment enthusiast, I often wonder how top level investors are able to become financially stable, I do have a significant amount of capital that is required to start up but I have no idea what strategies and direction I need to approach to help me make over $400k like some people are this season.
I believe the safest approach is to diversify investments especially under professional; guide. You can mitigate the effects of a market meltdown by diversifying their investments across different asset classes such as stocks, ETFs etc It is important to seek the advice of an expert.
On the contrary, even if you’re not skilled, it is still possible to hire one. I am a project manager and my personal port-folio of approximately $750k took a big hit in April due to the crash. I quickly got in touch with a financial-planner that devised a defensive strategy to protect and profit from my port-folio this red season. I’ve made over $350k since then
Due to the market falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this financial planner?
‘Grace Adams Cook’ is the licensed advisor I use. Just research the name, you’d find necessary details to work with a correspondence to set up an appointment.
Thank you for sharing, I must say, She appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
High leveraged folks are the first to crumble in unpredictable market shifts.
Wow, very informative! I am not getting the deductions I should have been getting now that I watched this video. I have two reantal condos and based on this video, I should now have paid taxes. I need to checkout the website!
And how do you pay the loans without selling your assets? Sooner or later you have to pay during your lifetime
Leverage is good if you already have the amount borrowed. So if the market goes down you can pay back without paying interest.
Just found your channel on my TH-cam (TV feed). Great video. You've got a new subscriber.
Can you take on another margin loan after paying all the interest or would you have to pay off everything you borrowed before doing another loan?
Ok, I am not sure I understand how this works. Say I incorporate my business and use your strategy. I would use the profits the company makes to purchase assets, say for simplicity's sake I buy ETFs in S&O, DOW, GOLD, SILVER and other markets such as food, tech and pharma. Now, who borrows the money? Me or my company? If it's me, how do I repay the loan if I have no income? If it's the company, how do I take the money out for my own use without it being considered a salary? The plan sounds very interesting but the details are missing.
You don't repay the loan. That's the whole idea of this strategy. You just keep paying the interest payments from the original loan amount. You borrow more once you're low on cash. Wash rinse and repeat. Works great as long as you have enough assets to survive market downturns and your assets go up in value over time.
Thanks, if you had an unused heloc, you could use it to buy equities in a down market, or could use it to live on and to pay for Roth Roll overs post retirement pre SS and RMDs.
I Have a question. If I trade options on my Robin-hood Acct and make 50K in a year.
What is that taxed at?
It’s not really owning a stock,yet it is more so owning the contract for a set period of time.
Usually short term capital gains.
@@jscotthamilton5809 what’s the tax rate?
Congrats on your channel. I just followed you. You do a great job explaining, and did so with great knowledge and shared excellent tips. Can I give you a suggestion, to grow. your channel faster? It would be to not wear a t-shirt for the videos. You are really good at what you do, but when I first saw the thumbnail, with the t-shirt, I thought, I wonder if he's a professional. I love t-shirts, haha, just would suggest a little more formal wear for the videos. Once I clicked on your video, and started watching, I was immediately impressed with your professionalism. Anyway, just wanting to help you grow a lot more. Have a great day, and thanks again for doing such a great job.
I appreciate the feedback, Gary. I will take it into consideration.
Hi Sherman, one question. How does one go about paying back the loan ? If assets need to be sold to pay back the loan, then it will incur taxes isn't it ?
Im not sure if i missed something, just overthinking, or you went over it in another video but how do you get a loan, even if using a Heloc if you are showing minimal income due to deducting as much expenses as possible.
Even with equity wouldnt a poan be harder to obtain with minimal net income?
Thanks!!
The securities are pledged as collateral for a collateralized loan. With a stock brokerage account approved for margin, it's automatic. The borrowing can be 50% - 90% of the security's value, depending on the type.
So does this mean if I buy securities (stocks) that yields dividends (money 💵) if I hold on to the security and I don’t sell it but receive dividend payments I don’t have to pay taxes on the dividends???! 🤔
Okay, you take out a loan against your assets, but you now have to pay back that loan, which means you need an income stream. Once you get the income stream you're back to paying taxes. Any questions? Class dismissed.🤨🤨🤨🤨
Set up my whole life policy to do this exact same thing.
Absolutely excellent video. Thank you Sherman.
The best way for the “regular working person” that isn’t broke or rich to execute this strategy is a whole life insurance policy designed for maximum cash value and minimum premiums.
Total scam. No longer works since interest rates are no longer historically low
Interesting BUT you should give additional examples, working with an excel file, to show the real numbers.
How are the interest payments offset?etc….
I understand what you are saying but something is missing.
I have about 50k saved up no debt besides my home and truck make around 100k a year in south Ga so cost of living much lower down here i wont to redo my rental property i inhented from my grandma i was trying to keep working OT and do it all cash out of pocket or would it be wiser to borrow from the equity in my current home i live in or what would you advise
I have portfolio margin and do this strategy. I buy more assets with it and always keep a debt
So getting rid of step up bases is the best way to close the loop hole
Could you please elaborate on how we can use cash value life insurance to implement your Buy, Borrow, Die strategy? You mentioned it at the beginning but did not go into detail. Thanks for doing these videos for us, Sherman. I'm benefitting from them a lot.
Normally, a portion of your life insurance premium is allocated to a "cash value" component. Once you build your cash value to a certain level, some policies will allow you take a loan against it. In that event, the proceeds are not taxable.
@@mycpacoach do you pay back at the interest rate of the year you borrowed or the rate of when you pay it back? I'm thinking this a question for the insurance company.
@@mycpacoach Thanks for this response. Would you be able to to please consider doing a video going in depth into this?
In particular, could you please let us know if the gains from using a whole life insurance policy loan will be taxed? Can an individual deduct interest paid to the insurance company?
I have been telling black folk to do this for years. We have 2 CPAs in the family. You appear to be well-versed. How can I reach out to you for a consultation?
Problem with leveraging is you payback creditors. Which means you have to pull cash out which means you get income which means you get taxed. If your businesses or assets don’t appreciate you screwed. Only RE is worthwhile then but there is limited supply so price is already out of reach get into this strategy.
No, you are only paying interest, which you write off.
I don't understand the part where they loan money ($5000)to buy more stock; how do they repay the loan? Do we expect the person to have tons of cash in the first place?
This will help me one I have my 100 million dollar stock portfolio
You are so good at explaining!
Thank you!
@@mycpacoach What happens to credit card debt when you die?
What if you can't obtain a loan based on your credit score? Or what if you have good credit but too many hard inquiries? (ex. I have good credit but a stupid car dealership did 17 hard inquiries when I bought a vehicle.)
Don’t try this method. It simply doesn’t work today because interest rates are too high
This still doesn't make sense to me. I borrow money to avoid paying taxes, but to pay it back, i need income. So wont that income be taxed? Can you write off PERSONAL loan payments?
If it is to say,buy a property to do Airbnb, and I register and AirBnB company, then the proceeds from that business repay the loan, but what do I do with the profits, wont that be taxed?
Great strategy; in a much better borrowing climate than we have today.
I agree - thank you!
Does that “be your own bank” meme fit into this picture?
Thank you for the great information.
Thank you, very insightful strategy.
phenomenal information! thank you for sharing your knowledge
Kind of missed the part that you have to make monthly loan payments at high interest rates. Defeats the purpose of
Kind of feel like you skipped the paet where you pay the loan back and what money you're using to do that.
Great video Sherman.
My question is If you borrow to buy lets say a house then how can you pay back what you borrow without income ?
And can you address the Harris tax on unrealized gains. Thanx.
Wouldn’t the interest rate of the loan have to be lower than your states taxes in order to truly pay no taxes?
You might exempt yourself from taxes...but you still need to make the payments...and the insurance...
And in the UK inheritance tax kicks in at around 250k lol..
Passing on a mountain of debt and a huge tax burden to my kids would be great if I hated my kicks lol.
Seriously though it's an eye opener to me how using debt to get richer and not pay tax works.
I was brought up with the attitude that debt is bad " if you can't buy it in cash you can't have it " mentality ....
So I learned to save for what I wanted from a very early age and it's stuck with me but I have seen others around me use debt to get rich and feel annoyed but I've also seen others lose everything when crashes come along..
Gotta good whatever lets you sleep at night.
In the UK your parents pay 0 tax and pass 0 debt for unlimited inheritance if they continue living for 7 years after they make a gift. Fairer and better system than in US by far
Can your personal home be considered as your asset to borrow against? Can I use this step up basis when I die and bequeath my personal home to my heir?😊
I have a reverse mortgage on our home. Is this similar to what you’re describing. Does it fit with this strategy
Yes. Except the house goes to mortgage company on death to extinguish the debt. The house doesn't get passed on to heirs with a stepped up basis.
Best video this year!
If you buy a house and live in it for 2 years then sell it you didn't have to pay capital gains.
Muni bonds are tax free. Exceptions don't make the concepts of income and income taxes go away.
Debt- my 2cents
Good Debt is buying assets.
Bad Debt is consumption spending
Find a sweet spot where you use good debt to acquire assets that will service the debt
And
Cover the consumption spending.
Have a reserve cushion to reduce risk of getting burned.
Did I get it right?
Someone got settlement quitam which is TAXABLE. is that avoidable
I don't see how this could work in Kanadistan.
- There will be interest and likely principal repayments on the debt. The only way to finance thes are through a hamster wheel of more and more debt.
- Using cash flow from the asset itself to pay off personal debt is either income itself first, or a taxable benefit if paid directly by an asset that is a seperate legal entity.
- If debt was borrowed from such an entity in the first place, rather than arms-length lender, it will either have to report & pay extra high tax on the interest income, or the debt will be treated as dividend income to the individual and taxed.
Here's my Q: in step #3 your heirs inherit at market value BUT what about your estate and the "deemed disposition" value?
Doesn't the loan interest amount payable every year dwarf the amount of taxes paid after a while (once the loan balance becomes significant)?
If I pay 30% of a 100K income every year, that is 30K.
But if I need to pay 5% interest on a 1 mln $ loan (after widthrawing 100K for 10 years), that would be 50K per year...
Doesn't this strategy only work while the loan balance is low, but then becomes too expensive to pay off in terms of loan interest costs?
But doesn’t one still get taxed on the dividends they use to pay back the loans?
So how do you pay for the loan you never have earned income?
can i borrow from my assets to pay a car for my business that id use as a depreciation tax deduction
What about paying interest??
I like your videos, thanks for doing them.
Do you have videos on Opportunity Zone Funds and its legislation?
Thanks In Advance
Thank you! And I don’t. I’ll add this to our queue for future videos.
This is why I bought variable universal life insurance. I don’t remember why but we needed cash fast for something and I was able to grab $10k from my policy and pay it back at 4%… or not. It just would have reduced my payoff when I died. I’m also a fan of real estate equity for loans etc but, like you, I also don’t like debt so I pay those off quickly if needed.
Great use case.
I love the name of this strategy!
How do I find a CPA who uses strategies like this?
Just complete this form and you'll be directed to one who can help you. mycpacoach.com/contact/
Does this apply to business owners only? If I am just a regular guy with a 100k/year job, can i take a personal loan of 10k with a 5% interest, knowing/assuming i can make more than 5% with stock investments. Can I offset my 100k income tax with the 5% interest from the 10k loan, effectively making my taxable income 99500?
These numbers are just an example. Trying to understand how this works
Do you have to pay back from borrowing and or interest too?
Eventually, but the idea is that the benefits of borrowing can greatly outweigh the cost of taxes and interruption of your investment returns.
How do you buy assets without income??????
You need income to pay off the loans. That income you’d pay tax on.
This strategy doesn’t really work unless interest rates are at all time lows. Today those loans would be at 8% rates or higher. Basically destroying any value from those investments
How about borrowing from my 401
id be scared of a market crash. So i would not take a loan on stocks but i like the ideal of portafolios that can be passed to heirs wihtout taxes... will try to work that onto my plan
I agree. Certainly a risk to consider.
Who's left holding the debt bill when you die though from all the leveraged loans? I understand debt doesn't pass on, but seems immoral to borrow against assets and then die without selling to pay that back
I think if one begins to make over a certain dollar amount, lets say 3Million, it may be "less riskier" to do this. But i dont think it makes sense for the average person. Too much debt.
So you keep borrowing to make the payments on the loans? And to pay all your other expenses? Seems like a risky method. And you do all of this to pass your fortune on to your heirs?
I do not understand this logic, I need more explanation and clarity. If you are not paying tax, are you not going to pay interest on the money borrowed? Depending on the interest rate and the return from your investment that would determine whether it is a worthwhile venture. Moreover how do you return the borrowed money without selling the investment at some point.
You don't pay taxes because loans are not taxable, but they still have interest. You would pay the interest and the loan principal down with the assets you own, assuming they are gaining in value over time. Since billionaires have such high stock and company share values, banks are more than happy to lend to them to pay for cheaper mortgage rates, other business investment, cars even, etc.
Borrowing money against your own assets, reinvesting it, and paying it back with earned income is a much better scenario than borrowing from a bank.
I agree.