 Once again, ladies and gentlemen, boys and girls and children of all ages, welcome to the Prince of Investment right here in Haluu, Hawaii, via Denver, Colorado. Don't forget to hit that like, subscribe, comment, and share button for everybody that's catching a playback on the podcast, YouTube, Facebook, Instagram, Twitter, or whatever else you may be catching us around the globe. Also drop some comments below if you've got questions and also check out our description box to get in contact with myself or the guests and all the other great stuff. As always, I don't have a lot of time and I definitely know you guys and girls don't have a lot of time, so we're going to jump straight into it. So as you guys and girls can see in the description box, we got a very, very special episode of the day with a very, very special guest. We all know it's that time of year again, it is tax season. Tax season of everybody fighting taxes, whether it's a business, whether it's investments, whether whatever it is. But you know, we have a new president office and a lot of things have changed via the tax season. We know taxes change every single year. But that's why I brought in a very, very special guest and professional for our public accountant, Mr. Logan Howard, who called all the way from Pittsburgh, what's Pittsburgh, Pennsylvania? I almost forgot what State Pittsburgh was in for, but a lot further do, let me introduce my guest. How are you doing today, Mr. Howard? I'm great, friends. Thank you for having me. I appreciate the opportunity. Awesome. Awesome. Thank you for coming on today. So the first thing I want to do is for the people out there who don't know you or who haven't been introduced to you yet, tell us a little bit about yourself. Yeah, so I graduated from a state school here in Pennsylvania and then I graduated from the University of Pittsburgh with my master's in accounting. And I've been doing, started out auditing, but I've been doing tax work. This is my fourth year doing tax work. I am a certified public accountant and I do have my own business. So, and I'm also passionate about financial planning. I teach college accounting and tax courses at a local university and the University of Pittsburgh. So I'm pretty ingrained and entrenched in the accounting and tax community here in Pittsburgh area. Okay. Awesome. Awesome. That's some great stuff there. Now, so by you having all your information and knowing all you know about taxes coming into 2019 with the people that are new, some people have just started buying stocks, started buying investments, things like that. And that first question is, okay, so how does this affect my taxes? What do you have to say to that person? Right. So yeah, there's been a Simone, obviously a Simone going chatter and talk over the past year about the tax law changes. And, um, you know, it's not one size fits all. Every individual has their own, you know, personal financial situation and it needs to be evaluated individually like that. But, you know, in general, tax rates have come down. You know, we've heard the tax forms have changed and, um, and I would say big picture items, um, you know, exemptions and dependence were eliminated and the standard deduction, you know, has increased. You know, I'm sure those are some very technical terms. So if there's anything you really, you know, want me to explain, you know, I'd be happy to help. Okay. When you say the standard deduction, what does that mean? Yeah. So every individual, um, you know, business owner, you know, W2 employee, um, automatically gets a deduction and that is called the standard deduction. Last year, every individual, so just say a single person last year, they would have got just over $6,000 deduction right off the bat as a deduction this year. That same individual that would have had that's just over $6,000 deduction now has a $12,000 deduction. So the standard deduction increased from $6,000 to $12,000 and, um, if you were married last year filing jointly, so a husband and wife, they would have had six each, a little over six each that had been just over 12 this year, that same married couple would have just over, or they would have a $24,000 deduction. Wow. Okay. So that means that all of the taxes that they paid $24,000 would be taken down. Am I saying that correctly? Right. So just say a married couple in 2019 or 2018, um, if they just say they, you know, each made $50,000, they were at $100,000. So their taxable income would automatically drop from $100,000 to $76,000. They would only be paying tax on $76,000. The standard deduction would drop their income. Got it. Now, uh, for the people that are out there, they're listening to this that are, you know, everyday person, uh, they have a 401k, they bought some, they purchased some stocks and things like that. What are some tricks or what are some ways to limit their tax exposure, aka paid less taxes? Right. So I would say right off the bat, if you're an employee working for an employer, you know, then you have access to a retirement plan, a 401k or a 403b. If you're a government or nonprofit worker. So I would encourage, you know, employees to contribute the maximum amount or try to contribute as much as they possibly could to limit their taxes. Um, that would definitely, that's, you know, pre-tax, that would drop their taxable income. And also, you know, when you're contributing to a retirement account for your employer, you're, you're, you know, you're deferring your taxes, but you're also saving, you know, for retirement and investing for your future. And I wouldn't leave money on the table because a lot of the times your employer will match up to a certain percentage. So if you do not, you know, meet that, you do not meet the amount for them to match, then you're, you know, losing money or leaving money on the table. Okay. When, when you say, I should put money into my 401k to avoid taxes. Did you explain a little further? What does that mean? How does that work? Right. So just say you, um, you know, are making $50,000 at your salary and you want to contribute to your, um, 401k. So just, just say, you know, you try to contribute 10% of your, and your gross income. So if you are making 50,000, you decide to contribute 10% of your income, um, you know, 50,000 times 10%, you're contributing $5,000. So your taxable income would go from $50,000 to 45. So you avoid paying tax on that $5,000 that you contributed. Awesome. Awesome. Okay. So now you're explaining what we all know as traditional and a Roth out of traditional and a Roth tax purposes, which one are you leaning towards and which one you'd probably recommend for who? Right. You know, I get this question often and I am self employed. So, you know, I face this question as well. And I'll tell you what I do personally and what I personally recommend. Um, I have one of each, I have a traditional IRA and a Roth IRA. And just to explain from a tax perspective, the difference, a traditional IRA, you get a tax deduction now for the amount that you contribute. And that grows tax deferred until retirement. And then you have to, um, so in, and in retirement, you pay income tax when you withdraw that money. So, so a traditional, you get a tax deduction now, and then you pay tax when you withdraw, um, at retirement. And you have to keep the money in there until age 59 and a half. Um, and that's the earliest you can take it, but then you automatically have to start taking withdrawals at age 70 and a half. And then on the other hand, you have a Roth IRA and a Roth IRA, you do not get a tax deduction now. The money that you contribute, um, rose over time, the money invested. And then when you retire, then you can withdraw that money tax-free. So essentially you pay tax now, but you'll have tax-free income during retirement. Um, also one thing that people do not know about the Roth IRA is you can withdraw your contributions, um, tax-free. But if you try to withdraw money before retirement from a traditional IRA, you will be hit with a penalty. Um, the reason I say to contribute to both is because, you know, it's nice to get a tax deduction now, but it's also nice to have tax-free income in retirement. So, you know, I like to, you know, hedge my bets and diversify as much as possible. Okay. So you do like a little mix, like a little bit into Roth and a little bit in traditional, am I correct? Yeah. That's what I do. And I sort of encourage other people to do that as well, because I would rather take a little tax hit now and, but also have that, you know, the ability to withdraw the money if I would need it, but also have tax-free income in retirement. If you wanted a tax, if you wanted a tax deduction now and tax was your main driver, then you would probably want to contribute the whole amount to the traditional IRA. Okay. Got it. Now you've just explained about one of the ways that you can lower your tax exposure, it's different between tax evasion and tax avoidance. But one of the ways you can limit your tax exposure is by contributing to your 401k, because that money, um, takes down your tax exposure. What are some other ways out there that I can lower my tax exposure? Yeah. Another way would be for a family, you know, or an individual, if you, you know, if you don't have the greatest health plan, you can also have an health savings account in HSA. And that money that you contribute to an HSA will also provide a tax deduction, um, right now. And then that's also invested similar to an IRA. And then when you withdraw the money, you can use that money for medical expenses and medical purposes. So, you know, if you plan on needing, you know, health, having health or medical expenses, then you might as well contribute the money throughout the year because you will get a tax deduction as well. Okay. So you're saying, okay, the HSA, the health savings account is pretty much a way where you can put money up to the side that you can use later on for health expenses. Am I correct? Yes, that is correct. Okay. So that's another great way. You spoke about a 401k in the HSA about ways to lower your tax avoidance. What are some other tips you got out there under your sleeve? You know, so about business owners, so like you said, the purpose of tax, you know, is to lower your taxable income as much as possible. And as you said, tax avoidance is legal. I remember a professor I had, you know, it said tax avoidance is okay. And, you know, we should play within the rules and be as aggressive as we possible, but it's not okay to evade taxes. You know, other things that, you know, I encourage for like, maybe business, I deal with a lot of small business owners, you know, Schedule C, sole proprietors or single member LLCs, you know, legitimate tax deductions for them would be, you know, I always tell my clients and myself, you know, try to look for ways to maybe turn your personal expenses into illness, you know, so your cell phone is a normal expense that business small business owners would have. So, you know, then obviously you can get a tax deduction for your cell phone and all of the business miles that you drive and business owners can also get tax deductions for their, you know, if they're self employed, they're self employed health insurance and a home office. So, you know, whenever you are an employee, you're, you are pretty limited, but as a business owner, you know, there are, you know, many other tax deductions available to business owners than there are two employees. Okay, now you just explained about being a tax about tax avoidance via being a business owner. So, would that be something that you would advise people to like, hey, if you are an employee and you're at home, you know, starting a business is a way to help you lower your tax with income? Yeah, first of all, you know, without even talking about tax, just from like a personal finance perspective, you know, I think we should strive to have multiple streams of income, let's create as many streams of income as we have. So, if you are a W and two employee, great, but that doesn't mean you shouldn't be, you know, have some kind of savings account and earn interest on your money and also invest in stocks and receive dividends and similar to that, then I think, you know, having a side business or as they're calling them now side hustles, I think that's great. It's great to have another source of income, but then there is also, you know, it does open the potential to maybe some other tax deductions that you may not be able to receive as an employee. Okay, now when it comes down to someone sitting down with a CPA like yourself, how are you guys paid as far as let's say, hey, I'm a small business owner or I'm a regular person instead of going to the traditional HR block or going to the traditional Jackson, I can't even think of the name of it, but you know the other tax places. Jackson Hewitt, exactly. If I go into them, what are the advantages of going to a CPA like yourself? Yeah, so, you know, if I'll start on the other end, so if you are going to some chain or franchise or just some local shop, you know, they may have some experience, but in general, they, you know, well, the CPA has to have education, you know, there's an education requirement of being a CPA, you have to take four strenuous exams to become a CPA, you also have to work, have work experience, work under a CPA, and then there is also a continuing education credit, so 80 hours every two years. So when you go to a CPA, you know that, you know, they have experience, you know that they're educated, and you know that they have to continuously keep up with the rules and laws, you know, whenever you go to a franchise, you know, pretty much anybody could get a job there. I'm not saying I'm not trying to knock them because I'm sure there are people that work there that have experience, maybe more experience than me. But you know, I think the stress test for a CPA, you know, it's it brings credibility to, you know, your tax profession. Awesome. I would definitely agree. Now, most people, now CPAs are, do you guys, is there a fee up front, or do you take a portion of tax returns? What is the fee structure for hiring a CPA? Right. So that, as you said, a fee up front, you know, I think a lot of the franchises, you know, they get paid from the refund. So I think a lot of people that are looking for a quick refund or just to have it done fast, they may go that route. Some CPAs will have a monthly retainer. For me personally, I just like charging a flat fee. Okay, so, you know, I'll charge so much for your tax return, and that's how much it'll be. And with that, I also, you know, I give out a lot of free advice throughout the year. I try to be fair and reasonable. It is business. I have to be run a profitable business. But you know, I try to help people and I want to be fair and reasonable for all parties involved. So I go by a flat fee model, you know, some CPAs probably charge a monthly fee in order for the client to have access to them. But you know, I just, I try to be open, honest and transparent with my pricing. Okay, okay. I like that. Now, let's switch gears here for a second, where we were speaking about the new tax laws. What are some things like you've seen all this craze about people saying, oh, this changed the tax law, you know, Trump did this, the president did this, this new tax law. What are the disadvantages that are coming down? Or is that just some rumor meal going around? Yeah, so yeah, I've heard stories that, you know, refunds are less. And I actually just recently read one, read one today, I saw an article that said refunds are now more than last year. You know, I think there has just been a lot of hype, way too much hype, you know, and so far in my experience, this is my second year of having my own business and having repeat clients. The repeat clients so far, most of them are in a very similar spot. I do not think the chat, the tax law changes are going to, you know, be as big as they were talking about the government was talking about or other, you know, commentators were talking about. I think people are going to end up very close to where they were. Now, like I said, it has to be evaluated on an individual basis, because I'm sure that there will be people that see, you know, big differences in both directions. But I think the vast majority majority of Americans at file tax returns are going to be in a very similar spot, just based on my experience so far this tax season. Okay, because I haven't seen anybody, you know, some people went crazy about things like that. Now, if some people out there saying, Hey, you know, I started investing into stocks, I'm earning dividends. My dividends are being reinvested. How is this going to affect my tax exposure? Is this going to, with these dividends I'm earning, I'm looking good, you know, on McDonald's stocks, how is this going to affect my tax exposure? Yeah, so, you know, in general, so dividends are taxed at a favor, qualified dividends are taxed at a favorable rate. So when you when you receive dividends or capital gains from investments, you know, maybe from a mutual fund or a stock, those are taxed at capital gains tax rates. And capital gains tax rates can be taxed at 0%, 15% or 20%. So you could be earning dividends on a yearly basis and keep paying 0% tax rate on those dividends, depending which income tax bracket that you fall into. Also depends on, so let's say if I get my, for my broker, I get my, what's that, not the 1099, is it a 1099? So I get my 1099 for my broker and they say, Hey, you earned this many dividends. But you say, Hey, I didn't earn those, I reinvested those dividends. And you're saying essentially it depends on your income tax level is whether you will pay stock, what would you pay taxes or not? Right? Right. Right. So, you know, when you rein, so yes, from an investment perspective, I encourage reinvesting dividends because, you know, that that's pretty much the compound interest effect. And, you know, when you reinvest dividends, your investments will eventually grow exponentially. But from a tax perspective, when you reinvest dividends, you will pay, and when I say reinvest dividends, so say you own a stock or a group, you say you own so many shares of stock, if it pays you $100 in dividends, when I say reinvesting dividend, that means taking that $100 and reinvesting it back into that same stock. But yes, so that $100 that you received in income would be taxable. And it could be taxed at a 0% income tax rate, 15% or 20%. It would all matter into which tax bracket you fell into. But capital gains tax rate is definitely favorable and typically lower than income tax rates. Got it. Got it. Okay. Now, when you look at million dollar athletes or million dollar celebrities or whatnot or whatever the case can be, and they're paying crap ton in their taxes, what advice would you give them? What advice would you give them to kind of avoid taxes and their tax bracket? Right. So, you know, that's definitely challenging. That's a good problem to have. And I don't work with any professional athletes or entertainers yet. But that's in one other complex. When I worked in Pittsburgh, I did actually work, you know, with I would say like a professional football coach. And, you know, they have to file in, you know, multiple states, their issues get very tricky. But as for, you know, ways for them to limit their tax, I think it just comes back down to, you know, the way any other employee would do that. And that is to try to contribute as much as money to a retirement account as you possibly could to lower your, you know, lower your tax, your income and also, you know, contribute to things like HSAs or just try to defer taxes as much as possible. But there is no, there's really no way to, you know, just based on the normal situation. Okay. So would you agree that would you agree that the top three ways to kind of lower your tax exposure or avoid taxes is to one, increase as much as you can to a 401k, to put as much as you can into a health savings account, three, start a business. Yeah, I would say those are, those are three pretty good, pretty good options. Yeah, off the top of my head. Okay. So now, because you know, I want some people to get out there because they always ask questions and I know there are some celebrities and some athletes that have asked that question that are tuned into the show and watching things like that. And, you know, they're like, hey, you know, when I get paid, you know, like you said, I'm paying taxes in every city, you know, I have a way game in LA, I'm paying California taxes, Georgia taxes, this taxes, that taxes. So like half of my income goes to tax. So I thought I'd be very keen to get on tax avoidance or some ways, some keys out there. Right. Definitely. Go ahead, go ahead. Good, I'm good. Okay. And one of the things I want to YouTube is found on as well is going forward into the future. Right. Would you recommend someone, you know, for their kids, for their children? What are some of the tax advantages of tax ways when you start to think about children, if there are any out there? Right. So, you know, one thing that you could start to think about is gifting money away. You know, it depends because it depends how much, you know, how many assets an individual has, you know, if they're going to be, you know, dealing with the estate tax one day, and some states have, you know, inheritance tax like Pennsylvania does. So some at some point, it may be favorable from a tax perspective to start gifting money away to your children or maybe different beneficiaries, because that is a legitimate way to limit estate tax. You can you can gift $15,000 to as many individuals as you want every year. And that is something that is a way to transfer money without paying an estate tax in the future. And also, you know, if there are, you know, wealthy athletes, entertainers or whatever it may be, you know, then you may want to consider to start a trust because, you know, that gives that gives you more control over, you know, how those assets will be distributed and to make sure that the funds, you know, are in good hands to take care of your, you know, loved ones, family, friends, beneficiaries. Okay, good stuff. Glad you brought that up. Quick question. Can you explain it to people? What is a trust? Yeah, so a trust is it's an agreement. It's a it's a it's an illegal agreement where you pretty much are shifting monies to a fiduciary, you know, whether that's a bang or some other company. So they're you're shifting money there and that that company is holding your assets and somebody that works for that company, or somebody that you name acts as a fiduciary, and that they they are making sure that the trust agreement is being carried out as as you wished. So you there are different types of trusts, but in general, you're shifting money to a trust and somebody a third party is watching over those assets and making sure that those assets are those assets and the income is being handled in the way that you wanted and you requested through legal agreement. What are the benefits of a trust wide and waste my time shifting my money to fiduciary? What are the benefits of a trust? Yeah, so you can potentially avoid taxes, you know, gifting so much money away every year. So from there is a benefit from a tax perspective. But then from a from also, it's to make sure that, you know, if you if a person died with assets, you know, you may not have exact control of those assets. So whenever, you know, you have that legal agreement, then you are ensuring that those assets and that income is being distributed as you wish. And my mind would blank here. There was an off also because when you shift those assets to a trust, those assets do not have to go through a will. They avoid probate. So it's a more secretive process to, you know, transfer assets. It's not open to the public, more private. Got it. Because I always hear people say trust fund, baby, and this is a trust fund. And blah, blah, blah, like why do I want to set up a trust fund? What are the benefits? So thank you for sharing that. You're welcome. I'm no legal expert. And I'm no trust expert either. But I have enough knowledge to be dangerous, I guess. That's all we need sometimes these days. But I did want you to share that they put that out there. Now, for people that sit back and heard you this entire episode, and they want to know more about you, they want to follow you, how to get in contact with you. What do you have to put out there for? Yeah. So, you know, I'm a business owner, I'm a CPA, and, you know, I specialize in tax. So this is my busy time of the year. But I also enjoy personal finance and financial planning. I enjoy just helping people with all of their finances. You know, I want to be here as an act as a financial resource. Also, I do have a nonprofit and it's called Project Financial Freedom. And I go into high schools in the local community and I teach, you know, personal finance to, you know, high school students and even adults sometimes. You know, I started writing a little bit for a personal financial company, personal financial company out of New York City. And other than that, you know, you can find me on social media. You have a business page on Facebook, I have a website, I'm on Facebook, LinkedIn, Instagram, wherever, just search for Logan D. Howard CPA and, you know, happy to connect with anybody and help any way I possibly can. Okay. Thank you for stopping by. And I wanted to say, is there anything you want to leave people out there with before we get out of here? Yes. So I always say, create multiple streams of income, learn, learn the difference between a want and a need. You know, I always hear people saying I need this, I need that. No, do you really, do you need that or do you want that? You know, so and live live below your means because if you do those and simplify your finances, try to keep things as simple as possible. If you do that and you're disciplined and, you know, and learn as much as you possibly can about your finances, now you're going to have a, you know, a good future. Alright, Mr. Howard, thank you definitely for stopping by and we'll be in contact for everybody that's out there. Once again, this is the Prince of Investment coming to you live all the way from the beautiful state of Hollywood, Hawaii, be a Denver, Colorado. Until the next video, podcast, cartoon or whatever else you see, we do crazy around the globe. Peace, be safe, I'm out and thank you.