145 - Step 1 - Deductions - Tax Strategy Framework

December 18, 2025

In this episode, we begin the Eight-Step Tax Strategy Framework by focusing on Step 1: Deductions, which is one of the most important and often overlooked parts of tax planning. Brent explains how deductions work for different types of taxpayers, including W-2 earners and business owners, and why understanding your tax bracket is a key part of making smart financial decisions. You will learn: - The difference between standard and itemized deductions - Commonly missed personal write-offs such as medical expenses, mortgage interest, charitable contributions, and property taxes - How business owners can use reimbursement plans, fringe benefits, and legitimate business expenses to reduce taxes - Advanced deduction opportunities such as defined benefit plans, captive insurance, charitable strategies, and conservation easements - Why it is important to review expenses you have already paid personally but have not charged to your business This episode lays the groundwork for the entire tax strategy framework. It helps you understand your position in the tax code and ensures you do not miss deductions that could meaningfully lower your tax bill. Next episode: Step 2, Deferring Income and Accelerating Expenses.

Episode Transcript

Alright, we are continuing the,

the eight-step tax strategy framework.

This is number one of eight.

We've already done the summary, so the first one,

which is going to sound very basic, but I want to bring up some

specific strategies. The first you by the end is talking about deductions.

I know it's very vague to start,

but I'll explain kind of some of my thoughts behind deductions and where people

commonly miss them. so first thing, like with,

so first thing is just figuring out where you're at in the tax code.

Like what types of tax code applies to you depends on your specific situation

and your circumstances. So if you are an individual,

individual taxpayer. Like your W-2 employee,

there's going to be different deductions for you than,

say, compared to a business owner. And,

say, you're a business owner and you have employees,

which could be different also to,

like, from you being an investor.

you've seen our personas. That's why I've done some of these tax personas,

like Employee Ed and High Net Worth Helen and people that are retired.

There's just different types of deductions,

but I'll cover them. I'll cover some of those broadly, so, but to start,

so as an individual, everyone files an individual tax return,

so I think that's a great place to start, so just some common things

not to forget related to deductions.

And deductions are different from credits, so we're going to talk about credits after

in another one of the episodes, but deductions are things that reduce your taxable

income, and remember, your tax is calculated on your taxable income,

so. your gross income is the total that you've received,

but the taxable portion is what you're actually taxed on,

so these deductions bring down the, bring down the number that the tax is

calculated on, so your tax does go down,

and sometimes you can get into different tax brackets as well,

so the planning with deductions is important to understand your situation,

but also understand your tax brackets and where you're at.

And I hope well, to start, I would, figure out what tax bracket you're

in, so we've talked about tax brackets in the past,

but for you to know how much a deduction is even worth to you,

you need to know what your tax bracket is.

And remember, there's a 10% bracket up to like $10,000 in taxable

income, there's a 12% bracket up to about $100,000 of income if you file

a married joint tax return, and it goes up from there.

And 32, and 35, 37. It goes up depending on your tiered system.

I won't even pull up the chart here, because we're just doing the audio

today. but think of, because, think of someone that's in the 12% bracket compared

to someone that's in the. 35% bracket.

If you have a $10,000 deduction,

that reduces your taxable income by $10,000.

But that $10,000 deduction is worth $1,200

to the person in the 12% bracket and it's worth $3,500

to the person in the 35% bracket because their taxable income goes down.

The tax is calculated on that. And so, in that example, the deduction for

higher income range, it's three times more valuable.

So if you're just like, it's just a $1,200 tax savings.

It's not worth the effort to go through and jump through those steps.

But similarly, so it could be the same all our amount of deduction,

but it could be saving some $3,500.

So just think of that as well. So there's a lot of these moving,

these moving parts. so to start the personal.

I'm going to do personal deductions. I'll talk about business deductions.

I want you to consider. And then lastly,

we'll talk about kind of unique tax strategy and tax planning deductions

at the end. So first off. Personal deductions.

Every individual taxpayer has the opportunity to itemize their personal deductions.

If you itemize your deductions, there's,

there's not a ton of options. I'll give you what the options are.

You've got medical deductions. Which,

you've got to be over seven and a half percent of your income anyways

to even start making an impact. But there's medical.

There's property taxes on a, on your personal residence.

There's state taxes that you pay. Like,

er- Like, in-state income taxes.

Then there's mortgage interest. And then there's charitable

donations. Like charitable deductions. And it's mortgage interest on your personal residence.

Mm. So to start medical deductions,

you've got to have a lot of medical deductions. Your income needs to be

relatively low. For those to even make an impact,

I won't dive too deeply into that. But state and property tax deductions,

those are lumped together. We'll just call them like the state taxes.

in prior years, from 2018 through 2024,

the cap, the maximum you could deduct there was $10,000.

But now in July 4th of,

And big, beautiful bill act jumped it up to $40,000.

So that was a big increase with that.

And a lot of people were hitting the cap before,

like, if you live in a state, a state income tax and you pay

proper tax to your house, you could see how quickly you could get to

$10,000. But now,

with the cap of $40, so say if you've got $20,000 of those expenses,

now that $20,000 can actually, reduce your tax flow income instead of being capped

at $10,000. Yeah, it's pretty awesome.

It's going to make a big impact on a lot of people's tax returns.

the other one is some mortgage interest,

so you can do that. But mortgage interest on a how,

on a loan, up to $750,000 loan.

and then the last one,

and then real, it's kind of a, what's, it's a pretty s- Thank so

much simple calculation, but if you've got a loan that's bigger than $750,000,

we just have to cap how much you can actually deduct.

And then the last one is charity. And charitable donations,

there's a lot, there's a lot that can- go with that.

So from, like, the simple approach, it's just,

you give cash to a charity during the year,

you get- you get a deduction, it can reduce your tax income,

save you on taxes. And there's cash donations and non-cash donations.

But actually a lot of the strategies I like are related to charitable donations,

because there's donor advised funds, where you can front load,

we'll talk about this a little more later, but you can front load deductions

going into that, and then you have control of which- organizations they go to.

There's private family foundations, you can donate money into your own private family foundation.

There's a lot of rules surrounding that, but there's- there are some deductions there,

and it's gotta be managed correctly, but. Well, let's do that.

You can do that as well. You can donate. There's things like conservation easements.

There's a- donating appreciated stock.

Or- or any appreciated asset

saves you on having to pay tax on a capital gain,

and you could eat deduction at the fair market value.

And then there's a lot of, like, related to charity- charitable types.

I hope you enjoyed the things, business planning,

exit- exit planning. There's a lot of things to be done there.

But just- just talking about- from the personal tax planning,

personal deductions, those are the main deductions.

If I were to take those and add on- add on two other things.

Thanks. Retirement contributions for individuals.

Don't forget those. And then,

like HSA plans, it is medical related,

but it's for, your medical costs if you have a qualifying insurance plan.

The HSA plans can, give you a direct,

reduction of your tax fund come to. So those are personal deductions.

So I want this next one in just the next portion I'll talk

to you about. Is the business deductions.

So business deductions are,

like you think of like, like you're operating your business.

So to start, make sure for your business,

you've got the accounting. And the bookkeeping done correctly,

you've got your personal and business expenses separated and in different accounts,

just so you can look at an account, look at all the transactions,

and know that those are all related to the business.

But most business owners, you know what your costs are,

you might not know exactly what your P&L is,

numbers might not even be organized quite yet, but,

like, if you, if you build houses,

you know that you, you're buying materials, you know,

you're buying the nails in the wood. And the sheetrock,

like, you know what your costs are, like, there's not,

like, some secret deduction,

there's not, there's not gonna be a deduction that is just gonna completely surprise

you, like, you. You know what the costs are, and so we just want

to make sure to, track it correctly. But where the strategy comes in,

what I like to talk with people about, are those deductions that you don't

know about, Or those deductions that you don't know about,

are deductible. And for some,

especially small business owners, like a lot of your personal life does blend

with your business life. And you're just like,

yeah, I've been running my business for two years.

And and in a minute. I'm using my own truck and my own tools

and my own house. And I've got a shed or a where we're storing

all the tools and we've got a shop where we're doing all the work,

but say it's all on here by your personal house.

There's a lot of those deductions that business owners are like.

I didn't even know I could write that off.

Like a truck, like a truck that you bought five years ago that you're

now using in the business, there's a way you can contribute that to your

business. Same with the tools and the equipment and materials.

If you've never deducted it in the past and- It was a personal use

type of thing in the past and paid for personally in the past.

You can contribute that to your business.

And in most cases, you can get a deduction for it.

Same with, like, using your home for the business part.

The home could be deducted. If you've got a- A shop at your house

if you've got a shed that you're using. Those types of expenses are the

ones I like to highlight and make and have people think about because they're

things that you didn't pay for. It's not gonna be on your credit card

statement, but there's things- they're things that are deductible.

and then there's other things like things that you don't pay for are

some of my favorite deductions. And it's- I kinda like you're stealing stuff.

So don't worry, you're not gonna break the law here.

But one example of this is like,

with depreciation. So say you go and buy,

and I'll talk to the town as you buy. It's your end of the

year and everyone wants to buy a new truck type of thing if you're

a business owner or a vehicle. But let's say,

here's, here's one of the ways that works. If you go buy a car

and for easy math, let's say I, or let's say it's a truck.

It's over six thousand pounds. It's a hundred thousand dollar truck.

And you're like, I need the truck.

I don't have a hundred thousand dollars of cash. So you go get a

loan for it. And say you have to put five thousand dollars down.

You have a ninety-five thousand dollars. So, how much did you pay for that

truck? This year, you paid five thousand dollars of cash.

But you bought it for a hundred thousand. Remember,

the difference is the loan. Something this type of deduction is something you don't

pay for. Yeah,

and it's a depreciation deduction. So in that,

in that example, it's a truck that's over six thousand pounds,

it's a hundred thousand dollars. You can take a deduction.

It can reduce your taxable income for the f- All $100,000,

even though you didn't pay for it yet.

You paid $5,000 for it. You'll pay,

you'll pay it in the future on, in the future payments to get the

rest, but that's an example of not having to pay for sh- something.

So if you're cash crunched, but you need deduction still,

taking loans is actually a way to help you out with that.

finding things that you're using in the business that had not been deducted previously,

I could talk about personal tools, personal views. You Go.

Business use at home. Those are ways to get deductions that you didn't have

to pay for. And then sometimes even things like,

and actually I'll go through this list of, this actually.

You in this tax planning strategy framework that we use for our tax strategists

as we're just brainstorming with clients. I'll bring this up in a minute,

just a few of these things. But things like, paying your kids,

a lot of times you're, you're paying your kids, you're- your kids might be

helping out with your business anyways. If you go,

oh well, I could just pay my kids for help their- their things are

helping me with anyways related to the business.

But then have them pay for some of those things, their own things anyways.

It's not their food or shelter, but it's vacations or soccer practice or- or

other things that they want. You can have them pay for it.

So it's things you were probably gonna pay for anyways through your own bank

account, but you just pay them to their bank account.

You don't have them or some money, you learn some of the accountability,

and you pay them. So that's another example of a deduction that you're paying

for. Anyways, you would end up getting.

So just the list, really just going off- this spreadsheet that you can go

download, through, for free through the WealthGame Basics course,

or in the WealthGame, the WealthGame Alliance portal,

you can download it there as well. And,

And then if you've got questions about it, of course,

you can, you can bring up any of the questions in the,

in the WealthGame, the WealthGame Alliance calls,

where you can answer those questions every week. but here's the list.

So, for deduction. So,

we're still in one of eight for the things to not forget related to

the strategy framework. Don't forget your ordinary operating expenses if you're a business owner.

Don't forget about travel that you might be paying for anyways.

business use at home expense. This is the Augusta Road,

renting the home from yourself up to 14 days a year,

tax-free, paying the kids,

and they can make about $15,000 tax-free.

Reimbursement plans for your business,

employee perks and fringe benefits that a business can legally pay

for, can pay for, and get a deduction for it.

Consider charitable giving strategies, donating your private foundation.

Conservation easements, defined benefit plans,

captive insurance. There's whole episodes we could cover on each of those,

but those are some things to not forget about on deductions,

just kind of in summary. Remember to consider things that you didn't.

Pay for or that you've, you've brought to the business that you're not using

yet. Remember to think about through all those different personal deductions that

I talked about the itemized deductions. And here in the next episode two

of eight we'll talk about deferring in. . Come and accelerate your expenses.

This is a number one of eight for the tax strategy framework.

Talk to you later. See you. Thank you.

145 - Step 1 - Deductions - Tax Strategy Framework

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