If you were a highly-paid person over the last 40 years, the CPA field basically offered three suggestions for saving taxes. Let’s examine why these strategies don’t achieve big tax-savings.

Buy a Bigger Primary House with a Bigger Mortgage: You can’t deduct interest on a mortgage loan bigger than $750,000 on your primary house. Mortgage interest rates have doubled to over 6% today and your monthly payments will be high! Maximize Deductions to your  IRA or 401k Retirement Plan: The 2024 contribution limits to an IRA is $7,000 or $23,000 to a 401k. If you are age 50 or older, the IRA limit is $8,000 and the 401k limit is $30,500. Let’s suppose at age 35, you deduct $10,000 annually to your 401k and do this for 30 years. If you average a 25% tax rate, you save $2,500 of annual income tax. After 30 years, your $300,000 of total contributions saved you $75,000 of tax.

Assume that your 401k is now worth $1 million. If you and your spouse pass away in an accident, that $1million is taxed as ordinary income. If you have one child, $1 million is added to their normal taxable income and if total federal and state tax is 40%, that’s $400,000.  You saved $75,000 of tax and your kid will have to pay $400,000. The IRS set a tax trap! Your 401k becomes a ticking tax time bomb!

Invest in Real Estate: A small, modest rental house today in a nice area would cost you at least $500,000. To get a good interest rate on a mortgage, you would have to put 25% down or $125,000. If there are $6,000 of closing costs and $14,000 of fix-up expense, you have to spend $145,000. The typical allocation to the building is $400,000 and land is not depreciable. The allowed depreciation rate is5 years and so your annual depreciation is $14,545. If you are in the 25% tax bracket, you save $3,636 of annual income tax but had to pay $145,000 to buy that rental house and now have to deal with tenants, trash, and toilets.

In contrast, there’s an advanced tax-saving strategy where clients can reduce 2024 federal income tax to $0 and recover all federal tax paid in the last three years! The Energy Policy Act of 2005 introduced the 30% solar tax credit and defined solar business equipment to be eligible for 5-year accelerated depreciation. The Tax Cuts and Jobs Act of 2017 allows increased deductions for business equipment. Example: if one buys $80,000 of solar business equipment, one can deduct either $68,000 via Section 179 if one has another business with at least this amount of taxable profit; OR at least $46,240 via “bonus depreciation” if one does not have a profitable business. One also gets a 30% or $24,000 tax credit. If one were in the 25% tax bracket, the total tax savings in 2024 is $35,560. One gets 17.7262  times the tax savings per dollar spent compared to buying a rental house.

Attend my Free Live Seminars to learn more: Tues. 2/20/2024 or Thurs. 2/22/2024, starting at 6 pm at Hyatt Place, 3535 W. Chandler Blvd. Chandler, AZ 85226. The seminars are followed by a Free catered meal. Topic is “Advanced Tax Strategies, including How to do Big Roth IRA Conversions and Not Pay Income Tax!”

Free Tour/Workshop at Solar Reefer (Refrigeration) Factory: Saturday, 3/02/2023 9am–12 noon. Topic is “How Solar Reefers can Reduce Taxes to $0 and earn a steady 10-14%!” Lots of tasty refreshments served! Location is at Advanced Energy Machines: 4245 E. Norcroft Street, Mesa, AZ 85215, ¼ mile SW of McDowell & Greenfield Roads.

To RSVP for the seminars or schedule a free consultation, please contact Dr. Harold Wong at (480) 706-0177 or This email address is being protected from spambots. You need JavaScript enabled to view it.. His website is www.drharoldwong.com.

Dr. Wong earned his Ph.D. in Economics at University of California/Berkeley and has appeared on over 400 TV/radio programs.