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How To Get A 6 Figure Tax Deduction With A Cash Balance Plan - YouTube
Channel: True North Retirement
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Do you own a successful small business?
Is Your Business highly profitable?
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Do you pay too much in
taxes? In today's video,
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I'm talking about how you can get a six
figure tax deduction by contributing to
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a cash balance plan in your business.
Hi there, my name's Ashley Micciche,
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CEO of True North Retirement Advisors
where we specialize in retirement and exit
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planning for business owners.
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[inaudible].
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Now, in today's video I'm super excited
because the cash balance plans are a
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tremendous opportunity for small business
owners who have profitable successful
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business.
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You have paid too much in taxes
and you want more tax deductions.
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Now, these are especially beneficial
if you are close to retirement.
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So I'd say if you're over 50,
especially if you're over 60,
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pay close attention to today's video
because it's going to be highly relevant
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and getting you a tremendous,
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now we're not talking about like a
$500 or a $1,000 tax deduction here.
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We're talking about potentially
a six figure tax deduction,
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lowering your income.
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It's a powerful way to reduce
the income that you take home,
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reduce your taxes,
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put more money into retirement for you
so that when you do transition into
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retirement, not only do you
save money on taxes today,
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but you build that nest egg up as well.
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A lot of people don't
know that these exist.
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A lot of CPAs don't even
know that they exist.
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A lot of financial advisors don't
know that they exist and as a result,
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they're not telling their
clients about these plans,
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but they have absolutely exploded
in popularity in recent years.
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And even with all the tax changes
with the tax cuts and jobs act,
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they're actually even more compelling now.
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And I'll explain that in a couple minutes.
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[inaudible]
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So cash balance plan, it's
a hybrid retirement plan.
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So it has the elements of
a qualified plan like 401k.
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It is a qualified plan,
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but it has some elements of what's
called a defined contribution plan.
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These are 401k profit sharing plans.
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And then it also has some elements
of defined benefit or pension plan.
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It is not a pure pension plan.
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It kind of straddles the
line between the two.
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And so because it's a
qualified retirement plan,
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contributions that you make,
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money that you put in as the business
owner into this plan are tax deductible.
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And that's essentially how you're able
to make a six figure contribution to your
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cash balance plan depending on your
age and how you can get a massive tax
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deduction. What I really want to
emphasize here is that the tax deduction,
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it's not, you know, there's a lot of
tax deductions out there where, uh,
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you know, you contribute to your
Ira if you can do that and um,
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you can make like a $6,500
tech or contribution and
then you get tax deduction
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on that about and it's
nice but it's not as huge.
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This is one of the potentially biggest
tax deductions that you can take in your
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business. Again, I don't know
where else you can find, well,
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I don't know many other places where
you can find a six figure tax deduction
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opportunity in your business other
than the 401k plan. They exist,
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but they're few and far between.
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Do you want to talk to your
tax advisor about all this?
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Obviously I'm not a tax advisor,
I'm not giving tax advice.
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I'm just trying to outline this for you
so you can see the tremendous potential
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that this has.
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[inaudible].
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Okay,
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so the other point I want to make about
the taxation of cash balance plans and
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what makes them so attractive is that not
only do you get a tax deduction on the
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amount that you contribute
to the cash balance plan,
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but whatever amount you
contribute lowers your AGI,
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your adjusted growth income as
well. So let's just say for example,
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you make $400,000 a year or a successful
a doctor and you're over 60 so you can
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make a pretty sizable cash
balance plan contribution.
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What would have happened with that
contribution is that it would actually
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significantly lower your
AGI. So you could go from,
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I've seen examples where
you can go from, you know,
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making $400,000 a year to making
like 150 or $200,000 a year.
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And this has a tremendous ripple
effect when you lower your AGI as well,
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which will impact the investment taxes
you pay, medicare taxes, you pay,
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capital gains rates are different
based on your income, it can uh, lower,
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significantly lower your top marginal
tax bracket. I mean it's like swoosh,
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swoosh. Oh,
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I also did mention it can also potentially
eliminate or reduce your medicare
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payroll tax, which I know everyone,
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most pains and also help you
qualify for the QBI deduction,
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which is something that's new
from the tax cuts and jobs act.
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That lowers the top
bracket that you pay of 20,
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you pay 20% taxes. So again, talk
to your tax advisor about this,
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but that's another tremendous opportunity.
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There are certain businesses who
wouldn't otherwise qualify for that QBI
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deduction. They could with a cash
balance plan if they utilize it.
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I want to explain how the tax deduction
works so that you can understand with
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real dollars what this looks like if
you were to implement a to cash balance
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plan. So, um,
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you can see on this chart that the
amount that you can contribute to a cash
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balance plan is dictated by
your age. So the older you are,
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the closer to retirement you are,
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the more beneficial it is because you
can put more money into the plan so you
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can get more dollars in for retirement.
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And then at the same time you get
a higher tax deduction because the
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contribution amount is
higher. So in the chart here,
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you can see the maximum contribution
that you can make through the 401k plan.
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Then we have the profit
sharing plan contribution.
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So you add those up and that's
usually where most people stop.
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If you're at a point where
you're maximizing your 401k plan,
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you're maximizing your profit
sharing plan, you're like, okay,
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I've done all I can do. No,
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because you can both on a cash balance
plan doesn't eliminate the 401k or the
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profit sharing plan. If in addition to,
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and you can see that the contribution
amounts that you can make with a cash dog
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plan is massive. This is where we
get the six figure tax deduction.
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This is this year in 2019 alone.
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And that's why the tax savings are so
significant because it reduces your income
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and you get a tax deduction for every
single dollar that you put into the cash
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balance plan in a given year
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is a cash box then right for you? Well,
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the truth is there are five
question one, two, three, four,
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five that you need to answer
in the affirmative to decide
if a cash balance plan
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is right for you. Click on the link below
to schedule a strategy call with me.
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It's free,
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it's simple and it takes 15 minutes
and in 15 minutes you will have a much
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clearer idea of whether or not the massive
opportunity that exists with the cash
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balance plan is appropriate for
you. Thank you so much for watching.
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My name is Ashley Micciche and I will see
you next time where we will cover part
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three of the cash balance
in a four part series.
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Yeah.
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And so, uh, I don't know what else.
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I mean I could just end the
video right here. Honestly,
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six figure tax deduction opportunity with
the cash balance plan. Done. Mic drop,
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I'm done. There's nothing
else I need to say. Okay.
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