Reducing taxes Forum

[Anonymous User]

What’s the best way to create tax reductions in big law if you’re a non-married single associate with no kids and no house? Or is my best course really the standard deduction… Any methods/thoughts appreciated

[Anonymous User]

“Hi my name is Steve. I work with a bunch of partners and associates at your firm here. I work with people like you to create tax advantaged investment solutions. Was wondering if I could grab 15 minutes of your time to tell you about how we can grow your wealth in a tax efficient manner.”

First time one of them called I was like “cool - this guys gonna sell me on some Caymans investment fund, or some cool pass-through investment that spins off huge losses now for chance at huge capital gains in the future. Maybe this is the meeting where they are impressed by my $160K starting salary and invite me into the back rooms of Goldman and show you all the tax loop holes that we don’t show to the poors.” 10 minutes into lunch later I’m staring at a life insurance table showing that if I put $10K a month into this insurance product, if 5 years, I can start borrowing $1K a month, tax free! 15 years in, and you hit the break even point although it’s not really clear why you have to pay this $2M over 15 years just to break even. He had other great advice like “don’t use a 401(k), you’ll have to pay taxes on a lot more later.”

So not really tax advice, but you can probably get 2-3 free lunches at a place slightly above Subway in terms of quality. You just have to keep track of who is calling you and who has already taken you out, and then deal with 2-3 years of weekly calls from some cell phone number you keep picking up in case it might be a partner on his cell

[papermateflair]

Charitable contributions, contributions to your 401(k) and HSA, buying a house, marrying someone who makes a lot less money than you, having kids? Unless you're going to start investing in real estate or running a business, there's not a ton you can do when you're making $215k+ a year at ordinary income rates. I'm sure someone has some more creative ideas.

[Anonymous User]

Not many creative tax strategies you can employ when you're a W-2 earner. If your spouse can get their Real Estate license and commit 750 hours to real estate you can deduct depreciation of assets against your W-2 income. Otherwise, the usual HSA/MBDR.

[Anonymous User]

“Hi my name is Steve. I work with a bunch of partners and associates at your firm here. I work with people like you to create tax advantaged investment solutions. Was wondering if I could grab 15 minutes of your time to tell you about how we can grow your wealth in a tax efficient manner.”

First time one of them called I was like “cool - this guys gonna sell me on some Caymans investment fund, or some cool pass-through investment that spins off huge losses now for chance at huge capital gains in the future. Maybe this is the meeting where they are impressed by my $160K starting salary and invite me into the back rooms of Goldman and show you all the tax loop holes that we don’t show to the poors.” 10 minutes into lunch later I’m staring at a life insurance table showing that if I put $10K a month into this insurance product, if 5 years, I can start borrowing $1K a month, tax free! 15 years in, and you hit the break even point although it’s not really clear why you have to pay this $2M over 15 years just to break even. He had other great advice like “don’t use a 401(k), you’ll have to pay taxes on a lot more later.”

So not really tax advice, but you can probably get 2-3 free lunches at a place slightly above Subway in terms of quality. You just have to keep track of who is calling you and who has already taken you out, and then deal with 2-3 years of weekly calls from some cell phone number you keep picking up in case it might be a partner on his cell

is this actually what they're selling? do you think their shop pays for their lunch budget or do they have to go OOP for that--if OOP has to be brutal, i think those guys work heavily on commission.

[Anonymous User]

Anyone have time to actually invest in real estate (e.g., something like rental properties) while managing big law. Want to but feel like you have to have a spouse or someone else who can devote more time to it…

[Lacepiece23]

Anyone have time to actually invest in real estate (e.g., something like rental properties) while managing big law. Want to but feel like you have to have a spouse or someone else who can devote more time to it…

I did and know a few others with varying success. I’d say that I would have been better off investing more in the market.

I have three rentals (used to have four) and my primary all of which I didn’t come out of pocket for with my down payment. Rehabbed them all and then refinanced the equity, which covered the respective down payments.

So the velocity of money can be like no other. But I’ve lost a ton of money to contractors who are like the worst profession or workers in America. If you don’t have a great relationship with a fantastic contractor, I wouldn’t even bother. Because at that point you’re just dropping tons of money on down payments and can’t refi your money through earned equity, which is the name of the game.

[Anonymous User]

“Hi my name is Steve. I work with a bunch of partners and associates at your firm here. I work with people like you to create tax advantaged investment solutions. Was wondering if I could grab 15 minutes of your time to tell you about how we can grow your wealth in a tax efficient manner.”

First time one of them called I was like “cool - this guys gonna sell me on some Caymans investment fund, or some cool pass-through investment that spins off huge losses now for chance at huge capital gains in the future. Maybe this is the meeting where they are impressed by my $160K starting salary and invite me into the back rooms of Goldman and show you all the tax loop holes that we don’t show to the poors.” 10 minutes into lunch later I’m staring at a life insurance table showing that if I put $10K a month into this insurance product, if 5 years, I can start borrowing $1K a month, tax free! 15 years in, and you hit the break even point although it’s not really clear why you have to pay this $2M over 15 years just to break even. He had other great advice like “don’t use a 401(k), you’ll have to pay taxes on a lot more later.”

So not really tax advice, but you can probably get 2-3 free lunches at a place slightly above Subway in terms of quality. You just have to keep track of who is calling you and who has already taken you out, and then deal with 2-3 years of weekly calls from some cell phone number you keep picking up in case it might be a partner on his cell

Yes, I remember this call exactly when I was a first-year. It was some guy at Northwestern Mutual and I agreed to a 15-minute call on such and such date even though I knew he was trying to sell me some scam Life Insurance investment scheme. I thought agreeing to talk to him would get him off the phone faster. Anyways, I "missed" our call and about three times a week for the past 4 years (I'm a 5th year now) has has called me...I've never picked up.

[Anonymous User]

.

[The Lsat Airbender]

Megabackdoor Roth is enough tax-advantaged space for any junior associate, honestly. You don't need to get more creative than that. If your firm doesn't allow MBDR, lateral.

[Anonymous User]

Megabackdoor Roth is enough tax-advantaged space for any junior associate, honestly. You don't need to get more creative than that. If your firm doesn't allow MBDR, lateral.

I mean it's tax advantaged but less so than actual reducing your tax burden.... right

[The Lsat Airbender]

Megabackdoor Roth is enough tax-advantaged space for any junior associate, honestly. You don't need to get more creative than that. If your firm doesn't allow MBDR, lateral.

I mean it's tax advantaged but less so than actual reducing your tax burden.... right

Biglaw associates will generally prefer to defer taxes, which is why your 401(k) should be pretax, but it's pretty close at the end of the day. Especially if you think America's historically-low tax rates might rise later this century.

[Anonymous User]

Ask to get held back a year or for a pay cut.

[johndonne]

Live in a state with no income tax?

[Anonymous User]

Live in a state with no income tax?

Then the property tax gets you lol

[Anonymous User]

Live in a state with no income tax?

Then the property tax gets you lol

Don't own property.

[Anonymous User]

Live in a state with no income tax?

Then the property tax gets you lol

Don't own property.

But you need the home interest deduction.

[Anonymous User]

Live in a state with no income tax?

Then the property tax gets you lol

Don't own property.

But you need the home interest deduction.

itemizing since the SALT cap is barely worth it even with $10k SALT + mortgage interest deduction

[Anonymous User]

Live in a state with no income tax?

Then the property tax gets you lol

Don't own property.

But you need the home interest deduction.

itemizing since the SALT cap is barely worth it even with $10k SALT + mortgage interest deduction

Yeah so I actually just barely cane in under the standard deduction this year but will probably be itemizing next year.

To the larger point, most of us here are in high tax brackets and it sucks but that's life. If you want to avoid a large tax bill, make sure you withhold a lot.

[1styearlateral]

The only real answer is to quit the law and start a business, build equity, and borrow against it at crazy low interest rates (you do not pay income tax on borrowed money). As someone above stated, as long as you're getting a W-2, there's not much you can do unless you want to do both (but this may be hard/impossible).

[Anonymous User]

The only real answer is to quit the law and start a business, build equity, and borrow against it at crazy low interest rates (you do not pay income tax on borrowed money). As someone above stated, as long as you're getting a W-2, there's not much you can do unless you want to do both (but this may be hard/impossible).

I’m curious — are law firm partners able to run this playbook too? Obviously they are receiving a shit ton of income annually (K-1? idk not a tax lawyer), but you have to think there’s some value in their shares. Or maybe it’s impossible to pledge those shares as collateral bc of limits (contractual / statutory) on who can own a law firm?

[1styearlateral]

The only real answer is to quit the law and start a business, build equity, and borrow against it at crazy low interest rates (you do not pay income tax on borrowed money). As someone above stated, as long as you're getting a W-2, there's not much you can do unless you want to do both (but this may be hard/impossible).

I’m curious — are law firm partners able to run this playbook too? Obviously they are receiving a shit ton of income annually (K-1? idk not a tax lawyer), but you have to think there’s some value in their shares. Or maybe it’s impossible to pledge those shares as collateral bc of limits (contractual / statutory) on who can own a law firm?

Great question--I don't know. I'm sure the partnership agreement prohibits it, but also--and maybe more importantly--banks are less likely to use private equity as collateral against a loan. These are all questions for a wealth manager who regularly counsels HNWI private business owners.