In this real-world example, we see how waiting too long to address tax issues can lead to missed opportunities for savings. Jose shares a story about a client who experienced a windfall and came to him seeking help after generating significant business losses. The client, along with his wife, was a real estate professional, and they thought cost segregation would be the key to offsetting their income. However, their high salary and stock options pushed them above the Excess Business Loss (EBL) limitation, which meant they couldn’t use all the losses to offset their taxes.
What could have been a strategic advantage turned into a challenge, as EBL limitations kicked in, and they were left with fewer options. If they had come to Jose earlier in the year, after the first quarter or even after June, they could have explored more tax-saving strategies and potentially reduced their tax burden in a more efficient way.
The lesson here is clear: proactive tax planning is crucial, especially for high earners. Waiting until it’s too late could mean missing out on effective strategies, so make sure you’re working with a CPA who can help guide you through the complexities of tax planning throughout the year, not just at the end.
