Client Profile and Proposed Tax Optimization Plan
Client Profile:
• Total Projected Income for 2024: $1,000,000
• Business Structure: Multiple LLCs
• Proposed Action: Establish a new single-member LLC for consulting services
Proposed Tax Optimization Strategies and Cash Requirements
1. Establish a Single-Member LLC for Consulting Services
o Action: Form a new consulting business as a single-member LLC to allocate consulting income separately.
o Cash Requirement: $500–$1,000 (filing fees vary by state).
2. Allocate Income to the Consulting LLC
o Income Allocation: Existing LLCs pay $300,000 to the consulting LLC.
o Tax Savings: Allows for deductions and retirement contributions specific to the consulting LLC.
o Cash Requirement: None (allocation involves income transfer only).
3. Set Up Retirement Plans
o SEP IRA for One LLC:
▪ Contribution Limit for 2024: Up to 25% of compensation or $69,000.
▪ Tax Savings: Contributions reduce taxable income by allowing deductions up to the maximum limit.
▪ Cash Requirement: Up to $69,000 for maximum contribution.
o Solo 401(k) for Consulting LLC:
▪ Contribution Limits for 2024:
▪ Employee Elective Deferral: Up to $23,000.
▪ Employer Profit-Sharing Contribution: Up to 25% of compensation, with a maximum of $69,000.
▪ Tax Savings: Contributions to the Solo 401(k) are tax-deductible, reducing taxable income.
▪ Cash Requirement: Up to $69,000 for maximum contribution.
4. Establish a Health Savings Account (HSA)
o Eligibility: Client must be enrolled in a high-deductible health plan (HDHP).
o Contribution Limits for 2024:
▪ Family Coverage: $8,300o
▪Tax Benefits: Contributions are tax-deductible, grow tax-free, and withdrawals for qualified expenses are tax-free.
o Cash Requirement: $8,300 for full contribution.
5. Contribute to a Traditional IRA
o Contribution Limits for 2024:
▪ Under Age 50: $7,000
o Tax Benefits: Contributions may be tax-deductible, depending on income levels.
o Cash Requirement: $7,000 for full contribution.
6. Acquire a Property for Airbnb Rental
o Action: Purchase a property valued at $350,000 to operate as a short-term rental.
o Down Payment Requirement: 15%
▪ Cash Requirement for Down Payment: $350,000 × 15% = $52,500
o Additional Closing Costs: Estimated at 2–3% of property value.
▪ Cash Requirement for Closing Costs: $350,000 × 3% = $10,500
o Total Cash Requirement for Property Acquisition: $52,500 + $10,500 = $63,000
7. Conduct a Cost Segregation Study
o Purpose: Accelerates depreciation deductions by reclassifying certain property components into shorter depreciation periods.
o Cost of Study: Estimated at $5,000–$10,000 for a $350,000 property.
o Cash Requirement: Estimated $7,500 for the study.
Summary and Recommendations
• Total Estimated Tax Savings: Approximately $90,221 for the 2024 tax year.
• Total Cash Requirement: $224,800 to fully implement the tax optimization strategies.
Conclusion
By implementing these tax optimization strategies, the client can reduce their taxable income significantly,
resulting in a projected tax savings of $90,221. The total cash required to maximize these strategies is $224,800,
which includes down payments, retirement contributions, and the cost segregation study.
This approach leverages income allocation, retirement contributions, HSA setup, and property acquisition to
maximize tax efficiency and lower the effective tax rate on the client’s projected income of $1,000,000 for 2024.
Establishing the consulting LLC and conducting a cost segregation study for the Airbnb property provide
substantial immediate and long-term tax benefits, helping the client achieve significant tax savings while
diversifying investments.
11. Disclosure
Important Notice:
Advisory services are offered through Sigma3Capital LLC an Investment Advisor in the State of CA.
Sigma3Capital LLC and Long Nguyen are not affiliated with or endorsed by the Social Security Administration
or any other government agency.
All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the
basis for any financial decisions. Nor is it intended to be a projection of current or future performance or
indication or future results. Purchases are subject to suitability. This requires a review of an investor’s objective,
risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
The information contained in this material has been derived from sources believed to be reliable but is not
guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials
discussed. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage
commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to
you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy
or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you
to compare the information provided in our statement with the statement you receive directly from your
custodian. All content is for information purposes only. It is not intended to provide any tax or legal advice or
provide the basis for any financial decisions. Nor is it intended to be a projection of current or future
performance or indication or future results.
Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time
horizons. Investing always involves risk and possible loss of capital.
Thank you for considering this investment proposal. We are committed to supporting you in achieving your
financial objectives and look forward to working closely with you on this journey.
