Military Taxes – How to Stop Paying State Income Tax, Get a Smaller Refund, and Stop Fearing Taxes | Military Money Manual Podcast Episode 27

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In this episode Spencer and Jamie breakdown

  1. How to stop paying state income tax
  2. Why you should do your own taxes
  3. How to stop being afraid of taxes

We also cover military spouse taxes including the Military Spouse Residency Relief Act (MSRRA), which allows military spouses much more flexibility in which state they are taxed in.

This is extremely helpful if you need to PCS in the middle of a year. You can avoid paying and filing taxes in multiple states!

We also cover why you DON'T want a large refund when you file your tax return.

Other topics include:

  • When it makes sense to hire a CPA
  • What to do if you receive a Combat Zone Tax letter CP04 from the IRS
  • How to avoid tax audits
  • If you need to pay taxes on points and miles
  • Should you keep mortgage or student loan debt around for the tax deduction (spoiler alert: no)
  • Taxes on military career bonuses
  • Taxes on side hustles or 2nd jobs
  • Real world examples of taxes paid by military servicemembers

Resources mentioned in the podcast:

Military Money Manual Podcast Episode 27 Links

Outline of Episode:

  • How to stop paying state income tax based on you state of legal residency
  • When to do your own taxes vs when to contact a CPA
  • Utilizing Miltax free tax software through Military One Source
  • State income tax exemptions for spouses based on legal residency that doesn’t have to change as you PCS around
  • Is it ever advantageous to hold onto debt for tax purposes? 
  • Combat Zone Tax Exclusion (CZTE) and responding to the IRS combat zone tax letter
  • Tax on military income vs side hustles and non-military income
  • Overview of tax brackets
  • Real-world examples of filing taxes and getting a smaller refund

Military Money Manual Podcast Episode 27 Transcript

[00:00:00] Jamie: So there's no reason to be scared of taxes, but there are some smart things you can do to be better with taxes. Be smart about what state you declare residency in and don't overpay taxes. You don't want a $6,000 refund every April. That could be an extra $500 a month to help you get out of debt or invest, or whatever your goals are at that time.

Don't give a free loan to the IRS.

[00:00:22] Spencer: Welcome to the Military Money Manual Podcast.

Hello, podcast listeners, Spencer here from the militarymoneymanual.com and author of the new book, The Military Money Manual, A Practical Guide to Financial Freedom, all about how military service members can achieve financial independence while they serve in the military. You can learn more about the book.

It's audiobook, ebook, and hardcover looks really nice. Shop militarymoneymanual.com or militarymoneymanual.com/book. Either of those links will bring you straight to the book. 

I'm here with my good friend and co-host Jamie for another episode of the Military Money Manual Podcast. And today we're talking about taxes.

[00:01:10] Jamie: That's right, Spencer. It's tax season now. So, if you haven't done your taxes yet, you're probably at least thinking about them or starting to collect your tax statement. Quick reminder and disclaimer, this is not intended to be specific tax or financial advice. You have to research current regulations and laws and make the best decisions for your specific situation.

Neither of us are certified CPAs or investment professionals.

[00:01:35] Spencer: Nor, do we play them on TV. This is all for entertainment and informational purposes only.

Please don't make decisions off of what we're telling you today. Just use it as general knowledge and information to, to make your investment in tax decisions. For today's episode, I've got three main “taxaways” or takeaways.

Little pun, but first of all, stop paying state income tax. I see this a lot, especially with my troops. I've got a troop right now. She's paying state income tax to Kansas and she obviously went through basic military training, BMT in the Air Force in Texas. So we'll get into why that's important in a couple minutes, but stop paying state income tax even if you get it back when you file your tax return. That's just added paperwork.

It's more work for you. It's more work for the state and it's not necessary. We'll talk about how you can avoid paying legally, avoid paying state income tax in just a bit here. So that's number one. Don't pay state income tax. Number two, do your own taxes. If you have a simple return, if your only income is sourced from the military, so you're only getting a W2, a form W2 from My Pay from DFAS from the military, that’s a simple return.

Just take that for most of the tax prep software now you either link the My Pay to the tax prep software, or you just upload the W2 and it pulls all the numbers out for you right off the PDF and there you go. You've pretty much done your taxes at that point.

After that it’s just answering a few simple questions, maybe talking about  how much you contributed to your Roth IRA and that's it. You're probably done with your taxes. I remember I used to do my own taxes from 2000, I think basically 2008 to 2018, probably 10 years, I did my own taxes.

And every year it was pretty basic. It was pretty simple. So that's number two, do your own tax return. Number three, don't be afraid of taxes. So honestly, if you're in the military and your only income is from the military, even if you're dual military, unless you're  a dual military lieutenant colonel major type, you just don't make enough for the IRS to care about.

Sorry. And so much of your military pay is an untaxed allowance. So flight pay, BAH, which is a big one for everyone, basic allowance for housing, basic allowance for sustenance, BAS, all of those allowances are tax free. So you're really only being taxed on your base pay plus a couple other pays and that's it.

And so while your monthly paycheck might be $10,000 and you're making $120,000 per month, if you're, say, a senior captain or, or a young major, your actual taxable income is going to be way less than that. 

[00:04:44] Jamie: So we will give some examples of that too.

[00:04:46] Spencer: Exactly. Let's say you do your own taxes and I've talked about point number two.

If you make a mistake when you file your tax return, honestly, don't worry about it too much. I have made a couple mistakes on my tax returns in the past, and all that happens is the IRS sends you a letter and says, “Hey, either these numbers don't add up, or can you provide more evidence of this?”

Either you do, or you just pay the tax unless you are willfully trying to evade taxes, it's actually pretty difficult to get to the point where you're, you're being audited and you have to pay fees or fines or whatever. So don't be afraid of taxes. Do your own taxes.

Stop paying state income tax. Those are the three things I want you to think about today. Now, before we jump in too much further, I just want to say, if you're enjoying the podcast, if you could please leave us a five star review on Spotify or Apple Podcast, wherever you listen to the podcast. We would really appreciate it and especially if you're getting some good information out here, it takes you  five seconds.

Just hit that five star, hit submit. And that's a nice way that you can tip us for the information that we're about to give you in this podcast today.

[00:06:05] Jamie: We would definitely appreciate that. Spencer, taxes are important, but sometimes can be a little intimidating, you mentioned and it's so true that it's an important topic for all of us.

We all have to deal with it. Many military members don't know that they have options when it comes to state taxes. We've mentioned several times in past episodes about how you're a Texas resident and I'm a Florida resident, even though neither of us live in either of those spots right now. So we've both used this.

So we'll share exactly what we've done and some guidelines that you might want to look into and we would encourage you to look into. Just the other day I was chatting with someone, Spencer, I think I mentioned this to you who was stationed in Texas but was still paying taxes or home state new to the Air Force, and kind of knew it was something but didn't realize the impact of it.

By giving him the idea to change his residency to Texas, where he's stationed right now, which is completely legitimate, he'll save $309 a month. He'll be able to put that towards crushing his debt snowball and get out of debt even faster. So that's a quick example of how important and impactful this can be for you.

Remember, your home of record is a completely different topic people throw around that term a lot, but it's not your state of residency and your home of record are different things so Spencer, when you say stop paying taxes, what do you mean by that?

[00:07:24] Spencer: Well, don't stop paying taxes.

[00:07:26] Jamie: Sorry, I need to learn how to read first

[00:07:31] Spencer: Yeah, you definitely want to keep paying your federal taxes, but if you can establish residency in an income tax-free state, then you don't have to worry about paying state taxes. I've dove into this a little bit over the last couple days. The law is very vague on this.

Essentially all you have to do is show intention to permanently reside in a state in order to declare a residency there per the military. That can actually even just be filling out the form saying, I'm a legal resident of Florida, or I'm a legal resident of Texas. You don't even have to be in the state to do that.

Now granted, depending on the finance person that you get, they might ask, “Well, do you have a driver's license from there? Do you have a car registered there? Do you have insurance there? Do you have property there?” There's different things that can establish your intent to permanently reside there.

Some of the things they mentioned in this lawyer's document I was reading the other day was ownership of real property, registering to vote there, registering a vehicle driver's license but really at the end of the day, you can essentially you can, or your station there that's another, that's another way to do it as well.

Or if you were born there or if you when you joined the military, that's where you came from, or you went to school there there's so many ways to establish residency in a state when you're in the military. Honestly, other than a couple states like California for instance, most of the states are not going to hunt you down.

Right? They, they just don't have the manpower to go and check, “Oh, are you actually, do you actually intend to permanently reside here?” When you're on military orders, you have to reside wherever the military sends you. So it only really becomes a question when you get out of the military and you start collecting a civilian paycheck. 

While you're in the military do whatever you can to establish a connection to an income tax-free state. Then if you're currently stationed there, that's the easiest thing to do. There's lots of bases and a lot, Jamie, you're going to talk about some of the states that have no income tax. There's lots if you look at this list of states, chances are there's probably an Army, Navy, Marine, Air Force, guardians, Space Force, there's probably a base of your branch that's in that state.

[00:10:00] Jamie: Yeah. But it's not that you're cheating the system here. You're legally allowed to declare residency and you have some options. Asvyou mentioned, some states would just absolutely rob you if you're not even living there, or have no intention to ever go back or situations that just because your parents live there or you commissioned out of that state, or whatever the situation may be that your My Pay says California right now, or New York or whatever.

You do not have to leave it there. If you're a legal resident of California, for example, and stationed in California they'll tax your military pay, but you have options. As of this recording, the following states have no income tax for anyone: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

If your state wasn't listed there, don't worry though. You may have other benefits, right, Spencer?

[00:10:56] Spencer: Yeah, that's right. So other states exempt active duty military pay for troops, especially if you're stationed outside the state. So Arizona, for instance, is one of those states where you have to file an Arizona, you only have to file an Arizona state income tax return if you had state income tax withheld.

So if you're stationed outside of the state though, all of your military pay is exempt from Arizona State taxes. So, the way that most states in the union tax income is based on domicile or based on location. So if you are a physical resident of that state, then you are subject to their laws and to their taxes.

So you can't be a resident of California and live in Nevada physically. You you have to live in one place or the other. Because the tax laws are so different between Nevada and California, people in the civilian world, this is a really tricky and complicated thing where they might work in California but live in Nevada just to avoid paying the California taxes.

So yeah, and like you said, Jamie, tons of states there that don't tax income for anyone, civilians or military. And I think some of the big ones there that I see right off the top. I mean, Alaska, you've got Fairbanks, Eielson, you've got Joint Base Elmendorf-Richardson.

[00:12:29] Spencer: Florida, you've got Homestead

[00:12:35] Jamie: McDill and Tampa. Everything on the gulf coast. 

[00:12:37] Spencer: Hurlbert just to name a few, Pensacola. There's a Navy base. Yeah. So multibranch. Nevada, you've got Las Vegas, obviously you've got fighter town USA there. South Dakota, you've got bases there as well.

Texas is a big one because for the Air Force people listening to this podcast, a lot of you will go through training in Texas at some point in time, whether it's Joint Base San Antonio or Lackland. What else is down there? Randolph, Laughlin, if you're in pilot training out there, there's Goodfellow.

[00:13:18] Jamie: There's huge army posts in Texas too, massive. 

[00:13:23] Spencer: Oh yeah, Army posts. Yeah. El Paso, Fort Hood, so tons of tons of bases. Washington again, all these states have bases and so there's a good chance that you're going to probably be stationed at one of them at some point in your career and you'll have the opportunity to declare residency there and not have anybody think twice about it.

If you are paying state income tax and you see an opportunity, it might be worth, depending on how long you're going to stay in the military, it might be worth taking a two year PCs to somewhere where you can easily declare that you're a resident of that state and you're going to stop paying state income tax.

So, Okay. So that's point number one: stop paying state income tax. 

Now, let's talk about point number two, which I mentioned at the beginning of the. Where I think you should do your own taxes. So Jamie, what can you tell people about doing their own taxes? How hard is it in the military? Is it expensive?

What do you think? 

[00:14:25] Jamie: For most military members, you mentioned in the beginning, taxes are pretty easy to file for yourself and you gave the example of military only income, and I would maybe even take it one step further is if your spouse is working too and you have two W2s and even maybe a little bit of investment income or you own one house, that's still probably considered a simple return.

It’s not going to be that complex so in a lot of cases, you should consider doing your own taxes because they're free through services the Military OneSource Military Tax Service. If you Google search military or a MilitaryOneSource.mil, military OneSource taxes, you'll be able to find that mill tax service.

It's completely free to file your federal and state tax return through them for most cases if it's not too complicated but as your stuff gets more complicated, you may want to start considering having a CPA review your files, do some tax planning before tax season and things like that. So Spencer, when should people start looking at maybe paying for that, and how expensive would that be if they do want to hire someone to do taxes?

[00:15:34] Spencer: Yeah, sure. So I'll, I'll address the first point, a good CPA depending on if you're just going to go to Joe down the street in your local town, which is actually probably not a bad option. Just find someone who's well reviewed and has good references. Jamie, you hired a CPA recently and you called a bunch of them and you could tell a couple of them wanted your business and a couple of them didn't.

So it actually made the decision pretty easy for you. One thing that I would say is have a list of questions, especially for your specific situation. So if you're in the military, nope. Call them up and say, “Hey, I had two months tax free last year. Have you ever dealt with that on a tax return?”

And if they say, “Nope, never seen that before,” then, nah. Maybe go on to the next CPA. Yeah. It's not hard to declare a tax free combat zone. Tax exclusion income isn't hard, but you just want someone who's seen it before, so you're not the test case and they’re not learning about it while you are. It'll cost about $400 or so.

$400 to $500 I would say if you just walk down the street. If you go online, you might be able to find it a little bit cheaper if it's completely remote or email based. The biggest thing is just collecting. You're still doing most of the work because you're collecting the documents and then you're turning them over to the CPA and all they're going to do is open up the same tax software that you have and punch the numbers in.

They're not even going to do it. They're going to hire some kid to do it. An hourly worker. They're going to punch it in. So they’ll double check, they'll make sure you're getting all your deductions and credits and everything.

If you're still a little afraid of taxes, do them yourself on Miltax and then hire a CPA to do them as well, just for one year and see how close the numbers are. If they're not, if the CPA isn't saving you more than what they cost, then do it yourself and it’s not that big of a deal.

So, back to your original question: when should you start thinking about a CPA? If you've got a lot of self-employed income and I'm not just talking about it a few 1099 miscellaneous is because you referred a couple credit cards, that's fresh in my mind because I got a couple in the mail today from American Express for handing out my AMEX Platinum referral link.

And Jamie, you got a few of them too, is that right? 

[00:18:05] Jamie: Yeah, which is really surprising that we both got them on the exact same day considering the distance there. That's kinda ironic.

[00:18:10] Spencer: it just says, “We value the points at $550” and so that's income that I haven't paid taxes on.

They're declaring it to the IRS and now I'm going to have to go and pay taxes on them when I file my tax return. It's going to lower my refund a little bit, not a big deal so even if you get a couple 1099s, it's still not a big deal. 

When I would really start thinking about getting a CPA is if you have multiple properties or if you have rental properties, if you're running a business. If you have any kind of Self-employment.  If your spouse has an Etsy shop and they're making over $500 or $1,000 a month, it's probably time to just just check in with a CPA and say, “Hey make sure you're paying your self-employment tax.”

If you're driving for Uber, if you're doing anything like that, it might make sense to just check in with a CPA and make sure you're not missing anything. If you've had a big windfall, say a family member passed away in the last year and you maybe you inherited an IRA. Depending on the value of the IRA, it could be the largest dollar amount that you've received in your lifetime. That's a good time to just consult a CPA and say, “What do you recommend I do with this?”

What's the most tax efficient way to deal with this? Really other than that, there's not that many situations for military service members. Again, unless you're running some kind of  side business or if you've got a more complicated situation.

[00:19:48] Jamie: I think rental properties stuck out in my mind as I heard you answer that question because CPAs can get really in the weeds with depreciating assets and how to claim losses and some business strategies to minimize how much you're making. Which means therefore how much you're paying taxes on the depreciating value of the house and things like that.

I've had some years where I hired a CPA. When I had a CPA in Hawaii, his tax return was relatively simple out there, to be honest and we paid him $500 out there, which Hawaii prices maybe, too. We also had a CPA for a few years in New Jersey and I've had a lot of years where I did it myself as well.

So it just kind of comes and goes, kind of bounces back between the complexity of it. I've actually done what you recommended Spencer, and I've done my taxe through that free H&R block software on Military One Source and compared it to their numbers. I figured, well, it's just kind of worth my time investment because it does take a few hours to do it to compare.

One year the CPA got me $2,700 extra refund than what I would've calculated on my own just because of the way he phrased some of the questions that triggered a memory of something that we could add to our deductions that I would never have thought of on my own. So sometimes just a little outside perspective is huge. I mean, $2,700, that's a big impact for a $300 or $400 CPA bill.

[00:21:16] Spencer: Oh, absolutely. I think the other advantage to hiring a CPA as well is they've probably dealt with hundreds if not thousands of returns. What they can honestly answer when sometimes you'll look at those questions and you'll say, “Can I actually claim this deduction?”

And a CPA will be like, “Oh, absolutely.” There's no question in my mind. You'll read the question and it'll be in this legalese and you're like, “I don't know if I qualify for that. I don't want to make a mistake.” The CPA will read it and be like, “Oh, 100%.”

There's no way if you got audited that the IRS would ever question that. So, that's the other advantage to hiring professional help but again, if you go on Miltax and you fill out the whole thing and it says, “Hey, $2,000 return.” If your income is $40,000 to $50,000, maybe one year have a CPA just double check and make sure you're not doing anything too crazy. 

Again, if you have a simple financial situation where you pay rent, you get your military W2, even if your spouse works as a civilian and she's got a W2, the W2 basically has all the answers on it. Even if you have taxable brokerage accounts, well they're going to provide you a 1099.

Honestly for most Vanguard, Schwab, Fidelity, you just provide your login details. Miltax, which used to be H&R Block, well they used to hire H&R Block, now they just call it Miltax. Military One Source, the MIL tax program will just log in for you, pull your details out, and throw it all into the program. And it's done. It's a brilliant system and honestly it's a lot faster than it used to be. 

[00:23:03] Jamie: The other big benefit that I just briefly mentioned about a CPA where they can really make their money for you is tax planning. So meeting with them halfway through the year at the beginning of the year, what do you project your income to be?

Should I do Roth or traditional contributions? What should my charitable donation strategy be? You can just really get into the advice side with a CPA. They can crunch some numbers and estimate what your tax burden is going to be and how many exemptions you should have in My Pay and, and things like that.

So I think there's a lot of benefit there for tax planning as well. And that's why I hired a CPA again this year for some of the complex situations we have.

[00:23:45] Spencer: I've also hired a CPA this year and I have for the last couple years, but a lot of that, like Jamie is saying, is tax planning because I have this business.

So, I have Military Money Manual, but my personal financial situation is actually incredibly simple. It's just the military W2, it's my wife's income. One more caveat on that though. She gets paid by an overseas company because she works for an overseas company and there's actually some tricky things there with foreign income exclusion and foreign taxes paid.

If you're in one of those situations, let's say you're in Germany and you're married to a German national or you're in Japan and your spouse works on the economy, then that could be a situation right there where having a CPA who kind of knows the landscape would be valuable.

[00:24:52] Jamie: Spencer, I just saw this article on Forbes that I want to bring up real quick. It's 2015, so it's a little outdated, but my guess is the numbers are still the same. They found that 93% of business owners were overpaying on their taxes. So assume that 9 out of 10 people are overpaying on their taxes too.

Maybe I haven't seen a study that proves that. I've heard ⅓ of Americans overpay on taxes, but haven't seen real good data on that. Just say it's 1/3, that is worth getting a CPA sometimes to make sure you're not in that ⅓. If there's some more things going on than just very simple returns or maybe just checking in every couple years, like you said, just to see.

[00:25:37] Spencer: I still maintain though that if you're a captain or lower, if you're a tech sergeant or lower rank than that, you're probably fine. Unless you married a doctor or some mil to mil situations you will have a higher income.

Most of the time, so much of military pay is not taxed. It just doesn't make sense to hire a CPA because you're just not going to save that much. There's just not enough deductions and credits in there, and we'll talk about that in a little bit about the standard deduction.

[00:26:11] Jamie: I want to caveat my last statement. Just make sure I wasn't pushing too hard towards a CPA, just trying to counterbalance the benefits of a CPA. I 100% agree that most people's tax returns are simple enough to take advantage of the Miltax. So hopefully that didn't come over too passionately.

Sometimes I get a little emotional.

[00:26:28] Spencer: No, no. Excited. It just depends and I’m a firm believer in hiring a CPA when you need one. I'm looking at my tax records right now and so many of them I filed myself.

So, another hot topic, Jamie, or a common question is military spouses and the taxes that they have to pay when they're working outside the home.

So spouses, thanks to an update to the servicemembers Civil Relief Act, can claim the state of legal residence. The same one that the service member claims or a previous state that they've been stationed in. So that's especially useful.  Let's say that you worked in Oklahoma and you had a remote job and then you moved to Hawaii.

You could keep Oklahoma as your  state that you want to be taxed in and not, not move to Hawaii and get the much higher Hawaii state income tax. What's really advantageous there is you could align it with the service member's state of legal residence.

So again, Florida, Texas, Alaska, Washington state. These are the states that you should be thinking about in your head, “Hey, I gotta get to there so I can declare legal residents there. Or I gotta find a way to declare legal residents there.” Then if you're married or if you're going to get married, your spouse, no matter where they are, can jump on board and say, “I also intend to permanently reside in that state with my military spouse.” At that point you qualify for what's called the Military Spouse Residency Relief Act. This was a 2018 update to the 2009, I think, Servicemembers Civil Relief Act, SCRA. You've heard us mention the SCRA before in regards to credit cards and to getting your interest rate rates reduced on loans.

This is a separate subsection of the act. It gives you a lot of flexibility, a lot of options. So you can be taxed in the state you're currently in. So let's say that you're in San Antonio, Texas, and guess what? No state income tax. So that's probably a good place to keep your legal residence. If you move to, let's say, California, well, stay a resident of Texas and then you don't have to pay the state income tax. You can also vote. And there's a couple other benefits as well, but the main ones are voting in taxes and the active duty spouse’s state of legal residence.

That was the Veterans Benefits and Transition Act of 2018. They added that to the SCRA. 

[00:29:19] Jamie: Yep, Spencer, thanks to the Military Spouse Residency Relief Act and those changes, that's how my wife is a Florida resident. We've had some issues with HR professionals or even some CPAs that weren't familiar with this.

So several times we've had to bring in a copy of an article from Military OneSource or some kind of IRS.gov kind of resource that explains the Residency Relief Act and say, “Hey, because my husband was PCS’d here, he's here on military orders in Alabama. I don't owe Alabama taxes. I'm a Florida resident.”

Eventually they kind of got it, but even her W2 got messed up this year. So we're going to have to go back and get them to correct it. So pay attention to this one closely. Some people may not be familiar with it. It is kind of new and it's not very common but very, very important for spouses.

You do not have to pay state taxes when you have the opportunity to align it with the service members Texas, Florida, Washington, those kinds of states that they've been in in the past.

[00:30:24] Spencer: Right. I think what happened there was, so the law was passed in 2018, which meant that in 2019, it was the first time that CPAs and tax professionals and everybody started encountering it.

Well then in 2020 when everybody was about to go do their 2019 taxes, Covid hit and everybody was like, “There's no rules and taxes aren't due until June and the world is burning.” So, I think that's kind of what happened. Then everybody kind of lost track of the Military Spouse Residency Relief Act.

MSRRA. You'll see it abbreviated as, but it's really good and it needs to be hyped up more. It needs to be talked about more. So maybe I'll do an article about it. I don't think I've done an article about it on my site. That's a good idea. Keep an eye on your CPAs and your HR professionals as well.

Make sure that they understand what the act allows and make sure that they're coding your W2 correctly. Then if you do end up paying, let's say you're in Alabama and you're actually technically a Florida resident, file a return and say, “Hey, they screwed up. I need all my money back.” That could be a couple hundred dollars. 

[00:31:35] Jamie: We've had to do that before and you just get it all back. It's pretty simple. One other thing I wanted to add, Spencer, is the time to tell them you're actually a Florida resident, or Texas resident or whatever, is in the new hire process when you're filling out your W-4, telling them how much tax you want withheld from your taxes.

So don't wait until tax season to tell them you're actually an Alaska resident or a Washington State resident. Do it when you're a new hire or if you've never done it before, go to HR tomorrow and tell them that you should have, based off of what we talked about, based off the Military Spouse Residency Relief Act, you should have been a Florida resident all this time, or whatever your situation is.

[00:32:12] Spencer: So we talked about three main points today. Stop paying state income tax. We've really harped on that. number two do your own taxes. We've, we've just kind of addressed that. So now let's move on to bullet point number three. Don't be afraid of taxes. A lot of people are intimidated.

A lot of people have really, really weird notions about taxes. They are so afraid of the IRS and the IRS does, I'll have to go look it up, maybe a 100,000 audits a year, and there's 300 million tax returns filed.

We mentioned earlier that you really just don't make that much for the IRS to care about you. We're not saying cheat on your taxes. That's a hundred percent what we're not saying. We're just saying, do your best. Fill out the forms to the best of your ability. If you get confused at some point Miltax has professionals that you can call. I'm pretty sure it's 24/7. They're stationed all over the world. 

Call them up and say, “Hey, I don't understand this question. Do I qualify for the Saver's credit? When it says individual retirement account contribution, is that my TSP or is that my Vanguard IRA?” Call them up and ask them these questions. I guarantee if you sump them, that's the time to go talk to a CPA. Most of the time for most military situations, they're going to have the answers for you.

[00:33:41] Jamie: Yeah, before I found the Military Money Manual and all the goodness before this podcast existed, I actually called them one year and I have a success story I want to share real quickly. I put in both my TSP and my Roth IRA as the same contribution because I didn't understand that they are different with their own contribution limits, like we talked about a few weeks ago.

So I called them and said, “It's showing that it over contributed to my retirement accounts. What should I do?” Kind of freaking out a little bit and I wasn't really sure I hadn't done a great job of explaining it. We ended the call without a resolution. He actually called me back 20 minutes later and was like, “I think I realized what you did. Did you say TSP and a Roth IRA?” I was like, “Yeah, I did them both. Is that terrible?” And he is like, “No, that's fine. It's completely okay.” So that's the level of customer service that I personally have experienced with this free resource with Military One Source. Just great people, and they're very knowledgeable, too.

[00:34:41] Spencer: Yeah, that's awesome. Every time I've interacted with any of the Miltax types, I called him a few times when I was first in the military and filing taxes for the first time. Yeah. Just absolutely really friendly and really nice.

And then I've never actually had the horror or the honor, depending on how you look at it, of talking to the IRS. From what I understand they're pretty friendly as well, and all they want to do is resolve the situation. At the end of the day, all they're looking to do is collect the taxes that they're owed, right?

They're not out to get people usually unless you are willfully hiding income and doing really sketchy things. If you're listening to this podcast, you're in the military. You probably have a little bit of integrity, hopefully.

[00:35:35] Spencer: So, yeah, so just remember,  you're a small fish, Give it your best effort.

If you mess up, they'll let you know and maybe send you a letter and ask for an explanation. If you’re on your way to financial independence, you've got a great savings rate and you make an honest mistake on your taxes, you're going to have the emergency fund, you're going to have the savings set aside there to deal with it.

If most of your income is coming from the military anyways, you have withholding. So, you're not going to get a surprise tax bill when you go to file your taxes at the end of the year. It's only for people usually who have self-employed income, or maybe their withholding was coded incorrectly on their W-4.

Most of the time for military service members, you can just throw a 10 into your exemptions. I haven't done a W-4 in a while.

[00:36:28] Jamie: 10’s the max.

[00:36:28] Spencer: 10’s the max exemptions for My Pay. You're still going to get a refund . That's not advice to throw 10 in there. There's a couple calculators, I think there's one on the IRS website that kind of spits out a number of how many exemptions you should claim.

A few other points about taxes that I want to mention. So you might have to pay taxes on points and miles. So it's kind of a tricky situation and the credit card company started interpreting it differently in the last couple years. So, If you get rewards from spending, that's not considered income.

If you get a punch card from Subway, right, and you get 10 punches and you get a free sandwich, you don't have to pay taxes on that sandwich. But, if you refer someone and say, “Hey, go shop at that Subway,” and then Subway gives you a free sandwich, that's income. Now you're performing a service and getting a reward or payment. Income as a result. In that super weird analogy I just came up with, in this case when you spend money on your Amex Platinum Card or your Chase Sapphire Reserve, go check out our episodes about those cards and how you can get your annual fees waived, or check out military money manual.com/umc3 for the ultimate military credit cards course, and I'll walk you through how to get your annual fees waived on that.

But if you're paying for things on your credit card and you're earning points from that, you're not going to have to pay taxes on that. When you would have to pay taxes is if you're referring people to the cards. It's kind of a rule change, I think back in 2018, maybe 17.

They started issuing 1099’s and at first people were kind of freaking out. But it kind of makes sense that you'd have to pay taxes on it because you're basically getting these points by referring people, which is exactly the weird subway analogy I just used. 

Then typically they value it about $0.01 per point. So if you refer, most Amex cards cap out at 55,000 Amex membership reward points. So at least that's how it is for right now. And on my Amex Gold and my Amex platinum card, I can refer enough people to earn 55,000 points a year and Amex is valuing them at a penny per point, which is pretty fair I think.

I was just looking at a redemption on American Airlines the other day. I can move a 100,000 Amex membership reward points to Etihad and then book a $2,500 American Airlines ticket. So 2,500 divided by 100,000. That's $2.50 cents per point, which is pretty good.

So yeah, when they value it at a penny per point, I think that's pretty fair.

[00:39:21] Jamie: Yep. We talked all about referrals in episode 26, if you missed that. How to refer cards for both Amex and Chase. 

Another kind of off topic good thing to mention here that is heavily debated. 

The question is, “Should you keep a mortgage or student loan debt around just for the tax advantage interest?” Student loan interest and mortgage interest can be deducted on your taxes in some cases. What I found looking this up the other night, taxfoundation.org estimated that in 2019, less than 14% of Americans itemized their taxes.

So one of the tax laws changed a few years ago. The standard deduction for married filing jointly went way up, huge change. In 2021, the married filing jointly standard deduction was $25,100. So what that means is, if you didn't have more than $25,100 in charitable donations, deductible interest, or any of those other deductions, then it's basically worthless for tax purposes.

Say that you're super charitable and you donated $10,000 to the Wounded Warrior Project or whatever your favorite charity is last year. Well, if it was only $10,000 and that's your only deduction, it's not going to affect your taxes at all because the standard deduction is now so high at $25,100.

Again, that may change in the future. So, unless your mortgage interest is higher than $25,100 or that combined with your other donations and things, it's probably not even affecting your taxes because so many Americans are now taking a standard deduction. So, back to the mortgage question.

When you get rid of your mortgage payment and experience mortgage freedom, which I'm a huge fan of personally, your annual expenses go way, way down. And as we talked about in episode 23 and 24, when we talked about financial independence or FI, the way to achieve FI is by having 25 times your annual expenses and savings.

So if you no longer have that $2,000 a month in your mortgage payment, for example, your annual expenses are going to be much lower, and that'll enable you to achieve FI sooner and give you the peace of mind if you get out of the military, your expenses are going to be lower, which means you need less of a savings to cover a few months without a job or during the transition or things like that.

So, just a quick example, if your annual expenses are currently $60,000 a year and you drop your $2,000 a month mortgage, then your annual expenses would go down to $36,000 a year. So your FI number would drop from 1.5 million to 1 million. So you could achieve financial independence $500,000 sooner, which is a big difference.

So I know I got a little, I promised not to get emotional. I failed. Sorry, I am a little opinionated on this, but what do you think, Spencer?

[00:42:13] Spencer: On the mortgage? Yeah, it just doesn't make sense. I remember hearing this when I was in pilot training and that's actually one of the reasons I started the website was because I just couldn't understand, I was like , “No, I'm right on this and I can't understand why nobody else can see this.” 

But people were talking about, “Oh, I'm paying the minimum on my student loan payment because the interest is tax deductible.” And I was like, “Well, but your interest is only 4% on the loan or 6% on the loan. And so your principal payment is $200 and your interest payment is on top of, So it's a $300 payment and maybe $250 is principal and $50 is interest. Well, you can only deduct that $50.” And this was before they changed it a couple years ago and they raised the standard deduction really high.

This was back when it was much lower, but even then it didn't make any sense. So it's just mind blowing that people would keep a debt around that's continuing to hamper their finances and you can do the math and work it out. The other thing, Jamie, is a $2,000 a month mortgage payment is one thing, but it's not $2,000 a month of mortgage payments deductible.

It's $2,000 per month of interest. Yeah, that would be deductible. Great point. Which means that,  if your mortgage would have to be, depending on what your interest rate is, probably six or $7,000 a month mortgage payment of which $2,000 is interest depends obviously depending on your loan value and all those other factors.

So yeah, it's absurd to me. A phrase that my wife used to use is, “they are stepping over dollars to pick up pennies.” You could pay off your mortgage or your student loans and be debt free and then all of a sudden you have all of your income that you get to decide to do with, but instead you're paying interest on this loan and you're keeping it around and you're keeping a monthly payment so that you can save a little bit on taxes once.

[00:44:35] Jamie: Maybe even paying PMI and stuff.

[00:44:38] Spencer: Yeah, no thanks. It's ridiculous. I can't. Anybody who starts with that, I immediately, it’s very suss. Very suss. 

Usually the standard deduction, unless you're making large charitable contributions or you're running a business or something, usually the standard deduction is the right way to go for the military. But again, all this tax software, it's going to calculate what your deductions are, and it's going to say,  “Look, if you claim itemized deductions, you're going to claim $12,000. If you claim the standard deduction, you're going to claim twice that. So which one would you do? Which one would you do?”

[00:45:28] Jamie: It’ll say, “We recommend you take the standard deduction.”

[00:45:31] Spencer: Yeah, exactly. Trust the software. If you have a crazy situation, back it up with a human.

But most of the time with the simple returns, like we said with the W-2, it's going to be pretty easy. While we're talking about taxes, Jamie, let's talk about bonuses. So that's something that a lot of career fields in the military are eligible for at some point now, with the new BRS, almost everybody's going to be eligible for a continuation bonus.

Yeah. At the 8 to 12 year mark is the range that they can offer it. I was actually just offered it although all the paperwork says 2018, so it doesn’t give me a lot of confidence that they haven't updated their software since four years ago.

But yeah, taxes on bonuses. So what do you know about that, Jamie?

[00:46:23] Jamie: We hope to do a full episode on bonuses and windfall kind of topics in the future. But anytime you get a big bonus or continuation bonus or career field specific retention offer, pilot bonus, anything like that, you should expect 22% of that amount will be withheld for tax purposes.

So that's just kind of the standard from the IRS. If any other extra bonus kind of pay is withholding at 22% and that will cover most people from having a huge tax bill. The worst thing that could happen is you spend all your bonus and then all of a sudden you end up owing 12% or 22% of that money and you already spent it.

That would not be wise and you probably wouldn't be listening to this podcast. So, 22% is what you can expect to be withheld from the bonus and then hopefully you get a lot of that back. So that might be a time where you have a larger refund if you had a bonus pay during the year.

Spencer, one question I have that I think would be good for listeners is that we did an episode in the past where we talked about deployments and the SDP or the savings deposit program. That was back in episode 13, if you haven't listened that one yet. So what are the tax impacts for having the SDP where you can get kind of guaranteed 10% return there?

[00:47:37] Spencer: So the SDP, Savings Deposit Program, when it's growing, when the accounts open, they're not going to issue you any tax forms. Which is really nice but then once you leave the tax-free zone I think it's 90 to 120 days after you depart, it's going to automatically withdraw and deposit into your checking account unless you re hack your tax free time again.

Back when the wars were on it was a lot easier to do for some career field like air crew. You're going to get a 1099 INT once in the year that it actually withdraws. So my latest example was 2017. So I opened an SDP in 2017. I had it there until 2019, and then it deposited into my checking account at the end of 2019.

So in 2020, I finally got the 1099 INT to file it with my 2019 taxes. And it was there for two years. So it was almost over $2,000, I think, of interest, which is really nice but you're going to have to pay taxes on it as income.

So it's separate from your CZTE, your Combat Zone Tax Exclusion income. That's only your base pay, essentially, your federal pay.

[00:49:05] Jamie: Great segue, because my next question was about deployments and deployment verification. I've gotten this letter in the past and the first time it's a little bit scary and I think people kind of freak out when they do, but sometimes you get a letter from the IRS asking for more details about your deployment, basically to verify that you were actually deployed to a tax-free combat zone.

What do you tell people and what do you do when you get a letter from the IRS that's asking about CZTE and tax-free zone pay?

[00:49:36] Spencer: Yeah. So the first thing I would do is just type into Google CP-04 tax. And guess what? You're going to see my website pop up and I've got an article there on how I respond to the IRS combat zone tax letter.

Basically all they're doing is, they're the IRS, right? So they're, they're crossing their T's and dotting their I's, and they just want to confirm that you're claiming tax exclusion for certain pay periods and they just want to make sure that that is in fact true and you're not trying to defraud the government.

I don't know why the Department of Defense can't just talk to the IRS directly behind the scenes and why every year they probably have to send out millions of these letters to military service members. If you separate from the military, this can be a little tricky.

It would behoove you to keep your LES and TDY orders or if you've got orders of any kind for deployments to tax free zones, keep those especially if you've separated from the military. It's going to be harder for you to log in into DTS. But, if you're still active duty or you're Guard or Reserve, you still have a CAC card to log into the Defense Travel System, DTS.

Just pull your PDF copies of your TDYs out of there and you can send that to them. I think last year I got lazy and I just wrote down the dates I was deployed and mailed that back to them, and they were like, “Yep, you're done.” I know some guys who've called them and talked to the first person who picks up and they say, “Oh yeah, what days were you deployed?”

And they just tell them over the phone, and they type it into a computer and they're like, “Okay, you're all set.” That's it. So they're just doing due diligence. They probably have a checklist and they have to follow it. They just want to make sure that people aren't scamming the system.

Claim your benefits, right? You'll see it on your W-2, your tax form as a Q code. I think it's in the bottom right hand corner. When you go to use any of  the Miltax or any of the tax filing softwares, there'll be a little section to add if you received combat zone tax exclusion pay.

[00:52:05] Jamie: Right. So a couple other topics as we continue the list of kind of random thoughts about taxes. 

Moving expenses for military PCS, a lot of times the tax software will ask you about those. Most often, I will say in my non-professional tax, non advice, you probably will not be able to claim military PCS moving expenses in there as a deductible expense.

If you had something you think might qualify as unreimbursed moving expenses, that's a great time to reach out to those Military OneSource tax counselors for help. I also want to mention some bases have volunteer tax offices too, but who knows how good they'll be. That might be kind of hit or miss. So take that for what it's worth. 

Spencer, kind of mentioned this earlier, but what if I have a side hustle like driving for Uber in South Carolina while I'm stationed there, but I'm a Texas resident what do I need to do with that? Could that affect my taxes, either federally or state?

[00:53:04] Spencer: Yeah. So for most states, any non-military income that you earn is going to be subject to the tax of the state that you earn the income in. So, an example that you gave, right? You're driving for Uber in South Carolina, but you're a legal resident of Texas according to your W-4 and the paperwork that you have on file with the Department of Defense.

Sorry, it doesn't matter. You're going to have to pay South Carolina taxes. I don't know what their taxes are, but in my situation, I have a company. It's an LLC here in Hawaii, and I'm physically here in Hawaii. So I have to pay Hawaii State income taxes on my business revenue or profit.

And even though it’s an online business, it doesn't matter.  I am the business essentially, and I'm here in Hawaii. So I have to pay taxes on that. That's non-military income, and the law is very clear. So my military income is only subject to the state taxes of Texas.

That's my state of legal residence. But my side hustle, my business income is, I think it's more than a side hustle now. We'll call it a business. It is subject to Hawaii taxes. You're not going to owe income tax on your capital gains investment returns.

So things like that, it's only income that you earn as an individual or as a self-employed person you're going to have to pay. Taxes to the state based on your income. But for all the other things, you will only pay taxes in the state that you're a legal resident of. Which is hopefully one of the income tax restates, but some of the income tax free estates have taxes on investment return, capital gains tax and interest and dividends and stuff.

Yeah. So just a couple other random notes before we close up with some real world examples here usually for most military couples, married filing jointly is going to be the best option. Again, put into the tax software and figure out what the right answer is for you. And if it's more complicated than that, talk to a CPA.

So just remember that tax brackets are progressive, so your lower income owes less of a percent than the higher income earners. So if you're in the 22% bracket, it doesn't mean that all your income is tax at 22%. It's just the income that's over the 12% bracket. So I'm just going to use general numbers because I'm too lazy to look up the actual brackets right now.

The other way you can think about it that I've seen online, there's a great YouTube video called  buckets of taxes. Essentially you have to fill that bucket first before you move on to the next one. So let's say the first $10,000 is taxed at 10%, right? So that means the first $10,000 you make in that year is taxed at 10%.

So you pay a thousand dollars of taxes, and let's say the next bracket is $10,000 to $20,000, just to keep the numbers simple and the tax rate goes up to 20%. Okay? So your marginal tax rate is 20%. So, The next $10,000, you're going to pay $2,000 of taxes, because 20%. 

So between the first $20,000 of your income, the first $10,000 was 10%. The second $10,000. 20%, your effective tax rate is 15%, because you're making $20,000 of income and you're paying $3,000 of taxes, right? But your marginal tax rate is 20%. People's brains just shut off when they start talking about taxes.

But they say, “Oh, I don't want to make any more money because I don't want to be in a higher tax bracket.” The only situation that I think that can be true is with capital gains, because capital gains is based on which income tax bracket you're in but for most military service members, again, none of that matters.

Yeah. So don't worry about making more money because you're going to move into a higher bracket. The higher bracket is only taxing that next dollar that you make into that bracket or into that bucket. By that higher tax rate, you're already on the hook for all the taxes underneath that bucket or bracket.

So never be afraid to make more money and move into a higher bracket. Yeah,

[00:57:29] Jamie: I just pulled them up real quick. The tax brackets. So 10%, 12%, 22%, 24%. And if you're above 24% come be the host of this podcast. So it would be huge if, for example, you knew you were close to the line between 12 and 22 and that that was going to jump you all the way down.

But it's only that amount that is above the 12% bracket. So it's not as drastic of a change as it seems when you look at the percentages there. But if you're on the line, you can look at it and do some estimates. If you have a CPA, you could talk to them about it, contact the Military One Source, and they can kind of help with those strategies.

A lot of people are like, “Oh, you're in the 24% tax bracket. That's a lot of taxes.” It is a lot of taxes. 

[00:58:18] Spencer: I mean, honestly, the more taxes you pay, the more money you're making. So,think of it as a good thing.

I just want to run through a couple real world examples. So in 2015, I was stationed in New Jersey at McGuire Air Force Base, or Joint Base McGuire-Dix-Lakehurst, to be exact. I filed my taxes that year, and I got a $116 refund. That was pretty good. So one thing we haven't talked about, Jamie, is that you really want to set your tax withholding so that by the end of the year, you're going to get as close to a zero refund as possible.

And the reason for that is that's your money, right? If you're giving it to the IRS every month rather than having it in your pocket, that's just money that you're going to get back, right? 

But over a year, if you missed that money over 2021, you missed out on a 25% stock market increase, right?

That could have been money that you were throwing in every month into this stock market and dollar cost averaging your into a great stock market. So some people are really stoked when they're like, “Eh, I got $3,000 back.” You could be a little bit more efficient.

Now, I will say, me personally, I'm kind of ambivalent about it. If you're the kind of person that you're going to say, “Ooh, I got a $3,000 tax refund. I'm going to put $1,000 of it into my IRA, I'm going to spend $1,000 of it, and I'm going to invest $1,000 of it”, or “I'm going to pay a thousand dollars worth of debt down.”

Well, that's great, but most people aren't going to do that, right? They're going to be like, “Sweet new computer, or I can finally afford the down payment on that Ford F-150.” I think it definitely depends on the person you are, but I know for myself, I always tried to see how close I could get to a zero refund.

It's more efficient that way because you get a larger paycheck and you can invest it every month. But if you're finding that you're going to have to actually pay money to the IRS when you file your taxes because you were too close and you're not able to do that because you don't have the savings and you're not following the principles of financial freedom, well then, first of all, read my book, but then second of all, fix it.

Right? So reduce the number of exceptions that you have and that way more money is withheld. Then you can fix the problem and you're closer to zero.

[01:01:02] Jamie: If you're in a situation where you find yourself about to have a tax bill that you're not quite prepared for, one idea that you could consider is just delaying filing your taxes.

So if you figure this out February 15th, for example, don't file your taxes until April 17th, or I think it's April 18th this year because of some holiday or something, but normally it's around April 15th. Wait until April to file your taxes. That gives you really three or two and a half months to save up for that bill if you got caught off guard. Then fix it for next year.

[01:01:33] Spencer: Yeah, the one thing I'll mention is, you don't have to file your tax refund until April 18th this year. And usually every year it's April 15th, but there must be a Sunday or a Saturday or something in there, but if you owe any money, it is due by tax day. So if you find out that you owe money, you have to make that payment.

Start saving. There are ways to extend when you file your taxes, there's forms you can fill out to  get until June or even October if you're waiting on documents to come in. But if you're going to owe any money, you have to make that payment. So try to figure that out, like Jamie was saying earlier rather than later. 

In 2015 in New Jersey, my marginal tax rate was 15%. So I was in the 15% bracket, but my effective tax rate was 5%. So super low there. I think it was actually even lower than that because I'm looking at my 2015 taxable income and it was $64,000.

I'm pretty sure I made more money than that as a new captain so I think I ended up paying, let's see, $3,800 of taxes that year. So I got $116 back. I'm pretty sure the effective tax rate is even lower than 5% because that 5% is being calculated on my wages, salaries, and tips.

It doesn't include BAH and allowance and everything, so I was probably paying a 3% effective tax rate because I was probably making $100,000 a year.

[01:03:23] Jamie: So I have one of mine from New Jersey. Can I share? I pulled my 2017 report from New Jersey as a mid-level captain.

This is a year that I filed my taxes on my own through the Military One Source that we've mentioned several times. AGI, adjusted gross income, was around $86,000 that year. Taxable income to the IRS was only $31,900 after all the deductions. So my tax bill ended up being about $3,800 for the year, and I got a refund back because I wasn't expecting as many tax frees as I got, or something probably like that.

My marginal tax bracket was 15%, but my effective tax bracket, 2%. 

[01:04:05] Spencer: Yeah. Wow. That's pretty money. I just looked at my December LES for 2015. My total entitlement for that year was $93,000. So, there you go. I paid $3,000 of taxes. It's pretty crazy how tax free our military pay is.

2018 was a good year for me, tax wise, and lifewise, I guess too. I was tax free for the whole year, so I was stationed in Abu Dhabi in the United Arab Emirate. My wife worked for an overseas company as well and she was completely outside the US and I earned $94,185 as an 0-3 captain with 8 of active duty service.

I paid $4,400 in social security taxes, $1,000 in Medicare taxes, and $0 in federal income tax. So that's awesome. That's a pretty good year. No state income tax since 2010. That year as well, I contributed all the money to my Roth TSP because I was tax free for the whole year.

So I got tax free money, tax free income goes into a Roth account on untaxed, it's going to come out on untaxed, it's going to grow on untaxed. And I got matching. So the matching was actually paid into the traditional account because that's the only place the matching can go. That was a good year for the old Spencer net worth right there.

You got any numbers from Hawaii, Jamie, when you were out here? 

[01:05:40] Jamie: Yeah, I looked up our 2020 numbers from Hawaii as an O-4. AGI, $92,400 basically. BAH was a huge source of income out there, so that's nowhere close to what we actually were getting paid. Taxable income according to the IRS was only $67,600.

So go from $92,000 to $67,000. That's pretty sweet from the start. My tax burden that year, the taxes I owed were just under $1,200 so I got a refund. After that I’m like, “Okay, what can I do to stop getting refunds?” So I went up to 10 exemptions in My Pay. I'm like, “Oh my goodness, you're killing me.” That's when I went up to 10 because I kept going up two or three a year and still getting exemptions. Now I have gotten fewer tax frees over the years and now I won't get any for the next couple years.

I probably need to reevaluate that a little bit, but that's another good example of how much you actually get paid in the military compared to what the IRS is considering for taxable income.

[01:06:45] Spencer: So I think, this must have been 2020, $150,000 of entitlement on my LES, but I think I only ended up paying something absurd, $5,000 to $8,000 in taxes.

So again, just the tax benefits especially if you're in a place that has a really high BAH. It's pretty good in the military. 

I think that's enough time spent on taxes, at least for this year. 

Jamie, what do you have for our review?

[01:07:29] Jamie: As a review for today's episode, thanks for sticking with us. Taxes are important. We said, three main points to take away from today. 

Evaluate your state income tax and stop paying state income tax. You have options. 

Number two, do your own taxes because most people have a simple return and use a free filing service Military OneSource tax program.

Number three, don't be afraid of taxes. The IRS isn't a boogeyman. They're not out to get you. Do your best and be honest. If they send you a bill, you'll be fine because you're pursuing FI and savings and emergency savings are in place. Your savings are growing. Every year you're going to be okay.

Don't be afraid of it. It's not that big of a deal. 

The last thing I want to say one more time is we appreciate all the listeners and the subscribers to our podcast. We've seen amazing growth and Spencer and I really do appreciate each and every one of you, especially our listeners that come back every week.

I’m very thankful for that. If I could ask one more time that you would help us out, if you're enjoying it too, please leave a five star review on Spotify or Apple Podcast so more people will find helpful episodes like this one.

[01:08:35] Spencer: Give a shout out to Ryan on Instagram, TheGoodCadet. They were recent followers. And then let's see who else is there? Heather. Heather also reached out on Instagram as well, and I got a couple of emails as well. Mike, that was a recent one. Thanks for that. And I think I had one more Shia and Andrea, and David.

So thank you all for reaching out and Instagram and email really appreciate it. And it's just really awesome to be a part of your journey to financial independence and to do this podcast with you, Jamie. It's been a real treat, so thanks for that. Leave the five star reviews, subscribe to the podcast, and we'll see you next week.

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