How Can You Save $600k Through Strategic Tax Planning?

How Can You Save $600k Through Strategic Tax Planning?

This blog contains tax-saving strategies and creative tips. We recently had the chance to sit down with Melanie Sikma and Byron McBroom.

This father-daughter duo runs “One Stop Tax Strategies,” with a focus on revealing

tax-saving strategies that most accountants miss.

We want you to review these strategies before the 2026 tax season—keep more of what you earn this year. These tips can help you save thousands of dollars on an annual basis. Let’s see which of these strategies can be applied to your situation.

How Did Byron McBroom Get Started in the Tax Industry?

It all happened in Modesto, California (1981), when I was searching for a job as a fresh graduate. I worked for a small firm but didn’t receive recognition for my efforts.

I then worked for a massive nationwide builder (a Fortune 500 company). My tenure at that company taught me a lot about how big investors operate. My next step was working for a construction company, which went broke, forcing me to start my own investment company.

With some luck and hard work— I had clients such as “American Savings and Loan” and had 10 CPAs working for me. Within six months, my company was among the biggest in this sector.

Today, 80%–90% of our clients are real estate investors. Many doctors, pharmacists, and contractors build wealth through real estate.

Melanie is the CEO of “One Stop Tax Strategies,” and Byron is the company’s mentor. Their combined experience in tax planning, and real estate strategy gives them unique insight into deductions, entity structures, and overlooked tax codes that can reduce your long-term tax liability.

Creative Approach to Tax Planning and Saving Money

At One Stop Tax Strategies, we run a checklist with our clients to make sure we’re all updated on our tax-saving plan. We don’t only meet during the tax season.

We review different approaches and go through various scenarios to see how we can help our clients save more.

Here is a creative angle many investors overlook:

As a real estate investor, if you’re planning to tear down a house, why not team up with the fire department and let them conduct their training on your property?

You can get a charitable deduction for the difference in value (purchase value – the value of the demolished structure).

The Simplest Way for Investors to Capture Deductions

Proper bookkeeping is needed to keep your taxes in order. Always use a separate bank account and credit card for all business transactions. Use a bookkeeping system to automate the process. That’s the first step to avoid wasting money.

What Are Some Overlooked Tax-Saving Strategies?

Once you are done with bookkeeping, focus on a proper entity structure, which depends entirely on your business operations.

• Flippers/wholesalers netting over $60,000–$70,000 should form an S-corporation to eliminate self-employment tax.

• Landlords should have a single-member LLC or partnership.

The wrong entity structure can flag you for more audits, or you might overpay. Being in an S-Corp drops your audit rate 7–10 times compared to a single-member LLC or sole proprietorship.

The Augusta Rule

With a partnership or S-Corp, you can rent your house for corporate board meetings and not pay income tax on those rental agreements (14 days). You must have proof for those meetings and charge reasonable rent per day. The rent amount should be supported with local comps.

Byron rents out his property for $1,000 per day for 14 days. He doesn’t have to pay income tax on that $14,000. His property in the Bay Area is valued at $3 or $4 million, so $1,000 per day is a reasonable rent.

Kids Payroll

You can pay your kids $15,000 each tax-free if they’re under 18 and working for you as a parent. However, you cannot use an S-Corp because you’ll have to pay payroll taxes—that’s about $2,000 extra per child. You have to make the payment as a sole proprietor. You must have proof of the work you are paying for.

Move Income Strategically (The Ebb Tide Plan)

The Ebb Tide Plan is implemented at our company. Review all the lower tax brackets around you and figure out how to shift some income to them.

Byron helps his 92-year-old mother by opening a company in her name and then hiring the company for services. His mother is a stockholder. Byron shifts $80,000 of his income to his mother’s lower tax bracket through that company. It’s taxed at her rate instead of his, which saves them a total of $30,000, and the profit is split between the two. Byron’s mother transfers half of the profit as a gift to her son. It’s a win-win and a great way to support your parents.

Offset and Defer (Kick the Can Plan)

If you have a business with a lot of marketing or payroll expenses, we look at your P&L and figure out which expenses we can justify in another company. Then we can open it up with a November year-end or any fiscal year-end.

We teach you to mark up the services and funnel the funds back and forth. You can get a significant tax deferral on expenses you’re already paying.

With a $1 million payroll expense, we could get you a $2.8 million deduction with very little cash. It’s like an interest-free loan from the IRS.

We had a client for whom we were able to achieve up to a $15 million deferral over several years. He used that to fund real estate back in 2010 and was able to grow it into a portfolio worth $26 million today—with money he would have otherwise sent to the IRS.

Qualifying as a Real Estate Professional for Tax Purposes

Let’s say you are a dentist or CPA making half a million each year. You can take that loss and offset your CPA practice income, generating substantial tax savings if you or your spouse can qualify as a real estate professional.

To be a real estate professional:

• You have to spend at least 750 hours in real estate.
• You have to spend more time in real estate than in any other profession.

It’s very difficult. For example, if I’m a CPA working full-time at 2,080 hours a year, I’d have to spend over 2,100 hours in real estate—nearly impossible.

Often, people have a spouse who’s a realtor because that qualifies them as a real estate professional. Or, if you have a lot of rentals, you can have the spouse manage those properties and qualify. That way, you can take those losses and offset your income.

This qualification allows you to invest in syndications and take those losses. It unlocks opportunities unavailable to non-real estate professionals. But the key requirements remain the 750 hours and spending more time in real estate than in any other profession.

Here is a flowchart to help you see if you qualify as a real estate professional.

Minimizing/Avoiding Capital Gains When Selling Properties

There is an option we use called a “deferred escrow trust.” Let’s say you’re going to sell a property with a $2 million gain. With a 20% tax bracket, plus almost 4% net investment income tax, and in California a 13% state tax, you’d face about 37% tax on that sale—that’s $740,000. That’s painful when you’ve had this property and put in so much blood, sweat, and tears.

But if you use seller financing or an installment sale, you only pay taxes on the amount you receive from the buyer each month. This spreads your tax liability over time.

In my $2 million example, if you break your capital gains into under $250,000 per year, it can be taxed at 15% instead of 20%—a 5% permanent savings. Also, if you stay under $250,000, you avoid the 4% net investment income tax. And in California, receiving the income in smaller portions reduces the state tax from 13.3% to only 9.3%.

A Success Story

Here's a real-world example of how these strategies add up. Our client Juan had an annual income of $1 million through flipping houses and real estate investing. Here is what we did for him:

• Augusta Rule: We talked about renting the house.
• Kids Payroll: He had two kids under 18.
• College Kid Corporation: He had a child attending Arizona State. We formed a corporation in Arizona for that college student. By showing the student was financially independent, they were able to qualify for in-state tuition much faster. So not only did he save money on taxes, but he also got in-state tuition—probably more savings than the taxes.
• Mom’s Income Shift: He was also helping his mom. We put his mom and the college student in the same corporation.

If you add everything up, the permanent savings for him were about $67,000 per year:

• About $20,000 with his mom
• About $17,000–$18,000 on the child
• Two kids: $30,000 deduction
• Augusta Rule: another $12,000–$13,000

All that added up to almost $70,000 in savings. And he makes a lot of money. We also implemented our deferral program, which gave him a significant amount of working capital to expand his real estate empire.

You don’t have to be a big investor to save a lot of money. Even a smaller investor making $125,000 a year could save $10,000 or more just by using kids’ payroll and the Augusta Rule.

If we save somebody $20,000 and they invest it at only 4% over 20 years, it would grow to over $600,000. And that’s just through tax planning alone—not by increasing their business, reducing living expenses, or anything else. It’s purely the result of strategic planning.

Set Yourself Up for Success Before This Tax Season

Get a second assessment of your tax planning efforts and make sure your CPA is actively working on your taxes. You can get a free assessment from us to see if funds are being left on the table.

What’s Next for Melanie and Byron?

Melanie and Byron are focused on growing their business—serving more clients and making profitable decisions for them. Byron also wants to focus on his golf game while continuing to mentor the team.

You can connect with them via their website: One Stop Tax Strategies

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