12/9/25 Newsletter

It’s December 9, which means tomorrow is the Form 4070 deadline for tips received in November 2025.

This week’s lineup:

• 💼 The IRS test that decides whether your side gig is a business or just “expensive fun.”

•  📊 The retirement debate boils down to one question: pay tax now or later?

• ⚡️The EV credit rules that changed again (and who still gets up to $7,500).

• 🤠 The tax lien that forced Val Kilmer into a multimillion-dollar fire sale.

Business & Gigs

💼 Is Your Side Hustle a Business or a Hobby?

You’ve done it. You’ve turned your passion into a side hustle. That little Etsy shop selling custom dog sweaters is actually making money. Your weekend woodworking projects are now adorning the homes of happy customers. You're getting paid to do something you genuinely enjoy. It's the dream!

But as you happily deposit those checks, a shadowy figure looms in the distance. It’s the IRS, and it’s squinting at you, wondering, "Are you having a little too much fun with this?"

Welcome to one of the grayest areas in the tax code – the distinction between a business and a hobby.

The All-Important "Profit Motive"

If you have a business, you can deduct your expenses and, if those expenses are more than your income, you can take a loss. That loss can sometimes be used to offset other income, like your W-2 wages, which is a nice perk.

If you have a hobby, you have to report every single dollar of income you make. But when it comes to deducting your expenses (the yarn for the dog sweaters, the fancy new table saw), you can deduct precisely zero. Zilch. Nada. You get the tax bill for the income with none of the benefits of the expenses.

So, what separates a bona fide business from a mere pastime in the eyes of the IRS? It all comes down to one thing: profit motive. Are you actually trying to make money, or are you just trying to fund your weekend obsession?

👉 See the IRS’s 9-point test (and how to prove your gig is legit) →

Money Moves

📊 Traditional vs. Roth: Which One Actually Wins?

Walk into any office breakroom, or, heaven forbid, mention you're "thinking about retirement" at a family barbecue, and you will be instantly assaulted by the most baffling financial debate known to modern man: Traditional or Roth?

It’s a question that turns mild-mannered accountants into soapbox preachers and makes your brother-in-law, who still thinks a "dividend" is a type of garden tool, speak with the unshakeable authority of a Wall Street titan.

The whole thing boils down to a ludicrously simple premise that we have somehow managed to complicate with more acronyms and rules than a high-stakes board game. It is, simply: When do you want to pay your taxes? Do you want to pay them now, or do you want to pay them later?

That’s it. That’s the whole argument.

The Old Guard: The "Pay You Later" Traditional

The Traditional IRA/401(k) is the old-timer, the reliable sedan of retirement accounts. The deal is this: You put money in before the government taxes it. This is lovely, because it makes you look poorer on paper than you actually are, which means your taxable income for the year goes down. Your paycheck feels a little fatter. You get to enjoy your tax break today.

The money then grows in this wonderful, tax-sheltered terrarium for decades, untouched by capital gains or dividend taxes. The catch is that when you finally retire and try to take that money out, the IRS will be waiting for you at the door, hand outstretched, demanding its cut of everything—your original contributions and all those glorious earnings.

The Flashy Newcomer: The "Pay Me Now" Roth

The Roth IRA/401(k) is the flashy newcomer. The Roth flips the script entirely. You pay your taxes today, on the money you earn, just like a responsible adult. Then you put that after-tax money into the Roth account. This feels slightly less good right now because your paycheck doesn't get that immediate tax break.

But the money grows, and when you take it out in retirement, it is 100% tax-free. All of it. The contributions, the decades of compound growth, all of it. The IRS can't touch it. You get to slam the door in their face, legally.

👉 Learn which option future-you will love →

Filling 101

⚡️The EV Credit Is (Finally) Simple

Buying an electric car is supposed to feel good. You are cutting your gas station visits, you are feeling mildly smug about saving the planet, and you are getting a sweet $7,500 break from the government.

Except, as your cousin who bought a Tesla in 2022 probably discovered, it is not a check. It is a credit. And you only get it if you pick the right car, stay under the income and price limits, and avoid specific battery components from countries on the federal naughty list. Easy.

To make things extra fun, Congress changed the rules again in 2025.

Under the One Big Beautiful Bill, federal EV credits are available only for vehicles acquired on or before September 30, 2025. If you bought or entered into a binding contract and made a payment by that date, the credits still matter for your 2025 return. If you are shopping now, in late 2025, the federal credits are gone, and you are looking at state incentives or dealer discounts instead.

But if you did get in under the wire, here is how the rules work.

The Big Kahuna: New Clean Vehicle Credit (Up to $7,500)

This is the headline credit under Internal Revenue Code section 30D. For qualifying new EVs and fuel cell vehicles, you could get up to $7,500. The credit is split in two:

• $3,750 if the car meets the critical minerals requirements

• $3,750 if it meets the battery components requirements

A car can qualify for one half, both halves, or nothing at all. Whether a specific model qualifies depends on the exact trim and battery and can change over time, so you always have to check the official list on FuelEconomy.gov or the IRS site before you sign anything.

But before you worry about the battery, you have to pass two bigger tests: price and income.

👉 Check the EV credit rules before you file →

Last Time the Market Was This Expensive, Investors Waited 14 Years to Break Even

In 1999, the S&P 500 peaked. Then it took 14 years to gradually recover by 2013.

Today? Goldman Sachs sounds crazy forecasting 3% returns for 2024 to 2034.

But we’re currently seeing the highest price for the S&P 500 compared to earnings since the dot-com boom.

So, maybe that’s why they’re not alone; Vanguard projects about 5%.

In fact, now just about everything seems priced near all time highs. Equities, gold, crypto, etc.

But billionaires have long diversified a slice of their portfolios with one asset class that is poised to rebound.

It’s post war and contemporary art.

Sounds crazy, but over 70,000 investors have followed suit since 2019—with Masterworks.

You can invest in shares of artworks featuring Banksy, Basquiat, Picasso, and more.

24 exits later, results speak for themselves: net annualized returns like 14.6%, 17.6%, and 17.8%.*

My subscribers can skip the waitlist.

Skip waitlist

_{*Investing involves risk. Past performance is not indicative of future returns. Important Reg A disclosures: masterworks.com/cd.}

Wild Tax Tales

🤠 Val Kilmer vs. the IRS: A Real-Life Western

Val Kilmer has played some iconic roles (Doc Holliday, Batman, and Iceman, to name a few), men who never seem bothered by things like quarterly tax payments. Real life, unfortunately, doesn’t offer the same plot armor.

Kilmer’s tax trouble centered on his 6,000-acre ranch in New Mexico, a property so large it was practically its own zipcode. It was his sanctuary, but sanctuaries of that size burn money. In 2011, the IRS filed a lien against him for $489,165. And here’s the kicker: that bill was for one tax year. 2008.

A federal tax lien isn’t a polite reminder. It’s the government legally attaching itself to everything you own until you pay up. And because the lien was tied directly to the ranch, Kilmer couldn’t easily sell it to free up cash. Anyone buying the land would inherit the problem unless the IRS was paid first.

That put him in a brutal bind. Kilmer originally listed the ranch for $33 million. But a looming federal lien kills leverage fast. With pressure building, he sold off most of the property for about $18.5 million — nearly a $15 million haircut. And after owning the land for decades, the sale likely triggered a sizable capital gains tax of its own. Rough.

Kilmer eventually paid off the IRS, but the lesson stands: tax liens are one of the most powerful tools the government has. They turn assets into anchors, force fire-sale pricing, and follow you until they’re satisfied.

Even the coolest gunslinger in movie history couldn’t dodge this showdown. When the IRS wants its cut, they’re always your huckleberry.

The quick (and slightly prickly) stories we didn’t have time to get to:

• 📅 IRS urges taxpayers to prep early as new 2026 rules kick in.

• 🛡️ A new law forces clearer IRS math-error notices

• 👶 IRS releases first rules for new children’s Trump Accounts

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.

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