The wealthy don’t pay taxes! There, I said it.

What’s your reaction to that statement? Kinda get you mad? Happens a lot. Totally understandable. But not very wise.

Don’t get mad. Get even! Become one of those wealthy people and you can pay little or no taxes too. That’s how the system is designed. First off, the Courts have ruled over and over again that there is no moral, ethical or patriotic duty to do more than the law requires. That includes tax law.

And Congress designs the tax laws to benefit the producers of wealth. You’ve heard the word “loophole.” It may sound like an unintended mistake, but it’s not. There are no mistakes in the tax code. As unfair as it may sound, the tax code was created to ensure the rich get richer.

You can fight the system or you can use the system to your advantage. Like everything else in life, the choice is yours. Just make sure whichever direction you go in that you follow the rules. Tax cheats do go to jail.

Let me give you just a few examples of how legally and ethically you can cut taxes to the bone.

Let’s say you have a home of your own and a real estate apartment investment. On the home you can do what every homeowner can do: deduct the interest you pay on your mortgage. On the apartment complexes you’ve invested in, you can do a lot more, like take advantage of two very powerful tools: deductions for depreciation and deductions for capital expenses. Let’s look at them one at a time.

Depreciation

If you’ve ever bought a new car, you’ve been the victim of depreciation. Simply put, it’s the devaluation of an asset (in this case, your car) over a period of time. In the case of your car, depreciation is caused by normal wear and tear but also because every year, newer and better models are produced. The appeal of the new model makes the value of the old model drop.

As a businessperson I can depreciate the value of something I’ve purchased even if its actual value does not diminish. Real estate doesn’t normally drop in value. I said normally! But the tax laws allow depreciation on the properties, literally treat them as if they are worth less and less every year. And because they are worth less (on paper) less taxes get paid every year.

Plus, the cost of any new improvements made to the property (like a new roof) and the cost of any equipment needed to manage the property (a lawn mower, a pick up truck or a computer for the office) can all be depreciated.

Capital Expenses

This is a whole different animal. While depreciation takes place over a number of years, here you get to deduct the entire expense in the year you made the purchase. The cost of repairs would be a good example. If you had to repair a section of roof because a tree fell on it, you could immediately deduct the entire cost of this capital expense. If, on the other hand, you elected to replace the roof as part of a normal maintenance program, then you’d have to depreciate the expense over time.

The key is to have expenses balance out your income so you show as little profit as possible. And as long as your expense is related to your business it’s deductible. Many businesses show no profit even though all expenses are paid and everyone receives a paycheck each week. No profit means no taxes due.

Corporations don’t pay taxes!

It’s true. Even when politicians say they’re going to tax these corporations. Even when legislators pass laws taxing these corporations. They still don’t pay taxes. Here’s why…

The very basics of running a corporation (or any business for that matter) are simple. Add up the items that constitute a “cost of business” and then add a profit margin. The result is the selling price of your product or service.

So what are some of the things that constitute a cost of business? Labor, raw materials, equipment, rents and leases, and get this…taxes!

Think about it. If a company’s cost of producing a widget is $1.00 and it sells that widget for $2.00, what happens when the legislature passes a bill to tax all widget manufacturers an additional 10%? Well, now the cost of producing this widget is $1.10. To maintain that same profit margin, the company now sells their widget for $2.20. So who really pays the new tax? You, the consumer!

So all of you who say “tax the rich” and “tax big business” are only telling the government you’re willing to pay higher taxes yourself. And without a strategy to offset those higher taxes you will ultimately pay…you end up the loser.

If you feel you’re paying too much in taxes, don’t grumble. Don’t protest. Learn how to decrease your tax burden, legally and ethically. It’s just another wealth building strategy you didn’t learn in school, but you can learn here.

Maybe you should consider a business of your own. If you thought about having more control over your life and more money in your pockets, being the boss might just be the way to go. And if you’ve got a passion (or even a hobby you love) that could be the start to a new career.

It’s not as difficult as it may sound. In fact running your own business today is not difficult at all. The Internet, for one, pretty much levels the playing field for you. You can go head-to-head with giant corporations and probably run circles around them. Contact me for more info. I’ll show you how it’s done.

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To YOUR Success,

Business & Marketing Mentor
Phone: 805-874-2410