More with David

4 Ways To Beat The IRS At The Tax Game

October 26, 2020 David Bradford Season 2 Episode 14
More with David
4 Ways To Beat The IRS At The Tax Game
Show Notes

TAX COUPONS

  • Wealthy people like Donald Trump and Warren Buffet are famous for publicly declaring how little they pay in income taxes by using the full provisions available to them in the federal tax code.
  • Stuffing money into tax deferred plans like 401ks, IRAs and other plans like this only delay the tax problem -- there are better alternatives.  
  • Tax coupons (conservation easements, film credits, fee simples, and others) are examples of ways the wealthy pay only a fraction of their income taxes.
  • Most people are advised by accountants to spend money on company expenses at the end of the year -- expenses that are unnecessary and sometimes ridiculous.  
  • Tax coupons are provisions made by the federal government to give tax credits for accredited investors who invest in certain projects -- often that relate to easements and environmental sanctuaries.
  • When you use a tax coupon, someone who owes $100,000 in federal income tax can purchase a $25,000 tax coupon to cover their taxes. This means they write a check for $25,000 instead of $100,000.
  • Tax coupons are used regularly by savvy investors to reduce their income tax.

Don’t Pay Off Your Mortgages

  • Many people make the mistake of thinking that mortgage debt is bad debt. Actually, mortgage debt allows you to control your capital and also give you tax deductions.
  • Homes and properties appreciate no matter whether they are owned outright or have a 30 year mortgage. Appreciation is unaffected by debt.
  • One reason to do a cash out refinance is to free up the ‘equity’ so you can have more capital to grow outside of your real estate portfolio (or to expand it!
  • The negative tax consequences of paying off your rental or home mortgage.
  • The negative market consequences of paying off your rental or home mortgage.
  • The number one law of investing teaches us to buy low, sell high.  This means you should cash out as much equity as you can to ‘cash in’ on your market winnings.
  • If you want the maximum amount of options, safety, tax incentives and opportunities to grow wealth, you should NOT pay down mortgage debt.

Rent Where You Own

  • Renting where you live gives you more flexibility and freedom.
  • The renter has almost no market risks, whereas the owner can be stuck with a home that they can get their money back from if the market turns.
  • Renting allows you to invest your down payment money in investments that put money into your pocket.
  • If you would be 25% wealthier by the time you reach your 60s by renting vs owning AND you did not have to give up any of your lifestyle quality, would you rent vs own where you live?

Premium Financing

  • Premium financing of large, cash-heavy permanent life insurance has been used by the wealthy for over 100 years to protect their wealth from taxes and to grow their wealth.
  • The bank funds your policy with large lump sums while you pay the bank a much smaller amount as principal and interest.
  • If structured the right way, these payments to the bank can be tax deductible.
  • After the bank is paid off, you can retire with a large tax free paycheck every year for the rest of your life -- you win the tax game now by having large annual deductions (usually for 5-10 years as the bank funds the policy) and later in retirement when your income is tax free.

Text MORE TAX HELP to 770.400.0092