In Episode 9 of the #EverythingMoney show, we talk about how taxes work in general, the different ways that we – as Americans – get taxed, which taxes can be legally avoided, and which ones can’t.
Since the beginning of time – at least for human civilization – the concept of taxes has existed. Maybe towards the very beginning, it wasn’t as structured as it is now, but there was definitely a way through which the primary authority figures of any town or city would collect “taxes”.
Taxes, Taxes All Around
It started out as a simple tax on the income you generated, and a tax for living in certain neighborhoods.
Then it graduated to taxes that you would have to pay for the assets that you owned and for the activities that you experienced.
Then it grew to essentially being taxed for everything.
The most common forms of taxes include but are not limited to:
- Income Tax – You Make It, They Tax You
- Sales Tax – You Spend It, They Tax You
- Capital Gains Tax – You Grow It, They Tax You
- Estate Tax – You Die, They Tax You
Can You Avoid Paying Taxes?
Believe it or not, this is one of the most popular conversations among the wealthy class.
However, most middle and upper-middle income families don’t talk about this concept very much. Mainly because they can’t fathom a world in which it’s legal to avoid paying taxes.
But if you’ve paid attention to the 2020 Presidential Election – and really, any other major event that revolves around wealthy people – you’ve probably heard insane ideas like millionaires and billionaires NOT paying any taxes, at all. Period. Seriously.
Most people’s initial reaction is, “How could such greedy rich people avoid paying taxes when us hard working folks have to pay a portion of our income to Uncle Sam?” (Or whoever your Uncle of Taxes is in your country)
Very few people actually ask, “Well, how is it that these people are actually avoiding taxes all together?” Or an even better question, “How can I avoid paying taxes like they do?”
How to Avoid Paying Taxes… Legally
I’d like to openly disclose that the concept of avoiding taxes is much more complicated than I can explain in a short blog post.
BUT… there certainly are ways that taxes can be avoided.
In fact, Capital Gains Taxes and Estate Taxes can be avoided by simply using the right financial instruments for your investments.
- For example, by hiding your cash assets inside of a Cash Value Life Insurance policy that grows based on the Indexed performance of the S&P500, you effectively avoid paying Captail Gains on the growth of your assets. You also can take a non-taxable 0% loan against your savings and avoid paying taxes on the use of your cash. And finally, when you pass away, your Estate will get the Life Insurance benefits AS WELL AS the accumulated cash, completely tax free.
- To speak with a Licensed Financial Consultant and see if you qualify to use Tax Free Financial Vehicles to eliminate your Capital Gains and Estate Taxes, call us directly at 866-624-3741 or Request a Free Financial Consultation here.
Then comes the question of avoiding taxes on your income… which is a bit more complex, but still very manageable. (For best results, please consult with a Certified Public Accountant. I am NOT a licensed tax professional)
In order to avoid income tax, you would have to funnel your income through some type of established business. (File an S Corp for your home-based baking business and write off all of your expenses as a cost to do business)
These expenses can be:
- The rent that you pay on your apartment – since it’s the location at which you operate your business
- Your phone bill – Since you take customer calls on it.
- The gas and payment of your car, and even car insurance – Since you use your car to make deliveries or purchases of your inventory
- The cost of your inventory – Since you bake stuff with it
- The cost of your utilities – Since you use kitchen appliances to bake your goodies.
- The cost of your clothing – Since you wear them as your “work uniform”
- And if you use your family to help you, then you can write off a certain portion of your earnings as “income” that you pay them.
In many cases, you can write off a large portion of your spendings as business expenses and drastically lower – or even eliminate – the amount of taxes that you pay at the end of the year.
This is how Donald Trump – a billionaire – was able to pay only $750 in taxes in 2019.
These concepts are very real, and they can make a great impact on your finances at the end of the year… and ultimately, throughout your lifetime.
To speak with a Licensed Financial Consultant and see if you qualify to use Tax Free Financial Vehicles to eliminate your Capital Gains and Estate Taxes, call us directly at 866-624-3741 or Request a Free Financial Consultation here.