Tax LOOPHOLES The Rich Don't Want You To Know - Robert Kiyosaki and Tom Wheelwright

Summary

In this insightful episode of 'Advanced Lessons in Millennial Money,' Robert Kiyosaki and his tax advisor, Tom Wheelwright, discuss the intricacies of taxes and how the wealthy legally avoid them. They break down the tax burdens at various stages of business—employees, small business owners, large corporations, and professional investors. Key topics include the impact of taxes on small business owners, the tax benefits for large corporations, and how debt can be used strategically to minimize tax liabilities. The episode highlights the importance of financial education to make the most of tax incentives and build wealth.

Takeaways

• 😀 Employees typically pay around 40% in taxes, and small business owners can pay as high as 60% due to both personal and employer tax responsibilities.
• 😀 Big businesses with 500 or more employees pay around 20% in taxes due to government incentives for creating jobs and contributing to economic stability.
• 😀 Professional investors, like those on 'Shark Tank,' can reduce their taxes to as low as 0% by taking advantage of tax incentives in industries such as housing, technology, and energy.
• 😀 The wealthy don’t always avoid taxes, but they use financial education and tax incentives to legally minimize their tax burdens.
• 😀 Financial education is crucial to understanding how to take advantage of tax laws and avoid common mistakes that lead to high tax payments.
• 😀 Small business owners often get into financial trouble because they don’t plan for taxes, which can lead to a sudden tax burden when they aren’t prepared.
• 😀 The government offers tax breaks to businesses and investors in exchange for engaging in activities it wants to promote, such as creating jobs or developing infrastructure.
• 😀 Tax benefits are available to anyone who understands how the system works, not just the wealthy, and can be applied even in small or startup businesses.
• 😀 Debt can be a powerful tool to reduce taxes if used correctly, especially when leveraged in business investments like real estate.
• 😀 McDonald's business model, centered around real estate investments, demonstrates how business owners can use their business income to acquire valuable assets and reduce taxes.
• 😀 The tax system is designed to benefit those who are producers (business owners and investors), not consumers (employees), which is why understanding the difference is key to wealth-building.

Q & A

Why do employees typically pay around 40% in taxes?

Employees pay around 40% in taxes due to the progressive nature of income tax systems, which are designed to collect a higher percentage as income increases. This rate is relatively stable even after tax cuts, such as the Trump tax reforms.

How much do small business owners pay in taxes, and why is it higher than for employees?

Small business owners can face taxes as high as 60% because they are responsible for paying both their share of employee taxes and the employer's share. This significantly raises their tax burden compared to employees.

Why do large businesses pay around 20% in taxes?

Large businesses typically pay around 20% in taxes because the government incentivizes them through tax breaks to create jobs and economic stability. These businesses contribute to employment, which aligns with government goals.

What are some examples of tax benefits received by large corporations like Amazon?

Large corporations like Amazon benefit from multiple tax incentives, including reduced income taxes, sales tax benefits, and lower unemployment taxes. These incentives come from various levels of government, such as federal, state, and local governments.

How can professional investors pay as little as 0% in taxes?

Professional investors can pay as little as 0% in taxes by strategically using available tax benefits and incentives, such as deductions and reinvestments. These strategies are part of financial education and are not typically accessible without understanding the tax system.

What is the misconception about tax breaks and who benefits from them?

A common misconception is that tax breaks are only given to the wealthy. In reality, tax laws are designed to reward those who take advantage of incentives, regardless of their income. It’s not just the wealthy who benefit; it’s those who know how to navigate the tax system effectively.

What is the 'McDonald's formula' and how does it relate to wealth building?

The 'McDonald's formula' refers to the strategy of investing in real estate as a means of generating wealth. McDonald’s did not become rich by selling hamburgers but by owning real estate, which provided a steady income stream. This approach can be used by entrepreneurs to leverage business success into real estate investments and tax benefits.

What role does financial education play in taking advantage of tax laws?

Financial education is crucial because it equips individuals with the knowledge to understand and navigate the tax system. Those who have this education can use tax laws to their advantage, while those who don’t often end up paying higher taxes and missing opportunities.

What is the main difference between the mindset of the 'rich' and the 'poor' regarding taxes?

The main difference lies in how they use taxes to their benefit. The wealthy view taxes as a tool to be leveraged through investments and business strategies, while the poor may not understand or utilize tax incentives, resulting in higher tax burdens.

How does debt, when used properly, provide tax advantages?

Properly used debt, known as good debt, can provide tax advantages by allowing investors to leverage borrowed money for income-generating activities. This can accelerate both earnings and tax benefits. In contrast, bad debt, like car payments and student loans, does not provide the same advantages.