How The 1% Legally NEVER PAY Taxes

professional tax advisor to avoid any

legal issues.

Some of the richest Americans pay little to no money in taxes. We've all heard of President Donald Trump paying zero dollars in taxes, even though he's one of the richest people in the world. Warren Buffett, who's one of the most successful investors of all time, talks about how he pays a lower tax rate than his secretary. Even if we move beyond the famous people, what we'll see is that rich people, in general, pay a lower tax rate than regular people. And you want to know the craziest part? This is 100% legal. How do I know? Well, two reasons. For one, if it was not legal, all of these people would be in jail. And the second way that I know is because I've spent a lot of time studying the federal income tax code. As an attorney who's not your attorney, what I can tell you is that while the federal income tax code is over 2,000 pages long in super small font, it really only tells you three things. Number one, it tells you how to categorize your gross income. Second, it tells you what deductions you can take from your gross income, which brings you to your taxable income. And then it tells you what is the tax rate on your taxable income. That's all you get from this 2,000 pages. And then once you understand that, either you're going to have a big tax bill or a small tax bill. See, rich people are always trying to figure out, for one, how can I have little to no taxable income? And second, if I do have any taxable income, how can I have the lowest tax rate possible on this taxable income? There are four main ways that rich people do this. These are things that you can start doing right now, too. But I do have to advise you that before you make any changes to your financial situation or your taxes, make sure you talk to a professional tax advisor to avoid any legal issues.

employee, your income is categorised as wages and salaries, which are taxed at the highest rate. On the other hand, if you have a business or invest in stocks, your income can be categorized as capital gains, which are taxed at a lower rate.

However, it's important to note that there are specific rules and regulations surrounding each type of income, and it's crucial to consult with a professional, such as an attorney or an accountant, to ensure that you're categorizing your income correctly and legally. It's essential to avoid running into any issues or red flags with the IRS because that could land you in a lot of trouble.

If you're serious about trying to lower your tax bill, make sure you watch this video until the end. Suppose you made $100,000 and went to an accountant to ask about the tax rate. In that case, the first question they're going to ask you is how you made the money. If you earned it from your job as a W-2 employee, you'll have one tax rate. But if you earned it from your investments in the stock market or real estate, it'll have a different tax bill.

Employee, this is called ordinary income, otherwise known as earned income. If you sold a stock and made a $100,000 profit and owned the stock for longer than a year, this is called portfolio income, and you pay long-term capital gains. If you made $100,000 in cash flow from your real estate investments, this is called passive income in the eyes of the IRS. Do you want to know which of these three different types of income has the highest tax rates, highest tax brackets, and lowest deductions? This one right here - your ordinary income - the money you make from your job, the money you make from what you do, comes with the highest tax rates and the lowest tax deductions. The money you make from what you own comes with lower tax rates, and it also comes with higher tax deductions.

So, the first thing that every wealthy person tries to do, which is something that anybody can do, is they work to re-categorize their income. They don't just work for this ordinary income. They invest their money into assets so that they can earn this type of income. Portfolio income is when you own an investment and sell it for profit, like your stock market investment income, assuming you own your investments for longer than a year. Your passive income is things like rental checks or real estate properties. This is a different type of investment income and comes with its set of tax deductions. Wealthy people are working to move their income from ordinary income to portfolio or passive income because it comes with bigger tax breaks. Not to mention, when you own an asset, it also requires less time than going to work every single day. So, if we come back to this tax chart, what we just talked about is changing your tax rate because now when you re-categorize your income, you have the ability to pay a lower tax rate legally.

The second thing that wealthy people do is they lower their taxable income. So, the question here is, how do you lower your taxable income? You're not taxed on your gross income; you're taxed on your taxable income. This is the gross income minus all of your deductions. This is what your taxable income is, and it pays to have a good accountant on your side because a good accountant's job is to help you find the most amount of deductions and write-offs possible. Now we have the lowest taxable income possible because when you have the lowest taxable income, that means you're going to have a lower tax rate as well.

Now, for the majority of people who work a job, if you were a W2 employee, the way that it works for you is like this: you make money from your job, then you might get the standard deduction, which is what the IRS offers to everybody, and then after the standard deduction, you pay your taxes. This is the money that you have left over to go out and spend. This is the money that you can use to buy a car, to buy a home, to go out on vacation. This is the money that you have to do that - your post-tax income. But if you own a business, this could be a real estate investment business, this could be a business that you created, this could be a business that you bought, now this is completely flipped. Now, the way that it works is you make money from your business, then you pay your expenses right here.

And then you pay taxes on whatever is left because now these expenses are deductions that you can take against your gross income. Which is why you have a much lower tax liability and a lower taxable income because you're paying for your expenses first. Now, the question is: what can these expenses be? Well, these expenses have to be used inside of your business to help grow your business. But this, again, is where the help of an accountant becomes so important. That way, you can classify the right expenses that we can use as many expenses and deductions as possible.

For example, if you own a business, you may need a laptop to run your business. So, your laptop was an expense that you get to deduct from your income before paying taxes. If you need a phone for your business, you can also deduct it from your income. If you had to travel to San Diego or Manhattan last year, both of those were expenses that you could expense your travel, flight, Airbnb, meals, and more. All these things were expenses that you got to deduct from your income before your taxable income.

Now, if you didn't own a business and wanted to go to Manhattan, you would have to spend that money with your post-tax income. You make money, pay taxes, and then whatever's left, you have to use to fly to Manhattan. If you wanted to buy a cell phone or a laptop, it's the same thing. But, if you needed to buy a truck for your business and it classifies under the right exemptions, there are deductions out there right now that will allow you to deduct the value of a heavy vehicle against your income. So, if you went out and bought a $150,000 G-Wagon, you could deduct most of the value of the G wagon against your income.

Now, this is where clever accounting comes into play. Like last year, my accountant kept telling me to buy a G-Wagon. Why a G-Wagon? Because he said that we could justify that if I bought a G-Wagon, he could say to the IRS, "Look, just Brit is an influencer, and he needs to maintain his image as an influencer. How can he do that? Well, he can buy a G-Wagon, and now this G-Wagon is a tax deduction for him."

Now, did I buy a G-Wagon? No. Because for me, I don't want to go out and just spend my money to spend it. Not to pay money in taxes. I'd rather pay a little bit of money in taxes and have more money at the end of the year, rather than go out and buy something that I don't need. But this is where fancy accounting can come into play if you have a good accountant. Because now you can use a tax code which is written by the IRS, and now you can use the code to your advantage. But you have to understand how it works.

I am not an expert in the tax code, but I have hired an expert in the tax code. I have hired an accountant whose sole job is to study the tax code, study the deductions, stay up to date on what's happening, and then tell me what I can do in terms of tax planning. So, I know how to spend my money and different ways for me to now use my money that way I can pay less money in taxes legally. Remember this: it's not how much money you make that matters, it's how much money you keep.

If a doctor, a stock market investor, and a business owner all made a million dollars in a year, they're not all going to keep the same amount of money after taxes. The doctor might be paying 40%

You might have to pay $400,000 to $500,000 that year in taxes, meaning you're left with $500,000 to $600,000 worth of your income. It's a lot of money, but nowhere near the $1 million that the stock market investor earned. Portfolio income means you get the benefit of a lower tax rate, which means a top tax rate for you is 20%, meaning you're going to be paying about $200,000 in taxes. You still made a million dollars, but you get to keep $800,000 out of that million, and thirdly, you have the business owner who made a million dollars. Now, if the business owner made a million dollars but had no other deductions, that was the profit that's the taxable income. They're going to pay the same tax rate as the doctor, that $400,000 to $500,000 in taxes. However, you have the ability now to harvest debt that the doctor couldn't do, and this means that you'll have the ability to keep money in your bank account and not have to pay taxes on all that money. Now, there are two ways for you to use debt as a business owner to earn money and not pay any money in taxes, legally, but I gotta give you a little bit of a disclaimer here because anytime you use debt, you increase the risk. You increase the risk of you failing, you increase the amount of expenses that you have because now no matter what happens, even if your business starts to struggle, you still got to make your debt payments. So anytime you increase the debt, you increase the risk, and you increase the chance of failure, so don't do this for the purpose of just saving money and taxes unless you really understand the risk, unless you understand the issues that could happen with debt, and unless you fully understand that, don't use debt. I personally don't do these strategies because for me, I don't want to go out and just take on debt to save money in taxes. If I was to use debt, I want to use it strategically to help grow the business. So just understand that the debt increases risk. Option number one is to follow the Elon method, which is now where you don't take out an income from your business but rather you use debt to finance your lifestyle. So one of the things that Elon made really popular was the fact that he doesn't earn an income, a salary income from Tesla. He gets paid in stock options. What that means is he owns a lot of Tesla stock, billions and billions of dollars worth of Tesla stock, but this isn't cash in his bank account. So now if he wanted to actually receive any cash, he had two options. He could one go out and sell this Tesla stock, but as soon as he sold this Tesla stock, he'd have a huge taxable income because he created Tesla, so his basis in the Tesla stock is very low. So if you sold his Tesla stock for a huge profit, which is what he'd be doing, he'd have a big taxable income. Option number two is he can refinance out of his Tesla stock. He can use debt again against the value of his Tesla stock and use debt to pay for his lifestyle because debt isn't taxable. It's easier to understand this with bigger numbers, so let me just explain what this means. Let's assume now that you own a business making one million dollars a year. If your business is making one million dollars a year, it might be worth somewhere between 10 million and 20 million dollars, 10 to 20 times multiple depending on what industry your business is and what your business does. So your business is worth 10 to Costs, let's just say a hundred thousand dollars. Well, that means you're going to be out of your cash if you buy the G-Wagon with cash. Option number two is you put down twenty thousand dollars and now you finance the other eighty thousand dollars. If you were to finance the other eighty thousand dollars, now you only put down 20 grand which means you still have 80 grand in your bank account, and now you have a G-Wagon. But now you also get the tax write-off for the entire G-Wagon. Let's assume that you use eighty percent of the G-Wagon for your business and you use twenty percent of the G-Wagon for your personal life, meaning sometimes you take this G-Wagon and you go to the movies, you hang out with your friends, you do other things. So, the G-Wagon is primarily for business use and some of it is for your personal life. Now, what you get is an 80% deduction on the value of the G-Wagon against your taxable income. Eighty percent of the hundred thousand dollar G-Wagon is an eighty thousand dollar deduction against your taxable income. So, now you get an eighty thousand dollar deduction against your hundred thousand dollar income, meaning you only have twenty thousand dollars worth of taxable income, but you have eighty thousand dollars in your bank account.

Remember, you don't buy this G-Wagon with the hundred thousand dollars in your bank account. You bought this with a loan; you use debt. So, you put down twenty thousand dollars, which is why you have eighty grand in your bank account. Use the other eighty thousand dollars from the bank's money to buy the G-Wagon, but you still get to deduct eighty percent of the value of the G-Wagon or eighty thousand dollars against your income. But this is where things really give one because now what happens if you buy something for your business, but you don't have enough income to support the value of your deduction?

Let me show you what I mean. By the way, if you are an entrepreneur and you want to stay up to date on the latest business trends, you want to know what's happening with the latest innovation trends. That's why I created Business Briefs, just a completely free resource for entrepreneurs to keep you up to date on what's happening in the business and entrepreneurship world. You can read it in less than five minutes every morning, and every day my team is covering the latest innovation trends, the latest business trends, and the latest in funding trends. You can read it for free, and I'll put the link to how you can join Business Briefs for free down in the description below.

So, let's say that you want to buy a G-Wagon, but you don't make a hundred thousand dollars a year. You only made twenty-five thousand dollars a year. Now, I'm not gonna recommend anybody do this. I'm just talking about how the taxes work, and I'm talking about how debt works when it comes to taxes. Okay, so take this for what it's worth. You made twenty-five thousand dollars this year in your business. Nice. Now, you want to go out and ball out with a G-Wagon, but you don't have a hundred thousand dollars to buy this G-Wagon with cash. So, what do you do? You put down twenty thousand dollars to buy this hundred thousand dollar G-Wagon, and you finance the other eighty thousand dollars. Now, you will get that same eighty thousand dollar deduction, but how are you going to write off 80,000 of a deduction when you only have twenty-five thousand dollars worth of income.