How Rich People Use Debt & Taxes To Get Rich(er)
Published: 2024-06-09
Status:
Available
|
Analyzed
Published: 2024-06-09
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
To avoid paying taxes, individuals should aim to have no taxable income.
"if you don't want to pay any taxes then you don't want to have any income"
Pending
Rich individuals can avoid personal income tax by borrowing against their business's value instead of taking a salary.
"instead of taking out an income is they borrow against the value of their business"
Pending
Rich individuals can borrow money against their business's value instead of taking a salary, and this borrowed money is tax-free.
"Instead of taking out a salary of $100,000 you can go and take a loan against the value of your business for $100,000. Now you still have $100,000 in your pocket but this debt isn't taxable because you don't actually pay yourself anything you're borrowing money from the bank and now you have $100,000 in your pocket just like before but this is taxfree because this is debt."
Pending
Elon Musk paid no taxes for years by not taking a salary but receiving stock options, then borrowing against the value of those options instead of selling them.
"Elon Musk is probably the most popular example of this in action because he built Tesla but while he was building Tesla for a number of years he never paid himself a salary... he was paid not in dollars but in stock options... instead of actually selling his stock and having this cash come into his bank account from the sale that would be taxable what he did was he went to the bank and he told him hey I have the stock worth a million dollar just for example give me a loan for $100,000"
Pending
Larry Ellison used the value of his Oracle shares to secure a $9.7 billion credit line instead of selling shares and incurring taxes.
"Larry Ellison the founder of Oracle did the exact same thing he had access to 250 million shares of Oracle but if he sold those shares he'd have a big taxable event so instead of selling his shares and paying a whole bunch of money in taxes he used the value of his shares to go to the bank and open up a $9.7 billion dollar credit line"
Pending
The 'Buy Borrow Die' strategy allows wealthy individuals to borrow money and live without paying taxes legally.
"and then after that they follow what I was talking about in the beginning of this video which is BBD buy borrow die this system allows many rich people to now borrow money and live their life wealthy and pay0 in taxes legally"
Pending
Heirs receive assets with a 'stepped-up basis,' meaning the IRS treats their purchase price as the current market value, eliminating capital gains tax on prior appreciation.
"and then when you die you pass your shares onto somebody else and the person who gets your shares your new company they get something called stepped up bases and they don't have to worry about the major tax implications because of the stepped up bases what that means is let's assume that you have a company worth a million dollar but your basis what you bought it for is $11,000... the IRS assumes that they don't get it for $1,000 the IRS assumes that they bought it for a million and so if a kid now sell this asset for a million doar they have $0 in taxable income"
Pending
For small business owners, the focus should be on how expenses can become deductible, rather than simply asking if they are deductible.
"what you have to understand is what can fall here into your taxable income because a lot of times people ask is this thing deductible is it deductible for me to go on a particular trip is it deductible for me to buy a certain item well a better question to ask is how can it become deductible"
Pending
Until the end of 2022, business owners could receive a 100% tax break for taking employees out to eat at restaurants.
"one of the things that's going on uh until the end of 2022 is the tax code is giving bigger tax breaks for business owners that are eating out at restaurants so if you go out and you take your employees out to eat you get a 100% tax break until the end of 2022"
Pending
A two-month business trip for work, meetings, and interviews is considered a tax-deductible expense.
"if you're watching this video when it goes live I will be on a two-month business trip travel where I'll be staying in San Diego with my business partner working on a whole bunch of different things I'll be meeting with a bunch of different business owners out there doing some interviews meeting some influencers so doing work out of San Diego"
Pending
Real estate investors can deduct a portion of the building's value (depreciation) annually over 39 years, creating a tax loss.
"because they offer something called the depreciation deduction which says that every single year you get to depreciate the value of the building on your real estate... you will get to take a deduction of right around $20,500 every year for 39 years"
Pending
Real estate investors can refinance a property to pull out cash, which is tax-free as it's considered debt, not income.
"now what happens is you get to refinance against this property so if you do the same thing and you pull out some cash let's assume that you pull out 1.1 million... and that still leaves $100,000 that now you can put in your pocket for putting this deal together and remember this is taxfree because this is debt"
Pending
Real estate investing can achieve an 'infinite return' by repeatedly leveraging the asset's growing value.
"this is why it's called an infinite return and you can keep doing this again and again and again as long long as the value of the asset is strong"
Pending
The mortgage interest deduction for homeowners requires earned income to pay the mortgage, while real estate investors use the asset's income to cover the mortgage, making it more advantageous.
"when we're talking about your home you have to have an income you have to go to work every single day to pay off the mortgage to get this tax incentive not even the tax break or the tax credit you're getting a little tax deduction from the interest that you have to pay but you still have to work to get the money to pay it versus here the assets doing all the work for you"
Pending
Amazon pays significant taxes, but avoids corporate income tax by investing heavily in assets and paying other forms of taxes like property and payroll taxes.
"Amazon is paying Millions if not billions of dollars in taxes it's just not income tax or corporate tax they're paying property taxes they're paying um payroll taxes they're paying uh you know maybe excise taxes between you know importing and exporting but it's just they're avoiding paying corporate taxes"
Pending
Estonia has a policy where businesses registered there do not pay taxes on profits if the money remains within the Estonian account.
"he was saying look we have this this Rule now... that essentially if you make a business create a business you have it in Estonia and your business makes a profit and your money leaves or sits in that account you don't pay any taxes"
Pending
The US taxes its citizens on their worldwide income, regardless of where it is earned.
"US tax code is based on global income so it's one of the the countries in the world where you're taxed as a citizen of the country on all worldwide income whether you make it in foreign uh countries or not"
Pending
US citizens living abroad can earn over $100,000 tax-free due to foreign earned income exemptions.
"Now if you live in Estonia or you live in Dubai or other places around the world you have a foreign tax uh income exemption which means you could be a US citizen and make a little bit over $100,000 uh living in these foreign countries where your income up to 100,000... is not taxed"
Pending
It's better to aim for breaking even on taxes or owing a small amount, as receiving a large refund means you've essentially given the government an interest-free loan.
"you don't want to get a refund you actually want to break even because then you're just giv an interest free loan to the government or owe a little bit of money in taxes because if you owe money in taxes it's a good sign you're making money"
Pending
While depreciation deductions reduce taxable income, banks add it back when calculating loan eligibility, allowing businesses to save on taxes and still qualify for financing.
"depreciation is something that the banks add back so for example let's say you had $100,000 in profit for your business but you had a $100,000 deduction in depreciation your taxes show zero income but if you provide that tax return and that financial statement to lenders the mortgage officers and the banks know that they can add back depreciation to qualify you for financing"
Pending
The 'Augusta Rule' allows homeowners to rent out their property for events up to 14 days a year and not claim the income, effectively turning a portion of their home into a deductible event space for their business.
"there's the Augusta rule you can write off um 14 payments that you make to your home if you host events or functions team building activities at your home so let's say it would cost you... $2,000 a month you could do this up to 14 times... $24,000... you could transfer that amount every single month 14 times to your personal bank account and it would be considered a rent expense or or an event space expense now you could claim that income personally because you've received the deposit... and you would not have to claim it as income because it's called the Augusta rule"
Pending
Home office deductions can be calculated using a simplified method based on square footage or an actual expense method, including a portion of mortgage, utilities, and repairs, subject to the dedicated office space's size.
"you can take a portion of your home office now your home office you could take the standard uh rate of your it's a simplified method rate based on the square footage of your office in comparison to your home or you could take the actual expense method which means you could take a portion of your mortgage your utilities your repairs your construction uh part of your interest as a deduction but it's subject to the square footage of your home"
Pending
Only business owners and entrepreneurs can deduct home office expenses; employees can no longer do so as an itemized deduction.
"writing off your home only qualifies for business owners and entrepreneurs period employees can no longer write off their home as an itemized deduction"
Pending
When deducting business expenses like vehicles or travel, it's prudent to back out a personal portion (e.g., 20-25%) to avoid issues with the IRS and be considered fair.
"we always back out a personal portion of these expenses so for example your vehicle expenses we're always going to take out 20 25% and say hey this is personal this is not business... your trip to Estonia that when you stopped in Germany that's a personal portion we're not going to take that as a business deduction so we can't say 100% of your trip was business purposes... we're going to say I'm going to take 80% of this as a deduction I'm going to be fair"
Pending
While a G-wagon can be 100% deductible due to its gross vehicle weight, personal use like driving it for non-business errands or dates does not qualify for the deduction.
"you can write off 100% of a G wagon Yes the gross vehicle weight qualifies to be written off 100% but if you're driving that G wagon home or if you're going to your kids uh practice or you're going out on a date with your with your spouse that doesn't qualify as a business deduction"
Pending
To deduct home office space, business owners can create a formal rental agreement with themselves, where their business pays rent to their personal entity for the use of the space.
"what I would suggest is creating a rental agreement with yourself so a you would your entity would pay rent to you personally or to your LLC of the space per month it's a legal document so that way if God forbid you were to ever get audited you could present that document to say hey I have a rental agreement with myself"
Pending
The Augusta Rule, allowing up to 14 days of rent-free use of one's home for business events, is presented as a clean way to deduct home expenses without claiming personal income.
"the cleanest way of doing it is using tapping into the Augusta rule 14 payments"
Pending
Even with a steady job, starting a side business (e.g., e-commerce, hobby-related) is the first step to leveraging the tax code and gaining financial benefits.
"if you are an employee even if you're making $75,000 start your business start your idea... if you can start a business by just simply doing something e-commerce or you know something hobby related you are able to that's the the first step"
Pending
As a business owner, you are responsible for determining your own payroll, salary, and tax payments, unlike when you are an employee.
"your boss your manager president of the company is no longer going to hold your hand and pro and pay the taxes on your behalf it's your responsibility now you're the employer and the employee as a business owner so you have to determine your payroll how much tax you're going to pay what your salary is going to be"
Pending
Meeting with an accountant only after the tax year ends is too late for effective tax planning.
"if you're meeting with accountant after December 31st you're too late"
Pending