Chapter 1 — Taxes Are Stealing Your Money, Your Time, and Your Future
The average person in a developed country spends between 25 and 35 percent of their life working to pay taxes — more than two hours of every workday, three to four months out of every year. Over an entire lifetime, it comes to twenty years. That is a prison sentence. And yet there are millions of people who legally pay little or no tax. Their secret is not loopholes — they simply understand how the tax law works. The tax law is not primarily a revenue-raising tool. It is a tool governments use to shape the economy and reward specific behaviors. Congress does not write incentives into the code to trap you. They write them to reward the behavior they want.
It is not just what you make that matters — it is what you keep. Consider how much faster a $10,000 investment grows without taxes: after thirty years at a ten percent return, a taxed investment grows to about $60,000, while the tax-free investment grows to nearly $200,000. That gap is your future. All taxes are based on your facts and circumstances. If you want to change your tax, change your facts. Real tax planning is permanent — beware of tax preparers who focus on deferring taxes to a later year. Consider two investments: $100,000 in stocks returning ten percent versus a $500,000 rental property purchased with $100,000 of your own money. The stock investment nets $8,000 after twenty percent capital gains tax. The real estate investment earns $7,000 with no tax on it, plus a $27,000 depreciation deduction that creates a roughly $6,000 reduction in taxes on your other income at a thirty percent bracket. Your real return from real estate: $13,000 — a full $5,000 more than the after-tax stock return.
Chapter 2 — Taxes Are Fun, Easy, and Understandable
Worldwide, the average person pays between 30 and 50 percent of their hard-earned income in taxes — through income, sales, value-added, payroll, estate, and property taxes combined. Almost a third to one-half of the world’s wealth is simply handed over to governments. One practical insight most people overlook: invest where you travel. If you have a favorite destination, consider investing in that area. It converts travel expenses you already have into deductible expenses. Any travel can be deductible when its primary purpose is business or investment — the IRS requires that you spend more time on business than recreation, and when that threshold is met, all travel expenses, including hotel, airfare, and meals, qualify as deductions.
Chapter 3 — The Two Most Important Rules
The LLC has become the entity of choice for asset protection purposes. But for tax purposes, your LLC can be whatever it wants to be: a sole proprietorship, a partnership, a C Corporation, or an S Corporation. This flexibility gives you the best of both worlds — the tax advantages of whichever structure suits your situation and the asset protection the LLC provides. If you are just starting a new business, treat your entity as a sole proprietorship in the early years when there is a loss or not much income. When you are ready to change to an S Corporation to reduce employment taxes, simply check the box on the form and file the election with the IRS. The flexibility is remarkable, entirely legal, and largely unknown by the people who would benefit most from it.
Chapter 4 — Put Money Back in Your Pocket — Now
In many countries you can file amended returns to correct errors on returns for up to the previous three years if you discover you overpaid. You can even carry a loss from the current year back to a prior year, use that loss to offset the prior year’s income, and receive a refund right now. But the most immediate way to put money in your pocket is simpler: change your personal expenses into business deductions. What if you could get a twenty to thirty percent discount on all of your purchases? That is exactly what happens when a personal expense becomes a business deduction.
For an expense to qualify, it must meet three tests: it must have a business purpose (the primary reason for spending the money must be for your business), it must be ordinary (customary and usual within your industry), and it must be necessary (aimed at making more money for your business). One rule of thumb: pigs get fat and hogs get slaughtered. If you regularly expense elaborate restaurant meals, the IRS may not look kindly on your deductions.
Chapter 5 — Entrepreneurs and Investors Get All the Breaks
The Cashflow Quadrant separates income earners into four categories: employees and the self-employed on the left side; big business owners and investors on the right. Those who earn from the left side pay much higher taxes than those on the right — and that is exactly what Congress intended. Governments want entrepreneurs to create jobs and investors to build affordable housing. The market does a better job at both than government-sponsored programs, and it costs governments far less to give tax benefits than to fund those initiatives directly.
Make your business a family business. You can shift income from your higher tax bracket to your family members’ lower brackets. Consider a nine-year-old daughter doing bookkeeping for a parent’s real estate investments, earning $4,000 in a year. That $4,000 is a deduction at the parents’ forty percent bracket. If the child has no other income and her standard deduction plus exemptions exceed $4,000, she pays zero tax. The parents save $1,600. Great tax benefits for the parents, genuine educational benefits for the child, and over time, a potential successor in place when the parents are ready to retire.
Chapter 6 — You Can Deduct Almost Anything
Business expenses are the best kind of deductions. Real estate expenses are the next best. Energy-related expenses can be highly valuable as well. Your first step toward increasing your deductible expenses is to become an entrepreneur or investor. Until you take that step, the tax laws will be stacked against you. You cannot be a typical investor if you want to enjoy the tax benefits of investing — you have to become an active investor, one who invests specifically for passive income. Passive income — coming from dividends, rents, and business — is taxed at much lower rates than earned income. With the right tax strategy, you can even deduct losses from investments against income earned from other sources. The key to good passive investing is a good team: a great investment advisor, a stellar tax advisor, a good lawyer, and a knowledgeable banker. And one of the best practices available: keep good documentation. The IRS loves documentation. If you pretend to document a deduction, you will get a pretend deduction.
Chapter 7 — Depreciation: The King of All Deductions
When you buy an asset that produces income, you can deduct a portion of it each year you own it. For physical assets like real estate or equipment, this deduction is called depreciation. The benefit is a non-cash expense that reduces your taxable income without reducing your cash flow. Even better: you get the depreciation deduction for the entire cost of the building, even if you borrowed all the cash to pay for it. The bank’s money counts toward your depreciation base just as much as your own.
Consider Pierre, a restaurant owner who buys a building for $780,000. A portion of that price — floor coverings, cabinetry, and other contents — can be depreciated faster than the building structure. With $680,000 allocated to the structure and $100,000 to shorter-lived contents, Pierre’s total annual deduction comes to about $37,500 — meaning that much of his restaurant income is shielded from tax entirely. Cost segregations are not just legal; they are specifically sanctioned by the IRS. The trick is to properly document all items you depreciate through a cost segregation or chattel appraisal. The more deductions you can take today, the more money you have to reinvest.
Chapter 8 — Earn Better Income
Think of your income as falling into five buckets. Earned income has serious holes — high income taxes and high employment taxes. Ordinary income — pension plans and 401(k)s — taxed at the highest rates but without employment taxes. Investment income — capital gains, interest, dividends, and passive income from business and real estate — taxed at lower rates. Gifts and inheritance — in most countries, the recipient pays no tax. And passive income in the United States — income from any business or real estate you do not personally manage.
Passive Activity Losses — PALs — are losses from passive investments such as real estate depreciation. Passive Income Generators — PIGs — are investments that produce passive income. When you combine the two, your losses offset your income, sheltering it from tax entirely. Suppose you have $10,000 in passive losses from real estate and you invest in a friend’s S corporation for five percent ownership. If that company earns $100,000, your $5,000 share is fully offset by your real estate losses. That is the magic of combining PIGs with your PALs.
Chapter 9 — Take Advantage of Your Tax Brackets
By dividing ownership of a business among family members, you can achieve significant tax savings. Consider George, who divides ownership between himself, his wife, and his children — the business could earn $387,000 and have every dollar taxed at only twelve percent or less, provided it was structured correctly. The key principle: it is not how much you own that matters — it is how much you control. Beginning in 2018 in the United States, the corporate tax rate is a flat twenty-one percent, so all income you keep in a corporation can be taxed at that single rate. Many large corporations outsource work to separate entities — marketing, accounting, payroll — and you can do the same with your small company, as long as all transactions have genuine economic substance beyond saving taxes and are well documented. Pass-through entities also receive a new deduction generally equal to twenty percent of net revenue, subject to several limitations and unavailable for most professional service businesses above certain income thresholds.
Chapter 10 — Credits: The Cream of the Tax-Saving Crop
A tax credit offsets your taxes dollar for dollar — it goes directly against your taxes, not merely against your taxable income. A $1,000 credit reduces your taxes by $1,000 regardless of your bracket. Investment tax credits are reserved for business owners and investors: credits for building low-income housing, buying equipment, and doing research and development. Never invest in a project solely for the tax benefits — always look at the profit opportunities first. When paying your children to work in your business, have them invest their earnings into an LLC or limited partnership rather than a government-controlled Section 529 plan. Unlike a 529, you retain full control, the money can be used for any purpose beyond basic support, and there are no penalties for distributing it. Stop using government plans and make your own.
Chapter 11 — Conquer Your Employment Tax Troll
Instead of being self-employed, you can become both an employee and an owner of your own company. A physician who restructures his practice as a corporation can have his income paid partly as a distribution — not subject to employment taxes — and partly as salary. The goal is to keep the salary portion as low as reasonably possible and distributions as high as possible. But the salary must be reasonable for the services you actually render — if you take too low a salary, the government may treat all company income as self-employment income subject to employment taxes. In the United States, you generally want your primary business taxed as an S corporation, which avoids the potential double taxation of a C corporation.
Chapter 12 — Your Property, Sales, and Value-Added Taxes
There are as many exemptions and tax benefits in the sales and property tax rules as there are in the income tax law — yet the dollars involved are enormous. As a business owner, if you do not collect sales tax on a sale and a state later audits you, the burden shifts from your customers to your business. Always collect sales tax unless you have clear proof that no tax is due. Every company should have a sales tax professional review its collection requirements every few years. Property tax is especially hard to accept because it is charged whether or not you make a profit. Since property tax is calculated as a percentage of assessed value, challenge that value by showing your property is worth less than the assessor says — using an appraisal or evidence of reduced rents — or show that comparable properties are valued lower. Pay close attention to the protest deadline on your property tax bill: missing it means accepting the assessment for another year.
Chapter 13 — Estate Planning Is Good Tax Planning
Estate planning ensures your assets pass to your loved ones rather than the government. Three steps cover most of the ground: place assets in trusts, create a will, and structure your affairs to avoid the estate tax. Probate is expensive and public — the easy solution is to ensure all major assets are titled to a trust, keeping your family matters private. Limited partnerships are a powerful tool: as the general partner, you maintain complete control while your children hold the economic interest as limited partners. A twenty percent share in a $500,000 business might be valued at only $60,000 — because it carries no control. This minority discount, combined with a marketability discount for closely held businesses, allows you to transfer more value using less of your lifetime gift tax exemption. Giving away small shares early reduces your taxable estate on growth you will never have to pay taxes on. With proper planning, you can completely eliminate the estate tax. For those with charitable intentions, a charitable remainder trust provides income during your lifetime with assets passing to charity when you die — bypassing your estate entirely — while a charitable lead trust does the reverse, providing the charity income now and passing assets to your family later. Both provide an income tax deduction in the year the trust is established.
Chapter 14 — Reducing Your Taxes in Other Locations
When you do business in multiple locations, you will be taxed where you have property, where you have an office, and where you have employees. But every location has different tax rules, and paying tax in several locations can result in paying less total tax than if you did business in only one place. Some of your business income can become “nowhere” income — not taxable in any state at all. Suppose your main office is in Arizona and your warehouse is in Nevada. You only report sales shipped to Arizona on your Arizona return. Since Nevada has no income tax, all other sales become “nowhere” sales — taxed on only a small portion of your income and not subject to tax anywhere else. That structure requires nothing exotic — just an understanding of how the rules work.
Chapter 15 — Plan to Take Control of Your Taxes: Entities
Taxes are important, but not nearly as important as your personal and business goals. Make sure your tax planning never interferes with what you are actually trying to achieve. You may want an LLC to own your real estate investment properties, a corporation or LLC taxed as a corporation to own your operating business, a limited partnership to own assets you want to transfer to your children, and trusts to protect assets set aside for children. One of the most powerful strategies is to combine different entities into a single coordinated structure. Consider two partners who own their business in an LLC taxed as a partnership, then each owns their interest through a separate LLC taxed as an S corporation. Because the business is a partnership, income can be distributed differently from how it is allocated — creating flexibility unavailable in a straight corporate structure. Because each partner owns their interest through an S corporation, both benefit from reduced self-employment taxes. In one example, two business partners who made this move lowered their combined taxes by approximately $70,000 per year.
Chapter 16 — Protect Your Wealth from Pirates, Predators, and Other Plaintiffs
The worst structure for asset protection is the general partnership — it offers no protection whatsoever. You are personally responsible for everything you do, everything your partner does, and everything your employees do. Corporations are considerably better: as a shareholder, you cannot personally be sued unless you personally did something wrong. Limited liability companies are best of all — they give corporate-level protection but actually provide even more protection than a corporation when you are personally sued. Be sure to have both an attorney and a CPA help you with your entity structure. Your asset protection strategy and your tax strategy should be developed together — the two go hand in hand.
Chapter 17 — Plan to Retire Rich, Not Poor
Government-qualified retirement plans contain a fundamental lie: they presume that when you retire, you will be in a lower tax bracket than when you are working. The only way this could possibly be true is if your goal is to retire poor. While working, you benefit from deductions that disappear in retirement — dependent children, mortgage interest, business deductions. In retirement, you have additional expenses for travel and grandchildren you deferred while working. When you invest through a 401(k), all income is eventually taxed at regular rates — not the preferred capital gains rate. If you invest in real estate inside an IRA, the depreciation deduction gets trapped inside the plan. And when you borrow inside a retirement plan — how real estate produces its best returns — the income earned becomes taxable even while inside the plan. The critical rule: never put a tax shelter inside another tax shelter. Focus on assets that work well inside qualified plans — those that do not benefit from leverage or depreciation: tax liens, hard money loans, stock and option trading, gold and silver bullion, and cryptocurrency. Choose your wealth strategy, then figure out the best structure — not the other way around.
Chapter 18 — Business Can Be Your Best Tax Shelter
Employment credits are a favorite government tool to encourage companies to hire more people. Many governments give credits for hiring long-term unemployed workers, for hiring in enterprise zones, for increasing overall headcount, or for investing in equipment and research. One often-overlooked opportunity involves your business’s fiscal year. A bonus paid in March is deductible to your company for the fiscal year ending that March — but you do not personally report the income until you file your return for the calendar year ending December 31. That time difference creates genuine flexibility in when you pay tax on your income.
The reason Warren Buffett pays only seventeen percent on his income is that most of it is investment income — portfolio income taxed at lower rates. An even better type is passive income, because when you have passive income you can offset it with losses from real estate investments. All it takes is giving a part of your business to a family member who does not work in it — their share becomes passive income. Give them a portion of real estate that carries passive losses, and those losses offset the passive business income. There is also a little-known U.S. provision called Section 1202 stock that allows the owners of a qualifying small business to completely avoid tax when the company is sold.
Chapter 19 — The Magic of Real Estate
Real estate is such a good tax shelter that a serious investor should never have to pay tax on either their cash flow or the gain from selling property. Keep buying more real estate, rolling your gains into like-kind properties through tax-free exchanges under Section 1031. Cost segregations allow you to take more depreciation in the first several years. One powerful feature of tax basis is that it includes debt — you can buy a property with no money down and still receive the full basis and all associated depreciation. Start with single-family homes, build equity, then sell through a 1031 exchange to buy apartment buildings. Later, exchange again into a triple-net-lease property — a Walgreens, for example. Many retail chains build their stores, sell to an investor, then lease them back for thirty years, handling all maintenance themselves. And here is the real magic: if you hold the property until death, your basis is automatically stepped up to its fair market value on your date of death. Your heirs inherit at the full value and pay zero tax when they sell. You received the full benefit of all that depreciation during your lifetime, and none of it is recaptured at death. Selling assets creates unnecessary capital gains taxes — you can always access cash by borrowing against real estate, and debt is tax-free.
Chapter 20 — Stocks Can Lower Your Taxes Too
Mutual funds carry a hidden tax trap most investors never see. Suppose you invest in Mutual Fund A at the beginning of the year. The fund bought Stock B for $10 per share fifteen years ago. When you joined, that stock was worth $50. The day after you join, the fund managers sell it. There is a gain to the fund of $40 per share — and all investors who owned shares on the day of the sale share the gain. If by year-end the overall market declines and your shares are now worth less than you paid, you still owe tax on your share of the gain from the sale inside the fund. Mutual funds are one of the few places in the investment world where you can lose money and still owe tax.
To make stock-related expenses deductible, you need to qualify as a stock trader: the volume of trading must be significant, the time spent on trading must be a significant part of the day, and the income from trading must be a significant portion of your overall income. Since stock and option trades are treated as short-term capital gains taxed at ordinary income rates, trading inside an IRA means you simply postpone the tax on gains. Trading inside a self-directed Roth IRA means none of the gains are taxable, ever.
Chapter 21 — Commodities Can Be Your Tax Friend
In the United States, oil and gas is one of the truly great tax shelters — but only for exploratory or development drilling operations, not for buying stock in an oil company or royalties from a producing well. Congress allows investors to deduct intangible drilling costs — labor, survey work, fuel, and repairs — plus equipment costs in the year the money is spent. Beyond that first-year write-off, investors also get to deduct fifteen percent of the well’s gross income every year as a depletion allowance. To claim all of these deductions, you must own your investment through a general partnership or sole proprietorship — not through a corporation, LLC, or limited partnership. Renewable energy — wind turbines, solar panels, electric vehicles — attracts substantial tax credits in most countries, and when renewable energy equipment is used in business, one hundred percent of the cost is immediately deductible in the year of purchase. Gold and silver, by contrast, are actively discouraged in U.S. tax policy through a special higher capital gains rate.
Chapter 22 — Don’t Fear the Audit
The best way to approach a tax audit is to never be surprised by one. Preparation has three components: organized bookkeeping records, organized receipts for every deduction you intend to claim (retained for at least seven years), and comprehensive documentation including legal contracts, prior tax returns, and complete corporate books. The language you use to describe deductions also matters — instead of listing an expense as “seminar,” describe it as “continuing education.” Avoid round-number estimates; precise numbers signal records. The best way to avoid an audit entirely is to have your returns prepared by a tax professional who understands how to eliminate possible red flags before they are filed.
Chapter 23 — Choose the Right Tax Advisor and Preparer
The essential question when evaluating a tax advisor is how they view the tax law — with fear, or as an opportunity? You have all of the answers. Your advisor should have all of the questions. If you find yourself having to ask the questions, you simply have the wrong advisor. A great tax advisor is fully educated about the tax law, passionate about reducing your taxes, focuses on permanent tax savings rather than deferrals, uses creativity in applying the law in your favor, asks you detailed questions about your specific circumstances, and is willing to teach you the tax rules as they go. Never use a tax preparer who is not also your tax advisor — you may otherwise receive great advice that is never implemented, and lose out on thousands of dollars of savings that were always within reach.
Chapter 24 — What Are You Going to Do with All Your Extra Money?
To produce massive amounts of wealth, there are three concepts you must understand: compound interest, leverage, and velocity. Compounding is important — but it is a slow way to build wealth on its own. Leverage is what happens when you earn interest not just on your money but on someone else’s money as well. Borrow $100,000 at eight percent, invest it in equipment and inventory generating $12,000 per year, pay the bank $8,000, and net $4,000. Compare that to the $500 you would have earned from a bank certificate of deposit. Velocity takes leverage further — by redeploying earnings quickly, your wealth compounds faster each cycle. The more you leverage and the faster you re-employ your money, the faster your wealth compounds. It is all about momentum.
Appendix — Tax Strategies, Tips, and Rules
Twenty-four tax strategies form the backbone of this book. Include tax planning in your wealth strategy from the beginning. Invest where you travel, converting existing trips into deductible expenses. Elect how your LLC will be taxed. Deduct your business meals whenever the three tests are met. Put your family to work in your business, shifting income to lower brackets. Document everything — if you pretend to document a deduction you will get a pretend deduction. Do cost segregations on rental properties to accelerate depreciation. Pair passive income generators with passive activity losses — PIGs with PALs. Make your parents business partners. Save for your children’s education through your own investment vehicles rather than government-controlled plans. Reduce the wages you take from your business, minimizing employment taxes. Use charitable trusts to reduce estate taxes. Use multiple states or countries to your advantage, finding “nowhere” income. Combine entity types — partnerships, S corporations, LLCs, and trusts — for the maximum combined benefit. Align asset protection and tax strategy from the start. Use a Roth IRA selectively. Turn your business into a passive investment by giving a portion to a family member, then pairing it with real estate losses. Trade stocks and options inside a self-directed Roth IRA, where gains are never taxed. Invest in oil and gas development operations. Hire the right tax advisor — one who asks you questions. Build massive passive income through compound interest, leverage, and velocity.
Twenty-two rules anchor the entire framework: it is your money, not the government’s. The tax law is written primarily to reduce your taxes. All tax planning must have a business purpose beyond tax savings alone. It is not how much you own that matters — it is how much you control. Taxpayers with long-term, flexible strategies always pay less tax than those without. Never put a tax shelter inside another tax shelter. The single best tax shelter in most countries is investing in rental real estate. Mutual funds are one of the few places where you can lose money and still owe tax. The more passionate you and your advisor are about reducing your taxes, the lower your taxes will be. It is not how much your preparer charges you — it is how much they ultimately cost you.