In this world nothing can be said to be certain, except death and taxes.”
— Ben Franklin
Gentrifanatics!
Ok full disclosure this title is a little misleading!
But if I named this post “Read The Tax Code” would you have clicked?
Maybe yes, probably no!
So before you stop reading know this; if you want to be wealthy, you need to know the tax code, period.
Depending on what financial bracket you’re in you’re probably thinking one of three things:
1. “I love tax season because I get a fat tax refund check”
2. “I hate taxes because I pay too much and owe the IRS money during tax season”
3. “I love taxes because they show me where to invest and help me build wealth”
I’ve been through each of these stages. Most people get stuck in stage number two.
This post will talk about how to get out of stage two and the benefits of stage three.
Tax Refund Madness
Usually when you get a tax refund that means that you gave the government a tax free loan.
Early on in your financial education a tax refund can seem like a godsend.
I used to scrap by all year waiting for that refund.
Finally early into the next year I would get a few thousand dollars give or take.
What would I spend it on you ask?
Dont ask.
I bought the most ridiculous things, from rims and sound systems to TVs and gaming consoles.
Related Post:
4 Brilliant Ways to Invest Your Tax Refund Money in 2018
If you’re in a position to get a large tax refund use it wisely, but also try to get out of that position!
Get out of that position because getting a large tax refund means that you’re either paying too much in taxes throughout the year or you dont make much money in your job.
Ideally you can jump from stage one (large refund) to stage three (using the tax code to build wealth).
Unfortunately that’s not a jump that many of us (including me) make.
We usually start making more money at our jobs.
The Middle Class Trap
Being in the middle class is sort of like being gently rocked to sleep and then having your throat slit.
Sheesh, that’s harsh!
Thus is life.
I’m so against any of you becoming a complacent consumer following foolish and counterproductive practices that I’m willing to be very harsh!
You graduate from your 25k-40k per year job and start making better money.
We’re talking 55k-100k per year. This is where most people settle in life.
You’re at a job, working for someone else, making enough to support your family and buy some “extras”.
It’s likely that you owe money to the tax man at the end of the year if you dont understand how taxes work.
Maybe you dont owe but you dont get a big refund and most of your paycheck throughout the year goes to taxes.
Some just take this as a fact of life, just the way that it is, or paying their fair share.
That’s lazy thinking.
Here’s where it gets really interesting.
Tax Code Knowledge is Power
Bottom line up front; read the tax code!
In the U.S. (and other countries) tax law is written in a way that shows investors what the government wants you to invest in.
Why does this matter?
This is important because when the government wants you to do something they give you tax incentives to do it.
Yes, when you make more money you pay more taxes.
However when you pay less taxes you keep more money.
Sounds simple but the majority of us get caught in the middle class trap of making more and more money and paying more and more taxes.
We do this because we dont know any better.
But now you dont have that excuse anymore!
If you’ve read any of my other posts then you know my philosophy on breaking out of a 9-5 job through buying assets and investing.
Related post:
5 Things I Didn’t Know About Wealth That TOTALLY CHANGED My Life!!!
Learning the tax code helps you know where the government wants you to invest your money.
When you invest in areas that the government wants money flowing you get tax advantages.
This is a major reason why I’m such a huge proponent of real estate. The government wants money to go toward quality affordable housing.
Investing in real estate provides several tax breaks including depreciation and interest deductions.
There are other areas mentioned in the tax code such as oil and new construction.
With the new tax code came “opportunity zones” which provide huge tax breaks for investing in revitalization of disadvantaged areas.
As with anything seek professional advice, in this case from CPA’s and Lawyers.
Wrap Up
Here’s what you need to take away from this post:
1. Learn the tax code, it tells you where to invest your money
2. Dont get caught in the middle class trap of paying taxes just because
3. Dont be happy with a huge tax return, that’s your money and it could be making you more!
As always I’m here to discuss, just HMU, I’ll be around!
