Frustrated by taxes? This one principle will change everything

What if I told you there was one principle that if you understood it, would change everything about the way you think about taxes?

Well, let me tell you the principle and the story of how I learned it.

It was the fall semester of my master’s in accounting and I was not wanting to be in my tax class. 

I was frustrated by the myriad of nuanced rules that we were having to memorize and I raised my hand to ask again why a certain rule existed.

In response to that question my tax professor said something that completely changed my perspective and I’ve never forgotten it.

He said, “Rob, the entire tax code is an incentive system. Why do you think Congress made that rule?”

This professor looked like a stereotypical nerdy accountant, but he was far from it. He had spent years working with and advising professional athletes, super successful entrepreneurs, and other very “cool” people on how to pay less in taxes.

And in that one sentence he had given me the key to doing the same thing.

Once you understand that the entire tax system is one giant incentive system, suddenly, how to pay less in taxes becomes so much easier to figure out.

Today I’m going to give you the key principles you need to understand about that incentive system and how to apply them to pay less in taxes.

Principle #1 - If you understand what Congress wants the average person to do, you will pay less in taxes.

So what is it that Congress wants people to do? 

They want them to do things that will stimulate the US economy.

Things like starting businesses, building houses, farming, producing energy, investing in others doing these things, and so much more.

Ironically, if you do any of the things mentioned above, you will almost immediately start to pay less in taxes, with almost no additional work on your part.

Want to know how Trump pays so little in taxes? (I’m not trying to be political here)

It’s because he does the things that Congress wants him to do.

Or in his words, “I understand the tax code better than anyone who’s ever run for president.”

Principle #2 - Understanding the intent of a tax law helps keep you out of trouble

With any incentive system there’s always two sides to the coin.

One side is designed to get us to DO something.

The other side is designed to KEEP us from doing something.

And the tax code is no different.

So many of the tax rules are written to keep people from using the tax laws in ways they weren’t intended.

Let me give you an example: the home office deduction.

A fantastic write-off for any small business owner.

But if you talk to most tax accountants they’ll advise you not to do it because “it’s risky” or “you’re going to get audited.”

Want to know the truth?

It’s not risky. People just abuse the rule and have to be slapped back into place.

If you follow the intent of the rule, you will have no problem in any audit that comes your way…if it comes at all.

Conclusion

So the next time you’re frustrated about your taxes remember, “it’s all an incentive system.”

If you’re still paying too much in taxes, start paying attention to what congress wants you to do.

Or (shameless plug) you can talk with me and we can find some ways to help you.

Either way, now you know.

Till next time.

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Whenever you’re ready, here are a couple of ways in which I can help you save money on your taxes:

1. Book a free Strategy Call: Provide me with some financial information before the call and in 45 min to an hour I’ll give you every strategy, tactic, tool, and adjustment I’d make to your financial life to help you pay thousands less in taxes and build wealth faster.

2. Book me as a Keynote Speak: In my talks I share the practical strategies, principles, and rules anyone can adopt to save them thousands of dollars a year on taxes and build wealth more quickly.  

3. ​Start working together: Feel like you've read enough and are ready to get some help implementing the things we talk about here in this newsletter? Respond to this email letting me know and we can talk about next steps.