I don’t pay taxes. That’s not a boast – it’s a fact based on understanding how money and tax codes actually work. While many Americans hate taxes so much they resort to cheating, I’ve discovered there’s a perfectly legal way to minimize or eliminate your tax burden.
The truth is, there are three distinct tax systems operating in America today: one for employees, another for the self-employed, and a third for business owners and investors. Guess which group pays the least? That’s right – business owners and investors.
The Wealthy Use Different Tax Rules
When I say I don’t pay taxes because I understand the tax code, it’s not arrogance – it’s education. The wealthy aren’t necessarily smarter; they just play by different rules that are available to anyone willing to learn them.
Take real estate investing as an example. I use debt to purchase properties, then depreciate the entire value even though I only paid for a portion with my own money. The government allows me to write off the depreciation of assets I purchased primarily with borrowed funds. This creates a powerful tax advantage that employees simply don’t have access to.
Here’s how the strategy works:
- Use leverage (loans) to purchase income-producing real estate
- Claim depreciation deductions on the entire property value
- As equity grows, borrow against it tax-free
- Use that borrowed money to acquire more assets
- Repeat the cycle to build wealth without triggering tax events
This approach follows a fundamental principle: No sale means no taxes. By borrowing against equity instead of selling assets, I avoid capital gains taxes while still accessing my wealth.
Why the Government Rewards This Behavior
You might wonder why the government allows these strategies. The answer is simple: they want people like me to create housing, stimulate the economy, and provide jobs. My activities as an investor and business owner help drive economic growth, so the tax code incentivizes my behavior.
Meanwhile, the middle class follows a completely different playbook:
- They save money in accounts that get taxed
- They focus on earning higher wages (which get taxed at the highest rates)
- They sell investments and pay capital gains taxes
- They pay off their homes, eliminating valuable interest deductions
The contrast couldn’t be clearer: the middle class saves and gets taxed, while the rich borrow and get deductions. This isn’t about income level – it’s about strategy.
Turning Knowledge Into Action
By age twenty-six, I had become a multimillionaire using these principles. I didn’t get there by focusing solely on making more money. I got there by understanding how to keep more of what I made through strategic tax planning.
The wealthy understand that it’s not just how much you make – it’s how much you keep. When you earn a dollar as an employee, you might keep 60-70 cents after taxes. But when you earn a dollar through the right business structures and investment strategies, you can potentially keep the entire dollar and even create additional tax benefits.
This isn’t about exploiting loopholes or doing anything unethical. It’s about understanding the incentives built into our tax code and aligning your financial activities accordingly. The government created these rules to encourage certain economic behaviors, and I’ve simply learned how to work within that system.
The good news? These strategies aren’t exclusive to the ultra-wealthy. Anyone can learn them. The tax code doesn’t discriminate based on your current income or net worth – it responds to how you structure your finances and investments.
If you want financial freedom, start by educating yourself about the tax rules that govern business owners and investors. Then gradually shift your activities from the high-tax employee system to the tax-advantaged business owner and investor system. Your financial future depends more on this knowledge than on simply earning a higher salary.
