Blog | Entrepreneurship

3 Ways to Avoid Taxes Like a Millionaire (legally)

How the tax code is written to reduce your tax burden

My good friend Robert Kiyosaki once said, “If you want to be rich, you need to play by the rules of the rich." Meaning, the the rules of money are skewed in favor of the rich, and against the working and middle class.

The problem is that most people are raised to think that you are born to pay taxes. Your only purpose in life is to go to school so you can get a job and then pay into the government. Worldwide, the average person pays 30 to 50 percent (or more!) of their hard-earned income in taxes, through a combination of income, sales, value-added, payroll, estate, or property taxes.

Almost one-third to one-half of the world’s wealth is handed over to governments. That’s bad news.

Let’s take a look at how you can avoid paying 30 percent or more of your income to the government. And just like my book title suggests, you can enjoy tax-free wealth.

#1 Understand that your money is your money—and not the government’s

Unless you live underneath a dictatorship, the money you earn and the wealth that you build belongs to you. Yes, you may be required to give some of it to the government to help build roads, maintain the military, and sustain schools. But fundamentally, it’s your money.

Judge Learned Hand, a former judge on the United States Court of Appeals for the Second Circuit and a judicial philosopher, was adamant about this principle. He went as far as to say this: “Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right, for anybody owes any public duty to pay more than law demands.”

The first and most important way to avoid taxes like the rich is to change your mindset. And if you need help, repeat this statement, “I have no obligation to pay more than the law demands.”

#2 Use the complexity of the tax law to your advantage

The so-called complexity of the tax law is aimed at reducing your taxes, not increasing them.

In the United States, for example, there are over 5,800 pages of tax law. About 30 pages are devoted to raising taxes. The remaining 5,770 pages are devoted entirely to reducing your taxes.

So, if 99.5 percent of the tax law is written to reduce your taxes, then the government must really want you to do that. If it weren’t true, then why would such legislation exist?

For example, Rich Dad Advisor Ken McElroy, owns real estate because the government gives him tax credits for providing housing. In fact, real estate is such a good tax shelter that a serious real estate investor should never have to pay tax on their cash flow or on the gain from the sale of their real estate.

#3 Make tax planning a part of your wealth strategy

Remember that your wealth strategy is not just what you make, it’s what you keep. When you invest with taxes in mind, you keep more money and make better investment decisions.

You may think that you have no choice about how much taxes you pay. Everyone has to pay taxes, right? Wrong. There are millions of people who legally pay little or no tax. What’s their secret? They are doing exactly what the government wants them to do and they follow the tax law.

The tax law is a map (or a code) to vast amounts of wealth. And the tax code doesn’t only show you how to reduce your taxes. If you follow the tax law carefully, you will discover the secrets to amassing huge amounts of cash flow and wealth are found within its pages.

I’m big on education. With education, your knowledge increases and your risk decreases. Taxes are a great example of this. As a person’s knowledge about taxes increases, their risk of overpaying their tax decreases as does the risk of incurring penalties and interest. Learn more in my book, Tax-Free Wealth; get your copy now.