tonight the massive IRS tax leak it has revealed the wealthiest of Americans paying little to no federal income tax and after hearing this I read over 2 000 pages of the U. S tax code to figure out how they do it today I'm revealing Tax Strategies that actually work and at the end of the video I'll tell you what to start doing tonight to lower your taxes but first you need to understand how taxes work and why you need to lower them now okay so when you work the money you earn is called your pre-tax income this is what the government looks at to determine how much to take what's left over is your post tax income so we need to focus on this because even if you just saved five thousand dollars from taxes that could be worth nearly thirty five thousand dollars in 25 years if you invested it all right so the first easiest thing to do to lower your taxes is on page 159 when you work a job the usual tax process looks like this get paid pay taxes spend your money but if you have a side hustle a business or freelance the process which is to get paid spend money pay taxes this means that you can now control the Mount up your money that can get taxed and as ridiculous as a sound lowering your income is one of the easiest ways to lower your taxes but obviously you want to take home as much of that cash as possible so you need to do this very strategically when I went full time on YouTube a few years ago I was super overwhelmed with taxes because it was my first time being fully self-employed I had no idea what to do and I was stressing out but thankfully one of my friends who was studying to be an accountant said I can lower my taxes if I bought stuff for the business and so I did I bought stuff like this this and this and this and all these purchases cut down the amount of taxes I have to pay because I showed the IRS I had less money left over AKA my income that they can tax me on so if you're making a hundred thousand dollars a year then strategically buy something that will help you grow your business or side hustle over the long term if you spend forty thousand dollars of that hundred thousand dollars on equipment classes or coaching then the IRS will see you only making sixty thousand dollars a which means you'll pay significantly Less in taxes okay okay so now that we set the base foundation in your head we now have to go up a level so Paige 367. so Jeff Bezos paid zero dollars in income tax despite adding 46 million dollars to his personal wealth in 2007.
and I figured out how he did it and you can do it too for regular people like us we view debt as a terrible thing and yes when it's not handled correctly it definitely is but debt is also one of the easiest way to look your taxes and pay less to the IRS what Jeff Bezos and a lot of wealthy people do to generate little to no taxable income but still be able to buy 600 pair of sandals that look like trash is this these people have a lot of money tied to their stocks and other assets and they take out a loan against those assets which is where Mastermind debt comes in and you can do this too not by the sandals I wouldn't suggest that but you can use that strategically with these three steps let's say you have a hundred thousand dollars sitting in your stock portfolio you want to access thirty five thousand dollars from it but you don't want to sell the thirty five thousand dollars worth of stocks because you'll have to pay taxes so what can you do step one put that portfolio up as collateral to borrow 35 of your total portfolio value or thirty five thousand dollars and sometimes you can borrow even up to sixty percent depending on a few things but here's the cool part although you now have thirty five thousand dollars that you can spend however you like you don't need to pay taxes on that money because this money is a loan now you will have to pay back the borrowed money with interest but generally the interest rate on this type of loan can be lower than other types of loan that you're more used to and that rate can be negotiated depending on the total amount of assets that you have step two now the wealthy uses a small portion of this loan money for their personal spending and the rest to invest in stuff that can make more money at a faster rate than the interest that they're being charged from the loan so if if they're being charged three percent interest on a loan but can invest that money and make eight percent in returns they'll still make more money step three with the profits you can start paying off the loan so in the end you had access to untaxed money but this is risky because if something bad happens then you could technically lose your collateral if you don't want to deal with this collateral mess here's something else I do I live in New York City so rent usually costs me a quarter if I left kidney every year but thankfully I learned about this this is my studio I fill my videos here write my scripts and so on so I'm able to turn this entire workspace into a tax deduction which reduces my taxes the tax code is filled with hidden deductions that you need to use to your advantage how if I paid three thousand dollars in rent and my workspace takes up 25 of the total floor space that means I can take 25 of that three thousand dollars and turn it into a business expense so in a way I'm saving 750 in taxes per month and only paying two thousand two hundred and fifty dollars in rent which adds up to a savings of nine thousand dollars a year in taxes I can can also track the electricity I use and the business meals I eat I can depreciate my equipment like laptops business vehicle Furniture real estate a ton of different stuff and it can all get really confusing but there is something that can help look I don't know about you but I hate doing taxes it's hard to understand it takes a lot of time and it can get really expensive literally all the worst qualities in one thing so naturally I spent hours looking for ways to make filing my taxes quicker Freer and easier all the qualities I do love and I found Free Tax USA who's sponsoring this portion of the video and I'm super pumped about this because I've used freetax USA before and they're pretty amazing what's awesome is their website pretty much guides you through the entire tax thing and it's free to import your prior year's tax filing information so you can start right where you left off last year plus it's free to file federal returns and if you're self-employed like me it's free to file federal self-employment returns too State filing only costs 14. 99 and this low price includes customer service support tax extension and covers all major tax situations you can't get better than this like literally because I looked at pretty much everything go to freetaxusa. com Vincent Chan to file your taxes quicker cheaper and easier thanks again to FreeTaxUSA for sponsoring this portion of the video now let's dive back into the two biggest things to lower your taxes and unfortunately a lot of people don't know this Warren Buffett is worth more than 110 billion dollars yet he pays a lower tax rate than his secretary because of huh strange I guess we haven't unlocked this portion of the video yet anyways it's a lot easier to do than you think so scenario one you work a job and you earn forty thousand dollars a year depending on your state and other factors you'd be paying plus minus eight thousand dollars in taxes let's stick with that number to make the calculations easier that means at the end of the year you're walking away with thirty two thousand dollars post tax not great but in scenario two you're gonna end up making forty thousand dollars a year and actually paying zero dollars in taxes here's how first let's set the scene you don't work right now so you make zero dollars a year but you do have money tied up in stocks that you held for longer than a year the cool thing about this tax strategy is it plays with long-term capital tax rates I.
E the rate that you'll get taxed on from selling your stocks and realizing those long-term capital gains and the long-term capital tax rates come in three tax flavors first labor is if you sell your stocks and you realize a long-term capital gain of less than forty four thousand six hundred and twenty five dollars you don't pay any taxes second anything more than that up to 492 300 you'll pay fifteen percent of it in taxes the third flavor anything above 492 300 you'll pay twenty percent in taxes okay now remember you have zero dollars in income right now because you don't work but now let's say you want to sell your stocks to collect forty thousand dollars from that capital gain sale because you're selling long-term stocks you have no other income and since it's under 44 625 threshold you don't have to pay any taxes on that sale that means in scenario two at the end of the year you're walking away with forty thousand dollars post tax compared to scenario one where you walk away with thirty two thousand dollars post tax and paying eight thousand dollars in taxes investing funneling is how Warren Buffett pays such a low tax rate a bulk of his income gets paid as dividends and long-term capital gains which are taxed at a much lower rate than ordinary income but it's page 1746 that's my absolute favorite way to lower my taxes and it's perfect if you own real estate all have plans to get real estate in the future it's not a secret that real estate is probably one of the greatest tax investment vehicles that has ever existed now most people assume it's because the value goes up over time but not even there are countless tax benefits with real estate and here's two first is when you rent a property out which sounds bad because rental income is taxable right yeah but not really let's say you buy a house for two hundred thousand dollars and you rent it out for two thousand dollars a month this means you'll earn twenty four thousand dollars in rental income each year that's a lot of money to be taxed on but according to this mortgage interest property tax operating expenses depreciation and repairs all count towards rental income expenses and here's how this changes everything let's say your operating expenses repairs and insurance takes up about a third of your rental income 33 of 24 000 is 8 000. that leaves you with just sixteen thousand dollars of taxable rental income then you'll probably have to pay off some mortgage fees each month but say you took out 160 000 mortgage to pay for the house which means you'll probably be paying plus or minus 800 a month towards the mortgage so in a year that's nine thousand six hundred dollars of fees so take that nine thousand six hundred dollars out of the sixteen thousand dollars of rental income and this leaves you with sixty four hundred dollars of taxable rental income for the year so far the one thing you're forgetting is that your property is also getting older and so you can depreciate your property which is an additional tax break most U. S residential rental properties are depreciated at a rate of 3.
6 percent each year for 27. 5 years so you can go ahead and tell the IRS that you deserve a seven thousand dollar tax deduction because of depreciation and also it doesn't matter if your property value ends up going up or down this tax break is based on your purchase price but wait I thought you were only making sixty four hundred dollars in taxable income and that's where the beauty lies even though you're actually walking away with sixty four hundred dollars in rental income profit at the end of the year in the IR ssis you actually losing 600 a year from the depreciation aspect so in the end you pay zero dollars on taxes on your rental income and the next time you have to pay taxes you can add that extra 600 as an additional deduction that means over the next 27.
