Know why saving taxes makes you wealthy and is well worth the effort.
In my tax presentations, one of the first things I cover is why and how saving taxes can make you richer, faster. Well, here it is…
If you take $1.00 and double it tax-free for 20 days it’s worth $1,048,576 (over a million dollars). Take that same $1.00, taxed every year at 30%, it will be worth only about $40,640 — A LOSS of a MILLION DOLLARS!
Why is this so? Because with tax-free compounding, earnings accumulate not only on the principal amount of money but also accumulate on the tax-free earnings as well. (“Earnings on Earnings”).
Thus compounding combines earning power on principal and earning power on interest. Compounding has been called the “8th wonder of the world”, a “miracle”. Compounding money at high rates of tax-free return is a definite advantage of real estate, especially with a great tax plan.
The wealthy know that taxes are a primary factor in determining whether you get rich or stay poor. Let’s say, for example, you’re able to save just $2,000 annually on your tax bill. (With a good tax plan it will be much higher).
You invest the $2,000 annually in an IRA which earns a tax-free annual return of 10%. After 20 years, you’ll have over $114,000! If you can save $10,000 annually on your tax bill and invest it in a Simple IRA for 20 years, you’ll end up with almost $573,000!
$5,000 in tax savings (which is found money) as a 10% down payment can allow you to buy an additional $50,000 in real estate! Assuming a 20% yearly return you would earn $10,000 which is 5 years would accumulate t to $50,000!
You can use the tax savings to upgrade your rental properties for more monthly cash flow. One of my students, Richard, used $2,000 of tax savings (like found money) to employ the Mr. Landlord technique of adding optional upgrades to his facilities and increased his cash flow by $200 a month or a yearly total of $2400 which divided by $2000 = 120% return! But because the $2,000 in tax savings is found money, the return is really infinite!!
So does Saving Taxes Makes You Wealthy? – What would you say now?
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