GoKawiilStarting Cash Annual Return Volatility Loan Rate Leverage Depreciation Front-Load Tax Rate Period: Years Decades Period Invested Asset Value Debt Depreciation Taxes Cash Out Equity
How To Not Pay Your Taxes
tl;dr: Defer US taxes by reinvesting your taxable income into the economy as business expenses, depreciating assets, etc. For your leveraged investments, pay yourself in refinanced cash when your investments appreciate and/or credit rates drop.
You can dodge defer US taxes if you reinvest your dollars into the economy. This is no loophole; the system is working as intended. Your government wants you to create taxable wealth.
But you must reinvest your dollars in a particular way that Uncle Sam understands. When you report business expenses on your tax return, you inform the IRS what you spent on enterprise. The US tax code rewards entrepreneurial pursuits which grow the economy. Uncle Sam happily forgoes $1 now for $11 next decade -- it's the same slice from a larger pie.
To perpetually defer taxes on your taxable wealth, keep reinvesting your surplus. The IRS forgoes $10 now for $110 next decade, $100 for $1,100, and so on.
Depreciation spreads business expenses over time. If you invest $100 in a lawnmower that earns $11 per year, this depreciation schedule will minimize your total taxable income each year:
Year Revenue Depreciation Taxable Income 1 $11 $10 $1 2 $11 $10 $1 … … … … 10 $11 $10 $1 Total $110 $100 $10
But you can also ask the IRS to treat it as $10/year for 10 years rather than $11/year for 9 years. You might consider this schedule if your other investments lost $11 this year:
Year Revenue Depreciation Taxable Income 1 $11 $0 $11 2 $11 $11 $0 … … … … 10 $11 $11 $0 Total $110 $100 $11
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