493: Tax Strategies for High Paid Professionals

People have a misconception of what the tax code is. While there are a few pages devoted to telling you when you must pay taxes, the majority of it is about the situations in which you can avoid them. That's why it's important to find a competent tax professional. And that's not as easy as you might expect. You see, most high-paid professionals get their tax professionals from referrals from other professionals. And, most high-paid professionals like doctors are very risk-averse when it comes to anything financial. So they tend to go to the "conservative" CPA—the one who never gets audited. Well, that CPA has the easiest job in the world. He's got all sorts of high-paid clients who want him not to do his job, which, in my opinion, involves trying to find you deductions. Now, let me be clear. I'm not suggesting that you try to find someone who is going to break the law for you. You just need someone who is willing to look at the tax code and find out where there are opportunities to save you on taxes. When you go down that rabbit hole, though, you also need to have your guard up. Some of the strategies used by CPAs can get a little too risky. The last thing you want is to end up paying penalties and end up paying more money than you would have in the first place. In addition, even if the tax code is used appropriately, it may be the case that the end operator is not going to make the theoretical benefit actually happen. Let's take oil and gas for example. The advantages of investing in drilling programs are very clear in the tax code. The problem is finding an opportunity that might actually pay you a return. Of the multiple investments I've made in oil and gas, I've NEVER made money. In fact, I've never even gotten my principal back. My conclusion over the years has been that the best way to save on taxes is actually good planning. As Tom Wheelwright, author of Tax-Free Wealth, says, if you want to change your tax, you have to change your facts. Bottom line: there are plenty of ways to save on taxes if you think bigger and plan smarter. You don't have to do anything crazy or controversial. Just be strategic, understand the rules, and always, always know your risks. Remember, in the world of taxes, pigs get fat, and hogs get slaughtered. So be aggressive, but be smart about it. Your future wealthy self will thank you. This week's podcast is going to give you some good ideas and, in my opinion, some very bad ones!