After 31 years… Major Tax Reform
and what it means to you
True overhaul of the tax law only happens about once every 30 years. In the past 75 years, the U.S. tax law has only seen three major revisions; one in 1954,
the next in 1986 and most recently at the end of 2017. I have been fortunate as a tax professional to be heavily involved in the last two reforms.
In 1986, I was a manager in the National Tax Department (NTD) of
Ernst & Whinney (now Ernst Young). My primary responsibility during my three years there was to create, teach and administer tax courses to the Firm’s
U.S. tax professionals. Just as I arrived in the summer of 1985, I discovered that much of NTD’s resources were being devoted to following the tax reform bill that had been introduced that year.
This gave me, as a young tax professional, some amazing insight into the legislative process as well as the horse trading for tax reform. President Reagan wanted two things; simplicity (the 1985 act was call the Tax Simplification
Act of 1985) and he wanted it to be revenue neutral (no net increase to the deficit). It took another year before bill was finally passed as the Tax Reform
Act of 1986. (Simplicity took a back seat to other goals of the reform.)
In 1986 the big winners from tax reform were individuals, with significantly lower tax rates, insurance companies (who got by relatively unscathed)
and businesses. The big loser was real estate investors (the passive loss rules were used as a last-ditch effort to make a “revenue-neutral” bill. The result a few years later was the Savings and Loan debacle accompanied by a massive real estate depression and the government bailing out real estate through the RTC (Resolution Trust Corporation).
Fast forward 31 years to 2017. President Trump had promised economic stimulus and had stumbled out of the blocks with the failure to repeal
ObamaCare. Everyone thought tax reform would take two years to complete like it had in 1985-1986. Instead, the Republican-controlled Congress was able to use slick procedural rules to pass major tax reform in record time (less than three months from start to finish).
The result was a bill the consequences of which and application of which are still largely unknown. Known are the clear winners and losers. Losers include employees with lost deductions for moving, investment expenses and reductions in home mortgage interest and state income tax deductions.
Winners include big corporations, with a major tax reduction from 35% to big corporations, with a major tax reduction from 35% to
21%, small businesses, with a 20% net income deduction, and real estate, with major depreciation incentives and the 20% net income deduction given to other small businesses.
The key to remember is that very few people had the chance to influence this legislation. Everyone has the same chance to take advantage of the windfalls given to the winners. Employees can choose to be independent contractors and receive the 20% small business deduction. Service professionals who were left out of the 20% deduction can now become C corporations and reduce their tax rate to 21%. Investors who received tax benefits from the costs of investing in the stock market can either begin investing in real estate, with its massive tax benefits, or invest through their Roth IRA or Roth 401(k) and avoid tax altogether on the income and gains from their investments.
Tax-Free Wealth is about using the tax law the way it’s meant to be used
– as a series of incentives to do what the government wants you to do. This
Second Edition incorporates some ideas of how to use the new incentives. The reality is that the incentives don’t really change that much. The government still wants businesses to hire employees, so businesses receive tax benefits for doing so. The government still wants investors to provide housing for renters (even more so now), so real estate investors receive large tax breaks for following through on the government’s goals. Energy is still favored, both traditional energy (oil & gas and coal) and renewable energy (wind, solar and hydroelectric).
For U.S. taxpayers, you will find helpful tips in this new edition to help you apply the new tax incentives to your situation. As a bonus, I have included information and a link to a free eBook that you can download detailing the
Top Ten Tax Benefits from the Trump Tax Reform. For you who live outside the United States, and no matter what country you live in, this edition should help you look for ways to apply your government’s incentives. You may even decide that now is the time to do business in the United States as that country.
is, to some degree, a tax haven.
You can take advantage of the tax incentives offered by your government only if you understand how the tax law works. Every day, you have the opportunity to reduce your taxes. Once you have digested this book, take it to your tax advisor and have them read it (or better yet, buy them their own copy). Then your tax advisor, who is responsible for understanding all of the technical details of the law, can help you apply them to your specific situation.
Enjoy this book and let me know what you think. You can always reach me at firstname.lastname@example.org. Here is to your Tax-Free Wealth.
|Publisher:||RDA Press, LLC|
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About the Author
Tom Wheelwright, CPA, is the creative force behind WealthAbility, the world’s premier Tax-Free Wealth movement serving entrepreneurs and investors worldwide. As the founder and CEO, Tom has been responsible for innovating new tax, business and wealth consulting and strategy services for premium clientele for the past 22 years.
Tom is a leading expert and published author on partnerships and corporation tax strategies, a well-known platform speaker and a wealth education innovator. Donald Trump selected Tom to contribute to his
Wealth Builders Program, calling Tom “the best of the best.” Robert
Kiyosaki, bestselling author of Rich Dad Poor Dad, calls Tom “a team player that anyone who wants to be rich needs to add to his team.” In Robert
Kiyosaki’s book, “The Real Book of Real Estate,” Tom, himself, authored
Chapters 1 and 18 of this book. Tom also contributed to Robert Kiyosaki’s
Rich Dad’s Success Stories. Who Took My Money?, Unfair Advantage and was Robert adjuvant for Why the Rich Are Getting Richer.
Tom has written several articles for publication in major professional journals and online resources and has spoken to thousands throughout the United States, Canada, Mexico, Asia, South America, Africa, Europe and Australia.
For more than 35 years, Tom has devised innovative tax, business and wealth strategies for sophisticated investors and business owners in the manufacturing, real estate and high-tech fields. His passion is teaching these innovative strategies to the thousands who come to hear him speak. He has participated as a keynote speaker and panelist in multiple roundtables, and led ground-breaking tax discussions challenging the status quo in terms of tax strategies.
Tom has a wide variety of professional experience, ranging from Big 4
accounting, where he managed and led professional training for thousands of CPAs at Ernst & Young’s National Tax Department in Washington,D.C., to in-house tax advisor for Pinnacle West Capital Corporation, at the time a Fortune 1000 company. Tom also served as an adjunct professor in the Masters of Tax program at Arizona State University for 14 years where he created the course for teaching multi-state tax planning techniques and taught hundreds of graduate students. He currently teaches his Tax and
Asset Protection class with fellow Rich Dad Advisor, Garrett Sutton.
Tom has his Master’s of Professional Accounting degree from the
University of Texas at Austin and his Bachelor of Arts degree from the
University of Utah.
Table of Contents
Foreword Robert Kiyosaki xv
Part 1 How the Tax Law Can Be Your Best Friend
Chapter 1 Taxes are Stealing Your Money, Your Time and Your Future 3
Chapter 2 Taxes are Fun, Easy, and Understandable 11
Chapter 3 The Two Most Important Rules 17
Chapter 4 Put Money Back In Your Pocket-Now 23
Chapter 5 Entrepreneurs and Investors Get All the Breaks 29
Chapter 6 You Can Deduct Almost Anything 39
Chapter 7 Depreciation: The King of All Deductions 51
Chapter 8 Earn Better Income 63
Chapter 9 Take Advantage of Your Tax Brackets 79
Chapter 10 Credits: The Cream of the Tax-Saving Crop 93
Chapter 11 Conquer Your Employment Tax Troll 103
Chapter 12 Lower Your Property, Sales, and Value-Added Taxes 113
Chapter 13 Estate Planning is Good Tax Planning 125
Chapter 14 Reducing Your Taxes in Other Locations 139
Part 2 Your Tax Strategy for Tax-Free Wealth
Chapter 15 Plan to Take Control of Your Taxes: Entities 153
Chapter 16 Protect Your Wealth from Pirates, Predators, and Other Plaintiffs 167
Chapter 17 Plan to Retire Rich, Not Poor 181
Chapter 18 Business Can be Your Best Tax Shelter 195
Chapter 19 The Magic of Real Estate 207
Chapter 20 Stocks Can Lower Your Taxes Too 217
Chapter 21 Commodities Can be Your Tax Friend 227
Chapter 22 Don't Fear the Reaper Audit 237
Chapter 23 Choose the Right Tax Advisor and Preparer 251
Chapter 24 What Are You Going to do With All Your Extra Money? 263
Epilogue: Tax-Free Wealth-A Few Final Thoughts 279