Let’s Ask the Tax Man How Much He Really Takes
I’m Ted Thomas and I think you’ll enjoy, not from a money standpoint but from a knowledge standpoint, the following.
Everyone knows the tax man gets his share. Investing money has many hidden fees and surprises. Taxes are not hidden, and they shouldn’t be a surprise at this point in your investing career.
The important point is to understand the importance of what can be accepted over a few decades. This is an example of how powerful the tax man will be in your life.
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As Investors We Must Pay the Tax Man His Due
For example, this will start out very simply. Try to keep it that way. Don’t try to figure out every dime and just open your mind to what really is happening with your investment income.
Assume you have $1 and somehow or another you are able to double the $1 every year for the next 20 years. To be sure I’m clear, $1 doubles that year to $2, in the second year, or subsequent year it doubles to $4. In the third year it doubles to $8. In the fourth year it doubles to $16.
While I’m talking to you, try to estimate in your mind and guess what $1 will be worth in 20 years.
The magic of compounding is working for you in this example. $1 becomes $2, $2 becomes $4. $4 becomes $8, and in 2 decades… you’ll have $1,048,576! That’s the incredible magic of compounding.
How Much Does the Tax Man Take?
What’s my point? The tax man always gets his share. Many of our friends pay 30% or 40% in just federal taxes. If they live in New York, New Jersey or California they might have to add an additional 10-14%.
Let’s take another look at what happens to our $1,048,576 after taxes! To answer our questions, let’s use a relatively low tax rate of 33%. The total tax rate no matter where you live is 33%.
I’m painfully telling you that after 20 years of compounding and building a million-dollar estate and now deducting the 33% tax, due each year on the growth, your dollar will not grow to $1,048,576.
After you’ve paid the tax man, you’ll only have $28,000.
Ask yourself, do you think taxes are going to be less in the next 20 years? My point is you don’t know what you don’t know.
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How to Beat the Tax Man
You must get your money working for you.
I’m sharing with you in these many articles how small investments in tax defaulted property sold at government mandated tax auctions may be turned into extraordinary cash cows which generate outrageous returns.
The brilliance of what you are about to learn in these many articles will work for you over and over, and you’ll generate returns of capital where you work once and receive income for 10 years.
Maybe you can’t beat the tax man, but you can still get ahead and live the lifestyle of your dreams.
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