• Skip to main content
  • Skip to primary sidebar

Cade Hildreth

Everything You SHOULD'VE Been Taught in School.

MENUMENU
  • Blog
  • Finance
    • Cryptocurrency
    • Real Estate
    • Gold and Silver
    • Investing
    • Increasing Income
    • Financial Q&A
  • Real Estate
  • Health
    • Fitness
    • Nutrition
    • Confidence
  • LGBTQ+
  • Podcast
    • "What You Should've Been Taught"
    • Audio Feed of the Website
    • Ask a Podcast Question
  • About
    • Testimonials
    • About Cade
    • Rugby Bio
    • Instagram
    • Contact
You are here: Home / Finance / Tax Strategies: How to Play the “Tax Game” Like the Wealthy
Tax Strategies: How to Play the “Tax Game” Like the Wealthy

Tax Strategies: How to Play the “Tax Game” Like the Wealthy

February 29, 2020 By Cade Hildreth Leave a Comment

Looking for tax strategies to owe less to the IRS this April? Or better yet, going after a larger refund? The tax laws are always changing, so it makes sense to maximize your return.

In the United States, we have a progressive tax system. Meaning, people who earn more should pay a higher tax rate than those who pay less. This approach is based on fairness and an “ability to pay”.

What is interesting, however, is that the American tax system is only progressive up to a point. It is progressive for lower and middle class Americans, but it is not for wealthy individuals.

For example, in 2015 the effective tax rate peaked at:

  • 29.3% for taxpayers who earned $2-$5 million
  • 28.8% for taxpayers who earned $5-$10 million
  • 25.9% for taxpayers who earned $10 million or more

As you can see, at the highest income levels, people who earn more actually pay less in taxes. That’s a pretty sweet deal, right? This is because high earners in the US have more access to ways to shield their income to avoid paying taxes.

Playing the “Tax Game”

While it’s a complicated question—and there is, of course, much debate surrounding it—it is true that the richest members of our nation have a greater ability to control their tax bills.

The consequence of this is that the tax code unfairly burdens the middle-income tax bracket, where the tax system is progressive, with earners paying paying up to 37% in federal tax.

On the upside, wealthy Americans (making $2M, $5M, $10M or more per year) do contribute to our nation in the form of real estate development, business growth, job creation and charitable contributions. Meaning, there are contributions from these individuals outside of the tax system.

Unsurprisingly, nothing is entirely “good” or “bad” — rather, it is simply valuable to consider how to optimally apply the tax law to your individual situation.

Plus, the hard truth is that there is little utility in being angry about the way the tax code is being applied (at least until election day).

What is useful is to emulate the activities and tax strategies of the wealthy—albeit at a smaller scale.

Tax Strategies to Protect Your Money

Thankfully, you too can play the “tax game” by modeling the behaviors of the wealthy, in the ways that you can. Specifically there are three key tax strategies that you should adopt, immediately. These strategies are described in detail below.

1. Lower your taxable income that the IRS uses to calculate your taxes owed.

To apply the tax strategies of the wealthy, you’ll first want to take advantage of various savings accounts, along with credits and deductions that apply to you.

One of the reasons that I love real estate investing is that the IRS tax code is littered with deductions and credits related to this activity, from mortgage interest deductions, to depreciation deductions, 1031 exchanges, primary residence capital gains tax exclusions, and so much more.

While you may not love real estate as much as me, ask yourself, what parts of the tax code could apply to you? Might it be:

  • Charitable Contributions
  • Home Office Deductions
  • Travel Deductions
  • Work Related Education Expenses
  • Mortgage Interest Deductions
  • Student Loan Deductions
  • Residential Energy Credits
  • Health Savings Account Contributions
  • Capital Gains Exclusions for Home Owners
  • Or, something else?

2. Get your money invested so it that multiplies and is taxed at a lower rate.

Next, you need to get your money invested, because it will position you to have a greater percentage of your income come from capital gains (“passive income”), instead of earned (“active”) income.

This is one of the key tax strategies of the wealthy, because capital gains are taxed at favorable, long-term rates that top out at 20% for assets owned for one year or longer.

IRS Tax Strategies

Specifically, capital gains tax rates are only 0%, 15% or 20% for assets held 12+ months. (For assets owned less than a year, capital gains get taxes the same as ordinary income, so from a tax perspective, it’s usually advantageous to hold assets for a year or more.)

Capital gains are defined as profits from the sale of a property or investment.

Examples of capital gains include dividend payments, stock profits, Bitcoin profits, real estate profits, profits from the sale of a business, etc.

Also, when you get your money invested, it will start compounding for you, multiplying every day and every year—without your involvement. Because you can keep working and your money will be working for you, this is how you stack income sources like the wealthy. 

Best of all, you don’t have to do this at a large scale to start reaping the benefits.

For example, let’s say you earned $50K at your job this year. Next year, you again make $50K from your job, but also make $5K in passive income, for example, from the sale of a stock that increased in value. That’s a 10% improvement in your gross income and the extra $5K you made will most likely be taxed at a lower rate than your earned income if you owned it for 12+ months.

Pretty awesome, right?

Plus, compounding is one of the world’s greatest forces, often called the “8th Wonder of the World“. At a 10% rate of return, your money will double in value approximately every 7.2 years. That means it will quadruple (4X) in value in only 14-15 years. That’s incredible.

3. Continually learn about taxes.

Finally, wealthy people tend to give enormous attention to their tax strategies, learning about them, brainstorming with their peers, and hiring smart professionals to advise them.

Remember, tax law is always changing and it pays to understand how it affects your personal finances.

Best of all, you can do this too—for free.

Accounting firms have published thousands of articles on tax topics which you can read online. Or, you could schedule a free consultation with a tax professional to see if hiring them would save you money beyond the fees they’ll charge. There are also hundreds of YouTube videos about tax strategies.

I frequently remind people that if you were to learn about only one new tax deduction each year, the compounding effect of that action over 50 years would be profound.

To help people to best understand tax strategies, I liken it to playing a game of Monopoly. In both cases, you must follow the rules (in the case of taxes, it’s the law), but there are also clear strategies that you’ll want to learn and implement.

As Warren Buffet says, “Learn more to earn more.”

Tax Strategies for Life

In summary, the American tax system is progressive (increases with income) for lower and middle class Americans, but the wealthiest Americans tend to get proportionally greater tax relief.

Given this reality, what can you do to best position yourself within the existing framework? What can you learn from the wealthy and how can you model them on a smaller-scale?

Let me know your ideas in the comments below or feel free to ask questions. 

Up Next: How to Save Money on Taxes This April (7 Savvy Tips)

Are we connected yet on social media? If not, let’s make it happen: Instagram | Twitter | Facebook | Pinterest

5/5 - (3 votes)

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Finance Tagged With: taxes

Reader Interactions

Tell Us What You Think! Cancel reply

Primary Sidebar

  • Instagram
  • Twitter
  • Facebook
  • LinkedIn
  • Pinterest
  • TikTok

“As an LGBTQ+ entrepreneur, real estate investor, former USA Rugby Player, and fitness fanatic, I’ll teach you what your parents and teachers should’ve taught you, but didn’t know themselves.” -Cade Hildreth

Want to know what I learned making my first few million? Subscribe here.

Or, listen to Cade’s articles on the go as a Podcast.

Because it’s the New Year, let’s talk about ch Because it’s the New Year, let’s talk about change...

For a long time, I’ve thought about top surgery. I remember when I was 6 or 7 years old when I wanted to run around outside on a hot, sunny day with my shirt off…and I first saw my parents… hesitate. Ughh. 

It wasn’t their fault but I still remember that heart wrenching feeling. To their credit, they ultimately said, “Ok, go do it!” While I did “do it”, I remember the feeling of shame that crept in.

Over the years, being in affirming sporting/rugby circles helped suppress the urge to get top surgery, but it never quite “stayed down.”

So last summer I got keyhole #topsurgery. I’ll talk about recovery in another post because it was definitely weird to not strength train for months.

But in THIS post, I want to share two things:

1. I am SO grateful to my wife Erin for being the supportive and growth oriented partner that she is. 🥰🙏❤️ 

She is now following her call to get a divinity degree and she’s already working in ministry as a Pastor in Training at an incredible, inclusive Presbyterian church here in Virginia. I am grateful to her for supporting me as I become more and more of who I am—and I’m enjoying watching her do the same! Love you, babe!

2. Second, I’m grateful to get to share who I am with my family. This summer we took a trip to Madden’s resort in MN to celebrate my parent’s 50th wedding anniversary. (It was actually their 52nd, because we had to postpone it twice due to Covid.)

I was nervous to be in the pools and lakes around them, but I could feel it was my only choice because I knew I wanted them to “know me”. And, how could that happen if I “hid me”?

Ultimately, I have to tell you…it was freeing to be me, as I am, who I am. 

I had the BEST time splashing around and biking and goofing around with my wife, niece, nephew, & sister. 🌊🏖🐟

So, I suppose, this is a gratitude post to thank those who have supported me over the years as I become more and more of who I am. 

Top of that list is my wife, Erin, but there are countless others. ❤️

If you’re reading this, thank YOU for being one of those people in my life too. I am deeply grateful. 🥹
.
.
#lgbtqfamily #nonbinary
How to set a boundary? 🤔 . . . . #lgbtqia #lgb How to set a boundary? 🤔 
.
.
.
.
#lgbtqia #lgbtqcommunity #emotionalhealth
What do you do if you’re telling a past story ab What do you do if you’re telling a past story about someone who has transitioned? 🤔 Share a 💯 if you agree ➡️🏳️‍⚧️🏳️‍🌈
7 things I got clarity on in 2022: 1. Good and b 7 things I got clarity on in 2022: 

1. Good and bad are labels. All things are experiences. 

2. Maturity is taking full responsibility for oneself. 

3. Having a loving, conscious relationship with myself is a core value. 

4. Emotions do not mean that anything has to be done. 

5. When I am in congruence with what I want, I have it. 

6. I have permission from myself to stop doing anything that doesn’t lead to my peace and empowerment. 

7. Stepping toward emotions and being able to feel them is a superpower. It determines the quality of my life. 

(Are there any above that you’d like me to further explain?)
 
Most importantly, which # above resonates with you? ⬆️

Happy New Year, y’all! 🎊🥳
.
.
.
.

#lgbtqcommunity #lgbtqiaplus #lgbtsupport #nonbinary #trans #selfgrowth
Interview with Jenny Nguyen, Founder of the Sports Interview with Jenny Nguyen, Founder of the Sports Bra—The World's 1st Bar to Only Play Women's Sports - shorturl.at/doGHZ

I'm excited to introduce you to today's #podcast guest, Jenny Nguyen, who is a professional chef, elite athlete, and entrepreneur.

I invited Jenny onto the podcast because she has done something extraordinary that is long overdue: She has opened up a sports bar that exclusively plays women's sports!

Despite extensive research, Jenny hasn't found another sports bar worldwide that ONLY plays women’s sports.

Given that it's nearly 2023, this is mind-blowing. As a lifelong athlete, I find her vision compelling and inspiring.

Aptly called the "The Sports Bra", the venue is putting Jenny's culinary skills on display alongside women's sports worldwide.

The Sports Bar has taken its mission a even further by partnering with and elevating other local, women-owned businesses.

Specifically, it:

1. Sources its grass-fed beef from @CarmanRanch, an ranch run by Cory Carman, a third gen rancher out of Wallowa, Oregon).

2. Sources its alcohol from Freeland Spirits, an all-women owned and operated distillery out of NW Portland.

3. Has furniture built by @girlsbuild_org, a non-profit organization headed by @ktmhughes in Portland, OR, that teaches carpentry and construction skills to young girls as a path to empowerment.

Since opening the Sports Bra this April, people have come from ALL over the U.S. and the world to experience it—including many professional female athletes.

To learn more about Jenny as she makes history, features women's sports, and elevates women-run businesses, listen to the episode here:

shorturl.at/doGHZ

Or, you can check out the Sports Bra at:

@thesportsbrapdx
TheSportsBraPDX.com/

Have you heard of the Sports Bra or been out to experience it in person?

#lgbtqiaplus #womenownedbusiness #lgbgtqia #lgbtqcommunity #womenssports #womeninsport
Over this recent holiday stretch, we… - enjoye Over this recent holiday stretch, we… 

- enjoyed some quiet time at home
- got a sauna delivered (but not yet installed)
- decorated for the holidays
- baked a bunch
- visited our favorite farm
- did some sight seeing
- and perhaps, most importantly, survived the cold snap along with our feather friends (who lived in the garage for a few days so we could heat them with a space heater) 🥶🐔

How have the holidays treated you…and did you get hit by the winter storms? ❤️🎁☃️❄️
Load More... Follow on Instagram

Recent Posts

Gender Spectrum

The Gender Spectrum: A Scientist Explains Why Gender Isn’t Binary

Laith Ashley

Transgender Model Laith Ashley: 11 Fascinating Facts

Real Estate Syndicators

Master List of Real Estate Syndicators for 2023

Pride Flags

Beyond the Rainbow: Your Ultimate Guide to Pride Flags

Nonbinary

What is Nonbinary Gender? On Being Both, Beyond, and In-Between

Categories

  • Biohacking
  • Confidence
  • Cryptocurrency
  • Entrepreneurship
  • Exclude
  • Finance
  • Fitness
  • Gold and Silver
  • Increasing Income
  • Investing
  • LGBTQ+
  • Nutrition
  • Podcast
  • Real Estate

Ask a Podcast Question | Contact Us | Terms of Use | Privacy Policy

COPYRIGHT © 2019 · CADEHILDRETH.COM | PHONE: ‪(202) 660-4705‬  | 800 CORPORATE DRIVE, SUITE 301, STAFFORD, VA 22554, USA

 

*Disclaimer: Nothing on this site should be construed as medical, health, or financial advice. Before making any health decisions, you should consult with your doctor. Before making any financial decisions, you should consult with professional adviser, such as a financial planner or CPA.