Interview with Tom Wheelwright
Tom Wheelwright on How to Permanently Reduce Your Taxes and Build Wealth Faster
Taxes are looked at so negatively by most people, but taxation is actually one of the most powerful tools for wealth creation—and today, you’ll learn why!
I’m speaking with Tom Wheelwright. Tom is an entrepreneur, best selling author, Rich Dad Advisor® and international authority on tax, whose goal in life is to make taxes fun, easy & understandable. He’s dedicated his life to learning and studying the tax law and has taught thousands of investors around the world how to permanently reduce their taxes.
He has been a keynote speaker at Rich Dad conferences worldwide with Robert Kiyosaki and his work has been featured in hundreds of media outlets, including Forbes, The Huffington Post, Accounting Today, CFO Magazine, ABC News Radio, and Entrepreneur Magazine.
In today’s discussion, you’ll hear the real truth about taxes. If you want to follow the rules of the rich, gain more control over your money, and permanently pay less taxes so you can build wealth faster, don’t miss this episode with Tom Wheelwright!
Featured on This Episode: Tom Wheelwright
✅ What he does: Tom Wheelwright, CPA is the visionary and best selling author behind multiple companies that specialize in wealth and tax strategy. Tom is also a leading expert and published author on partnerships and corporation tax strategies, a well-known platform speaker and a wealth education innovator.
In his best selling book Tax-Free Wealth, Tom shows entrepreneurs and investors how to build massive amounts of wealth through practical and strategic ways to permanently reduce taxes.
💬 Words of wisdom: The tax law is a roadmap to financial freedom, filled with incentives for entrepreneurs and investors. You just have to follow the rules of the rich!
- How the infrastructure bill will affect your taxes
- The blueprint for paying less taxes—legally!
- Understanding tax deductions and credits—and why your retirement plan is working against you!
- Leveraging private equity to receive more tax benefits.
- How to follow the smart money and avoid government controlled plans.
- How to lower risk and gain more control over your money.
- Why you don’t have to break the law to reduce your taxes!
- What it’s like to work with Robert Kiyosaki.
- Why the government will pay you to make certain investments.
- Connect with Tom Wheelwright
Tom Wheelwright Shares The Blueprint For Paying Less Taxes
Tom Wheelwright Tweetables“The tax law is a roadmap to financial freedom, filled with incentives for entrepreneurs and investors. You just have to follow the rules of the rich” -Tom Wheelwright Click To Tweet “There’s much better ways to deal with your taxes than a retirement plan.” - Tom Wheelwright Click To Tweet
- Tom Wheelwright Website
- Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes by Tom Wheelwright
- The Wealthability Show with Tom Wheelwright
- Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
- Rich Dad’s CASHFLOW Quadrant: Rich Dad’s Guide to Financial Freedom
- Robert Kiyosaki
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Connect with Justin Donald
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Read the Full Transcript with Tom Wheelwright
Justin Donald: Well, Tom, I’m so glad to have you on the show. In fact, this is really special for me because I have learned so much from you over the years, from books and speeches and messages, and we run in similar circles and have a lot of mutual friends. And so, I’m just thrilled to be able to get a chance to share all this wisdom that you have with The Lifestyle Investor audience. So, thanks for being here.
Tom Wheelwright: Oh, Justin, it’s always good to be with you. I’m always learning from you, too. So, I do love the circles we run in because I think they’re very interesting people who have very interesting perspectives.
Justin Donald: Yeah. There’s no doubt about that. And in fact, a nice shoutout for anyone who’s actually watching this, if you’re listening, this is going to be important but, Tom, you are stylish. You’ve got quite the outfit on, your glasses are super cool, super chic, and I just want to pay you that. That’s pretty awesome.
Tom Wheelwright: I’ll take it.
Justin Donald: I like it. So, recently, you and I had a chance to speak together on a panel with Mike Dillard, and what a great lineup of guests he had and some cool people that we got a chance to also interact with and learn from. But I just feel like you’re always on the cutting edge of what’s happening, what’s new, what’s coming down the pipeline in terms of tax reform and business ramifications. And so, I love your knowledge and I’d love to know anything as you see it here today. And then I’d like to journey back and maybe figure out how you became the guy that you are today, probably the most well-known CPA that exists. From an entrepreneurial standpoint, you’ve built just a mega business. This may just be my paradigm but, to me, I felt like you had a nice launching pad with the Rich Dad Poor Dad book and series. And that’s really where I learned about you. So, I’d love to hear kind of what’s new now, and then let’s take a step back and hear how you became who you are today.
Tom Wheelwright: No, sure. Thank you. Lots of nice compliments in there and I love compliments, so it’s great. So, what’s going on, right? Now, of course, we got really two major bills but it really has seemed to be morphed into a single bill because one’s not going to pass without the other. And that’s the infrastructure bill, which is being held hostage by the progressive Democrats that they’re not going to pass that until they get their $2 trillion to $3 trillion social extravaganza put in place. So, we’ll see what happens but the reason, actually, you mentioned predicting the future, it’s really easy to predict the future when you have an understanding of how the government actually works. And I was fortunate to spend three years in the National Tax Office of Ernst & Young back when Ronald Reagan passed the ’86 Tax Act. So, that dates me a little bit but it tells you that there are certain things that happen and you really can predict. So, for example, when the state and local tax deduction went away in 2017, that was not a surprise to anybody. That had been on the chopping blocks for literally 30 or 40 years. So, what we see in this legislation is there’s nothing really astounding that’s going to end up in this legislation. There were some proposals, and I think they’re just trying to get them on the list. So, understand that there’s a list of proposals and things move up and down that list. And so, if you want to predict what the government’s going to do, you just have to understand what’s on that list.
And so, for example, this idea of capital gains at death, right, that’s something, by the way, that Canada already does. Now, they don’t have an estate tax. They just have capital gains at death, which you can get away with capital gains at death if you don’t also have an estate tax. But if you add an estate tax, you end up with it like a 92% tax rate on people who have been very successful. So, that’s been pulled off the table. The 1031 exchanges, they were put on the table. That’s been pulled off the table but it’s interesting they were put on the table. These massive increases in capital gains, which is a terrible idea, by the way. I think the Tax Foundation and several other of the think tanks say that your capital gains rate can’t go above 31% else you start losing money. And that’s where I end up, by the way. You hear it’s going from 20 to 25. Well, it’s not. It’s going from 23.8, okay, because we have the net investment income tax, which is just another tax, right? Just because it’s Medicare taxes, I mean, it’s not tax and it’s a tax on net income so it’s still an income tax. So, your really top rate right now is 23.8. It’s going to go to 28.8% but when you add in the 3% surtax on people over $5 million, you end up at 31.8%. Okay. That is a magic number so you look, what are the magic numbers? Well, in regular income tax, the magic number is 40%. And the reason is that once you get much over 40%, people start, really, it starts impacting how much will people work, how much effort will they put in. You lose productivity once you get over 40% because what happens is instead of putting money into incentives as you’ve heard me say a hundred times and I do in Tax-Free Wealth, the tax law is a series of incentives, right? Instead of putting into incentivized investments, what you do is you end up looking for tax shelters.
So, what you trying to do if you have any sense at all on the government is you don’t want money going towards tax shelters. You want them going towards true incentives that you want. So, for example, in this new legislation, there are big incentives for solar. Well, that’s a tax incentive. If you want more solar and more charging stations, those are the two big tax incentives in this bill then you give incentives for that. The Democrats also want population growth. That’s actually a big part of their agenda. That’s what’s happening at the border. That’s what’s happening with the child tax credits and the pre-K and all of that kind of stuff. These are all population incentives for, remember, the higher your income, the lower your birth rate. And that is true around the world. The higher your income, the lower the birth rate. Well, so if you give incentives to the people who would have a higher birth rate, which are the lower-income, then you get a higher birth rate. And actually, nobody’s talking about that but that is part of the incentive behind all of you see child tax credit, you see the prekindergarten, you see the child care credit. All of those things are related to, okay, well, that’s an incentive to have more children. So, we can’t ignore what the incentives are and also, we can’t ignore what makes sense. So, what we’ve seen in this current iteration of this bill, which is going to go through a number of iterations still to come but what we’re seeing is we’re seeing that capital gains rate 31% target. We’re seeing the ordinary income rate target, 40%. So, you can just watch these and you go, “Okay. Well, they’re just hitting the top.”
And what they did was, I call this the Costco bill because when you walk into Costco, what do you see? You see the big-screen TVs. You see the expensive jewelry. So, that when you get back to that $15 bottle of mayonnaise, that’s a good deal. Well, that’s what’s going on right now with this. Remember, in the original proposal, there’s this 92% estate tax and now they’re looking at just reducing the exclusion from 12 to 6 and everybody’s going, “That’s not so bad, right? They’ve actually managed it pretty well.” So, I think it’s interesting to watch and kind of watch how they’re thinking. They’re just trying to get a bill through. That’s all they’re trying to do. They’re trying to get their social programs in place. And the reality is, I mean, this is my own perspective but the reality is I think there’s a good portion of our population that does need help. And so, I like Joe Manchin’s idea. Well, let’s make it work-related. Let’s make sure that it’s means-based and all that kind of stuff. People that make $400,000 a year probably don’t need additional child credits.
Justin Donald: You know, it’s interesting. There are a few things that I want to highlight from what you just said. I mean, one of them is that it’s very obvious that one of your most simple sales strategies as you start with the highest price you can and then you drop down and you eventually meet somewhere in the middle and then both parties feel like they won because they got some movement and there were some negotiating and there were some people kind of like just giving on some points and then you make a deal in the middle. But one of the big things that you said that you just kind of skimmed over that I don’t know if people realize is like as important as it is and it’s the whole idea of tax incentives. So, I learned this from your books. You wrote a book, Tax-Free Wealth. By the way, I think that this book is the best book on the market about anything and everything tax. And in fact, I liked it so much that I included it in my list of recommended books for my book because I just thought it was such a great start-to-finish overview plus the details of anything and everything tax code. And the whole idea of the government’s not saying, “Don’t do all these things. We’re going to tax you,” but really, they’re saying, “Do all of these specific things because we’re going to give you a credit,” or some sort of a discount or a break because they’re looking for certain things to happen: affordable housing, renewable energy, agriculture, the list goes on and on. And so, I’d love to have you touch on that because that might be one of the greatest takeaways that I’ve had is the whole idea of this is a blueprint to figure out how to pay less in taxes. Just do what the government wants you to do and you’re going to pay less.
Tom Wheelwright: I love that. Actually, I was at a seminar I was speaking at this weekend and people were quoting me on that. I’m going, “Alright. We’re doing our job when people start quoting us.” Because it really is a series of incentives and I know that it seems like apparently, I coined that but, to me, it’s obvious because when you look at it. So, anybody who’s ever gotten a paycheck knows that we’re all partners with the government. When you look at, you look at withholding in that FICA and you go, “Why are they taking all this money on my check?” Well, that’s your partner that’s taking the money out of your check. Now, it’s not a really fair partnership because, in that case, you’re a silent partner. You don’t get any say except in who you elect.
Justin Donald: And they get a top-line rev share like in perpetuity. I mean, it’s…
Tom Wheelwright: Exactly. They get it through until death and after death. Okay. Let’s not forget, there’s an estate tax too. So, they get gift tax, they get estate tax, they get excise taxes. I mean, everything is taxed but here’s the thing. You don’t have to be a silent partner. This is what I think is fun about a tax law. And that’s really what tax-free wealth is about is that you don’t have to be silent. You choose to be silent. Okay? And you may choose to be silent just because you choose to be ignorant of how the tax law works but one way or another, you’re choosing to be a silent partner. You could choose to be an active partner if you look at, so, there’s been a lot of comments lately about Jeff Bezos and Elon Musk and these rich guys who don’t pay tax. I mean, even back in the 2008 election, sorry, 2012 election and Mitt Romney was running against Barack Obama and Warren Buffett says, “Hey, I pay a lower tax rate than my secretary,” and I’m going, “Well, of course you do. You make your money as a big business and that is something that the government wants you to do because they want all your employment, right? In exchange, all your employees pay the taxes. So, you’re not paying those taxes. Your employees are paying the taxes but you’re creating the employment. And the government says, “Look, we need jobs.” So, jobs is number one. That’s the most highly incentivized activity that we have is creating jobs. So, that’s why big businesses pay much lower tax. Big business owners pay a much lower tax.
Another one is real estate, one that I know you’re very active in, Justin, is, look, we need housing. We need commercial buildings. Let me tell you, we need self-storage because people are hoarders. So, we need this real estate. We need convenience stores because we need places for people to fill up their cars and now we’re putting charging stations at those convenience stores, right? So, we need that. So, what we’d like to do is we’ll give you an incentive to risk your money because it is a risk, right? You’re taking a risk with your money. You’re not putting it into the savings account. You’re not putting into a mutual fund. Those are very low risk investments that you’re paying into high risk business opportunity or high risk real estate opportunity or high risk farming opportunity, for example. And what happens is if you do that, the government says, “Look, we’ll contribute part of that initial investment and part of the ongoing investment. But guess what? Once you start turning a profit, we’re going to take a portion of that.” So, if you look at Jeff Bezos as an example, and Amazon didn’t pay taxes for many years, well, they had billions of dollars of losses. Well, why would they be paying taxes when they’re losing money? We have a net income tax. It’s not a sales tax. It’s not a value-added tax. We have a net income tax, which means that if you don’t make money, you don’t have to pay tax. Well, Jeff Bezos didn’t make money for many, many, many years in Amazon. Now, he starts to make a profit. Guess what? Amazon’s paying high taxes, right? If you look at their current tax rate, it’s a pretty decent-sized tax rate.
Same thing is true with Tesla. Tesla has been losing money. Tesla doesn’t pay taxes. Another thing the government incentivizes is research and development. Again, Amazon and Tesla do a lot of research and development. Well, not only do we get deductions, we get credits for those. So, it’s just like you say, Justin, the tax law is really a roadmap. I look at this road map to tell you how to reduce your taxes. And I think that if you’re an active partner, I think you’re very patriotic. If you want to just pay your tax and be a silent partner, great. You can be patriotic that way. If you want to be patriotic and do what the government wants you to do, great. You can be patriotic that way. Let me tell you, it’s interesting, I’m writing a new book and I’m looking at seven different investments. And the one investment that doesn’t pay the government is retirement funds. The government makes no money on retirement funds. They make money on everything else. They make money on business, real estate, oil, solar, agriculture. Even insurance, they make money on. They don’t make money on retirement plans. So, it’s really interesting this idea of you go to school, get a job and put your money in 401(k) in mutual funds, that’s the one thing that’s probably the least patriotic thing you can do as far as the government goes because you get a tax break, but the government gets no tax benefit. Everything else, the government is going to share in those revenues a lot more down the road than they do in their retirement plans. I found that interesting.
As I was writing this book, I didn’t know what I was going to get because you write a book and you have this idea, and then I start writing this book, I’m going, “Wow. The government gets a lot. I had to go back and write all of what the government gets.” What’s fascinating is the government actually does much better on these investments than the taxpayer does. So, don’t think that these are tax dodges. These are not. These are things the government wants you to do. They’re paying you to do it and they get a huge benefit as a result.
Justin Donald: Yeah. I would think about it is the government’s in a win-win scenario. So, no matter what happens, they win. So, how can you do the best you can to, A, pay fairly and do taxes but, B, make sure that those dollars go somewhere that is going to get the best return on that money? And by the way, that’s best return for your own portfolio but it’s also best return for those dollars not being wasted on something that you don’t believe in. So, there’s a lot of ways that you can structure how you pay your taxes, obviously reducing as best you can. But additionally, there are a lot of different things that you can do such as charities that you believe in, different organizations you believe in where not only do you get a deduction, you get a tax credit. You talked about this with research and development, and I love that, and anyone who owns a business should find some high-level CPA or architect, you know, Tom, his team, whoever, but someone that can really kind of teach you how to do it and make sure that you do it the right way because that’s really important. But this could be a huge opportunity for tax reduction. The same is true of many other charitable organizations, so some they just give you a straight-up credit. I’m sorry. Some just give you a straight-up deduction. Others give you a credit like a dollar-per-dollar credit against your taxable income. I’d love to hear you speak about that.
Tom Wheelwright: Yeah. So, it’s a little embarrassing story. I’ll tell you. So, my wife is also a CPA and I prepare our tax return and she reviews it. And she’s reviewing our tax return and she finds that I missed some Arizona tax credits and she actually found $6,000 more of tax savings by reviewing the return that I prepared. Well, I’m okay saying that because, look, first of all, you really don’t want me preparing your tax return. I look at things at a very high level most of the time. But second of all, it takes a team and this is the thing about investing. I mean, Justin, you’re an expert on this. Robert Kiyosaki, my buddy, he always says investing is a team sport, right? And so, with my wife, like I said, I prepared. She knows the details of the Arizona because she has more Arizona clients than I do and she found these Arizona credits. She says, “Oh, you need to enter this here and it will reduce our Arizona taxes.” And so, states have a lot of credits. When you talk about tax credits, states have a lot of dollar-for-dollar tax credits. And again, for those of you to make sure you understand and demonstrate deductions and credits, the highest tax bracket is 40%. So, a dollar of deduction at most is worth $0.40 to you but a dollar of a credit is worth a dollar no matter what your tax bracket is. So, you may be in a 10% tax bracket or a 40% tax bracket, and a dollar of credit is still worth a dollar to you. So, research and development tax credits, so here’s what you get. You get both a deduction and a credit. Solar credits work the same way. Solar credits are way better, by the way, than research and development.
Solar credits in this new bill are scheduled to go up to 30%, and you get to deduct everything but half of the credit. So, let’s say, for example, you put $100,000 in solar panels, you’d get a $30,000 credit. That’s dollar-for-dollar, but you get an $85,000 deduction. So, you only have to reduce your depreciation by half of that $30,000 credit. So, a $30,000 credit, an $85,000 deduction just I run the numbers a number of times, and that means the government is putting in 62%. Now, that’s not counting any of the credits that the state may give you when I put solar on my house. Now, this is for solar on your business, not solar on your personal residence. But when I put on my house, the utility company sent me a check for $3,500. So, on top of that, the utility company might send you a credit. I’ve done the return on investment calculation, the ROI calc, on my solar, and my solar is like over 20% ROI because I reduced my usage. I reduced my usage, which I wasn’t getting a deduction for because it is my home. I reduced my usage and I got this huge credit and I got money back from the utility. I got money back from the state. I’ll tell you what, it’s a pretty sweet deal. So, these credits are one way. You know, you’ve got nontaxable income, you got credits, you’ve got low taxed income like capital gains, you’ve got deductions. There are certain ways you can postpone your tax like a 401(k) but, seriously, that’s probably the last thing you should look at because there are so many ways to permanently reduce your taxes. I’m not sure why you would focus on temporarily reducing them.
Justin Donald: Yeah. Especially, Tom, because the reality is we don’t know what the tax rates are going to be in the future. But based on the debt that is happening on just such a crazy basis that there’s just no way in my mind they’re going to be less than they are today. So, why defer into the unknown, which most likely is going to be a higher tax rate? I don’t see any way it’s not a higher tax rate.
Tom Wheelwright: On top of that, Justin, I mean, consider that a qualified plan, which is what all these retirement plans are, what that means is substituting the word government-regulated for qualified and you’ll be more accurate. It’s government-regulated. So, the government regulates how much money you can put in. The government regulates how it’s taxed, when you can pull the money out, what you can use it for, how you can invest it. Everything about that, the government is regulating. And we’re entrepreneurs, Justin, so the last thing we want is for somebody to tell us what to do. So, you don’t see entrepreneurs putting a lot of money into pension and profit-sharing plans unless they just don’t have real good tax advice because there are so many things you can do with your money. Unless you put it all into the stock market, seriously, there are much better ways to deal with your taxes than a retirement plan.
Justin Donald: Yeah. I couldn’t agree more. In fact, this is one thing that I talk about with my mastermind all the time is just the beauty of private equity, the beauty of private investments that have terms that are unparalleled, and just so many different ways that you can structure a deal. It’s just night and day from public equities. And the benefits that you get from a tax standpoint from, I mean, there’s endless benefits but there are so many things even like depreciation. You call it in your book magic. Just out of thin air, you get to just take this number that you reduced from your taxes and it’s gone for really no reason at all, except for the fact that you’ve got an asset that is going to become worth less in time. And there are ways to even accelerate that depreciation. For people that have maybe a high-income year, they can accelerate it into one year or a few more to offset the taxable income that they have. That’s been one of my greatest strategies for getting creative with the dollars that I pay in taxes.
Tom Wheelwright: Yeah. All right. First, we have to decide what do you want to invest in. And once you decide what your plan is for investing, then we can decide, okay, now how do I do this in the most tax-effective way possible? I don’t ever like to see the tax tail wag the dog. So, some people like the stock market. Great. Then you should be maxing out your 401(k). You should be doing a Roth. You should be doing all sorts of things there. But if you’re outside of the stock market, I agree with you. It’s kind of like you can go and buy something. Let’s say you want to buy a new suit or a new shirt or a new dress. You can go buy retail. You can. That’s fine. But what if you could buy the same thing wholesale, which would be half the price, right? Why wouldn’t you do that? Well, all you’re talking about, Justin, is investing at wholesale prices. That’s what private equity is. That’s just the wholesale level of investing. If you could, if you were able to, and you had the education and you knew how, why would you ever shop retail if you could always shop wholesale?
Justin Donald: Yeah. It’s a brilliant analogy, and I absolutely love it. The other thing to consider with these qualified plans or what you said government-controlled plans, is that they can change the rules whenever they want to, and they do. And we’re seeing it right now.
Tom Wheelwright: Yeah. Let’s talk about that. So, big, big proposals to change what you can do in your qualified plan, especially your IRA. So, they’re saying what? IRAs will no longer be able to invest in private equity at all. That’s what they’re saying. Now, what’s interesting is they’re not including 401(k)s in there. So, they’re saying pension plans, you can. Remember, rich people don’t have IRAs. Rich people have pension plans. So, when they say rich people know how to – to say rich people don’t pay tax is a fallacy but to say rich people know how to reduce their taxes is an absolute truth. So, there’s a rule, Justin. You’re more of a financial wizard than I am. When you’re investing, you always follow smart money, right? And the smart money, they’re rich for a reason.
Justin Donald: That’s right.
Tom Wheelwright: They’re smart. That is the smart money, right? If everybody could do what Blackstone does, we would all do what Blackstone does because that is the smart money, right? They’ve done all their research. They’ve been super successful. So, we follow the smart money. Well, smart money doesn’t go into IRAs. Doesn’t go into 401(k)s. It goes into pension plans. Why? Because if you’re going to have a qualified plan, a pension plan has much broader rules for investing and how much money you can put in than a 401(k) or an IRA. But look at this new law and they’re saying, “Look, all of your pension plans, all of your 401(k)s together can’t be over $10 million. That means that they’re going after the Mitt Romney’s of the world and they say, “You got to distribute it all down to $10 million.” So, you have people with literally over a billion dollars in their pension plan, and they’re going to have to distribute that and they’re going after that. So, it’s like you say. If the government controls it, they control every aspect of it and you never have control over it and you don’t even have control over the timing of it. So, I like retirement plans. I just like non-qualified retirement plans. I want ones where I have control because then if the government changes something, I can change what I’m doing without a penalty.
Justin Donald: Yeah. And control is key. That is maybe the magic word or the overlying strategy. A lot of people kind of get wrapped in this idea of it being into, I guess, a better way to say it is you want to control your assets. You don’t need to own your assets. You just want control, and I want to elaborate on that but I want to do that in just a moment. So, one of the things you mentioned was Blackstone and a lot of people invest in public equities. They invest in these companies that you can invest them on the stock market. You’re paying a premium to do that. Right now, it’s overvalued. Look at the P/E ratios, price-to-earnings ratios, like what you’re paying to invest. So, what a lot of people don’t know is that if you know the right people, you have the right connections, there are other ways to get into the same type of investments a lot cheaper. So, for example, Blackstone is a company that my mastermind invests in. We have this really, basically, an opportunity to get into the Partners fund, which is the same fund that Stephen Schwarzman, himself the founder of Blackstone, invests in. So, our dollars are in the same place as his dollars are getting those types of returns, which are much greater with less risk because I don’t think they’re going to screw things up. They’ve hired the best analysts in the world. They make money. They print money literally not like the Fed does. They print money by outsized returns and they’re just consistent.
And so, this is a great example of private equity winning and the return profile you can get compared to – and the depreciation you get to offset the income that you make, the profit that you make compared to what would happen in public equities, and the tax that you would pay on it there, the fees that you would get, et cetera. But let’s get back here for just a second to control. So, a lot of people, they want to own all their stuff. And so, what I don’t like, as you said about qualified plans, about government-regulated plans, is that the government has all the control. You don’t have the control. Same thing in trusts. The trust can own your assets, but here’s where I like, you don’t need to own it. All you need is control of it to make sure that you can invest in what you want to invest in. It acts as a liability protection. It acts as a creditor protection. There’s just so much that it does but the key here is control. It’s not ownership. It’s control. You don’t have control in qualified plans and you want to create structures in your world that you can control, whether it’s in or out of your estate. And I’d love to know your thoughts on that, Tom.
Tom Wheelwright: Yeah. Well, let’s look at a few different levels of control. First of all, a qualified plan, now this is the worst because, first of all, you have no control over the plan itself but second of all, now you’re investing. What are you investing? Well, you’re investing in public equities so you don’t have any control over what happens with those companies, either. So, you’ve actually lost two levels, two aspects of control. Moving the money back and forth, you can’t do that, right? When you use that, when you pull it out, you can’t do that. How much money you put in, you can’t do that. So, you lose all that control. And on top of that, you’re really losing control over what happens with the investment because the big Wall Street lie, let’s think about the big Wall Street lie. Wall Street is smarter than you are, therefore, you should give them your money. There are a lot of thieves outside of Wall Street that are smarter than I am. That doesn’t mean I’m going to give them my money. So, our message, my company, WealthAbility, is you are smart enough. You’re better taking charge of your assets and your wealth than anybody else on Earth. There’s nobody better suited to take charge of yours and it just requires a little bit of education. So, the control that you have and this is where we have this idea. It’s kind of like, okay, what’s a riskier way to make money? Having a job or owning a business? And most people would tell you, “Well, having a job.” I’m going, “Well, wait a minute.”
So, here’s what you do. Let’s do a test. Let’s take a business that has a thousand clients and a business that has one client. And let’s go to the bank and see what the bank will do from a lending situation. The bank will not lend a dime to the one with one client, but they’ll lend all the money in the world to the one with a thousand clients. Why? Because you have a thousand clients. You’ve got a pretty low risk. Well, what do you have if you have a job? You have one client. So, to me, having the job is the highest risk business activity or moneymaking activity in the world. So, what we have to do and I think what you’re doing really well, Justin, is we have to shift our mindset. And so, this idea of control, do I have more control in the stock market or do I have more control if I buy my own real estate or if I have my own business, or if I run my own farm? Where do I have the control? Personally, what I know is I have way more control if I run my business. I went to work years ago, Justin. I took a job as the in-house tax advisor for a Fortune 1000 company. My very first responsibility, major responsibility, was to let people go, not because they’ve done anything wrong, not because they were bad workers, but because we had a layoff. It’s just at that moment, I’m going, “Wait a minute, I’m in a really risky position here.” So, eventually, I started my own business because I’m going, “I would rather have a thousand clients because I’ve got that much lower risk by being in control and having more customers.” Then when you talk about owning assets, so that’s the next iteration of control, right?
All right. So, do I really need to own it? I’m going, “Well, wait a minute. If I’m a general partner and the other owners are limited partners, that’s kind of like I’m the government and you’re the wage earner. I have complete control over the money and I can pull whatever money I want. I can borrow whatever money you want. I can increase my salary anytime I want because guess what, limited partners, you have no say, zero, just like you are as an employee paying taxes to the government. It’s the same thing. You have zero say.” So, what we want to do is whether it’s through trust, through limited liability companies, limited partnerships, however we set it up, we don’t have to own it. A trust for our kids can own it. A trust for our grandchildren can own it but we don’t have to own. What we want, you hit a spot on the head, Justin, is we want to control it, and we want to be able to say, “Look, if I need extra $100,000 because I want to fly around the world, I should be able to go get that $100,000.” That’s true control. And what’s remarkable, Justin, is it’s so easy to do. You just have to have the right team around you.
Justin Donald: That’s right. Yeah. And it’s funny because it’s just a few pieces of paper that you signed. Someone structured an entity that basically buys these other entities, entity or entities, however many you have and it’s so easy. You just want to find a team that does a great job and you want a strategy and a plan that’s supported by case law. So, a lot of people are selling a plan. There are many of these plans that are out there right now that there’s no case law to back it up. So, the moment that a court ruling happens that is not in favor of these new strategies, then it implodes. It falls apart. And so, you really have to follow case law on this.
Tom Wheelwright: Yeah. I appreciate you saying that, Justin. You’re, by the way, the first person ever said that to me outside of when a bunch of nerdy accountants like myself are getting together. Remember that you want something that is tried and true. To go on the fringe, there’s just no need. You can. You can push the envelope if you want. Frequently, it’s not against the law but my question is, why would you if you don’t have to? If you can get the same result going down the middle of the road as you get going on the edge of the road, why wouldn’t you go down the middle of the road? Because I’ll tell you what, I don’t have any clients who their goal in life is to end up in prison. They don’t want penalties. They don’t want the IRS to attack them. So, what do we do? We do what the government wants us to do rather than find the loopholes and go with these exotic programs. I just don’t think that’s necessary. Once you understand that 99% of the law is an incentive to reducing your taxes, why do you need to go outside that 99% law? I’ve never quite understood that because there are so many things that are so obvious within the law. And as long as they’re obviously within the law, I’m going just, by the way, if the IRS doesn’t like it and it’s still within law, I’m fine with it. I don’t care what the IRS likes or dislikes.
The IRS is not who I’m afraid of. I work with the IRS. When we get an audit, which is rare, but when we get an audit, we’re working with the IRS auditor to come to the accurate result. And I’m good with them. They’re doing their job. They’ve got a job to do. They need to do it. I highly respect the IRS auditors. I mean, can you imagine going to work every day and your best customers hate you? That’s what the IRS auditors have to deal with. And so, we treat our IRS auditors very, very well. We help them do their job better. And when you do that and you can be transparent, you don’t have to be afraid of them. So, there’s really no need to be afraid of the IRS when you’re doing this. You can have control, you can reduce your taxes, and it can all be right down the middle of the road.
Justin Donald: Yeah. And it’s interesting because so everything you said is just wonderful and I totally agree with it. Why push the boundaries if you don’t need to push the boundaries? And keep in mind, there is a double standard that exists where if you’re caught doing this stuff, you will get fined and you could serve time. Whereas Wall Street, these banks, these lending institutions, even the Fed, they can do all these same things and just get away with it. I mean, we see a lot of people in the Fed that are retiring a forced retirement because they were caught investing in things prior to making decisions that impacted them, making millions of dollars. And these people are not getting fined. They’re not serving time. I mean, I think of all the corruption that happens in the banking industry, how many like corrupt cases there have been, situations. Every bank is guilty, every bank, every major Wall Street firm has like these crazy corruption cases, market manipulation, you name it. No one ever gets fined. No one ever serves time. They get bailed out. So, to me, it’s like I don’t want to feed that beast. I want control and I want to get away from it. But at the same time, I want to make sure that I’m doing things the right way because I’m not going to get out of it. I’m not going to get a handout. You’re not going to get a handout. And so, you really just want to surround yourself with people that are infinitely smarter, infinitely wiser, that have the skillset, the education. They’ve been doing this forever like this is their bread and butter, and that’s what I do in my world.
Tom Wheelwright: And the other thing I think you want is you want to make sure that they will explain it and can explain it to you because I don’t think you ever want to invest in something you don’t understand. I think that is a huge mistake. That’s no different than invest in Wall Street, frankly. So, we’re big believers in laying everything out on the table. When I wrote Tax-Free Wealth, I asked my partner, I said, “Is there anything we need to keep to ourselves?” He said, “No. Give them everything.” I’m going, “We’re just going to…?” Because we truly believe that a better-educated client is a better client. So, we want you to understand, I mean, our clients know there they get all these education courses. We don’t charge extra for those education courses because we need them to understand what we’re talking about because the reality is, I can’t change your taxes. Only you can change your taxes. My job is tell you what you need to do in order to change your taxes and then you go do it but I can’t do it for you. And this is a “With you, not for you” proposition. So, that’s why I think the education part of it and especially when you have a team that talks to each other, there are so many times when the accountant points the finger at the lawyer, the lawyer points the finger at the bookkeeper, the bookkeeper points the finger at the banker, and the banker points finger back at the accountant. Where what we ought to be doing is all being on the phone, saying, “Hey, let’s figure this out.” That’s when the magic happens.
Justin Donald: Yeah. There’s no doubt about that. I mean, gosh, there are so many levels of truth in that. And I love what you’re doing. I love what you’re sharing. You know, I’d love to also talk about how you met Robert Kiyosaki. Actually, I’m going to be spending some time with him in a couple of weekends, and I’m really looking forward to it. You know, I mentioned him in my book and actually your last point that you talked about every dollar like it’s my 10th commandment, every dollar gets a return, so I don’t want to just pay to get things done. I want to invest. I look at it as an investment. I want to pay and invest into the education I’m going to get. So, don’t just do it for me. Teach me why you’re doing it and how you’re doing it. And I think that’s important. And so, that to me is like with Robert Kiyosaki, when I read Rich Dad Poor Dad and then followed that up to Cashflow Quadrant and then yours was next in my series so then it was Tax-Free Wealth. And so, that one-two-three punch for me was really a game-changer. And so, I’m thrilled to be able to spend time with him because that is my 10th commandment. Every dollar gets a return. You know, I spent money on his products, I spent money on your products, and I’m getting a return on those years and years and years later. But I’d love to hear how you guys teamed up, how you met, how that kind of came together.
Tom Wheelwright: So, it’s kind of a funny story. This is my junk mail story. What happened was is that I broke up with a partner, so Robert likes to say that bad partners bring you good partners, right? So, you learn from bad partners. Well, I broke up with this partner. You can read into it what you will but half the clients left with him but none of the staff left. So, you’ll understand why we broke up. It’s hard to get good staff. It’s hard to train good staff. So, I’m going, “We need more work and we need it now.” So, I literally got a postcard in the mail saying, “CPA firms for sale.” I called them and one of the CPA firms, one of the clients happened to be Robert Kiyosaki. And so, literally, it was a random call on a piece of junk mail and because I wanted to take care of our employees and make sure we didn’t lose our employees. And so, we actually went through we acquired that CPA firm, and in doing so, I met Robert. I remember, Robert, to his credit, he put me on stage when he knew nothing about me and he had me explain depreciation. That’s actually when I coined it’s the magic of depreciation. He puts me on stage. He goes, “This is my other accountant,” because I was the new one and he had never seen me speak, had no idea what I could do. That guy is the gutsiest guy I know. And that was 20 years ago and we’ve been together ever since. He’s a great mentor. I mean, I’m very fortunate because now Rich Dad advisors, there’s seven of us, we meet with Robert and Kim Kiyosaki every week to study the economy, to study what’s going on. So, Robert is, first and foremost, a student. So, he’s a great teacher but great teachers tend to be great students. That’s why when you say, “You’re going to go learn from Robert Kiyosaki,” that’s what we do. We’re constantly learning from each other.
Justin Donald: That’s awesome. I love that story because, number one, you wouldn’t still work with them after 20 years unless you are truly serving him in a way that no one else was serving him but, two, like you were a go-getter to get in his circle. And I talk about this all the time that if you want to play the game of life at a higher level, find the people you want to play that game with and then just get in their network.
Tom Wheelwright: Yeah. Ironically, I had no idea who Robert Kiyosaki was at the time. I mean, Rich Dad Poor Dad was fairly new and I’d never read it and, seriously, it was like it was just meant to be.
Justin Donald: That’s even better. That is so cool.
Tom Wheelwright: It was meant to be. We were doing the right thing by maintaining our staff, taking care of our staff, and making sure that they had jobs, and building our business. We were doing the right thing and by doing the right thing and being open to it, right, because most people would just throw that postcard away. I called on that postcard and it’s calling on the postcard. Direct mail works. And so, it worked for this broker and it worked for me.
Justin Donald: I love it. And it was one decision. That one decision totally changed the trajectory of your life. I have no doubt you would’ve had a great life. You would have built a great business. But the impact that you two have been able to have together and the other advisors, but just the impact that you’ve had on me, let alone all the other millions of people, I think is just profound. I think it’s so cool. And by the way, that’s part of the reason why I have invited you to speak and really kick off The Lifestyle Investor Mastermind coming up here in what? Two weeks? Less than two weeks?
Tom Wheelwright: Yep. A couple of weeks.
Justin Donald: Yeah. We’re so excited to have you at the event. I mean, the chatter inside the mastermind is electric, so people just can’t wait to meet you and hear about you and hear all the cool things that you have to offer.
Tom Wheelwright: I’m looking forward to it. Absolutely.
Justin Donald: So, I’d love before we wrap for you to share any of the other seven investments the government will pay you to make that you feel like sharing from your new book. And I know you’re no nowhere close to really releasing this thing yet, and I think it’s cool that you’re even willing to talk about it. But if there’s one or two other things that you want to share, I’d love to know it. And then I’d love to find out where our audience can learn more about you, Tom.
Tom Wheelwright: You know, it’s really simple. I mean, you look at what does the government want to have happen? Okay. They want jobs. So, business is obviously one of them. They need housing so, obviously, real estate. They need energy so, obviously, energy. They want technology so, obviously, you want technology. So, you just go down that list and it’s going, “Okay. Now the real question is, what does the government get out of it?” And you think, “Well, the government’s getting their policies met.” No, no, no. What people don’t understand is and, frankly, I didn’t until I wrote the book is that the government, their return on investment is out of this world, absolutely out of this world. I actually look at two things in this book. I look at the taxpayer strategy. So, what do you need to do? And I look at the government strategy. What does the government need to do? And what do both sides get out of it? And that’s the most fascinating thing to me is the government gets a better return than the taxpayer, but the taxpayer gets the enormous returns. These are literally investments the government will pay you to make these investments. And so, I’m looking forward to getting this book out and letting people see what’s possible on both sides. And I’d like to quiet the chatter a little bit, frankly, because there’s all this chatter about the rich cheat on their taxes, which is not my experience. And what’s really going on is the rich are doing what the government wants them to do. And everybody can do it. You don’t have to be rich to do it. That’s the good news.
Justin Donald: Yeah. There’s a big difference between tax evasion and minimizing your taxes using the exact tools and tax code that the IRS is encouraging you to use. Big difference, night and day.
Tom Wheelwright: For sure. Congress wants you to do this. Now, I say Congress is on your side. I don’t know that the IRS is, but Congress is definitely on your side. The government wants you to do this stuff. They’re paying you for it. By the way, none of these things are on the chopping block. None of them. Not even one is on the chopping block. So, these are long-term policies. And by the way, this book covers 15 countries. So, we looked at 15 different countries. Guess what? Most of them all do the same thing. So, we think we’re unique. We’re not. This is what’s good for the governments. It’s what’s good for the economy. It’s what’s good for taxpayers and probably something I think will continue long into the future.
Justin Donald: Oh, I love it. And what’s also great is our mastermind here, The Lifestyle Investor Mastermind, we have representation now from, I believe, 16 different countries.
Tom Wheelwright: Awesome.
Justin Donald: So, where probably most of the countries that you used in the research, which is super cool. Can you give a preview of what it is you’re going to cover at The Lifestyle Investor Mastermind Retreat coming up here in Austin? We’re staying at the gorgeous Omni Barton Creek Resort & Spa.
Tom Wheelwright: Beautiful. A beautiful resort. I’ve stayed there before. I’ve been there before. It’s a beautiful resort. You know what, I’m going to cover how to permanently reduce your taxes. I mean, three to five steps to permanently reduce your taxes, and they’re pretty simple and anybody can do them. You don’t have to be rich to do them. And, by the way, you don’t have to be in one investment versus another investment. It’s not a specific investment that matters. It’s how you think about investing and how you set up your entities, how you set it up on doing it the way the government wants you to do it.
Justin Donald: Tom, this is just wonderful. It’s been just an incredible time. You’re a wealth of knowledge. I learn something every time we hang out and I will continue to do that. My goal is to be an eternal student. I just always want to learn, and you’re an easy person to learn from because you just have so much good insight. So, every time we hang out, I’m just gleaning more information from you. Where can our audience find out more about you?
Tom Wheelwright: Really simple. Just go to WealthAbility.com. It’s wealth ability. It’s your ability to create wealth, and that’s where the name comes from, WealthAbility.com, and welcome to schedule a call. We have a network of 40 CPA firms around the country and we’ve got a system for reducing taxes. If there’s a way we can help you, we will. If there’s not a way we can help you, we won’t. But we’re happy to help any way we can.
Justin Donald: Oh, I love it. And for our audience, those of you watching, those of you listening, I love wrapping up our episodes each week with kind of the same idea, the same mantra, and action steps, which is this: What is one step that you can take today towards financial freedom and towards living a life on your terms by design, not by default? So, what does that look like? What’s one thing you can do, just one step, even a baby step, what’s one form of action that can help you move towards financial freedom? Thanks for joining us, and we’ll see you next week.