Do you want to know how to decrease taxable income? How can it help you?<\/p>\n\n\n\n
Learning how to decrease taxable income is one subject Robert Kiyosaki covers in Rich Dad, Poor Dad. While it’s possible that there is some value to learning how to decrease taxable income, it shouldn’t be your go-to for making money. You can read Kiyosaki’s advice on how to decrease taxable income below. <\/p>\n\n\n\n\n\n\n\n
(Shortform caveat: we consider this the worst chapter in the book. He doesn\u2019t explain the advice clearly enough to be useful. The advice doesn\u2019t apply to most people\u2019s situations. And taken incorrectly, it could get you into trouble.<\/p>\n\n\n\n
Treat none of this as actual tax advice; seek a tax attorney for real advice, and executing some of this too liberally is illegal.)<\/p>\n\n\n\n
In Rich Dad, Poor Dad<\/em>, Robert Kiyosaki is clearly strongly against taxation, and says that people should learn how to decrease taxable income, saying things like:<\/p>\n\n\n\n Whatever your philosophical bent on taxation, the practical point is that the rich find ways to minimize their tax burden, sometimes paying a lower % of their income than lower tax brackets. According to Kiyosaki, this is the benefit of knowing how to decrease taxable income. <\/p>\n\n\n\n Robert Kiyosaki\u2019s solution? Form your own corporation<\/strong>. Here are its benefits on how to decrease taxes. <\/p>\n\n\n\n You can pay legitimate business expenses from pre-tax money, rather than post-tax money. This is one way of figuring out how to decrease taxes. <\/p>\n\n\n\n Say you have a business that buys and sells real estate. To travel to see new properties, you can pay for a car. You have business dinners that you can partially expense. You can have board meetings in exotic locations you would have vacationed anyway.<\/p>\n\n\n\n Shortform Explanation<\/strong><\/p>\n\n\n\n Here\u2019s the financial difference on how to decrease taxes. <\/p>\n\n\n\n * Say you earn $100 from salary, and after 40% taxes it\u2019s $60 in your pocket. Your car costs $60, so you end up with $0.<\/p>\n\n\n\n * Say your corporation makes $100 in income. Your car is used for business, so the corporation pays $60 for the car. The corporation then has income of $40. After a 40% tax, this ends up being $24. This profit can then be distributed to shareholders as a dividend.<\/p>\n\n\n\n * (In reality, this would be taxed at a 20% corporate rate and 20% personal capital gains rate, but I use 40% to better compare with the pre-tax situation above)<\/p>\n\n\n\n * Here\u2019s another way to phrase it: In the company, the $60, if it wasn\u2019t spent on the car, would have been taxed as income. After the 40% tax, this is equivalent to $36. So it basically cost you $36 post-tax <\/em>to get the car service, rather than $60 pre-tax<\/em>, leading to a $24\/$60 = 40% discount.<\/p>\n\n\n\nForming a Corporation<\/strong><\/h3>\n\n\n\n
Deductions for Expenses<\/strong><\/h4>\n\n\n\n