Rule #4: Pay as few taxes as you can

Wealth

Jan 16

Taxation is a necessary public good.

It creates the social safety net for those unable to generate income through productive work, provides the necessary infrastructure and emergency services for the collective, and underwrites pure scientific research — the foundational discoveries on which humanity’s technological advances are founded.

At the same time, you are under no obligation to pay more than national and local tax law demands, and yet many people do, ignorant of the mechanisms by which they could minimize their personal tax bill.

These include common strategies like contributing to retirement accounts and taking advantage of mortgage interest deductions, as well as less-common strategies like moving to a low-tax state, engaging in tax-loss harvesting in your brokerage account, and routing income through an LLC or an S-Corporation.

Beyond maximizing your income and savings rate, building your knowledge of (and using) tax laws to your advantage is one of the highest return activities you can pursue. Quite simply, it allows you to keep more of the money you earn, increasing your ability to accumulate wealth quickly and shortening your journey to Agency.

To their detriment, the stigma of the word "taxes" keeps most people from learning anything about them, yet the problem is easily solved — hire a competent Certified Public Accountant, meet with them well prior to tax filing season to discuss your personal financial situation, and reap the benefits. This investment of a few hours and a few hundred dollars per year is almost certain to pay for itself many times over.