Tax-Free Life: Legal Solution

Tax-Free Life: Legal Solution | The Kitti Sisters

EP184: Tax-Free Life: Legal Solution


This is when our journey really began as we delved into the intricate strategies and tactics employed by the wealthiest in our society to learn how they optimize their tax strategies.

It was during this exploration that we stumbled upon a transformative gem that would change everything.

More on that in a few…

➡️ Today, we are going to expose what the uber-rich have been using for years to pay little to no taxes, and what you can do today to lower your taxes, but first, you’ll need to understand how taxes work and why it’s so critical that you lower them now.

During our fashion days, like many of you, we came to terms with taxes being an inevitable aspect of adult life, where the notion prevailed that the higher your earnings, the greater your payments. This led to a perpetual sense of apprehension, feeding the metaphorical tax beast.

The more we earned, the more we felt compelled to relinquish to Uncle Sam. 😣😣

We were well aware of the substantial legal consequences that would follow if we disregarded this reality.

For years, we embraced this reality until a moment of realization hit – continuing down this path for even just another year would be utterly detrimental.

We thought to ourselves: there’s got to be a better way.

In a moment of shared contemplation, our eyes locked in mutual understanding.

That instant marked our awakening – the recognition that achieving genuine wealth, financial, and time freedom demanded a fresh perspective. 

So it dawned on us that we were running a business, and allowing the fear of taxation to halt our income generation was simply illogical.

Remember the book gem we discovered? 

Well, that book was none other than Rich Dad, Poor Dad. 💋

From the book, we learned that the government wrote their tax code as a guidebook with tips on how to score their approval and lighten your tax load.

Think of it as an adventure – the government sneakily nudges us toward certain moves and choices within the tax system.

Kind of fun when you think about it that way, right?

Essentially, taxes are far from just money collectors – they’re like strategic tools nudging us to mold our actions in sync with the government’s aspirations for a prosperous society. 

Think of it like a real-world game of Monopoly 🎲 but with the most intricate board game rules. 

When we follow their cues – whether it’s channeling investments into specific sectors, advocating eco-friendly habits, or aiding community well-being – we discover the secret pathways to tax advantages and exemptions.

There’s this thing called the Cashflow Quadrant that we learned about in the purple book we mentioned earlier. 

👉 This book happens to be called “Rich Dad’s Cashflow Quadrant”. 👈

In the book, the author, Robert Kiyosaki, introduces a framework that he calls the Cashflow Quadrant.

This framework neatly sorts people into four distinct categories, each defined by their main income source: E (Employee), S (Self-Employed), B (Business Owner), and I (Investor).

Let’s explore each category and what they mean for you. ⏬

✔️ First up, you have employees (E), who are individuals who earn income through their jobs, and taxes are often withheld from their paychecks even before they receive them. The tax system treats their earned income, like wages and salaries, distinctively, imposing higher tax rates and fewer deductions compared to other income sources.

✔️ Self-Employed (S) individuals include freelancers, consultants, and small business proprietors who generate income through their expertise and endeavors. Their taxation involves their overall business income, leading them to shoulder both employee and employer tax portions. As a result, their tax responsibilities exceed those of employees. Unfortunately, those entrenched in this quadrant might feel they’re on the receiving end of the short straw when it comes to taxes.

✔️ Business Owners (B), on the flip side, enjoy the perk of subtracting business expenses prior to computing their taxable income. This practice can notably slash their tax obligation, rendering their tax situation more advantageous in contrast to employees and self-employed folks.

✔️ Best of all, Investors (I) rake in earnings from passive investments like dividends, capital gains, and rental income. The tax regulations frequently bestow preferential handling on investment proceeds, yielding reduced tax rates and a spectrum of tax perks. If you find yourself in the investors’ quadrant, congratulations!

Unlike those stuck in the E (Employees) and S (Self-Employed) sectors, investors liberate themselves from the ⏰ time-money bind.

Their income isn’t solely tied to skills, effort, or limited hours; they leverage compounding and the art of earning while asleep. 💤

As they amass wealth in the investors’ quadrant, these savvy individuals additionally tap into the tax benefits offered to passive income streams.

So if you’re like us, you’re probably wondering which passive income strategy to employ for optimal gains. And guess what – this approach is incredibly accessible, and you might find yourself questioning why you didn’t initiate it earlier.

To shed some light on this, let’s rewind to the events of 2017.

In 2017, a pivotal legislative move took center stage – the 2017 Tax Cuts and Jobs Act (TCJA) which brought in bonus depreciation.

With bonus depreciation in play, apartment investors gain the advantage of deducting a substantial chunk of qualified asset expenses in the year they’re put into operation, as opposed to stretching the depreciation deductions over multiple years. 

This translates to instant tax savings and enhanced cash flow for investors, rendering it an enticing tax tactic for those venturing into real estate, apartments included.

By leveraging bonus depreciation, apartment investors can fast-track their tax deductions, curbing their taxable income, and potentially reducing near-term tax burdens. 

So, how big of a payoff do investors typically get?

This serves as a strategic asset for real estate investors seeking to optimize cash flow and amplify returns on their investments.

Just keep in mind that given the dynamic nature of tax laws and regulations, staying informed is key. Seeking guidance from tax experts ensures a clear grasp of how bonus depreciation aligns with individual apartment investment scenarios.

Allow us to introduce David, an astute investor who opts to inject $100,000 into an apartment complex.

Thanks to the property’s attributes and the advantageous tax provisions of the Tax Cuts and Jobs Act (TCJA), David becomes eligible for a generous 62% bonus depreciation on the qualifying asset in year one of his ownership.

Through a $100,000 investment in an apartment and strategic employment of 62% bonus depreciation, David can substantially slash the taxable income stemming from this venture. 

What’s more, if they qualify as a full-time real estate professional, these tax benefits can seamlessly offset income from other avenues, ushering in more extensive tax savings.

Once again, it’s worth emphasizing that the realm of tax laws and regulations is intricate and prone to shifts, with individual scenarios often diverging.

For investors like us, you, and David, forging a close partnership with an adept tax advisor or specialist is critical.

Such experts adeptly navigate the tax code’s complexities, tailoring optimal tax strategies to align seamlessly with their unique financial circumstances.

Well, guys, that’s it for us today. Thanks so much for tuning in. 🙌

We hope you had fun and learned a thing or two along the way!



The Kitti Freedom Club


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We're Palmy ➕ Nancy Kitti 〰️ The Kitti Sisters

A sister duo team obsessed with all things financial freedom, passive income, and apartment investing + apartment syndication, who turned a $2,000 bank account into a nine-figure empire.  Now, we're sharing with you the behind-the-scenes secrets of our wealth building strategy.

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