Indianapolis CPA explains why the easiest way to make money is by taking it from the IRS with legitimate tax incentives

Taxes are the largest expense you’ll ever have – larger than the cost of your home or sending your kids to school.  And therefore, they’re the largest obstacle to your financial freedom.  This is very important to understand.

If you’re not familiar with the term “tax freedom day,” it’s when you finally stop working for the government and start working for yourself.   Or as an entrepreneur, it’s the reason why you don’t breakeven until at least 3 to 4 months into each year.

The following table, calculated by the Tax Foundation, shows how many days the average person had to work to pay taxes for each of the years listed:

Year

Tax Freedom Day

Percentage

1950

March 31

24.6%

1960

April 11

27.7%

1970

April 19

29.6%

1980

April 21

30.4%

1990

April 21

30.4%

2000

May 1

33%

2006

April 24

31.2%

2007

April 24

31.1%

2008

April 16

29%

2009

April 8

26.6%

2010

April 9

26.9%

In other words, the average person spends nearly a third of the year paying off taxes.  But effective tax planning can free up your profits by an extra month or more.

Let’s say you could save just $4000 dollars each year.  If you invested that money for 40 years – at an average yearly return of 9% — your investment would be worth 1.6 million dollars!

Not to mention, all of the alternative ways that you could use the extra cash — new homes, cars, child’s education, etc.

So, tax planning is extremely important to your long-term success, and it can pay off very well in the short run as well.

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