2025 – The Entrepreneur’s Guide to Smart Tax Strategies with WealthAbility’s Tom Wheelwright

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1:05With us right now, it's Tom Wheelwright. Tom, you are a best-selling author, entrepreneur, and worldwide authority on tax. Your book has nearly 4 ,000 five-star ratings on Amazon. It is legendary. It's an honor to have you. The title of the book, by the way, if you don't have it on your bookshelf, go get it. It's called Tax-Free Wealth, How to Build Massive Wealth by Permanently Lowering Your Taxes. Everybody loves that, especially my entrepreneur and business owner friends. Tom, it's great to have you. It's so good to be with you, Josh. Just a privilege to be on your show. Well, the privilege is mine.

1:46So, Tom, let's go through maybe just, I don't know if you can kind of give us a thumbnail sketch of the impact you have on the world today and who you work with. And I know that, you know, obviously beyond just the book and being a tax guru, you also own several businesses as well. I do. So in 1995, I started my first CPA firm with the goal of delivering great advice to entrepreneurs. I only wanted to serve entrepreneurs. The big firms had stopped serving entrepreneurs. I wanted to serve them. I thought there was something missing. It's still missing, by the way, with the entrepreneurs. And the reason is I think entrepreneurs are the lifeblood of our society.

2:35They're the lifeblood of the world. And I love entrepreneurs. So when I wrote Tax Free Wealth, the idea is I think that people have the wrong idea of taxes. I think people just think, oh, well, either I've got to pay my tax and stay away from the IRS, or I got to do everything I can to look for the tricks. And if I can cheat and get away with cheating, that's what I do. But that's not the way I look at taxes. I've studied 45 years. I've been studying the tax law. And when I look at the tax law, I see it as primarily a series of incentives. And so it actually becomes, once you look at it as positive instead of negative, as a way to help me build my wealth, not a way to take away my wealth, then all of a sudden you're going, wait a minute, if it's a series of incentives, that means the tax law is actually a roadmap for building wealth.

3:25And that is the approach that I take in everything that we do with tax-free wealth, because look, there's only one line in the tax law says everything's taxable unless we say it isn't. There's another line says nothing's deductible unless we say it is. And then there's some few charts and tables, but the tax law is over 6 ,000 pages of really teeny tiny print. Well, so what's the rest of it? The rest of it's just a guide. It's a guide to reduce your taxes. So to me, you have to start with, wow, if I can change my facts to what the government wants, I can lower my tax. Wow. Yeah, I mean, that is actually a unique way of looking at taxes as the way that it's set up.

4:12It really should be more of a roadmap rather than those are just the rules. So what would be, let's get into some great advice here. So what would be, especially if we think about our entrepreneurial friends, you know, they're running, let's say, you know, an S or C corp or an LLC. So they've got their separate entity. You know, they always make sure to keep things separate, you know, make sure that they're expensing things that are legitimately business and keeping that separate from their personal finances. But maybe you could come up with a few high level tips of things that we can make sure that we are following with our own strategies.

4:54Well, let's let's start with three questions, three questions that you need. your advisor ought to be asking you, but if they're not, you ought to be asking yourself. The first is how do I make my money? Because how I make my money has a major impact on how much tax I pay. For example, if I make my money as an employee, I'm probably going to pay 40 plus percent. But if I make it as a professional investor, I probably pay zero. So how you make your money. So those are things like those questions lead to, am I an S corporation? Am I an LLC tax as a partnership, how, you know, those types of setup things.

5:31Very first question, everybody's got to ask themselves, how do I make my money? And how does that impact what I need to do from a tax planning standpoint? And I think there are some good advisors who ask that question, but the same question is even more important than the first question. And that is, what are you going to do with your money? And that's a question that's a much harder question to answer, but it's about 90 % of your tax benefits are going to come from what are you going to do with your money? Because if you think about it, you have a partner in how you make money. Your partner is the government.

6:07And we don't get to choose whether they're a partner, but we get to choose what kind of partner we are. So we can do things the government wants us to do, or we can do whatever we want to to do. And the government doesn't care. If we do what we want to do, we pay high taxes. If we do what they want to do, we pay lower taxes. Either way, the government wins. So if you want to be an active partner with the government, then you have to learn what are those things? What are those incentives? What are those things the government actually wants you to do with your money? Like business, like real estate, like energy, like agriculture, those types of things that the government wants you to do.

6:43And then the third question, which nobody ever asks is what are you going to do with your money when you die? Because that actually has a major opportunity for tax planning today. If you figure out what am I going to do with my money when I die, because then I can actually plan that way so that I'm not paying a hundred percent of tax, even though when I die, I'm either going to give it away or I'm going to give it to my children or whatever I'm going to do with it. Unless I'm going to spend it all, right? Then it actually can have an income tax impact today if you ask that question. So I always start with those three questions.

7:23You've got to set the context. How do I make my money? What am I going to do with my money? And what do I do with my money when I die? Once you do that, then I can start answering the question, okay, so what should I do if you know, for example, if you're going to put all your money back in your business, I'm going to set you up in a different way than if you're going to take all your money out of your business. Those are two different answers because you have two different sets of facts. Yeah. And I would imagine, Tom, you kind of go through this in your book. Is that right? Yes, absolutely. Yes, and of course, a second book that's not quite as well known is win-win-wilts strategy, which is seven investments the government will pay you to make.

8:08So that actually goes to that second question. What are you going to do with your money? Yeah. Yeah. You know, you're also a contributor to some outlets, including Success Magazine. And the one that you had just written about is about the advantages of franchising your business. Now, this is very great timing for me. So I am all ears, Tom. Give us, you know, for those of us that have a franchisable potentially business, can you tell me a bit about that? Well, I can actually, because I have just franchised my business. Okay, good. We actually launched the very first franchise of CPA-based tax advisors.

8:54And we have franchises all over the country. and what the advantage from a franchising standpoint is, now you get to be, if you look at, take Robert Kiyosaki's cashflow quadrant, ESBI, right? Employee, self-employed, big business and small business. Well, the franchise, now you're moving from that small business to the big business. And there's lots of advantages to being a big business. For example, as a franchisor, as a franchisor, you can set yourself up so that when you sell it, you pay very little tax or no tax. You can actually set it up so that you pay half the tax rate that you would pay if you were a small business.

9:39So franchising, for example, you know, anybody can, the nice thing about tax odds, it's fair. Anybody in the same situation can do the same thing. That's the requirement of the Constitution, right? So anybody could be a corporation, and they can either be an S. Now, a small business can be an S corporation, big business can't. But a small business could also be a C corporation like a big business. The reason small businesses don't do that and pay that 21 % tax rate is because most small business owners take all their money out of their business. Or if you're gonna do that, it makes no sense to do that.

10:15But as a franchisor, your goal is to build that business. And your goal eventually is probably to sell that business. So you're going to keep putting your money back into the franchise. That's how you're going to build your asset. So why not do it at the 21 % rate instead of at a much higher rate as a typical small business would? Brilliant, brilliant. Tom, I know you've got a lot of resources that you make available. Obviously, we talked about the book, but I know you do a lot of teaching. You've got a lot of videos and so forth online. Um, anything in particular, like for a friend that's, um, kind of motivated right now, obviously go get tax-free wealth, go get win-win wealth strategy.

11:00Um, but aside from that, um, where do you like to send folks? Well, yeah. So I, I typically send people to, um, tfwadvisors.us, which is our franchise. Cause most people, first thing they want is, well, how do I find somebody who actually does what you do and actually understands the way you've learned? And of course now we have a franchise, so we can actually control that. So that's the first place I send people. And then, you know, people might say, well, I'd like, you know, I'd like a course, maybe I'd like a little deeper course, like our tax free formula course. Well, then you go to wealthability.com, which is our education company, and you can actually sign up for Tax-Free Formula, which is actually software-driven, our own learning management system through software.

11:46We decided that we have to teach differently if we're going to actually teach a different way of thinking. So we better teach it differently as well. Yeah. Tom, you know, here we are. I know another topic that you've been speaking about lately. We're in an election year and without getting political, you know, there are potentially changes ahead. Or is there anything on your radar that you would just say, hey, business owners, I would pay very close attention to conversation around X, Y, or Z. Anything come to mind? Yeah, there's two big things. If you follow Warren Buffett at all, you know that he sold a bunch of Apple stock.

12:32And when he was asked, why did you sell Apple stock? He goes, because capital gains rates are going up. He sold his Apple stock because taxes. He thought the capital gains rate was going to go up. I think that's a big one because under the Biden plan, which presumably Harris would adopt, certainly it's the Democratic plan. they want to double the tax rate on capital gains. So they don't want to tax it at 20%. They want to tax it at 45%. So that is a big one to keep in mind. And again, nothing's going to happen before 2025. So you've got time between now and the end of the year. But I'll tell you the other big one.

13:12And that is, if you've ever thought, wow, I'd really not like to leave my estate to the government. I'd actually like to leave it to my family or somebody else. then you really ought to look at doing your estate planning right now. And you don't have to sign the documents, but you've got to have them ready because here's what we know is going to happen next year. We are going to have massive tax changes next year because the 2017 act largely expires next year. So it doesn't matter who's in Congress or who's in the presidency. We are going to have massive tax changes next year. The thing to remember is, is that which side gets in, it's just going to depend where the incentives are.

13:52They're still going to be the incentives. You just have to look at, for example, Biden, one of the biggest incentives ever in the tax law is the renewable energy incentives. Well, so he's not like, I'm just about increasing people's tax rates. He's like, but here's a$2 trillion giveaway on solar energy and renewable energy. Well, okay, well, that's an incentive. So maybe I should be looking at investing there. And maybe that's something to be looking at. But when you watch that election, just know. The other thing I think to recognize is that in their plans, the Democrats want to raise taxes by$5 trillion and the Republicans want to reduce taxes by$2 trillion.

14:35So there's about a$7 trillion swing. And so that is actually not been enough of a conversation, I think, during the election process. I would hope that it becomes more of a conversation because people just need to understand that, hey, and particularly entrepreneurs, here's the other thing that I think that we have to look out for. We have a 20 % small business deduction for pass-through entities. It's 20%. So that means if you make$500 ,000, you're only paying tax on$400 ,000, right? You got a 20 % haircut on what you pay tax on. That is in danger. That's in danger of going away next year. It will expire unless it's renewed.

15:17And it's a lot of money. It's about a half of, it's about a half a trillion dollars of cost to do that. So, so that is, that is a big one that's up in the air. People ought to be planning for that. Yeah. I mean, and I think if anything, you know, out of this conversation, you know, I think that whoever is advising us on tax, I hope that they have their ear to the track. I hope that they're mindful and nimble and helping us, you know, know, as a business owner, make decisions in preparation for risks, threats, you know, that sort of thing. And of course, as you mentioned, taking advantage of huge opportunities that are out there.

15:57And I feel like it's almost like, you know, fast movers or people are paying attention seem to take advantage of just so much more that lazy folks who don't, aren't keeping their eyes, I don't want to say lazy, it's just unaware or, you know, what's the opposite of proactive? less proactive, right? Just don't get those benefits. And because again, there is, there's so much movement here. It's not like, you know, tax law in 2024 is the same as it was in 2014. Lots of differences. Yeah, right. And you made some, a very important point there is that we have to make decisions. So your tax advisor can't make those decisions for you.

16:38My job as your tax advisor is to give you a choice. So you can either choose to do this or choose to do that. And as we know, not doing anything is a choice. Okay. But once we understand the choices, now we can make better decisions. The problem is, and the reason I wrote Tax-Free Wealth is the average person, rich people, they have great tax advisors. They, you know, they hire Ernst & Young. They can, you know, they're going to get taken care of, but the average entrepreneur doesn't have that. And so I wrote Tax-Free Wealth with the idea that, well, wait a minute, if you understand more, then you can make a choice.

17:17I can't change your tax, but I can tell you what facts, what things you need to change in order for you to change your tax. Tom Wheelwright, let's share your websites. First off, there's tfwadvisors.us. We have, by the way, every link that I'm sharing, every resource I'm sharing is in our show notes. If you're listening to audio podcast, just click around in your podcast app until you get to the show notes. That's where we have direct links. so you can kind of follow up on what you've been listening to. TFWadvisors.us, that is your franchise. That is correct. Yeah, and so who should go there? So anybody, any entrepreneur who feels like, I wonder if I'm really getting what I need from my tax advisor.

18:01I wonder if I'm paying too much tax. If you're wondering that question, then go to TFWadvisors.us because that's where we can actually evaluate your situation, say, yes, you are paying too much tax. No, you're not. And let you know. And then we'll hook you up with the right CPA that really will work for your situation. Yeah. And I like one of your taglines on the website. We are entrepreneurs serving entrepreneurs. Well, that's this audience. Also, of course, tax-free wealth. If you just search that on Amazon or you can get to it certainly from any time of your websites. But again, getting on nearly 4 ,000 five-star reviews, very, very well liked, very, very popular.

18:50Tom, anything else that I missed? Where else should folks go to engage with you or connect with you? You know, I do have a podcast, The Wealth Ability Show with Tom Wheelwright. So I would probably go there because a podcast and a YouTube channel, because like you, I want to get great education out into the world. And I really appreciate what you're doing, Josh, because entrepreneurs need this information and they can make better decisions and have more influence on their customers and their public. Yeah. So to our friend that's listening, just search for WealthAbility, all one word with Tom Wheelwright.

19:29You'll find it. Click, hit subscribe, start listening. Tom, it's been a great conversation. Thank you so much for joining us. Been my pleasure. Thanks, Josh.

19:42Thanks for listening to the Thoughtful Entrepreneur Show. If you are a thoughtful business owner or professional who would like to be on this daily program, please visit upmyinfluence.com and click on podcast. We believe that every person has a message that can positively impact the world. We love our community who listens and shares our program every day. Together, we are empowering one another as thoughtful leaders. And as I mentioned at the beginning of this program, if you're looking for introductions to partners, investors, influencers, and clients, I have had private conversations with over 2 ,000 leaders asking them where their best business comes from.

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