#31: Tom Wheelwright, CEO of WealthAbility - Tax-free wealth, choosing the right accountant, and the investments the government will pay you to make

Because the reality is I can't change your taxes. I can only tell you what you need to do to change your taxes. But you still have to do it. And I think actually that's the big issue. First of all, people have been taught to be afraid of money. I think they've been taught primarily by Wall street, but also by the government, by their employers. Don't worry about this, we'll take care of it, okay? You just go do your thing. And we actually have a. We call it our declaration of financial Independence. And it is. We believe everybody throughout the world has the right to become independent of the government, employers, and Wall Street. And that is our mission, is to help people come independent if they want to become independ.

On today's episode, we have tax expert and CEO of Wealthability, Tom Wheelwright. Steve. Boy, what an interview. So I'm sure most people who are listening to this have heard of Tom Wheelwright. If you haven't, he wrote Tax Free wealth, the Win Win Wealth Strategy. Amazing books. I know what you're saying. Taxes. How could that be amazing? These books just change the way that you think and perceive taxes. One of the things that Tom said was, you know, we just, because it's called taxes, we kind of demonize it as a society. And one of the points he made in this interview is that the government incentivizes through taxes, the things that they want us to do. And so if you do those things, you end up being able to keep a lot more of your money than the average citizen does. And he kind of views it as a game of how do I get to zero taxes? How do I live a tax free wealth? And boy, this thing was just chock full of amazing tax wisdom that people who have zero knowledge of taxes or who don't think that it's gonna be interesting are gonna be blown away by this interview.

Jake.

This was one of the most fun interviews and we were talking about taxes. And with, with the common theme that was throughout the podcast was Tom is making taxes fun, simple, and easy to understand. And I can't believe how fast this podcast got went and went so fast.

Yeah, yeah, he really, I mean, it sounds cliche, let's make taxes fun. But it's. You read the book, you're like, this is a really interesting topic. Is way more interesting than I thought it was. It's a lot more fun than I thought it would be. And like he said, it's a, it's a game. There, there are incentives in place to have you do what the government wants you to do to stimulate growth in the economy and to provide, you know, housing for people. And, and the more you know about your taxes and your own situation, the better off you're going to be in, the more money you'll be able to keep and to, to invest in other areas and take care of your family and whatnot. So highly recommend reading his books, highly recommend listening to his podcast. But let's just get into it. Let's head west. Stay tuned as we discuss tax free wealth, choosing the right accountant, and the investments the government will pay you to make with our guest, Tom Wheelerite. This episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest your money. Stocks, bonds, crypto and rental home. The list is literally endless. As we've all seen over the past year, the stock market is unstable, the housing market is just weird and inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. All right, Tom, I would love, if you wouldn't mind, what's typical of Heading west and episodes is we love to start at the beginning and see how you've headed west in life and in your profession. So I'd love for you to walk us through how you got to today. Going from a 9 to 5 job at a large firm to a bestselling author, a CEO of a growing company, a rich dad, advisor, and the foremost authority on tax taxes. Can you kind of walk us through how did you go from there to present day?

Well, actually start. I grew up in a family business. I'm the son, grandson and great grandson of entrepreneurs. So it's kind of in my DNA and actually did bookkeeping for my father's print shop and my mother was the controller so she was my boss. And when I went to school at the University of Utah, I, I took a tax class early on, because I love law. I've just always loved the law. And I found that it was the perfect combination of math and law. And I like math. I'm good at math. And law was so interesting because you get to argue, right? What could be better than law, where you get to argue all the time? And so I did the normal thing. I went to undergrad graduate school in the University of Texas and got my start at Ernst, what was then Ernst and Winnie. And two years in, they gave me the opportunity to go to the national office. And so I got to be with all the big wigs. I mean, these are the smartest brains on the planet in tax. And spent three years learning from them. It was hard. It was like post graduate education. It was. And I was there during the Reagan year. So I was there when the big tax law was passed in 1986 and just had a lot of opportunities and was always fascinated by how the law worked. But I never liked the big companies. So I tended to work because my specialty was partnerships. I tend to work with entrepreneurs. I tended to work with smaller companies. Even when I was at Ernst, Winnie, Ernst and Young. When I left, I went to a Fortune 500 company, which is really more of a personal decision, because I. I really wanted a 9 to 5 job at the time. My wife was going to graduate school and we had, you know, we had little kids. So that's why I made that move, actually, at the time. And. But I never liked the big companies. I just, I. I've always liked entrepreneurs. I've always been fascinated by entrepreneurs. So I started my own firm in 1995, and I started with two clients and worked really hard, and nine months doubled. So I had four, but that's not quite enough. And then I acquired a firm and. And then I had a partner. And then I lost part and all that kind of stuff. But. But really then what happened was in 2001, my partner and I broke up. He took 50% of the clients, but all the staff stayed. And it was part of the reason we broke up. But you might imagine. But in any case. So I asked one. I asked my senior staff. I actually asked her to be my partner. She was 26 at the time. And I said, would you like to be the partner with me in the firm? She goes, oh, absolutely. And it's like total confidence, by the way, we've been partners ever since. But we had this decision to make. We had to go, do we let half the staff go or do we go find new clients? And I said, why don't we just get, let's go buy a firm. And she said, yeah, sounds great. So I'm looking and I get this postcard in the mail. It says accounting firms for sale in, in, in Phoenix. And so I called on it in one of the firms, everything sounded great. They did a lot of consulting, they did high end work. They charged enough, they weren't, they weren't underpricing themselves. I said, great. And the owner said, there's just one thing. I said, what's that? He said, well, you have to read this book called Rich Dad, Poor Dad. And I said, really? What's why, why? He said, well, because Robert Kiyosaki is a client. And so I said, okay. So I read Rich Dad, Poor dad. And fast forward two years later, Robert Hatt just pulled me out of the audience, said, well, this is my new accountant and going to put him on stage and he's going to explain depreciation. And I got up and I explained that I'd done a lot of teaching when I was in the national tax office. That's what I'd done for three years was teach other CPAs. So I wasn't new to being in front of a group, thankfully, and I have always loved teaching. Anyway, so Rob put me up and then, I mean, how brave is that? I mean, there were like 500 people in the room and he's putting me on stage. He barely knows who I am. Yeah, right. And puts me on stage to explain something. After that, actually we became fast friends. We've been friends ever since. And he asked me to write Tax Free Wealth. He said back in 2011, he said, Look, I, I need you to write a book on tax. And of course I've been thinking about it for 30 years. So it's not like it was hard.

Yeah.

And it took me about a month to write and, and then about six months to edit, but it took me about a month to write and a lot of editing.

Yeah, they always say writing is not hard. Rewriting is hard.

Oh yeah, yeah, yeah. Rewriting is really hard. I, I, I've, I, I've learned that since then and the other books I've written. But we start traveling all over the world and so I got to learn other countries tax laws. I learned that tax laws are the same all over the world. Substantially the same. The details are different, but the premise is the same and the incentives are the same. And to me it's just fascinating. I just, you know, once I, once I, it was clear to me. I remember in 2012. Robert and I and the other rich advisors were on stage at the Paris in Las Vegas. And I, and it's my turn to be up and I'm talking. I said, well, you know, the tax law is really just a series of stimulus packages. Right. We just had the big stimulus packages for the 2008 recession. And I said, it's just, it's just a series of stimulus packages for entrepreneurs, investors. And Robert looks, kind of gets this look and looks at me, goes, really? I said, yeah. He says, wow, that's cool.

That's totally a Robert thing to say.

And he goes, it's like the light went on for Robert. And we actually have been kind of, I mean, he's been a great mentor of mine ever since. Certainly taught me how to do a much better job from stage in front of thousands of people. And it's just, it's. And I, you know, we still, we still talk a couple of times a week and, and study together and work together and so, I mean, I really do. Oh, you know, I do owe him a lot. He really, he really did have quite an influence on my career. Yeah.

And go figure. I'd always wondered like, okay, how. I've read your, I've read Tax Free Wealth, I've read Can McElroy's and some of the other Advis. And I always wonder like, okay, how did these people get connected with Robert? How did this whole group get together? It's so funny and serendipitous that yours came from a postcard. You know, like, mailers don't.

Junk mail.

Yeah, junk mail. Junk don't work.

They usually don't work these days. And go figure, the trajectory of your life, you know, changed dramatically from that little interaction.

You know, one thing that I always point out to people is that it would have been really tempting just to let half those people go and think about the difference. I think about the difference in my life and the life of the hundreds of thousands of people who've read Tax Free wealth and, and everything else. Had I not, had we decided to go small instead of big and not take, make that big bet on just buying a firm. Yeah, it'd be a whole. But I, I have no idea what I'd be doing. I'd probably be running a small, small accounting firm. Who knows?

Yeah, it sounds like you hear the entrepreneurism coming out in Tom and, and what he's doing in the decisions and, and taking the gamble. And have you told Robert that the only reason, you know him was from junk mail?

I, I haven't told him that piece of the story. No, he knows, of course, the rest of the story. He knows that, that, that I bought the accounting firm, but.

Yeah, that's awesome.

You know, that's great. It's the story about me reading Tax Free wealth was. I, I, on my personal side, we had a tax situation that our accountant missed something and it cost us a lot of money. And I'm like, okay, I can't keep deferring my tax situation to somebody else. And, you know, although I trust them, although they're an expert, I got to take responsibility. And so I reached out to a friend who knows taxes and, you know, money well, and he said, read this book. It's fantastic. It's called Tax Free Wealth. I read it and like you said, tax, tax law is just a lot of incentive or a lot of, what'd you say? Stimulus packages. And I think you wrote in the book that it's just, it's the way of the, of government incentivizing the things they want you to do. And when you put it that way, I start thinking, wow, this. I used to dread taxes. I used to worry about like, okay, what do I have to owe at the end of the year? I got through that book and I said, okay, there's a lot of opportunity here to really take advantage of the, of what the government has put into place. I can mention the positive way, not in a scheming way, but. And to, to keep more of what I earn. But I found that most people do not view taxes that way. They look at taxes as I'm being robbed of things I've earned.

I'm being, yeah.

As if it's a negative thing. Why do you think there's that kind of psyche?

Well, because taxes by definition, negative. Right. I mean, to tax something is to put a drag weight against it and, and prevent it from moving forward. And that's what taxes do to your wealth. I, I like taxes. I, I like the tax system just because I think it's a game.

Yeah.

And, and it's a fun game. And, and, you know, Albert Einstein, one of my favorite quotes is him saying the most difficult thing in the world to understand is income tax. I'm going, if I can make something that was difficult for Albert Einstein, if I can understand, make it easy for other people to understand, I, I'm going, that is as big a win as you can get in life.

Yeah.

And, but, but once you. That's the, of course, that's the whole point of Tax Free Wealth. Just change the Paradigm change, the thought process. Because the reality is, is, you know, there's one line, the tax law says all. All income's taxable unless we say it isn't. Another line says, nothing's deductible unless we say it is. But. But really, the. The rest of it is really okay. So here, you want to reduce taxes. Here's how to do it. And most of it, like you say, they're really incentives. These are. Since John F. Kennedy, he was really the first to use tax incentives in a major way with the investment tax credit for manufacturers back in the 1960s. And since then, I mean, everybody realizes, look, if somebody hates something, then make it so they don't have to do it. And they will. They'll do. They'll. They'll do what you want them to do. So whether it's in, you know, farmers who reinvest in their agriculture, whether it's a business owner who builds a business and hires more employees, whether it's. I mean, most recently, we've seen the incentives in the renewable energy, right? I mean, huge tax incentives in solar, wind, high hydrogen, hydroelectric, even, even nuclear energy. So huge incentives right now for what is considered to be green or renewable energy.

Hey, Tom. With some of my peers and what I see is that all accountants aren't created equally.

I found that out the hard way.

Just because you have a CPA at the end of your name. And there was an example, I won't say the gentleman's name, but he's. He's worked with his accountant who does his tax returns, and he's comfortable with them. And boy. And you talk to him about, you're missing out. You need to be doing 1, 2, 3, 4, 5. And they hear it and, okay, I'm going to do something. And then they stay with their accountant. Do you see that out there with people? They, oh, no, this kid. This is too good to be true. This can't be right.

I hear it more than you can possibly imagine. What I hear is, first of all, but I like my accountant. And what I have to do is show them the numbers. I had one friend that she was a friend before she was a client, and she actually knew Robert Kiyosaki pretty well before I'd met him. And she's. She actually told me the first year that she worked with us, she saved $20,000. Now this is 20,000 that she'd saved that she got back every year. And I actually ran numbers, and I said, okay, so $20,000 a year for 20 years. Right? Right. What does that end up being. I'm sorry, I take that back. It was $70,000 a year.

Oh, my God.

70,000 a year for 20 years. So that's 1.4 million. But when you put in an interest rate on that, we actually figured out she'd given up because she'd been paying that for 20 years before she'd given up $4 million. And so when people say, oh, but I like my accountant, and say, okay, so how much do you like your accountant?

Yeah, right.

Is it really worth that kind of money? And the challenge is you do get. It's too good to be true. I've heard this. The first time I heard that was in Santiago, Chile. I'm not kidding you. For Santiago, Chile. The very first day, Robert and I and a couple of the other advisors are at an event. There's 600 people in the room, and on one side of the stage is a Bentley, and the other side of the stage is Lamborghini, because that's who the sponsor was. The Bentley Lamborghini dealer was the sponsor of the event. And so the. The. Robert comes up to me very first morning. He says, okay, today I want you to explain how they could deduct a Bentley on their taxes. And so I, you know, I went through the rules. This is before lunch, and. And at lunchtime, this tax attorney from Santiago comes up to me. He says, tom, this is really great. Only you can't do that here. He goes, it's. It's, like, illegal. You can't deduct. Yeah, I mean, it's in the. It's in the law. You can't deduct it. So later that evening, I'm telling Robert and the other speakers the story. And Robert just kind of nods his head, says, oh, okay. Next morning, we're about to go on stage. He says, tom, today you're going to teach him how to legally deduct a Bentley in Chile. And I'm going. I've learned. You've got. You've got to trust the process.

You just got to trust the process with Robert, apparently.

So I said, okay, you know, sure. You know, we'll. You know, we'll figure it out. So later that day, we actually showed how to deduct the cost of a Bentley in Chile. And the tax attorney comes back up to me at the end of the event. He says, tom, I would never have thought of doing that. That way, it will absolutely work.

Wow.

So, you know, this. I get the. How can this really be possible? To live tax free, you know, to reduce Your taxes. We tell people, within three months, if you're an entrepreneur, we ought to be able to reduce your taxes by 10 to 40%. That's not an empty promise or a saying. That's something we do easily if you're willing to engage. But the biggest challenge is that most people aren't willing to engage. You mentioned that earlier, most people aren't willing to engage. Jake, you were mentioning how you have to be in charge of this. Because the reality is I can't change your taxes. I can only tell you what you need to do to change your taxes. But you still have to do it. And I think actually that's the big issue. First of all, people have been taught to be afraid of money. I think they've been taught primarily by Wall street, but also by the government, by their employers. Don't worry about this, we'll take care of it. Okay? You just go do your thing. And we actually have a. We call it our Declaration of Financial Independence. And it is. We believe everybody throughout the world has the right to become independent of the government, employers, and Wall street. And that that is our mission, is to help people come become independent if they want to become independent.

Yeah, you're so right. On the, the, on the. You have to engage. Because I think my mentality beforehand was my tax accountant. It was just a transaction. I come to him at the end of the year, he works all the numbers and saves me money or makes or, you know, or cost me money. And I think after reading your book and doing further research and taking ownership of it, I recognize this is a relationship and we need to be talking more frequently. I need to tell him what my plans are for the year and what we have in store and what we tend to intend to make and what we intend to invest in. So, so he's better equipped to not only, you know, help me at the end of the year, but also to give me advice of what I should be working on throughout the year and really engage throughout the whole process, not just January, February, March and April. Yeah.

You know, part of the problem, honestly, Jake, is that is the way accountants bill. Because they bill on a transaction basis. They're billing you for hours, they're billing you for a tax return, they're billing you for a transaction, which if you're a transaction based company, you know, you're not really basing it on a relationship. And one of the things that we're working on with the accounting profession is getting to them, getting accountants to change the way they bill for the relationship. Don't bill for the transaction.

Yeah.

So we, for example, I do still maintain a few clients, including Robert in a small CPA firm. Besides the. Sell that, you know, besides the education work that I do. And we bill a flat monthly subscription. That's what it is. And that's, that's what you pay. And it doesn't change during the year. And at the beginning of the year, we tell you what it's going to be and it's going to be that. And every month, you know, there's, you know, it's just payment. So the idea is to pay, you know, you want. I think you have to tie the money to the way that you're going to work. And if you want it to be transaction, then you should pay for transactions. But if you want a relationship, you should pay for the relationship.

It's brilliant. Great way of changing psyche.

Yeah, you talk about the psyche, Jake, is it needs to be turned into a more proactive type relationship. Not just at the end of the quarter, the end of the year, okay. And put things together on a balance sheet or, or etc. Or an income statement. But I find the best information I get from our consultants, whatever they are, is when you're sitting down across for them and there isn't a transaction going on. You're talking about business and life and, and there's been a couple times where I'm explaining something to one of my consultants. He goes, wait, stop, stop, stop, stop, stop. What are you doing? And then in that sense, and you, oh, you can do this, you can do that, and et cetera. But if you're not in having that relationship and you're only calling them when there's a problem or a perceived problem, you're missing the benefit. And it could be that $70,000 a year.

Well, I'll give you an example of that. So when we move to a subscription and I told the clients, and so I'm having conversation with one of our clients, and he goes, oh, well, this sounds like I need to call you a lot more often. And I'm going, yes, that is exactly the reason for the subscription. We want you to call us more often. We'll call you, but we also want you to call us. So it's got to be both ways, right? But I do think that there is a lot. I had, I had a good, good friend, I spoke at his conference and he told me afterwards, he said, you know, I thought of just. I thought I should just leave my CPA and see if, see if, you know, Tom's group will help me, he says. But then I realized that I was not doing my accountant justice and I went and I needed to give him a chance. I needed to say, look, here's, here's what I'd like. Now, I think accountants should just do that. You know, I think accountants should be in charge of that. I don't think that the client should have to do that. But he did. He went back to the accountant, he said, and then months later, he said, it's completely changed the relationship. So, you know, like you say, Jake, the more you can be engaged in that relationship. It's true with any relationship. Right? The more you're engaged in it, the better the relationship. And if, then it still doesn't work, you know, if they don't catch on, then you need to find a new accountant. That's fine. That's actually what we do is we, you know, we, we help people find accountants. So that's, that's fine. But I do think that the clients tend to kind of put it off onto the accountant and don't take responsibility all the time.

I love how, you know, in, in, in your book Tax Free wealth, you're. You're talking about how the government sets up tax to incentivize the, the, the things they want us to do. In the same way you set up this pay per month subscription to incentivize your clients to do what you want them to do, which is engage more often, call me more often. So we could be in partnership. That's. I think it's, that's brilliant. I'd love to, I'd love to talk about a little bit more about your practice. How. Two questions. How do you extend your network? How do you grow your network? Because I, you know, I know some people will think, oh, I got to work with Tom. Well, no, you're not probably working with Tom, but you're going to work with the people that he trains. So how do you find that network nationwide? And then two, how do clients find a tax advisor that has been trained by you?

Yeah, no, thank you for that. So, so kind of started a number of years ago, five or six years ago. We decided that we. Because we built a pretty large CPA firm and we decided, you know what, we're going to sell the CPA firm. We actually sold it to existing partners. And because we want to serve a broader range of people, we could, we didn't want to just serve a niche of people, which is really all you can do with any single firm. Right? You can only serve A certain niche. You know, it's like the big four accounting firms that they don't serve everybody. They don't even serve entrepreneurs anymore. They only serve the really big companies. And we decided, well, we'd like to serve everybody from I'm just beginning as an investor all the way up to the Robert Kiyosakis of the world. And as long as you're entrepreneurial, as long as you're engaged, we want to be able to serve you. The way to do that, we figured was, well, what if we had a network of CPA firms or accounting firms that, you know, some of them liked gig workers and others of them, you know, were, you know, wanted the more sophisticated investors and others still wanted the serial entrepreneurs. And we're training that way. So basically every firm is a niche firm. It's just wait, right now we have 60 of them. And so we have, we have two rules for our, for, for people we take on. The first is we have to like spending time with you. So key rule number one, I am too old to be spending time with people I don't like spending time with. Right. I'm not doing that anymore.

So true. So true.

And, and the second is that you have to be an entrepreneur that just happens to be an accountant. So we don't want accountants who want to be an accountant. We want entrepreneurs who want to serve as. Serve the clients in the tax advisory area. What we've actually done now is in order to better serve, we've. We're actually moving to, we've actually moved to a franchise. So now we have a tax advisory franchise. Wealth ability franchise. The, the company is wealth Ability, and it's, it's a franchise. So now we actually have a, a partnership, more partnership relationship rather than just a loose network. We have very, very strong systems, like you said, you know, how do I, how do you know that they're doing it the way we're doing it? Well, if they're a wealth ability franchisee, then, you know, they're doing it the way we're doing it. And that's really the way you do it. And the easiest way is just come to our website at wealthability and just schedule a call with us. Because we're actually better at determining which of our franchisees you should be with than you are, because we know them and we can learn about you. It's much easier because that's what we're good at, right? We're good at actually making that fit. We have people all say, well, I want to interview CPAs. I'm going. Really? You want to interview 60 CPAs? Really? That's what you want to do? Literally, I can think of, like, a hundred thousand other things I'd rather do than interview a bunch of CPAs.

Yeah, right.

I'm not kidding. So. And I love our CPAs. They're still CPAs. Right. So we're not known for our engaging personalities as an industry. Yeah, but, but so, so we do that for you. I mean, it's actually something we do for you. And we know our. We know our franchisees. We know them very well. We know who's going to be able to do the right. Be the right person for your situation, and that's our job.

Tom, can you speak to the. Your potential clients that think their CPA must be in Omaha, Nebraska, or two miles from my office? Can you speak to those people that think that way?

Well, I'll go back to. Really. How much time do you really want to spend with your cpa? I mean, seriously. Although I did have a client once that was spending time with one of the CPAs on our staff and actually ended up having an affair with her, which was. It's a very interesting story, but I'm going that. That's not what we're talking about here. Okay. You know, these days, everybody does zoom. You know, I mean, everybody's. Everybody's doing video call. You're not going to sit down their office? Honestly, I'll bet we don't have one client a year that comes into our office. Not even one. And we have an office. They're welcome to come in. It's a nice office. But nobody comes. I mean, why would you. You know, because it's so much more efficient and effective. I mean. I mean, let's think about it. We can pull up your tax return on our screen. We can go through. We actually have software that we go through together. We can do that on the screen. It's actually more effective to do it on the screen. You know, most human interactions are better in person. I. I'm total believer in that. I don't think that's the case with a. With an advisor, though. I actually think. With an advisor, I think there's so much you can do collaboratively on a screen that you're going to. If you were meeting together, you'd sit down and look at a single screen together. Well, why? It's so much easier to do it on your computer screen than it is to actually sit down on somebody else's computer screen. I just think it's. It's really easy to do that nobody really wants to go to sit down and you know, chew the fat with their cpa. You know, if you do great, I mean, you're welcome to come. I have, you know, I see clients most of all. They typically don't come to the office. We typically go to dinner, lunch or something like that. I like my clients a lot, but, but it's, it's really more about you want somebody who is the right person for you and the location is just such so unimportant these days.

That's what I love about what you guys do at wealthability is that you match the client to the accountant and with today's technology, you could be anywhere in the world and you guys will put them with the right person and that fits their culture, their personality. And that is critical. That is so critical. The nice fit.

Yeah.

Yep. Thank you.

Yeah, I think that's. And that's a, it's just a flawed way of viewing it that they have to be local because, you know, we're, we have the benefit of living in Omaha. It's a big, you know, metropolis. There's, there's good accountants here. But if I live in a small town in middle of Nebraska, I am beholden to the quality of accountant that's within the five mile radius of my small town. That might not be the best situation for me. I'd much rather go to wealth.

And it's not just that. I mean, even, even in all Omaha, even in New York City, I mean, so we have, we have accountants in New York, but if somebody's in New York, we might, and they might end up with somebody in la. Yeah, right. Just because they have the right specialty, they have the right skill set. They're like you said, Steve, the right personality. And the other advantage we have of course is every once in a while it, it's not a good fit. We thought it was a good fit and I mean this is rare, but a couple of times a year this happens. We just move them to somebody else. I mean that's the advantage we have is we can move them to another entrepreneurial CPA and they'll know that they're going to stay in the same system using the same software, you know, really with the same attitude. And all of that's going to be the same. The only difference is going to be the, you know, the person.

Yeah, I love that. Well, Tom, I'd love to talk about real estate heading west. This podcast produced by Skyline Point Capital. We, we're private real estate investing. So Would love to spend a little time on the tax benefits, the unique tax benefits that come with real estate. So could you kind of just walk us through? And I know you do it a lot in your books, but what are some of the unique tax benefits that you see that real estate provides?

Well, one of the great things is, is you actually get multiple tax benefits from real estate. First of all, real estate's a business, and so you get all the business tax benefits. Right. Biggest tax benefits in the world worldwide are business. But you get that because you're in the business of real estate. Okay, so you got. Got all that knocked down. Then there's a specific real estate and real estate. The magic of real estate, as you know, is leverage. That's the magic. Real estate, it's debt. That's what makes real estate work. Real estate. I was, I just, I got to tell you this real quick story. You'll love this. I speak at an event every year to. And the person I follow is always. Is always the financial, the financial person from Wall street, always. And she's up there and she's talking about. And I love her. She's. She's great. But she's saying, well, you know, over, over time, stocks are better than real estate. I'm going, only if you're not leveraging. Right? If you don't use debt. Okay, I can buy that.

Yeah.

Okay, probably so. But once you add debt, and then if you on top of that, add the tax benefits, I mean, stock market's not even in the same league as real estate because, you know, there are no tax benefits from investing in the stock market. I mean, you, you investment, you have benefits. When you take the money out, you have capital gains, but that's it. There's, you know, unless you're gonna put Money through your 401k and, you know, you got that little bit of a tax benefit. But real estate, the, the, the two big benefits are debt, frankly, because debt, you can borrow and there's no tax on debt. And the thing is, debt leverages your tax benefits of depreciation. You know, of course, you know, depreciation is the big tax benefit because what's cool about real estate is goes up in value, but we get a tax deduction as if it's going down in value. That's the cool thing about real estate. So you get this what we call a phantom deduction. It's like, I don't have to be out of pocket to get a deduction. And that, that's just not very many places you can do that. And so, for example, you could put down this year, you could put down $100,000. If you paid cash, you'd be, it wouldn't work this way. But you put it down $100,000, you borrow 400,000 from the bank. Okay, so now you bought 500,000. Well, you don't get any depreciation based on 100,000 that you put in. You get depreciation based on the 500,000. So you've just multiplied your tax benefits. Right. Your five times tax benefits you would have had with bonus. Now we have bonus depreciation still. We're at 80% bonus depreciation this year, goes down to 60 next year, but it's 80% this year, which means that if you cut through it that you're able to get a hundred thousand dollar deduction on that $500,000 property. So basically you get to deduct 100% of the money you put in. And there's outside of renewable energy, there's just very, very few places you can do that, get 100% deduction. Actually fossil fuels, you can do the same thing. But this is, you do it with leverage and you get that huge tax benefit. And then there's enough depreciation left over in the future years to offset most of your rental income. And then when you sell it, you can either take capital gains, not sure why you would do that, or you can do a 1031 exchange and never pay tax. And then you can always play this. What? Go back to my idea that this is a game. And the game is buy, borrow, die, right? You buy the real estate when you need money, you borrow against the real estate, not taxable. When you die, the tax from the real estate disappears like magic. That's called the step up in basis. So you know, this buy, borrow, die game is a really cool game because you literally, we literally have, we have clients who just haven't paid tax in years. The problem is you have to continually reinvest. You always have to be reinvesting. And so I call it a positive addiction. You have to actually be addicted to, to building wealth.

Yeah.

And you talk about the 1030 ones. There are some peer investors could not find a piece of property to do a 1031 too short. There wasn't enough of the property assets they wanted. When you're in that situation, is there another alternative direction you can take so you don't lose that?

Well, first of all, bonus depreciation is so good that it, it's not always good to do a 1031 right now, sometimes you're better off tax wise to do to sell it, recognize the gain. Because remember, the gain you're recognizing is 20 to 25% maximum. But the deduction from the bonus depreciation gets to offset your ordinary income or which can be as high as 37%. So you literally can have a 13% swing just by recognizing the gain. So, so sometimes it's counterintuitive and sometimes actually recognizing the gain is better. The other thing I would say is, what I very few people understand is you can do a reverse 1031 exchange, which means you can buy the new property before you sell the old property. And that's called a reverse 1031 exchange. You can do it up two years ahead of time. So what I always tell people is, look, you've always, if you're going to be a real estate investor, you've got to always be looking for the deal. Don't worry about, I don't have the money for the deal. Let's find the deal, let's tie up the deal and then we'll go sell the property. And then we have really all the time in the world. We're not limited. This 45 days, 180 days rule, that kind of put so much pressure on people. I'm going, why are you waiting? Remember that 180 days, 180 days after. There's nothing about before and the IRS has said they're fine with two years before. The reality is under the Internal Revenue Code, you can do it five years before. So yeah, literally, it's just, you've got to change. It's just a, it's just a shift in the way you're thinking about it.

And that goes back to the mentality of finding the right accountant and understanding the financial aspects of the reverse 1031 as compared to the normal 1031 and have that ahead of the game and not react to it. What's going on?

Well, and that's why, you know, Jake, when you were saying that you need to have that relationship with your cpa, well, if I don't know my clients thinking about, you know, selling a property, if I don't have that, you know, typically I, I talk to clients monthly. I, it's, I mean, some like Robert, I talk to weekly, but most clients, it's monthly. And when you have those conversations, like you were saying, Steve, when you have that conversation, you go, well, okay, well there's this, this, this and this where if you hadn't had the conversation, you Just wouldn't know because you as the client wouldn't think about it because you don't know what questions ask. I always say that the most important job of an advisor is to ask the right questions. Our job is to ask questions. Your job is to give us answers. Our job is ask questions. And, and so I, I think it's backwards with most CPAs, they think it's the client's job to ask questions. No, that's your job. Your job. It's like you go to a doctor, you know, you spend 20 minutes with a doctor, they spend 19 minutes asking you questions, diagnosing. They don't wait for you. Well, ask me a question. You know, ask me if I should get your health. Go ahead, go ahead. Here's a list of questions you should ask your doctor. I'm going, no, that's the doctor's job is to ask you questions to diagnose the issue. The same thing is true with a financial advisor or tax advisor. That's their job. So that's why. And I would say also that, you know, to rely on a single person is also is, I think, a mistake. Even that person is somebody that's super smart because you don't, I mean, no single person knows everything. I will tell you if I need, if I have somebody come in and they want to set up a employee stock option plan, I don't know how to do that. So I have to go to people in my network who know how to do that. Or if I have international tax questions, I'm not the expert. I go to international tax experts in my network. So one of the things is, you know, do they have in their network? So that's important. And the other thing is, is the tax law is actually very systematic. There are patterns in the tax law. And once you have a pattern, you can develop a formula. And if you can develop a formula, then you ought to be able to develop a system that applies that formula over and over again. And that's really the magic of wealth ability is that what we've done is I've identified the patterns. I'm not a systems guy, but I can identify the patterns. And I've identified the patterns, create the formula, and then my team creates this amazing system. We have a full software company just for implementing the system. Just because we think it's that important to be consistent and have our, our franchisees follow our system. We make them follow the system. We, we can audit what they're doing. So we're paying attention without having that big firm attitude. Where you get lost in a big firm because it's still a small firm you're with. It's just that they have the system like a big firm, and they have the network like a big firm.

I. You just mentioned something that triggered a thought. So you talked about, you see the patterns and then you can build formulas around that. This might be a little hard or difficult for you to answer, but I'm going to shoot. If you weren't a tech expert, like, if this was not your profession, but you still knew about taxes. Right. How would you create the perfect life? Call it slash business ecosystem to live tax free. Like, you understand the best tax laws out there. So would you create a business that has passive income, that invests in real estate? And there's this kind of ecosystem where.

I would. First of all, you've got to make sure that you. It takes a very holistic approach.

Sure.

So let me tell you, I think there are three questions that every accountant should be asking their clients, and I think they ask maybe one of the three. And the first question is, how do you make your money? And most accountants will ask that question. And there are some things you can change to reduce taxes based on how you make your money. Robert Kiyosaki talks about that in his book Cash Flow Quadrant.

Right.

How do you make your money? The next question, though, I think is way bigger, which is, what are you gonna do with your money? It's a huge question. What are you gonna do with your money? And I would tell you that most like entrepreneurs, they come to us, they have no idea what they're gonna do with their money. They know how to make their money. They don't know what they're gonna do with their money outside of putting it back in their business. Right. So what are you gonna do with your money? And then third, third thing is, the third question is, what do you do with your money when you die? Because think about this. Let's say you go, well, I'm going to leave it all charity, so I'm not going to have any estate tax issues. I just leave charity. I'm going, okay, well, you want to wait until you die to get the tax benefit of that charitable deduction, or do you want to get it both now and then? Do you want to get it twice? Because I can set it up. We can set it up so you can get it twice. Okay. You get a tax benefit now and a tax benefit when you die. To me, that's way better.

Yeah.

Right. And so you really have to look at. I Mean, we ask questions like, tell me your relationship with your children, with your spouse, with your extended family. What do you want to do? You know, from. Do you have charitable purposes? Do you want to build your business? When you die, are you going to leave your money to your children? You're going to, you're going to be like my mother who, her goal was to break even. She didn't want to leave any money to us. She goes, I don't leave you money. I don't want to spoil you that way. I'll leave you an education. I'll leave you with all that, but, sorry, I'm not going to leave you any money. And there are other people that want their kids. They want it to be a dynasty. Right? I was talking to this morning on my podcast with a rancher who's fourth generation, his daughters are now running, running the ranch, their fifth generation. That's. That's, that's what it is. It's a. It's family. Right? We're going to keep passing this down. So I really think what's important. I don't think it matters what your, I don't know, think it matters. Which it is. Is it. It has to be business. You have to start with business. That's. You want to reduce taxes. Employees just get the short end of the stick when it comes to taxes. They just do. Didn't. Always. Hasn't always been that way, but it is now. So you have to start with some kind of business. Whether that's a real estate business, energy, you know, online, whether it's a service business, doesn't matter. But, but really, I would have a business. And then, yeah. What are you gonna do with your money? You gonna put it in real estate? Great. You can put it into oil and gas. Great, do that. If you're going to put it into renewable energy, great, do that. I've got, I've got one client. He was in business, sold his business, put it on to a ranch. He goes, I want to be a rancher. I'm going, are you kidding me? You want to be a rancher? Says, yeah, I want to be a rancher. So now he's raising w. Cattle. Oh, I love that. I'm going, that's awesome. Nope. But he's doing the one. He's doing something he loves, you know, and that's what I would say. Do something you love to do, you have a passion for, because you'll get good at it. And, and then invest in hard assets. So, you know, real estate's a hard asset. Agriculture, hard asset. Energy, hard asset. I think investing in the stock market. If you've made all your money and you just want to diversify and you try not to lose money, that's fine. But if you're trying to build wealth, the only way to build wealth is really with hard assets.

Tom, you were talking about what to do with your money. One of my mentors, my father in law, he before I just, I think after I got, we got engaged and sat down and, and then got married and very close family, he pulled me over when and said steve, just want to let you know, he did really well. Just want to let you know I'm not going to leave very much to the kids. I want to spend the money with the family while I'm alive so I can enjoy it. And we went on trips around the, around the world and etc. And as we sit back and listen today about how, what type of legacy you live, we sit around the table laughing about all the fun we had on trips, not what they bought us. And those memories go on for generation and generation. And that's what he did. He spent his money with the family and it was a blessing last, it was so much fun. And that's what I want to do with our family and the next generation.

Well, and that's great. And that's why I say, I mean everybody's different and, and, and but I think that when you're doing your planning for your building tax free wealth, you need to include all that because some people, they want to, they go, I want to use all my money, but I want to make sure I leave this much money to my family. Okay, well maybe you need life insurance, right? I mean that's, that's a really good reason for life insurance. In my book Win Win Wealth, I actually talk about life insurance as a tax favored vehicle, one of the seven investments the government pays you to make because it is such a good vehicle for the right person in the right situation as an investment vehicle because it's a safe asset. So I really think that's why you have to look at all the motivations, all the relationships, you know what you want out of life and then plan accordingly, plan for that.

Hey Tom, you were talking about investing in hard assets and real estate. Everybody's talking about real estate, but you mentioned oil and gas, renewable energy. Could you spend a few minutes talking about that, what those investments look like? And when you buy real estate, you see a building. But for the listeners here, what does that look like?

Well, so for oil and Gas to the drilling rig. Right? So that, that is, that really is because when we're talking about the asset, we're not talking about the stock. So, like I'm, I don't ever suggest people invest in a rate. A real estate investment trust. Right? That's invest. First of all, that's investing at retail, and I hate investing in retail, just like I hate buying real retail. So I want to invest at wholesale, which is where I go to a syndicator, right? Because that's a wholesale. I'm getting a wholesale deal there. I'm not paying retail like a reit, like I would on a rate with, with oil. It's oil and gas. You're really investing in the actual drilling and you actually have an investment in the working interest in the well. And I've done oil and gas for many, really, my entire career. I'm probably the only accountant in Arizona who understands oil and gas from a tax standpoint. And the reason is because I'm. First of all, energy is what makes the world go round, right? I mean, without energy, we don't, we really don't function as a world. And so I'm a big fan of all types of energy. I have solar on my, I have solar on my business. I have oil and gas investments. And, but, but oil is one of those things because you can't see it. It's even more important than real estate. You know, I think I always say the most important thing about real estate is who are you investing with? Who's the team?

Right?

That's the most important thing about real estate. Not the property, it's the team. You know, I've seen, for example, during this, you know, we've been in rocky times in real estate, and I've seen really good operators and they're not even phased by this. Not even phased. And I've seen others that I, I thought were pretty decent operators, but they completely missed the boat when it came to how they were using debt. And it's absolutely killed them because they just were too aggressive with the debt. And so with oil, it's even worse because there's a lot of people, because you can't see it. They'll sell you a piece of paper and say, there's oil, and guess what? No, they're just a piece of paper. So that's the first thing. You got to make sure the people are good. Second thing is you do actually need to understand what you're getting into with oil. You, you know, much more variation in the price, supply and demand, and the price, I mean, we've seen prices right now are really good. They were down to $30 a barrel not that long ago. They're up over 80, you know, between 80 and 90 right now and probably will be for the foreseeable future, I think. But that's the key, you know, you really got to know the people. Then you really do have to understand the project. What are they really doing and is this a project that's worth doing? And recognize that, you know, with, with oil more so than real estate, you really could lose everything. So you, you have to know that, you know, they, for example, I had this. True, true story. I had an oil deal. This is one of my worst investments ever. There was absolute. We, we actually had, we had all the surveys. We knew there was oil. The bedrock was so hard we couldn't get through it.

Oh.

So that was the end of that deal.

Yeah.

It had nothing to do with. The operators were good, the oil was there, the price was right, Everything. We just, but, but we didn't have the technology to get through the bedrock.

Yeah.

Well.

Hey, Thomas, before we wrap up, I, I want to, I want to finish with a couple questions, one last one. And then I want to talk about your book before we wrap up. But is there anything that's happening in tax law currently that's getting you either excited or giving you angst? Anything new coming up?

I think that, well, the excited part is renewable energy. That's the exciting stuff. If I were a full time investor right now, I would be looking very hard at convenience stores.

Why?

I'm very hard at convenience stores. First of all, convenience stores. Here's why. Because first of all, there are no buildings on, on that property according to the irs. There's only equipment. So all of it is subject to bonus depreciation. So that's the first thing from a tax standpoint. Second of all, where are people going to go to, you know, when they, when they have to charge up their Teslas? They're going to go to a convenience store. That's where they're going to go. Right. How, where are you going to get the electricity for that convenience store? Well, if you're smart, it's going to be solar because that's where the electricity is going to come from. And you've got all this space. You know, you get, put all these roofs up there, put solar up. I mean, I'm just going. That is a trifecta to me. You've got a business, you've got real estate. You actually have both oil and renewable energy and you get the tax benefits of the tax benefits for the charging stations and the solar on your roof. So I just think that's, I just think that's a very cool play. But go back and remind me of the original question because I think I got off a little bit.

No, no, I was asking what in tax law is getting you excited or giving you a.

That's excited.

Ye.

Let me tell you the other side of it. So the other side is the IRS is going to be a challenge for people more than they think. First of all, they're already using AI which is great. You know, they should have been using for years, frankly. New York, New York State has been using that kind of a, to determine who to audit, how to assess, et cetera, for many, many years. And I think that's good. They're upgrading their systems, which is really good. Of course, they just gave a slap on the wrist to the guy who released Trump's tax returns to the New York Times and 3,000 tax returns to ProPublica and it was a contractor. So you're going, and what did, what did he get? He got like eight, he's getting like eight months in, in, in a, in a country club prison. That's it. That's it. I mean, it's like we're not going to punish you because the reality is I think he did exactly what they wanted him to do. So that's my conspiracy theory. There you go. But, but we are getting more auditors and they are targeting, and one of the challenges with the IRS is let's say that they come and assess $50,000 and you argue with them and they say, no, it's $50,000. What are you gonna do? You're going to go to court over $50,000? No, you're not. And in fact, they have a policy which they have been very public about that if they don't like a law, they consider it to be illegal and therefore you will be assessed tax. And I can, there are two situations right now where they don't care what your facts are. They're going to assess the tax and say, see in court, well, it can take, cost a million, $2 million to defend in court. You're not going to do that for a $50,000 tax bill or $5,000 tax bill. So my, my concern is there's, there's, that they have been heavy handed that I would like them, I'd like to see some controls there. And adding giving them more money is probably the way to do that. I would like them to see. To see them put more money into customer service and technology and less money into auditors personally, because I think they. I mean, you know, if your business is struggling, the very first thing you do, you need to have customer satisfaction. Right. That's. That's rule number one, customer satisfaction. Well, unfortunately, sometimes the IRS treats their customers as the enemy, and I think that's just generally a bad idea to treat your customers as enemies. So I think people need to be aware that a lot of accountants have never handled an IRS audit. And so we're actually developing our own IRS audit guide for our franchisees. We're teaching them how to handle an IRS audit because I think we're going to see a lot of IRS audit. So that's the one that keeps me up at night.

Is there anything we can do as, you know, citizens to prevent an audit or to mitigate it?

Yeah, for sure. So, so, so two things. Well, your tax preparer becomes way more important.

Yeah.

And unfortunately, a lot of tax preparers do not maintain work papers, meaning that if you get audited, they're going to come back to you and say, give me all this documentation, because they're not keeping up when they file their. When they do your tax return. We do. We always maintain all the documentation because we prepare a tax return as if it's going to be audited. Okay. You want that kind of preparation on the front end. Second of all, there are ways to prepare a tax return to reduce the chances of an audit. Right. How do you report things? Where do you report them? What. What do you have to do? And actually, understanding those rules, I think, is also very important. I mean, for example, you know, people for years have said, well, I don't want to take a home office deduction, because, red flag. I'm going, it's only a red flag if you're doing it wrong. If you do it right, it's not a red flag at all. In fact, the IRS doesn't even know unless they audit you. So, you know, and yet these same people will have a Schedule C, which is just a sole proprietorship. Right. In their business. Well, Schedule C is the worst way in the world. You can file on your tax return. Five times greater chance of being audited. I mean, you're just saying, come get me. That's what you're doing with a Schedule C. Donald Trump on his tax return had five schedule Cs. Five. I'm going, what is wrong with your accountant? You've got five schedule Cs. I mean, it's just begging. It's just begging for, come audit me. And so, so, so you really do have to pay attention. And I would always say, I have people say, well, I want a tax advisor and I want a tax preparer. I want that person to be the same. I want that to be the same firm. Tax preparation is where the rubber meets the road. You want the advisor handling the audit who understands the tax return and how it's been prepared. It's a, you know, it's all one. It's all one thing. So that's what I would say. The other thing, by the way, that we're actually doing with our clients is we actually do an audit assurance, which I talk about in Tax Free wealth, which is we charge a little bit a month to all of our clients, and then when an audit comes, they don't have to pay for our professional fees. It's included.

I love that. Well, Tom, we've taken up enough of your time, but I want to finish off by giving you the floor and talk a little bit about the Win Win wealth strategy. Give us a little bit of a synopsis on this book and what provoked you to. I know writing a book is not easy. Rewriting it's even harder. But so what provoked you to write this.

Is a man with a little experience. Yeah, people don't understand just how hard it is to write, to write a good book. A lot of people write books, but not very many of them are very good. Yeah, I frankly, I got tired of people saying tax the rich. That I was really just upset with Tax the rich. And I'm going, you don't understand that we're doing what the government wants us to do. And so I decided, well, let's look at it. So we looked at it in Tax Free wealth from a pure tax side. Let's look at it from a wealth side. Let's look at it from an investment side. And let's go, okay, so what are those things that the government around the world. Governments around the world incentivize? I want people to understand. So it's like tax Free wealth for people who just, they don't care. They just hate paying taxes. Anything I can do to not pay taxes. Tax Free wealth is the book.

Right.

But there are a lot of people that go, oh, but I have an obligation to pay taxes. This is bad if I don't pay taxes. You know, this is. And there's this whole dialogue. Right. And I want people to understand that, no, that's not how the tax law works. You get to choose. You can be a silent partner with the government or you can be an active partner with the government. And if you're A silent partner, Mr. Kiyosaki calls a tax mule. And you can do that if that's what you want to do. On the other hand, if you're an active partner with the government, you say, look, I'm going to be a better partner with the government. I mean, do things the government wants me to. I'm going to build housing, I'm going to create jobs. I'm going to. I'm going to build, you know, devote my resources to renewable energy. I'm going to grow food. You know, whatever it is, if the government wants you to do it, there's a tax incentive for it. I mean, why do people, seriously, why do you put people put money in 401k? Would anybody put money in a 401k if there weren't a tax benefit? Anybody? No. 0. It would be zero. Nobody would do it without a tax benefit. It is. It's the carrot, right? That's the carrot. And, and so, you know, then you go, well, why? What can we do besides a 401k? And we're going, I just want you to understand that it's about the investing, right? And the government wins, you win. And I think the world wins, frankly. And that's why it's called win win, because it's a win for you and it's a win for the government. And we looked at 15 different countries. There's charts and tables in there for 15 countries. And that's the other thing I want to show is, look, you're complaining about the United States. Stop complaining about the United States. This is how the tax law is used everywhere. And by the way, it's always about, my incentives are good, yours are bad. I want you to understand, look, the incentives. The incentives for the most part, if you like renewable energy, then do that. Great. If you don't like fossil fuels, then don't do that. Right. If you like real estate, do that. If you don't like real estate, do business. But do something you like to do that's actually improving the world and you'll improve your taxes.

Tom, it's absolute pleasure having you on the show. That's 60 minutes of pure gold. If people want to get connected with you, if they want to get connected, wealthability, if they want to get a copy of any of your books, which I highly recommend, all of them, how would they get ahold of you?

Well, best way to get a hold of us, go to our website, wealthability.com, just schedule a call with us and we'll actually do a free review of your tax return. We'll let you know, give you a second opinion, you know, if you're worried, am I paying too much tax? And we'll tell you if you're doing good and there's not much you need to be doing, then we'll tell you. You know, I don't, I don't want any unhappy clients, so we will absolutely let you know. So do that. The books are available in the bookstore. They're available on Amazon. Where we're where we're where, as they say, wherever books are sold. Literally wherever books are sold. Tax free. Wealth is a top business book. So it's literally. And it's on audio.

Yeah.

So, you know, I think we're number 28 on audible when it comes to business books. So you have to listen to my voice for 12 hours, but other than that, it's great.

Hey, that's, that's a good 12 hour spent. Well, Tom, again, we thank you for joining us. We really appreciate it and I know that our listeners are gonna get just immense amount of gold from this episode. So again, thanks for joining us and tune again next time for Heading West.