Dan Novaes explains how a one-time tax savings (example: ~$1M on a $4M business sale) can grow substantially through compound returns over decades. Using a 30-year horizon and an 8% annual return, he claims the $1M saved could become roughly $10M by age 70, and frames relocating to Puerto Rico before a sale as a strategy entrepreneurs might use to capture such savings. The video uses simple round-number examples and ends with a call to follow for more tips.
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The concept of compounding interest is really important when we're talking about saving money on taxes and really anything in your life, but especially in these big outcomes. So let's say that you're an entrepreneur and you're going to sell your company as an example and you decided to move into Puerto Rico maybe a couple years before or something like that while you're building this business or you're thinking about building your next business. This is why you may want to do it. And we're just going to use some very simple numbers here so then you can see the impact. Say that you're going to sell your business for $4 million. The approximate tax that you're going to pay on this cap gains wise federally in the United States is going to be close to a million dollars, might be a little bit more, but I just want to keep very simple numbers here. And so effectively you're going to take home $3 million. This is just federal. If you live in a state with high income tax or income tax in any capacity, you're going to also pay another 10%. But you can effectively save one to $1.4 million depending on your state. Now just for the sake of math, let's just use the $1 million example and say that we're in 2025, you know, you're 40 years old and you're going to sell your business for $4 million. And so essentially that million dollars, what is that worth by the time you're 70? So 30 years over time with the concept of compounding interest. Now if you take 8% interest rate, which is a pretty reasonable conservative interest rate of compounding interest rate growth, what that will equal after 30 years of being applied to the market for this one year that you decided to take advantage of this mil, $10 million. The point is though, that $1 million in savings could be 10 million. And that's just one year. So think about it. The next business you build or the next opportunity, if you want to get more of this, follow us and get all of our hacks for free.
