Double Your Income: Stop Paying Taxes!
The easiest way to double your money—nearly overnight––actually has very little to do with investing. How much wealthier would you be if you could just keep the money you already make?
Forget an extra exemption, forget a marginally bigger return—give yourself a real tax cut, the one that reduces your yearly tax bill by 100%!
Correct—You Can Pay ZERO In Federal Taxes—And It’s Completely Legal.
Now, if you’re not an American citizen, this is simple. Just move to any one of numerous zero-tax jurisdictions out there—places like the Bahamas, Panama, or the British Virgin Islands. Easy does it.
But, if you too are from the land of Baseball, Budweiser and Bald Eagles, the path is slightly more involved.
Only two countries on the planet tax their citizens on worldwide income—Eritrea and the United States.
It doesn’t matter where you live, you still have to check in with Uncle Sam each year and pay your dues.
Until recently I was in this boat—living the last ten years as a resident of multiple countries across Europe.
Just living abroad has its tax advantages, mainly the foreign earned income exclusion, which makes the first $102,100 you earn tax-free. But for the rest of your earnings, with few exceptions, you’re in the same boat as everyone else living stateside.
The first time I read Robert Kiyosaki’s Cashflow Quadrant I remember being surprised by how much of the book was devoted to taxes. His point though, was that the wealthy don’t just spend all their time putting together investments, researching their next trade; they are equally dedicated to reducing their tax burden.
And it makes sense.
Just think of your personal situation, say for last year.
Which was greater—the net returns from your investment portfolio, or the amount of tax you paid to the government?
There’s a reason they call it a tax BURDEN, and the more I think about it the more astonished I am.
State and Federal combined, you’re lucky to get away with 40%. I have some friends in California and New York paying upwards of 50%––half their year––to taxes.
Just because it’s normal doesn’t make it any less shocking.
Look at this way—every year you work the whole month of January, all of February, the month of March, April, and all of May—for free. All of that money goes….somewhere. And if you’re doing well in life, go ahead and chuck in June’s paycheck too while you’re at it, just for good measure.
Makes today’s calendar date pretty depressing if you’re grinding it out in the office right now; one month down, just five more to go….
But There Is Another Way.
And it’s Fun!
Turns out there’s one place the IRS doesn’t necessarily have jurisdiction: US Territories. By virtue of their Territory Status, places like the U.S. Virgin Islands, American Samoa, Puerto Rico and Guam have their own independent tax departments.
This was of little help until recently, as their tax law mirrored existing federal IRS code.
But that story changed in 2012, when Puerto Rico passed what’s known as Act 20, The Export Services Act, and Act 22, the Individual Investor’s Act.
This Established Puerto Rico As The Only Existing Tax Haven On Earth For American Citizens.
It goes like this:
Like every good government, Puerto Rico spends more than it makes, and has done so for some time.
Needing cash, and looking for investment & love in all the right places, the territory took advantage of Internal Revenue Code: 26 U.S. Code s 933, which lays down the law: Puerto Rican residents, and their income, belong to the Puerto Rican Tax Authorities, not the IRS.
With the goal of attracting individuals and companies to relocate—bringing jobs, investment, consumer spending and other intangibles—Puerto Rico offered up a treasure chest of tax exemptions to those willing to make the move:
-As an individual under Act 22, you pay zero federal income tax of any kind, and zero Puerto Rican Income tax on interest, dividends, and capital gains.
-As a business under Act 22, companies pay zero tax on dividend distributions, and just 4% tax on their yearly net profit.
Meaning if you’re only source of income is investing, then under Act 22 you can legally earn a living 100% tax-free.
If, like myself, you’re an investor and a business owner/self-employed, then under Act 22 + Act 20, all investment related income is tax-free, as are all dividends you pay yourself from your Act 20 company.
You’ll only need to part with 4% of your company’s total net profit at the year’s end….a fair contribution.
Calculate the impact––if you only had to pay ~5% tax on your income over the next 5 or 10 years, how much money is that? Take the math and ask yourself,
“If someone offered me a check for that amount, and in return all I had to do was move to an American island in the Caribbean, would I really turn down that deal?”
Last year, I was living quite happily in the absolutely phenomenal state of Maine—4 minutes from the nearest piste and no plans to leave—but when I framed it that way, I just couldn’t say no.
Last week my Act 22 status was finalized. And I feel like a million tax-free bucks—liberated.
There are, naturally, some caveats:
-Upfront, one-off fees: $750 for Act 20, and $5,000 for Act 22.
-Get ready to be charitable: Act 22 requires an annual contribution of at least $5,000 to nonprofit entities operating in Puerto Rico. Keep it local and level-up your “pillar of the community” status!
-Also under Act 22, you’ll need to buy a residential property within 24 months, although no minimum price is dictated…so technically that $10,000 patch in the hills with 2 bricks and goat qualifies, no sweat.
-Act 20 requires you employ one Puerto Rican resident full time, and that means you’ll have to pony up some payroll taxes.
But in an interesting twist, it’s not too late to be employee of the month! As a new Puerto Rican resident, you can employ yourself!
-You have to actually move here—no fake moving! Both Puerto Rico and the IRS will verify that’s the case. There are a few ways of passing that test, but generally the most bulletproof is to just make sure you’re here on the island for at least 183 days a year—6 months plus a day.
The other 6, of course, should be spent skiing. It’s always winter somewhere.
The best caveat of all though, is the construction of the agreement itself:
This isn’t just a law on the books—you get a contract with the government, guaranteeing your tax exemptions for twenty years.
So if at some point the politicians change and the law is repealed, your status is protected by private contract.
And private contracts are specifically protected by The Obligation of Contracts Clause, Article I, of The US Constitution––Security wise, the legal equivalent to a presidential motorcade.
And aside from its tax-haven status, this place has some serious positives:
The people are vibrant. It’s cheap. The laxness towards the rules and the law—all the best of the libertarian Wild West.
And at least here on the west coast, crime is almost zero—most people don’t lock their doors.
Best of all, it’s the Caribbean. The air is ~80°F year-round, and so is the ocean.
And, it’s beautiful.
As I write this article, here’s my view:
And it’s still America. It won’t take you a month to find a place that sells clipboards—Walmarts are everywhere, along with most of the retail you’re accustomed to. So is English. So is the Dollar. You won’t need a visa, or even a passport.
Having moved 21 times over the last 9 years…. London, Lisbon, Rome….this place is among the very best.And why not relocate to a place you normally vacation?
Move to an island in the Caribbean, and every day is a post card; what a way to spend life!
Granted, moving is easier for some than others. If you already work from home, well lucky you can work from anywhere, come on down!
If not, take a look at The Four Hour Workweek by Timothy Ferriss.
The second half is basically a how-to on turning your office job into a work from home job, or the other option—starting a business that allows you to work from anywhere.
If you’re already an entrepreneur, this place is ripe with opportunity, and a fantastic labor pool. My little surfer town on the west coast is booming right now; why not add your company to the mix?
Not one to easily pull the trigger? I get it.
I’ll leave you the same words my very successful and very wise friend Mark once left me,
“The chief cause of unhappiness is trading what you truly want for what you can have at the moment. Talk to people approaching the end of their life––they don’t regret the things they’ve done––they regret the things they DIDN’T do.”
I don’t know what you really want, but I know this from doing it repeatedly:
There are few things in life more exhilarating than packing your world into three suitcases, boarding a plane to the unknown, and taking a shot.
K.457 © 2018 FatCat Consulting Limited. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from the publisher. This ...
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