Wealth Podcast Post

Tax Planning with Tom Wheelwright

George Grombacher August 11, 2022

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Tax Planning with Tom Wheelwright

LifeBlood: We talked about tax planning, how to be an active participant versus silent, strategies for reducing income tax liability, and how to get started, with Tom Wheelwright, CPA, Best-selling author, and Founder and CEO of WealthAbility. Listen to learn why you should start thinking of the government as your partner!

You can learn more about Tom at WinWinWealthStrategy.com, Facebook, Twitter, YouTube and LinkedIn.

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Our Guests

George Grombacher

Tom Wheelwright

Episode Transcript

george grombacher 0:00
Come on one left foot. This is George G. And the time is right welcome today’s guest strong and powerful Tom wheelwright. Tom, are you ready to do this?

Unknown Speaker 0:18
Let’s do it. GEORGE ready to go?

george grombacher 0:20
Let’s go. Tom is a CPA. He’s a best selling author a worldwide authority on tax. He’s the founder and CEO of wealth ability. His newest book is The Win Win wealth strategy seven investments that government will pay you to make. Tom, I’m excited to have you on tell us a little about your personal life some more about your work and why you do what you do.

Unknown Speaker 0:41
That’s awesome. Thank you. So, so married to my children, two step children and two grandchildren. So I My mother taught me years ago, the grandchildren were the reward for being parents, and I totally understand that now. I’m as like you, I’m in Arizona. And love actually love. I don’t mind the heat. I love the heat. I love watersports. I love outdoors, any, any any game that has a ball. I’m good with it. And just And mostly what I love to do is what I’m doing right now, which is really doing my best to make taxes fun, easy and understandable. I do it because I love entrepreneurs. And I think entrepreneurs are the lifeblood of the world. And they’re under attack right now. And I think we need to let the world know just, you know, we’re not the enemy where we’re the good guys. And we’re here to help. We’re here to serve. We’re here to solve problems. And I’m just, I’ve long been a huge fan of entrepreneurs. I’m the son, grandson and great grandson of an entrepreneur. So it runs through my blood.

george grombacher 1:58
Well, I appreciate all that. And that’s one of the things you hear that the grandkids are just obviously children are wonderful, but the grandkids is just a whole nother level. So I’m glad to hear that that that’s been your experience,

Unknown Speaker 2:09
grandkids or dessert.

george grombacher 2:13
I think that’s awesome. All right. So the winwin wealth strategy, what was the motivator behind the book?

Unknown Speaker 2:19
You know, originally, what I want to do is actually show people that the tax law is not just a, an instruction guide to reducing taxes, which is what I pointed out in my first book tax free. Well, the what I want to point out in this book, was the tax law is really a guide to building wealth. And what’s what changed over the last couple of years. Before I actually started the actual sit down and write it was this whole controversial discussion about why don’t the rich pay taxes? Are they not paying enough taxes, we need to tax the rich. They’re not paying their fair share. They’re cheating. The IRS is commissioner who should know better saying that he could raise a trillion dollars for the against the deficit if only we had more people and more money, because the rich were cheating all the time. And I you know, and I take offense to all of that, because, you know, CPAs, where every rich person has a CPA, which means we’re either complicit complicit, or we’re stupid. If you if you think the rich are cheating. Absolutely. I mean, I don’t think there’s any other way to frame that. And so I’m going, You know what, somebody needs to stand up and say something on the other side of this, because those of us who are CPAs and been around for a while I’ve been CPA for over 40 years, know that the tax law is designed for people to pay less tax if all they do is what the government wants them to do. That’s how the tax law is designed. So it’s not a matter of cheating or loopholes or trying to get around something. It is a matter of here’s what the government wants done and anything the government wants done, they’re probably going to give a tax incentive, not just in the US, we looked at 15 countries around the world, and every country gives similar tax benefits.

george grombacher 4:19
So the way that that the tax rate is at any current moment in time is reflective of what the government’s motivations are.

Unknown Speaker 4:28
Yeah, and it’s more than the tax rate. So it’s really the base of tax, you know, what is taxed? So for example, until 1944 employees weren’t taxed at all, from 1944 to 1954 employees were only taxed on really if they made a whole lot of money. Okay, the basic you made a standard amount of money, an average amount of money, you weren’t taxed at all. That started a shift in the late 50s, early 60s. And in the early 60s, John F. Kennedy He, he looked at a recession was going on. He looked at manufacturing he goes, if we give a small incentive, like an investment tax credit for manufacturers to buy more equipment, will they do it? And it worked. And then fast forward to 1981. President Reagan’s in Ronald Reagan’s in this terrible economy where we have high inflation. And we have a recession, kind of like we have now. And Ronald Reagan said, Okay, well, we’re gonna let the Fed do their thing and raise interest rates, but we need to do is stimulate the economy. And so in 1981, he proposed and what was enacted was a tax reduction for real estate investing. And that was the very first big tax reduction for real estate. And then you fast forward all the way to 2017. You have a president White House, who’s a real estate developer, you have huge real estate tax benefits. Now you have a president that’s very geared towards renewable energy. And what do you know, we have big renewable energy tax benefits? So you know, this is not something new, it’s really okay. It what is that it’s not my tax rate that matters. It’s how much tax I pay, right? So it’s how much income is subject to that tax rate. And the more we do, that the government wants us to do the the less amount of our income that’s actually taxed to the point where there are some people who legitimately pay zero tax, not because the tax rates lower, but because they don’t have to show any income, because the government says they don’t have shown any income.

george grombacher 6:43
So this is it sounds like this is the reason why we engage in proactive tax planning, because we need to not necessarily stay in front of it, but least stay with it.

Unknown Speaker 6:56
Well, it’s that plus, you know, a lot of our clients, they’re little they’re, they’re afraid, right? They’re afraid of the IRS, they’re afraid Well, I don’t want to do something wrong. I don’t want the government’s my enemy. And the winwin. Well, strategy is all about No, the government doesn’t have to be your enemy, the government can. The government is your partner, and they can be a good partner. Okay. I mean, let’s face it, everybody knows first time you open your paycheck and you see FICA and withholding, you know, that the the government’s your partner, right? You don’t get to choose that what you do get to choose is, are you a silent partner? Or are you an active partner, and Southern partners pay high tax, go on their way, spend their money, save their money, whatever, active partners, pay less tax, do things that everyone wants done, create social good, credit, economic good, and everybody wins? It’s truly a win win wealth strategy, when you’re doing things the government wants you to do.

george grombacher 7:52
Got it. And this is public information. This is information that requires a trained eye to be able to sift through, how does it How does it work?

Unknown Speaker 8:06
Well, you know, that’s the thing is that, you know, there was the famous debate between Hillary Clinton and Donald Trump in 2016. Right when Hillary Clinton accuses Donald Trump of not paying tax, and he says, that’s because I’m smart. I mean, well, where Donald Trump was smart, was hiring good tax advisers. And what the rich have known for years is, taxes are their biggest single expense, they need to have good tax advisers, their tax advisor is an asset, okay? It’s not an expense as an asset. The average person doesn’t know that. Right? The average person believes that if you want it done, right, you do it yourself. And so I just felt like after 40 years, it was time for me to actually share what I know. And share that. Look, taxes don’t have to be that difficult. Unlike, you know, Albert Einstein said taxes, income tax, the most difficult thing the world understand, and when it doesn’t have to be? Yes, there’s a lot of details. It’s complex when you get into the nitty gritty. But the basics of it are very simple. You have one line in the tax law that says all incomes taxable unless we say it isn’t. You have one line of the tax law says nothing’s deductible unless we say it is. Yeah, some charts and tables tell you how much tax to pay. And literally 99% of the tax law is an instruction guide to reducing taxes and building wealth. So why are we afraid? You know, why do we let our clients be afraid of doing tax planning? What what I love what I found with the winwin wealth strategy is we have a network of CPAs we work with, and a lot of them have bought multiple copies of the book for their clients, because they want their clients to see that they can have the permission to do tax planning. A lot of people feel like they need permission. They’ve been taught that if you’re going to make money you need to pay tax. Well, let’s give him permission. So this book By going through the examples by going through the different laws of the different countries shows that you know what this is what the government actually wants, this is not something that we need to hide, this isn’t something we’re trying to escape tax. This is something where we’re simply trying to do follow the government’s programs and do what the government wants done. And once we do that, now that proactive tax planning makes sense, because we’re not tax, we’re not planning to reduce taxes for the sake of reducing taxes. We’re planning to reduce taxes for the sake of building wealth. And that should always be the goal behind serious tax planning, it should not be just the matter of reducing taxes, it should be the matter of building serious wealth that, you know, can be generational wealth.

george grombacher 10:48
Of the seven, do you have a favorite? How long do you expect them to be around the the stay open commonly for a long time, or they close quickly?

Unknown Speaker 10:57
So these have all been around for about 60 years. Okay, so they’re not new, a lot of them are unknown, for whatever reason. What I love is, I love that you don’t have to do all of them. Right? You can pick one, you can go, Well, I want to read for example, one’s real estate, I want to I want to learn about real estate, great, then learn about real estate do real estate, great. Or myself, I’m a business guy, I’m an entrepreneur, I love businesses, I own several businesses. And I’m going okay, I can get my tax benefits from business. What magic is when you actually combine a few of the different categories. So for example, let’s say I’ve got a business and in my business, I have an office building, that where I operate my business, so I got business, now I’ve got real estate, and I put solar energy on top of my office building. Okay, now I’m using three different government incentives, all that revolve around my business. So I don’t really have to go outside my wheelhouse, I don’t have to go outside what I know, I can simply utilize these other tax benefits these other incentives to do what I want to do anyway. And, you know, why not take advantage of serious government incentives, I mean, solar, for example, on a business, the government, in, in my example, paid about is paying about two thirds of the cost of that solar, which means my net reach mine return on investments, right around 22% and 22%, on a very low risk, I mean, we’re gonna still have around 300 days of sunshine, Arizona, every single year, it’s always been that way, it’s always gonna be that way. We’re, we’re always going to have electricity bills, we’re always going to need that electricity. And so now I don’t have to pay for it. Now, I don’t have to pay for electricity. That’s my return on investment. Instead, I get my electricity from my car, I get my electricity for my building, I get electricity for everything I need off of my solar panels. Why? How is that not like, the greatest thing since sliced bread?

george grombacher 13:10
That seems like a win win, which is why it’s in the book. There you go. In terms of, in terms of, of the mindset that he talked a little bit about how 99% of the tax code, it’s it’s not necessarily black and white, it’s open for interpretation. But people are afraid, because they don’t want to run afoul of this. They don’t want to get a letter in the mail that says I’ve been audited. I can’t go from zero to 60. Or maybe I can is it how do I sort of take baby steps towards being more comfortable engaged in this kind of planning?

Unknown Speaker 13:48
You know, first thing, frankly, is, you know, I need I need to understand why. Okay, so I need to send why is this why why does this work this way? And doesn’t make sense to me? Is it intuitive? Once I read it? Is it intuitive? And everybody who reads winwin? Well, strategy is gonna say, Oh, well, yeah, that makes sense. I mean, it’s like people read tax free wealth. They go, Well, yeah, I’m going but but Well, then why aren’t you doing it? Well, it’s because you need that aha moment, you need that, that? That fundamental shift, I’ll give you an example. So I’m on the stage at the Paris in Las Vegas with Robert Kiyosaki. Robert is one of my good friends. And he wrote the foreword to the winwin wealth strategy. And we’re on stage. And I remember this like 2012. And I said, so the tax law is really a series of stimulus packages for entrepreneurs, investors. Robert looks at me and he goes, really? And I said, Well, yeah, that’s really all it is. Well, the light went on, and ever since then, he’s been talking about debt and taxes being you know, that’s the key to to building wealth. Well, that’s what needs to happen. Light needs to go on. So that’s the very first thing that has to happen. The second thing is, you know, we really do have to have good advisors because if our adviser is afraid of the IRS, if our tax advisor afraid of the IRS, we’re going to be afraid of the IRS. So your tax advisor cannot be afraid of the IRS. You know, I always I remember an interview, I did a TV interview on the local television station channel three here a number of years ago. And I asked the, the interviewer, I said, so would you like to know how to never be afraid of an IRS audit? He said, Yeah. I said, Okay, repeat after me. I said, I will never speak to the IRS. Okay, it’s not your job, to speak to the IRS. That’s my job. So you have a good tax advisor, a good tax advisor will no way more than the IRS. I mean, these are not the best and the brightest. I mean, let’s face it, okay, they’re trying to do their job. But I just saw today that the IRS is hiring, like, by 470, new auditors, and their the pay range is from 38,000 to 68,000. I can’t hire somebody out of college for 68,000. So clearly, they’re getting them from somewhere else. Right? If you if you’re afraid of those guys, seriously, I mean, really, that’s who you’re afraid of. So that’s the, you know, that’s the issue. If you’re doing extravagant things, if you’re doing you know, you’re finding loopholes to work, you shouldn’t be afraid of the IRS. Right? The IRS is your enemy. But if you’re doing those things that the government says, Here’s plain in the law, this is what you should be doing. I mean, you’re taking bonus depreciation, the IRS never come after anybody for taking bonus depreciation. I’m taking 179 expense on my irises never come after somebody for taking 179 expense. You know, I’m donating cash to charity, oh, well, job. That’s a that’s a red flag. So, you know, you do those things, you don’t have to be, you know, in those gray areas, you don’t have to be flirting with the Dirty Dozen, right? The IRS is Dirty Dozen, although they have some things on there. And I’m going how are these Dirty Dozen. But at the same time you go, you don’t have to go there. There’s so many ways, you know, seven broad categories of investments that I talked about, which include things like retirement plans. I mean, there’s no, nobody in the world who thinks a retirement plan is nefarious? Right. And that one’s okay. But at the same time, you might you think real estates in the forest, you think businesses in the forest? You think farming snow fires? I mean, I don’t understand. So, you know, it’s really, why are you afraid? Yeah, we’re afraid of things we don’t know. And that we can’t control. Taxes are something that we can have an advisor, who knows, we can know, because we can learn from our advisor, we can learn from books like tax free wealth, and when when wealth and and then we can do those things that are comfortable for us. We don’t have to be afraid we can control, we literally ought to be able to control how much tax we spent. We that is within our control. You don’t have to be rich, to pay lower taxes, all you have to do is follow. Follow the rules, basically, you know, it’s it’s a bit like saying, Well, we’re in a game. And typically, most people, there’s a winner and loser the IRS wins and you lose.

Unknown Speaker 18:37
But this is a game where you can both win. So why not play the game? And why not play to win? You know, just because you win doesn’t mean that the government loses even the government actually makes money on these incentives, they make a ton of money. They wait make way more money on these incentives. I mean, think about this. Let’s say that the government decides to go out and build housing, which is like, a scary thought for any of us. Right? Not, I don’t think there’s a person in the world who would choose to live in government housing, if they had a choice, right. So if they did, though, let’s say you spend $100,000 to build a house. All right, so it cost them 100,000. Doors cost 700,000 doors. But what if they gave an incentive of 20,000 doors for somebody else to build $100,000 house? Well, now they get five times the production out of that $100,000 Instead of spending $100,000 themselves. So from a pure investment standpoint, if you look at the if you look at tax incentives, as an investment by the government, you go, Oh, this makes sense. I mean, think about as an investor wouldn’t be great. If you could make the rules. You could enforce the rules. You could judge the rules, you could change the rules, and your customers were prohibited from leaving you. That would be it. That would be a great place to be any investor would take that. That’s all. That’s all the government’s doing. They’re just saying, there are certain things that we really would like you to invest in, we will encourage that investment to such a point that, you know, will, will contribute to that, and in some cases, completely pay for it, just because we trust that we’re gonna get our money back in the future, because we are the long arm of law.

george grombacher 20:23
What a great way to look at it. The total shifted framing, but makes perfect sense. Thank you. Well, Tom, you’ve given us a lot, but the people are ready for that difference making tip? What do you have for them?

Unknown Speaker 20:34
You know, for me, it’s all you said earlier, it’s all about mindset. It’s not about tactics, we tend to focus a lot on tactics. And once we change the way we think about something and our view of the world, the whole world changes for us. And so rather than think of the government as the enemy, why don’t we think of them as our partner? And how would we want our partner to treat us and how would we want to treat our partner and I would say, look, recognize that the government’s your partner, and you can be a good partner, or you can be a bad partner. But you get to choose because they’re a silent partner. All right, you get to be you get to choose what you do. The government does get to choose what you do. So you know, be a good partner, play to win. make way more money, pay way less tax.

george grombacher 21:27
Whether that is great stuff that definitely gets Come on. Tom, thank you so much for coming on. Where can people learn more about you? How can they get a copy of the winwin wealth strategy,

Unknown Speaker 21:37
best place for a copy of the Win win all strategy is going to be Amazon. Easiest place it’s right there. Right now people already have their copies of the book. So go ahead and order on amazon.com and you want to reach us weldability.com Either if you’re a CPA and wants to learn how to serve your clients better or if you’re a an entrepreneur and you go I don’t think my CPA gets this. I need a new CPA. We’re happy to help you with that too.

george grombacher 22:04
Love it. If you enjoyed as much as I did, so time your appreciation and share today share with a friend who also appreciates good ideas, pick up a copy of the winwin wealth strategy seven investments that government will pay you to make at Amazon and then learn more about Tom and his work at wealth ability.com and see if it’s a good fit. Thanks. Good, Tom. Thank you. And until next time, keep fighting the good fight. It’s we’re all in this together.

Transcribed by https://otter.ai

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