How Rich People Avoid Paying Taxes -Robert Kiyosaki


– Hey guys, welcome back to part two of Advanced Lessons in Millennial Money where we answer all your questions about taxes with Robert
Kiyosaki and Tom Wheelwright. If you missed part one you can watch it by clicking the link in
the description below. For the rest of us, let’s get started. Robert and Tom talk about the
three most important terms you should know if you want to understand how taxes can work for you. Let’s listen. – There are three basic accounting terms you must know in why I do this here. So when I have debt, okay, which is over here. Liability. The reason I want a lot of debt is because my hamburger business
is paying for my debt. What is that called? – It’s called amortization. So you’re paying down the
debt with other money. – That make sense to you? – Yeah. – So let’s say I have
$20 million in debt here. Every hamburger that’s being
sold is paying down my debt. Is that tax free? – That is. – It’s amortization but
if you’re on this side and you have a house is amortization tax. Well not really but who
pays for that amortization? – Well you pay for it. – Yeah, these guys here are
the suckers in this whole deal. They have a big house. That’s why most sports stars are bankrupt because they got the $20 million contract and they buy a big house
for mommy and daddy, right? – That’s right. – But they don’t get this bit here. The other word that is
important is this word here. And that’s called. – Appreciation. – Appreciation. So what
does that mean to you Tom? – Oh, well that what that means
is this is the asset column. It means that as the real
estate goes up in value, it’s appreciating and you get the benefit. What I love here is where the debt goes. It’s the bank’s money,
that’s the banks money, but you get the appreciation on your money and the bank’s money and
that’s what’s magic to me. – Yeah, so let’s say I have
one million dollars of my money in here, by levering up I
got six million dollars. Now this thing goes up in multiples of six but it’s the bank taking out that money. – They get none of it. – Debtors are winners, yeah. And then we have the third word. So you get the amortization, appreciation, and this is the magic word here that most people don’t understand. It’s depreciation. And this is where it gets tricky. See. Why is that actually both sides? – Well because what
happens is depreciation is a deduction for tax purposes but it’s no money out of your pocket. So, because of that,
what’s really happening is you’re lowering your taxes, you’re lowering your taxes
with the depreciation, okay, because your
paying net income right? So you lower your taxes with depreciation, which increases the amount of cash flow. – Yeah, so let me say this much. So let’s say I have $100,000 okay, that goes to taxes but
because I have depreciation, I don’t have to pay the $100,000 in taxes. So that means my income goes up but it also means my expenses went down. This is number one of all the things that’s hard to understand is this is simple. Everybody knows appreciation. Everybody knows amortization. I paid my car off, I
paid my student loan off. But this here is the trick here. See, depreciation means
instead of paying a 100,000 in taxes to the government
I keep the income but that’s why it goes up. – Let’s say that outside of this, let’s say you didn’t have this and you have all this income
from your business, right? Or from this business, either one. Okay. – This person can do it it too if– – This person sometimes can do it, okay. But this person can do it, this person. Let’s say that you have
all this income coming in, you’re paying all this tax. Let’s say you have $100,000 of tax. Okay, now you go out and
buy a piece of real estate. Well, why does the government
give you an incentive? Well because they’re–
– Not a house, now. Not your residence. – Not your personal residence. This is investment. So, this is housing for other people, or–
– Apartment housing. – Or this is commercial
property for a business. – This is an office building that I own. – Exactly, an office
building or hotel, okay. Any kind of business real estate. – That’s bought with debt too. – Now we add the debt. So, now let’s say that
we had a million dollars of your own money and five million dollars of the bank’s money. Well we get depreciation deduction, a percentage of the six million dollars. So the bank doesn’t get any of that. We get all of the depreciation
six million dollars. That could be as much as $500,000 a year and because we’ve got
that much depreciation, that’s just a reduction
of our tax expense. – Right, so it’s 500,000 extra in income but it’s actually called phantom income. – Right so what happens
is because we’ve got, now we have less income
for tax purposes, right? – We don’t have to pay the– – We have less income for tax purposes so now what happens is we
have to pay less taxes. Okay, because we’re
taxed on our net income. We’re taxed on our gross income
minus our business expenses and in this case the business
expense of depreciation is like magic because it’s
not money out of our pocket. We’re still appreciating. We’re still making money here and here and cashflow from the property. Okay and at the same time
we’re reducing our taxes. Well anytime you can reduce an expense, I’m an accountant and so
I love reducing expenses, and every time you reduce expenses it’s like putting money in your pocket because now you have more
that you didn’t spend. – Right, so this is the same number. So let’s say it’s 500,000, that means 500,000 in income
we didn’t have to spend, but it was caused by 500,000 in expenses you didn’t have to spend. So you paid nothing for taxes. – Oh my gosh, don’t
worry guys I’m still here but that was a really long
clip but very important. Next we discuss the most
important lesson of all and that’s financial education. Then, Tom and Robert wrap
up our discussion on taxes and where you get the most benefit. For example, a lot of millennials, the first thing they would
do when they get a check, is go spend it and I think
that is the big difference. – If their parent’s did the same thing. – Yes, because they didn’t
get the financial education but then I see you– – No, but I bet your economy
teacher does the same thing. – Yeah, and then I see people
like you that the moment, I mean it’s like you said what
do I do with all this money. I have to find the next investment, and it’s just that’s a
really impactful lesson. It’s not spending it,
it’s investing it again. – So as this goes up, I’ve
got to borrow more of this so I can buy another asset here so I can get more depreciation this way, more amortization, and more appreciation and I just get richer
and richer and richer. Is this legal, Tom? – It’s legal, and you know, I was just thinking as you
were talking about this, that, you know, the depreciation sometimes it’s got a cost recovery
or has other terms in different countries,
okay, and sometimes, and the rates are different and how much the depreciation is, but the concept is very consistent
from country to country. It’s one of the first things I look for when we go to a new country is how does depreciation
work in that country. Sometimes it works only on new property, sometimes it works on used property. You know, sometimes, you
have to build it yourself. So whatever it is the tax laws are there. Here’s what’s going on, we
talk about this all the time. The government’s your partner. Well if you’re unemployed your government’s taking
40% of your money. They’re your partner,
they’re a silent partner and they’re giving you
nothing back for that, okay. If you’re a small business
they’re taking 60% of it, but what happens is that if you start doing what the
government wants you to do, big business, investor,
investing energy, and– – Real estate. – and real estate. – Food, water. – Food, water, all those things. You start doing research, okay. You start new things the government wants they’ll say ‘Look, we
know that that’s risky. As your partner we will
contribute to that cost’ and that’s really all
that depreciation is. Depreciation is just the
government’s contribution, okay, to your real estate investment. That’s all it is. – Yeah and in kind of the cliche term is, between Tom and I, is I
want more phantom income. Phantom income means money
that stays in my pocket or doesn’t go out of my pocket. So the same money. – Right, and you make a good point that if you’re buying your own house, for example, you’re not
gonna get that tax benefit. There are some countries that have small tax
benefits for your own house. What they really want is
for you to build housing for other people, okay. Then you’re being generous and
then you get the tax benefit. – Thank you guys so much
for joining us on this video and I hope you guys loved
it just as much as I did and if you did give it a thumbs up, comment if you have any questions, and subscribe to our channel. (foreign language) Oh my gosh I almost fall asleep but that was a very long (laughs) clip. Oh my gosh I’m still awake. That was really. (laughs) Thank you guys so much for
joining us on this episode. I spit. (laughs) The most important lesson of all. Whoa. (laughs)

100 thoughts on “How Rich People Avoid Paying Taxes -Robert Kiyosaki

  1. So if I make a music record, write a book, make an online course and sell all of them, and get royalties, in what quadrant am I?

  2. Commercial loans, cash on cash, present value, bla bla bla. No one gets rich owning the bank money. Only in America can someone be considered rich through leverage. If the credit market shutdown for a week, large cap corps like GM won't be able to make payroll and would be out of business within days. It has happened at least two times already.

  3. Good video Robert.
    So how do you actually bring about depreciation and appreciation to benefit you??

  4. So I am kind of confused. First, is Robert and Tom talking about being a corporation and is assumed a c corp or s corp. If that is the case, the wouldn't you get double taxation on any profit in the corporation? Double taxed if he pays himself a salary. Correct? I want to set up a c corp for tax and liability purposes but not sure if I understand how to avoid double taxation. Even if I expense most of the profit, wouldn't I still be taxed on any profit I took as owner?

  5. Robert can speak for himself but it looks like he has hired a few people here to speak for him. I wonder which quadrant they work in and how much tax they pay.

  6. Which country allows you to deduct depreciation of your personal assets from your income? I live in India, here it is not like that

  7. I have a house and two mobile homes on my property that could be used for rental property but it they're in need of repair can opium help me there other peoples money

  8. Make the next video on multiple sources of income on the E and S side and the mindset of growth AKA the moving into a real estate or investor mindset

  9. Very very misleading as one thing that isn't talked about is that the debt is always secured against an asset and if that asset drops in value, say in a recession your house is worth less, the lender can force their money to be repaid and you have lost all your investment.

    This is shown as a riskless method but it isn't. This only work in an appreciating market.

  10. Where is the part where real estate taxes are talked about? I am still getting taxed just in a different way.

  11. When buying property, do you use your main business that has employees or set up a separate business for property or a separate business per property?

  12. Holly crap, this was the most educative video I've ever seen. I had to watch the depreciation part twice, but after I've understood I can never look at investments and taxes the same again.

  13. Haha. 300 m in debt for 80m positive net worth. I'm assuming some other shady numbers. You have good information but overall messed up idealogy. Your old enough it don't matter, but only socially conscious people can expect to rule the future. Your mentality would create too many headaches for my future.

  14. How'd you meet your connections and the people from your team?

    Did you find them online like specifically searching Google for what they are good at, and eventually meet them to collaborate with them,
    or did you first meet them personally when you were out and about,
    or did you find them through social media network?

  15. Let's say I buy a house or an apartment but instead of living there myself and paying taxes, I turn it into a hotel or a house for someone to live in there. Do I still pay taxes or not? Since you said as long as you invest in what the government wants (housing in this case) you pay no taxes? Did I understand this correctly or do I need to watch the video again?

  16. He is using the tax strategies as Donald Trump that is why the Dems want to get his tax records so that they can tell the world he pays no taxes which is absolutely true and absolutely legal.

  17. Can my brain take this info please!

    I been watching this now 10 times still dont understand

    I will watch till I learn

  18. Funny how the accounting classes I took in college don't even come close enough to teach you about the possibility of financial freedom. They only apply scenarios where you learn how to balance someone's else's business. Just prepping you to be an employee…Wow….

  19. Wow she said that was a long clip. Haha. That's funny. I listen to 14 hr lectures most every day. On a lot of different topics. I sure hope people have longer attention span than this. Great video tho.

  20. You don't have to understand everything about appreciation and depreciation.All you have to do is hire accountants that know the tax codes.That is what rich people do.The average person will never understand about the tax codes, the tax code book has hundreds of pages.

  21. This is like Greek to me. I hear you… but I don't hear you. But I'll keep playing this video till I get it. won't give up.

  22. I like these recent videos you guys are doing keep it up. I would like to see many more topics in other areas too…

  23. Hey, I get it…quit work, borrow other poeple's money, and have the middle class and poor…ie the ready dupes of the charlton and demagogues pay for it. Cool!

  24. They keep mentioning that a self employed business owner pays 60%. I have owned my own businesses for 20 years and haven’t paid even half that ever. Am I missing something?

  25. So how does one invest using good debt when there is pre-existing bad debt, eg. credit card and personal loan? Would the bad debt need to be paid back before buying investments?

  26. Watching this as an awaken soul the body language is so cringy robert tends to like to show who is the boss by forcefully cutting off his employee and starts saying random when buddy gets ramped up a topic

  27. Who do I communicate with or what classes are reliable for more information to learn these fundamentals taught?

  28. WHERE do you even start if you are a regular 9 to 5er making 40,000 a year. How do you get money to invest in 'real estate' or office buildings that create jobs. This is the part that never seems to be addressed. Its good to tell ppl what they should do, but its great to share basics on how to do it. I ve just started reading Rich Dad Poor Dad, hoping to gain some financial education.

  29. But if and when the property is sold the depreciation deduction now becomes income. Taxes must be paid on that amount.

  30. I thought a lot of time, for rental property or hotel, if you have to pay $500,000 of mortgage interest to the bank, and your rental income or hotel income is about $500,000, they already cancel each other out, and so you don't need to pay taxes… so why do you need the "depreciation cost" so that you pay no taxes? I can see that it is useful only when your rental income is greater than your mortgage interest expenses. In some parts of the world, your monthly mortgage payment is $30,000 and the rental income per month is $20,000 so you don't need the depreciation cost… but I guess if your mortgage payment is $3000 and you can take in rental income of $3500, then depreciation cost can help, especially after 10 or 15 years, when your mortgage interest expenses keep on dropping, while the rental income keep on rising

  31. if you go into the "B" or "I" quadrant, don't you have to have some amount of money and good credit score to begin with? I'd imagine at least $100,000 or even $200,000? So you have to be in the "E" or "S" quadrant first?

  32. I admire much of what Robert Kiyosaki says and does. However, I also know that government can and does take everything and with obfuscation will justify it in the end. Even real estate, large business, etc. is not immune from this beast. Furthermore, I do see how large and often inefficient organizations are hiring more and more people to do simple jobs that have been complicated by committees, ambivalent group think and excess regulations. But there is a game changer on the horizon….known as robotics, computerization and artificial intelligence. In the end, you cannot stop efficiency. You may delay it but you cannot stop it. Once we reach the point of Singularity….where artificial intelligence is equal to the human brain…it is going to be a game changer. I would not be surprised if the government or whatever ruling power at that time then decides that it is no longer necessary to give big tax breaks to big business creating many jobs. I think in the end, we all must optimize our independence. We all must somehow secure a basecamp that can provide us with the essentials in life necessary to withstand such things as massive civil unrest. Even Mr. Kiyosaki has somewhat acknowledging this by commenting on the wisdom of a Mormon tradition of having one year of food supply stored. We live in interesting times. And we are on the precipice of a paradigm shift known as the Post Industrial Revolution. But until that precipice is reached, the model of going to the right of the quadrant – i.e. big business and investor – is probably the current best avenue to take.

  33. I had a few questions from this video and part 1:
    How do you invest directly into companies providing housing, energy, food, water, etc to take advantage of tax breaks? It's not the same as setting up an online trading account and investing in company stocks, right?

    How do you get to be in the 'B' mindset? My guess is starting as an employee, get industry experience, start your own small company and grow from there. But is Robert suggesting a faster or more effective way?

    How do you accurately calculate the depreciation of your assets each year, to write off as a deductible?
    Cheers for any insights

  34. I had an internet retail biz for 10 years, operated at a loss every year and helped reduce my taxable income from my regular job, problem now is, amazon and the big boys own internet retail so it’s very difficult to own your own shopping cart

  35. Alright. I'am an employee and i wanna get "rich" (Have a decent life)
    i work for 1.3k euros a mounth
    From the 1.3k the company cut me off the 300 for insurance e.t.c
    I pay 450euro rent. I pay electricity , water , internet , petrol
    Where can i find the 200k to open a business and grow it up EXcept by getting them from bank , where also the bank wont accept give me 200k for 1k salary???

  36. I get the concepts you preach, but the truth is, you are only encouraging a broken system to further render the middle class broke, or we can say you're just making it more and more impossible for the poor dad to ever do better. The saddest thing about our government is that they reward people who skirt taxes and punish the ones who don't know any better. It's an example of the rich taking advantage of the poor and I don't know about you, but the government should be protecting the middle class, considering they are the ones that fund everything by paying taxes. It's really sad, poor dad paves the road so you can be rich.

  37. Depreciation helps a real estate asset in taxes look like it’s operating at a loss and takes the biggest portion compared to debt interest or other write off expenses but realistically it’s only a small fraction of the tax savings you receive. All the deductions a real estate asset receives are deducted from the income the property is generating. If you are not at a loss you don’t get a tax deduction as your gain will then be thrown back into your regular income depending on how you structure your entity. All real estate gurus talk about the benefit of real estate deductions but don’t mention the need to be operating at a loss to save on taxes…

  38. I read Rich dad poor dad back to cover… I 100% approve of his lessions. I grew up with similar life experiences. But I learned at young age about the stock market. Thank you Robert I will forsurely be buying more of your books. You are not a fraud. Those people need to realize it takes money to make money. And having your money work for you is a key fact.Time precious and its the only thing you can't get back. Without taking risk you will never see great rewards. Have a great day!

  39. Would it be possible to make a video in future showing the examples with numbers. Just to show how it all works, depreciation and appreciation. I believe it would show the importance of this even more. And also Tom mentioned that it's possible for an employee to take benefit of depreciation, but didn't explain how. It would be interesting to know that too. Thanks for your work, very much appreciated.

  40. Hello, I am Italian and I want to invest in real estate here in my country, but it looks like the taxes are very high for real estate investors in Italy. Could you do a research, seen you go from country to country, and tell me how is it possible to bring the taxes near to zero here as well?

  41. Can anyone break down these brackets meanings individually for me? Because I can’t lie I’m pretty lost with the explanation.

  42. Can I suggest that some one do an introductory course or video on Financial education which explains d financial statement its parts n how they work . remember "they dont this in school" pleazzzz send me a link to it if it already has been done

  43. There bank interest rates is very very very less so your formula is working . Banks are collecting deposits with less interest and making rich more richer and the politicians are fooling the common citizens by creating this type of loop holes in the income tax bill

  44. Mr. Kiosaki, thanks for the great video. I am new to this and hooked to pull the trigger. But my concern has been holding me back. My concern is: how, where do I get a loan (debt) to start this? With my credit card I won’t be able to get the money for the business. Thanks in advance.

  45. What is debt. All I know is it is money I have to pay to other people. How could it be useful. How can he joint his income and debt to real estate

  46. No one individual will understand the intent of this video without a more advanced education in this subject matter.
    Is it correct that as a property increases in value, a depreciation can occur, and if so..how does that work?

  47. Give me a real world example of depreciation , that would bring a person's tax to zero…..can you count on depreciation to be valid every year ??? How do you control or manipulate that…..again these videos need more explanation , too vague IMO

  48. I love these bideos, but her voice is so annoying that I cant. Ive been looking for other R.K. Videos without her talking

  49. Great video. Question: so depreciation works on investment properties but does not work for your personal residence. What if you buy a 4-Plex, live in one of the units, and are renting out the other three? Does it apply to that property then? Or would you get 75% of the depreciation value instead of 100%?

  50. There are probably very few situations where you get $500k deduction on a $$6 million real estate investment. Count on more like $200k

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