Self improvement includes mental and physical improvement, and developing financial resources. One very important aspect of this is minimizing the taxes you pay. This has two benefits. First, you are saving more of your money, which can be invested, used to purchase items you want, or kept as an emergency fund. Second, you are not contributing as much financially to any of the SJW projects, endless warmongering, and general incompetence of the government.

Let’s look at a few ways you can reduce your tax burden. Note that I live in the US, but many of these general ideas should work in most jurisdictions.

1. Purchase Online

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Most internet and mail order purchases are free from sales tax. Sales tax rates can be 10% or more. Much of what I purchase in an average year is available on sites like Amazon, Jet, and other smaller internet retailers. Saving 10% off your entire purchases for the year is quite easy, not to mention the time, gas, and effort you save by ordering items delivered straight to your door. Bonus tip: You can use sites like Retailmenot for discounts and 3Camel to compare prices before you buy.

2. Consider Downsizing

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Tax Free Houseboat

In the US, you are subject to local, state, and national taxes. Jurisdictions find a way to have an optimal mix of these taxes in order to extract the most resources from you.

For example, New Hampshire has no income tax, but one of the highest property tax rates in the nation. Florida is home to the largest retiree population in the US. Any plan to raise taxes from Floridians would do well to tax incomes lower and purchases higher (as the retirees have no income, but plenty of assets off which to live and make purchases). So, don’t you know it, Florida has a high sales and property tax.

If you live in a high property tax state, consider downsizing or moving into an apartment, which has a far lower property tax burden than a detached home. I actually know a guy who lived in a houseboat (it was permanently located in the same spot) and paid zero property taxes on his “house.”

3. Work In The Underground Economy

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Waiting…

I have a buddy in his late thirties who has been a bartender for over a decade. He’s tried quitting, and getting a “real job” but always comes back because he simply can’t beat the easy, tax free money.

If you work in a cash industry, including construction, service industry, blue collar trade like plumbing, electrician, etc, or for a small employer who will pay you in cash, you can work up to 30% less. Note that this method is the only one discussed here that may not be legal—you are technically required to report any income received on your annual income tax return, but if you are paid in cash, there’s less risk that anyone other than you knows your true earnings.

4. Become Self-Employed

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Self employment has a ton of benefits, including setting one’s own schedule, becoming anti-fragile, not having to deal with a human resources department, and more freedom. But it is one of the very best tax decisions one can make. Why? Because of expenses that are deducted from one’s gross income. Let’s just take a simple example.

Say you learn to be a plumber. You can go work for a repair or plumbing company, who will pay you a set wage. Or you could work independently as a self employed plumber. If you choose the latter, many of the costs you have with doing a plumbing job now become “deductible expenses.” Whereas in the first case, they are simply costs the employee must pay for with after-tax dollars.

You will need a set of tools, which you can buy, and the purchase of these tools is a business expense. You may need to wear a certain uniform or clothing to crawl underneath houses. You might need heavy duty coveralls, good work boots, etc. Need a telephone for people to make service calls? Need a tablet to map out the GPS addresses? Need a camera to document repairs and identify parts? All of these can be deductible expenses.

They are also items you can use when you are not on the clock and have real benefits to you. After a year or so, assuming business is good, you may wish to buy a truck to carry around your tools and supplies. Guess what? The purchase of that truck is a deductible expense. Even the cost of fuel and maintenance can be deductible. When you subtract all of these expenses from your gross income, you are paying far less tax.

Let’s assume you earned $50,000 plumbing, and bought a used $15,000 truck and $5,000 in other expenses for the year. You now pay taxes on $30,000 of income. And guess what? A $30,000 income is below average, and you are therefore taxed at a lower rate as well. So you now have more money and a truck paid for out of your plumbing earnings, while your plumbing buddy working for the man has to pay for his truck with his own money.

5. Work Abroad

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The USA is one of two nations (the other is the primitive African dictatorship of Eritrea) to tax income worldwide. But luckily, due to the lower cost of living in much of the developing world, one can work abroad and find a way to minimize or avoid paying taxes to the US. You may be able to exclude up to $100,800 of foreign income from taxation, provided you pay local taxes abroad and meet certain other requirements (note: the local taxes are always FAR less than what the US charges).

6. Invest in real estate

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Real estate investment has several tax-advantaged rules that make it a great investment, especially for those earning $50,000 a year or more.  There is a reason why so many highly compensated white collar workers like doctors and lawyers invest in real estate. It is one of the best ways to lower their tax bill. There are two main reasons: deductibility of expenses and depreciation.

(Note: The general ideas here are accurate, but I don’t want anyone audited or fined for not property following the rules, so please do your own research, as property investing is somewhat complex.)

Deductibility means that any expenses, including property taxes, insurance, maintenance, even interest on the mortgage used to purchase the property, are all deducted from its total income that year. The remaining amount is taxed. But wait. First a special further deduction only done for tax purposes is made. It’s called depreciation. This is a special federal tax rule where the value of the property is diminished by a certain percentage each year. The IRS describes it as “an annual allowance for wear and tear, deterioration, or obsolescence of the property.”

For example, a rental home has a depreciation amount of ~3.5% per year of the building value. It doesn’t matter if the home is actually deteriorating. Perhaps you just put in all new hardwood floors, which actually improve the condition of the home. You’re still entitled, just like any owner, to take this automatic deduction. So, assuming the home’s value was $100,000, there is an annual deduction of ~$3,500. This is the same as if you spent $3,500 of your money on deductible expenses, except you didn’t spend a penny!

A Hypothetical Example

Let’s say you decide to purchase a $100,000 investment home. First, any repairs or purchases made for maintenance of the home are deductible. Need a lawn mower? That’s a deductible expense. Need a tool set to make basic repairs? That’s also deductible. Need a blower, weed eater, landscape supplies, plants, gravel, etc.? All deductible.

Let’s say the rent is $500. At the end of the year, the total rental income is $6,000. After deducting expenses and interest payments, the net income is $3,000. And then we deduct another $3,500 in depreciation. The property now shows a net loss of $500! Zero tax is due, and in some cases, that loss can be used to offset income from another source.

Fast forward 20 years, and the home, due to inflation, is now worth $200,000. The mortgage has been paid off completely by the tenant. During that time you have paid no taxes on what would otherwise be $200,000 of income. And if the property generated taxable losses due to the depreciation “expense,” you even reduced your tax bill lower than it would have been had you not ever purchased the home.  And you also have a lawn mower, tool set, and a bunch of other items that your tenant paid for that are useful to you.

The Purpose of Money

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Money is a medium of exchange in order to buy things we need or want. If you go into a business that you enjoy, the purchase of things you wanted to buy anyway, now become deductible business expenses. They can be purchased with the proceeds of your business, not with your after tax income. Love photography and want thousands of dollars of photography equipment? Start a photography business. Love working on cars and having tools? Start your own mechanic business.

Do not start a sham business as this is not legal—it must be legitimate in order to deduct these expenses (i.e. you can’t just call yourself a motorcycle racer and then go buy a Harley).  But using these examples, one can acquire many things tax free, saving money and starving the beast at the same time. Legally.

Read Next: 16 Ways To Save More Money