Loopholes are government incentives to promote public policy. They aren’t something shady or shifty. In fact, the government wants you to
take advantage of the legal tax loopholes that the tax law provides. So where are the loopholes? You’ll find most of the loopholes in the two areas that most support the economy—businesses and real estate investing. Businesses, and particularly small businesses, provide stimulus to the economy. A growing business employs people, hires consultants, invests in equipment, and just generally kick-starts a struggling economy. In fact, look at recent tax legislation. Does it seem like the tax cuts are un-fair? They are! That’s because the government wants to create a change in the economy and knows that the best way to do that is by creating opportunities for businesses to grow.
Real estate loopholes are another important part of public policy. Real estate investors provide housing for people who don’t currently own their own homes. The government has tried to provide that same kind of housing (called public housing), and the result is decaying tenements where no one wants to live. In fact, while property values have generally appreciated (when taking the long-range view), public housing values have generally gone down. The government therefore provides the loopholes in order to encourage real estate investors.
The first edition of Loopholes of the Rich was published in 2001. Since then, I’ve heard from thousands of people about how they have made more money and reduced their taxes by taking advantage of the tax loopholes that the government wants you to use. The loopholes are there! The government puts them there for us to use, but it’s up to us to find them.
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