No wonder he didn’t want to release his taxes. Yes, it’s true, Mitt Romney is different from you and me—he’s way, way richer. Than most everyone on the planet. I’m no fan of his and he deserves every bit of the outrage people are expressing. It’s not that he’s done anything illegal, it’s the smarminess of it all. But maybe there’s just a tiny, envious part in all of us that whispers, “I wish I could do it, too.” I don’t think that will carry him into office (at least, I hope not), but there are a few useful lessons to be learned from scrutinizing his strategies.
- Starting or being a partner in a successful business is the way to wealth. Okay, having a really successful parent doesn’t hurt, either, but if you don’t already have one, you probably can’t get one. Your own business offers some significant tax opportunities, both in deductions and in ways you can pay out money to yourself.
- Park your accounts where you’ll pay the least taxes. For most of us, this probably isn’t the Cayman Islands. But any of us can do some smart asset allocation, choosing to plunk the appropriate investments in either taxable or tax-deferred/nontaxable accounts, e.g., generally bonds in non-tax, capital gainers in taxable (at least for now) Of course, it’s a little more complicated than that. Maybe you should see a financial planner.
- Keep updated and scrutinize those returns—you can bet he has a phalanx of estate planners and tax attorneys who are on top of this. Things do change, and small changes in tax law can cost plenty. More than one set of eyes on a problem can come up with more solutions.
- Have an estate plan in place. Romney’s kids aren’t going to be wards of the state. I guarantee he’s got a complex and thoroughly thought-out estate plan. If you don’t have a will and all the appropriate powers of attorney, pick up the phone NOW and call your attorney. If you don’t know one, pick up the phone NOW and call me, I’ll give you some names.
- Buy and hold. Do you think Mitt checks his portfolio every day? He’s looking for long-term capital gains, which cost less in both taxes and trading costs.
- Don’t miss the itemized deductions. One of the most common mistakes I see is people who have a little side business and don’t take deductions for their costs. When I ask, I’m usually told, oh, I don’t want to depreciate my house. You don’t have to! It’s a different item! So deduct those 5,000 ink cartridges you buy, and the amount of phone service attributable to your business, etc., etc.
- Give to charity. I probably wouldn’t select the same charity he did, but at least he gave something. Actually, quite a lot. Do it. It’s only right.
- Don’t forget the State you live in. Each state has its own quirks and you, or your accountant and financial planner should review your individual picture to make sure you’re taking it all in (and complying with local law).
That should get you started. The Wall Street Journal had a pretty good article on this same topic (although they perpetuated the same misinformation about home offices.) Here’s a link—if you can’t get the full text, email me and I’ll send it to you through my subscription.
