To summarise how the rich always get richer while the middle class stays stuck comes down to one word, ‘debt’. The ability to take loans and use them to grow their wealth gives the rich an upper hand. On the other side, most middle-class people might not even qualify for a loan from the bank.
This Tiktok video by Jarod explains how he helps the rich buy mansions/houses and pay less in taxes.
@jarodangehr Here is how rich people are able to buy their house AND write off all of the interest #texashomes #texasrealestate #wealthymindset #wealthylifestyle #finaciallyfree
He says, “So most people would buy this house in Texas for 2.2 million, put 20% down, and then get a mortgage for $1.76 million.”
However, the IRS only allows you to write off the interest you pay on the 1st $1,000,000 of your mortgage.
Then he asks, “What if you’re rich? You pay $2.2 million for this house in cash, and then 90 days later, do a cash-out and refinance with the same $1.76 million.”
After the funds are available, take the full amount and invest it in taxable security, which means buying stocks in a brokerage account.
What changed? Jarod says, “Now the IRS will allow you to write off all of the interest you pay on an unlimited amount of money that you take out of your home.”
That’s not the best part, though. Since the invested money is in the market and not only the house, you can also expect a much higher rate of return, anywhere between 7 to 10% a year.
The base is almost double the 4% appreciation you would get if you left that money in your house.
The comments on the video are also interesting. One user wrote, “You gotta have money to make money, boys”. Jared replied to this, saying, “It definitely makes it easier, I think”
Another user pointed out, “I’m a CPA, and many of my clients do this. But you could only write off up to the amount of investment income not including long-term capital gains.”
Jared replied, “That’s correct! This was my main job at JPM Private Bank. You also need to be making a lot for this write-off to be worth it.”
What are your thoughts on how the rich are getting richer? Do you think a middle-class person could use this same trick in the book to save on taxes? Let us know in the comment below. And, if you found our content informative, share it with your family and friends.
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