Hello everybody, it's Sam from Financial Samurai and don't forget to do your taxes April 18th. If you can't finish them, file an extension. It's something that I've been doing for several years now. For the longest time, I've been a proponent of paying federal income taxes. Did you know that most of the federal income taxes are used to pay for Social Security, Defense, and major health care programs such as Medicaid and Medicare?

Those three items account for about 60% of where federal income taxes go. So someone has to pay these taxes, so it might as well be us able-bodied Americans. Further, a lot of our elders rely on Social Security to live. Social Security sometimes accounts for 30 to 50 plus percent of a retiree's income.

So if we don't pay our federal income taxes, it's kind of like disrespecting our elders. The one thing about paying taxes is that it takes so long to do your taxes. For me, it takes four to six hours on average. I've got to hunt for all the documents, the K-1s, the investment returns.

I've got to download them. I've got to reconcile them. And then I've got to go review all these documents multiple times so I don't make an error. Over the years, I've obviously made errors and I've had to rectify them. I've had to file an amendment and it's such a pain in the butt.

So just imagine if all of us Americans, who are Americans, can file our taxes in 30 minutes or less. How much more productivity our country would generate if so. Now imagine if you spend many hours doing your taxes and then you had to pay a tax bill. That's no fun.

I've been paying over six figures in income taxes for years now. And for a while it was okay, but after the pandemic started, there's just been so much work to do. Exhausted, taking care of kids and writing that I just want to take things down a notch. And the funny thing is, I kind of feel guilty paying less taxes because I've been doing it for so long.

And so when you change what you've been doing for so long, it just kind of feels weird. It's kind of like going from working for decades to not working. It'll feel weird. And the thing is, as someone who came to America in 1991 for high school, went to college, got a job, and now makes money as a solopreneur, I feel very fortunate.

I feel very fortunate to be able to grow up in this country, work, and make money and take care of a family. So not paying federal income taxes feels a little bad, right? You want to give back to the country that gave so much to you. So with my quest to take things down a notch and therefore pay less federal income taxes, I decided to reach out to several millionaires who feel little to zero guilt about paying zero federal income taxes.

And maybe you're one of these people and I'd love to hear your perspective in the comments in the post, or shoot me an email or whatnot. Now before I highlight these profiles, if you're unemployed, underemployed, or struggling to make ends meet right now, you shouldn't feel bad at all about not paying any federal income taxes.

We all go through ups and downs and the reason why we pay taxes is to help those who are temporarily down get through difficult situations. So we're brothers and sisters in arms and that's the way it should be. Please utilize the unemployment benefits, stimulus checks, and government subsidies to the maximum.

For many in 2020 and 2021, there were tough times. In 2022, better times so far. But who knows, maybe there's going to be a recession in the next 12 to 24 months with the way things are going. Also, if you're a traditional retiree who's worked 30, 40, 50 years, I don't think you should feel guilty paying any federal income taxes either.

You spent your entire career helping the federal government, helping our country. So thank you for your hard work. Further, there's a chance you might not even live long enough to see the benefits of all you've contributed. And I'm talking specifically about Social Security, which is interesting. If you're single, Social Security, if you die early, that money goes back to the government.

So that's kind of sad and a little bit unfair. So let's move on. Profile number one, 41 year old with two kids and a 3 million net worth. He doesn't feel guilty paying any federal income taxes. And here's his story in his words. I haven't paid federal income taxes for five years since I retired at age 36.

I don't feel guilty because I already paid over 500,000 in federal income taxes when I was working in I.T. Except for sending my kids to public school, we don't consume much of the government's resources. We also spend less than $50,000 a year. We pay property tax each year, which partly goes to fund our public school system, parks, sanitation, roads, fire department and police department.

In addition, we pay sales tax and a small amount in state tax. If the government was efficient, more efficient and less corrupt, maybe I'd be willing to pay more federal income taxes. However, when you have Elizabeth Warren claiming she was Native American to get ahead, to get power, to get money, you've got Donald Trump paying only $750 in taxes the year he got elected and no taxes for 10 out of 15 years.

And then congressional insider trading. Come on now. Why the hell would I ever feel guilty not paying federal income taxes when many of our leaders are so corrupt? So does he have a point, listeners? I think he does. We should lead by example. And if you look back in history, a lot of government officials have shirked on their tax responsibilities.

There was like Timothy Geithner and TurboTax Timmy, remember that time? A lot of issues going on with politicians. And the reason why is because in order to be a politician, you have to be really into yourself and really desire power. And that's just human nature. We understand that. And so if our leaders can't lead by example, why should their followers, we the people, lead by example?

So that's his point. The second profile is a 39 year old woman and a 41 year old man with no kids and a combined $1.6 million net worth. Here are her words. I haven't paid federal income taxes in the past two years. In addition, I get a 70% health care subsidy under the Affordable Care Act because our income is less than 200% of the federal poverty limit.

If we had no health care subsidy, a silver plan would cost over $2,000 a month. I know we're not poor, but I've got a chronical medical condition that prevents my husband and I from having kids or ever feeling fully financially secure. One medical mishap could really ruin us. My job was damaging both physically and mentally.

So my husband, who is one year older, left his day job to spend more time with me. Okay, so she's 39 and he's 40. I don't feel guilty that I don't pay federal income taxes because I already paid into the system for 17 years. I also have a chronic illness, which I don't think anybody would wish for in order to avoid paying federal income taxes or get health care subsidies.

Our passive income generates about $35,000 a year. We have deductions and credits to get our taxable income below $20,550 to pay no federal income taxes. So this is an interesting point because a lot of government subsidies is based off the percent of federal poverty level income. So for example, household size of one, you're considered impoverished at the poverty level if you earn $12,140 or less.

Now that is where you get maximum subsidies. And you can get subsidies up to 400% of federal poverty level. So again, for a household size of one, you can earn up to about $48,560 to get health care subsidies and other subsidies. And if you're a household size of four, you're considered in poverty at about $25,000.

And you could earn up to $100,000 and change to still get some subsidies. That's 400% of FPL. But after that, you don't get many subsidies. So I don't know if most Americans understand this. But this is the way the government is set up to help subsidize those who earn less or who are struggling with based on their household size.

And I kind of empathize with the health care subsidies because my family, we spend about $2,400 a month on health care premiums, $2,400 a month. And then we've got to do our co pays and co insurance. So we're protected from disaster case scenarios. But paying $2,400 a month after taxes is a lot.

So what we've done is we've structured that as a business expense for our business, and it's our family plan. So therefore, it should help in terms of lowering our effective cost. Okay, the final profile number three is a 43 year old man and a 39 year old woman with two children living abroad and a $2.5 million net worth.

Here are his words. We haven't paid federal income taxes for over seven years because we live abroad based on the foreign earned income exclusion amount of $108,700 in 2021 and $112,000 in 2022. We didn't have to pay any federal income taxes. Why should we we were not consuming any American resources.

Meanwhile, we actively did Roth IRA conversions when our income was down and strategically harvested capital losses to offset any capital gains. As a result, it was very easy to minimize or eliminate our federal income tax bill. We still had to pay some local taxes to the foreign government, as we should, but they were minimal.

When my wife and I plan to return to America, we will likely not have to pay federal income taxes either. The 2022 standard deduction amount is $25,900 for a married couple. We'll probably get a mortgage when we buy a house, which means we'll be able to reduce our income by the annual interest amount.

Further, we get child tax credits for two children under six. We will then strategically earn most of our income from investment income, which is taxed at a lower tax rate. Further, we'll work just enough to cover our estimated annual expenses of about $60,000 a year. With how bloated and inefficient the US government is, paying federal income taxes more than you should is a waste of money.

I don't feel guilty paying zero federal income taxes at all. So let me ask you folks, how many of you knew about the foreign earned income exclusion amount? And that was so high at $112,000 for 2022. That's pretty sweet. That's one of the reasons actually why I would want to work abroad.

And I've always wanted to work abroad since I lived abroad for 13 years of my life. My parents were in the foreign service. I lived in Japan, Malaysia, Philippines, Zambia. And I always thought how cool would it be to live in let's say China, Taiwan, Hong Kong, Singapore with income.

And now that I have income, passive income, and also online income, I can do it. However, we have two young children who just started school and we don't want to disrupt their lifestyles. So if you want to travel abroad and work abroad, do so before you have children or do so after your children maybe are over the age of five so they can remember their travels.

And I think children are pretty flexible and pretty accommodative moving around before about age 13 or 14. After 13 or 14, let's say high school, they want a steady environment so they can build those friendships and network and then better plan for their future, college, trade school or whatever it is.

But if you don't want to work and live abroad, here's another master plan. And that is to work and live abroad for the summer vacations your children have or the winter vacations. That's what we're planning on doing two to three months during the summer, visiting a new country, then two to four weeks, maybe going back to Hawaii and spending time with family during the holidays.

Sounds like a good plan. Let's see if we can pull it off. All right, I purposefully highlighted the perspective of three millionaires because they are all in the sweet spot for paying minimal to zero federal income taxes. In the past, I've wondered how millionaires can pay zero federal income taxes.

But I realized that so long as your liquid net worth is under about three to three and a half million, and you're not working a W two day job, or you aren't earning much from one, it's highly feasible. After your liquid net worth is over 3.5 million, it's much harder to game the system to pay less tax.

But of course, you could live, let's say in a $5 million mega mansion, and have your entire 3.5 million invested in growth stocks that pay no dividends. So no dividends means no income, you can have that 3.5 million invested in private companies that take 10 years to see a liquidity event.

Again, no income, and therefore no federal income taxes. So the key to paying less federal income taxes is having not too much investment income or W two income, and plenty of expenses. If you're a business owner, you also need the appropriate level of income per household size to receive government benefits and subsidies.

As the federal poverty limit chart shows in this post that I have. So for example, family of four, you can earn up to about $70,000 a year in income. And it'll give you a great opportunity to pay no federal income taxes. However, if you're a family of one, you could probably earn about 30, maybe 35,000 a year and also give you a great chance to pay zero federal income taxes.

Remember, there's the standard deduction for individuals and married couples. And also you can contribute the maximum 401k amount, which is 20,500 in 2022. And these random tax credits, so these limits and credits, they tend to go up over time, thanks to indexing to inflation. When you hear the statistic that 60% of working Americans didn't pay federal income taxes in 2020.

And about 57% of working Americans didn't pay federal income taxes in 2021. It'll probably bum you out if you spend hours paying your taxes and paying a big amount. But the flip side is that you have enough income to pay taxes. And these folks probably didn't have that income to pay enough federal income taxes.

What I actually find really interesting about the Urban Brookings Tax Policy Center forecast is that by the year 2031, it forecasts only 37% of tax units, tax units or households or individuals will pay federal income taxes. That's a huge improvement from the 60% we saw in 2020. And if so, this is a bullish data point for the future of our economy, because it means more Americans are making more money, being more productive, there's going to be more revenue to fund social safety nets and resources.

So one of the fears is, you know, more and more people don't pay any taxes, and they rely on fewer and fewer people to fund them. And so that, you know, leads to socialism, lack of innovation, productivity, and so forth. But the Tax Policy Center believes it's going to go the other way, with, let's say, 63% of Americans paying federal income taxes.

So if that happens, that's pretty good. I'm kind of skeptical it will happen, but let's just see. So let me ask you, do you feel less guilty paying less taxes in the future, after listening to this podcast or reading my post? For me, I do feel a little less guilty if I start paying less federal income taxes, because, well, if you work less, and you make less, then of course, you should pay less in federal income taxes.

However, I don't think I'll fully be able to overcome the guilt of paying zero federal income taxes as an able-bodied American. You know, I'm 45 years old, so that's middle age. I still have a lot to give, and I feel really good about paying a certain amount in federal income taxes, because there are people in need in this country.

It's the same thing with donating money to charity. You feel good helping other people, and so you feel good having skin in the game and contributing to your country. So if you can't contribute by paying federal income taxes for whatever reason, then the simple solution is to just contribute more of your time to help other people.

And I think as long as we can contribute our time or our money, our thoughts online to help other people, I think that's a great thing, and I look forward to hearing from your responses. Thanks so much, everyone. I'm going to spend the next four to six hours doing my taxes.

I've really waited to the last minute, and if you enjoyed this podcast, I'd love to hear from you, and I'd love a five-star review. Thanks so much.