I think part of what prompted this second line of questioning here was a discussion I had with a coworker. My coworker is also a real estate agent on the side and recently bought a new $65k Tesla that she uses as part of her realtor-ing and was talking about keeping records and her accountant making various deductions that made the car much more affordable. Now, this car is more than her annual salary at the place where we work together and, by her admission, she currently only sells a house every 2-3 months (she plans to quit this job when she's selling an average of 1 property per month). Assuming everything she told me is reasonably accurate, and since this is the US and almost everyone needs a car (esp. here in Florida), it made me wonder if there was something we could be doing that would allow us to fund or deduct things we were going to be doing anyway. She's the only person I've known personally that has been as forthright about some of the advantages to owning a business. Other people I've known have alluded to advantages, beyond simply selling one's product or service, but have never really spelled anything out. So that's why I ask here, as there is a breadth and depth of knowledge and a willingness to share it. Like, I've witnessed more open conversations about money here on this forum than I've ever experienced in real life. You see what I'm saying?
So the way you get those advantages is to own a business. The tax code has advantages for businesses that do not apply to regular people working W-2 jobs.
There are two primary disadvantages that go along with this, though.
1. It is a job. You have to dedicate time and energy and hustle to grow the business to make the money to get the tax breaks. The nice thing about investing is that if you don't feel like fretting about it, you can just choose something like VTSAX and set up automatic deductions and call it good -- IOW, it's something you can easily do on top of a regular job. We all have the same 24/7/365; it's just how you choose to divide it up.
2. You still have to spend the money to get the tax breaks. This is the bit that doesn't make a lot of sense to me if the goal is FIRE. Say you're a RE agent, you need a car to drive your clients around. You buy a $65K "nice" vehicle. Everyone is impressed! You must be rich if you can afford such a nice car! And the government pays for it! You must be pretty smart, too. It's a great way to impress people?
But are you wealthier? Sure, you get to deduct part of the costs of the car every year* and deduct the mileage you use in that job. But you've still spent $65K on a car! And you still pay the operating costs for that car for all the time you're not using it on the job! Sure, the tax deduction save you some money -- but you still had to work enough hours to earn the $65K to buy the car in the first place.
Note also that the tax breaks mean that you just don't pay taxes on that part of your income, which means the "savings" is whatever your marginal tax bracket is. IOW, if you get to deduct, say, $20K/yr from your taxes as business expenses, and you're in the $22% tax bracket, you have saved $4400. OTOH, again: you had to pay $65K for a car to get that $4400/yr.
IMO, those tax breaks are really helpful if your goal is to live a flashy lifestyle without paying for it all. OTOH, if your goal is to maximize savings and investment, not so much.
Now, there are situations when you can use the tax breaks to help grow your wealth. The obvious case is real estate investments, where you can take out a loan to buy a property that produces income, and then deduct the interest on the loan and costs of running/managing that property. That option really does let the tenant and the government buy a property for you, and you can ultimately use the income and equity for whatever you want. But a lot of people don't distinguish between that scenario and things like a flashy car and lifestyle improvements that don't add to the bottom line. And this also takes us back to point 1: it's still a job that requires a fair bit of your time if you want to do it properly -- at least until you get to the point you can hire someone to manage things for you.
Which brings us back to: there's no secret sauce or magic answer. Any path to wealth requires time and effort. You can absolutely use the tax code to help grow wealth through your own business --
if you're willing to dedicate your free time to developing and growing that business, and
if you don't let the lure of "tax deductions" lead you to spend more money than you need to.
*My understanding is when you buy an asset like a car, you don't get to deduct the whole $65K in the first year -- you have to amortize it over the useful life of the car; tax people have schedules for things like this. So say it's a 6-7-year useful life, that means you get to deduct $10K/year. And then you can fully deduct operating costs, like the mileage you drive. So maybe that car gets you $20K/yr in tax breaks, just for a round number.
