Building wealth investing in startups

Building wealth is easier when taxes aren’t involved.

Over the decades, the top 1% of wealth in our society has used a variety of tax loopholes to expand their wealth at an amazing pace.The combination of access to invest in startup by non-accredited investors (thanks to the JOBS act) and the tax free returns and compounding (thanks to the PATH act) opens one of those tax loopholes to a wider audience. Here’s a good overview of what changed by Alan Patricof on TechCrunch.

While the media is buzzing about the ~$2 Million in tax savings 1202 provides, 1045 delivers much more impact. 1045 exchanges are like Real Estate’s 1031 exchanges but for startups. Invest in a qualified startup (as defined by 1202), earn multiples of your investment after five years (hopefully, probably 1 out of 10), rinse, repeat, and don’t pay taxes until the end (when tax deferral options are plentiful).

The compounding effect here is why your 401k, IRA, and HSA are such valuable tools for building wealth. Real estate investing has always been more accessible and with 1031 exchanges they’ll have more impact when it comes to building wealth. Now startup investing is becoming more accessible and with 1045 exchanges, it will also have more impact.

Want to learn more about my research and writing into private markets? Join my mailing list for early access.


Leave a Comment

%d bloggers like this: