A high-income AI architect thought he’d found a clever way to cut his six-figure tax bill. Instead, the pitch was so shady it sent him running straight to personal finance guru Dave Ramsey.

On Ramsey’s “Everyday Millionaires” segment on “The Ramsey Show” earlier this week, caller Joe from Orlando said he and his wife, both 38, have earned about $1.1 million annually from W-2 wages and investment income over the past four years.

With an annual tax bill of roughly $300,000, he recently met with a tax advisory firm that suggested borrowing $550,000 to invest in a business — putting in $85,000 as an initial investment and using the remaining $450,000 as a tax deduction under what it described as a new Trump tax provision.

Joe said the proposal didn’t sit right with him because it required taking on debt to save on taxes, so he called Ramsey before moving forward.

‘Run Away From These People’

Ramsey didn’t hesitate. “Run away from these people as fast as you possibly can,” he said.

Joe explained that the advisers wanted to add him as an investor in a business he knew little about. He said they claimed “thousands” of taxpayers were already using the strategy, even though he had no idea whether the business would be profitable.

Ramsey said he suspected the advisers were using some form of a Section 179 tax deduction, which allows certain business investments to be deducted more quickly. He noted the provision is legitimate when used by someone who already runs the business and understands its cash flows — like a contractor buying a truck or a dentist buying a chair. But he warned that even if the tax strategy worked, the investment itself still had to make financial sense.

“If you had $550,000, would you invest $550,000 cash in this in order to get a $450,000 write-off?” Ramsey asked. “Obviously… we wouldn’t even do that, much less have the debt around it.”

“You got the write-off, but you’ve got the loan,” Ramsey added.

Tax Savings Don’t Make a Bad Investment Good

Ramsey told Joe that one lesson has stayed with him throughout his career.

“Never do a deal that doesn’t make economic sense and only makes tax savings sense,” he said. “Because it’s always gonna bite you in the butt.”

He recalled similar tax-driven investment strategies during the real estate boom of the 1980s. Investors were attracted by generous depreciation write-offs, but many properties failed to generate enough income to cover their debt. According to Ramsey, many of those deals ended in foreclosure and bankruptcy.

“I knew one guy at $110 million net worth, he’s bankrupt, gone,” Ramsey said. “And it’s this very principle they violated, is they were doing deals just for the tax write-off that were bad deals.”

A Tax Deduction Isn’t Free Money

Ramsey also pushed back against the idea that borrowing money simply because the interest is deductible is a smart financial move.

He explained that writing off an expense only reduces taxable income. It does not eliminate the cost of the expense itself.

“That’s trading a dollar for a quarter,” Ramsey said after explaining that paying $100,000 in interest might save someone roughly $37,000 in taxes. “That’s stupid on a sixth grade level.”

Ramsey closed with one final warning. “Run from these guys. They’re dangerous.”

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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