Tax secrets the rich don't want you to know

For a lot of people and businesses taxes are going to be your single largest expense, yet there are many ways around them that most individuals just don’t know.

What are Taxes

Taxes are what the government charges the “people” in order for it to run. Not everyone pays the same in taxes. There are Federal taxes that pay for national things like the President, Military, Congress, etc. State taxes pay for things your local roads and governor. While County and city taxes pay for police, fire trucks, and schools. If you work a job the more money you make the more taxes you pay every year. Here’s how you can save money in taxes every year.

The Four Major Tax Brackets

How the Rich Don’t Pay Taxes

Here are some of the stratageies that millionaires and billionaires use to pay little to zero in taxes every year through these tax loopholes outlined below and how you can too.

#1. Tax Deductions

A deduction reduces the amount of a taxpayer's income that's subject to tax, generally reducing the amount of tax the individual may have to pay. Some common deductions businesses use are advertising, Travel expenses, home office, business use of car, business meals, etc. This is the most common way businesses avoid paying taxes by using write offs.

#2. Where you live

Where you live plays a huge role in how much you pay in taxes. One of the worst known places to live for taxes is California where you would have to pay a whopping 23% if you make 100k a year, Vs if you live in somewhere like Dubai you would pay 0% in taxes!

#3. Investments

This is one of the biggest ways that the top wealthiest people use to pay little in taxes. As an investor invests money into an asset and that asset grows in value they pay nothing in taxes. Say Warren buffet invests $1,000,000 into a stock and it doubles to $2,000,000. He pays 0% in taxes unless he decides to sell, when in that case it would be taxed as a long term capital gain at 20% which is still a lot less than what most people pay in taxes. Which is why this strategy is so powerful and why they almost never sell. What they do instead is illustrated in #4.

#4 Loan Against Assets

Instead of paying 20% for selling a stock at a capital gain, they use the strategy of getting a loan against their stocks and using that to buy more stocks, start another business, or even buy real estate which they can then once again get another loan on that asset. This is how they accumulate so much wealth tax free from their businesses.

5. Real Estate Tax Benefits

Real Estate is a big way the entrepreneurs are able to save on taxes. A common strategy they use is called a 1031 Exchange. Real estate also comes with a lot of tax incentives, deductions, and deprecation that you can use to lower your taxable income.