How the Rich People Avoid Paying Taxes 2023

If you think the question is how the rich people avoid paying taxes? You can understand the answer to this question through many points. A request to you. Keep reading this post in its entirety. Because at each point there are some things that you must know. Do you want to know how the Rich people avoid paying taxes? Keep reading.

Albert Einstein said it best: The hardest thing in the world to understand is the income tax! The rich have very expensive accounting experts that help them minimize just how much money they pay in taxes.

In the last decade, we’ve learned quite a lot about the field and this experience has allowed our companies and personal wealth to grow at an accelerated rate. Write all of these down because you don’t know when this information will come in handy. 

This isn’t financial advice, this is just what we’ve seen the rich use to grow their wealth and we believe it’s valuable for you to know about it too. Here are How the Rich People Avoid Paying Taxes.

1. Invest All of It

There are various ways in which you can invest in this world. For example, cryptocurrency is in vogue nowadays.

The rich don’t sit on cash unless they need it for something specific. Here’s the golden rule when it comes to paying taxes: Reinvested profit is not taxed! If your company was about to make 5 million dollars in profit and before the end of the fiscal year you choose to invest those 5 million back into the business in order to grow it, even more,

you don’t have to pay taxes on the 5 million. That’s how companies grow quickly. As the owner of the business, your net worth goes through the roof, with little to no tax to be paid. 

2. Everything You Use is Owned by a Business

There are separate rules for business, which means that if you are a businessman, your business will use another rule on money.

The second golden rule of tax optimization is DEDUCT EVERYTHING! Here’s the thing, if a business needs anything to function, the money you spend isn’t taxable. Do you want to buy yourself a new car? Well, the company needs the car as well,

so allow the company to buy it on the company’s dime and you get to use it since you need it to run the business. Here are some things rich people deduct: Any type of technology (hardware, software, etc.) Laptops, phones, gadgets, they’re all needed for the business. 

Travel – Hotels and flights are needed for business trips Home office & utilities like the internet, health insurance premiums Even going out to eat is a deductible expense The more things you can deduct, the less money there is to be taxed. 

 3. Move Somewhere with Little or No Tax

Nowadays, it has become a trend to flee to another country with money from one country.

People often underestimate just how big of an impact moving somewhere where they allowed you to keep your money would have on your life. This used to be the way to do it back in the day. You would move to Dubai, Monaco, the Cayman Islands, or the Bahamas as your main residence. 

These countries have no income tax. They don’t require you to pay any tax on the money you’re making. But there is a catch: it’s usually really expensive to move there, hence why the rich get an unfair advantage in life. The cost of living in Monaco is also incredibly high, but even with everything.

4. Send it Overseas

This is how Facebook, Google, and Apple do it. They set up companies in Ireland because of its tax-friendly environment. These companies own intellectual property. The US company needs to pay a licensing fee to Ireland company every year to keep developing and selling products in the US. 

This created a legit deductible expense for the US company. Through this scheme, they’re taking money out of the US economy and moving it to Ireland where they end up paying only 1% or even less with even more optimization. 

If you live in a low-income tax country, you can always set up a local company there and invoice your US subsidiary for rendered services minimizing the tax burden in the US. Companies like these tech giants would rather pay a fine than pay their taxes in full. The more you think about it, the more you realize A fine is a tax for doing something wrong. A tax is a fine for doing something right. 

Also Read: Top 15+ Easiest Ways to Make Money

5. Charitable Donations

It’s a good thing to donate, but you also need to make sure that the donation has reached the right place.

5th rule of taxes: Money donated to charity is not taxable! This is why every rich individual owns a foundation of sorts. In their defense, the state has always proven to be a poor manager of money, so instead of giving it the money to do with it as it pleases, you’re better off using a charitable foundation to make sure your money actually has a positive impact on your community. 

Where things get interesting, is that even these non-taxable foundations have deductible expenses. They need things to function. You can even donate land, vehicles, or other assets to a charity you own and it still counts as a charitable contribution. (also, as the head of the charity group, you can still use the same car that you donated on paper).

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6. Instead of a Salary They Take Equity

As Queen Bey put it Pay me in equity! You do this for 2 reasons Equity might increase in value over timeEquityisn’t taxable, unless you sell it. This is how Elon Musk got so rich so quickly. Believe it or not, Elon’s yearly salary is between $0 and $23,000. Yep, that’s how many dollars Elon earns per year for his role as CEO of Tesla. 

Based on the company’s performance, Elon gets new-minted stock instead. With Tesla being a public company, his net worth is skyrocketing and at this rate, it’s just a matter of time until he most likely will become the richest man in the world. 

7. Buying Art 

Here’s something only the rich know: The art trade is the last major unregulated market! When you buy a piece of art, it counts as an expense and if you’ve been following along, by now you should know that a good portion of expenses can be deductible. 

But as the rich know, there are layers to this. Let’s say you earn $1 million this year and you decide to blow it all on a $1 million painting. Since the expense matches the income, there’s 0 money left to be taxed. 3 years go by and now the same painting you own is worth 6 million dollars, or at least that’s what a professional appraiser says.

Instead of selling it for profit, you decide to donate it to a museum or better yet, to your art foundation. This means you just scored a $6 million tax-deductible. Assuming you’re still earning $1 million per year, you just saved an additional $5 million in nontaxable income; and that’s all legal. 

You can even go for another round if you wanted to. Let’s say you decide to sell the painting at the $6 million valuations, earning you $5 million in profit on that deal which normally should be taxed, right?!. The government, once again, comes to the aid of the super-wealthy.

If you take all the money you made from the sale, all 6 million, and buy more art with it, you don’t have to pay any taxes on the profit you’ve made from the sale.

8. Multiple Nationalities with No Fixed Residence

This is probably the shadiest and most confusing one on the list, but people have done this successfully everywhere around the world. When it comes to paying taxes, you must pay taxes in your country of residence – your home country. But what happens when you no longer have a home country?!

There are plenty of super-wealthy individuals that choose not to have a home country, despite owning properties all over the world. When institutions ask for a proof of address, they provide one from a property they own in Thailand or Bhutan that’s in a different language and overlooked by a government that has no intention of providing any additional information. 

Then there are the folks that buy a massive yacht and use it as their primary home. One day you’re parked on the coast of Monaco, the next you’re in international waters. Although we recommend having more than 1 nationality so you can reap the benefits of multiple passports, we don’t think that going full off the grid is a good long-term solution. 

9. Gift Money Away

Did you know you can gift things to people and the gift is non-taxable? Crazy right?! There is a $15,000 cap on the gift tho’ If the gift is worth less than the 15k, you don’t have to tell the IRS about it as it counts as a non-taxable event. You might think: cool,

but this is a video about really rich people and how they optimize to make the most out of it… $15k barely gets you into the Rolex game, gift-wise.. $15,000 might now sound like a lot, but there’s more room to maneuver in. As of 2021, the lifetime gift exemption is capped at 11.7 million dollars in the US, as long as each gift is less than 15k. 11.7 million dollars in tax-free wealth translates to a damn lot of Rolex watches. 

10. Hold it in Privacy Coins

Crypto is changing the game in terms of wealth transfers and wealth security. The fact that you can put a billion dollars on a stick put it in your pocket and fly to Singapore with it is mind-blowing. With the likes of Bitcoin & Ethereum, which are heavily regulated, measures are in place to provide transparency, link wallets to individuals, and make sure everyone is paying their fair share. 

By the way, profits from the sale of crypto are only taxed at 10% in most countries, still giving a better return than some other assets if you take into account the industry price appreciation.

Bitcoin is completely legal and it’s here to stay. But there’s more to it. The rise of blockchains has given way to a new breed of technological currencies called PRIVACY COINS. These can be exchanged, stored, and transferred completely anonymously. Privacy coins are not illegal,

but their legality remains subject to each jurisdiction. The most popular ones are Monero, Dash & ZCash. The belief is that once you make your money legally, you should be allowed to spend transact with it without other parties overlooking your transactions. 

11. You have no money but you have assets you can borrow against 

Here’s why most rich people are super-wealthy but cash-poor: In order to take cash out of your businesses you need to pay taxes on that money, so rich people choose to never take their money out. Just leave it as stocks or assets. But there are situations where you need some kind of cash.

That’s where the relationship you have with your bank comes into play.  Rich people walk into banks and say: Look at how much stuff I own, the cars, the assets, the stocks. I’m good for the money if it comes to it, so gimme a loan. The bank looks at the portfolio and gives wealthy individuals access to quick cash anytime they want. 

Since this is technically a loan they take, this isn’t their money, so they’re not required to pay tax, just to give it back. If all of it happens through a company and not from an individual perspective, this mutually beneficial relationship can go on for generations. 

READ ALSO: How to Change Country on Amazon Prime Video 

12. Filing for Bankruptcy

Filing for bankruptcy is expensive, tiresome, and complicated unless you’re super-rich and know how to get over it. Here’s how the process works. Let’s say you’re a pretty decent lawyer, making $250,000 per year. 

You own a $1 million house and managed to save an additional $1 million. You’re looking to go into business, so you decide to buy a $10 million office building because it will make you a lot of money.

You go to a bank, put your $1 million down, get a $9 million loan and buy the office building. 1 year later, a pandemic hits and all your tenants leave. You still owe the bank $9 million.

 To make matters worse, the building you bought now is worth only $5 million because nobody wants to buy an office building. Since the office building is owned by a company, our lawyer can now file for bankruptcy. 

Although they will take the office building away from him and will have a really hard time ever working with the bank again, bankruptcy laws prevent the bank from taking away the house or siphoning off his wages. 

This is the difference between being poor and being broke. Rich people can be broke, meaning that on paper their Networth might be 0 or even negative, but they’ll never be poor. 

Also, if you didn’t need the bank, paid it all out in cash, the financial loss would still count as tax-deductible, meaning that for the many years to come, you won’t need to pay taxes on your income until you catch up to the amount of money you lost. 

13. Claim Your Yacht as Your Second Home

 Here’s an interesting observation when it comes to taxes: Governments love homeowners and despise the super-wealthy who like to splurge, they really want to tax these show-offs – #taxtherich it’s actually trending all around the internet right now. 

So what do rich people do to combat this? They claim their yachts as secondary homes to get better taxation rates. At the end of the day, it’s true, they’re using it as a holiday home when they’re traveling to Mykonos during the Summer. 

As long as the boat has sleeping, cooking, and toilet facilities, then the IRS treats the boat as a second home. Motor-homes can also be used in the same way But how many super-rich people are buying motor-homes anyway?! 

14: Using a Trust to Avoid Paying Estate Tax

Among the rich, there’s a funny saying that goes like this: A person doesn’t know how much he has to be thankful for until he has to pay taxes on it. Unless you’re rich you might now be aware of this If you’re rich and you die, the state taxes up to 45% of the wealth you want to pass down to your children.

It’s called an estate tax. By the way, Here’s important information The US qualifies you as rich if you’re worth more than $11.7 million! For everyone worth less than that there isn’t an estate tax or it is considerably lower.

 $11.7 million might sound like a lot of money to the average person, but we’re living in the realms of billionaires and we’re likely going to have our first trillionaire in this lifetime. With inflation the way it’s going right now, everyone will be a millionaire eventually.

The way rich people are structuring their wealth in order to keep the state from taxing it away is by using TRUSTS. If you put things into a trust then, provided certain conditions are met, they no longer belong to you, so it’s not yours to pass them down onto your children. 

Once the property is held in trust,  it’s outside anyone’s estate for inheritance tax purposes. It also protects you from putting all your wealth under the name of your child because they could easily blow through it if they decided to,

so the control remains with you while you’re alive. You can also set up smart-contract-like rules where your children get gradual access to the assets in the trust under certain conditions like when they turn 25 or graduate school. 

15. Depreciating Assets on Paper to Outweigh the Cash Income

Accounting is the language of money so if you want to be rich you better learn how to speak it, or at least understand it. In simple terms Depreciation is a deduction that enables a business to write off the cost of the investment it buys, be it a car, a machine, and so on.

 It’s spread out for the life of the investment.  The reason behind spreading deductions for the cost of property is to enable a business to be in a position to replace the property at the end of its life. Now let’s say you buy a factory for 10 million dollars and intend to use it to make those ugly-looking face shields for the next 10 years. 

From an accounting perspective, every year, the value of the factory will be depreciating by $1 million. If you make less than $1 million per year from selling your face shields, there is no profit left to tax. Equipment, vehicles, and even offices can be depreciated from an accounting perspective allowing you to keep paying less and less tax. 

If people knew how to optimize their money, their businesses would grow at much faster rates, allowing them to hire more people and create better products. You are under no obligation to pay more taxes than is legally required! Taxation was meant to help the poor, but since everything is privatized and optimized for profit it doesn’t work the way it was intended. 

We have a large audience from everywhere around the world so we’re curious to know What % do you pay in taxes in your country? Let us know in the comments, it will for sure make for an interesting conversation!

You all know the 15 points that were made for this question How to get rich people avoid paying taxes but a bonus point is highlighted for you must read.


Taxes are high because of inefficiencies

 In really everyone wants to pay their fair share, the problem arises in the management of those taxes and the variation in terms of how much one should pay. You don’t want to pay taxes when your government doesn’t use it to benefit you. 

This is one of the reasons why the people of Switzerland, are actually fine with the high level of taxes they pay, it’s because the government does with the contribution what a government should do. Education is free and qualitative, Hospitals are free and state of the art good, the environment is clean and blossoming and the overall population is quite happy. 

Compare that with the way corrupt governments choose to spend their money. The bribes, the roads… the corrupt system. It all breaks your spirit because it feels like you’re being played. It’s 2021, we have mind-blowing technology available to us,

why can’t we choose where our money goes through an app on our screen? Of course, there needs to be a portion that goes to the military and security and healthcare but where does the bulk of it go? Why can’t you choose to deploy your resources to the school in your neighborhood, or fix the roads in your city?

 This is why we believe blockchain will have a massive impact on society. It removes the need for middlemen to make decisions on your behalf. There can be a smart contract written where a small percentage of your income gets automatically attributed to the causes you care about with full transparency and control. 

How much is your government wasting? How many people are employed only to push papers from one office to another? We can’t wait for it to be all automated. We need leaders and transparent technology more than we need politicians and governments are up for disruption. The way we pay our taxes will change this decade and we can’t wait for the system to be fully optimized. 

How the rich people avoid paying taxes The answer to this question is given to you in very simple language. Hopefully, you have gained a lot of knowledge about how the Rich people avoid paying taxes.

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