Top ways the rich stay away from taxes (and so could you!)

Budget101 Discussion List Archives General Budget & Finance Top ways the rich stay away from taxes (and so could you!)

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    • #309652
      Elliot130

      Whether or not you agree that the rich people in the U.S. should pay more taxes, the truth is that the Internal Revenue Service has allowed numerous tax code loopholes. Through these loopholes, the resourceful can save cash by working out tax exemptions.

      Because tax rate actually declines when annual income surpasses $1.5 million, there’s definitely something at work. It’s how the rich avoid taxes. Shouldn’t you get a bit of the tax break action?

      Using the right bonds will keep taxes away

      There are a ton of bonds to invest in, but the very best ones are the ones that are tax-free. For instance, local and state governments issue municipal bonds that are tax exempt though they get a lower interest rate. An individual may earn $100,000 on a bond that is taxed but only take home $60,000 after paying $40,000 in taxes.

      However, a tax-free bond might only bring in $80,000. Still, since it is not taxes, it will bring in more cash than the other bonds.

      How the rich keep away from taxes tip No. 2 – Capital gains

      The ultra-rich earn two-thirds of their income in long-term gains, which is why it is nice to know that the tax rate is lower for assets held longer than a year. The average tax rate settles around 16.6 percent, which is smaller than the amount a wife and husband with a $100,000 annual income would pay in taxes. With the normal 35 percent tax right for the highest tax bracket, it makes sense that these gains would be needed.

      You will either get capital gains or suffer capital losses whenever you purchase or sell an investment.

      Giving gifts is very important for staying away from taxes

      Giving a gift of cash needs that taxes get paid, but according to the IRS, there are certain exclusion amounts per individual per individual, per year. Cash gifts of $13,000 or less are not taxable, and neither are equivalent gifts of property given to a political organization or charity, or medical and educational expenditures. For those who have a family with multiple children, for instance, you can gift each $13,000, the money avoids taxes and remains in the family.

      Keep in mind that there is a lifetime cap on gift tax exemption, and it is $5 million. This figure is directly linked to the federal estate tax exemption. You may also give unlimited gifts of this nature to a wife.

      Consult with a tax professional for additional data.

      Charity makes it easier to keep away from taxes

      Giving to charity may start as an altruistic notion, but the tax exemptions involved make it an excellent escape for the rich. The greater your tax obligation, the less a charitable donation costs. If you’re making $35,000 per year in the 15 percent tax bracket and give $100 to charity, the actual cost after tax exempt savings is $85.

      But if you’re a high-earner in the 35 percent tax bracket, that $100 only costs $65. When items whose value has appreciated (such as artwork) are donated, the IRS permits the donor to deduct fair industry value as of the contribution date. This can translate into big-time profit.

      How the rich avoid taxes tip No. 5 – Vacation homes and yachts

      If you happen to have multiple homes and yachts, you too can take advantage of sizable tax loopholes. If you spend at least 14 days a year on a yacht in furnished quarters with kitchen and bathroom facilities, that yacht could be considered a home for tax purposes. Generally speaking, if a home appreciates in value over the course of numerous years and then is sold, profits can fall under the mantle of capital gains, and hence be taxed at a lower rate than other types of investment and salary income.

      Plus, homes rented out up to 14 days per year are exempt from having to be declared as income.

    • #441315
      drea

      @Elliot130 246461 wrote:

      Giving a gift of cash needs that taxes get paid, but according to the IRS, there are certain exclusion amounts per individual per individual, per year. Cash gifts of $13,000 or less are not taxable, and neither are equivalent gifts of property given to a political organization or charity, or medical and educational expenditures.

      So.. if I make $100,000 (in my dreams of course) and I give my kid $13,000 in their Bank account, I don’t have to pay income taxes on that revenue??

    • #446988
      lovemaui

      good ideas, thanks! I appreciate you taking the time to post this information!

    • #448253
      KatLeon

      Interesting read. Thanks

    • #448338
      var122

      Doesn’t look lie this within my reach any time soon 🙁

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Budget101 Discussion List Archives General Budget & Finance Top ways the rich stay away from taxes (and so could you!)