The entire human clan chases one common thing: Money. It is a popular belief that money can buy you anything, even happiness these days. It is probably why; every rich individual is rich because of their money-saving tactics. They use all possible loopholes to not pay taxes, hide funds, and enjoy a lavish lifestyle, because well, money is valuable.
Wondering how they manage to dodge strict tax laws, government scrutiny, and save money via tax loopholes? Well, let’s find out!
1) So-called Side Businesses
It isn’t rare to see celebrities, kids of rich businessmen, or even businesswoman themselves start a small business on the side. The reason? Well, the ease of setting up a legal business has increased in the nation.
Also, the ease of putting money into tax-deferred accounts on behalf of the business is also very easy. Infact, you can write off business losses and use expenses to reduce your taxable income as well!
2) Family Hires
Well, when you have your business set up and have a rich household, it will not cost you much to hire a family member (even just for show).
The compensation paid to a family member will reduce your taxable income and your family member can even use tax-free accounts for investing the received salary.
3) Use of vacation Home
Investing in a vacation home is never unusual when it comes to the A-list rich crowd. Yet, the tax benefits are definitely a reason here.
If you rent your home for less than 14 days a year, you get earnings that are tax-free. Moreover, if the renting period is beyond 14 days, you are allowed to deduct expenses instead.
4) Real estate exchange
Playing the buy-sell strategy with real-estate apartments or similar estates can save you from tax implications. It is a rollover trick where you get to escape any taxes on your capital gains made on the sale.
5) Investing in Life insurance
Investing in life insurance has no upper limit. Plus, it is highly risk-free and can eliminate tax burden.
Moreover, any money taken out of any existing life insurance policy can be a tax-free loan for the family. So, you save taxes in multiple ways.
6) Secret accounts
There are many famous banks in the world known for having off-shore accounts of the rich. These accounts are set up in countries that are called ‘tax havens.’ It isn’t illegal but often the most common unethical practice for tax saving.
7) Shell corporations
A shell corporation is a business that exists mostly for the purpose of tax-saving. It does not have any operations or assets of its own.
Shell corporations are used to find loopholes in the law and safeguard money, assets, or secret operations of the rich. This also includes using multiple shell companies for transactions to not leave behind a trail.
8) Government bonds
A legal way to reap the benefits of tax saving is to invest in government bonds. The interest rate is decent, it is safe and the money you invest is almost 99% times tax-free. It is a win-win deal.
9) Jewelry Investments
Buying expensive jewelry is also a unique yet shady way that the rich use to not pay taxes. These assets are often transferred to family members or children without ever any taxes being filed (like gift tax). Who knew buying jewelry can save some taxes?
10) Donor-advised funds
Setting up a DAF can allow you to get tax exemption on the amount invested. Yes, the money has to go to charity but not immediately.
This fund with your transferred money can stay for a long-term period in a resting phase before you finally send it to a charity. However, your tax-exemption is claimed as soon as you put money into a DAF.
These are tricks used by the wealthy to become wealthier. Unethical and illegal ways are never the right way forward when it comes to your income. Yet, knowledge is always powerful!