10 Secret Places Rich People Hide Their Money
10 Secret Places Rich People Hide Their Money
Michelle L. Black Updated: Oct. 02, 2020
It's no secret that people with money like to shield their earnings from the IRS. What is often a secret, however, is how and where they do it.
No one enjoys paying taxes. So, no matter your income level, searching for new tax breaks can be a wise use of your time and energy. The ultra-wealthy, however, sometimes take steering clear of taxes to another level. Former treasury secretary Lawrence Summers, along with finance professor Natasha Sarin, recently released a research paper with some eye-opening claims. According to Summers and Sarin, the top 1 percent of taxpayers are projected to avoid more than $5 trillion in taxes between 2020 and 2029. Of course, the legal tax-reduction strategies used by rich people are worth reviewing and utilizing when possible. But it’s not a bad idea to learn about the illegal methods as well—so you can avoid them and their potential consequences. While we’re on the subject, check out some of the craziest tax deductions ever claimed.
Business Deductions
Starting a business (or multiple businesses) is a common way the rich aim to reduce their tax liability. But you don’t have to be wealthy to use this method, notes Jon Dulin, founder of Money Smart Guides. If you’ve been wanting to give entrepreneurship a try or even formalize a side hustle, this may be a good option. Of course, you have to go through the proper channels first: Creating a legal business entity typically requires a simple visit to the websites of your Secretary of State and the IRS.
Once you establish your business, tax deductions are just one of the benefits you may be able to enjoy. “For starters, you can write off losses the business incurs in the beginning and then use business expenses to offset business income to lower taxable income,” Dulin says. “
Additionally, you can put money into tax-deferred accounts, like solo 401(k) plans, which allow the business owner to save a lot more than traditional 401(k) plans since you are contributing both as the employer and the employee.” Wish you knew more about your 401(k)? Here are the answers to 10 common retirement savings and 401(k) questions.
Hiring family members
Another tactic the rich often use to shield income from taxes requires getting the family involved. If you have a business, you can use this strategy to your advantage, too, by hiring your spouse or your children and paying them a salary. The IRS even says that “one of the advantages of operating your own business is hiring family members.”
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