Ways the ultra-rich legally avoid paying taxes



Revelations of Donald Trump’s 1995 tax returns probably shocked the majority of the U.S. tax-paying population but for the mega-rich, similar strategies of legally avoiding their ‘responsibilities’ to the IRS are just old news.  In fact, the ultra-wealthy families follow a standard and fail-proof way to go tax-free by either having a top-notched understanding of the U.S. tax laws or by simply hiring an expert wealth manager to find loopholes in the tax code.

So what are the ways that the ultra-rich do to legally avoid paying taxes?

1. Declaring income
The super wealthy population is proficient at convincingly declaring their lowest possible taxable income and other applicable tax rates. How? By paying themselves reasonably lower salaries and placing a bigger portion of their income in the form of dividends.

2. Strategic borrowing
It’s legally possible to employ borrowing tactics to earn money and at the same time, avoid capital gains. For instance, rich people take every opportunity they have to purchase stock options at fixed rates and eventually use these options as collaterals in order to borrow money. Borrowing becomes an earning opportunity—and these earnings pay off the loans.

3. Tax-deferred benefits
The super-rich also enjoys similar benefits when it comes to tax deferral for several retirement programs like IRAs and 401(k)s, just like ordinary people. Their massive wealth allows them to max these benefits out annually and at the same time enjoy the fullest advantage based on the limits allowed by the law.

4. Tax-free inheritance
Products like life insurance or an irrevocable trust can provide income and at the same time, protect the assets from taxes. Upon death, these assets will be handed over to their heirs free of estate tax. 

LOM Financial is an international financial services company that provides brokerage, custody, asset management, and corporate finance services to its primarily high net-worth individual and institutional customers around the world. For inquiries, please call (441) 295-3343.


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