HOW THE RICH HIDE THEIR MONEY AND PAY NO TAX #Best Education Page #Online Earning

would you believe me if I told you that Warren Buffett pays less tax than his

secretary you may wonder how a billionaire pays fewer taxes than an

average income earning secretary and the answer is that there are two kinds of

taxpayers those who accept taxes as a natural part of life and pay whatever

the government tells them to and there were others who do everything in their

power to avoid paying taxes let's give each of these types of people a name we

will call the willful taxpayer Paul and the tax avoider Jack to Paul when the

government comes knocking at the end of the year he doesn't see it as a big deal

earning $40,000 a year Paul hands over his $15,000 worth of

income taxes and moves on about his life sure he would love to keep more of the

$15,000 but he sees paying taxes as a normal part of life jack on the other

hand is a medium-sized business owner who draws himself a salary from the tech

company he owns and built from scratch jack has over 50 employees working for

him and has seen his business grow year-over-year unlike Paul Jack despises

tax he thinks to himself how can the government who played no part in making

his business's success take such a huge chunk of his money for nothing to make

matters worse being taxed personally and by being a business owner jack is

subject to just about every tax imaginable such as personal income tax

sales tax excise tax property tax and investment tax with all these potential

taxes being applied to his income Jack decided to look into how big

corporations avoid paying taxes after hearing that in 2018

Amazon paid zero income tax even though they earned over two hundred billion

dollars in revenues that year determined to avoid losing a sizeable chunk of his

earnings to tax Jack looked into ways he could cut down on the amount of

corporate tax his business pays and reduce his own personal tax bill in his

hunt for tax strategies Jack came across the following techniques method number

one riding off expenses given that most rich individuals earn their fortunes

through a business this gives them the opportunity to write off expenses and

their taxable income you see most expenses you occur in your day-to-day

business operations can be written off against your income to lower your taxes

payable for example let's say you run a digital marketing agency and are in

$200,000 a year in revenues if you had no expenses then the whole $200,000

would be subject to tax however as most businesses incur expenses these costs

will reduce what amount of profits will be subject to tax for instance if you

have $100,000 worth of legitimate business expenses a year then this would

make your annual profit $100,000 instead of the $200,000 you earned in revenue

which would cut your taxes paid on your earnings by more than half

eligible expenses can include things like business meals office supplies new

laptops internet connections etc employee benefits staff training rent

and leases car expenses etc as the owner of the business if you decide to take a

trip for a conference to develop your skills in digital marketing you can

decide to write that off as well again this method of reducing your taxes

is only enjoyed by people who own businesses leaving little wonder as to

why most people who own businesses seem to be considerably richer than people

who work as employees method number two diverting income as of 2017 the United

States corporate income tax rate was reduced from thirty five percent to

twenty one percent and while this offered many companies Amazon included

the opportunity to significantly reduce their income tax payable many companies

still elect to recognize their income in countries with even lower tax rates for

instance the Cayman Islands has no income tax no corporate tax no estate or

inheritance tax and no gift tax or capital gains tax making it a pure tax

haven in short whatever you earn you keep of course without any calculations

it is obvious that this is the significant savings to any business who

can realize their income overseas but just how much would this save you if you

had set up a tax haven in this country let's say your business earned five

million dollars last year instead of paying an income tax of thirty five

percent for 1,750,000 dollars you would instead pay nothing and keep that almost

two million dollars for yourself besides allowing you to realize income tax free

the Kane have very strict banking laws designed

to protect banking privacy the country does not have any tax treaties with

other nations thus guarding the finances of its

offshore banking clients from the tax authorities of other countries

moreover offshore corporations in the Caymans are not required to submit

financial reports to any Caymans government authority an incorporation in

the Caymans is a very simple streamlined process with all these benefits

it's no wonder companies are flocking to these remote destinations to hide their

earnings method number three netting revenues against losses if you've ever

looked at the stats in favor of starting a business then you will know just how

bleak they can be the numbers show that 20% of small businesses fail in their

first year 30% of small businesses fail in their

second year and 50% of small businesses fail after five years in business

finally 70% of small business owners fail in their tenth year in business

with the chance of success in business being rather low there are still

numerous companies that succeed and make a fortune

for which they need to protect and one of the ways they do this is through the

use of loss carryforwards you see most businesses require a few years in

operation before they start turning a profit and in the years where business

is not exactly booming losses are bound to be incurred these losses while

unfortunate at the time are excellent tax avoidance tools for future periods

you see like expenses loss carryforwards can be netted against your earnings to

reduce your overall taxes payable meaning that less of your income is

subject to tax method number for issuing stock options another way businesses

reduce their taxes is by issuing stock options to its stake holders this method

is particularly convenient for businesses for two reasons number one it

is booked is an expense which will reduce profits and ultimately the amount

of money that is subject to tax and number two it does not result in a

cash outflow for the business you see when stocks are issued they are

booked as an expense for accounting purposes but no cash changes hands this

means that the company can reduce its profits through the expense and maintain

a strong cash position moreover companies that use this

strategy gain the benefits realized by incentivizing their shareholders to

further increase the stock price if you own stock in the company you worked for

wouldn't you put an extra effort in order to make the company's stock value

rise so that you could cash out your options for more money with these four

corporate tax strategies in mind jack is starting to feel more confident that he

can reduce or eliminate his corporate tax bill but he knows that he needs to

withdraw some income from his business in order to live and once that cash to

be minimally taxed so he decides to switch gears and look into ways he can

reduce his personal tax owing method number five leveraging geographical tax

laws for the past 20 years jack has grown his business in the heart of

Silicon Valley however his patience with living in the state with the highest

income tax rate in the United States has finally reached a tipping point with the

state income tax rate of 13.3% for the highest income earners Jack is seeing a

large chunk of his income being handed over to his state government with even

more being passed along at the federal level while federal taxes can't be

avoided Jack wonders what he can do to avoid

some of the other taxes he is being subject to that are eroding his personal

wealth Jack began researching other states with

lower income tax rates and was surprised to see that 7 states were income tax

free such as Texas Nevada and Florida meaning that he could save the 13.3% tax

he was currently paying and still enjoy the warmth of the Sun all year long as

Jack began looking into housing options in each of these three states he

wondered if there were other ways he could further reduce his personal tax

bill method number 6 investing in real estate part of the reason the rich

continue to get richer is that they make their money work for them and one of the

ways they do this is through real estate you see not only does owning real estate

increase your wealth by generating income but it also allows for the

reduction in taxes payable when you buy a property you are requiring a

depreciable asset and because the asset reduces in value over time from an

accounting perspective you are able to deduct depreciation and reduce the

amount of income that is subject to tax common deductible expenses include

repairs to the property and mortgage interest and the more money you spend on

expenses the more you can reduce your tax selling however once a property is

fully depreciated what do you do you sell that property and buy a new one

while selling property usually triggers tax there is such a thing as a 1031

exchange which allows you to defer the tax you

paid on selling the property if you buy a new property within 60 days of sale in

essence you can continue to depreciate your properties and then sell them in

perpetuity and never pay the tax while still being able to use the assets to

generate rental income method number seven deferring income while Jack has

looked into moving states and using real estate to reduce his taxable income he

still feels as though some of his income will need to be sheltered for tax and

another way he can do this is by deferring his income the most common tax

deferral vehicle is an individual retirement account or an IRA which

allows you to move your income into a fund and subject your earnings to tax at

a later date if you're an employee you probably use this type of account to

hold your savings and allow them to grow over time

however they also double as a solid tax avoidance strategy you see income earned

from employment is subject to tax unless that is you contribute the funds to your

IRA account in the year you contribute money into your IRA you will receive a

deduction from your taxable income or the amount you contributed this strategy

is particularly effective for high-income earners because it reduces

their tax bill during their highest earning years for instance if you earn

five hundred thousand dollars a year and are in the highest tax bracket your

income is probably being subjected to tax of up to 40% but what if you could

avoid the 40% tax and instead have part of your income only be taxed to 20%

well you can do just that using an IRA you see when you contribute to your IRA

you do not pay any tax in the year you contribute and instead pay tax when you

withdraw all the funds which is typically during retirement however

during retirement you'll probably be earning much less

than $500,000 meaning that the money you withdraw will be taxed at a lower rate

and the difference in tax rates is how much you would have saved by using this

income deferral technique with all these tax avoidance techniques in your

financial toolbox you only have one question left to

answer which type of tax payer will you be from here on out a Paul or a jack

thanks for watching

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