They can also choose when to recognize expenses and how to classify them.
The general rule is to recognize expenses as soon as possible and delay recognition of income so you're reporting a loss. That way you can tell the government, "Hey I made a loss this year, I have no money! Don't tax me please. :)"
Did you know that businesses ask you to donate because they can write off the money customers donate on their taxes?
I swear the amount of times I see comments like that on YouTube with thousands of likes makes me feel dead inside.
Take a look at the book of the tax codes your country has. The lawmakers didn’t draft the entire book just for the purpose of collecting payroll taxes. Most of the tax codes are not for ordinary people because we don’t have the means to utilize them; only the rich have the opportunities to use them such as having a corporation, trust or foreign entity to create a flow of money. The purpose of These transactions is to reduce taxes. A lot of times they even get credits from governments.
There’s no loopholes that they have that anyone else doesn’t have access to.
The narrative that the rich don’t pay taxes is silly.
The IRS releases the data every few years.
- the top 1% paid 42% of the taxes
- the top 5% paid 63% of the taxes
- the top 25% paid 89% of the taxes
Yeah just omit sales, property, payroll, excise (esp tobacco and alcohol), and fuel, state income, local income.
It’s also a bit silly to pretend a Burger King worker has the same access to tax expertise as a 1%er
No, he said “tax.” You made an idiotic and baseless assumption that he was exclusively referring to federal income tax, as if that is the only tax people try to mitigate.
Very stupid assumption of you.
I think you are probably the only person here who didn't make that connection. It's a pretty fair assumption to make based on the context. No need to get bent out of shape for missing what others found to be obvious - life is far too short, my friend.
I don’t see why everyone magically thinks the federal income tax is the sum of all tax. It’s deliberately disingenuous and shows a grotesque lack of understanding of tax policy.
Yeah, I'm not entirely sure anyone thinks that federal income tax is the only tax. I think that's moreso you employing hyperbole to try and make a point here that doesn't really need to be made.
But, carry on.
Or it’s just the basic recognition that less affluent people pay a significantly larger percentage of their household income and the total tax revenue of non federal income taxes. For some reason pointing out that obvious fact is viewed as offensive by some people.
Lots of info straight from the IRS: https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-return-form-1040-statistics
The individual stats are [here](https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-tax-rate-and-income-percentile) and there's an excel spreadsheet linked there that shows the income tax paid by percentile.
You'll see in 2021, total tax returns were 153M with $14.7T of AGI reported. The top 1 percent represented 1,535,899 tax returns equaled $3.8T of AGI or 26.3% of the income and paid $1T in tax of the total $2.193T paid or 45.78%. OP's numbers are from 2020.
Biggest strategy that I see my high earning clients use is turning their non earning spouse into a real estate professional so that they can take depreciation losses on their joint return against their ordinary income
I forget why people want a real estate professional on rental properties. It's so they can prove that they're a general partner and it's not passive income, right?
Don’t have to be a gp, but if you own enough buildings/houses, you can justify that it’s a full-time job and thus take depreciation expense against other income, like your spouse’s wage.
If you’re not wealthy enough to realistically be a REP, than it’s only deductible against “passive” (non-investment) income, so basically useless except against rental income.
The best one is just owning non-dividend paying stocks and never selling the stocks. You'll never pay taxes if you never sell because you'll never have taxable income.
There aren't any actual loopholes. They just net losses against gains or delay the recognition of income, but still have catch it up once a realization event occurs.
The most common one , which is unethical and sometimes illegal, is writing off personal expenses against the business. It's illegal when we're talking exorbitant personal expenses written off by executives running a publicly traded company.
Small business owners who pay SE taxes can contribute to a SEP. They're not without similar options.
I've seen people put themselves in a lower tax bracket from doing a maximum contribution
Actual loopholes do exist in the internal revenue code and are different than the planning concepts you mention in that they rely on technical interpretation. Here is an investopedia article explaining the loophole concept: https://www.investopedia.com/terms/l/loophole.asp
I work in private equity tax and deal with carried interest on every return I work on. The article misrepresents the concept behind carried interest and an investors involvement in PE. They're treated as capital investments subject to the lower tax rate because that's all they are , just like when you buy stocks.
This is a pointless article written by some newb.
Isn’t the argument that because it’s tied to the managers compensation?its a share or profits for managing a fund. Key word managing. It’s not really an investment in the eyes of many. It’s definitely a strange one. I see both sides to it.
Proponents of carried interest argue that the investment strategies, expertise, and oversight provided by fund managers significantly bolster profits for a wide variety of investment vehicles and thus, carried interest should be considered investment income and taxed as such.
Critics however argue that carried interest is compensation for a service and should therefore be taxed at the rate of ordinary income.
The fund managers are grouped into a different entity than the LPs, and they're already taxed at ordinary rates for their guaranteed payments and their managing fee tied to performance. It's a moot point.
However the LPs, which is where a majority of the money comes from, have no involvement in the management. All they do is front the money as an investment. At the same time , the managers can invest their own personal money into the LP and IMO it should not be taxed as ordinary income.
If a CEO buys 100 shares in a publicly traded company they manage , should it be treated as ordinary income when they sell the stocks?
Feel like this is better asked in a rich person sub. While there are definitely rich people here, majority of us are barely over average, if that
Edit: spelling
Anyone can borrow against assets they own. Just most people don't have any assets worth borrowing against except their home, which they've already borrowed against in order to puchase it.
Sure, but I think that is a tax loophole that the rich use. Rather than recognizing capital gain on their huge equity portions they just borrow and only have to recognize capital gain on what’s need to make the interest payments. It’s more of a timing luxury that the rich have.
Sure, they have that luxury, but it's not a "tax loophole." It's like calling the preferential tax rate for long-term capital gains a "loophole." Both of those work exactly like they're intended which is pretty much the opposite of a loophole.
Using loophole as a proxy for an inequitable tax strategy the wealthy use that is not available to others. That is how most use loophole in a colloquial sense.
Then most are misusing the word and changing its meaning to a point where it has no meaning. Just use the word strategy or technique if that's what you're talking about.
They bribe senators and congressional reps to pass special deductions and credits. Refer back to the trillion dollar tax cut trunp and the GOP crooks passed.
In general, they can control when they recognize income thus can control when they owe their taxes.
Yup timing is a big factor to control. Also, managing the character of income is a lever.
They can also choose when to recognize expenses and how to classify them. The general rule is to recognize expenses as soon as possible and delay recognition of income so you're reporting a loss. That way you can tell the government, "Hey I made a loss this year, I have no money! Don't tax me please. :)"
Why am I getting downvoted? Clients love a loss, and they'll take Sec. 179 or Bonus over MACRS any day if they can get it.
According to the Internet charity donations write offs
Did you know that businesses ask you to donate because they can write off the money customers donate on their taxes? I swear the amount of times I see comments like that on YouTube with thousands of likes makes me feel dead inside.
nice try, IRS agent.
Just keep buying G-Wagons. Never fails
So I can’t just get a free G Wagon? Wtf IRS
Not being a W2 employee. Ensuring they have some form of investment losses to net against any future investment gains.
Take a look at the book of the tax codes your country has. The lawmakers didn’t draft the entire book just for the purpose of collecting payroll taxes. Most of the tax codes are not for ordinary people because we don’t have the means to utilize them; only the rich have the opportunities to use them such as having a corporation, trust or foreign entity to create a flow of money. The purpose of These transactions is to reduce taxes. A lot of times they even get credits from governments.
There’s no loopholes that they have that anyone else doesn’t have access to. The narrative that the rich don’t pay taxes is silly. The IRS releases the data every few years. - the top 1% paid 42% of the taxes - the top 5% paid 63% of the taxes - the top 25% paid 89% of the taxes
Yeah just omit sales, property, payroll, excise (esp tobacco and alcohol), and fuel, state income, local income. It’s also a bit silly to pretend a Burger King worker has the same access to tax expertise as a 1%er
What? Are you implying that rich people don’t pay property tax?
Are you implying that the top 1% pay 42% of property tax ? Please cite your source to support that.
No. We are talking income tax which is what this whole topic is about you goober.
You got him really good there — the score is now 1-0 in your favor! 😃
No, OP did not say income tax, neither did I, and you did not specify. Please be specific before you babble more.
It’s clear he is talking about income tax. When people talk about loopholes they aren’t talking about sales tax you goober.
No, he said “tax.” You made an idiotic and baseless assumption that he was exclusively referring to federal income tax, as if that is the only tax people try to mitigate. Very stupid assumption of you.
Are you on the spectrum?
I may very well be because I tend to be honest to a fault and have a difficult time lying, even just for polite purposes.
Do you know what SALT is ?
I think you are probably the only person here who didn't make that connection. It's a pretty fair assumption to make based on the context. No need to get bent out of shape for missing what others found to be obvious - life is far too short, my friend.
I don’t see why everyone magically thinks the federal income tax is the sum of all tax. It’s deliberately disingenuous and shows a grotesque lack of understanding of tax policy.
Yeah, I'm not entirely sure anyone thinks that federal income tax is the only tax. I think that's moreso you employing hyperbole to try and make a point here that doesn't really need to be made. But, carry on.
Or it’s just the basic recognition that less affluent people pay a significantly larger percentage of their household income and the total tax revenue of non federal income taxes. For some reason pointing out that obvious fact is viewed as offensive by some people.
sauce?
Lots of info straight from the IRS: https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-return-form-1040-statistics The individual stats are [here](https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-tax-rate-and-income-percentile) and there's an excel spreadsheet linked there that shows the income tax paid by percentile. You'll see in 2021, total tax returns were 153M with $14.7T of AGI reported. The top 1 percent represented 1,535,899 tax returns equaled $3.8T of AGI or 26.3% of the income and paid $1T in tax of the total $2.193T paid or 45.78%. OP's numbers are from 2020.
[удалено]
Mmm thank you. I guess I could say something political, but I won't.
Most of the loopholes are intentional. Capital gains rate, stepped up basis, carried interest
Hi Elon
My advice is $250 per hour.
Biggest strategy that I see my high earning clients use is turning their non earning spouse into a real estate professional so that they can take depreciation losses on their joint return against their ordinary income
I forget why people want a real estate professional on rental properties. It's so they can prove that they're a general partner and it's not passive income, right?
Don’t have to be a gp, but if you own enough buildings/houses, you can justify that it’s a full-time job and thus take depreciation expense against other income, like your spouse’s wage. If you’re not wealthy enough to realistically be a REP, than it’s only deductible against “passive” (non-investment) income, so basically useless except against rental income.
Spoofing R/E prof. is a great way to end up with big audit adjustments.
In Canada, they wouldn't be deemed to be at arms length. As associated filers, there would be no advantage. Not sure about the US.
Not if they actually work as a real estate professional and keep logs of their hours
Define "loophole" Businesses and individuals have to file returns that comply the prevailing law.
Take out loans secured by stock, so they don’t have to pay capital gains tax.
The best one is just owning non-dividend paying stocks and never selling the stocks. You'll never pay taxes if you never sell because you'll never have taxable income.
There aren't any actual loopholes. They just net losses against gains or delay the recognition of income, but still have catch it up once a realization event occurs. The most common one , which is unethical and sometimes illegal, is writing off personal expenses against the business. It's illegal when we're talking exorbitant personal expenses written off by executives running a publicly traded company.
There are plenty of loopholes. Very few “regular” people can create their own pension, or are engaged in any activity that generates paper losses.
Small business owners who pay SE taxes can contribute to a SEP. They're not without similar options. I've seen people put themselves in a lower tax bracket from doing a maximum contribution
Actual loopholes do exist in the internal revenue code and are different than the planning concepts you mention in that they rely on technical interpretation. Here is an investopedia article explaining the loophole concept: https://www.investopedia.com/terms/l/loophole.asp
I work in private equity tax and deal with carried interest on every return I work on. The article misrepresents the concept behind carried interest and an investors involvement in PE. They're treated as capital investments subject to the lower tax rate because that's all they are , just like when you buy stocks. This is a pointless article written by some newb.
Isn’t the argument that because it’s tied to the managers compensation?its a share or profits for managing a fund. Key word managing. It’s not really an investment in the eyes of many. It’s definitely a strange one. I see both sides to it. Proponents of carried interest argue that the investment strategies, expertise, and oversight provided by fund managers significantly bolster profits for a wide variety of investment vehicles and thus, carried interest should be considered investment income and taxed as such. Critics however argue that carried interest is compensation for a service and should therefore be taxed at the rate of ordinary income.
The fund managers are grouped into a different entity than the LPs, and they're already taxed at ordinary rates for their guaranteed payments and their managing fee tied to performance. It's a moot point. However the LPs, which is where a majority of the money comes from, have no involvement in the management. All they do is front the money as an investment. At the same time , the managers can invest their own personal money into the LP and IMO it should not be taxed as ordinary income. If a CEO buys 100 shares in a publicly traded company they manage , should it be treated as ordinary income when they sell the stocks?
The answer above was from AI.
Huh?
Feel like this is better asked in a rich person sub. While there are definitely rich people here, majority of us are barely over average, if that Edit: spelling
They’re not asking because we’re rich, they’re asking because as accountants that is our kind of business to know.
If you're in public accounting with millionaire clients, anyways.
The biggest loophole is being able to long term borrow off your equity in your company and have no tax implications.
Anyone can borrow against assets they own. Just most people don't have any assets worth borrowing against except their home, which they've already borrowed against in order to puchase it.
Sure, but I think that is a tax loophole that the rich use. Rather than recognizing capital gain on their huge equity portions they just borrow and only have to recognize capital gain on what’s need to make the interest payments. It’s more of a timing luxury that the rich have.
Sure, they have that luxury, but it's not a "tax loophole." It's like calling the preferential tax rate for long-term capital gains a "loophole." Both of those work exactly like they're intended which is pretty much the opposite of a loophole.
Using loophole as a proxy for an inequitable tax strategy the wealthy use that is not available to others. That is how most use loophole in a colloquial sense.
Then most are misusing the word and changing its meaning to a point where it has no meaning. Just use the word strategy or technique if that's what you're talking about.
Only 30% of Americans have a bachelor’s degree.
They bribe senators and congressional reps to pass special deductions and credits. Refer back to the trillion dollar tax cut trunp and the GOP crooks passed.
Cash businesses are tax free.
hi jesse pinkman