The one percent have ways of getting around taxes, some of them not morally acceptable. However, you can learn from their methods and cut taxes in more acceptable ways.
Almost every corporation, politician, individual billionaire, and celebrity will have a foundation or two to their name. Foundations are a way to get around taxes while also earning profits. Corporations or individuals will set up foundations and channel their taxes through it. Of course, a portion of their “donations” to the foundation goes to running it. Most charitable foundations use 10-12 percent of donations for overhead costs, although more unscrupulous ones can spend 70-80 percent on it. A foundation can give their employees and higher-ups sizable wages. It’s a good way for the rich to employ their sons and daughters, giving them reputable positions and salaries.
Almost anyone can set up a foundation. All it takes is a lot of paperwork and a bit of patience. You can set up a charitable non-profit and channel your taxes through it, maybe even get the services of a grant writer and get money from other corporations or individuals for your cause. Of course, if you don’t want to deal with the details and scrutiny of having your own foundation, you can always just donate to a charitable institution. Corporations can donate up to 25 percent of their taxable income. Individuals can donate a maximum of $12,200 or $24,400 for married couples. Just make sure your donations are itemized and that the institutions you are donating to are legit.
A scheming billionaire will buy a painting for an obscure artist, have it appraised by an “expert” who values it at 20-30 times its purchase value, and then donate it to a museum for a big tax break. It took a while for the government to catch on to the scam, but art inflation is still going on to this day, just not at blatant levels. While it isn’t advisable to go to an art dealer and start buying paintings (you’ll also need an art expert who’s on the take), you can purchase actual items that increase in value, most notably gold. While precious metals won’t spike in value like fake art pieces, they constantly appreciate and sometimes spike when the economy is shaky.
You don’t need shell corporations and residency in the Bahamas to get away from taxes. A few states in the US won’t tax your income, whether wages or investment gains. Texas is the most famous of these tax havens, bringing both corporations and professionals. Other states that won’t tax your earnings are Alaska, Florida, Nevada, Washington, and Wyoming. While you might not want to move to these states immediately, you should consider doing so before you retire. Once you solely rely on your 401k and Social Security, getting most of your money becomes essential.
You don’t need sleazy backroom deals or schemes to get away from taxes. Take a page from the one percent playbook, but use legal (and moral) ways to do so.