NFL players make more in a year than most people will see in an entire lifetime.
Don’t believe me? In 2016:
Ben Roethlisberger made $17,750,000, Philip Rivers made $22,000,000, Tom Brady made $28,764,705, Von Miller made $25,100,000, and the New Orleans Saints paid Drew Brees a whopping $31,250,000.
Meanwhile, the average annual salary in America is $51,539. That means that you would have to work for more than 600 years to make as much as Drew Brees made last year.
Despite the fact that they make so much more than you do, sometimes it seems like they pay virtually nothing in taxes, doesn’t it? Now, the truth is that a lot of them use pretty shady, sometimes even bordering on illegal, methods to avoid paying taxes. From hiding money in offshore accounts to funneling money through shell companies, the rich are adept at finding ways to keep more of their money. The good news is that there are just as many billionaires using completely legal methods. Many of them simply use their own understanding or their accountant’s understanding of tax laws in order to take advantage of as many legal methods as possible. Today, we’re cracking the code and sharing some of those methods with you.
Here are 5 tax-reducing tips from the rich and famous:
- Use capital gains to your advantage. Short-term capital gains are taxed at a rate of 39.6% for the mega-rich. Meanwhile, long-term capital gains (those held for more than a year) are taxed at a maximum rate of 20%. Timing is everything and claiming these gains at the right time can make a huge difference.
- By incorporating and paying yourself a smaller salary, you reduce the amount of income you claim on your personal tax returns and enable yourself to take advantage of tax benefits for corporations.
- Invest in your retirement. The mega-rich often max out their IRAs and 401(k)s each year in order to take advantage of deferring taxes on that income.
- Borrow the right way. By essentially borrowing money from themselves, the mega-rich enable themselves to invest in new ventures, creating more income without paying extra income or taxes on loans. One example of this is borrowing against owned real estate. For example, if you own a property valued at $3 million and you can borrow 75% of the equity, you have access to $2,250,000 that you can invest in other things, tax-free.
- Avoid paying an estate tax. When you die and your assets are handed down to your heir(s), they will be subject to an estate tax, sometimes known as an inheritance tax or a death duty. But, by investing money into a trust fund in their heir’s name, many of the richest people in our country avoid paying this tax altogether.
There are many other tax loopholes that you may be able to take advantage of so it’s important that you work with a Certified Tax Coach to make sure you get the most bang for your buck, the legal way. Contact us today for a referral to one we’ve personally trained.
