If that sounds impossible to achieve, just look at the leaked tax returns of the wealthiest Americans that nonprofit news site ProPublica analyzed in 2021: Over several years, billionaires Elon Musk, Jeff Bezos, and Michael Bloomberg, among others, paid no federal income taxes at all. How do they do it?
Berkshire Hathaway paid more than $5 billion in federal taxes to the U.S. government last year. If 800 other companies matched Berkshire Hathaway's federal taxes, the government would receive approximately $4 trillion. The federal government collected $4.5 trillion from taxpayers in fiscal 2023.
Bill Gates pays an average effective federal income tax rate of 18%. The average american pays 25%. If Bill Gates is looking for ways to benefit society, he could simply pay his taxes.
The good news for investors is that Berkshire accounts for its tax liability on unrealized capital gains each quarter as a deferred tax expense.
Billionaires avoid these taxes by taking out special ultra-low-interest loans available only to them and using their assets as collateral. This income works just like any other kind of income, allowing ultrawealthy to purchase homes, yachts, or even, Twitter.
In 2021, the top 5% of earners — people with incomes $252,840 and above — collectively paid over $1.4 trillion in income taxes, or about 66% of the national total. If you include the top 10% — everyone who made at least $169,800 — that figure rises to $1.7 trillion, or 76% of the total.
“Companies are allowed to 'carry forward' excess losses to years with profits, with the old losses canceling out current earnings,” the report explains. That's how Tesla, which last year made $10 billion in profit on $96 billion in revenue, was able to pay no federal income tax.
According to Warren Buffett, selling Apple stocks made sense as Buffett believes stocks are trading above their intrinsic value and capital gains taxes are also likely to rise. This makes it advantageous to realize gains at the current lower tax rate as Buffett is trying to lock in profits before potential tax hikes.
Elon Musk has repeatedly bragged (or, perhaps, complained) that he'll pay more in federal taxes for 2021 than anyone has ever paid — about $11 billion. But Tesla apparently won't pay a cent.
Jeff Bezos isn't paying massive taxes on his wealth, and here's why: He doesn't rely on a big salary from Amazon. Taking just $80K a year avoids that brutal 37% tax rate (plus Social Security and Medicare taxes).
Elon Musk to pay record-breaking $12 billion tax bill. CNBC's Robert Frank reports on Elon Musk's tax bill which is the largest in history. Musk will pay a total of $12 billion for 2021.
The report concluded the rich were less likely to donate in settings with high economic inequality because they were concerned about losing their “privileged position.” A separate study published in Nature Aging found people living in poorer countries are more willing to donate to a hypothetical charity than those in ...
The requirement to pay taxes is not voluntary and is clearly set forth in section 1 of the Internal Revenue Code, which imposes a tax on the taxable income of individuals, estates, and trusts as determined by the tables set forth in that section. (Section 11 imposes a tax on the taxable income of corporations.)
The $100,000 Loophole.
With a larger below-market loan, the $100,000 loophole can save you from unwanted tax results. To qualify for this loophole, all outstanding loans between you and the borrower must aggregate to $100,000 or less.
According to the latest IRS data, the top 1% of earners paid 40.4% of all federal income taxes in 2022. This underscores the extent to which the burden of the income tax system falls on taxpayers from the highest income groups.
Walmart annual income taxes for 2023 were $5.724B, a 20.35% increase from 2022. Walmart annual income taxes for 2022 were $4.756B, a 30.65% decline from 2021.
A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.
Under current law, these gains in the value of stocks, bonds, businesses, real estate and other assets are not taxed unless the gain is “realized” through a sale. But the ultra-wealthy don't need to sell to benefit: they can live off low-cost loans secured against their growing fortunes.
Others will object to taxing the wealthy unless they actually use their gains, but many of the wealthiest actually do use their gains through the borrowing loophole: They get rich, borrow against those gains, consume the borrowing, and do not pay any tax.