Rich people reduce taxable income through strategic investments in appreciating assets (real estate, stocks, art) that aren't taxed until sold, borrowing against these assets for cash, maximizing tax-advantaged accounts (401k, HSA), claiming extensive business/depreciation deductions, utilizing trusts, and charitable giving, often structuring wealth to grow untaxed until passed to heirs via "step-up in basis". Key methods involve deferring income, converting it to lower-taxed capital gains, and leveraging business structures for write-offs.
Wealthy family buys stocks, bonds, real estate, art, or other high-value assets. It strategically holds on to these assets and allows them to grow in value. The family won't owe income tax on the growth in the assets' value unless it sells them and makes a profit.
Top 10 year-end tax planning tips for high earners in 2025
We thought Michigan residents might be interesting in learning how Facebook founder Mark Zuckerberg and several company insiders are using a legal tactic called a “grantor-retained annuity trust” to avoid paying hundreds of millions of dollars in estate and gift taxes on their Facebook shares.
The Bezos $2.7 billion income tax payment, Liu noted in her Forbes analysis, represented only 4.5 percent of the 2024 increase in his personal net worth — approximately $60 billion — and barely more than 1 percent of his overall $230 billion net worth. Props to Liu for her reporting.
In some years, billionaires such as Jeff Bezos, Elon Musk and George Soros paid no federal income taxes at all. Billionaires avoid these taxes by taking out special ultra-low-interest loans available only to them and using their assets as collateral.
Googlers call Zuckerberg's approach the 80 percent rule
She calls this idea the 80 percent rule. It states you should schedule only about 80 percent of your days. Leave 20 percent open to absorb whatever craziness comes up.
The One, Big, Beautiful Bill will cut taxes for Americans earning under $50,000 by 14.9%. 66% of The One, Big, Beautiful Bill's tax cuts benefit families making less than $500,000. The tax cuts and economic growth from The One, Big, Beautiful Bill will increase the take- home pay for a family of four by $10,900.
The IRS 7-year rule primarily applies to keeping records for claiming a deduction for bad debts or losses from worthless securities, allowing a longer period to file for a credit or refund, but it's not a universal audit limit; it's often a recommended safe buffer for general record-keeping, with the standard IRS audit period usually being 3 years, extending to 6 years for substantial income omission (over 25%) or foreign income issues, and indefinitely for fraud.
Grantor Retained Annuity Trusts (GRATs)
A GRAT is an irrevocable trust designed to shift future asset appreciation to beneficiaries, typically children, with minimal gift and estate tax liability. The grantor contributes assets into the GRAT and in return receives a series of annual payments for a specified term.
The wealthy paid lower overall taxes because they were able to shelter more of their business income from taxes, and on the income they did report, tax rates were lower, the authors said.
The top 1% are evading $163 billion a year in taxes, the Treasury finds. WASHINGTON — The wealthiest 1 percent of Americans are the nation's most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a Treasury Department report released on Wednesday.
“Tesla: The company has used mechanisms like deferred tax assets, research and development credits, and massive deductions from Elon Musk's stock-based compensation to reduce its U.S. federal income tax to near zero in profitable years.”
Mark Zuckerberg famously became the world's youngest self-made billionaire at age 23 in 2008 after Facebook went public, though more recently, in late 2025, a trio of 22-year-olds (Brendan Foody, Adarsh Hiremath, and Surya Midha) from the AI company Mercor beat his record, becoming the youngest self-made tech billionaires.
Eminem has filed a lawsuit against Meta, which is owned by Mark Zuckerberg, over allegations that the tech company did not get permission to use his music across many of its platforms. Meta operates Facebook, Instagram, Threads, and WhatsApp.
Jeff Bezos's 1-Hour Rule is a morning routine focused on avoiding screens (phones, laptops) for the first hour of the day, allowing for slow, deliberate activities like reading, having coffee, exercising, or spending time with family, which he claims enhances focus, energy, and decision-making, a practice supported by neuroscience for promoting clearer thinking and reducing digital fatigue.
Yes, Jeff Bezos famously kept his Amazon base salary at around $80,000 per year for decades, choosing to take most of his compensation through stock options, which grew immensely as the company succeeded, making him one of the world's wealthiest individuals without a high executive paycheck. He felt he had enough incentive as a major owner and preferred building wealth by increasing the value of his existing equity rather than taking more salary or bonuses.