Taxes—we all have to deal with them and honestly, if there were a legal way to keep more cash in our pockets, a lot of us would probably be interested. However, there are some methods of avoiding taxes that are morally questionable at best. At worst, they’re illegal! Here are ten of these controversial methods. Just remember, we’re not here to judge or give you financial advice.
Featured Image Credit: logoff/Depositphotos.com.
Banking in Tax Havens
The Cayman Islands & Bermuda are more than vacation spots—they’re where people keep their money to save on taxes. Putting money into a bank there means enjoying the sunny benefits of low to no taxes. It’s not illegal to bank offshore but it is against the law if you don’t declare your funds or if you’re doing so to explicitly evade paying taxes.
Using Shell Companies
Some people create companies that don’t really do anything & don’t make anything—yet they’re an important part of their tax-saving strategy. They’re known as shell companies. People use them to shuffle money around in a way that makes it hard to figure out who owns what. Essentially, when the taxman arrives, he can’t quite pin down where to collect.
Like our content? Be sure to follow us.
Exploiting Loopholes in Tax Laws
Other people are really good at finding the loopholes in tax regulations—or at least hiring people who can do it for them! They’re not necessarily breaking the law, they’re just good at reading between the lines to find ways to pay less. This can involve specific investments or clever timing. Either way, they shrink their tax bill without stepping over the line.
Investing in Real Estate
Pouring money into real estate can actually save you money on taxes, thanks to things like depreciation & mortgage interest deductions. Real estate moguls reap a lot of tax benefits and, best of all, it’s all legit. It’s no wonder so many people are looking to invest in real estate—it’s an above-board way to manage your taxes efficiently.
Retirement Account Contributions
We all love a good retirement plan and especially when it comes with the benefits of lowering your current tax bill. If you max out your contributions to 401(k)s & IRAs, you’ll have a nice retirement while also reducing your taxable income now. It’s a win-win that’s on the up and up for many people.
Gifting to Avoid Estate Taxes
Nobody wants to think about the tax bill that comes with inheriting money and that’s why some people start gifting their wealth to their loved ones early. It allows them to use the tax-free limits of a gift to their advantage. This way, they can make sure their hard-earned cash goes to their family instead of the tax office.
Charitable Donations
If you have a big heart & a big tax bill, charitable donations can help with both of these. Giving to charity reduces your taxable income and for those who are particularly generous, setting up a charitable foundation is also useful. It allows you to manage exactly where your money goes while scoring some tax benefits.
Offsetting Capital Gains with Losses
Many investors use this method for those investments that didn’t pan out. Selling them at a loss can offset the taxes they owe on their winners and this strategy is called tax-loss harvesting. It’s completely legal and quite a smart way to keep your tax bill in check without resorting to anything dodgy.
Incorporating Businesses Offshore
Some companies decide to establish themselves in countries with friendlier tax laws, even if they do most of their business elsewhere. In doing so, they can drastically cut their tax rate. While there are legal ways to go about it, some critics argue that there’s a fine line between avoidance & evasion.
Claiming Non-Residency
Who knew that where you call “home” could have some big tax benefits? Some world travelers carefully manage how many days they spend in each country so that they pay way less tax than if they stayed in one place. The law around this is a little iffy but, if they play their cards right, they can make the rules work for them.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
Like our content? Be sure to follow us.
Read More:
