You know how the saying goes; nothing is certain in this world except death and taxes. But that doesn’t stop people from wondering how to avoid paying taxes to the extent that it’s possible. After all, if Uncle Sam wants to let you keep more of your money, it would be rude to refuse.
In this article, we’re going to skim the surface of tax avoidance. There are enough exceptions and quirks in the tax code to make a whole new code, so this won’t be a comprehensive list.
These are some of the most common and applicable ways to avoid paying as much tax as possible.
How to Reduce Taxable Income
First, it’s essential to get your expectations in line with reality.
In other words, you’re going to pay tax sooner or later. There’s no getting around that fact. With that in mind, the best way to avoid paying taxes is not to earn money; simple, right?
That may seem like a joke, but there’s a kernel of truth to it because there’s a difference between what you really earned and what the federal government recognizes as income. You can take advantage of that difference using any of the 11 simple ways to avoid paying taxes legally listed below.
1. Contribute to a 401(k) or an IRA
Retirement accounts are the undisputed deans of tax avoidance. They’re accessible to most people, and the first thing experts recommend for paying less tax upfront.
Not only do contributions to a retirement account reduce your taxable income, but the funds you invest also grow tax-free until you retire. On top of that, many employers will match some or all of your 401(k) contributions, effectively giving you money for free.
However, you’ll still pay taxes on that money sooner or later. Broadly speaking, you have to start making “required minimum distributions” (RMDs) when you reach the age of 70 years and six months.
That leads to the next question, which is how to avoid taxes on RMD?
The most reliable way is to simply give it away. Statistically, if you’re at an age where you have to use RMDs, you’re probably making charitable donations anyway. Donating from your IRA is a foolproof way to reduce your tax liability.
If you meet certain conditions, you could convert your IRA into a Roth IRA, which isn’t taxed on distributions.
And, you could use the funds from your retirement account to purchase an annuity, thereby reducing the amount from your RMD calculations up to $135,000.
2. Contribute to a Health Savings Account
Health savings accounts are in the same vein as retirement accounts in that the money you put into one is deductible. Some of the details on how to pay less in taxes using an HSA fall outside this guide’s scope, but we’ll cover the basics.
An HSA is essentially a personal savings account that you can use to pay for medical expenses. Usually, an HSA works in concert with a high-deductible health insurance plan.
There are limits to the amounts you can deposit in an HSA, and if you’re enrolled in Medicare, an HSA is not an option for you. HSA limits change periodically, but the IRS-announced limits would be $3,600 for single users and $7,200 for family coverage in 2021.
3. Don’t Sell Assets
Many people fail to apply the common-sense approach to avoid adding to their income when it’s inconvenient. A formula for how to avoid taxes on investments is to hold on to assets until you’re in a position to increase your income.
Try to space out when you sell your assets instead of liquidating a large amount in a single year. If possible, save the most significant investments for years when your income will be the lowest.
That way, you can stabilize your long-term income and stay in the same tax bracket despite earning a lot more money.
4. How to Pay Less Taxes on Your Paycheck With a Flexible Spending Account
If your employer offers it, a flexible spending account (FSA) lets you funnel money directly from your paycheck into a tax-advantaged account. You can use the funds from an FSA account mostly to cover out-of-pocket medical expenses.
Insurance copays are generally included, as are a variety of medical items. There are also stores specializing in FSA-eligible items that take the guesswork out of it.
The one big caveat is that if you don’t use the money in the account by the end of the year, you’ll forfeit most of it back to your employer. Employers can choose to give you an additional two and a half months to spend the money or roll over up to $500 to the following year’s income.
5. How to Avoid Paying Taxes on a Bonus Check? Defer It!
A year-end bonus check can substantially increase your income and even put you in a higher tax bracket. In that case, you can simply ask your employer to give you the check in January of the following year.
You’ll still get the money, but you’ll avoid inflating your income, and it’s unlikely to get any pushback from your employer.
6. How to Avoid Tax on Salary by Deducting Your Mortgage Interest
If you have a mortgage, you can deduct the interest you pay on it from your income for tax purposes. This deduction applies to up to $1,000,000 of mortgage and can include your first and second mortgage.
Claim Applicable Tax Credits
Above we cover some ways to reduce your taxable income, but it’s nowhere near all the deductions for which you may qualify.
Remember that you get a standard tax deduction of $12,550 for the tax year 2021 and $12,400 for the tax year 2020. So any income below that isn’t taxable. If you’re wondering how much money do you have to make to not pay taxes, that’s the loose answer.
However, you can either choose to take an itemized deduction or a standard deduction—never both in the same year.
In addition to deductions, you may qualify for a number of tax credits. While deductions reduce your taxable income, tax credits reduce the amount you owe in taxes if you spend it in ways that qualify for the credit. It’s a subtle but important distinction.
How to Avoid Paying Income Tax With Individual Tax Credits
You can think of tax credits in terms of two broad categories—individual and business credits. The names make it clear which credits are aimed at what type of taxpayer.
Common individual tax credits include:
7. Child Tax Credit
If you have children, each child may qualify you for up to a $2,000 credit on your tax bill. Dependents who aren’t your children still count but will qualify you for up to $500 per dependent.
8. How to Avoid Income Taxes With an Earned Income Tax Credit
If you fall into specific earning categories, you could qualify for a significant tax credit. In addition to an income threshold, you’ll need to meet several other requirements, which include:
- Less than $3,650 in investment income
- Must file jointly if married
- You’re ineligible if you file Form 2555, or 2555-EZ
- At least $1 of income in the tax year
The earned income tax credit will range between $543–$6,728 based on filing status and the number of dependents for tax year 2021.
9. How to Avoid Paying Taxes at the End of the Year With a Residential Energy Credit
Residential energy credits are relatively underused but can mean significant savings under the right circumstances.
In short, it’s a federal tax credit of a portion of the installation costs of solar energy systems. The tax credit was 26% in 2020 and falls to 22% in 2021. As it stands, this credit expired in 2021, so now is the time to install those solar panels if you haven’t already.
Furthermore, you can carry forward any unused portion of the credit to the following tax year.
10. How to Pay Less Taxes Using an American Opportunity Tax Credit
Students get a lot of tax breaks, and one of the biggest is the American Opportunity Credit. The credit reduces your tax bill by up to $2,500 of undergraduate expenses.
It covers 100% of the first $2,000 you spend on school supplies and books, tuition, school fees, and equipment and 25% of the following $2,000. It applies to undergraduate students themselves or those students’ parents if they cover the educational expenses.
If you’re wondering how to reduce taxable income for high earners, American opportunity credit is not a great option.
You must have a modified adjusted gross income of $80,000 or less in 2020 or double that if filing jointly. Taxpayers with a MAGI between $80,000–$90,000 get a reduced credit, and higher incomes don’t qualify for the credit at all.
Moreover, it’s refundable credit up to $1,000, so it will increase your refund amount by up to $1,000 if you owe no taxes or have no income.
11. How to Not Pay Taxes Using a Lifetime Learning Credit
As another tax break for students, the lifetime learning credit reduces your tax bill based on the money you spend on education.
It applies to 20% of the first $10,000 you spend on tuition and educational fees. However, this credit is a little more inclusive than the American opportunity credit. It applies to most students, and you can claim it for any number of years.
You can claim both credits in the same year, but you can continue claiming the lifetime education credit even if you’ve claimed the American opportunity credit in the past. Also, this credit is not refundable.
How to Reduce Taxable Income with a Side Business
Above, we covered ways for individuals to avoid certain taxes. Another way to reduce taxes is to start a business to take advantage of business tax credits that may apply.
At this stage, it’s crucial to point out that we’re not suggesting you create a shell company or any other kind of questionable tactics. If you have a legitimate business or want to start one, the IRS offers a few ways that business can help you reduce your tax bill.
And, since you own the business and are self-employed, these are viable ways for how to avoid paying taxes on a 1099-MISC Form.
If you decide to go down the business ownership route, you’ll want to prove to the IRS that you’re a serious entrepreneur rather than a hobbyist. Besides, the expenses of opening and maintaining a business may entirely negate the tax savings you could gain.
How to Avoid Paying Taxes Legally by Deducting Business Expenses
The primary way in which a business can reduce your taxes is by creating expenses. If a company operates to generate profit, most of its costs are deductible.
The cost of goods sold and capital expenses are the two obvious ones. And you can indeed find ways to apply those deductions.
However, you should be careful to stay within what the IRS recognizes as “ordinary and necessary” expenses. You’ll have to make a powerful argument as to why your morning lattes are ordinary and necessary to your business if you want to deduct them.
How to Reduce Your Taxable Income by Deducting Business Use of Your Home and Car
For many people, a much more lenient way the IRS allows business deductions is if you use your car or parts of your home in the service of your business.
Things such as mortgage interest, utilities, and home insurance can be seen as business expenses if you have a home office.
Likewise, if you use your personal car for business purposes (most small business owners do), you can deduct mileage and other related expenses from your tax bill.
FAQs
How to avoid paying taxes on an inherited annuity?
You can’t avoid all the taxes on annuity disbursements, but there are things you can do to reduce them slightly.
One strategy is to do what the IRS calls a 1035 exchange. In a nutshell, you’re allowed to swap one type of annuity with another without a tax penalty. You can’t switch from qualified to non-qualified annuities this way, but you may be able to continue to defer paying income tax on a new annuity this way.
You also may have the option of rolling it into an IRA if you’ve also inherited the annuity owner’s IRA. This option merely changes how your inheritance is taxed but could prove advantageous.
How to avoid paying taxes on a lawsuit settlement?
First, you should know that if you’re compensated for physical injuries or sickness, that’s not taxable income, and you don’t need to worry about avoiding taxes. That also includes proceeds received for emotional distress or mental anguish if they stem from those physical injuries.
If that’s not the case, you can choose to invest the proceeds into a structured settlement or a tax-exempt holding account. And, generally, receiving lawsuit settlements over time rather than as a lump sum will reduce your tax obligations by virtue of potentially remaining below a higher tax bracket.
How to avoid paying taxes on savings bonds?
If you’re trying to reduce the taxable income generated by interest from Series EE or Series I savings bonds, you can use the education tax exclusion.
This exclusion avoids taxes on that interest if you use it to pay for eligible higher education costs for yourself, your dependents, or your spouse. It’s not a catch-all solution since you still need to meet certain requirements, but every bit counts.
How to avoid paying taxes when selling a house?
If you’re selling your primary residence with the intention of upgrading, relocation, etc., you will likely qualify for a capital gains tax exemption. Home sale profits (what you sell the house for minus what you bought it for) generate capital gains that fall under the section 121 exclusion of the Taxpayer Relief Act of 1991.
To summarize, in order to qualify, you need to:
- Own the house and have used it as your primary residence for at least two of the five years prior to the sale.
- Not have claimed the exemption in the past two years.
How to avoid paying property taxes legally?
You may have some luck reducing property taxes by getting your property tax card and looking for anything that doesn’t match your home. But a more reliable way is to see if you qualify for any exemptions based on your status.
These exemptions include:
- Homestead exemption—Applies to a greater or lesser degree based on your state of residence and income. This exemption is either a flat amount or a percentage of property tax that is excluded.
- Senior and disabled exemption—Elderly and disabled homeowners qualify for property tax exemptions in many states.
- Military exemptions—Many states also offer property tax exemptions to military personnel who use the home as their primary residence.
- Renovation exemptions—At the county level, your area may offer exemptions if you make home improvements.
- Energy incentive exemptions—Eligible renewable energy systems also qualify you for certain exemptions.
How to avoid taxes on stocks?
There are a few ways to defer or entirely deduct long-term capital gains, such as what you may earn from stock appreciation. After all, it’s difficult to make smart investments when you have to worry about how much it will increase your taxable income.
Some of those include:
- If you’re in the 10%–12% tax brackets, you’re in the clear. The long-term capital gains tax rate for you is 0%.
- Donate the stock. Instead of selling the stock, getting taxed on the gains, and then making charitable contributions, you can directly donate the stock at its appreciated value and bypass the tax.
- Offset your gains with losses. If you got lucky with some stock but not-so-lucky with others, you could deduct net capital losses from your ordinary income.
Conclusion
That should be enough to cover a variety of circumstances.
Hopefully, by now, it’s pretty clear that if you’re wondering how to pay zero tax, you basically have to earn zero dollars.
As with any other financial guide, this should serve as a starting point, and you should consult a qualified CPA or tax advisor before settling on any tax reduction method.
If all else fails, and you can’t figure out how to avoid paying taxes, you can ultimately consider using a tax relief company if you simply cannot pay your tax bill.
Tax settlement companies negotiate with the IRS on your behalf to reduce your overall tax bill. It’s a paid service but could be a substantial net gain if you owe a lot of tax.
Optima Tax Relief, Community Tax, and Anthem Tax Services are three of the most well-known and best tax relief companies.
Dateline: Kotor, Montenegro
Today we’re just going to jump right in. You’ve come for my best advice, and that’s what you’re going to get.
US citizens run in circles to get tax breaks. These include all sorts of tax credits, from the child tax credit to the earned income tax credit to lower the federal income tax and breaks on capital gains tax, amongst others. People contribute to a health savings account, stock money away in retirement accounts to grow tax-free, and hope they’re offered flexible spending accounts by their employers.
This might or might not even apply to your adjusted gross income, and you can’t necessarily deduct all your contributions on your federal income taxes.
You can completely avoid paying not just your federal taxes but all sorts of taxes in this tax system, and you can do so legally.
So here it is the four ways you can legally avoid paying taxes on US income tax:
1. Move outside of the United States
One of the fastest and easiest ways for tax deduction is to live outside the United States the vast majority of the time. This is called the Physical Presence test of the Foreign Earned Income Exclusion(FEIE). This test has been well covered, and it’s a very common tax strategy for most expats.
According to the IRS, if you reside outside of the United States at least 330 days out of 365, you can exempt $101,300 of taxable income from your annual taxes. The beauty of this strategy is that you can leave the US any time you want. I’m always telling you to get off your tuckus and go move today. Well, you can! And if you move, you can start claiming benefits ostensibly 34 days back. Plus, even if you’re like me and you never go to the US, you theoretically get one month in the US.
The one thing to be aware of is that the exemption specifically refers to time spent in a foreign country or countries. It’s not just about “being out of the United States 330 days”; it’s about “being in a foreign country or countries.” What difference does that make? What it comes down to is that international waters and air spaces do not count.
For example, recently the guy who was working on a yacht discovered that his time outside the US didn’t qualify him for the FEIE. International waters do not count, so once he passed 35 days in international waters, he lost the exemption — even if he never went to the US.
In general, however, the physical presence test is easy to qualify for. The only other thing to be aware of is if you have many flights over oceans. It’s more of an issue when you’ve spent four weeks in the US and then have several long overseas flights. If they ever look at your time in international air spaces, they may just see that you were flying eight or nine days over oceans or that you were on a repositioning cruise for 12 days in the middle of the sea and disqualify yourself without knowing.
So, while the Physical Presence test is a great and very simple strategy for reducing taxes, there are a few things you’ve got to be aware of to ensure it works.
2. Establish a residence somewhere else
Obviously, one of the things I always tell people to do is to get a second residency. It makes sense on so many levels and for so many purposes. Reducing your US income tax is one of these purposes. However, there are only certain types of residencies that qualify (although that’s an entirely different subject). It really depends on your situation.
In general, I don’t think this is a great idea. This is for people who want to spend more time in the US and can actually establish residence outside the United States. If you’re just going to be a nomad and a wanderer in a different country every other week for an entire year and then try and do the bona fide residence test, it’s not going to work. Even if you have a residence permit, it’s not going to work. So this is a very difficult one.
If you qualify under the bona fide residence test, you can spend up to four months in the US. However, there are a lot of tax issues that come up if you’re running a business that you own and you’re spending four months a year in the US. The actual qualification process is very subjective. According to the IRS:
Questions of bona fide residence are determined on a case-by-case basis, taking into account such factors as your intention or the purpose of your trip and the nature and length of your stay abroad. You must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
3. Move to one of the US territories
Another legal strategy that is widely talked about is moving to a US territory like Puerto Rico. Of course, Puerto Rico is bankrupt and, personally, I don’t really trust them. But if you don’t mind the bad offshore fundamentals, there are two different ways you can save on US income taxes by moving your entire business to Puerto Rico.
The first tax incentive is Act 20, also known as the Export Service Act. The act targets certain service businesses by offering incentives such as a low 4% export income tax and 0% tax on earnings and profits to those who choose to relocate and export their services from the island. You can see the full list of qualifying service businesses here.
Act 22, or the Individual Investors Act, on the other hand, specifically targets high net worth investors. The draw? Zero percent tax on interest, dividends, and capital gains. The only catch is that you have to spend at least half the year (183 days) in Puerto Rico. You can find more details on the act here.
A lesser-known act is the International Financial Center Regulatory Act, or Act 273. Under this act, tax exemptions are made to businesses set up and engaged in eligible activities in Puerto Rico. To qualify, the international financial entity (IFE) must have authorized capital stock no less than $5 million. The entity must also employ at least four individuals.
Many people think they can qualify under Act 273 by hiring chefs, maids, and chauffeurs and be fine. You cannot. That’s a terrible idea. You should hire real employees who work at a real business, even if they’re just low-level employees not doing a ton of work. Hiring a maid and a driver is not going to cut it. If they audit you, you’ll be in trouble.
Puerto Rico is not the only US territory to offer tax incentives to businesses and investors. The US Virgin Islands also has a program. The programs in both countries allow you to cut your taxes by about 90%. The caveat is that you need to spend at least six months a year there. Everyone will tell you that there’s some work-around, blah-blah-blah, but it’s very similar to the bona fide residence test, and it’s actually even worse because there’s a second closer connection test to determine where you are mainly based.
Puerto Rico and the US Virgin Islands are great programs if you’re willing to really live there. And by really living there, I mean at least six months a year AND not spending the other just less than six months on the mainland. You really shouldn’t spend that much time in the US mainland under these programs — only a few months a year.
The potential benefit of these programs is best suited for those who are making large amounts of money and don’t want to settle for the FEIE (outlined in options one and two). Because the FEIE only allows you to exempt up to $101,300 in 2016 and taxes everything else you make, the opportunity of 0-4% tax rates is actually very attractive. If you’re making big money, go for Puerto Rico.
Do understand that there are ways that you can make a million dollars and not pay tax on the whole thing if you run a business overseas. It’s just that Puerto Rico allows you to spend the money. It allows you to take all the money out rather than keep it all in your business.
4. Renounce your citizenship
For some people, renouncing US citizenship doesn’t make a lot of financial sense, even with the tax savings. If you renounce, you will have to pay an exit tax on all unrealized capital gains, from your business (which can be hard to value) to real estate to Bitcoins. For some, that can be quite a blow.
However, if you have less than $2 million to your name, you do not have to pay the exit tax — just as long as you’ve been paying your income taxes properly up until you renounce. Most people will not pay an exit tax. If you’ve paid a lot in income taxes in the past five years, then you will still have an exit tax. The good news is that you can still receive your government benefits and, in some cases, continue using US banks after renouncing.
The best news of all, however, is that if you renounce your citizenship, you’re done forever. No more jumping through hoops or handing over half your income to the government each year. It’s a drastic move, but it’s legal. It’s not for everyone, but there are definitely certain cases where it makes sense for an individual to renounce their citizenship to get out from under the crushing burden of the US income tax.
Therefore the estimate covered those who avoid paying taxes and social security contributions and hide their incomes.
If our clients can legally avoid paying taxes, we will always advise them how to do it properly.
Если наши клиенты могут законно не платить налоги, мы всегда подскажем, как это сделать правильно.
But this tax applies to those companies
that enter into transactions with affiliates in order to transfer profits and avoid paying taxes in the UK.
Но этот налог касается тех компаний,
которые заключают сделки с аффилированными лицами с целью перемещения прибыли и избежания уплаты английских налогов.
In general such production relates to the informal sector,
but some handicrafts producers avoid paying taxes and thus constitute the hidden part of this sector.
В целом такого рода производство относится к неформальному сектору,
но часть кустарных производителей уклоняется от уплаты налогов и таким образом составляет скрытую часть этого сектора.
At the same time, the owner can avoid paying taxes on income earned as a result of usage of the ship
as the ship is registered in the offshore zone.
В то же время, зарегистрировав судно в оффшорной зоне, у владельца появляется возможность избежать уплаты налогов, связанных с доходом, полученным в результате использования судна.
For example, 18 January 2011 one of former Swiss bankers gave to scandalous Wikileaks some banking data
only to let know the public about“wealthy businessmen and legislators, who avoid paying taxes.”(5).
Например, 18 января прошлого года один бывший швейцарский банкир передал скандально известному WikiLeaks банковские данные только для того,
чтобы ознакомить общество с теми« состоятельными бизнесменами и законодателями, которые уклоняются от налогов»( 5).
Micro-enterprises enjoy a special status and certain advantages(special loans, special provisions for the workforce, advantages on the market compared to large enterprises, etc.) if they are registered,
В этой стране микропредприятия пользуются особым статусом и некоторыми преимуществами( специальные кредиты, специальные положения о рабочей силе, преимущества на рынке в сравнении с крупными предприятиями и т. д.), если они зарегистрированы,
To avoid paying tax on the house the people there didn’t finish the roof,
because then the law building is not considered complete.
тогда по закону здание
не
считается законченным.
In addition, business enterprises that knowingly avoid paying tax are purposefully depriving countries of the resources
they need to fulfil their human rights obligations.
Кроме того, предприятия, сознательно уходящие от уплаты налогов, целенаправленно лишают страны ресурсов, необходимых им
для выполнения своих обязательств в области прав человека.
Aid budgets are funded by a
tax
system that increasingly weighs most heavily on low-income and
Бюджеты помощи финансируются за счет налогов, бремя которых все в большей степени ложится на налогоплательщиков с низким
At annual conscription they
were often drafted into the Ottoman army, and they avoided paying taxes for non-Muslims.
Во время ежегодных воинских
Underground production: Underground production consists of activities that are productive in the economic sense and quite legal, but
that are deliberately concealed from public authorities for reasons such as avoiding paying taxes.
К подпольному производству относятся виды деятельности, которые являются продуктивными в экономическом смысле и вполне законными,
In the past,
most of these resources remained in private companies, which avoided paying taxes serving to promote knowledge.
The Venezuelan State has therefore strengthened its collection and monitoring systems in this regard.
В прошлом значительная
доля средств оставалась у частных предприятий, которые уклонялись от уплаты налога, идущего на развитие науки,
поэтому венесуэльское государство укрепляет системы взимания
налогов
и контроля в этой сфере.
A subsidiary of a company avoids paying taxes in a high taxation country by selling its products
at a loss to a subsidiary in a low
tax
country, which then sells the product to final customers at market price and yields the profit.
с убытком дочернему предприятию, находящемуся в стране в низкими
налогами,
который затем продает продукцию конечным потребителям по рыночной цене и получает прибыль.
Using LLC in Delaware, non-residents of the United
Пользуясь LLC в Делавере,
It’s no secret that by using some methods permitted by law a taxpayer has a right to avoid paying mandatory taxes or minimize their volume.
Ни для кого не секрет, что налогоплательщик имеет полное право избегать уплаты обязательных налогов или минимизировать их размер, если использует дозволенные законом способы.
With his specialized knowledge, he shows her how to avoid paying a great deal of taxes.
Olenicoff alleged that UBS and Birkenfeld had engaged in fraud and conspiracy by giving him bad advice, i.e.,
that he could avoid paying U.S. taxes by moving his assets to the Swiss bank.
Олейников утверждал, что UBS и Биркенфельд участвовали в мошенничестве и преступном сговоре, уверяя его,
что он может избежать уплаты американских налогов путем перевода своих активов в швейцарский банк.
Multinational corporations have shifted their assets offshore to take advantage of tax havens and engaged in transfer pricing in order to
claim profits in low-tax jurisdictions and avoid paying higher taxes in the States in which they are domiciled.
Многонациональные корпорации перевели свои активы в офшорные зоны, для того чтобы воспользоваться преимуществами налоговых убежищ, и стали проводить политику трансфертного ценообразования, с тем чтобы
получать прибыль в территориях с низкими
налоговыми
ставками и избегать уплаты более высоких налогов в государствах, где эти корпорации расположены.
It is unlikely that trading banks
would opt out of SWIFT’s communications platform to avoid paying the tax.
Вряд ли банки, торгующие валютой,
In order to
avoid
paying taxes, many people worked»off the books.
Чтобы не платить такой налог, многие лица полностью
не
декларируют свои заработки.
Black market traders used these tunnels to
avoid
paying taxes on goods in and out of Ma’an.
Торговцы черного рынка использовали эти тоннели чтобы избежать уплаты налогов на товары из Маана.
I have never
heard of Kolomoisky that he set the goal of maliciously
avoid
paying taxes.
Я никогда
не
слышал от Коломойского, чтобы он ставил задачу злостно не платить налоги.
The smallest enterprises, with 5 to 10 machines,
Самые малые предприятия, насчитывающие от 5 до 10 машинок, как правило,
This being said,
Russian taxpayers do not always create foreign companies to
avoid
paying taxes in Russia.
При этом далеко не всегда российские
налогоплательщики создают иностранные организации для уклонения от уплаты установленных в Российской Федерации налогов.
Years ago I started a book project called The Zero Percent Tax Bracket. The idea was to write a book with all the ways a person can bring in money and legally not report it as taxable income. As I started pulling information together it became clear marketing such a book would be difficult. Since I was not focusing on tax protesting or other such BS it would not attract the wing nut crowd nor was I interested in becoming the next Charles Givens. A book called The Zero Percent Tax Bracket would probably languish on the back shelf of a bookstore with only modest sales. The idea was sound but I did not like the marketing plan.
Today I am resurrecting the idea. As a book it would need a serious shove to turn a profit for the publisher; as a series of blog posts it is an excellent way to outline all the ways to line your pocket without owing a penny in tax. You will not find all of these tax-free methods listed in the tax code. It is the unusual interpretation of tax law that always appeals to me as long as jail time is not involved. (Jail time might be okay if it is a fairly short stint of three-hots-and-a-cot, plus free healthcare at the expense of the taxpayers. Taxes are no fun, but collecting benefits—even free jail lodging—does.)
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Foster care stipends: When Mrs. Accountant and I first married we sat down and made a list of things we would like to do at least once. Having foster children was on that list. We wanted to have foster kids before we had our own out of concerns it could affect our own children. For three years we accepted high school age foster children. Many foster parents want infants and young children; not us, we wanted the toughest cases. Two foster children were with us a year or more with two more children for a shorter time. The stipend back in 1990 was $1,000 per month, per child and it was tax-free. The stipend is there to defray the costs of having a foster child in your home. There was a shortage of foster homes for high school aged children so the pay was high compared to $300 a month for an infant. It wasn’t about the money; I didn’t want to take care of a crying baby. Our foster children were introduced to Tony Robbins’s Personal Power program and educated in personal finance issues. The goal was to give our foster kids the tools necessary to build a quality life. A few years ago one of our foster kids stopped in the office to show me how he put the knowledge we shared with him to work. He is married, employed, and living the dream.- Credit card bonuses and rewards: This is one of the best deals going. Credit card companies are killing themselves to get you to open an account. Bonuses are frequently worth $500 or more in cash, plus points on all purchases of up to 5%, redeemable for cash or travel. Points are often more valuable when used toward travel rewards. Personally, I like cash; there are other ways to get cheap or free travel. The high bonus cards generally require $3,000 – $4,000 in spending in the first three months to earn the bonus. Small business owners and landlords should have no problem meeting bonus spending levels. Planning a large purchase with credit card bonuses can get you 20% or more back on your purchase. And it is all tax-free. The IRS considers it a return of your own money, as if it was from a discounted price or rebate. Manufactured spending can turn credit card bonuses and rewards into a modest living. (Manufactured spending will be the discussion of a future post.)
Foster care stipends: When Mrs. Accountant and I first married we sat down and made a list of things we would like to do at least once. Having foster children was on that list. We wanted to have foster kids before we had our own out of concerns it could affect our own children. For three years we accepted high school age foster children. Many foster parents want infants and young children; not us, we wanted the toughest cases. Two foster children were with us a year or more with two more children for a shorter time. The stipend back in 1990 was $1,000 per month, per child and it was tax-free. The stipend is there to defray the costs of having a foster child in your home. There was a shortage of foster homes for high school aged children so the pay was high compared to $300 a month for an infant. It wasn’t about the money; I didn’t want to take care of a crying baby. Our foster children were introduced to Tony Robbins’s Personal Power program and educated in personal finance issues. The goal was to give our foster kids the tools necessary to build a quality life. A few years ago one of our foster kids stopped in the office to show me how he put the knowledge we shared with him to work. He is married, employed, and living the dream.- Disability insurance benefits: For disability insurance benefits to be tax-free you need to pay for the premiums with after-tax dollars. If your employer provides the benefit at no cost to you then the benefits are It might be a good idea to pay your own disability insurance premiums. Worker’s Compensation benefits are always tax-free; so are most benefits from an auto policy covering injury claims. (Punitive damages are taxable.)
- Sale of personal residence: Years ago the tax code allowed gains on the sale of a primary residence to be rolled into the next residence without tax consequences. As long as you kept buying a more expensive home you never paid tax on the gain. At age 55 you could take a one-time $125,000 gain tax-free and keep rolling the rest of the gains to the next home. That and Form 2119 are now gone. (It is bad enough I know so much about tax code the way it is without remembering tax laws from over a decade ago. Senior moments become a blessed relief for old accountants.) Now it is easier to take tax-free gains from your home. The sale of a primary residence gets a $250,000 exclusion ($500,000 for most married couples) if you lived there 2 of the last 5 years. Even though it is possible to have two primary residences qualify in the same tax year, the exclusion can only be taken once per tax year. Planning tip: There is nothing wrong with buying a fixer-upper, moving in, and working on the property for two years and selling it for a sizable tax-free gain. I have a few clients (emphasis on few) who have done just that. They buy a home and work on it as their job. Two or three years later they cash a nice check and repeat. If you don’t mind the lifestyle it is a way to live large while sticking it to Uncle Sam.
- Loans: Loans are not taxable events! Clients always know loan proceeds are never added to income, but sometimes forget the payments are not deductible either (except for interest in certain cases). Because loan proceeds are never included in income the tax code offers ways to put money in your pocket without paying income tax. Loans from 401(k) plans, for example, are tax-free. You do need to pay the loan back and if employment is terminated the loan is due in full at that time or taxable. Insurance companies understand well the value of tax-free loans. I am not a big fan of insurance products, but there are a few select situations where they make sense, even with the high fees. If you own a non-qualified annuity or universal life policy there could be planning opportunities for tax-free money and you never have to pay it back. Talk with a qualified accountant.
- Foreign income exclusion:S. citizens working abroad are allowed to exclude from income up to $100,800 of foreign earned income, including certain foreign housing costs. The rules are complex so I will not take time here to list details. You may still owe tax in the foreign country. I recommend a qualified tax professional help you with filing your tax return if you have foreign income. The biggest problem is finding a qualified tax professional. I get close to 1,000 requests per year for tax services from ex-pats. Unfortunately I no longer accept ex-pats as new clients. My office is small and we don’t have the room. If you are a tax professional looking to grow your business fast and love working with Americans living and/or working abroad and are comfortable with the foreign income exclusion, contact me. We need to build a business relationship where I send you lots of wonderful new clients.
- Life insurance benefits: The death benefit from a life insurance policy is income tax free. There could be estate tax issues to consider.
- Gifts: Gifts from anyone in any amount are tax-free. The person giving the gift may have to file a gift tax return and pay a gift tax, but the receiver of a gift has no reporting requirements and does not report it as income.
Roth IRA:Roth IRA gains are always tax-free if you follow a few simple rules! There seems to be significant confusion on this issues if people take the money out before age 59 ½. Let me clear it up. You can take money out of your Roth IRA at any age without income tax! If you take money out before age 59 ½ you could face a 10% penalty and tax unless you follow a few simple rules. Your original money (basis) has already been taxed, comes out first, and suffers no additional income tax or Once you have withdrawn your entire basis, the gains are subject to penalty and tax if the withdrawal is before age 59 ½ and it is not for an excluded item. Think about this for a second. You should fill your Roth IRA to the hilt every year regardless your financial or tax situation (there are a few reasons I would not fill a Roth IRA, but I digress). You can take your original money (basis) out at any time. Earnings distributed before age 59 ½ and before the account is five years old are subject to tax and penalty unless you qualify for an exception (used for a first time home purchase ($10,000 lifetime max), for qualifies education expenses, you become disabled or pass away, used for unreimbursed medical expenses or health insurance if unemployed, or part of a substantially equal periodic payments.) The larger the Roth IRA balance the more you can access with a substantially equal periodic payment. I will write a more in-depth post on IRA distributions in the future to flesh out the details.- Health savings accounts: I call these things super Roth’s. You get a deduction and tax-free gains. Where you going to get a better deal than that? HSAs are not for everyone. People with significant medical issues or high prescription costs will not benefit from an HSA in many cases. As always, talk to a friendly, and I might add competent, tax professional.
Roth IRA:Roth IRA gains are always tax-free if you follow a few simple rules! There seems to be significant confusion on this issues if people take the money out before age 59 ½. Let me clear it up. You can take money out of your Roth IRA at any age without income tax! If you take money out before age 59 ½ you could face a 10% penalty and tax unless you follow a few simple rules. Your original money (basis) has already been taxed, comes out first, and suffers no additional income tax or Once you have withdrawn your entire basis, the gains are subject to penalty and tax if the withdrawal is before age 59 ½ and it is not for an excluded item. Think about this for a second. You should fill your Roth IRA to the hilt every year regardless your financial or tax situation (there are a few reasons I would not fill a Roth IRA, but I digress). You can take your original money (basis) out at any time. Earnings distributed before age 59 ½ and before the account is five years old are subject to tax and penalty unless you qualify for an exception (used for a first time home purchase ($10,000 lifetime max), for qualifies education expenses, you become disabled or pass away, used for unreimbursed medical expenses or health insurance if unemployed, or part of a substantially equal periodic payments.) The larger the Roth IRA balance the more you can access with a substantially equal periodic payment. I will write a more in-depth post on IRA distributions in the future to flesh out the details.The tax-free income ideas here deserve more fleshing out. Rather than provide an info-dump I wanted to share the strategies so you can dig further on your own or at least ask great questions of your accountant. There are hundreds of other ways to load the First National Bank of Wallet with tax-free income. Some of the most common I listed above. I’ll share more ideas in future posts with a full fleshing out of some strategies in separate posts. I get too wordy at times, so I did not want to lose you before I helped you load your pockets before you left the room.
Blog | Personal Finance
Tom Wheelwright
last updated
July 15, 2020
How many of you pay taxes? And how many of you would prefer not to pay taxes?
How many of you know somebody who cheats on their taxes so they do not pay taxes? You do not have to cheat to avoid paying taxes.
For the last 35 years, I have dedicated my life to learning and studying tax law. I have a master’s of tax degree from the University of Texas at Austin. I developed and taught courses to thousands of CPAs and accountants.
When I was in the national tax department of Ernst and Young, I taught hundreds of students as a professor at Arizona State University. For the last 25 years as founder and CEO of ProVision, I have taught thousands of entrepreneurs and investors like yourself around the world how to permanently reduce your taxes.
Remember, there are four ways you can earn money:
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You can go to school, get a job and earn it as an employee.
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You can go to school even more, become a doctor, a lawyer, an accountant, a specialist or a small entrepreneur
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You can be a big business owner
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You can earn it as a professional investor, a true entrepreneur
It does not matter if you are in Santiago, Chile, Sydney, Australia, Johannesburg, South Africa or San Francisco, California. The tax rates are approximately the same depending on how you earn your money.
On average, employees are going to pay about 40 per cent in taxes. If you are a specialist or small entrepreneur, you are going to pay even a higher tax rate, 60 percent on average.
As a big business owner, the big entrepreneur, you can reduce your tax rate to 20 per cent but here is the magic. If you can become a professional investor, a true entrepreneur, you can reduce your tax rates to zero.
Here are a couple of high-profile people
Donald Trump has paid nothing in federal taxes. The only years of tax returns anybody has ever seen were from a couple of years when he had to turn them over to state authorities to get a casino license. They showed he did not pay any federal income tax.
In fact, it would absolutely shock me if Trump paid any taxes. He would have to have the worst tax advisers on the planet to pay any taxes. Why in the world would you want to stay small when you can pay lower taxes and make even more money.
This is Hillary Clinton. I am not for Trump or Clinton, I am just telling you Hillary, as an attorney, is in the 60-percent tax bracket. That is all she has ever known.
This is Barack Obama. He said he paid 30 per cent tax, which was low for an employee, but Obama has only worked as an employee.
There is a reason that people do not want to go into big business or investing and it is a single four letter word — fear. They are scared to death of an audit.
I guarantee Trump’s business gets audited every single year by two different organizations: financial auditors and tax authorities. Meanwhile employees and small business owners may be scared to death of one audit because they are cheating or because they are not used to it.
In big business or investing, you do not have a financial statement. You live off an income statement. You do not have to have a balance sheet, a statement of cash flows and all these other financial statements, so these people love an audit. It is like going for a checkup with the dentist or the doctor to know where you are.
With the right team around you and with the right instruction, such as the lessons in Tax Free Wealth, you do not have to be afraid of this.
The real purpose of the tax law in your country is to provide incentives to business owners and investors. The law would be three pages long if it were not for that. Instead, it has thousands of pages to give these incentives to business owners and investors.
Sit back, learn and do not be afraid of making mistakes.
If you do it legally, then the government is more than willing to be your partner. It will contribute up to 40 percent for every investment you make, whether it is real estate, energy or business.
The government wants you to create employment so you partner with them to create employment. When you do that, the government gives you tax benefits.
Maybe the government wants you to build real estate, such as commercial properties or residential properties, so they give you huge tax benefits. We call it appreciation or cost recovery.
The government gives you tax breaks for using debt for your real estate and for your business. For the rest of you, the government does not give any tax breaks for debt only. But the government wants big business and investors to succeed.
Tax laws are set up to help you become wealthier, but you must do what the government wants you to do. When you do, you make more money, you pay less in taxes and you never lose sleep at night.
Original publish date:
July 15, 2020
Recent Posts
Four ways to legally avoid paying US income tax
- Move outside of the United States.
- Establish a residence somewhere else.
- Move to one of the US territories.
- Renounce your citizenship.
As well, Who pays the most taxes in the world?
Top 10 Countries with the Highest Personal Income Tax Rates – Trading Economics 2021:
- Japan – 55.97%
- Denmark – 55.90%
- Austria – 55.00%
- Sweden – 52.90%
- Aruba – 52.00%
- Belgium – 50.00% (tie)
- Israel – 50.00% (tie)
- Slovenia – 50.00% (tie)
Then What happens if I don’t pay taxes?
The charges accrue at a rate of 5% of the unpaid taxes for each month or part of a month that a tax return is late. The charges max out after five months, at which point the failure-to-file penalty is 25% of the unpaid tax liability. As you can see, filing late does not pay off, with or without an extension.
Therefore, Will I owe taxes if I claim 0? In theory, the fewer allowances you claim, the less money you owe the IRS. Sometimes, though, you may claim 0 allowances on your W4 but still owe taxes. Here, we will talk about why you owe taxes despite claiming 0 on the form.
Why do I owe so much in taxes 2021? If you were overpaid, the IRS says it’s likely you may owe money back. Payments in 2021 were based on previous years’ returns, so some situations — like an increase in income during 2021 or a child aging out of the benefit — might lower the amount owed to the taxpayer.
Which country has no tax?
Bermuda, Monaco, the Bahamas, and the United Arab Emirates (UAE) are four countries that do not have personal income taxes.
Does Canada have high taxes?
We can learn from our neighbors to the north, whose broad and expensive social programs require a redefinition of “high-income earner.” Although Canada’s top federal income-tax rate (33%) is comparable to the top U.S. rate (37%), Canada’s provincial income-tax rates are much higher (ranging from 13% to 25%) than U.S.
Why is Finland tax so high?
However, higher taxes don’t seem to bother the Finns, for two reasons: First, taxes in Finland are highly progressive, so that the rich pay much more than the poor or middle-class. Finland also has a legal system that extracts larger fines from the wealthy than the poor or middle-class.
Can the IRS put me in jail?
And for good reason—failing to pay your taxes can lead to hefty fines and increased financial problems. But, failing to pay your taxes won’t actually put you in jail. In fact, the IRS cannot send you to jail, or file criminal charges against you, for failing to pay your taxes.
What happens when you don’t pay taxes for 10 years?
If you continually ignore your taxes, you may have more than fees to deal with. The IRS could take action such as filing a notice of a federal tax lien (a claim to your property), actually seizing your property, making you forfeit your refund or revoking your passport.
What does the Bible say about paying taxes?
Don’t collect more than is legal, he told them.” And in Romans 13:6-7, St. Paul writes, “That is also why you pay taxes, because the authorities are working for God when they fulfill their duties. Pay, then, what you owe them; pay your personal and property taxes, and show respect and honor for them all.”
Is it better to claim 1 or 0 if single?
By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period.
How much do I pay in taxes if I make 1000 a week?
If you earn $1,000 per week in gross pay, you’ll pay $1,000 X . 765, or $76.50 per week toward FICA.
What is the 2021 tax bracket?
How We Make Money
| Tax rate | Single | Married filing jointly or qualifying widow |
|---|---|---|
| 10% | $0 to $9,950 | $0 to $19,900 |
| 12% | $9,951 to $40,525 | $19,901 to $81,050 |
| 22% | $40,526 to $86,375 | $81,051 to $172,750 |
| 24% | $86,376 to $164,925 | $172,751 to $329,850 |
• Apr 7, 2022
Is it better to claim 1 or 0?
By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period. 2.
Why do I owe $1000 in taxes?
Simply put, if you owe a large sum in taxes, it’s likely because you kept too much of your paycheck during the year and had too little withheld automatically. If you owe more than $1,000, you also have to pay a penalty to the IRS.
Will I get a tax refund if I made less than $10000?
If you earn less than $10,000 per year, you don’t have to file a tax return. However, you won’t receive an Earned-Income Tax Credit refund unless you do file.
Is tax higher in UK or USA?
Second, relative to other countries, the U.K.’s 50 percent tax rate for high earners is uncompetitive, while the U.S. top rate of 35 percent is still highly competitive. Within Europe, only a few Scandinavian countries have a higher tax rate than 50 percent.
How can I live in USA tax-Free?
Here are seven tax-free tax strategies to consider adding to your portfolio or increasing the use of if you already have them.
- Long-term capital gains.
- 529 savings plans.
- Health savings accounts.
- Qualified opportunity funds.
- Qualified small business stock.
- Roth IRAs and 401(k)s.
- Life insurance.
Is it tax-free in Dubai?
Apart from the high quality of life, the foremost reason for such enthusiasm for Dubai is the fact that Dubai is a tax-free nation. There is no income tax on income generated in Dubai. Also, there is no sales tax on the majority of goods and services.
Is it cheaper to live in Canada or the US?
Is It Cheaper to Live in Canada or the U.S.? Overall, it is cheaper to live in a metropolitan city in Canada than in the United States. Of course, this depends on the city you are looking at and your income tax bracket.
How much tax do I pay on 100k in Canada?
If you make $100,000 a year living in the region of Ontario, Canada, you will be taxed $29,986. That means that your net pay will be $70,014 per year, or $5,835 per month. Your average tax rate is 30.0% and your marginal tax rate is 43.2%.
Is college free in Canada?
College in Canada isn’t free.
But it’s way more affordable than in the United States. For comparison, the average yearly tuition in the US is about $32.000, while the average yearly tuition in Canada is about $5.000.
Is healthcare in Finland free?
Public healthcare in Finland is not free, though charges are very reasonable. Public healthcare is the responsibility of municipalities, and is primarily funded by taxation. It is also funded by patient fees.
Why does Sweden pay high taxes?
Besides the generally positive view towards taxes, another reason for the Tax Agency’s popularity is its accessibility and customer-friendliness. Many errands can be done electronically, which suits tech-savvy Swedes. For example, you can submit your income tax return online, by app, phone or even text message.
What is the tax rate in Germany?
In Germany, the average single worker faced a net average tax rate of 38.9% in 2020, compared with the OECD average of 24.8%. In other words, in Germany the take-home pay of an average single worker, after tax and benefits, was 61.1% of their gross wage, compared with the OECD average of 75.2%.