Billionaires are some of the most influential people in the world and even though they hold a great deal of power, they can be just as likely to avoid paying taxes. Much of this behavior is due to their financial advisors who come up with creative strategies for tax avoidance and exemptions. Here are five common ways billionaires avoid paying taxes:
To reduce their taxable income, many billionaires open offshore accounts in countries with lower taxes, such as the Cayman Islands or Panama. These funds aren’t subject to taxation until the money is returned to the individual’s home country. This allows them to save a considerable amount of money on taxes each year.
Many billionaires take advantage of charitable deductions by donating large amounts of money to charitable organizations like foundations, hospitals, universities, and more. By doing so, they can reduce their taxable income while also supporting worthy causes they believe in.
Some billionaires set up complex entities that allow them to defer taxation on their investments until a later date when it becomes more advantageous for them financially-wise. One example is setting up a captive insurance company, which lets them shelter profits from taxation until the company is liquidated or dissolved down the line.
Purchasing real estate can be an effective way to make investments while also avoiding heavy taxation from capital gains on returns from those investments. Many investors are able to defer these taxes by utilizing strategic loopholes and taking advantage of depreciation write-offs as well as other incentives for investing in real estate projects that benefit society as a whole (i.e housing complexes).
This strategy entails forming multiple corporations or LLCs to transfer assets between them without springing any unnecessary tax liabilities onto its members at that time—when liability eventually ensues years later, it applies only to one entity rather than all involved parties at once, thereby reducing its impact overall; this is especially important if dealing with international transactions where capital gains taxes may be higher than normal due its double taxation clause between countries with separate laws & regulations on such matters (i.e US & UK).