Places where the rich hide money from the IRS
Conservation Easements
One of the best-kept secrets that wealthy people use to reduce their taxable income is called a conservation easement, says entrepreneur Brad Blazar. “By investing in one, or taking advantage of the strategy, people can effectively reduce their adjusted gross income by 50%,” said Blazar, who has personally taken advantage of such easements himself.
Qualified Opportunity Zones
One of the newest approaches to sheltering income is investing capital gains in businesses located in Qualified Opportunity Zones, says Phil Strazzulla, a former venture capitalist and founder of Select Software Reviews, which reviews human-resources software. Created in 2017 under the Tax Cuts and Jobs Act, these zones are disadvantaged neighborhoods and communities across the country in need of economic development and job creation.
Municipal Bonds
It may sound counterintuitive that you can protect money from being taxed by the IRS by giving it to the government, but Andrew Latham, managing editor of the site SuperMoney and senior writer on tax topics, says municipal bonds (issued by state and local governments) can serve as an effective tax shelter and are a popular way to earn tax-free income.
Life Insurance
Whole life insurance policies are another place the wealthy stash money, said financial adviser Adam Doran, who specializes in helping clients find ways to build sustainable, tax-advantaged wealth. “Similar to a Roth IRA, taxes have to be paid on the money prior to going into a life insurance policy. But once the money is in the policy as part of the cash value, it is tax-free, provided the policy is structured correctly,”
Charitable Investments
One of the easiest ways to dodge some taxes is by making sizable donations to charities, said Chane Steiner, CEO of the personal finance site Crediful. “You can donate up to $100,000 directly to the charity, but you can also donate to a charity savings account,” Steiner explained.
Off-Shore Accounts Around the World
Perhaps one of the most notorious ways people hide money to avoid taxes is by opening off-shore accounts. These accounts are typically located in places that are tax havens, in other words places with little to no tax liability, said Josh Zimmelman, owner of Westwood Tax & Consulting, a New York based accounting firm.
Shell Companies
Some wealthy individuals hide money by opening up anonymous shell corporations that don’t have their names attached, said Zimmelman, owner of Westwood Tax & Consulting. “It can be difficult for law enforcement or tax authorities to figure out who owns the corporation, so they don’t know whose money it is,”
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