Use Your Money Like the Uber-Wealthy

Some Examples

Amazon, Tesla, and Bloomberg L.P. are among the largest companies in the U.S., each making a name for themselves in disparate industries. From e-commerce, to automobiles, to media, these corporations have undoubtedly found massive success. But apart from success, what do each of these corporations have in common? Their billionaire owners — some of the wealthiest men on the planet — pay less in taxes than you do.



In the U.S., income tax is progressive, meaning that high-earning individuals pay the highest tax rates. This fact can be misleading. Though wealthy individuals are subject to the highest tax rates, this has not led to them paying the most in taxes. On the contrary, many millionaires and billionaires pay almost nothing in taxes, while the average American, making a median annual income of around $67k in 2020 , will on average pay about $5k in income taxes each year. 

In 2011, billionaire Amazon founder Jeff Bezos managed to pay nothing in income tax, something which Elon Musk of Tesla was able to replicate in 2018, as well as Michael Bloomberg and George Soros in recent years. There are some wealthy people, such as Warren Buffet, who believe the rich should be made to pay higher taxes. However, even when these high-earners do pay taxes, their true tax rate is meager. From 2014 to 2018, Buffet paid a staggering $23.7M in taxes, translating to a true tax rate of just 0.10%.

So if these guys are hardly paying anything in taxes, why should you? Here’s our six-step plan to help you pay hardly anything to the government, just like the wealthiest people in the world.

Step One: Know the Tax Rules

In order to avoid paying immense sums in income tax, the wealthy must develop a thorough understanding of taxes. A basic tax fact which allows for billionaires to pay low taxes is that income is taxed at the time of receipt, while wealth is taxed only when it is sold. Income refers to wages, while wealth encompasses appreciated stocks, cryptocurrency, and real estate, among other assets. This is important to note to understand the two following steps.

Because this is a foundational step and the U.S. tax code is often complicated, it’s best to connect with a tax professional. Having an accountant on your side can alleviate any mistakes you might make or any loopholes you might miss. Connect with a Yoke Tax pro for a free one hour consultation to get started.

Step Two: Own Significantly Appreciated Assets

Appreciating assets are assets which increase in value over time. Real estate holdings, stock in companies, and cryptocurrencies such as bitcoin are examples of such assets, which are potent sources of wealth. For example, if in 2010, a woman chose to invest $100 dollars into bitcoin, her investment would be worth nearly $8B in 2021.

As mentioned in the previous step, this wealth would not be taxed until she sells her assets, making this an attractive means of increasing wealth without incurring taxes. Collecting appreciated assets is the trickiest method individuals can use to avoid paying high taxes, as not many people can succeed this way. 

Step Three: Have Your Company Pay You a Low Salary

As mentioned in step one, income is taxed at the time of receipt, while assets are taxed when sold. For someone like Jeff Bezos, who owns about 10% of Amazon stock, wealth can be accumulated through his holdings of Amazon, while his “low” salary of $81k as CEO can be subject to income tax. In this way, Bezos will still pay taxes, but only on a fraction of his true wealth. 

Step Three: Borrow Money Against Appreciated Assets

Not only are appreciated assets not subject to taxes, but any money borrowed from these assets are not taxed either, as borrowing is not a taxable event. This means that the millions, and in some cases, billions of dollars made by the richest Americans through their assets can be spent freely, without fear of taxes reducing the funds available to them.

Borrowed cash can be used to fund extravagant lifestyles. Mansions in upscale neighborhoods, private planes, luxury cars, and designer clothes. The rich often also use borrowed cash to enrich themselves further, using it to buy up more stocks or investing further into real estate. This technique allows the rich to enjoy their wealth, without paying the price for their wealth. 

When it comes to calculating whether an investment is the right one, it’s best to consult with a tax professional first. This way, you can see the long-term effects of the asset on your portfolio, and whether or not the asset is as valuable as it seems. A free one hour consultation can save you hundreds of thousands in the long run.

Step Five: Die

When the rich pass away, their heirs receive the appreciated assets they leave behind, with a stepped-up basis, meaning they receive it at a value above the original value. For example, if a man paid $1M for a piece of land, and by the time he passed away, the land was worth $100M, his heirs would receive the land at its $100M value. In addition to this, heirs do not have to pay a capital gains tax on the $99M increase in value from the time the land was purchased. This passes wealth from one generation to the next.

Step Six: Repeat the Cycle

When one generation dies, the next utilizes the same techniques which allowed for capital accumulation, creating the building blocks for generational wealth and compounding on the wealth of previous generations. Heirs can continue to invest in appreciating assets, take on low salaries, and borrow money from their assets with the knowledge that these activities will only lead to a higher economic standing as income tax is avoided. 

Ready to get started? Connect with a Yoke Tax professional to start using your money like the uber-wealthy. Our goal is to minimize the money you put in Uncle Sam’s hands and maximize the amount you keep in your pockets. Let us handle the numbers.