How billionaires pay little to no taxes in the US 👇
Step 1: Know the tax rules
Tax 101: Income is taxed at the time of receipt. Wealth is not taxed at the time of receipt. It gets taxed only when you sell.
Income = Wages
Wealth = Appreciated stocks, crypto & assets
Step 2: Own significantly appreciated assets.
Ex:- stocks in the company you are building, crypto, real estate & other assets
(This is the most diff step. Not many people can do this successfully)
Step 3: Get paid a small amount of salary from your company
For ex, Jeff Bezo get paid 80K in salary
-Borrow money against appreciated assets.
-Borrowing is not a taxable event.
-Cash proceeds can be used to live a good life and make other investments that make you wealthier.
- In some cases, loan interest expenses can be a tax write-off as well.
Step 5: Die
- At death, heirs get the appreciated assets you left with a stepped-up basis.
- Ex:- You paid 1M for a piece of land. At the time of death, it's worth 100M. Heirs get it at a 100M cost basis and don't have to pay capital gain taxes on 99M.
Step 6 :
- Heirs to repeat the same steps and compound on the wealth from the last generation.
Disclaimer: this is a *simplified* version of how the Buy, Borrow & Die strategy works in the US today.