OAK STREET ADVISORS
  • HOME
  • SERVICES
    • Financial Planning
    • Tax Planning
    • Fiduciary Investment Management
    • Small Business Planning >
      • Business Retirement Plan Advisory
  • ABOUT US
    • WHAT IS A FEE ONLY ADVISOR?
    • FREQUENTLY ASKED QUESTIONS
    • OUR TEAM
  • SCHEDULE AN INTRO CALL
  • BLOG
    • BLOG
  • CONTACT A FINANCIAL PLANNER
  • FORM ADV PART 2
  • IS A ROTH IRA RIGHT FOR YOU?

NEWS YOU CAN USE

HOW THE ULTRA-WEALTHY PAY LITTLE TO NO INCOME TAX

6/17/2021

 
​Recently, a report by Propublica revealed that the richest Americans do not pay federal income tax at nearly the same rate average Americans do. How does this happen? What legal pathways
do these ultra-wealthy Americans take advantage of to ultimately pay so little in taxes? These are the questions many ordinary Americans are asking.
 
This works because the United States tax code favors wealth over work. The highest capital gains rate is the 28%, that is assessed on collectibles. Because the majority of wealth in America is created by owning or investing in businesses, a capital gains rate of 23.8% is what most wealthy Americans pay on most of their income, 20% capital gains rate and a 3.8% surcharge for gains over $250,000.
2021 Long-term capital gains rates
​Qualified dividends are taxed at capital gains rates, so, yes, all the dividends Bill Gates receives are only taxed at 23.8%. For a working class American, the marginal income tax rate on $250,000 is 24%, for married filers, not including Medicare taxes of 1.45% and another 6.2% in Social Security taxes on the first $142,800 of earned income. If you have earned income of over $628,300 as a married filer, your marginal income tax rate jumps to 40.3%. That is 69% more than the top rate for long-term capital gains on stock investments.
 
Or even better, if you are like Jeff Bezos, and own a lot of shares of a high growth company, why pay any taxes at all. You can borrow against the stock you own (margin) at less than a 1% interest rate, use the investment interest expense to offset some other income (for being CEO), and as long as your stock appreciates more than the 1% each year, you never have to sell, never have to realize a gain, and never have to pay any income taxes. Plus, when your kids inherit the stock from you, they get a stepped-up cost basis that can reduce their taxes on any sales to zero.
 
The ultra-wealthy can afford to hire some of the best advisors in the world to help them use these and many other tricks to minimize their income tax liability. For regular folks like you and me, smart tax planning is required to build wealth in the first place.
 
If you want to learn strategies you can use to minimize your income taxes and grow your wealth faster, then download a free copy of our “Tax Planning Basics” e-book. It is full of things you can do to keep more of what you earn. Things like asset location, Roth IRA conversion strategies, and income shifting strategies. It’s not an army of accountants, but it’s a start.


Comments are closed.

    Archives

    April 2025
    February 2025
    September 2024
    April 2024
    September 2023
    July 2023
    June 2023
    November 2022
    September 2022
    November 2021
    September 2021
    July 2021
    June 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    July 2020
    June 2020
    March 2020
    February 2020
    January 2020
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    September 2017
    June 2017
    May 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    September 2015
    August 2015
    June 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014

    Categories

    All
    401k
    403b
    529 Plans
    Annuities
    Behavioral Economics
    Bonds
    Budget
    Charity
    College Planning
    Credit
    Credit Cards
    Crypto Currency
    Debt
    Economics
    Estate Planning
    Federal Reserve
    Fiduciary
    Financial Planning
    Goals
    Gold
    HSA
    Income Tax
    Income Tax Planning
    Insurance
    Interest Rates
    Investing
    Investments Expenses
    IRA
    Jobs
    Life Insurance
    Real Estate
    Retirement
    Retirement Income
    Risk
    Rollover
    Roth IRA
    Savings
    Social Security
    Special Needs
    Stocks

    RSS Feed

Photos from archer10 (Dennis) 162M Views, Philip Taylor PT, mikecohen1872, cafecredit
  • HOME
  • SERVICES
    • Financial Planning
    • Tax Planning
    • Fiduciary Investment Management
    • Small Business Planning >
      • Business Retirement Plan Advisory
  • ABOUT US
    • WHAT IS A FEE ONLY ADVISOR?
    • FREQUENTLY ASKED QUESTIONS
    • OUR TEAM
  • SCHEDULE AN INTRO CALL
  • BLOG
    • BLOG
  • CONTACT A FINANCIAL PLANNER
  • FORM ADV PART 2
  • IS A ROTH IRA RIGHT FOR YOU?