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How to defer US taxes

173 points by surprisetalk 8mo ago

kg 8mo ago
> Defer US taxes by reinvesting your taxable income into the economy as business expenses, depreciating assets, etc. Be really careful when doing this. Make sure you have a great accountant - if you go more than a few years without turning a measurable profit, your risk of being audited apparently goes up. My accountant personally cautioned me about this since my business has been in an R&D phase for 5 years so we've been showing a small loss every year. The last thing you want is for the IRS to decide you've been cheating on your taxes.
- jt2190 8mo ago
  Can you elaborate? As a business owner in the U.S. I can opt to reinvest all revenue back into the business, thus would show zero net profit but (presumably) increase my company’s value. (And remember there are other taxes and fees paid to various governments, not just tax on income/profit, so it’s not typically like nothing gets paid.)
  - bombcar 8mo ago
    https://www.irs.gov/newsroom/know-the-difference-between-a-hobby-and-a-business https://www.irs.gov/newsroom/know-the-difference-between-a-h...
  - jeffreyrogers 8mo ago
    You can't reclassify profit as reinvestment to show zero net profit. (If you could every business would have an internal hedge fund or private equity business and would show zero net profit).
  - SilasX 8mo ago
    >As a business owner in the U.S. I can opt to reinvest all revenue back into the business, Not entirely, no. Any of those reinvestments that count as capital expenditures aren't immediately deductible, but only on a throttled schedule, which is why the concept of depreciation exists in tax law: https://news.ycombinator.com/item?id=15061439 https://news.ycombinator.com/item?id=15061439
    - jt2190 8mo ago
      I think I said that? > … it’s not typically like no taxes get paid. This is why I asked for elaboration: The poster was unclear about how, say, making capital improvements (and getting taxed on those over time) would somehow look suspicious to the IRS, as it seems like this is an extremely common practice. I assume it’s not that then, but something else which I’d love for the poster to share.
      - SilasX 8mo ago
        Your comment made it sound like any re-investment back into the business would count as a cost that then cancels the profits that would be taxed. Even with your clarification, it still sounds like that. This is orthogonal to taxes that would be levied on things other than profit.
  - anon291 8mo ago
    As a business owner, if you provide labor to the business, you have to pay yourself a salary.
    - bluGill 8mo ago
      This is why many people make minimun wage - they get a salary but they use the business profits to live on. See your accountant for all the fine print before doing this.
- bombcar 8mo ago
  This is true for most businesses (they will reclassify it as a "hobby" where expenses aren't deductible, though you can fight that in tax court or real court if you want to) - but for rental properties you can go for decades with no profits (because of depreciation).
- xikrib 8mo ago
  The point is creating failed businesses is legal and tax deductible.
hirako2000 8mo ago
I'm not sure to understand how deferring taxes is a better deal than paying it here and now. Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas. I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow suit given his budget was a bit below the retail price. That would just wait. His response was he would rather go ahead and up the budget a few hundred dollars to get it right away. That projectors will surely get much better by next year, but that he, certainly, will not.
- encoderer 8mo ago
  Because of cost basis step up at death, you can just defer forever.
- singron 8mo ago
  Deferring taxes is essentially an interest-free loan from the government to you. You can take that money, invest it, and then keep most of the earnings when you eventually pay the taxes. There are also some loopholes where capital gains taxes deferred until after death just don't get paid at all. This is the "step-up basis" where your inheritors get to reset the basis of capital assets and neither you nor they has to pay taxes on the capital gain.
  - dsizzle 8mo ago
    Yes, and when you do pay it's a lower "real" tax (due to inflation)
    - hirako2000 8mo ago
      Good point about inflation. Deferring can make sense. I was thinking what we earn today is more enjoyable to spend today than when we have bad knees and whatnot.
    - onedognight 8mo ago
      If I have X dollars and get taxed such that I have X * T after the taxing, say T = (1 - .20), then I invest and that money grows by a factor, say G = (1 + .50), over the years, then in the mean time inflation hits and reduces my money by a factor, say I = (1 - .10), so that what I end up with in the end is F = X * G * T * I. If instead I invested and grew and inflated and then got taxed, X * G * I * T, it would be exactly the same. Multiplication is commutative. What you are doing by delaying taxes is hoping you have a lower rate later. Say you make less in retirement or die untaxed and your kids get a step up in basis. But without a change in rate (which might go up even), there’s no difference.
WarmWash 8mo ago
If what was supposed to be your tax dollars is instead going towards giving more people work to do (and hence generate more taxes) the government will be happy.
josefritzishere 8mo ago
This feels like a great way to get audited by the IRS. It does not feel like sound advice.
- dgb23 8mo ago
  I'm getting very strong sarcastic vibes from the article.
  - munk-a 8mo ago
    Nah, the maximally sarcastic advice for tax avoidance is "become president" then you can just refuse to prosecute yourself for tax evasion and sue yourself for a ridiculous sum of money when someone leaks your tax avoidance.
- elliotec 8mo ago
  I don't know if you're right or wrong, but it is an incredibly common tactic and done all the time by many businesses and people. There are of course ways to do this that are less noticeable by the IRS (as acknowledged in the article) and it doesn't seem like they have the capacity to investigate and audit the vast amount of this practice. My understanding is they are typically focused on fraud and/or folks simply not filing.
- crdrost 8mo ago
  So the advice here is (from my understanding, not a tax lawyer) sound, but it is "unsound-adjacent" -- so a lot of people will start from this basic understanding and then go off into crazytown. So like influencers get to hear other influencers explaining this "you can reinvest your profits and then you won't have profits" type of advice... but then they will put it right next to unsound advice about "by the way, a great way is to invest in a "business" trip to Greece to sail the Mediterranean, it is "team-building" between you and your spouse and kids who are all employees of your little influencer company, oh by the way you should buy fancy watches so that you can show them off in your videos, and get a very expensive hairstylist to do your hair -- as long as you make a video about it!" And it's like, no, the tax courts actually have procedures they follow to determine if those things are personal expenses or business expenses and 90% of the advice that you hear here are some form of tax fraud. But from the point of view of a company, as the tax year comes to an end you hopefully have extra money left in the bank, now you can either use it to buy things that the company needs and thus grow the company, or you can hold onto it where if you're a C-corp the government will take 21% of the year-on-year delta, or you can pay it back to the shareholders as a dividend and they pay 15% capital gains tax on it. (And of course you don't have to dump the whole account into just one bucket, you can choose how much goes into each of the three.) And when it gives the advice "pssst, you should probably reinvest most of it," that's a standard practice explicitly sanctioned by the government.
jeffreyrogers 8mo ago
Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes since you do need to realize some income to pay for mortgage/rent, food, transportation, etc. I guess if you had assets you could borrow against it would be possible to pay for these using the loan proceeds (which are not taxable).
- gautamcgoel 8mo ago
  The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.
  - whaleofatw2022 8mo ago
    Sometimes its about the layers. I.e. what kinds of loans can be tax deductible? To be clear theres decent effort into this, you can't just do a cash-out refi on a home, but loopholes exist for those who find it worth the effort.
  - jeffreyrogers 8mo ago
    You do. I think these loans are generally used for short term liquidity. For example if you want to buy a new house before selling your old one. You'd get a loan against your assets, buy the home with the loan proceeds, sell your old home and pay off the loan. If your assets are growing faster than the interest it would also be possible to payoff the loan with a new (larger) loan, so you are still kicking the can down the road but eventually you would die and never need to pay the taxes while you were alive. I doubt this is done that often in practice, but who knows.
  - OkayPhysicist 8mo ago
    As mentioned in the article, death (and subsequent inheritance), solves this problem. Once you're dead, your tax situation changes significantly, and selling your assets to settle your debts is subject to estate taxes, not capital gains.
deleted 8mo ago
[deleted]
uoflcards22 8mo ago
super cool
dleslie 8mo ago
That's a great deal more complicated than our TFSA and RSP programmes, here in Canada.
- munk-a 8mo ago
  RRSP first time home buyer credits can get a bit complicated though. Also, a fun fact - dual US-Canadian citizens can't (effectively) use TFSAs because the US considers appreciation in a TFSA to be taxable income.
  - deleted 8mo ago
    [deleted]
jimt1234 8mo ago
Highly recommend: https://www.youtube.com/@taxleverage https://www.youtube.com/@taxleverage
davidfekke 8mo ago
Is this advice from Wesley Snipes?
- simonreiff 8mo ago
  Haha that made me laugh
buellerbueller 8mo ago
Or, just pay your taxes. We collectively benefit from them.
- racingmars 8mo ago
  Is there really any correlation between tax revenue and spending at the federal level anymore? It seems the U.S. government is willing to spend at huge deficit levels. If everyone stopped paying federal taxes I suspect nothing would change.
  - celeritascelery 8mo ago
    What would change is the government would need to greatly increase their debt. In 2025 the government got about $5.23 trillion in tax revenue and spent about $7 trillion. So most of the government spending is financed by taxes. Remove that and the rate of debt quadruples (and by extension inflation).
    - asdff 8mo ago
      When do we finally hit the cliff? Deficit has been going up for decades.
      - dataflow 8mo ago
        > When do we finally hit the cliff? When you can't pay the interest anymore?
        asdff 8mo ago
        Just add it to the deficit. Fact is US is able to run up 39 trillion and counting in debt because it prints the god damn monopoly money. No one would offer a loan to someone with that financial history. Shit really went off the rails after Bretton-Woods, huh?
  - marcandre 8mo ago
SoftTalker 8mo ago
It seems to me that I'm running into more people who just don't file their taxes. They wait for the IRS to send them a letter saying how much they owe, and they just pay that. I can't figure out the thought process of someone who finds this sensible. Maybe there isn't one.
- jaxefayo 8mo ago
  I’ve never heard of anyone doing this, but now I kind of wish everyone did. Maybe it would force the IRS to just give us a bill instead of having us try our best to calculate what we owe, submitting that, and then hoping that we don’t get an angry letter when the IRS calculates it themselves and their answer doesn’t jive with ours.
  - PopAlongKid 8mo ago
    >an angry letter when the IRS Do you have an example? I've seen dozens of IRS letters for dozens of different taxpayers and none of them had any "angry" language in them. The myth that the IRS is trying to scare or traumatize you is just a dark pattern by certain 3rd party "tax resolution" services. The IRS is quite tolerant of the person who breaks the law by not filing and paying on time and provides many opportunities to come into compliance, starting with an automatic first-time abatement of the most common penalties. https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter https://www.irs.gov/individuals/understanding-your-irs-notic...
    - heyjon 8mo ago
      I file every year and I had one year where the IRS miscalculated my taxes twice on an older return. I got the first notice which was ok and they requested me to respond, which I did. The 2nd notice they recalculated what I owe and said I owed more than the original notice and said if I didn't pay in the next 1-2 months I owe tens of thousands of dollars plus interest. I ended up calling them and getting someone who needed help from someone else. She ended up laughing and hanging up the phone. I called again and got an old lady who immediately knew they made a mistake and I ended up with a $0 balance. If you get the right person, it is ok. I was kind of scared I would have to owe all this money I already paid and then some. It ended well but I lost sleep for days thinking about it.
tonymet 8mo ago
tax penalities are low interest loans, so you can invest the money and pay the IRS the penalties at the end of the year.
- hnburnsy 8mo ago
  Not sure that I would classify 7% compounded daily as a low interest loan.
3rodents 8mo ago
How to Not Pay Any Taxes: don’t be American. Living tax free is easy enough for everyone except Americans.
- unclad5968 8mo ago
  Where are you living that you don't have to pay taxes?
  - 3rodents 8mo ago
    That’s the trick. Don’t live anywhere. Every other country taxes based on residency rather than citizenship. If you’re not a U.S. citizen you can just wander around the world living tax free regardless of your income. Don’t stay anywhere long enough to become a tax resident.
    - fer 8mo ago
      Sorry but that's been a meme and a house of cards since the Common Reporting Standard. The fact is that the country whereever you carry any legal activity will require you to prove you're taxed elsewhere not to tax you in place. To carry out economic activity you'll need a presence, if it's a company it's corporate tax, if you're freelance you'll need a registered address. Most banks will freeze you without a TIN and and address. Plus the whole can of worms of the centre of vital interests or source-based taxation systems. In the moment you input an address in the financial system, the tax administration will know, and they will knock your door for any significant income, plus arrears, pulling one of the cards from your house, and it's not going to be pretty.
      - 3rodents 8mo ago
        You are categorically incorrect. Picking a random country: Italy. Please explain under what legislation or mechanism an Italian citizen who spends 3 months in Japan, 3 months in South Korea, 3 months in the U.S., 3 months in Norway and then repeats the loop for the rest of their life would owe any taxes to any tax authority? Almost every country except the United States only taxes their residents, not citizens. Almost every country follows the typical 180 day rule for tax residency.
oxqbldpxo 8mo ago
It is a good thing for life, money and health, to be clear how much is enough. In money frugality always wins. These billionaires they're very miserable. Their faces show stress, worry and animosity. People say money does bring happiness. It is BS. It holds true only if there is health.
codemog 8mo ago
> If you aren't actually reinvesting capital, pay your damn taxes. Don't be an asshole. Why? So my government has more missiles to blow up children? No thanks.
- tootie 8mo ago
  Most tax money goes to social programs. Especially at the state and local level.
- mcmcmc 8mo ago
  You know that’s not the entire budget right? You’re being an asshole by denying funding for disaster relief, schools, healthcare, roads, scientific research, all the public goods and services that don’t work on a profit driven model, but you still get a direct benefit from. If you want to play concerned citizen get out and protest, vote with your dollars by not throwing them at big tech companies who kowtow to politicians and fund their campaigns. But if you think you’re sending kind of message by withholding your taxes, it’s really just that you’re a selfish asshole.
  - __MatrixMan__ 8mo ago
    > vote with your dollars by not throwing them at big tech companies Abstaining is not voting. If you want to vote with your dollar, spend it actively undermining big tech companies. Get out there and blind some cameras or something.
    - mcmcmc 8mo ago
      > Abstaining is not voting. Fair if you’re already not giving them money. But if you manage a sizable chunk of cloud spend at AWS, GCP, Azure etc, you can send a meaningful signal by taking away that revenue and shifting it to a company that’s not aiming for neo-feudalism.
- surprisetalk 8mo ago
  There are more productive ways to vote with your money than tax evasion. You can make tax-exempt donations, or start your own non-profit organization. Some people hoard money without building businesses, without participating in government, without contributing to welfare. People who take more than they give are assholes.
fredgrott 8mo ago
Funny thing, states like CA, TX, TN going after folks who thought it good idea to register vehicles in MN and not pay their own local state sales taxes... Please consult a real tax lawyer before even following such advice... Why? They have skin in the game such losing their license if they do something wrong and illegal...
- PopAlongKid 8mo ago
  The story I read recently involved Montana (MT), not Minnesota (MN).
- deleted 8mo ago
  [deleted]
nayuki 8mo ago
> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate. > Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant tax advantage to people who hold assets till death, especially with the step-up basis. The way Canada handles it seems more reasonable to me: > Capital property generally includes real estate, such as homes and cottages, investments like stocks, mutual funds or crypto-assets, and personal belongings like artwork, collections or jewelry. When a person dies, they are considered to have sold all their property just prior to death, even though there is no actual disposition or sale. This is called a deemed disposition and may result in a capital gain or capital loss -- https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/capital-gains.html https://www.canada.ca/en/revenue-agency/services/tax/individ... In exchange, Canada does not have an inheritance tax. All taxation is resolved in the estate of the deceased person before the money or assets are passed on without further taxation.
- trollbridge 8mo ago
  Well, except for that pesky "inheritance tax" thing, which definitely affects people who have net worths that hit multimillion levels.
  - hvb2 8mo ago
    Sure but would you rather have an inheritance that gets you to pay that tax or one that doesn't? Because getting a multi million dollar inheritance isn't something a typical person would feel sad about I would think
- deleted 8mo ago
  [deleted]
- CGMthrowaway 8mo ago
  Why is the Canadian approach fairer?
fogzen 8mo ago
You can’t legally reclassify all your expenses as reinvestment. The IRS will determine what is actually an expenditure, and there are rules around it.
yonixw 8mo ago
> For your leveraged investments, pay yourself in refinanced cash when your investments appreciate and/or credit rates drop. In other words: Gamble that (1) your investments appreciate, or (2) that you will find credit rates drop when convenient. In 1 word: Gamble. So, either you are rich and have spare money to gamble, which sure, might be beneficial against taxes. But you could also gamble against any other sector (stocks, housing, startups...) Or, if you are not rich, just put it in the 401k (or eq).
PopAlongKid 8mo ago
>Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article only addresses a subset of economic activity. The larger portion of the adult population are wage earners or retirees, not business owners. For them, large investments in Traditional IRAs or 401k plans are most definitely not able to escape upon death the income taxes that were deferred.
farceSpherule 8mo ago
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deadbabe 8mo ago
We should force cost basis to rise some % every few years, in order make tax due on unrealized gains. How would that throw a wrench into these tax deferral schemes?
melissarick10 8mo ago
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robinsoncrusue 8mo ago
I am a big proponent and teach my children pay as little taxes as you possibly can. Use all means available that are not fraud. So this article is a delight. Our government in my generation failed me and my kids, they are busy in fighting wars, manufacturing crises abroad, and doing other nefarious things. Question: can I use the means in this article to avoid my last year's tax? What asset categories are available to invest to defer my taxes, where can I learn more?
- skybrian 8mo ago
  On the other hand, having "after tax" dollars that you can invest or spend freely is good too. Software engineers who defer capital gains too long may end up with concentrated appreciated assets. Diversifying results in a big tax bill. Nice problem to have, but still.
crowthevegan44 8mo ago
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nsollazzo53 8mo ago
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gamblor956 8mo ago
I do taxes for a living. This blogspam is advocating tax fraud. Depreciation is permitted for business assets. In order to depreciate the lawnmower, you would need to claim it as a business expense. In order to claim a business expense, you also need to have some business income (net business losses are okay, but not having any income, or having only de minimis income, is a huge red flag). And importantly, you can't use the asset for personal use. Ever. This type of tax fraud is the #1 cause of tax penalties. And because it's fraud, it also means the IRS has an unlimited time to audit and penalize you for it. Rich people don't defer their U.S. taxes by buying depreciable property. They do so by buying investment property like stocks, and making charitable donations.
triage8004 8mo ago
It's half price to renounce citizen ship now, but that doesn't get you out of all of the obligations.
sireat 8mo ago
Along with already mentioned "Buy, Borrow, Die" strategy is the more widely practiced "Expense everything" strategy which often ends in tax disaster for the practitioner. One of the early adopters was https://en.wikipedia.org/wiki/B._C._Forbes https://en.wikipedia.org/wiki/B._C._Forbes the founder of Forbes. He expensed lavish Gatsby style parties and everything. I remember reading a biography of his that one way in 1920s he accomplished was by having bought some big mostly useless plot of land and technically his lavish parties were sales presentations to sell this land. Occasionally some of his acquintances would actually buy a parcel of mostly useless land in middle of nowhere thus the business use was actually maintained. Again, highly unlikely to fly today with IRS and even then there were tax lawsuits. The issue is that it is impossibly hard to pull off without going into tax fraud territory. Another interesting case of "Expense everything" were ABBAs stage dresses and suits. They were purposely flashily impractical to avoid falling afoul of Swedish tax laws. That said tax authorities in most countries do allow some leeway for the small fish. Basically pragmatic tax authorities give you certain limits for certain expenses that you can expense. So in my European country you can expense a certain amount of gas, travel, clothing, eating out, etc as a self-employed. Yes you should have receipts, but if you stay within limits, it is up to you how honest you want to be about that "business" lunch. I remember it being it common in US too, someone takes you to lunch and you are supposed to mention their business and talk a few minutes about their business, then in their eyes it was a business expense. However, the moment you start going over these limits you will face increased scrutiny and you are in for a bad time for claiming as business expense lunch with your friends at Dorsia.

173 points by surprisetalk 8mo ago

kg 8mo ago

> Defer US taxes by reinvesting your taxable income into the economy as business expenses, depreciating assets, etc. Be really careful when doing this. Make sure you have a great accountant - if you go more than a few years without turning a measurable profit, your risk of being audited apparently goes up. My accountant personally cautioned me about this since my business has been in an R&D phase for 5 years so we've been showing a small loss every year. The last thing you want is for the IRS to decide you've been cheating on your taxes.

jt2190 8mo ago
Can you elaborate? As a business owner in the U.S. I can opt to reinvest all revenue back into the business, thus would show zero net profit but (presumably) increase my company’s value. (And remember there are other taxes and fees paid to various governments, not just tax on income/profit, so it’s not typically like nothing gets paid.)
- bombcar 8mo ago
  https://www.irs.gov/newsroom/know-the-difference-between-a-hobby-and-a-business https://www.irs.gov/newsroom/know-the-difference-between-a-h...
- jeffreyrogers 8mo ago
  You can't reclassify profit as reinvestment to show zero net profit. (If you could every business would have an internal hedge fund or private equity business and would show zero net profit).
- SilasX 8mo ago
  >As a business owner in the U.S. I can opt to reinvest all revenue back into the business, Not entirely, no. Any of those reinvestments that count as capital expenditures aren't immediately deductible, but only on a throttled schedule, which is why the concept of depreciation exists in tax law: https://news.ycombinator.com/item?id=15061439 https://news.ycombinator.com/item?id=15061439
  - jt2190 8mo ago
    I think I said that? > … it’s not typically like no taxes get paid. This is why I asked for elaboration: The poster was unclear about how, say, making capital improvements (and getting taxed on those over time) would somehow look suspicious to the IRS, as it seems like this is an extremely common practice. I assume it’s not that then, but something else which I’d love for the poster to share.
    - SilasX 8mo ago
      Your comment made it sound like any re-investment back into the business would count as a cost that then cancels the profits that would be taxed. Even with your clarification, it still sounds like that. This is orthogonal to taxes that would be levied on things other than profit.
- anon291 8mo ago
  As a business owner, if you provide labor to the business, you have to pay yourself a salary.
  - bluGill 8mo ago
    This is why many people make minimun wage - they get a salary but they use the business profits to live on. See your accountant for all the fine print before doing this.
bombcar 8mo ago
This is true for most businesses (they will reclassify it as a "hobby" where expenses aren't deductible, though you can fight that in tax court or real court if you want to) - but for rental properties you can go for decades with no profits (because of depreciation).
xikrib 8mo ago
The point is creating failed businesses is legal and tax deductible.

hirako2000 8mo ago

I'm not sure to understand how deferring taxes is a better deal than paying it here and now. Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas. I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow suit given his budget was a bit below the retail price. That would just wait. His response was he would rather go ahead and up the budget a few hundred dollars to get it right away. That projectors will surely get much better by next year, but that he, certainly, will not.

encoderer 8mo ago
Because of cost basis step up at death, you can just defer forever.
singron 8mo ago
Deferring taxes is essentially an interest-free loan from the government to you. You can take that money, invest it, and then keep most of the earnings when you eventually pay the taxes. There are also some loopholes where capital gains taxes deferred until after death just don't get paid at all. This is the "step-up basis" where your inheritors get to reset the basis of capital assets and neither you nor they has to pay taxes on the capital gain.
- dsizzle 8mo ago
  Yes, and when you do pay it's a lower "real" tax (due to inflation)
  - hirako2000 8mo ago
    Good point about inflation. Deferring can make sense. I was thinking what we earn today is more enjoyable to spend today than when we have bad knees and whatnot.
  - onedognight 8mo ago
    If I have X dollars and get taxed such that I have X * T after the taxing, say T = (1 - .20), then I invest and that money grows by a factor, say G = (1 + .50), over the years, then in the mean time inflation hits and reduces my money by a factor, say I = (1 - .10), so that what I end up with in the end is F = X * G * T * I. If instead I invested and grew and inflated and then got taxed, X * G * I * T, it would be exactly the same. Multiplication is commutative. What you are doing by delaying taxes is hoping you have a lower rate later. Say you make less in retirement or die untaxed and your kids get a step up in basis. But without a change in rate (which might go up even), there’s no difference.

WarmWash 8mo ago

If what was supposed to be your tax dollars is instead going towards giving more people work to do (and hence generate more taxes) the government will be happy.

josefritzishere 8mo ago

This feels like a great way to get audited by the IRS. It does not feel like sound advice.

dgb23 8mo ago
I'm getting very strong sarcastic vibes from the article.
- munk-a 8mo ago
  Nah, the maximally sarcastic advice for tax avoidance is "become president" then you can just refuse to prosecute yourself for tax evasion and sue yourself for a ridiculous sum of money when someone leaks your tax avoidance.
elliotec 8mo ago
I don't know if you're right or wrong, but it is an incredibly common tactic and done all the time by many businesses and people. There are of course ways to do this that are less noticeable by the IRS (as acknowledged in the article) and it doesn't seem like they have the capacity to investigate and audit the vast amount of this practice. My understanding is they are typically focused on fraud and/or folks simply not filing.
crdrost 8mo ago
So the advice here is (from my understanding, not a tax lawyer) sound, but it is "unsound-adjacent" -- so a lot of people will start from this basic understanding and then go off into crazytown. So like influencers get to hear other influencers explaining this "you can reinvest your profits and then you won't have profits" type of advice... but then they will put it right next to unsound advice about "by the way, a great way is to invest in a "business" trip to Greece to sail the Mediterranean, it is "team-building" between you and your spouse and kids who are all employees of your little influencer company, oh by the way you should buy fancy watches so that you can show them off in your videos, and get a very expensive hairstylist to do your hair -- as long as you make a video about it!" And it's like, no, the tax courts actually have procedures they follow to determine if those things are personal expenses or business expenses and 90% of the advice that you hear here are some form of tax fraud. But from the point of view of a company, as the tax year comes to an end you hopefully have extra money left in the bank, now you can either use it to buy things that the company needs and thus grow the company, or you can hold onto it where if you're a C-corp the government will take 21% of the year-on-year delta, or you can pay it back to the shareholders as a dividend and they pay 15% capital gains tax on it. (And of course you don't have to dump the whole account into just one bucket, you can choose how much goes into each of the three.) And when it gives the advice "pssst, you should probably reinvest most of it," that's a standard practice explicitly sanctioned by the government.

jeffreyrogers 8mo ago

Pretty good overview of how/why these deductions reduce your taxable income. Couple of things to note. Depreciation is recaptured if you sell an asset for more than its depreciated basis. People sometimes get into trouble with this if they rapidly depreciate real estate and then sell it. Even if you sell for less than your purchase price it is possible to owe taxes. You also aren't going to be able to pay no taxes since you do need to realize some income to pay for mortgage/rent, food, transportation, etc. I guess if you had assets you could borrow against it would be possible to pay for these using the loan proceeds (which are not taxable).

gautamcgoel 8mo ago
The thing I don't understand with these loan arguments is: don't you eventually need to pay taxes in the income you use to repay the loan? It seems to me that folks who take out such loans are just kicking the can down the road.
- whaleofatw2022 8mo ago
  Sometimes its about the layers. I.e. what kinds of loans can be tax deductible? To be clear theres decent effort into this, you can't just do a cash-out refi on a home, but loopholes exist for those who find it worth the effort.
- jeffreyrogers 8mo ago
  You do. I think these loans are generally used for short term liquidity. For example if you want to buy a new house before selling your old one. You'd get a loan against your assets, buy the home with the loan proceeds, sell your old home and pay off the loan. If your assets are growing faster than the interest it would also be possible to payoff the loan with a new (larger) loan, so you are still kicking the can down the road but eventually you would die and never need to pay the taxes while you were alive. I doubt this is done that often in practice, but who knows.
- OkayPhysicist 8mo ago
  As mentioned in the article, death (and subsequent inheritance), solves this problem. Once you're dead, your tax situation changes significantly, and selling your assets to settle your debts is subject to estate taxes, not capital gains.

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uoflcards22 8mo ago

super cool

dleslie 8mo ago

That's a great deal more complicated than our TFSA and RSP programmes, here in Canada.

munk-a 8mo ago
RRSP first time home buyer credits can get a bit complicated though. Also, a fun fact - dual US-Canadian citizens can't (effectively) use TFSAs because the US considers appreciation in a TFSA to be taxable income.
- deleted 8mo ago
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jimt1234 8mo ago

Highly recommend: https://www.youtube.com/@taxleverage https://www.youtube.com/@taxleverage

davidfekke 8mo ago

Is this advice from Wesley Snipes?

simonreiff 8mo ago
Haha that made me laugh

buellerbueller 8mo ago

Or, just pay your taxes. We collectively benefit from them.

racingmars 8mo ago
Is there really any correlation between tax revenue and spending at the federal level anymore? It seems the U.S. government is willing to spend at huge deficit levels. If everyone stopped paying federal taxes I suspect nothing would change.
- celeritascelery 8mo ago
  What would change is the government would need to greatly increase their debt. In 2025 the government got about $5.23 trillion in tax revenue and spent about $7 trillion. So most of the government spending is financed by taxes. Remove that and the rate of debt quadruples (and by extension inflation).
  - asdff 8mo ago
    When do we finally hit the cliff? Deficit has been going up for decades.
    - dataflow 8mo ago
      > When do we finally hit the cliff? When you can't pay the interest anymore?
      - asdff 8mo ago
        Just add it to the deficit. Fact is US is able to run up 39 trillion and counting in debt because it prints the god damn monopoly money. No one would offer a loan to someone with that financial history. Shit really went off the rails after Bretton-Woods, huh?
- marcandre 8mo ago

SoftTalker 8mo ago

It seems to me that I'm running into more people who just don't file their taxes. They wait for the IRS to send them a letter saying how much they owe, and they just pay that. I can't figure out the thought process of someone who finds this sensible. Maybe there isn't one.

jaxefayo 8mo ago
I’ve never heard of anyone doing this, but now I kind of wish everyone did. Maybe it would force the IRS to just give us a bill instead of having us try our best to calculate what we owe, submitting that, and then hoping that we don’t get an angry letter when the IRS calculates it themselves and their answer doesn’t jive with ours.
- PopAlongKid 8mo ago
  >an angry letter when the IRS Do you have an example? I've seen dozens of IRS letters for dozens of different taxpayers and none of them had any "angry" language in them. The myth that the IRS is trying to scare or traumatize you is just a dark pattern by certain 3rd party "tax resolution" services. The IRS is quite tolerant of the person who breaks the law by not filing and paying on time and provides many opportunities to come into compliance, starting with an automatic first-time abatement of the most common penalties. https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter https://www.irs.gov/individuals/understanding-your-irs-notic...
  - heyjon 8mo ago
    I file every year and I had one year where the IRS miscalculated my taxes twice on an older return. I got the first notice which was ok and they requested me to respond, which I did. The 2nd notice they recalculated what I owe and said I owed more than the original notice and said if I didn't pay in the next 1-2 months I owe tens of thousands of dollars plus interest. I ended up calling them and getting someone who needed help from someone else. She ended up laughing and hanging up the phone. I called again and got an old lady who immediately knew they made a mistake and I ended up with a $0 balance. If you get the right person, it is ok. I was kind of scared I would have to owe all this money I already paid and then some. It ended well but I lost sleep for days thinking about it.

tonymet 8mo ago

tax penalities are low interest loans, so you can invest the money and pay the IRS the penalties at the end of the year.

hnburnsy 8mo ago
Not sure that I would classify 7% compounded daily as a low interest loan.

3rodents 8mo ago

How to Not Pay Any Taxes: don’t be American. Living tax free is easy enough for everyone except Americans.

unclad5968 8mo ago
Where are you living that you don't have to pay taxes?
- 3rodents 8mo ago
  That’s the trick. Don’t live anywhere. Every other country taxes based on residency rather than citizenship. If you’re not a U.S. citizen you can just wander around the world living tax free regardless of your income. Don’t stay anywhere long enough to become a tax resident.
  - fer 8mo ago
    Sorry but that's been a meme and a house of cards since the Common Reporting Standard. The fact is that the country whereever you carry any legal activity will require you to prove you're taxed elsewhere not to tax you in place. To carry out economic activity you'll need a presence, if it's a company it's corporate tax, if you're freelance you'll need a registered address. Most banks will freeze you without a TIN and and address. Plus the whole can of worms of the centre of vital interests or source-based taxation systems. In the moment you input an address in the financial system, the tax administration will know, and they will knock your door for any significant income, plus arrears, pulling one of the cards from your house, and it's not going to be pretty.
    - 3rodents 8mo ago
      You are categorically incorrect. Picking a random country: Italy. Please explain under what legislation or mechanism an Italian citizen who spends 3 months in Japan, 3 months in South Korea, 3 months in the U.S., 3 months in Norway and then repeats the loop for the rest of their life would owe any taxes to any tax authority? Almost every country except the United States only taxes their residents, not citizens. Almost every country follows the typical 180 day rule for tax residency.

oxqbldpxo 8mo ago

It is a good thing for life, money and health, to be clear how much is enough. In money frugality always wins. These billionaires they're very miserable. Their faces show stress, worry and animosity. People say money does bring happiness. It is BS. It holds true only if there is health.

codemog 8mo ago

> If you aren't actually reinvesting capital, pay your damn taxes. Don't be an asshole. Why? So my government has more missiles to blow up children? No thanks.

tootie 8mo ago
Most tax money goes to social programs. Especially at the state and local level.
mcmcmc 8mo ago
You know that’s not the entire budget right? You’re being an asshole by denying funding for disaster relief, schools, healthcare, roads, scientific research, all the public goods and services that don’t work on a profit driven model, but you still get a direct benefit from. If you want to play concerned citizen get out and protest, vote with your dollars by not throwing them at big tech companies who kowtow to politicians and fund their campaigns. But if you think you’re sending kind of message by withholding your taxes, it’s really just that you’re a selfish asshole.
- __MatrixMan__ 8mo ago
  > vote with your dollars by not throwing them at big tech companies Abstaining is not voting. If you want to vote with your dollar, spend it actively undermining big tech companies. Get out there and blind some cameras or something.
  - mcmcmc 8mo ago
    > Abstaining is not voting. Fair if you’re already not giving them money. But if you manage a sizable chunk of cloud spend at AWS, GCP, Azure etc, you can send a meaningful signal by taking away that revenue and shifting it to a company that’s not aiming for neo-feudalism.
surprisetalk 8mo ago
There are more productive ways to vote with your money than tax evasion. You can make tax-exempt donations, or start your own non-profit organization. Some people hoard money without building businesses, without participating in government, without contributing to welfare. People who take more than they give are assholes.

fredgrott 8mo ago

Funny thing, states like CA, TX, TN going after folks who thought it good idea to register vehicles in MN and not pay their own local state sales taxes... Please consult a real tax lawyer before even following such advice... Why? They have skin in the game such losing their license if they do something wrong and illegal...

PopAlongKid 8mo ago
The story I read recently involved Montana (MT), not Minnesota (MN).
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nayuki 8mo ago

> Loaned money isn't taxable income, so you can save/spend it without affecting your tax rate. > Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article talks about taxes in the USA, and I think the treatment of taxes at death is unfair by giving a significant tax advantage to people who hold assets till death, especially with the step-up basis. The way Canada handles it seems more reasonable to me: > Capital property generally includes real estate, such as homes and cottages, investments like stocks, mutual funds or crypto-assets, and personal belongings like artwork, collections or jewelry. When a person dies, they are considered to have sold all their property just prior to death, even though there is no actual disposition or sale. This is called a deemed disposition and may result in a capital gain or capital loss -- https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/capital-gains.html https://www.canada.ca/en/revenue-agency/services/tax/individ... In exchange, Canada does not have an inheritance tax. All taxation is resolved in the estate of the deceased person before the money or assets are passed on without further taxation.

trollbridge 8mo ago
Well, except for that pesky "inheritance tax" thing, which definitely affects people who have net worths that hit multimillion levels.
- hvb2 8mo ago
  Sure but would you rather have an inheritance that gets you to pay that tax or one that doesn't? Because getting a multi million dollar inheritance isn't something a typical person would feel sad about I would think
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CGMthrowaway 8mo ago
Why is the Canadian approach fairer?

fogzen 8mo ago

You can’t legally reclassify all your expenses as reinvestment. The IRS will determine what is actually an expenditure, and there are rules around it.

yonixw 8mo ago

> For your leveraged investments, pay yourself in refinanced cash when your investments appreciate and/or credit rates drop. In other words: Gamble that (1) your investments appreciate, or (2) that you will find credit rates drop when convenient. In 1 word: Gamble. So, either you are rich and have spare money to gamble, which sure, might be beneficial against taxes. But you could also gamble against any other sector (stocks, housing, startups...) Or, if you are not rich, just put it in the 401k (or eq).

PopAlongKid 8mo ago

>Death is a popular escape from deferred taxes. When you die, your obligations to the government vanish. Your heirs inherit assets/property at market value. Their assets depreciate from new cost bases. The article only addresses a subset of economic activity. The larger portion of the adult population are wage earners or retirees, not business owners. For them, large investments in Traditional IRAs or 401k plans are most definitely not able to escape upon death the income taxes that were deferred.

farceSpherule 8mo ago

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deadbabe 8mo ago

We should force cost basis to rise some % every few years, in order make tax due on unrealized gains. How would that throw a wrench into these tax deferral schemes?

melissarick10 8mo ago

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robinsoncrusue 8mo ago

I am a big proponent and teach my children pay as little taxes as you possibly can. Use all means available that are not fraud. So this article is a delight. Our government in my generation failed me and my kids, they are busy in fighting wars, manufacturing crises abroad, and doing other nefarious things. Question: can I use the means in this article to avoid my last year's tax? What asset categories are available to invest to defer my taxes, where can I learn more?

skybrian 8mo ago
On the other hand, having "after tax" dollars that you can invest or spend freely is good too. Software engineers who defer capital gains too long may end up with concentrated appreciated assets. Diversifying results in a big tax bill. Nice problem to have, but still.

crowthevegan44 8mo ago

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nsollazzo53 8mo ago

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gamblor956 8mo ago

I do taxes for a living. This blogspam is advocating tax fraud. Depreciation is permitted for business assets. In order to depreciate the lawnmower, you would need to claim it as a business expense. In order to claim a business expense, you also need to have some business income (net business losses are okay, but not having any income, or having only de minimis income, is a huge red flag). And importantly, you can't use the asset for personal use. Ever. This type of tax fraud is the #1 cause of tax penalties. And because it's fraud, it also means the IRS has an unlimited time to audit and penalize you for it. Rich people don't defer their U.S. taxes by buying depreciable property. They do so by buying investment property like stocks, and making charitable donations.

triage8004 8mo ago

It's half price to renounce citizen ship now, but that doesn't get you out of all of the obligations.

sireat 8mo ago

Along with already mentioned "Buy, Borrow, Die" strategy is the more widely practiced "Expense everything" strategy which often ends in tax disaster for the practitioner. One of the early adopters was https://en.wikipedia.org/wiki/B._C._Forbes https://en.wikipedia.org/wiki/B._C._Forbes the founder of Forbes. He expensed lavish Gatsby style parties and everything. I remember reading a biography of his that one way in 1920s he accomplished was by having bought some big mostly useless plot of land and technically his lavish parties were sales presentations to sell this land. Occasionally some of his acquintances would actually buy a parcel of mostly useless land in middle of nowhere thus the business use was actually maintained. Again, highly unlikely to fly today with IRS and even then there were tax lawsuits. The issue is that it is impossibly hard to pull off without going into tax fraud territory. Another interesting case of "Expense everything" were ABBAs stage dresses and suits. They were purposely flashily impractical to avoid falling afoul of Swedish tax laws. That said tax authorities in most countries do allow some leeway for the small fish. Basically pragmatic tax authorities give you certain limits for certain expenses that you can expense. So in my European country you can expense a certain amount of gas, travel, clothing, eating out, etc as a self-employed. Yes you should have receipts, but if you stay within limits, it is up to you how honest you want to be about that "business" lunch. I remember it being it common in US too, someone takes you to lunch and you are supposed to mention their business and talk a few minutes about their business, then in their eyes it was a business expense. However, the moment you start going over these limits you will face increased scrutiny and you are in for a bad time for claiming as business expense lunch with your friends at Dorsia.